Welcome login | signup
Language en es fr
OccupyForum

Forum Post: for those who think the debt is a problem

Posted 2 years ago on Sept. 1, 2012, 11:04 a.m. EST by flip (6987)
This content is user submitted and not an official statement

from michael hudson's talk in italy -

"The basic thrust of our argument is that just as commercial banks create credit electronically on their computer keyboards (creating a bank account credit for borrowers in exchange for their signing an IOU at interest), governments can create money. There is no need to borrow from banks, as computer keyboards provide nearly free credit creation to finance spending.

The difference, of course, is that governments spend money (at least in principle) to promote long-term growth and employment, to invest in public infrastructure, research and development, provide health care and other basic economic functions. Banks have a more short-term time frame. They lend credit against collateral in place. Some 80% of bank loans are mortgages against real estate. Other loans are made to finance leveraged buyouts and corporate takeovers. But most new fixed capital investment by corporations is financed out of retained earnings.

Unfortunately, the flow of earnings is now being diverted increasingly to the financial sector – not only to pay interest and penalties to banks, but for stock buybacks intended to support stock prices and hence the value of stock options that managers of today’s financialized companies give themselves. As for the stock market – which textbook diagrams still depict as raising money for new capital investment – it has been turned into a vehicle to buy out companies on credit (e.g., with high interest junk bonds) and replace equity with debt. Inasmuch as interest payments are tax-deductible, as if they were a necessary cost of doing business, corporate income-tax payments lowered. And what the tax collector relinquishes is available to be paid out to the bankers and bondholders who get rich by loading the economy down with debt.

Welcome to the post-industrial economy, financialized style. Industrial capitalism has passed into a series of stages of finance capitalism, from the Bubble Economy to the Negative Equity stage, foreclosure time, debt deflation, austerity – and what looks like debt peonage in Europe, above all for the PIIGS: Portugal, Ireland, Italy, Greece and Spain. (The Baltic countries of Latvia, Estonia and Lithuania already have been plunged so deeply into debt that their populations are emigrating to find work and flee debt-burdened real estate. The same has plagued Iceland since its bank rip-offs collapsed in 2008.)

Why aren’t economists describing this phenomenon? The answer is a combination of political ideology and analytic blinders. As soon as the Rimini conference ended on Sunday evening, for instance, Paul Krugman’s Monday, February 27 New York Times column, “What Ails Europe?” blamed the euro’s problems simply on the inability of countries to devalue their currencies. He rightly criticized the Republican party line that blames European welfare spending for the Eurozone’s problems, and also criticizing putting the blame on budget deficits.

But he left out of account the straitjacket of the European Central Bank (ECB) unable to monetize the deficits, as a result of junk economics written into the EU constitution.

If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.

Depreciation would lower the price of labor while raising the price of imports. The burden of debts denominated in foreign currencies would increase in keeping with the devaluation, thereby creating problems unless the government passed a law re-denominating all debts in domestic currency. This would satisfy the Prime Directive of international financing: always denominated debts in your own currency, as the United States does.

57 Comments

57 Comments


Read the Rules
[-] 2 points by jph (2652) 2 years ago

Yes, money is the root of all evil,. in that, the way it is run now, is a ponzi scheme that siphons wealth from the many, and transfers it to the few. From 99% ===to===> 1%

Until this basic systemic issue is addressed, all other political considerations are essentially pointless. There is no democracy while we are all being openly ripped off by a monetary system that we can not evade. All taxes go to pay the interest, and none is used for actual government programs! All programs are payed for with newly borrowed money that comes with even more interest debt,. and this cycle is ENDLESS! The banksters have created the infinite wealth extraction technology, and they defend it at all costs! We must find ways to undermine and dissolve this corrupted system.

Some options; eco-village, permaculture, slowmoney, relocalize, degrowth, etc.

[-] 1 points by flip (6987) 2 years ago

it used to be called political economy back in the day - they broke up the disciplines to confuse people and it worked. history, political science and economics are all ideological professions - unlike math or biology. money is like many tools - can be used to good and evil - a hammer can be used to build a house or kill a man. we have a lot of work to do - it is hard even on this site to get a reasonable dialogue. that is why i loved going to zuccotti park - the conversations were endless and intelligent - as soon as someone showed he was an ideologue or incapable or serious conversation they were politely silenced.

[-] -1 points by brudlo (-454) 2 years ago

the actual quote is " the love of money is the root of all evil". money itself is not evil.

[-] 1 points by jph (2652) 2 years ago

I was not quoting,. the monetary system or money itself IS THE ROOT OF THE PROBLEM! As I said the current system is entrenched stealing from the many by the few,. it is a system of wealth extraction by design!

[-] 2 points by PublicCurrency (1387) 2 years ago

Why are governments paying private financiers to generate credit they could be issuing themselves, interest-free? According to Professor Carroll Quigley, Bill Clinton’s mentor at Georgetown University, it was all part of a concerted plan by a clique of international financiers. He wrote in Tragedy and Hope in 1964:

The powers of financial capitalism had another far-reaching aim, 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 arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations.

Each central bank . . . sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.

Today this silent coup has been so well obscured that governments and gamers alike are convinced that the only alternatives for addressing the debt crisis are to raise taxes, slash services, or sell off public assets. We have forgotten that there is another option: cut the debt by borrowing from the government’s own bank, which returns its profits to public coffers. Cutting out interest has been shown to reduce the average cost of public projects by about 40%.

Game over: we win.

http://www.webofdebt.com/articles/canada.php

[-] 0 points by flip (6987) 2 years ago

why do so many people - and many here have so much trouble seeing the obvious truth. money and the economic system are today the basis for our political problems. i have people screaming at me about this stuff on an ows site. i assume they are ron paul acolytes but still they are doing the work for the rulers. hudson and kelter are right. do you know about keynes example of money in bottles? i think it is great

[-] 1 points by PublicCurrency (1387) 2 years ago

That people are so uninformed is an indictment against the system. It is not that complicated.

Thanks for engaging people!

[-] 0 points by flip (6987) 2 years ago

yes - thanks - and you also. this is the center of the debate today - same debate that took place in the populist era when dirt poor farmers educated themselves about the monetary system. they understood very well what money was and pushed for a central bank that would print money as needed - as usual their idea was co-opted into a semi private central bank. i guess you know all of this - sorry i got carried away! the paul types here are dangerous. i had many arguments with them in zuccotti park - that was fun because when you could show that their theory was based on sand then the people who gathered around to listen would send them packing. they would be politely hooted down - some would stay and change their minds - others would go off and try to recover their ideas by telling them selves their story over and over again. it was interesting to watch. the park was a trip - very interesting conversations with people who wanted to figure out what to do. conversations all over the park and you could join in and be heard - if it was clear that you understood something many wanted to hear it. here is graeber if you haven't read this already - Philip Pilkington: Let’s begin. Most economists claim that money was invented to replace the barter system. But you’ve found something quite different, am I correct?

David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.

It really deserves no other introduction: according to this theory all transactions were by barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-heads for that beaver pelt or what-have-you. This created inconveniences, because maybe your neighbor doesn’t need chickens right now, so you have to invent money.

The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when the Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.

So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?

By the time the curtain goes up on the historical record in ancient Mesopotamia, around 3200 BC, it’s already happened. There’s an elaborate system of money of account and complex credit systems. (Money as medium of exchange or as a standardized circulating units of gold, silver, bronze or whatever, only comes much later.)

So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

PP: You say that by the time historical records start to be written in the Mesopotamia around 3200 BC a complex financial architecture is already in place. At the same time is society divided into classes of debtors and creditors? If not then when does this occur? And do you see this as the most fundamental class division in human history?

DG: Well historically, there seem to have been two possibilities.

One is what you found in Egypt: a strong centralized state and administration extracting taxes from everyone else. For most of Egyptian history they never developed the habit of lending money at interest. Presumably, they didn’t have to.

Mesopotamia was different because the state emerged unevenly and incompletely. At first there were giant bureaucratic temples, then also palace complexes, but they weren’t exactly governments and they didn’t extract direct taxes – these were considered appropriate only for conquered populations. Rather they were huge industrial complexes with their own land, flocks and factories. This is where money begins as a unit of account; it’s used for allocating resources within these complexes.

Interest-bearing loans, in turn, probably originated in deals between the administrators and merchants who carried, say, the woollen goods produced in temple factories (which in the very earliest period were at least partly charitable enterprises, homes for orphans, refugees or disabled people for instance) and traded them to faraway lands for metal, timber, or lapis lazuli. The first markets form on the fringes of these complexes and appear to operate largely on credit, using the temples’ units of account. But this gave the merchants and temple administrators and other well-off types the opportunity to make consumer loans to farmers, and then, if say the harvest was bad, everybody would start falling into debt-traps.

This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any human language is the Sumerian amargi, a word for debt-freedom, and by extension freedom more generally, which literally means ‘return to mother,’ since when they declared a clean slate, all the debt peons would get to go home.

Read more at http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-economic-anthropologist-david-graeber.html#u7ST5cyWSXvSzioS.99

[-] 2 points by PublicCurrency (1387) 2 years ago

So cool that you have been working Zucotti Park.

Ron Paul types, last election cycle I was one, but was disappointed. Honestly, I think he fully knows the boss.

David Graeber, economic anthropologist, - will add him to my reading list. Good site www.nakedcapitalism.com.

Also, want to read "The Lost Science of Money," by Stephen Zarlenga.

I read "Web of Debt," by Ellen Brown J.D.

Another good book is "Secrets of the Federal Reserve," by Eustis Mullins. You can download it free - just do a search.

Also, "Modern Money Mechanics," by the Federal Reserve

Matt Taibbi is a great writer at Rolling Stone. I read his book, "Griftopia."

[-] 1 points by flip (6987) 2 years ago

i would add to your list "secrets of the temple" by william greider - he used to write for rolling stone. about the fed and the history of money in this country - keep at it

[-] 1 points by PublicCurrency (1387) 2 years ago

Some claim that "Secrets of the Temple" is a white wash in response to "Secrets of the Federal Reserve." But I'll check it out - especially since Greider wrote for Rolling Stone. Taibbi is the best.

[-] 1 points by flip (6987) 2 years ago

i am not familiar with secrets of the fed - looked at one site briefly. i am guessing it is a money masters type deal. some truth to what they say but turns in to a zionist conspiracy gig. greider's book is excellent. he lays out the economics of the reagan revolution and how volker ended the era of inflation (1970's) by putting the country into the worst recession since the depression. he said "the standard of living of the average american has to go down!" - that is all you need to know about what has happened to us over the past 32 years. wages down - profits up - strange how that works. greider gets into the history of money and the populist era, when they fought the same fight we are today. i think it is great and would help you understand what the debate is about surrounding money, economics and politics. i will check out the other thing but i think it is a ron paul fraud!

[-] 1 points by PublicCurrency (1387) 2 years ago

Just previewed "Secrets of the Temple: How the Federal Reserve Runs the Country," by William Greider at Amazon. I like the title alot.

Also previewed "Debt the First 5000 Years," by David Graeber. The first few pages are "right - on!" I find it encouraging that the author is one of the founders of OWS.

Mullins book is a good one - an historical account, drawn from the U.S. Congressional Record, and explains how the International Bankers LOVE a gold standard and cause recessions and depressions by slowing the supply of money and make huge profits purchasing real assets for pennies on the dollar.

I do not recall anti-semetic references. (From another great book: "Wall Street and the Bolshevik Revolution," the author, Anthony Sutton, stated that blaming a zionist conspiracy is strictly a distraction, too many other major players).

Here is a link for a free download in PDF format.

http://archive.org/details/TheSecretsOfTheFederalReserve

The original book, published under the title "Mullins On The Federal Reserve," was commissioned by the poet Ezra Pound in 1948. Ezra Pound was a political prisoner for thirteen and a half years at St. Elizabeth’s Hospital, Washington, D.C. (a Federal institution for the insane). His release was accomplished largely through the efforts of Mr. Mullins.

The research at the Library of Congress was directed and reviewed daily by George Stimpson, founder of the National Press Club in Washington, whom The New York Times on September 28, 1952 called, "A highly regarded reference source in the capitol. Government officials, Congressmen, and reporters went to him for information on any subject."

Published in 1952 by Kasper and Horton, New York, the original book was the first nationally-circulated revelation of the secret meetings of the international bankers at Jekyll Island, Georgia, 1907-1910, at which place the draft of the Federal Reserve Act of 1913 was written.

During the intervening years, the author continued to gather new and more startling information about the backgrounds of the people who direct the Federal Reserve policies. New information gathered over the years from hundreds of newspapers, periodicals, and books give corroborating insight into the connections of the international banking houses.

While researching this material, Eustace Mullins was on the staff of the Library of Congress.

[-] 0 points by flip (6987) 2 years ago

sounds interesting - will check it out - thanks - wow iddn't know that about pound! your comment - International Bankers LOVE a gold standard and cause recessions and depressions by slowing the supply of money and make huge profits purchasing real assets for pennies on the dollar. - is spot on - they hate inflation. it is one of the running debates i have had with a few people here - richard gates for one - he insists that bankers like inflation and that deflation would be good for working people. he is really aggressive and stupid it seems to me. it is such a simple and obvious point - the first time i read it - that inflation reditributes wealth was secrets of the temple years ago. my house inceases in value and my mortgage payment goes down every year - the banks hate it! i worked through the inflation of the 70's and my life was never better. increased my prices and watched my house (which was the bulk of my wealth) increase. inflation redistributes wealth and deflation concentrates it - that is why in europe and here much of the hard right are not afraid of recession caused by austerity. i often wonder if ron paul understands what he is preaching?

[-] 2 points by PublicCurrency (1387) 2 years ago

Sadly, I think Ron Paul does understand. He is an M.D. so he certainly has the ability to understand. So many books have been written..

Nobel Laureate Milton Friedman, one of the most influential economists of the 20th century, on the single cause of severe economic depressions:

“I know of no severe depression, in any country or any time, that was not accompanied by a sharp decline in the stock of money, and equally of no sharp decline in the stock of money that was not accompanied by a severe depression.”

Who is Richard Gates? - the architect?

Even Investors Business Daily articles have claimed that deflation is much more destructive than inflation.

Currently, even though the money supply is rapidly increasing, it is not getting into the productive sector

Yes, that is amazing - Ezra Pound - it really is a good book -

After WWI the banks tightened credit and caused a recession/depression. Too much wealth had made it into the hands of the peop[e. - Mullins gives all the details..

[-] 1 points by flip (6987) 2 years ago

according to hudson after ww1 the french and the british owed us big money from war debts. if i remember correctlyhoover wanted to forgive the debt and fdr said no (could have been the other way around). anyway the point is that the brits said they did not have the money and fdr said - "you have plenty of money - youshould stop spending so much on the military and you have very wealthy citizens so tax put a wealth tax on them and pay us!" - the french and british were trying to get money form the germans (war reparations) and the germans were balking - again if i remember correctly hudson claims that they deliberately created hyper inflation to fuck the allies oout of the debt. one last thing was that the germans did not lose ww1 on the battlefield - their armies had to go home to put down a commie revolt.

[-] 1 points by PublicCurrency (1387) 2 years ago

yes Mullins goes into that history as well - it has been 2 years since I read his book - and the bankers wanted to put Europe back on a gold standard and used U.S, gold to do it - i haven't heard of a commie revolt in Germany before but somehow am not surprised.

Hyper-inflation in Germany was a result of speculators short selling the currency - i think - haven't had a chance to research that angle - but i think the hyper-inflation occured after the Allies were in control.

THE TEQUILA TRAP: The Real AStory Behind the Illegal Alien Invasion http://www.webofdebt.com/excerpts/chapter-22.php

Why did Mexico need to go into debt to foreign lenders? It had its own oil in abundance. It had accepted development loans earlier, but it had largely paid them off. The problem for Mexico was that it was one of those intrepid countries that had declined to let its national currency float. Mexico's dollar reserves were exhausted by speculative raids in the 1980s, forcing it to borrow just to defend the value of the peso. According to Henry Liu, writing in The Asia Times, Mexico's mistake was in keeping its currency freely convertible into dollars, requiring it to keep enough dollar reserves to buy back the pesos of anyone wanting to sell. When those reserves ran out, it had to borrow dollars on the international market just to maintain its currency peg . . . .

The late Jude Wanniski was a conservative economist who was at one time a Wall Street Journal editor and adviser to President Reagan. He cynically observed of this banker coup:

There was a big party at Morgan Stanley after the Mexican peso devaluation, people from all over Wall Street came, they drank champagne and smoked cigars and congratulated themselves on how they pulled it off and they made a fortune. These people are pirates, international pirates.

The loot was more than just the profits of gamblers who had bet the right way. The pirates actually got control of Mexico's banks. NAFTA rules had already opened the nationalized Mexican banking system to a number of U.S. banks, with Mexican licenses being granted to 18 big foreign banks and 16 brokers including Goldman Sachs. But these banks could bring in no more than 20 percent of the system's total capital, limiting their market share in loans and securities holdings. They wanted the whole enchilada. By 2004, all but one of Mexico's major banks had been sold to foreign banks, which gained total access to the formerly closed Mexican banking market.

In a February 1996 article called "Militant Capitalism," David Peterson blamed the rout on an assault on the peso by short-sellers. He wrote:

The austerity measures that the U.S. government and the IMF forced on Mexicans in the aftermath of last winter's assault on the peso by short-sellers in the foreign exchange markets have been something to behold. Almost overnight, the Mexican people have had to endure dramatic cuts in government spending; a sharp hike in regressive sales taxes; at least one million layoffs (a conservative estimate); a spike in interest rates so pronounced as to render their debts unserviceable (hence El Barzon, a nation-wide movement of small debtors to resist property seizures and to seek a rescheduling of their debts); a collapse in consumer spending on the order of 25 percent by mid-year; and, in brief, a 10.5 percent contraction in overall economic activity during the second quarter, with more of the same sure to follow.

[-] 1 points by flip (6987) 2 years ago

right on once again - during the mexican bailout under clinton the money never left new york banks - same story over and over - we get sold out they get bailed out. not time to respond properly - have to go get the grandchildren! here is hudson on hyperinflation - pretty interesting i think. again shortened - now no scolding on that issue - it is a very long article -

(get the whole thing on his website - Financial Predators v. Labor, Industry and Democracy August 2, 2012 By Michael Europe’s sovereign debt crisis in historical perspective Sankt Georgen University, Frankfurt, June 22, 2012 Michael Hudson’s new book The Bubble and Beyond can be purchased here.) "I want to start by saying how shocked I was a few years ago to find that Germans are being propagandized with a travesty of history regarding the Weimar hyperinflation in the 1920s. When I studied – and later, taught – graduate economics in the 1960s, the problem was clearly understood. Students learned how Germany was loaded down with reparations far beyond its ability to pay after World war I. Already in 1919, John Maynard Keynes’s Economic Consequences of the Peace warned that setting these reparations so high would cause a breakdown of international payments. During the 1920s he defined the limits to how much foreign debt or other “capital transfers” could be paid abroad.

Followed by a few economists such as Harold Moulton and Allyn Young in the United States, Keynes’s “structural” balance-of-payments analysis was taught to a generation of students and credit analysts. It became common knowledge that what governments might tax away in domestic currency was not necessarily available to be paid in foreign exchange. Germany could pay dollars or gold only by exporting more – or by selling property, or borrowing hard currency. What collapsed its exchange rate and inflated its prices was trying desperately to pay foreign debts, not printing money to spend at home. I realize that Germans are traumatized by inflation. Rather than being carried away by emotions, now it is time to take a step back and acknowledge the real reasons that caused the trauma.

Keynes and his colleagues failed to convince governments to reject the arguments of Jacques Rueff in France, Bertil Ohlin in the United States and other creditor-oriented economists claimed that there was no limit to how much money could be squeezed out simply by imposing financial and fiscal austerity. Their narrow-minded views received powerful support from creditor interests, backed by nationalistic American diplomacy. Their logic of revenge was not a responsible guide to policy. Yet it has survived in less emotional but equally cold, calculated form as rationalization for the International Monetary Fund’s austerity programs imposed on Latin American and other Third World debtors since the 1960s.

What is remarkable is that awareness of the empirically valid side of the 1920s German reparations debate has disappeared from today’s discussion. The losers in that debate – the austerity advocates – have swamped the popular media, government and even the universities with what psychologists call an implanted memory: a condition in which a patient is convinced that they have suffered a trauma that seems real, but which did not exist in reality. The German public has been given a false memory of its traumatic hyperinflation. The pretense is that this resulted from the Reichsbank financing domestic currency spending. The true explanation is to be found in the foreign currency collapse – trying to pay foreign debts far beyond the ability to do so.

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending. The dynamics of hyperinflation traced in such classics as Salomon Flink’s The Reichsbank and Economic Germany (1931) have been confirmed by studies of the Chilean and other Third World inflations. First the exchange rate plunges as economies pay for foreign military spending during the war, and then – in Germany’s case – reparations after the war ends. These payments lead the exchange rate to fall, increasing the price in domestic currency of buying imports priced in hard currencies. This price rise for imported goods creates a price umbrella for domestic prices to follow suit. More domestic money is needed to finance economic activity at the higher price level. This German experience provides the classic example.

In 1919 the Allies imposed unpayably high reparations on Germany – largely to pay the Inter-Ally arms debts that the U.S. Government insisted on collecting from Britain and France for supplies and weapons sold before the United States entered the war. Such debts traditionally were forgiven among allies upon achieving victory. But the U.S. Government refused to do this, so its wartime customers turned to Germany to pay.

Its liability was unlimited under the Treaty of Versailles. For starters, Germany was stripped of its coal reserves, steel mills and other valuable assets. This left little alternative but for the Reichsbank to create German marks to throw onto the currency markets to obtain the foreign exchange to pay reparations. This raised the price of imports, and hence the domestic price level. More money was needed to transact purchases and sales at the higher price level. So the line of causation went from the balance of payments and currency depreciation to rising import prices. More expensive imported goods raised domestic prices as well. It was this that created a need for a higher money supply, not domestic money that forced higher prices.[1]

Germany’s mark was stabilized and reparations were paid by borrowing abroad, not by taxing domestic income. Its cities borrowed dollars in New York and turned the proceeds over to the Reichsbank in exchange for domestic currency (whose spending did not cause domestic price inflation). The Reichsbank paid these dollars to the Allies – which turned around and paid the money to the U.S. Government for their arms debts in a triangular circulation.

The Federal Reserve flooded Wall Street with enough credit to keep interest rates low enough to encourage foreign lending to obtain higher interest rates abroad. This appeared to make the system work – by financing debt service with new borrowing. Economists call this a Ponzi scheme (Schneeballsystem). What promises to be the “miracle of compound interest” cannot last for long without self-destructing. The low U.S. rates that made foreign lending profitable fueled a domestic real estate and stock market bubble that crashed in 1929.

It may seem strange for an American such as myself to be invited to Germany to tell you about your own history. But that is what happens when bank lobbyists skillfully exploit a collective trauma to strip a nation of knowledge of its history and replace it with a travesty of reality. This distortion of history is a precondition for spreading the creditor-oriented ideology advocated by the EU Commission, European Central Bank (ECB) and International Monetary Fund (IMF). This “troika,” captured and caged by neoliberal ideology, is using a false historical view to plunge Europe into needless austerity and poverty.

The most immediate decision was to do to Greece what the Versailles Treaty did to Germany: enforce foreign debt service far beyond its ability to pay. Politically, this requires suspending democracy and accepting the possibility of Greece slipping back into military dictatorship, by insisting that populations not be given a voice in whether to approve government’s commitment to pay. The veritable coup d’état is capped by replacing elected governments in Greece and Italy with “technocrats,” Euro-speak for what we Americans call investment bank lobbyists or factotums.

[-] 1 points by flip (6987) 2 years ago

not time to get into detail - i would like to one day. if paul really understands then he is a liar. not so sure about the decline in the stock of money - i have read a bit about the liquidity trap keynes wrote about - from wiki - "A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels" - as to richardkentgates - here is just a bit of my unpleasant discussion with richard - i think i will send him what you just wrote - that should send him over the top! - 1 points by flip (3134) 3 hours ago

from the ny times - In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day. - $5 a day - so huge inflation from 1910 to 1980 and yet a much richer country - and richer working class - that does not fit your theory!

↥twinkle↧stinklereplyeditdeletepermalink

[-]1 points by richardkentgates (2937) from Fort Walton Beach, FL 2 hours ago

If wages are the cause of inflation, obviously wages are keeping pace with inflation. How does the printing of money by the FED helping wages to keep pace with inflation?

I hope you aren't a student, I would expel you for arrogant stupidity.

[-] 1 points by PublicCurrency (1387) 2 years ago

I don't have time to think about Ron Paul either. Oh, that Richard Gates - i don't pay attention to him either. . .

WE need SOLUTIONS!!!!! - check this -

NORTH DAKOTA’S ECONOMIC “MIRACLE”—IT’S NOT OIL Ellen Brown August 31st, 2011 www.webofdebt.com/articles/north_dakota.php

North Dakota has had the nation's lowest unemployment ever since the economy tanked. What's its secret?

In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:

Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.

According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July . .

North Dakota has had the lowest unemployment in the country (or was tied for the lowest unemployment rate in the country) every single month since July 2008.

Its healthy job market is also reflected in its payroll growth numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent. Texas came in second, with an increase of 2.6 percent.

Why is North Dakota doing so well? For one of the same reasons that Texas has been doing well: oil.

Oil is certainly a factor, but it is not what has put North Dakota over the top.

A number of other mineral-rich states were initially not affected by the economic downturn, but they lost revenues with the later decline in oil prices. North Dakota is the only state to be in continuous budget surplus since the banking crisis of 2008. Its balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million, and is debating further cuts. It also has the lowest foreclosure rate and lowest credit card default rate in the country, and it has had NO bank failures in at least the last decade.

If its secret isn’t oil, what is so unique about the state? North Dakota has one thing that no other state has: its own state-owned bank.

[-] 1 points by flip (6987) 2 years ago

i have heard about the state bank - very cool. we know how to fix these problems but the politicaal system won't allow it. as to a surplus, i heard james galbraith say that governments should not run a surplus since they are taking money out of the economy if they do! he also said that we should allow people to retire with full social security benefits at 62 and partial at 59 (with medicare) for a few years to help people to retire and open jobs up for young people. we also heard about this on bloomberg yesterday - The Townsend Plan was a proposal by Dr. Francis Townsend, a retired medical doctor, during the Great Depression for an old-age pension in the United States. For a few years it spawned a popular movement, but with the passage of Social Security the Townsend movement lost most of its steam.

The plan was mathematically suspect. The proposed pension was $200 a month, to be funded by a 2% national sales tax, which wouldn't come close to covering the proposed pension for every senior citizen. To get around this, it relied on a requirement that the entire $200 be spent immediately, where it would be taxed at 2%, and claimed the plan would pump so much money into the U.S. economy it would automagically generate all the tax revenue needed to fund it, and get the U.S. out of the Depression all at the same time. (This is called something-d-o-o economics). It was opposed by Franklin D. Roosevelt for this reason, but its popularity may have propelled the passage of Social Security as a more workable, mathematically sound[1] plan in its stead.

[-] 1 points by VQkag2 (16478) 2 years ago

Ron Paul? You mean the old guy with the racist newsletter?

[-] 1 points by PublicCurrency (1387) 2 years ago

yeah - flaky - he panders doesn't he? and gives excuses when he is caught. He couldn't make it for the vote against the NDAA - he was campaigning.

The NDAA allows American citizens to be arrested and held indefinately (without trial or charges) for suspicion of aiding a terrorist group.

But RP is mr. constitution.

[-] 1 points by VQkag2 (16478) 2 years ago

Aaaah I didn't know RP was missing when the repub crafted ndaa (which was a repub created policy in 2002) was buried in the defense bill to force big yes votes.

At least Pres Obama has not indef detained anyone during his term, We must protest against this policy, Pressure all pols (Dems & Repubs) to eliminate this and patriot act, warrentless wiretaps, drone bombings, and others.

[-] 1 points by hchc (3297) from Tampa, FL 2 years ago

No, he just assasinated them.

[-] 1 points by doitagain (234) from Brooklyn, NY 2 years ago

you right. such bill will affect not only US but other countries. as we all know united states is semi free country. the model of democracy, freedom of speach and freedom of choice. and debt is not a problem. good example of the life in credit

[-] 2 points by mayda (57) 2 years ago

have you sent this to richard? how about those other paul acolytes?

[-] 1 points by Lucky1 (-125) from Wray, CO 2 years ago

Okay. So the national debt is no big deal. Why aren't we spending even more? Obviously we can spend our way out of this mess. Why won't Obama do just that?

[-] 2 points by flip (6987) 2 years ago

because he was paid for by wall street - when he put summers etc in power that was all you needed to know. the whole ruling class is in the grip of the econ profession and they do the heavy lifting for the rich - a very nice closed circle

[-] 1 points by PublicCurrency (1387) 2 years ago

That is a fact.

“Over time, whoever controls the money system, controls the nation.” - Stephen Zarlenga, Director American Monetary Institute

"The real outcomes in society – whether there will be general economic justice or corrupt financial privileges for the few – are usually determined by the structure of a society’s monetary system." - Stephen Zarlenga

http://www.monetary.org/

[-] -1 points by Lucky1 (-125) from Wray, CO 2 years ago

But he spent trillions and got nothing for it. Why stop now?

[-] 1 points by VQkag2 (16478) 2 years ago

Didn't he turn gdp from negative to positive.? Didn't he change losing 800K jobs per month to job growth? Didn't he dig out of the Repub threat of great depression and create a recovery (weakened by repub obstruction). Didn't he end the Bush great recession and get the economy moving foward again.

That is what he did in the face of your repub massive resistance.

Get it?

[-] 1 points by flip (6987) 2 years ago

spent trillions on what

[-] -1 points by hchc (3297) from Tampa, FL 2 years ago

None of this would happen if the people would slow the hell down for two seconds and decide that enough is enough.

[-] 0 points by VQkag2 (16478) 2 years ago

"no he just assassinated them"?

Just more anti dem partisan campaigning.

Please stop harassing me with you pro republican campaigning!

[-] 1 points by hchc (3297) from Tampa, FL 2 years ago

Are you denying that three American citizens were murdered with no rights? Because Gary Johnson, Rocky Anderson and Jill Stein all find this absolutely 100% appauling.

If you consider that to be anything besides me, an American, sticking up for what is right and just.....well......

[-] 1 points by VQkag2 (16478) 2 years ago

3 Americans"? I am against the drone bombings.! I won't pretend that we have reduced our military killings from a million + to thousands. I know this president WILL end them!

I will not pretend this pres has not made excellent progress, in the face of massive right wing war mongering pressure! To ignore this serves that right wing.! Gary Johnson, Jill Stein, Rocky Anderson are candidates for President! They will never get elected! To push for them serves the right wing. And constitutes anti dem partisan campaigning..

Please stop harassing me with your anti dem partisan campaigning.

[-] 0 points by flip (6987) 2 years ago

well first i think we have to understand the problem and possible solutions. money is at the heart of it at the moment - the ryan budgetetc. even obam is bragging about not spending money. many here are freaked about the debt and it is obviously the wrong way to look at things - just sent this to someone else so i will send it to you - if you like it the whole thing is worth reading - Philip Pilkington: Let’s begin. Most economists claim that money was invented to replace the barter system. But you’ve found something quite different, am I correct?

David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.

It really deserves no other introduction: according to this theory all transactions were by barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-heads for that beaver pelt or what-have-you. This created inconveniences, because maybe your neighbor doesn’t need chickens right now, so you have to invent money.

The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when the Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.

So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?

By the time the curtain goes up on the historical record in ancient Mesopotamia, around 3200 BC, it’s already happened. There’s an elaborate system of money of account and complex credit systems. (Money as medium of exchange or as a standardized circulating units of gold, silver, bronze or whatever, only comes much later.)

So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

PP: You say that by the time historical records start to be written in the Mesopotamia around 3200 BC a complex financial architecture is already in place. At the same time is society divided into classes of debtors and creditors? If not then when does this occur? And do you see this as the most fundamental class division in human history?

DG: Well historically, there seem to have been two possibilities.

One is what you found in Egypt: a strong centralized state and administration extracting taxes from everyone else. For most of Egyptian history they never developed the habit of lending money at interest. Presumably, they didn’t have to.

Mesopotamia was different because the state emerged unevenly and incompletely. At first there were giant bureaucratic temples, then also palace complexes, but they weren’t exactly governments and they didn’t extract direct taxes – these were considered appropriate only for conquered populations. Rather they were huge industrial complexes with their own land, flocks and factories. This is where money begins as a unit of account; it’s used for allocating resources within these complexes.

Interest-bearing loans, in turn, probably originated in deals between the administrators and merchants who carried, say, the woollen goods produced in temple factories (which in the very earliest period were at least partly charitable enterprises, homes for orphans, refugees or disabled people for instance) and traded them to faraway lands for metal, timber, or lapis lazuli. The first markets form on the fringes of these complexes and appear to operate largely on credit, using the temples’ units of account. But this gave the merchants and temple administrators and other well-off types the opportunity to make consumer loans to farmers, and then, if say the harvest was bad, everybody would start falling into debt-traps.

This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any human language is the Sumerian amargi, a word for debt-freedom, and by extension freedom more generally, which literally means ‘return to mother,’ since when they declared a clean slate, all the debt peons would get to go home.

Read more at http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-economic-anthropologist-david-graeber.html#u7ST5cyWSXvSzioS.99

[-] 0 points by funkytown (-374) 2 years ago

You know, this argument of Graeber's is fundamentally flawed. "After all people have been looking since 1776": historians have actually been looking much farther than that through the use of account books, receipts, correspondence, diaries, town records, etc.

Credit, as provided by merchants, the result of trade, has no real bearing since the loan of goods was facilitated by a promise of a return in goods. In any case, while neighbors often aided neighbors in a loan of labor, as in "I'll owe you one" (and so the word "friend" is defined in colonial america) there was always a medium of exchange - bushels of wheat, tobacco, etc., also many forms of species, and even amongst native americans - wampum; amongst African societies it was the conch shell.

The gift economy Graeber generally speaks of IS an economy of barter, these are relationships of reciprocity, even in the case which he mentions of the women's council which allots resources; there is no such thing as a gift economy.

In colonial America, people did not exchange chickens for a cow... the cow was purchased with some medium of exchange; even if they did, good luck finding that one in an archaeological dig and good luck refuting the documentary evidence that exists.

There were no banks or financial creditors in colonial America; one borrowed from neighbors. But again, these are relationships of reciprocity; it's barter in a world of economic interdependency; many debts were incurred later in life; they are predisposed in wills, disposed in repose. But the bankers are a later development, as generally the sons of the creditor merchant become the creditor merchants of species - there was always a mind to profit, the profit gained through the sale of species, enabled by fractional banking, secured through insurance, is labeled as "interest."

The dollared economy is an economy of barter, facilitated by a standardized species. But it is barter nonetheless.

If we are to look to government as our creditor of life sustaining resources, with taxes as the installment payment to the fractionalized Fed, the total debt obligation amongst families is now far greater than any benefit that will ever be derived of the all the combined members of any living three generations; we have bartered the future of non existent, which we rightfully assume to be our biological descendants.

What of foreign aid last year? We're paying for their future generations while our own literally starve; why would anyone do that?

All are correct to say that the to incur debt of such unrealistic proportions to the benefit of the money mongers is injurious.

The EU is unsustainable not because nations have lost the ability to print their own money but because there can be no central authority capable of equal and very specific distribution. Worse, it is financed on the backs of Americans who provide for their defense; they can allocate more because their defense is freely provided.

Freedom is different things to different people; as you can plainly see here it is defined in any number of very specific ways. But there is always the common denominator that serves to unite all in the communal defense of liberty, which itself is a very interesting word.

[-] 1 points by PublicCurrency (1387) 2 years ago

It is well known that Philadelphia was the birthplace of the U.S. Constitution and American democracy. Less well known is that it was also the birthplace of public banking in America. The Philadelphia Quakers originated a banking model involving government-issued money lent to farmers. The profits returned to the government and the people in a sustainable feedback loop that nourished and supported the local economy.

http://www.webofdebt.com/articles/philadelphia.php

[-] -1 points by funkytown (-374) 2 years ago

Colonial economy is pretty interesting. Because they essentially created it in from wilderness.

[-] 1 points by PublicCurrency (1387) 2 years ago

We must do that again. Are we not in a wilderness?

NORTH DAKOTA’S ECONOMIC “MIRACLE”— IT’S NOT OIL Ellen Brown August 31st, 2011 www.webofdebt.com/articles/north_dakota.php

North Dakota has had the nation's lowest unemployment ever since the economy tanked. What's its secret?

In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:

Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.

According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July.

[-] 0 points by funkytown (-374) 2 years ago

I'm game, let's do it.

[-] 0 points by flip (6987) 2 years ago

sorry but i did not read the whole thing - this first sentence - You know, this argument of Graeber's is fundamentally flawed. "After all people have been looking since 1776": historians have actually been looking much farther than that through the use of account books, receipts, correspondence, diaries, town records, etc - makes no sense to me. where did you get the quote? his book is about 5000 yrs of debt. i don't think you understand money and economics in the way i do - you have a mainstream approach to government debt etc and i am over that now. so unless you want to understand what hudson and kelton say about mmt we can end here.

[-] 0 points by funkytown (-374) 2 years ago

I'm not at all familiar with mmt; I'll take a look.

The Wealth of Nations was an attempt to rationalize economy of a national scale. But to understand the nature of the birth of American economy we must turn to primary source documents.

Jefferson lived amongst an elite in a cultural era when capital was provided by neighbors and friends who were not only not permitted to deny, or even seek profit in the form of interest; they were also bound by honor to never so much as ask that capital be returned. He was definitely not a proponent of central banking.

Two questions in my mind as related to Graeber's book which I have not read - is a gift economy even possible, is this itself not barter... and of what relevance to America which literally carved an economy from the wilderness without capital; the "corporate" vision of American economy itself is flawed.

[-] 1 points by flip (6987) 2 years ago

i would start by reading the whole interview - not sure why you are telling me about smith and jefferson but i am not interested in what they had to say beyond what i know of them already. the question of the day is money and debt. should there be austerity or is there money to do what we need to do. to me the answer is obvious - seems you are stuck in mainstream economics - google hudson and kelton in italy if you want an education in economics of the real world

[-] -1 points by funkytown (-374) 2 years ago

Why do I suspect that they will be rejected as easily as adam smith was?

[-] 1 points by flip (6987) 2 years ago

have you read smith or just about him - and rejected by whom - the ruling classes and the economists they select? or by the mass of the population that as the french say " did not cause the crisis, did not profit from it, have already paid as a result and will not pay more!" now what do you think?

[-] 0 points by funkytown (-374) 2 years ago

I don't have time to read everything of history. He was rejected on several points by the Fathers - see Hamilton, for example.

We don't need people like Smith to explain to us what went wrong; we can determine that on our own if we study American economy. And I don't have a lot of faith in intellectual histories because they have a tendency to pull sources from the air that were never even read let alone considered. Even in cases where they were an influence, the question of ideals is always, well, of how much influence; what was the response, if any at all. And if we look close enough, we can answer these questions.

I like listening to Graeber but I'm really struggling with a couple of his paragraphs in the above because they're not factual.

[-] 1 points by flip (6987) 2 years ago

well since you have said you have not read history so much i wonder how you know that graeber is not factual - read his book - then you might better understand

[-] 0 points by funkytown (-374) 2 years ago

I honestly think that all of these issues develop peculiar to individual societies, no need to study Mesopotamia unless you have a real interest and I don't.

[-] 1 points by flip (6987) 2 years ago

well seems to me that is not very smart but study what you like, of course. when you talk about things not being factual - especially when you are talking about graeber who has studied the subject it might be helpful to know the history.

[-] -1 points by funkytown (-374) 2 years ago

There is no such thing as a "gift" economy; this is a superficial evaluation. And anthropological studies of the other peoples who have developed independently do not serve to answer America's peculiarities. We can discover these things in American history, which has been relatively well documented. And this is what I do.

[-] 1 points by flip (6987) 2 years ago

then study the depression if you want to learn something about what is happening today. learn how to fix a broken economy - maybe look up keynes idea of money in bottles and see what you think. maybe read hudson "super imperilaism" to get an educated take on the american economy. you must be young - i hope so it will give you time to learn (although i don't think we have much time to fix things). not sure what you mean by gift economy but it seems you do not really know what you are talking about

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

No, you and V did just fine. Test passed. So tell me, are you and VQ the same person or just both working on the same campaign? Secondly, are you two volunteers or are you paid employees?

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

What is your point on economics? max 400 character. GO!

[-] 0 points by funkytown (-374) 2 years ago

You're right, I'm going to look at your suggestions [flip, below].