John Adams remarked that there are two ways to enslave a nation. One is with the
sword, the other is with debt. Americans are surely awash in debt. My guest Ellen
Brown authored the runaway bestseller Web of Debt. Her book challenges widely
held beliefs about our economy and our freedom. In essence, a handful of king
bankers control it all. We explore how private parties, not our government,
control America's money supply. Banking in America has become a cruel hoax acting
as a giant betting machine. Still there is a path to prosperity and freedom,
argues Miss Brown. It is my pleasure to welcome Web of Debt author Miss Ellen
Brown to Moral Politics. Welcome, Ellen. Thank you, Bill. Now you have in the title of your
book Web. What were you conveying by that? Are there spiders in an economic sense?
Attacking us? The spider, the web is actually something that we're all trapped
in and what's interesting is that everyone is trapped in it. Not just us as
individuals but governments. Most people think governments issue our money. If
they issue money, why are they in debt? They don't issue the money. It comes from
a private banking cartel actually. But this goes to the fact that most
Americans really don't understand American banking, do they? No and in fact
bankers themselves don't necessarily understand how they create money and
they'll argue with you that they don't but they do. Now is this been is this
part of a deliberate ruse? You said that we've got a cruel hoax going. Is this
part of that hoax? Is that it's been made deliberately complicated when it's
really not? Certainly at some stage that would be true but I think now it's been
so obscured in the thicket of misinformation. How is America's money made?
Money that's made by the government is coins but that's only one ten thousandth
of the money supply. The Constitution... One ten thousandth? Right it's like almost nothing.
It's one billion dollars. The Constitution says Congress
shall have the power to coin money and regulate the value thereof and that is
all that Congress does, the coins and all of the rest including the dollar bills
which are what we also think of as money are issued by banks. The dollar bills are
issued by the Federal Reserve but it is actually private. It's composed of 12
branches. If you look at your dollar bill you can tell which branch issued the
bill so it's actually issued by the branches. All those branches are owned by
the banks in their district only. The government does not own one share of
one federal district. So before it was even popular we've been outsourcing the
our economic most essential function the money supply to private interests.
Exactly. Now this is a widely held misconception people don't know that
basically banks just poof create money. Right well they created as credit. In
other words when you go to a bank to take out a loan the bank will write into
your account the amount of money that you want but they don't pull that from
anywhere. That's just the debit on one side of their books and a credit on the
other. They do it by double entry bookkeeping. They only need the deposits
when they go to clear the check and then as the check goes out you know they need
to balance their books so they have to have as much going out as coming in but
they don't really lend the deposit. They borrow from that deposit pool but the
deposits are always there. If you the depositor go in to get your money the
bank never says come back in 30 years because we just lent your money to Mr.
Smith. It's been lent out and yet you have access to it. Now what you just
described is lending this bringing money into creation poof out of thin air
double entry accounting where there's an asset balancing a liability is the bulk
of the American money supply. Right. This is why people can have valuations on
their homes but there's really not enough money to sustain all of that
valuation is there. Right but actually it's good to have so much credit out
there. I mean when the credit system collapses that's when we have a
depression such as we have right now. What you described is indeed the
fractional banking system. Is that correct? Right. And the unfortunate thing
is that this could if not control lead to inflation. Really what inflation comes
from when you create a loan and it's backed by a piece of real estate that
that loan will get paid off. So that is not necessarily inflationary. What
does inflate the system is when bankers speculate they're creating money that
they're using for money making money. Becoming a casino a better machine as we've seen recently.
How about the role of central banking? Was that done to protect the economy in
some sense? In theory. What you have here is this basically a shell game
going on by the bankers which is how money is created. It's not necessarily a
bad system as I will argue. I mean if it were public it would be a good system
but because it's private and there's this conception that money is a thing
like gold. The bankers never had enough gold to create all these loans so they
had to fabricate. So there's a certain fraud involved. So to keep
this fraud up to keep the ruse that the shell game going the central banks were
set up which had the function of printing money or creating money
to backstop the banks. But now they're sort of blocked from doing that as well
like look at the EU. So seeing the problem of their own making they created a
solution of their own making that allows the same problem to perpetuate.
In your book you mentioned that it's neither federal nor are there any
reserves in the Federal Reserve. So they create this entity that is as you're
describing a shell game. Are we in it for disaster? I think so. Well there are ways out
and I think we're kind of finding our way to those ways. Like you look at
the EU that's an unsustainable system but they are starting to create money
because that's what they have to do. There has to be a release valve to allow
this system to expand. Did Franklin Roosevelt take us off the gold standard
because he was aware of what you just described? He took us off the gold
standard because he had no choice. At that time everyone was afraid of the
banks so they were rushing to the banks to pull out their gold. Well the dollar
was 40% backed by gold. So you could take your dollars in. If you took two
dollars, paper dollars in and took two dollars worth of gold out, three dollars
would have to be called in in the way of loans. So the money supply was
just contracting and contracting and so we had a huge depression. So in order to
stop this implosion of the money system he took the dollar off the gold standard.
And that's not a solution for us either, is it? Going back on a gold or silver
standard or any kind of commodity based standard? No, it's never worked in the
past despite what gold bugs will say. The Federal Reserve System is made up of
private banks serving private interests. True, although you could argue the
Federal Reserve Board is a different thing than the Federal Reserve
banks. The Federal Reserve branches are all 100% private. The Federal Reserve
Board is appointed by the President and confirmed by the Senate so it's
definitely got a federal component to it. We know about Andy Jackson taking on the
Second Bank of America and I believe the name Biddle was popular at that time
opposing his effort. Biddle was the head of the Second US Bank which was quite
corrupt. He said I will kill it before the bank kills me which he did. He did. He
killed the bank, pulled all the money out. That's the last time that the debt
has been fully paid off. Now we had Lincoln in the greenback. Can you
describe that? That's another... Lincoln went back to the American system in other
words. This is the system that was popularized by Ben Franklin. Yeah, he
wrote about it. He didn't actually invent it but he wrote about it. It was actually
the Quakers in Pennsylvania that developed the best of these models.
Lincoln was faced with usurious interest rates in order to fund the Civil War and
in fact there is some evidence that the Rothschild bankers were that they
actually stimulated this war in order to trap the colonies back in debt in order
to have economic colonialism where they had lost their political colonies.
So to avoid these very high interest rates he issued US notes or greenbacks
and did manage to win the war and did a lot of development besides the railroads
that went all the way across the country. It was a very active period of
development but he was assassinated and that whole thing was terminated. And the private bankers reclaimed our American bankers.
Now you mentioned Rothschild. Everybody knows that name and what's
interesting in your book is that it was a shocker to me. I didn't know that
Rockefeller was so intimate in early American banking along with the
House of Morgan. JP Morgan and the House of Morgan. And there's another name that
people probably don't know. Aldrich who was the grandfather of Nelson Rockefeller,
the vice president under Jerry Ford. A very powerful man. Wasn't it Aldrich who linked up with the Rothschilds?
Aldrich brought the first Federal Reserve bill and it was called the Aldrich bill and he was a relative.
And Rockefeller and Morgan both were funded by the Rothschild. I mean there is evidence that they were both funded by the Rothschild bankers.
Rothschild of course was Jewish and at that time that was, that impaired his ability to deal with.
So Morgan was a good Protestant front for him.
The influence by the Rothschild still continue in the American banking system?
It's hard to know who the head of the spider is now. It is said that the spider moved across the Atlantic to
the Rockefellers that the American banking system is now stronger than the city of London but I doubt it.
I mean I think that it all still goes back to the city of London.
There is a need to expand the economy. We certainly don't want it to implode by not having productive lending.
I guess that's the important term, productive lending. How would you describe a productive loan?
Well my own solution to all this would be that the banks would be publicly owned.
So lending is a good thing and in fact all of our money comes from loans, virtually all of it.
And it is a very natural organic system. In other words, people take out loans when they want to do something,
build something or whatever and then as they pay the loan off the money supply contracts again.
So the money supply expands and contracts naturally in response to the need for credit.
So that's a good thing. The only bad thing about the system is that it is privately owned by bankers pretending to have money they don't have.
So not only is that bad in the sense that it gives a certain cartel power over the whole money scheme,
but it is bad for the bankers themselves because they are always getting into trouble.
I mean historically this system goes back for a thousand years and in fact when they were really strict about,
in the Italian bankers there was one Italian banker who was actually beheaded in front of his bank because he couldn't balance his books.
If only we could do that again. No. There is a role of interest.
Interest could be part of a sustainable system if it is a public system.
In fact there are many money reformers who will argue that the debt virus theory has been debunked.
So their argument is that the bankers put the interest back into the system.
They buy shoes and they buy food and they spend like everybody else. They spend their profits.
But the problem is they don't. It is the 1% versus the 99% thing. They reinvest their profits.
They have far more money than they can spend.
So not counting this mathematical issue of you have got to have an expanding debt in order to pay the interest,
they put their money into investments.
So instead of saying here is my dollar, give me some food, they say here is my dollar, give it back to me with interest or give it back to me with more profit.
It is not really just interest. It is any form of rentier money making money that is this parasite that is pulling the money off the top and that is why the 1% is game.
This is the basis of the Ponzi scheme that you talk about.
Money is created but only the principle is created, not the interest for that principle.
It is never created so it depends on further lending.
The system where the government itself is able to print some money, they can print the interest.
So they can put some debt free money into the system to cover the interest.
But a bank can't because all their money goes out there as interest bearing debt.
Well we know on the basis of households it is clear, but on the basis of the national economy,
is it clear that we will reach a time where we cannot service our debt, the interest will prevent us from, we can't even service the interest on the debt.
Yeah, well that would be true if we had, like if we were still paying 5% interest like we did at one time, we would already be at the point where we couldn't afford the interest.
But in fact that is why interest rates have been dropped so low, they are down to like 0.2% for the Fed funds right.
They are almost nothing and they have to hold them ridiculously low because the federal debt has grown by 50% since this banking collapse.
But you could service the debt, I mean if you borrowed from your own central bank interest free,
then it doesn't really matter the size of the debt, you just keep rolling over the debt.
It is the interest that will kill you.
So you are saying there is some artificiality that is holding or suppressing our interest, keeping it at near zero levels,
so basically the government doesn't suffer a calamity.
Yeah, if you could have zero interest the government debt can respond to the needs of the economy, which I think is a good thing.
Zero interest is not sustainable, I mean is it? Aren't we basically just holding on?
Well zero interest means borrowing from the Fed and they return the money.
Good point. Some of what we talked about, deflation, the fact that things are contracting.
We are not seeing lending. We don't see the productive activity. Even though there is a need for it, we don't see it.
In fact many people that are written in Forbes that have been on Charlie Rose, there is a hedge fund multi-billionaire that is saying
the future is a deflationary future and by deflation that is the opposite of inflation.
We know there is not much evidence of inflation today.
We are in a deflationary cycle. There is this entire shadow banking system that goes unreported
and that was the system that shrank in 2008 and according to the Fed's own figures it shrank by five trillion dollars.
Shadow banking system, what is it?
It is non-bank.
Goldman Sachs?
It was the Goldman Sachs until they became a bank but it includes investment banks, hedge funds, money market funds.
This whole system, supposedly it developed or one reason it is so big is that big institutional investors
don't want to put their money in a bank because they are only insured for 250,000 dollars and they have far more than that.
So they want something that is like a bank. They want to be able to pull their money out daily.
So that is the whole repo market where it is like a big pawn shop where they say I will give you my money for a day
and you give me those mortgage backed securities but I can give you back the mortgage backed securities
and you have to give me back my money tomorrow if I want it.
And that is what happened in 2008. The money market collapsed.
All the investors panicked and they pulled their money out at once overnight.
So it is a very unstable system. It shrank by 5 trillion suddenly and it has only come up by 1 trillion.
And if this continues again, this is the paradox of thrift, the liquidity crisis or the death spiral all under the rubric deflation.
Right.
Is there a way out of it?
Inflate. Put some money back into it.
For some lending is what?
Yeah. Well, ideally I just wrote an article on student debt would be a very nice way to get another trillion dollars into the system.
There is now a trillion dollars in student debt outstanding.
When the Federal Reserve did its quantitative easing 1, what they did was 1.3 trillion in mortgage backed securities
or toxic assets were bought off the books of the banks.
So the banks got the dollars and the Fed got the toxic assets.
They gave them at face value?
No, actually they got a deal on it. The Fed actually made money on that deal even though everybody said that.
But isn't that going to contract the economy if you mark to market?
Basically that means that the reserve limits or reserve requirements are met.
The lending amount that banks can make contracts.
The whole point, they gave them dollars.
So now they didn't have toxic assets on their books. They now had dollars on their books so they could lend again theoretically.
It didn't work obviously. For another reason I think it's because...
Maybe they helped America refinance their home program either.
But the Fed did it so they could just as well buy a trillion dollars in acid backed securities backed by student loans and then just rip them up.
And there would be another trillion dollars in the system and the students would basically get free higher education which I think we should have been giving all along.
But that's a hidden tax on the American public isn't it?
No, not if you're in a deflationary cycle. If things worked really well when we had five trillion dollars more in the system and we suddenly took that five trillion dollars out.
We've got to put some more money back in there.
Now the question is how to do it. They tried doing it by putting it on the books of the banks and it didn't work because there's still 1.6 trillion in excess reserves sitting on the books of the Wall Street banks.
Not the local banks. The local banks can't get it. It's the Wall Street banks.
So what if we gave a trillion dollars to the municipal governments or the states?
It would only take 200 billion to bail out all the states, to balance the books of all the states or the students.
But to do that we have to borrow that money the way the system works today. The present system. We have to borrow that and pay the interest to private interests.
That's what the Treasury would have to do or the Congress. But the Fed does not have to borrow. They can just issue the money. They have the power.
They have the fiat power to just issue money. And they're looking for it.
And again I want to make the point here. You said create money not create debt.
Right.
Okay. We keep talking about they. We refer to the Fed. Who's doing this? Who are these shadow bankers? Who controls this? Who owns it all?
Well if you trace it back historically there were some key players that set the system up and made it work the way it does.
But today people don't really understand the system. They just they see an opportunity to make money.
I mean all those people on Wall Street are just think that this is a good way to make money.
They're speculators.
Yeah. And they just jump in and do it. So they see a hole in the system and they go in and make money off it. It's driven by greed.
But it's legal greed and everybody kind of looks up to these rich bankers.
But we could fix that though. Can we like change the rules?
Yeah. So we need to change the system. Yeah. If you bumped off all the or if you put in jail all the guilty parties you wouldn't have fixed the system.
Yeah. And you can't put them in jail because it's not even illegal.
But if we made it illegal that would go a long ways towards fixing some of the problems.
Yeah. That's what you have to do is fix the system.
So it's this amalgam of opportunists which we'll call speculators. These are people that have bet against weak currencies like George Soros did in one time.
What about the central bankers as a group?
Well, Ben Bernanke for instance was a professor of economics and just got appointed. I don't see him as somebody who's scheming to pull off something.
No. I could envision that there are people scheming at the Bank for International Settlements because they have pretty much broken one economy after another by imposing their rules.
I mean the first...
And most people don't even know what the Bank of International Settlements is.
No. They kept a low profile for a long time until they decided they wanted a bigger building and they built this boot, you know, the famous boot in Basel.
The Bilderbergers are clearly a day. They meet once a year and they are...
Can we get the membership of the Bilderbergers?
There are infiltrators who report on it but nothing's official on that, that they see people going in and out.
Are there Rothschilds that we can look to and say that they are the spider that crossed the Atlantic?
Nobody really knows how much money they have or what they're up to but you couldn't really nail them.
To some extent aren't we really touching on a dicey issue here of class war, the 99% versus the 1%?
Yeah. But so to me the solution would be to set up our own system. I mean we can't really get them.
What we need to do is set up a model that works better, set up a better mousetrap and then everybody will just gravitate to that one.
And then when we realize that the too big to fails are not too big to fail, let them fail. We have our own more functional system.
Well that's interesting because I'd like to hear how you would solve the problem.
I know that there's a deflationary threat out there. We need to get the system going.
And the social contract seems to be broken. We see pensions under attack, health guarantees, health care guarantees under attack.
Even social security, Medicare is under attack because there are insufficient resources there for that.
Didn't Greece just sell off an island?
They imposed some austerity on our earth in the terms of taking the treasures, those antiquities.
And they're threatening to actually put in a military, like a police force that will enforce this.
They're going to take over those governments. They've abandoned their sovereignty because of debt.
This could be America's future without some austerity program if we don't find a solution.
Yeah, well actually it would be stupidity on our part if we let it happen to us because we do have the power.
Our federal, our central bank has the power to issue money.
And it should be issuing money and lending it to the government.
But because we have this whole faction that's refusing to allow the debt to expand,
we have an artificial austerity being imposed on ourselves that we don't need to impose because we can fix it.
So it would be good if the debt cap were removed and that we grew the economy through debt.
Exactly, because you need a certain amount of money in the system.
All money comes from debt. When private debt shrinks, public debt has to expand to fill up the gap.
So you want the money supply to match the GDP.
So if you want the GDP to expand, you have to expand the money supply.
Doesn't everyone know that our debt will never be repaid?
And we're even faced with a problem now of servicing the debt. The interest on the debt, rather.
Yeah, well it's the servicing that's the problem.
If you got rid of the interest and you just allowed the debt to expand as needed.
So going forward we get rid of paying interest on debt and then we deal with the debt and the interest that we have now by growing the economy.
What you could do ideally, everybody thinks this would be inflationary, but I would argue it's not, is you could print or coin.
You could do this right now without changing any laws.
Coin 14 $1 trillion coins, put them in the Treasury's bank account with the Fed and just buy back all those bonds and rip them up.
So all the current bondholders would now have dollars.
All a bond is, a federal bond is just an interest bearing account with the Fed and a dollar is a non-interest bearing account.
So you'd get rid of the interest in that way.
So instead of borrowing we just fiat the money into creation.
I believe it was Thomas Edison that you quoted in your book that if we can create a dollar bond we can create a dollar bill.
That's basically the argument that you're making right there.
What about the constitutional authority over the currency?
Is the Constitution specific about where that prerogative lies?
Well that itself is controversial and there are cases going both ways.
It's been argued for 200 years, but the Constitution says Congress shall have the power to coin money and regulate the value thereof.
Now the argument, the gold bug types say, well that just means that you can take your coins to the mint and Congress will put the stamp on it.
That's what coining money means.
The other argument is that coins were the official money at that time and they didn't have checks and credit cards and all this stuff.
So what they meant was Congress shall have the power to create the money supply. You have to read that into it to meet the current circumstances 200 years later.
Debt into dollars, which is what you recommend, we can regulate all of this financial engineering.
We can take back our money supply from private banking selfish interests.
Which has been basically the root of the class war for the whole time of our republic.
Ellen, I want to thank you for a very enlightening and interesting talk on the economy.
There are many things I didn't know. I have an MBA and I didn't know so many things about our economy.
Well I've got full faith and credit in a lot of the really sensible down to earth and very simplified banking proposals that you made.
Again, I want to thank you for being my guest on Moral Politics. It's been a pleasure.
Thanks, Gretchen.