John Adams remarked that there are two ways to insulate 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 keen 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. 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 a
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. One ten thousandth? Right it's like almost nothing.
It's one billion dollars. The stuff I do in my pocket. Yeah 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 our economic most essential function the money supplied 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. 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 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
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 which is the Fed which
is 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. We hit it for disaster I think so.
Well there are ways out which and 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 it would 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 a 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 a
hundred percent 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 the last time that the debt has been fully paid off. Now we
have 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
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
countries is a very active period of development but he was assassinated and
that whole thing was terminated. Private bankers reclaimed our American banking
system. 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 and there's another name that people
probably don't know Aldrich who was the grandfather of Nelson Rockefeller 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 so Rothschild of course was Jewish and at
that time that was that impaired his ability to deal with so so Morgan was it
was a good Protestant front for him. 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 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 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 they pay that 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's 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's bad for the bankers themselves because
they're always getting into trouble I mean historically this system goes back
for a thousand years and they've in fact when it 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 his books
no no there's a role of interest interest could could be part of a sustainable
system it's if it's a public system in fact there are many money reformers who
will argue that that that the debt virus theory has been debunked and so their
argument is well the bankers put the put the interest back into the system they
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's the 1% versus the 99%
thing they reinvest their profits they have far more money than they can spend
and so not counting this issue this mathematical issue of you've got to have
an expanding debt in order to pay the interest they put their money into
investments so instead of saying here's my dollar give me some food they say
here's my dollar give it back to me with interest or give it back to me with more
profit it's not really just interest it's any form of rent here money making
money that is this parasite that's pulling the money off the top and that's
why the one person basis of the Ponzi scheme you talk about the fact that
money money is created but only the principle is created not the interest
for that principle that it's never created so it depends on further lending
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 debt
bearing I mean interest bearing debt well we know on the on the basis of
households is clear but on the base basis of the national economy is it clear
that we will reach 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 five percent 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's why interest rates have been dropped so low they're
down to like 0.2 percent at the for the Fed funds right there 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 then it doesn't
really matter the size of the debt you just keep rolling over the debt it's the
interest that'll kill you so you're saying there's 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 of the economy which
I think is not sustainable I mean is it are we basically just 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're 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's a hedge fund multi-billionaire that's saying the
future is a deflationary future and by deflation that's the opposite of
inflation we know there's not much evidence of inflation today we're we are
in a deflationary cycle there's there's 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's non-bank it's going on banks it was the Goldman Sachs until
they until they became a bank but but it includes investment banks hedge funds
money market funds this whole system supposedly it developed or one reason
it's so big is that big institutional investors don't want to put their money
in a bank because they're only insured for two hundred fifty thousand dollars
and they have far more than that so they want something that's like a bank they
want to be able to pull their money out daily so that's the whole repo market
where it's like a big pawn shop where they say I'll give you money my money
for a day and you give me those mortgage-backed securities and 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's what happened in 2008 that the
money market collapsed all the investors panicked and they pulled their money out
at once overnight so it's a very unstable system it shrank by five
trillion suddenly and it's only come up by one 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 this is
put a little put some money back into it for some lending is what yeah well I
ideally I just wrote an article on student debt would be a very nice way to
get another trillion dollar into the system there's a now a trillion dollars
in student debt outstanding when the Federal Reserve did its quantitative
easing one 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 at them at face value no actually they got
a deal on it the Fed actually made money on that deal even though ever
everybody said that 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 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 and for another reason I think it's because it help America no
finance 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 edge free higher
education which I think we should have been given a line that's a hidden tax
on the American public in no not if you're in a deflationary cycle if you
used to have 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 it's still there's still 1.6 trillion in excess reserves sitting on
the books of the Wall Street banks that not the local banks the local banks
can't get it it's the Wall Street Bank so what if we gave a trillion dollars to
the municipal governments or the states it would only take 200 billion to bail
out the state all the states to balance the books of all the states or the
students you 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 interest
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 issue money and they're looking for it again I want to make the
point here you say create money not create debt right okay we keep talking
about they we refer to Fed who's doing this who are these shadow bankers who
who controls us who owns it all well if you trace it back historically there were
some key players that set this system up and 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 and they drive yeah 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 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 yeah that's what you have to do is fix the
system so it's it's it's this amalgam of opportunists which we'll call
speculators these are people that are bad against weak currencies like George
Soros did in one time what about the central bankers as a group well then
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 now I could
envision that there are people scheming at the Bank for International
Settlements because they are pretty much broken one economy after another by
imposing their rules I mean that the first and most people don't even know
what the Bank of International Settlements no they were kept a low profile for a
long time till 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 there are infiltrators
who report on it but it's not nothing's official on that but they see people
going in and out are there Rothschilds that we can look to and say that you know
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 two big two 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 we
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 is insufficient resources there for that
didn't Greece just sell off an island could be they impose some austerity on
our earth in the terms of taking the treasures those antiquities yeah and
they're threatening to actually put in a military like a police force that will
enforce this they're gonna take over those governments they've 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 it would
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 to 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 world the debt
cap will remove and that we grew the economy through that 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 to fill up the 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 doesn't everyone know that our debt will never
be repaid and we're even faced with a problem now servicing the debt it's an
interest on the debt rather yeah well it's a servicing that's the problem if
you got rid of the interest and you just allowed the debt to expand as we
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 yeah 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 it's out changing any
loss coin 14 1 trillion dollar coins put them in the Treasury's bank account with
the Fed and just buy back all those bonds and rip them up so so all those
all the current bond holders would now have dollars instead of all the 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 of
the dollar bond we can create a dollar bill which is 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 a lot of their 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 type say well that means that that just means that you can
take your coins to the mint and Congress will put the stamp on it that 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 that you have to 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 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 right
Ellen I want to thank you for a very 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 and
a lot of the really sensible down-to-earth and very simplified
banking proposals that you made and again I want to thank you for being my
guest in the moral politics it's been a pleasure thanks