November 26, 2023
July 17, 2023
The Federal Debt Trap: Issues and Possible Solutions
Posted on July 14, 2023 by Ellen Brown
from Web of Debt blog
First posted on ScheerPost.
“Rather than collecting taxes from the wealthy,” wrote the New York Times Editorial Board in a July 7 opinion piece, “the government is paying the wealthy to borrow their money.”
Titled “America Is Living on Borrowed Money,” the editorial observes that over the next decade, according to the Congressional Budget Office (CBO), annual federal budget deficits will average around $2 trillion per year. By 2029, just the interest on the debt is projected to exceed the national defense budget, which currently eats up over half of the federal discretionary budget. In 2029, net interest on the debt is projected to total $1.07 trillion, while defense spending is projected at $1.04 trillion. By 2033, says the CBO, interest payments will reach a sum equal to 3.6 percent of the nation’s economic output.
The debt ceiling compromise did little to alleviate that situation. Before the deal, the CBO projected the federal debt would reach roughly $46.7 trillion in 2033. After the deal, it projected the total at $45.2 trillion, only slightly less – and still equal to 115% of the nation’s annual economic output, the highest level on record.
Acknowledging that the legislation achieved little, House Speaker Kevin McCarthy said after the vote that he intended to form a bipartisan commission “so we can find the waste and we can make the real decisions to really take care of this debt.” The NYT Editorial Board concluded:
Any substantive deal will eventually require a combination of increased revenue and reduced spending …. Both parties will have to compromise: Republicans must accept the necessity of collecting what the government is owed and of imposing taxes on the wealthy. Democrats must recognize that changes to Social Security and Medicare, the major drivers of expected federal spending growth, should be on the table. Anything less will prove fiscally unsustainable.
The Elephant in the Room
Omitted was any mention of trimming the defense budget, which currently accounts for more than half of the federal government’s discretionary spending and nearly two-thirds of its contract spending. Rep. Ro Khanna (D-CA), who cast the sole dissenting vote on the recent $886 billion defense budget in the House Armed Services Committee, has detailed some of the Pentagon’s excesses. For decades, he writes, legacy military contractors have charged the federal government exorbitant sums for everything from fighter jets to basic hardware. Lockheed Martin, for example, has used its monopoly on F-35 fighter jets to profit from maintenance that only they can provide, with the work needed to support and upgrade existing jets projected to cost taxpayers over $1.3 trillion. TransDigm, another contractor responsible for supplying spare parts for the military, was found to be charging the Pentagon more than four times the market price for their products.
Rep. Khanna concludes, “Keeping America strong starts at home. It means ensuring access to quality, affordable healthcare and education, strengthening our economy with good-paying jobs, and giving Americans the tools they need to pursue the American Dream.… Bloated military spending is not the answer.… We can’t continue to sign a blank check to price-gouging defense contractors while Americans struggle here at home.”
In an address to the UN Security Council on Ukraine aid on June 29, 2023, Max Blumenthal added fuel to those allegations. He said:
Just June 28th, as emergency crews work to clean up yet another toxic train derailment in the United States, this time on the Montana River, further exposing our nation’s chronically underfunded infrastructure and its threats to our health, the Pentagon announced plans to send an additional $500 million worth of military aid to Ukraine….
This policy, … which sees Washington prioritize unrestrained funding for a proxy war with a nuclear power in a foreign land … while our domestic infrastructure falls apart before our eyes, exposes a disturbing dynamic at the heart of the Ukraine conflict – an international Ponzi scheme that enables Western elites to seize hard-earned wealth from the hands of average U.S citizens and funnel it into the coffers of a foreign government that even Transparency International ranks as consistently one of the most corrupt in Europe.
The U.S. government has yet to conduct an official audit of its funding for Ukraine. The American public has no idea where their tax dollars are going. And that’s why this week we at the Grayzone published an independent audit of U.S. tax dollar allocations to Ukraine throughout the fiscal years 2022 and ’23.
Among other dubious payments they found were $4.5 million from the U.S. Social Security Administration to the Kiev government, and $4.5 billion from USAID to pay off Ukraine’s sovereign debt, “much of which is owned by the global investment firm BlackRock. That amounts to $30 taken from every U.S citizen at a time when 4 in 10 Americans cannot afford a $400 emergency.”
The Black Hole of the Pentagon Budget
The Pentagon failed its fifth budget audit in 2022 and was unable to account for more than half of its assets, or more than $3 trillion. According to a CBS News report, defense contractors overcharged the Defense Department by nearly 40-50%; and according to the Office of the Inspector General for the Defense Department, overcharging sometimes reached more than 4,000%. The $886 billion budget request for FY2024 is the highest ever sought.
Following repeated concerns about fraud, waste and abuse in the Pentagon, in June 2023 a bipartisan group of senators introduced legislation to ensure the Defense Department passes a clean audit next year. The Audit the Pentagon Act of 2023 would require the Defense Department to pass a full, independent audit in fiscal 2024. Any agency within the Pentagon failing to pass a clean audit would be forced to return 1% of its budget for deficit reduction.
Sen. Bernie Sanders (I-Vt.) observed that the Pentagon “and the military industrial complex have been plagued by a massive amount of waste, fraud, and financial mismanagement for decades.… [W]e have got to end the absurdity of the Pentagon being the only agency in the federal government that has never passed an independent audit.”
Sen. Chuck Grassley (R-Iowa) said the Pentagon “should have to meet the same annual auditing standards as every other agency…. From buying $14,000 toilet seats to losing track of warehouses full of spare parts, the Department of Defense has been plagued by wasteful spending for decades. … Every dollar the Pentagon squanders is a dollar not used to support service members, bolster national security or strengthen military readiness.”
But defense audits have been promised before and have not been completed. In 2017, Michigan State University Prof. Mark Skidmore, working with graduate students and with Catherine Austin Fitts, former assistant secretary of Housing and Urban Development, found $21 trillion in unauthorized spending in the departments of Defense and Housing and Urban Development for the years 1998-2015. As reported in MSUToday, Skidmore got involved when he heard Fitts refer to a report indicating the Army had $6.5 trillion in unsupported adjustments (or spending) in fiscal 2015. Since the Army’s budget was then only $122 billion, that meant unsupported adjustments were 54 times the spending authorized by Congress. Thinking Fitts must have made a mistake, Skidmore investigated and found that unsupported adjustments were indeed $6.5 trillion.
Four days after Skidmore discussed his team’s findings on a USAWatchdog podcast, the Department of Defense announced it would conduct its first-ever department-wide independent financial audit. But it evidently failed in that endeavor. As Bernie Sanders observes, the Pentagon has never passed an independent audit. It failed its fifth audit in 2022. Whether it will pass this sixth one, or whether the audit will lead to budget cuts, remains to be seen. The Pentagon budget seems to be untouchable.
Continue reading "The Federal Debt Trap: Issues and Possible Solutions" »
December 10, 2022
What Does the Fed’s Jerome Powell Have Up His Sleeve?
by Ellen Brown
Posted on December 10, 2022
The Real Goal of Fed Policy: Breaking Inflation, the Middle Class or the Bubble Economy?
“There is no sense that inflation is coming down,” said Federal Reserve Chairman Jerome Powell at a November 2 press conference, — this despite eight months of aggressive interest rate hikes and “quantitative tightening.” On November 30, the stock market rallied when he said smaller interest rate increases are likely ahead and could start in December. But rates will still be increased, not cut. “By any standard, inflation remains much too high,” Powell said. “We will stay the course until the job is done.”
The Fed is doubling down on what appears to be a failed policy, driving the economy to the brink of recession without bringing prices down appreciably. Inflation results from “too much money chasing too few goods,” and the Fed has control over only the money – the “demand” side of the equation. Energy and food are the key inflation drivers, and they are on the supply side. As noted by Bloomberg columnist Ramesh Ponnuru in the Washington Post in March:
Fixing supply chains is of course beyond any central bank’s power. What the Fed can do is reduce spending levels, which would in turn exert downward pressure on prices. But this would be a mistaken response to shortages. It would answer a scarcity of goods by bringing about a scarcity of money. The effect would be to compound the hit to living standards that supply shocks already caused.
So why is the Fed forging ahead? Some pundits think Chairman Powell has something else up his sleeve.
The Problem with “Demand Destruction”
First, a closer look at the problem. Shrinking demand by reducing the money supply – the money available for people to spend – is considered the Fed’s only tool for fighting inflation. The theory behind raising interest rates is that it will reduce the willingness and ability of people and businesses to borrow. The result will be to shrink the money supply, most of which is created by banks when they make loans. The problem is that shrinking demand means shrinking the economy – laying off workers, cutting productivity, and creating new shortages – driving the economy into recession.
Demand has indeed been shrinking, as evidenced in a November 27 article on ZeroHedge titled: “The Consumer Economy Has Completely Collapsed – ‘It’s A Ghost Town’ for Holiday Shopping Everywhere.” But retailers have cut their prices about as far as they can go. While the rate of increase in producer costs is slowing, those costs are still rising; and retailers have to cover their costs to stay in business, whether or not they have customers at their doors. Rather than lowering their prices further, they will be laying off workers or closing up shop. Layoffs are on the rise, and data reported on December 1 showed that U.S. factory activity is contracting for the first time since the lockdowns of the Covid-19 pandemic.
It is not just activity in shopping malls and factories that has taken a hit. The housing market has fallen sharply, with pending home sales dropping 32% year-over-year in October. The stock market is also sinking, and the cryptocurrency market has fallen off a cliff. Worse, interest on the federal debt is shooting up. For years, the government has been able to borrow nearly for free. By 2025 or 2026, according to Moody’s Analytics, interest payments could exceed the country’s entire defense budget, which hit $767 billion in fiscal 2022. That means major cuts will be needed to some federal programs.
Breaking the “Fed Put”
In the face of all this economic strife, why is the Fed not reversing its aggressive interest rate hikes, as investors have come to expect? Former British diplomat and EU foreign policy advisor Alastair Crooke suggests that the Fed’s goal is something else:
The Fed … may be attempting to implement a contrarian, controlled demolition of the U.S. bubble-economy through interest rate increases. The rate rises will not slay the inflation “dragon” (they would need to be much higher to do that). The purpose is to break a generalized “dependency habit” on free money.
Danielle DiMartino Booth, former advisor to Dallas Federal Reserve President Richard Fisher, agrees. She stated in an interview with financial journalist and podcaster Julia LaRoche:
Maybe Jay Powell is trying to kill the “Fed put.” Maybe he’s trying to break the back of speculation once and for all, so that it’s the Fed – truly an independent apolitical entity – that is making monetary policy, and not speculators making monetary policy for the Fed.
The “Fed put” is the general idea that the Federal Reserve is willing and able to adjust monetary policy in a way that is bullish for the stock market. As explained in a Fortune Magazine article titled “The Stock Market Is Freaking Out Because of the End of Free Money – It All Has to Do with Something Called ‘The Fed Put:’”
For decades, the way the Fed enacted policy was like a put option contract, stepping in to prevent disaster when markets experienced serious turbulence by cutting interest rates and “printing money” through QE [quantitative easing].
… Since the beginning of the pandemic, the Fed had supported markets with ultra-accommodative monetary policy in the form of near-zero interest rates and quantitative easing (QE). Stocks thrived under these loose monetary policies. As long as the central bank was injecting liquidity into the economy as an emergency lending measure, the safety net was laid out for investors chasing all kinds of risk assets.
… The idea that the Fed will come to stocks’ aid in a downturn began under Fed Chair Alan Greenspan. What is now the “Fed put” was once the “Greenspan put,” a term coined after the 1987 stock market crash, when Greenspan lowered interest rates to help companies recover, setting a precedent that the Fed would step in during uncertain times.
But the “free money” era seems to be over:
The regime change has left markets effectively on their own and led risk assets, including stocks and cryptocurrencies, to crater as investors grapple with the new norm. It’s also left many wondering whether the era of the so-called Fed put is over.
Continue reading "What Does the Fed’s Jerome Powell Have Up His Sleeve?" »
September 04, 2022
July 28, 2022
Interest Rate Hikes Will Not Save Us from Inflation
Posted on July 28, 2022 by Ellen Brown on Web of Debt blog
Rather than making money harder to get, the U.S. government needs to focus on the other side of the demand vs. supply equation.
In prescribing cures for inflation, economists rely on the diagnosis of Nobel laureate Milton Friedman: inflation is always and everywhere a monetary phenomenon—too much money chasing too few goods. But that equation has three variables: too much money (“demand”) chasing (the “velocity” of spending) too few goods (“supply”). And “orthodox” economists, from Lawrence Summers to the Federal Reserve, seem to be focusing only on the “demand” variable.
The Fed’s prescription is to suppress demand (borrowing and spending) by raising interest rates. Summers, a former U.S. Treasury Secretary who presided over the massive post-2008 bank bailouts, is proposing to reduce demand by raising taxes or raising unemployment rates, reducing disposable income and thus people’s ability to spend. But those rather brutal solutions miss the real problem, just as Summers missed the crisis leading up to the 2008-09 crash. As explained in a November 2021 editorial titled “Too Few Goods – The Simple Explanation for October’s Elevated Inflation Rates,” we don’t actually have too much consumer money chasing available goods:
M2 money supply surged [in 2020] as the Fed pumped out liquidity to replace businesses’ lost sales and households’ lost paychecks. But bank reserves account for nearly half of the cumulative increase since 2020 began, and the vast majority seem to be excess reserves sitting on deposit at Federal Reserve banks and not backing loans. Excluding bank reserves, M2 money supply is now growing more slowly than it did for most of 2015 – 2019, when inflation was mostly below the Fed’s 2% y/y target, much to policymakers’ chagrin. Weak lending also suggests money isn’t doing much “chasing,” a notion underscored by the historically low velocity of money. US personal consumption expenditures—the broadest measure of household spending—have already slowed from a reopening resurgence to rates more akin to the pre-pandemic norm and surveys show many households used stimulus money to repay debt or build savings they may not spend at all. It doesn’t look like there is a mountain of household liquidity waiting to do more chasing from here. [Emphasis added.]
In March 2022, the Federal Reserve tackled inflation with its traditional tools – raising interest rates and tightening the money supply by selling bonds, pulling dollars out of the economy. But not only have prices not gone down since then, they are going up. As observed in a July 15 article on Seeking Alpha titled “Fed-Induced Recession Looms As Rate Fears Roil All Markets”:
On Wednesday, the Consumer Price Index came in at a 9.1% annual rate. The higher-than-expected reading puts the CPI at a new 41-year high.
The biggest contributors to rising consumer prices are the basic necessities of food, fuel, and shelter. As households struggle to make ends meet, they are trimming discretionary spending, burning through savings, and running up credit card balances.
Businesses are also getting squeezed. On Thursday, the Producer Price Index showed wholesale costs rising at a massive 11.3% year-over-year.
When their own costs go up, producers must raise the prices of their products to cover those costs, regardless of demand. Less money competing for their products won’t bring producer costs down. It will just drive the companies out of business, as happened in the Great Depression. The Seeking Alpha article concludes:
… As both businesses and consumers are forced to tighten their belts, a slowdown looms.
And if the Federal Reserve makes another major policy misstep, then a severe recession and financial crisis may also be coming.
Recession is already evident. The stock market has lost a cumulative $7 trillion in value this year, while the crypto market has lost $2 trillion since last November. Emerging markets are in even worse straits. According to a July 14 article by Larry McDonald on ZeroHedge, “Emerging and frontier market countries currently owe the IMF over $100 billion. US central banking policy plus a strong USD is vaporizing this capital as we speak.… A quarter-trillion dollars of distressed debt is threatening to drag the developing world into a historic cascade of defaults.”
Every time the Fed raises rates, borrowing becomes more expensive. That means higher interest costs not only for governments but for borrowers with mortgages, home equity lines of credit, credit cards, student debt and car loans. For both large and small businesses, loans also get pricier.
To be clear, this is not the same sort of inflation that Paul Volcker was taming in 1980 when he raised the Fed funds rate to 20%. McDonald observes, “In 2021, global debt reached a record $303T, according to the Institute of International Finance .… Volcker was jacking rates into a planet with about $200T LESS debt.” [Emphasis added]
Volcker was also not dealing with the supply shortages we have today, generated by lockdowns that put more than 100,000 U.S. companies out of business; sanctions and war that cut off global supplies of fuel, food and resources; and farming crises such as that in the Netherlands, generated by overly stringent regulations.
Higher interest rates don’t alleviate cost/push inflation caused by supply crises; they make it worse. Rather than making money harder to get, the government needs to focus on the supply side of the equation, stimulating local production to bring supply levels up. Rather than Volcker’s solution, what we need is that pioneered by Alexander Hamilton, Abraham Lincoln, and Franklin D. Roosevelt, who pulled us out of similar crises with public banking institutions designed to stimulate infrastructure and development.
For foreign models, we can look to the infrastructure-funding central banks of Australia, New Zealand and Canada in the first half of the 20th century; and to China, which salvaged the global economy following the 2008 banking crisis with massive infrastructure and development funded through its state-owned development banks.
Continue reading "Interest Rate Hikes Will Not Save Us from Inflation" »
July 08, 2022
The Food Shortage Solution in Your Own Backyard
Posted on June 9, 2022 by Ellen Brown from Web of Debt
While the global food systems we depend on come under increasing strain, there’s a solution to the growing crisis that most Americans can find in their own backyards–or front lawns.
A confluence of crises—lockdowns and business closures, mandates and worker shortages, supply chain disruptions and inflation, sanctions and war—have compounded to trigger food shortages; and we have been warned that they may last longer than the food stored in our pantries. What to do?
Jim Gale, founder of Food Forest Abundance, pointed out in a recent interview with Del Bigtree that in the United States there are 40 million acres of lawn. Lawns are the most destructive monoculture on the planet, absorbing more resources and pesticides than any other crop, without providing any yield. If we were to turn 30% of that lawn into permaculture-based food gardens, says Gale, we could be food self-sufficient without relying on imports or chemicals.
Permaculture is a gardening technique that “uses the inherent qualities of plants and animals combined with the natural characteristics of landscapes and structures to produce a life-supporting system for city and country, using the smallest practical area.”
Russian families have shown the possibilities, using permaculture methods on simple cottage gardens or allotments called dachas. As Dr. Leon Sharashkin, a Russian translator and editor with a PhD in forestry from the University of Missouri, explains:
Essentially, what Russian gardeners do is demonstrate that gardeners can feed the world – and you do not need any GMOs, industrial farms, or any other technological gimmicks to guarantee everybody’s got enough food to eat. Bear in mind that Russia only has 110 days of growing season per year – so in the US, for example, gardeners’ output could be substantially greater. Today, however, the area taken up by lawns in the US is two times greater than that of Russia’s gardens – and it produces nothing but a multi-billion-dollar lawn care industry.
The Dacha Model
Dachas are small wooden houses on a small plot of land, typically just 600 meters (656 yards) in size. In Soviet Russia, they were allocated free of charge on the theory that the land belonged to the people. They were given to many public servants; and families not given a dacha could get access to a plot of land in an allotment association, where they could grow vegetables, visit regularly to tend their kitchen gardens and gather crops.
Dachas were originally used mainly as country vacation getaways. But in the 1990s, they evolved from a place of rest into a major means of survival. That was when the Russian economy suffered from what journalist Anne Williamson called in congressional testimony the “rape of Russia.” The economy was destroyed and then plundered by financial oligarchs, who swooped in to buy assets at fire sale prices.
Stripped of other resources, Russian families turned to their dachas to grow food. Dr. Sharaskin observed that the share of food gardening in national agriculture increased from 32% in 1990 to over 50% by 2000. In 2004, food gardens accounted for 51% of the total agricultural output of the Russian Federation – greater than the contribution of the whole electric power generation industry; greater than all of the forestry, wood-processing and pulp and paper industries; and significantly greater than the coal, natural gas and oil refining industries taken together.
Dachas are now a codified right of Russian citizens. In 2003, the government signed the Private Garden Plot Act into law, granting citizens free plots of land ranging from 1 to 3 hectares each. (A hectare is about 2.5 acres.) Dr. Sharaskin opined in 2009 that “with 35 million families (70% of Russia’s population) … producing more than 40% of Russia’s agricultural output, this is in all likelihood the most extensive microscale food production practice in any industrially developed nation.”
In a 2014 article titled “Dacha Gardens—Russia’s Amazing Model for Urban Agriculture”, Sara Pool wrote that Russia obtains “over 50% agricultural products from family garden plots. The backyard gardening model uses around 3% arable land, and accounts for roughly 92% of all Russian potatoes, 87% of all fruit, 77% vegetables, and 59% all Russian meat according to the Russian Federal State Statistic Service.”
Our Beautiful but Toxic and Wasteful Green Lawns
Rather than dachas, we in the West have pristine green lawns, which not only produce no food but involve chemical and mechanical maintenance that is a major contributor to water and air pollution. Lawns are the single largest irrigated crop in the U.S., covering nearly 32 million acres. This is a problem particularly in the western U.S. states, which are currently suffering from reduced food production due to drought. Data compiled by Urban Plantations from the EPA, the Public Policy Institute of California, and the Alliance for Water Efficiency suggests that gardens use 66% less water than lawns. In the U.S., fruits and vegetables are grown on only about 10 million acres. In theory, then, if the space occupied by American lawns were converted to food gardens, the country could produce four times as many fruits and vegetables as it does now.
A study from NASA scientists in collaboration with researchers in the Mountain West estimated that American lawns cover an area that is about the size of Texas and is three times larger than that used for any other irrigated crop in the United States. The study was not, however, about the growth of lawns but about their impact on the environment and water resources. It found that “maintaining a well-manicured lawn uses up to 900 liters of water per person per day and reduces [carbon] sequestration effectiveness by up to 35 percent by adding emissions from fertilization and the operation of mowing equipment.” To combat water and pollution problems, some cities have advocated abandoning the great green lawn in favor of vegetable gardens, local native plants, meadows or just letting the grass die. But well-manicured lawns are an established U.S. cultural tradition; and some municipalities have banned front-yard gardens as not meeting neighborhood standards of aesthetics. Some homeowners, however, have fought back. Florida ended up passing a law in July 2019 that prohibits towns from banning edible gardens for aesthetic reasons; and in California, a bill was passed in 2014 that allows yard use for “personal agriculture” (defined as “use of land where an individual cultivates edible plant crops for personal use or donation”). As noted in a Los Angeles Times op-ed:
“The Legislature recognized that lawn care is resource intensive, with lawns being the largest irrigated crop in the United States offering no nutritional gain. Finding that 30% to 60% of residential water is used for watering lawns, the Legislature believes these resources could be allocated to more productive activities, including growing food, thus increasing access to healthy options for low-income individuals.”
Despite how large they loom in the American imagination, immaculate green lawns maintained by pesticides, herbicides and electric lawnmowers are a relatively recent cultural phenomenon in the United States. In the 1930s, chemicals were not recommended. Weeds were controlled either by pulling them by hand or by keeping chickens. Chemical use became popular only after World War II, and it has grown significantly since. According to the EPA, close to 80 million U.S. households spray 90 million pounds of pesticides and herbicides on their lawns each year. A 1999 study by the United States Geological Survey found that 99% of urban water streams contain pesticides, which pollute our drinking water and create serious health risks for wildlife, pets, and humans. Among other disorders, these chemicals are correlated with an increased risk of cancers, nervous system disorders, and a seven-fold increased risk of childhood leukemia.
That’s just the pollution in our water supply. Other problems with our lawn fetish are air and noise pollution generated by gas-powered lawn and garden equipment. The Environmental Protection Agency estimates that this equipment is responsible for 5% of U.S. air pollution. Americans use about 800 million gallons of gas per year just mowing their lawns.
Continue reading "The Food Shortage Solution in Your Own Backyard" »
April 10, 2022
Off the Top of My Head
What Are the Implications of Russia's Pariahdom for Global Warming?
by John Lawrence
All western politicians and pundits (with the possible exception of Tucker Carlson) agree that Russia is and shall ever be a pariah state. Putin is a pariah who should be tried for war crimes. So how is the world and the community of nations going to combat our truly mortal enemy - global warming? As a major producer of fossil fuels, in order to get off the fossil fuel bandwagon, we would need Russia's cooperation. If Putin is to be a pariah, he could care less about global warming. He's probably thinking about all the resorts he could build in Siberia! Besides that, as the world warms, the tundra in Siberia is thawing releasing tons of methane, a far more potent greenhouse gas than carbon dioxide. In recent years, climate scientists have warned thawing permafrost in Siberia may be a “methane time bomb”. But now a study by three geologists says that a heat wave in 2020 has revealed a surge in methane emissions “potentially in much higher amounts” from a different source: thawing rock formations in the Arctic permafrost. Russia and Putin could have the last laugh as the rest of the world goes up in flames and Russia adapts to a more moderate climate.
The Washington Post reported:
"The difference is that thawing wetlands releases “microbial” methane from the decay of soil and organic matter, while thawing limestone — or carbonate rock — releases hydrocarbons and gas hydrates from reservoirs both below and within the permafrost, making it “much more dangerous” than past studies have suggested.
"Nikolaus Froitzheim, who teaches at the Institute of Geosciences at the University of Bonn, said that he and two colleagues used satellite maps that measured intense methane concentrations over two “conspicuous elongated areas” of limestone — stripes that were several miles wide and up to 375 miles long — in the Taymyr Peninsula and the area around northern Siberia.
"The study was published by the Proceedings of the National Academy of Sciences. Surface temperatures during the heat wave in 2020 soared to 10.8 degrees Fahrenheit above the 1979-2000 norms. In the long stripes, there is hardly any soil, and vegetation is scarce, the study says. So the limestone crops out of the surface. As the rock formations warm up, cracks and pockets opened up, releasing methane that had been trapped inside."
Have the western politicos miscalculated or are they just playing into the Russian playbook in which the Russians are thinking 3 moves ahead on the chess board? The politicos and pundits all agree that Russia's financial lifeline is the sale of oil and gas and that the west must do everything it can do to shut off those sales starving Russia financially. But wait a minute. What they fail to understand is that Russia does not need the sale of gas or any other commodity to survive financially because the ruble is a fiat currency. The Russian central bank can print as many rubles as it likes with the only constraint being inflation. The US dollar is also a fiat currency and the US Federal Reserve can print as many dollars as it likes, the only restraints being political and again inflation which the US is now experiencing to a greater degree than Russia is. In fact the printing of Russian rubles will only tend to balance their economy and prevent it from going into recession. Meanwhile, the west, Germany in particular, struggles with replacing Russian gas and oil with gas and oil from other sources in a futile attempt to starve Russia financially. Ellen Brown has pointed out why sanctions may even be good for Russia because it forces Russia to develop sectors of its own economy rather than relying on imports from the west.
Besides Russia has a lot of friends in the world, some of them like Hungary who are even NATO members. Viktor Orban, Hungary's authoritarian leader and key Putin ally, calls Zelensky an 'opponent' after winning reelection. So while the US and Britain mainly fulminate over Russia's Putin being a pariah, not everyone in the non-western world agrees. Russia still has plenty of friends, just not in the US or Britain. Which brings is back to our original question, how can we solve the problem of global warming without Russia's cooperation even if we are not friends with them? Is it worth it to destroy the whole planet earth because of two countries engaging in a war no matter how brutal and ill founded? The west must eventually come to terms with Russia and with Putin if Putin is still the Russian leader when the war ends or watch while planet earth, not just Ukraine, goes up in flames.
April 06, 2022
Off the Top of My Head
Joe Biden's Policy: Speak Loudly but Carry a Small Stick
by John Lawrence
As opposed to Theodore Roosevelt's policy: speak softly but carry a big stick. I think Biden's policy is correct. By all means we don't want World War III. As Ellen Brown makes clear on Web of Debt blog, sanctions will not do much except hasten the day when the US dollar is not the only world's reserve currency. There are so many workarounds to sanctions, and billionaires can always replace their super yachts. Russia has a fiat currency just like the US dollar. Modern Monetary Theory has shown that a country with a fiat currency can have its central bank print as much of that currency as it wishes. The only constraining factor is inflation. Right now the US is more constrained by inflation than Russia is. There is no need for Russia's domestic economy to suffer because of inflation. Businesses can continue to receive investment loans from the central bank. International trade will continue with friendly countries like India, China, Venezuela and Turkey. Turkey is a member of NATO by the way, and India is the world's largest democracy.
Daily Sabah reported on March 11, 2022 in Turkish businesses expect progress on using rubles in trade with Russia :
"Since the currency dispute with shipping companies is causing problems in the delivery of goods passing through customs, Turkey should actively work to develop a mechanism to facilitate trade with Russia in rubles, Istanbul Chamber of Commerce (ITO) head Şekib Avdagiç said Friday. Avdagiç stated that the companies working with Russia see the withdrawal of Western countries from Moscow as a new opportunity and emphasized that it is important to enable the use of the national currency of Russia. The issue was also brought up during President Recep Tayyip Erdoğan’s phone call with his Russian counterpart Vladimir Putin, he reiterated. Erdoğan told Putin that, apart from the euro and dollar, trade between the two countries can be carried out using the Russian ruble and Chinese yuan."
Aljazeera reported:
Mumbai, India–Indian authorities are actively considering dedicated payment mechanisms for trade with Russia to enable existing trade obligations in the wake of sanctions imposed on the Kremlin, a move that will also pave the way for cheaper oil imports to meet the country’s energy demands. In the past month, as sanctions have been imposed on Russia, the scope of a payment mechanism in local currencies has expanded from being a means to sustain ongoing trade to possibilities of deeper engagement, including increasing bilateral trade.
Of course, US authorities are managing the news here just as they are in Russia. They don't want you to know that our erstwhile ally, India, the world's largest democracy is doing workarounds to avoid US sanctions. As Ellen's article points out, we in the US may be better off once the US dollar is not the only world's reserve currency. At that point we may have to rely more on our domestic economy and infrastructure just as Russia is being forced to do now. So we won't have to be at the mercy of supply chains from other parts of the world. More stuff will be manufactured here in the good old USA, and that's a good thing.
The Coming Global Financial Revolution: Russia Is Following the American Playbook
Posted on April 5, 2022 by Ellen Brown from Web of Debt blog
No country has successfully challenged the U.S. dollar’s global hegemony—until now. How did this happen and what will it mean?
Foreign critics have long chafed at the “exorbitant privilege” of the U.S. dollar as global reserve currency. The U.S. can issue this currency backed by nothing but the “full faith and credit of the United States.” Foreign governments, needing dollars, not only accept them in trade but buy U.S. securities with them, effectively funding the U.S. government and its foreign wars. But no government has been powerful enough to break that arrangement – until now. How did that happen and what will it mean for the U.S. and global economies?
The Rise and Fall of the PetroDollar
First, some history: The U.S. dollar was adopted as the global reserve currency at the Bretton Woods Conference in 1944, when the dollar was still backed by gold on global markets. The agreement was that gold and the dollar would be accepted interchangeably as global reserves, the dollars to be redeemable in gold on demand at $35 an ounce. Exchange rates of other currencies were fixed against the dollar.
But that deal was broken after President Lyndon Johnson’s “guns and butter” policy exhausted the U.S. kitty by funding war in Vietnam along with his “Great Society” social programs at home. French President Charles de Gaulle, suspecting the U.S. was running out of money, cashed in a major portion of France’s dollars for gold and threatened to cash in the rest; and other countries followed suit or threatened to.
In 1971, President Richard Nixon ended the convertibility of the dollar to gold internationally (known as “closing the gold window”), in order to avoid draining U.S. gold reserves. The value of the dollar then plummeted relative to other currencies on global exchanges. To prop it up, Nixon and Secretary of State Henry Kissinger made a deal with Saudi Arabia and the OPEC countries that OPEC would sell oil only in dollars, and that the dollars would be deposited in Wall Street and City of London banks. In return, the U.S. would defend the OPEC countries militarily. Economic researcher William Engdahl also presents evidence of a promise that the price of oil would be quadrupled. An oil crisis triggered by a brief Middle Eastern war did cause the price of oil to quadruple, and the OPEC agreement was finalized in 1974.
The deal held firm until 2000, when Saddam Hussein broke it by selling Iraqi oil in euros. Libyan president Omar Qaddafi followed suit. Both presidents wound up assassinated, and their countries were decimated in war with the United States. Canadian researcher Matthew Ehret observes:
We should not forget that the Sudan-Libya-Egypt alliance under the combined leadership of Mubarak, Qadhafi and Bashir, had moved to establish a new gold-backed financial system outside of the IMF/World Bank to fund large scale development in Africa. Had this program not been undermined by a NATO-led destruction of Libya, the carving up of Sudan and regime change in Egypt, then the world would have seen the emergence of a major regional block of African states shaping their own destinies outside of the rigged game of Anglo-American controlled finance for the first time in history.
The Rise of the PetroRuble
The first challenge by a major power to what became known as the petrodollar has come in 2022. In the month after the Ukraine conflict began, the U.S. and its European allies imposed heavy financial sanctions on Russia in response to the illegal military invasion. The Western measures included freezing nearly half of the Russian central bank’s 640 billion U.S. dollars in financial reserves, expelling several of Russia’s largest banks from the SWIFT global payment system, imposing export controls aimed at limiting Russia’s access to advanced technologies, closing down their airspace and ports to Russian planes and ships, and instituting personal sanctions against senior Russian officials and high-profile tycoons. Worried Russians rushed to withdraw rubles from their banks, and the value of the ruble plunged on global markets just as the U.S. dollar had in the early 1970s.
The trust placed in the U.S. dollar as global reserve currency, backed by “the full faith and credit of the United States,” had finally been fully broken. Russian President Vladimir Putin said in a speech on March 16 that the U.S. and EU had defaulted on their obligations, and that freezing Russia’s reserves marks the end of the reliability of so-called first class assets. On March 23, Putin announced that Russia’s natural gas would be sold to “unfriendly countries” only in Russian rubles, rather than the euros or dollars currently used. Forty-eight nations are counted by Russia as “unfriendly,” including the United States, Britain, Ukraine, Switzerland, South Korea, Singapore, Norway, Canada and Japan.
Putin noted that more than half the global population remains “friendly” to Russia. Countries not voting to support the sanctions include two major powers – China and India – along with major oil producer Venezuela, Turkey, and other countries in the “Global South.” “Friendly” countries, said Putin, could now buy from Russia in various currencies.
On March 24, Russian lawmaker Pavel Zavalny said at a news conference that gas could be sold to the West for rubles or gold, and to “friendly” countries for either national currency or bitcoin.
Energy ministers from the G7 nations rejected Putin’s demand, claiming it violated gas contract terms requiring sale in euros or dollars. But on March 28, Kremlin spokesman Dmitry Peskov said Russia was “not engaged in charity” and won’t supply gas to Europe for free (which it would be doing if sales were in euros or dollars it cannot currently use in trade). Sanctions themselves are a breach of the agreement to honor the currencies on global markets.
Bloomberg reports that on March 30, Vyacheslav Volodin, speaker of the lower Russian house of parliament, suggested in a Telegram post that Russia may expand the list of commodities for which it demands payment from the West in rubles (or gold) to include grain, oil, metals and more. Russia’s economy is much smaller than that of the U.S. and the European Union, but Russia is a major global supplier of key commodities – including not just oil, natural gas and grains, but timber, fertilizers, nickel, titanium, palladium, coal, nitrogen, and rare earth metals used in the production of computer chips, electric vehicles and airplanes.
On April 2, Russian gas giant Gazprom officially halted all deliveries to Europe via the Yamal-Europe pipeline, a critical artery for European energy supplies.
U.K. professor of economics Richard Werner calls the Russian move a clever one – a replay of what the U.S. did in the 1970s. To get Russian commodities, “unfriendly” countries will have to buy rubles, driving up the value of the ruble on global exchanges just as the need for petrodollars propped up the U.S. dollar after 1973. Indeed, by March 30, the ruble had already risen to where it was a month earlier.
A Page Out of the “American System” Playbook
Russia is following the U.S. not just in hitching its national currency to sales of a critical commodity but in an earlier protocol – what 19th century American leaders called the “American System” of sovereign money and credit. Its three pillars were (a) federal subsidies for internal improvements and to nurture the nation’s fledgling industries, (b) tariffs to protect those industries, and (c) easy credit issued by a national bank.
Michael Hudson, a research professor of economics and author of “Super-Imperialism: The Economic Strategy of American Empire” among many other books, notes that the sanctions are forcing Russia to do what it has been reluctant to do itself – cut reliance on imports and develop its own industries and infrastructure. The effect, he says, is equivalent to that of protective tariffs. In an article titled “The American Empire Self-destructs,” Hudson writes of the Russian sanctions (which actually date back to 2014):
Russia had remained too enthralled by free-market ideology to take steps to protect its own agriculture or industry. The United States provided the help that was needed by imposing domestic self-reliance on Russia (via sanctions). When the Baltic states lost the Russian market for cheese and other farm products, Russia quickly created its own cheese and dairy sector – while becoming the world’s leading grain exporter.
Russia is discovering (or is on the verge of discovering) that it does not need U.S. dollars as backing for the ruble’s exchange rate. Its central bank can create the rubles needed to pay domestic wages and finance capital formation. The U.S. confiscations thus may finally lead Russia to end neoliberal monetary philosophy, as Sergei Glaziev has long been advocating in favor of MMT [Modern Monetary Theory]. …
What foreign countries have not done for themselves – replacing the IMF, World Bank and other arms of U.S. diplomacy – American politicians are forcing them to do. Instead of European, Near Eastern and Global South countries breaking away out of their own calculation of their long-term economic interests, America is driving them away, as it has done with Russia and China.
Glazyev and the Eurasian Reset
Sergei Glazyev, mentioned by Hudson above, is a former adviser to President Vladimir Putin and the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the Eurasian Economic Union (EAEU). He has proposed using tools similar to those of the “American System,” including converting the Central Bank of Russia to a “national bank” issuing Russia’s own currency and credit for internal development. On February 25, Glazyev published an analysis of U.S. sanctions titled “Sanctions and Sovereignty,” in which he stated:
[T]he damage caused by US financial sanctions is inextricably linked to the monetary policy of the Bank of Russia …. Its essence boils down to a tight binding of the ruble issue to export earnings, and the ruble exchange rate to the dollar. In fact, an artificial shortage of money is being created in the economy, and the strict policy of the Central Bank leads to an increase in the cost of lending, which kills business activity and hinders the development of infrastructure in the country.
Glazyev said that if the central bank replaced the loans withdrawn by its Western partners with its own loans, Russian credit capacity would greatly increase, preventing a decline in economic activity without creating inflation.
Russia has agreed to sell oil to India in India’s own sovereign currency, the rupee; to China in yuan; and to Turkey in lira. These national currencies can then be spent on the goods and services sold by those countries. Arguably, every country should be able to trade in global markets in its own sovereign currency; that is what a fiat currency is – a medium of exchange backed by the agreement of the people to accept it at value for their goods and services, backed by the “full faith and credit” of the nation.
But that sort of global barter system would break down just as local barter systems do, if one party to the trade did not want the goods or services of the other party. In that case, some intermediate reserve currency would be necessary to serve as a medium of exchange.
Glazyev and his counterparts are working on that. In a translated interview posted on The Saker, Glazyev stated:
We are currently working on a draft international agreement on the introduction of a new world settlement currency, pegged to the national currencies of the participating countries and to exchange-traded goods that determine real values. We won’t need American and European banks. A new payment system based on modern digital technologies with a blockchain is developing in the world, where banks are losing their importance.
Russia and China have both developed alternatives to the SWIFT messaging system from which certain Russian banks have been blocked. London-based commentator Alexander Mercouris makes the interesting observation that going outside SWIFT means Western banks cannot track Russian and Chinese trades.
Geopolitical analyst Pepe Escobar sums up the plans for a Eurasian/China financial reset in an article titled “Say Hello to Russian Gold and Chinese Petroyuan.” He writes:
It was a long time coming, but finally some key lineaments of the multipolar world’s new foundations are being revealed.
On Friday [March 11], after a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system. The EAEU consists of Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, is establishing free trade deals with other Eurasian nations, and is progressively interconnecting with the Chinese Belt and Road Initiative (BRI).
For all practical purposes, the idea comes from Sergei Glazyev, Russia’s foremost independent economist ….
Quite diplomatically, Glazyev attributed the fruition of the idea to “the common challenges and risks associated with the global economic slowdown and restrictive measures against the EAEU states and China.”
Translation: as China is as much a Eurasian power as Russia, they need to coordinate their strategies to bypass the US unipolar system.
The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. …
The Eurasian system is bound to become a serious alternative to the US dollar, as the EAEU may attract not only nations that have joined BRI … but also the leading players in the Shanghai Cooperation Organization (SCO) as well as ASEAN. West Asian actors – Iran, Iraq, Syria, Lebanon – will be inevitably interested.
Exorbitant Privilege or Exorbitant Burden?
If that system succeeds, what will the effect be on the U.S. economy? Investment strategist Lynn Alden writes in a detailed analysis titled “The Fraying of the US Global Currency Reserve System” that there will be short-term pain, but, in the long run, it will benefit the U.S. economy. The subject is complicated, but the bottom line is that reserve currency dominance has resulted in the destruction of our manufacturing base and the buildup of a massive federal debt. Sharing the reserve currency load would have the effect that sanctions are having on the Russian economy – nurturing domestic industries as a tariff would, allowing the American manufacturing base to be rebuilt.
Other commentators also say that being the sole global reserve currency is less an exorbitant privilege than an exorbitant burden. Losing that status would not end the importance of the U.S. dollar, which is too heavily embedded in global finance to be dislodged. But it could well mean the end of the petrodollar as sole global reserve currency, and the end of the devastating petroleum wars it has funded to maintain its dominance.
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This article was first posted on ScheerPost. Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.
November 24, 2021
The Case for a Central Bank Digital Currency
by Ellen Brown
November 23, 2021
from Web of Debt blog
Whether the U.S. should have its own central bank digital currency (CBDC) is hotly debated. Several countries, including China, already have CBDCs in operation; but the U.S. Federal Reserve is proceeding with caution. Prof. Saule Omarova, President Biden’s nominee for Comptroller of the Currency, is in favor of a CBDC and has made a strong case for it; but many conservative commentators are opposed, and her nomination remains in doubt.
Omarova sees the CBDC as an extension of public banking, but even some public banking advocates are concerned about that development. One such advocate is British Prof. Richard Werner, who laid out his cautions five years ago in a paper presented at the 14th Rhodes Forum in Greece . Werner argued that central banks are in the process of consolidating their powers. Having achieved total independence from government and total lack of accountability to the people, they now want to eliminate competition in the form of both paper money and bank-created credit-money and control the issuance of money completely. To do this, he said, they are driving both cash and bank credit out of business by imposing negative interest rates, which have already been tested in some European countries. Werner argued that negative interest rates were designed not to stimulate the economy but to create deflation and wreak further havoc — “havoc that they intend to instrumentalise to accelerate their goal of becoming the complete masters of our lives, by allowing only digital currency that they issue and control – and that they can monitor in terms of all transactions, and that they can switch off, if, for instance, some pesky dissident criticizes them too much.”
In 2016, that may have sounded radically conspiratorial. But as libertarian commentator George Gammon observed in a podcast episode this past summer called the “The Future of America: Social Scores, CBDC, Health Passports,” the technology is now in place to take us to that very dystopian future. Federal governments already have the tools and legal framework to see everyone’s transactions and to order bank accounts closed. But a CBDC could facilitate the process, as Agustin Carstens, a member of the Financial Stability Board in Basel, observed at an annual meeting of the International Monetary Fund in October of last year. Carstens said that CBDC, unlike cash, gives the central bank absolute control over the rules and regulations respecting its use and the technology to enforce those rules.
Cause for Caution or Haste?
Those are serious concerns, but while the U.S. delays, George Gammon argues in another podcast that China could overtake the U.S. dollar as global reserve currency by issuing a “DigiYuan” through the Public Bank of China. It could then require its commercial partners in the vast Belt and Road Initiative to open accounts at the PBOC and take payment in that digital currency. In a third podcast, Gammon discusses another challenger to the dollar, the digital SDR (short for “Special Drawing Rights”, the currency issued by the International Monetary Fund). The digital SDR is preferred by the World Economic Forum as global reserve currency.
But Fed Chair Jerome Powell does not appear to be concerned. During a virtual panel at the Bank for International Settlements (BIS) Innovation Summit in March, he said, “Because we are the world’s principal reserve currency, we do not need to rush this project, and we don’t need to be the first to market.” More important, said Powell, is to get it right. At the October, 2020 IMF meeting at which Carstens spoke, Powell also said there were difficult policy and operational questions yet to be resolved, including protecting the currency against cyber attacks, counterfeiting and fraud; determining how it would affect monetary policy and financial stability; and preventing illicit activity while protecting user privacy and security.
Financial blogger Tom Luongo thinks the Fed has broken away from the Europe-centered central banking cartel and is actually our bulwark against it. Luongo points to Jerome Powell’s clash with Christine Lagarde in May over her insistence that central banks require private banks to monitor the business of their clients, and to the Fed’s raising its repo rate to 0.25% in June. Though an apparently insignificant percentage, 0.25% was enough to attract large investors hobbled with zero rates in Europe away from the euro and into the U.S. dollar.
Also noteworthy is that Powell is treading carefully in the CBDC space, acknowledging the need to protect user privacy and security. The Fed Chair said at that IMF meeting, “The real threshold question, for us, is does the public want or need a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments system?”
Democratizing Money
Those questions were addressed by Prof. Omarova in an October white paper titled “The People’s Ledger: How to Democratize Money and Finance the Economy,” which does an excellent job of laying out the issues. She has been criticized for saying that the system she was proposing would “end banking as we know it,” but she clarified in that paper that she did not mean that private banks would disappear. They would just revert to being what they profess to be: intermediaries between depositors and borrowers. As the Bank of England has confirmed, today banks are not merely intermediaries. They actually create the money they lend as deposits on their books. In fact most of the circulating money supply is created in that way.
In Omarova’s model, the pooled deposits would be held at the Fed and would be borrowed by “qualifying lending institutions” (chiefly banks) from the Fed’s discount window at preferential rates. This idea is not so radical as it sounds. Banks have traditionally met their liquidity needs by borrowing deposits (“reserves”) from each other through the federal funds market. But that mechanism broke down in the 2008-09 credit crisis, because banks no longer trusted each other to be good for the loans.
Pooling deposits at the Fed, wrote Omarova, would eliminate the threat of bank runs (since the Fed’s deep pocket cannot run dry) and the threat of “bail-ins” (confiscation of private funds to recapitalize failed “too big to fail” banks, a requirement of the 2010 Dodd-Frank Act). It would also eliminate the need for massive bank regulation and “stress tests” to ensure adequate capital and liquidity, and the need for FDIC insurance, “ending the intractable TBTF problem.” It would stem the troubling wave of bank consolidations in order to acquire deposits; stem speculative trading by banks and hedge funds in financial instruments; shrink the derivatives casino to a small private market; and end the need for the Fed to engage in massive repo operations. The reasons are complicated, but Omarova explains them at length in her paper.
Private lending institutions could still take investor funds and make loans, but they would be “narrow banks” or “mutual funds,” limited to lending only the money they actually had. They could not create money on their books but would be “mere intermediaries” as they purport to be now.
Free FedAccounts for all would solve other pressing problems: they would service the unbanked and underbanked, would pay interest on deposits, and would avoid the sort of widespread failure to get timely relief payments to recipients seen in the 2020 crisis. For servicing depositors, says Omarova, community banking institutions (CBIs) could be licensed to assist.
Postal banks or local public banks (if we had them) would be other good alternatives. During the Great Depression of the 1930s, federal postal banking was a very popular public option, and there is renewed interest today in restoring that system.
The People’s Ledger
As interesting as the deposit (liability) side of the Fed’s ledger is what could be done on the asset (or loan) side. Omarova calls it “The People’s Ledger.” Her white paper begins:
In 1896, William Jennings Bryan delivered his historic “Cross of Gold” speech, making a passionate plea for a monetary system that served the interests of the working people and increased the nation’s prosperity. Today, the precise contours of that political ideal are once again intensely contested. After decades of rising inequality, systemic instability, and relentless concentration of economic power, ordinary Americans are demanding a greater say in the distribution and use of financial resources. The Reddit-fueled GameStop rally, the dramatic rise of Bitcoin and other cryptocurrencies, the “universal basic income” and “public banking” movements—these are all discrete manifestations of the broader quest for more equitable and inclusive modes of finance.
Ultimately, however, it takes a system to beat a system.
This Article takes up the challenge of “beating” the currently dysfunctional U.S. financial system by reimagining its fundamental structure and redesigning its operation. It offers both a conceptual framework for analyzing the core structural dynamics of today’s finance, and a blueprint for reform that would radically democratize access to money and control over financial flows in the nation’s economy. [Citations omitted.]
Today, private banks rather than publicly accountable financial institutions are the chief creators of a national currency backed by “the full faith and credit of the United States.” The banks and their prime customers get the advantage of the “Cantillon effect”: those closest to the source of new money benefit first and most handsomely. They get the money cheaply and have control over where it goes. They can leverage it and speculate with it, pocketing the “seigniorage” as their own private profit; and they have no public mandate to invest it in a way that serves the people. Newly created money goes into speculative ventures, driving up demand without increasing supply, resulting in bubbles and busts, inflating consumer prices and widening the “wealth gap.”
A “People’s Ledger,” says Omarova, can limit the loans created with our deposits to truly productive endeavors. Under her proposal, “the Fed’s principal asset holdings would fall into three categories: (1) redesigned ‘discount window’ loans to qualifying lenders; (2) securities issued by existing and newly created public instrumentalities for purposes of financing large-scale public infrastructure projects; and (3) an expanded portfolio of trading assets maintained for purposes of financial-market stabilization.” Banks could still finance “non-qualifying” loans, but it would be “by issuing corporate debt and equity securities in capital markets, much in the same way as other corporations do.”
She clarifies that the Fed would not be making direct investment decisions, easing the current pressure on it to use its balance sheet for political purposes. Individual and business loans would be made by “qualifying lending institutions” drawing their liquidity from the Fed’s discount window. Loans characterized as “national development” would be made by an independent public institution she calls the National Investment Authority, “envisioned as the modern-day equivalent of the Reconstruction Finance Corporation (‘RFC’), the New Deal-era public institution that successfully led a massive nationwide capital mobilization campaign to aid Depression-struck sectors of the American economy.” That role could also be filled by the National Infrastructure Bank currently proposed in HR 3339, which is also modeled on the RFC.
Freeing the “Free” Market
What of Prof. Werner’s concerns about the centralization of power under a central banking system? His proposed solution is to reverse that agenda and decentralize power, by abandoning the big banks and supporting local not-for-profit community banks. This could also be done with decentralized cryptocurrencies. But it will be hard for either approach to gain the consumer and commercial confidence commanded by the U.S. dollar.
Omarova writes:
In part, depositors’ privacy concerns should be alleviated by (1) the continuing availability of physical cash, and (2) the CBI option for deposit services.A more complete solution, though, would likely require technology enabling sufficiently anonymous digital-dollar payments, subject to amount limitations and other conditions necessary to prevent criminal transactions. [Emphasis added.]
If Chairman Powell is indeed bucking the “globalists,” as Luongo contends, the Fed is likely to need its own CBDC to compete with the PBOC’s digital yuan and retain the U.S. dollar’s status in global markets. There are clearly reasons for concern, but if a program can be designed that protects against the risks perceived by its critics, a CBDC could be a powerful tool for “democratizing” money and credit; and Omarova’s academic paper lays out how this could be done. She argues that removing private banks from their privileged position as money creators and returning them to their traditional role as specialized intermediaries would return markets to their original state of “freedom.”
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This article was first posted on ScheerPost. Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.
July 30, 2021
Nature’s Own Fuel Could Save Us From the Greenhouse Effect and Electric Grid Failure
Posted on July 30, 2021 by Ellen Brown, Web of Debt blog
Hemp fuel and other biofuels could reduce carbon emissions while saving the electric grid, but they’re often overlooked for more expensive, high-tech climate solutions.
On July 14, the European Union unveiled sweeping climate change and emissions targets that would, according to Gulf News, mean “the end of the internal combustion engine”:
The commission’s draft would reduce permitted emissions from new passenger cars and light commercial vehicles to zero from 2035 – effectively obliging the industry to move on to battery-electric models.
While biofuels are a less high-tech, cheaper and in many ways more effective solution to our dependence on petroleum, the United States and other countries are discussing similar plans to the EU’s and California is already on board. But in a recent article in the Los Angeles Times and related video, Evan Halper argues that we may be trading one environmental crisis for another:
The sprint to supply automakers with heavy-duty lithium batteries is propelled by climate-conscious countries like the United States that aspire to abandon gas-powered cars and SUVs. They are racing to secure the materials needed to go electric, and the Biden administration is under pressure to fast-track mammoth extraction projects that threaten to unleash their own environmental fallout.
Extraction proposals include vacuuming the ocean floor, disturbing marine ecosystems; and mining Native American ancestral sites and pristine federal lands. Proponents of these proposals argue that China controls most of the market for the raw material refining needed for the batteries, posing economic and security threats. But opponents say the negative environmental impact will be worse than the oil fracking that electric vehicles are projected to replace.
Not just the batteries but the electricity needed to run electric vehicles (EVs) poses environmental concerns. Currently, generating electric fuel depends heavily on non-renewable sources. And according to a March 2021 report from the Government Accountability Office, electric vehicles are making the electrical grid more vulnerable to cyber attacks, threatening the portions of the grid that deliver electricity to homes and businesses. If that is true at current use levels, the grid could clearly not sustain the load if all the cars on the road were EVs.
Not just tribal land residents but poor households everywhere will bear the cost if the proposed emissions targets and EV mandates are implemented. According to one European think tank, “average expenses of the poorest households could increase by 44 percent for transport and by 50 percent for residential heating.” As noted in Agence France-Presse, “The recent ‘yellow vest’ protests in France demonstrated the kind of populist fury that environmental controls on motoring can provoke.”
People who can barely make ends meet cannot afford new electric vehicles (EVs), and buying a used EV is risky. If the lithium battery fails, replacing it could cost as much as the car itself; and repairs must be done by pricey dealers. No more doing it yourself with instructions off the Internet, and even your friendly auto repair shop probably won’t have the tools. Except for the high-end Tesla, auto manufacturers themselves are largely losing money on EVs, due to the high cost of the batteries and low consumer demand.
Off the Electric Grid with Clean Biofuel
Whether carbon dioxide emissions are the cause of climate change is still debated, but gasoline-fueled vehicles do pose environmental hazards. There is an alternative to gasoline that does not require sending all our combustion engine vehicles to the junkyard. This is alcohol fuel (bioethanol). Not only are greenhouse gas emissions from ethanol substantially lower than from gasoline, but as detailed in a biofuel “explainer” on the website of the Massachusetts Institute of Technology:
As we search for fuels that won’t contribute to the greenhouse effect and climate change, biofuels are a promising option because the carbon dioxide (CO2) they emit is recycled through the atmosphere. When the plants used to make biofuels grow, they absorb CO2 from the air, and it’s that same CO2 that goes back into the atmosphere when the fuels are burned. In theory, biofuels can be a “carbon neutral” or even “carbon negative” way to power cars, trucks and planes, meaning they take at least as much CO2 out of the atmosphere as they put back in.
A major promise of biofuels is that they can lower overall CO2 emissions without changing a lot of our infrastructure. They can work with existing vehicles, and they can be mass-produced from biomass in the same way as other biotechnology products, like chemicals and pharmaceuticals, which are already made on a large scale.… Most gasoline sold in the U.S. is mixed with 10% ethanol.
Biofuels can be created from any sort of organic commercial waste that is high in carbohydrates, which can be fermented into alcohol locally. Unlike the waste fryer oil and grease used to generate biodiesel, carbohydrates are supplied by plants in abundance. Methanol, the simplest form of alcohol, can be made from any biomass – anything that is or once was a plant (wood chips, agricultural waste of all kinds, animal waste, etc.). In the US, 160 million tons of trash ends up in landfills annually. Estimates are that this landfill waste could be converted to 15-16 million gallons of methanol.
In the third in a series of national assessments calculating the potential supply of biomass in the United States, the US Energy Department concluded in 2016 that the country has the future potential to produce at least one billion dry tons of biomass resources annually without adversely affecting the environment. This amount of biomass could be used to produce enough biofuel, biopower, and will bioproducts to displace approximately 30% of 2005 U.S. petroleum consumption, said the report, without negatively affecting the production of food or other agricultural products.
Energy Independence
A documentary film called Pump tells the tale of the monopolization of the auto fuel industry by the petroleum cartel, and how that monopoly can be ended with a choice of biofuels at the pump.
Henry Ford’s first car, built in 1896, ran 100% on alcohol fuel, produced by farmers using using beets, apples, corn and other starchy crops in their own stills. He envisioned the family piling into the car and driving through the countryside, fueling up along the road at independent farms. But alcohol was burdened with a liquor tax, and John D. Rockefeller saw a use for the gasoline fuel that was being discarded as a toxic waste product of the kerosene market he had cornered. In 1908, Ford accommodated Rockefeller’s gasoline fuel by building America’s first “flex-fuel” car, the Model T or “Tin Lizzie.” It could be made to run on either gasoline or ethanol by adjusting the ignition timing and air fuel mixture. Rockefeller then blocked competition from Ford’s ethanol fuel by using his power and influence to help pass Prohibition, a Constitutional amendment banning the sale and transport of alcohol.
The petroleum monopoly was first broken in Brazil, where most cars are adapted to run on bioethanol made from sugar cane. Existing combustion engines can be converted to use this “flex fuel” with simple, inexpensive kits. The Brazilian biofuel market dates back to the oil crisis of the 1970s, when gas had to be imported and was quite expensive. With the conversion to biofuels, Pres. Luiz Inácio Lula da Silva achieved national energy independence, giving a major boost to the struggling Brazilian economy.
The U.S. push for biofuels was begun in California in the 1980s, when Ford Motor Company was enlisted to design a flex fuel car to help reduce the state’s smog problem. But again the oil industry lobbied against it. They argued that bioethanol, which in the U.S. is chiefly made from corn, was competing for corn as a foodstuff at a time when food shortages were a major concern.
David Blume counters that it is not a question of “food or fuel” but “food and fuel.” Most U.S. corn is grown as livestock feed, and the “distillers grains” left after the alcohol is removed are more easily digested by cows than unprocessed grain. Distillers grains have another advantage over hay as a livestock feed: its easier digestion reduces the noxious cow emissions said to be a significant source of greenhouse gases.
Fuel from a Weed: The Wide-ranging Virtues of Hemp
Opponents, however, continue to raise the “food versus fuel” objection, and they claim that biofuels from corn are not “carbon neutral” when the steps used to create them are factored in. Even the fertilizers needed to grow them may emit CO2 and other greenhouse gases. But corn is not the only biofuel option. There are plants that can grow like weeds on poor soil without fertilizers.
Industrial hemp – the non-intoxicating form of cannabis grown for fiber, cloth, oil, and many other purposes – is a prime candidate not just for fuel but to help save the environment. Hemp has been proven to absorb more CO2 per hectare than any forest or commercial crop, making it the ideal carbon sink. It can be grown on a wide scale on nutrient poor soils; it grows remarkably fast with almost no fertilizer or irrigation; and it returns around 70% of the nutrients used in the growth cycle back to the soil. Biofuels usually require substantially more water than fossil fuels, but hemp needs roughly half the amount needed for corn. Hemp can also be used for “bioremediation” – the restoration of soil from toxic pollution. It helps remove toxins and has been used by farmers to “cure” their fields, even from radioactive agents, metals, pesticides, crude oil, and toxins in landfills.
An analysis published in the journal Science in 2019 concluded that a worldwide tree planting program could remove two-thirds of all the CO2 emissions that have been pumped into the atmosphere by human activities. As reported in The Guardian in 2019, one trillion trees could be restored for as little as $300 billion – “by far the cheapest solution that has ever been proposed.” The chief drawback to that solution is that trees grow slowly, requiring 50 to 100 years to reach their full carbon sequestering potential. Hemp, on the other hand, is one of the fastest CO2-to-biomass conversion tools available, growing to 13 feet in 100 days. It also requires much less space per plant than trees, and it can be grown on nearly any type of soil without fertilizers.
In a 2015 book titled “Cannabis Vs. Climate Change,” Paul von Hartmann notes that hemp is also one of the richest available sources of aromatic terpenes, which are known to slow climate change. When emitted by pine forests, terpenes help to cool the planet by bouncing energy from the sun back into space. In a mature hemp field, the temperature on a hot day can be 20 degrees cooler than in surrounding areas.
Reviving an American Staple
Hemp has many uses besides fuel. Long an American staple, its cultivation was mandated in colonial America. It has been used for centuries in pharmaceuticals, clothing and textiles; it is an excellent construction material; its fiber can be used to make paper, saving the forests; and hemp seeds are , providing protein equivalent by weight to beef or lamb.
The value of industrial hemp has long been known by the U.S. government, which produced an informational film in 1942 called “Hemp for Victory” to encourage farmers to grow it for the war effort. Besides its many industrial uses, including for cloth and cordage, the film detailed the history of the plant’s use and best growing practices.
Henry Ford used hemp as a construction material for his Model T, and Porsche is now using hemp-based material in the body of its 718 Cayman GT4 Clubsport track car to reduce its weight while maintaining rigidity and safety. “Hempcrete” (concrete made from hemp mixed with lime) is a “green” building material used for construction and insulation, including for building “tiny homes.”
Hemp can replace so many environmentally damaging industries that an April 2019 article in Forbes claimed that “Industrial Hemp Is the Answer to Petrochemical Dependency.” The authors wrote:
[O]ur dependency on petrochemicals has proven hard to overcome, largely because these materials are as versatile as they are volatile. From fuel to plastics to textiles to paper to packaging to construction materials to cleaning supplies, petroleum-based products are critical to our industrial infrastructure and way of life.
… Interestingly, however, there is a naturally-occurring and increasingly-popular material that can be used to manufacture many of the same products we now make from petroleum-derived materials …. That material is hemp.
… The crop can be used to make everything from biodegradable plastic to construction materials like flooring, siding, drywall and insulation to paper to clothing to soap to biofuels made from hemp seeds and stalks.
The authors note that while hemp was widely grown until a century ago, the knowledge, facilities and equipment required to produce it efficiently are no longer commonly available, since hemp farming was banned for decades due to its association with the psychoactive version of the plant.
Fueling a Rural Renaissance
In an effort to fill that vacuum, a recent initiative in California is exploring different hemp varieties and growing techniques, in the first extensive growing trials for hemp fiber and grain in the state since the 1990s. The project is a joint effort among the World Cannabis Foundation, hemp wholesaler Hemp Traders, and Oklahoma-based processor Western Fiber. The Pennsylvania-based Rodale Institute, a nonprofit that supports research into organic farming, has also partnered on a USDA-supported research project on the use of hemp in the development of biochar (charcoal produced by firing biomass in the absence of oxygen). On July 31, the World Cannabis Foundation will host a field day and factory tour in Riverdale, California, where an old cotton gin has been converted to hemp textile manufacture. The event will also feature presentations by a panel of hemp experts.
How to decarbonize 51 billion tons of greenhouse gases annually with hemp technology and regenerative farming will also be the focus of a COP26 “fringe festival” called “Beyond the Green,” to be held in Glasgow, Scotland, in November along with COP26, the 2021 UN Climate Change Conference.
A 2018 article summarizing research from the University of Connecticut concluded that hemp farming could “set a great example of a self-sustainable mini ‘ecosystem’ with minimal environmental footprint.” Henry Ford’s vision was to decentralize industry, with “small [factory] plants … on every stream,” a rural renaissance fueled not with oil but with alcohol. Hemp fuel and other forms of bioethanol are renewable energy sources that can be produced anywhere, contributing to energy independence not just for families but for local communities and even for the country. And it doesn’t place the burden of addressing climate change on the middle or working classes.
May 21, 2021
How America Went From Mom-and-Pop Capitalism to Techno-Feudalism
by Ellen Brown
Posted on May 19, 2021
The crisis of 2020 has created the greatest wealth gap in history. The middle class, capitalism and democracy are all under threat. What went wrong and what can be done?
In a matter of decades, the United States has gone from a largely benign form of capitalism to a neo-feudal form that has created an ever-widening gap in wealth and power. In his 2013 bestseller Capital in the 21st Century, French economist Thomas Piketty declared that “the level of inequality in the US is probably higher than in any other society at any time in the past anywhere in the world.” In a 2014 podcast about the book, Bill Moyers commented:
Here’s one of its extraordinary insights: We are now really all headed into a future dominated by inherited wealth, as capital is concentrated in fewer and fewer hands, giving the very rich ever greater power over politics, government and society. Patrimonial capitalism is the name for it, and it has potentially terrifying consequences for democracy.
Paul Krugman maintained in the same podcast that the United States is becoming an oligarchy, a society of inherited wealth, “the very system our founders revolted against.” While things have only gotten worse since then thanks to the economic crisis of 2020, it’s worth retracing the history that brought us to this volatile moment.
Not the Vision of Our Founders
The sort of capitalism on which the United States was originally built has been called mom-and-pop capitalism. Families owned their own farms and small shops and competed with each other on a more or less level playing field. It was a form of capitalism that broke free of the feudalistic model and reflected the groundbreaking values set forth in the Declaration of Independence and Bill of Rights: that all men are created equal and are endowed by their Creator with certain inalienable rights, including the rights to free speech, a free press, to worship and assemble; and the right not to be deprived of life, liberty or property without due process.
It was good in theory, but there were glaring, inhumane exceptions to this idealized template, including the confiscation of the lands of indigenous populations and the slavery that then prevailed. The slaves were emancipated by the US Civil War; but while they were freed in their persons, they were not economically free. They remained entrapped in economic serfdom. Although Black and Indigenous communities have been disproportionately oppressed, poor people were all trapped in “indentured servitude” of sorts — the obligation to serve in order to pay off debts, e.g. the debts of Irish workers to pay for passage to the United States, and the debts of “sharecroppers” (two-thirds of whom were white), who had to borrow from landlords at interest for land and equipment. Today’s U.S. prison system has also been called a form of slavery, in which free or cheap labor is extracted from poor people of color.
To the creditors, economic captivity actually had certain advantages over “chattel” slavery (ownership of humans as a property right). According to an infamous document called the Hazard Circular, circulated by British banking interests among their American banking counterparts during the American Civil War:
Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are glad of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led by England, is that capital shall control labor by controlling wages.
Slaves had to be housed, fed and cared for. “Free” men housed and fed themselves. Free men could be kept enslaved by debt by paying them wages that were insufficient to meet their costs of living.
From ‘Industrial Capitalism’ to ‘Finance Capitalism‘
The economy crashed in the Great Depression, when Franklin D. Roosevelt’s government revived it and rebuilt the country through a public financial institution called the Reconstruction Finance Corporation. After World War II, the US middle class thrived. Small businesses competed on a relatively level playing field similar to the mom-and-pop capitalism of the early pioneers. MMeanwhile, larger corporations engaged in “industrial capitalism,” in which the goal was to produce real goods and services.
But the middle class, considered the backbone of the economy, has been progressively eroded since the 1970s. The one-two punch of the Great Recession and what the IMF has called the “Great Lockdown” has again reduced much of the population to indentured servitude; while industrial capitalism has largely been displaced by “finance capitalism,” in which money makes money for those who have it, “in their sleep.” As economist Michael Hudson explains, unearned income, not productivity, is the goal. Corporations take out cheap 1% loans, not to invest in machinery and production, but to buy their own stock earning 8% or 9%; or to buy out smaller corporations, eliminating competition and creating monopolies. Former Greek Finance Minister Yanis Varoufakis explains that “capital” has been decoupled from productivity: businesses can make money without making profits on their products. As Kevin Cahill described the plight of people today in a book titled Who Owns the World?:
These latter day pharaohs, the planet owners, the richest 5% – allow the rest of us to pay day after day for the right to live on their planet. And as we make them richer, they buy yet more of the planet for themselves, and use their wealth and power to fight amongst themselves over what each possesses – though of course it’s actually us who have to fight and die in their wars.
The 2020 Knockout Punch
The final blow to the middle class came in 2020. Nick Hudson, co-founder of a data analytics firm called PANDA (Pandemics, Data and Analysis), argued in an interview following his keynote address at a March 2021 investment conference:
Lockdowns are the most regressive strategy that has ever been invented. The wealthy have become much wealthier. Trillions of dollars of wealth have been transferred to wealthy people. … Not a single country did a cost/benefit analysis before imposing these measures.
Policymakers followed the recommendations of the World Health Organization, based on predictive modeling by the Imperial College London that subsequently proved to be wildly inaccurate. Later studies have now been done, at least some of which have concluded that lockdowns have no significant effects on case numbers and that the costs of lockdowns substantially outweigh the benefits, in terms not just of economic costs but of lives.
On the economic front, global lockdowns eliminated competition from small and medium-sized businesses, allowing monopolies and oligopolies to grow. “The biggest loser from all this is the middle class,” wrote Logan Kane on Seeking Alpha. By May 2020, about one in four Americans had filed for unemployment, with over 40 million Americans filing jobless claims; and 200,000 more businesses closed in 2020 than the historical annual average. Meanwhile, US billionaires collectively increased their total net worth by $1.1 trillion during the last 10 months of 2020; and 46 people joined the billionaire class.
The number of “centi-billionaires”– individuals with a net worth of $100 billion or more – also grew. In the US they included:
- Jeff Bezos, soon-to-be former CEO of Amazon, whose net worth increased from $113 billion in March 2020 to $182 billion in March 2021, up by $70 billion for the year;
- Elon Musk, CEO of Tesla and SpaceX, whose net worth increased from $25 billion in March 2020 to $164 billion in March 2021, up by $139 billion for the year; and
- Bill Gates, formerly CEO of Microsoft and currently considered the “global vaccine czar,” whose net worth increased to $124 billion in March 2021, up by $26 billion for the year.
Two others are almost centi-billionaires:
- The net worth of Mark Zuckerberg, CEO of Facebook, grew from $55 billion in March 2020 to $95 billion in March 2021, up by $40 billion for the year; and
- The net worth of Warren Buffett of Berkshire Hathaway grew from $68 billion in March 2020 to $95 billion in March 2021, up by $27.6 billion for the year.
These five individuals collectively added $300 billion to their net worth just in 2020. For perspective, that’s enough to create 300,000 millionaires, or to give $100,000 to 3 million people.
Philanthrocapitalism
The need to shield the multibillionaire class from taxes and to change their predatory corporate image has given rise to another form of capitalism, called philanthrocapitalism. Wealth is transferred to foundations or limited liability corporations that are designated as having charitable purposes but remain under the ownership and control of the donors, who can invest the funds in ways that serve their corporate interests. As noted in The Reporter Magazine of the Rochester Institute of Technology:
Essentially, what we are witnessing is the transfer of responsibility for public goods and services from democratic institutions to the wealthy, to be administered by an executive class. In the CEO society, the exercise of social responsibilities is no longer debated in terms of whether corporations should or shouldn’t be responsible for more than their own business interests. Instead, it is about how philanthropy can be used to reinforce a politico-economic system that enables such a small number of people to accumulate obscene amounts of wealth.
With $100 billion, nearly anything can be bought – not just land and resources but media and journalists, political influence and legislation, regulators, university research departments and laboratories. Jeff Bezos now owns The Washington Post. Bill Gates is not only the largest funder of the World Health Organization and the Imperial College London but the largest owner of agricultural land in the US. And Elon Musk’s aerospace manufacturer SpaceX has effectively privatized the sky. Astronomers and stargazers complain that the thousands of satellites it has already launched, with many more in the works, are blocking their ability to see the stars. Astronomy professor Samantha Lawler writes in a piece for The Conversation:
SpaceX has already received approval for 12,000 Starlink satellites and is seeking approval for 30,000 more. Other companies are not far behind […] The point of the Starlink mega-constellation is to provide global internet access. It is often stated by Starlink supporters that this will provide internet access to places on the globe not currently served by other communication technologies. But currently available information shows the cost of access will be too high in nearly every location that needs internet access. Thus, Starlink will likely only provide an alternate for residents of wealthy countries who already have other ways of accessing the internet […] With tens of thousands of new satellites approved for launch, and no laws about orbit crowding, right-of-way or space cleanup, the stage is set for the disastrous possibility of Kessler Syndrome, a runaway cascade of debris that could destroy most satellites in orbit and prevent launches for decades…. Large corporations like SpaceX and Amazon will only respond to legislation — which is slow, especially for international legislation — and consumer pressure […] Our species has been stargazing for thousands of years, do we really want to lose access now for the profit of a few large corporations?
Public advocacy groups, such as the Cellular Phone Task Force, have also objected due to health concerns over increased electromagnetic radiation. But the people have little say over public policy these days. So concluded a study summarized in a January 2021 article in Foreign Affairs. Princeton professor and study co-author Martin Gilens wrote:
[O]rdinary citizens have virtually no influence over what their government does in the United States. … Government policy-making over the last few decades reflects the preferences … of economic elites and of organized interests.
Varoufakis calls our current economic scheme “postcapitalism” and “techno-feudalism.” As in the medieval feudal model, assets are owned by the few. He notes that the stock market and the businesses in it are essentially owned by three companies – the giant exchange-traded funds BlackRock, Vanguard, and State Street. Under the highly controversial “Great Reset” envisioned by the World Economic Forum, “you will own nothing and be happy.” By implication, everything will be owned by the techno-feudal lords.
Getting Back on Track
The capitalist model has clearly gone off the rails. How to get it back on track? One obvious option is to tax the uber-rich. As Chuck Collins, author of The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions (2021), writes in a March 2021 article:
A wealth tax would reverse more than a half-century of tax cuts for the wealthiest households. Billionaires have seen their taxes decline roughly 79 percent as a percentage of their wealth since 1980. The “effective rate” on the billionaire class—the actual percentage paid—was 23 percent in 2018, lower than for most middle-income taxpayers.
He notes that Sen. Elizabeth Warren (D-Mass.) and co-authors recently introduced legislation to levy a 2 percent annual tax on wealth starting at $50 million, rising to 3 percent on fortunes of more than $1 billion:
The tax, which would apply to fewer than 100,000 U.S. residents, would raise an estimated $3 trillion over the next decade. It would be paid entirely by multi-millionaires and billionaires who have reaped the lion’s share of wealth gains over the last four decades, including during the pandemic.
Varoufakis contends, however, that taxing wealth won’t be enough. The corporate model itself needs an overhaul. To create a “humanist” capitalism, he says, democracy needs to be brought to the marketplace.
Politically, one adult gets one vote. But in corporate elections, votes are weighted according to financial investment: the largest investors hold the largest number of voting shares. Varoufakis argues that the proper principle for reconfiguring the ownership of corporations for a market-based society would be one employee, one share (not tradeable), one vote. On that basis, he says, we can imagine as an alternative to our post-capitalist model a market-based democratic society without capitalism.
Another proposed solution is a land value tax, restoring at least a portion of the land to the “commons.” As Michael Hudson has observed:
There is one Achilles heel in the globalists’ strategy, an option that remains open to governments. This option is a tax on the rental income – the “unearned income” – of land, natural resources and monopoly takings.
Reforming the banking system is another critical tool. Banks operated as a public utility could allocate credit for productive purposes serving the public interest. Other possibilities include enforcement of anti-monopoly legislation and patent law reform.Perhaps, however, the flaw is in the competitive capitalist model itself. The winners will inevitably capture and exploit the losers, creating an ever-growing gap in wealth and power. Studies of natural systems have shown that cooperative models are more efficient than competitive schemes. That does not mean the sort of “cooperation” coerced through iron-fisted totalitarian control at the top. We need a set of rules that actually levels the playing field, rewards productivity, and maximizes benefit to society as a whole, while preserving the individual rights guaranteed by the U.S. Constitution.
_______________________
This article was first posted on ScheerPost. Ellen Brown is an attorney, chair of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.
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Three U.S. presidents were instrumental in establishing Thanksgiving as a regular national event. On October 3, 1789, George Washington declared the first federal Thanksgiving holiday. In 1863, Abraham Lincoln made it an annual federal holiday. And in 1941, Franklin Roosevelt signed a bill setting the date at the fourth Thursday of every November. All three presidents were giving thanks for bringing the country through a major financial crisis related to war, and they all achieved this feat through what Sen. Henry Clay called the “American system” of banking and finance – sovereign or government-issued money and credit.
For Washington, the challenge was freeing the American colonies from the imperial rule of Britain, then the world’s leading military power, when the new government lacked a source of funding. Lincoln faced a similar challenge, leading the Northern states in a civil war while lacking a national bank or national currency to fund it. For Roosevelt, the challenge was bringing the country through the Great Depression and World War II, when 9,000 banks had gone bankrupt at the beginning of his first term and the country was again without a source of credit.
In 1796, after 20 years of public service, George Washington warned in his farewell address to “cherish public credit” and avoid “accumulation of debt,” and to “avoid foreign entanglements” (“steer clear of permanent alliances with any portion of the foreign world”). He would no doubt be alarmed to see where we are 227 years later. We have a federal debt of $33.7 trillion, bearing an interest tab of nearly $1 trillion annually — over one-third of personal tax receipts. And we have a military budget from “foreign entanglements” that is also approaching one trillion dollars, devouring more than half the annual discretionary budget. Meanwhile, according to the American Society of Civil Engineers, the country is in serious need of infrastructure funding, tallied at $3 trillion or more; but our debt-strapped Congress has no appetite or capacity for further infrastructure outlays.
However, Washington, Lincoln and Roosevelt faced financial challenges that were equally daunting in their day; and the country came through them and continued to thrive, using a funding device that Benjamin Franklin described as “a mystery even to the politicians.”
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