I have long argued that the interest-based, debt-money, central banking regime is both dysfunctional and destructive, and advocated for the decentralization of control over credit and the creation of exchange alternatives that use privately issued currencies and direct clearing of accounts among buyers and sellers.
There is a considerable body of literature that makes the case for free money and free banking, most of which has been ignored. These ideas have been overwhelmed by the economic and financial orthodoxy which stands in support of the political status quo which centralizes power and concentrates wealth.
For governments, central banks serve as “lenders of last resort,” enabling deficit spending through their purchase of government bonds and manipulation of interest rates, while for the banking cartel, government serves as “borrower of last resort,” sustaining their privilege of lending money into circulation and charging interest on it. Whenever this unsustainable system threatens to implode (as it did in the crisis of 2008), the government steps in to take bad (private) debts off the bankers’ hands and place them on the shoulders of the citizens (“bail-outs”). When the next bubble reaches its climax, we will likely see another round of “quantitative easing,” but when that proves to be inadequate, we will likely see some combination of inflation and outright asset confiscation known as “bail-ins” (partial seizure of bank balances).
In his recent review, Leonidas Zelmanovitz, highlights the main points in Vera Smith’s book, The Rationale of Central Banking and the Free Banking Alternative, which was published in 1936. Paraphrasing Smith, Zelmanovitz concludes that [Keynsian policies are] “not necessary to solve the problems they are purported to solve; most likely, they are part of the cause of the problem. Furthermore, there is an alternative, and that alternative is free banking,.” and, ” You can have good money without central banking and central banking does not guarantee good money.” You can read the entire review on the EconLib website.
Another classic source on free banking is Henry Meulen‘s, Free Banking (London: Macmillan, 1934). Free download available here. I will provide some excerpts from that source in a future post.
Posted in Banking, Developing Alternatives, Finance and Economics, Geo-politics, Government, Prescriptions
Tagged bail-ins, bail-outs, free banking, free money, Henry Meulen, quantitative easing, Vera Smith
The American people elected Donald Trump to shake things up,
and, for better or for worse that is what he’s been doing. Most of what Trump has
done in the first two years of his presidency has been destructive—to the
environment, to social justice, to economic equity, and to civil discourse. But
whether he knows what he is doing or not, he has been shaking up America’s
longstanding foreign policy in a way that I think is positive. The United
States, under both major parties, has, since the fall of the Soviet Union, been
working to maintain “full spectrum dominance” around the world. It has been
bent upon constraining the power and influence of potential rivals like Russia
and China, and promoting by both overt and covert means, regime change in
numerous countries around the world in hopes of installing puppet regimes that
would be subservient to the demands of the “New World Order.”
Trump may very well be a narcissistic “loose cannon,” and his
intentions may be purely self-centered and aimed at self-aggrandizement, but many
of his foreign policy actions are moving the world in the direction that it
needs to go, i.e., towards a multi-polar
world order. He is doing this by (1) trying to cooperate and normalize
relations with Russia, (2) pressuring Britain and Western European (NATO)
allies, thus undermining longstanding alliances, and (3) upsetting prior trade
agreements via the imposition of tariffs.
The turmoil in Washington politics has at times been almost
comical, as we’ve seen the evident tug of war between a strong-willed President
with his own ideas, and the entrenched “deep state” that is
controlled by the elite global power establishment. This has been evident in
some of the presidential appointments that seem at odds with Trump’s rhetoric,
like the appointment of super-hawk and Russophobe, John Bolton as national
The appointment of John Kelly, as White House Chief of Staff,
was supposed to control Trump, but now Trump has ousted Kelly and named Mick Mulvaney as
his temporary replacement. Does that indicate a power shift in Trump’s favor? Or
now that the Democrats have taken control of the House, will they be able to
tie Trumps hands?
Time will tell.