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
In this recent interview below, Dr. Paul Craig Roberts describes the “house of cards” that is today’s global regime of money, banking and finance. Since the financial crisis of 2008, the major central banks around the world—the Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan—have all been active in the securities markets, buying huge amounts of government and corporate bonds and shares of private companies, a process that is euphemistically called “quantitative easing.”
As Roberts points out, these actions are being taken to support the big banks. I agree, but it goes much deeper than that. The underlying objective is to preserve the global interest-based debt-money system which requires continual expansion if debt, an inherent systemic flaw which I call the “debt growth imperative.” The result of these market manipulations, of course, has been the inflation of market bubbles in bonds, stocks, and real estate, and the massive transfer of wealth into the hands of a small segment of the population.
Roberts does not mention it, but the recurrent waves of tax cuts for the rich likewise seem to be designed to keep these market bubbles pumped up. The wealthy class, for the most part, does not spend these windfall gains, they invest them in, you guessed it, bonds, stocks and real estate. If tax cuts were to go mainly to the lower and middle classes, what would they do with the money? They would surely spend much of it, which would stimulate consumption of consumer goods and restore the real economy, but much of it would go toward reducing the massive amounts of debt that these people carry and make it unnecessary for them to borrow even more. A system that requires perpetual expansion of debt cannot tolerate that.
Now, do you understand?
Here is my latest interview on Primo Nutmeg. Discussion topics include alternative currencies, credit, central banks, the Federal Reserve, Austrian economics, the gold standard, bitcoin, geopolitics, and the relationship between U.S. foreign policy and the global system of money and finance.
Here is another excellent interview of Dr. Paul Craig Roberts in which he outlines the political situation in the U.S, some of the prospects for the Trump administration, limits to Presidential power, and what would need to be done to rebuild the American economy.
Michael Hudson is one of the few academic economists who is worth listening to. He understands how bankers and politicians of both major parties have been deceiving and fleecing the people and he is willing to expose it. In this video he explains how it works and how both Trump and Hillary have planned to continue (and intensify) the fleecing
Michael Hudson: Donald Trump Wants to Make the 1% Even Richer
Here is a comment I posted in response to an article, Donald Trump and the Ghost of Christopher Lasch: America’s yeoman class revolts, that appears in The American Conservative. –t.h.g.
Yes, there is a yeoman class revolt, but the characterization of the elite as “liberal” is in error. The elite class spans the socio-political spectrum. They have a hidden agenda which they advance by pandering to the sentiments of both social liberals (mainly by Democratic politicians) and social conservatives (mainly by Republican politicians), but both parties have been moving us inexorably toward a “new world order” that is anti-democratic and neo-feudal which concentrates ever more power and wealth in their own hands.
Their primary instrument of control is the global system of money, banking, and finance which they have constructed over a long period of time without any public debate, and with the help of politicians, academic economists, journalists, and others whom they have invited to the table to share the spoils.
Since the debt crisis of 2008, Americans of all classes and ideologies have finally begun to wake up to the facts that the game is rigged against them and that they have been manipulated and exploited by the Wall Street-Washington nexus. The next American revolution will happen when liberals and conservatives, Republicans and Democrats, Americans of all religions and races, stop being seduced by “hot-button” rhetoric and come to realize what their common interests are and are able to work in harmony toward the common good
Thomas H. Greco, Jr.
Here is my comment on a recent article titled Krugman’s Craziness that appeared in the New York Sun. –t.h.g.
Very few people today, including prize-winning economists, possess a deep knowledge of the fundamental principles of reciprocal exchange, and most of those who do are committed to maintaining the global interest-based, debt-money regime that enables an elite few to control economies and governments worldwide.
In the wake of the 2008 financial meltdown and the ongoing economic crisis, more and more people are waking up to the fact that there is something seriously wrong with our systems of money, banking, and finance, but remain mystified by it and have no idea what to do about it.
Many are calling for reform of the system via the political process, and most reformers want a return to the gold standard and favor a government monopoly over the issuance of money. Clearly, new legislation is needed to reverse the trend toward ever greater centralization of power and concentration of wealth, but such measures have no hope of passing into law so long as the “money power” is able to buy politicians wholesale. Further, since money is a human contrivance that is supposed to facilitate the exchange of value (like goods, services, and various financial claims), people should be free to use whatever payment media they find mutually agreeable. Rather than monopoly of money, either bank-controlled or government-controlled, we need competition in currency. Let us have more freedom, not less.
There are solid precedents that prove the effectiveness of private and community currencies, as well as direct clearing of credits among buyers and sellers, a process that has the potential to make money as we’ve known it obsolete. Private initiative is presently bringing to market new and creative mechanisms of exchange and finance that have the power to bring about economic and financial stability, social harmony and a dignified life for all.
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