For the past four decades E. C. Riegel has been my primary source of insight and
E,. C. Riegel
inspiration on the concepts and mechanisms of money and exchange. Writing mainly from the 1920s thru the 1940s, his is vision is acutely penetrating and his expression clear and almost poetic. For that reason I and a few others have made every effort to make his work known to a much wider audience. His most important works are freely available to be downloaded and I have listed the web links on my website under the Library menu item at https://beyondmoney.net/library/.
I realized very early in my peace and justice work, that the primary obstacle to peace, justice, and freedom, lies in the centralization of power and the concentration of wealth. Riegel and others helped me to see that the global money and banking system is the main instrument by which that is made possible. Riegel opened my eyes to the true nature of money and the fact that we the people already have in our hands the power to create true money. He pointed out that “Heretofore, economics has located the source of production at one point and the source of money at another, with the result that synchronization and balancing of issue between wealth producing power and money power were impossible.” Riegel then laid out a way to bring those two powers together, a plan which I, in all modesty, have enhanced and adapted to present conditions.
I’ve lately been in the process of preparing a document containing excerpts from Riegel’s 1944 book, Private Enterprise Money, along with my comments, much as I did years ago with my annotated précis of his book, Flight From Inflation. That may take a while to complete but I would rather not delay in sharing with my readers a little gem from pages 106 in which Riegel presciently described our present predicament. Here it is:
THE SURPRISE WEAPON
Society is in the twilight of a passing day. The state now undertakes to finance the economy, and, since a free economy is manifestly impossible where the state assumes the responsibility of supplying the money circulation, the politician is compelled to choose between fascism and communism. Under either choice liberty is abolished and the people are enslaved. As the planners all over the world adopt their devices for a managed economy, and ideologists and sloganizers prepare their implements to condition the minds of men to their control plans, and the cause of human freedom seems defenseless, there falls into the hands of the people a surprise weapon that will turn the tide of battle and give the people mastery, not only over their private affairs, but over the would-be political planners. This weapon is the people’s money power as defined in the following pages. It will change the whole course of human events into the paths of liberty, prosperity and peace.
This, my latest article, points out that capitalists now admit that the system is “rigged” in their favor; it argues that Trump and Sanders represent two edges of the populist wave that is now dominating U.S. politics, that a Sanders win over Trump is entirely plausible, that the New Deal of FDR has been systematically dismantled and needs to be reestablished, and that in the long run people will need to work together in communities to build systems and structures that can circumvent the rigged system.
There, the capitalists are admitting it–the system is rigged.
In his latest newsletter, financial advisor, John Mauldin, Co-Founder of Mauldin Economics, acknowledges that the system is rigged in favor of the wealthy and powerful, and against everyone else, including the shrinking middle-class. Mauldin says:
The “financialization” of the American economy has led to increasing income and wealth disparity. As much as it pains me to say it, the “system” really is rigged. Whatever the good intentions of the Federal Reserve in particular and the US government in general have been, it has distorted the economic feedback loops that balance a true market-based economic system. The fact is we already have “socialism” today. It’s not the socialism we feared in 1974. We have socialized the risks of capitalism, to the benefit of a small portion of the country, while a larger portion struggles.
So, Mauldin admits what has been obvious for a long time, that the U.S. economy is characterized by socialism for the rich ruling class, and dog-eat-dog competition for everyone else. He cites this fact as the main reason why political outsider Donald Trump was elected President in 2016 and why “socialist” Bernie Sanders might conceivably be elected President in 2020. I agree.
So, what do Trump and Sanders have in common?
As I see it, both are viewed by the electorate as “populist,” which ostensibly means anti-elite, Trump representing right-wing populism and Sanders left-wing populism. But, except for paying lip service to a plan to shift U.S. foreign policy away from the imperial belligerence of the deep state, Trump’s actions as President belie any anti-elite sentiment. In fact, it’s been quite the opposite.
What people want is something other than the globalist, interventionist, imperialist policies of the past several decades that have wasted enormous amounts of resources, killed hundreds of thousands of people, destroyed communities and nations, and caused political upheaval around the world. People want relief from the economic policies that have favored capital over labor by increasing capital mobility while shifting jobs from the U.S. to low wage countries especially in Asia, and at the same time reduced constraints on banks and corporations, enabling them to more fully exploit people and the environment.
A version of the article was also published on Medium and republished at OpEd News.
This video is based on a presentation I gave at the Economics of Peace Conference in Sonoma, California in October, 2009. My prescriptions for reclaiming the credit commons and creating a new “butterfly economy” remain completely relevant, and their implementation is becoming ever more urgent.
In November of 2009, I gave a presentation at the conference on Michigan’s Future Energy, Economy & Environment, at Crystal Mountain Resort in Thompsonville, Michigan. More than 10 years later, this presentation is still timely.
Ken Freeman has recently augmented and adapted recordings of that presentation to produce this new video, titled, Exchange Revolution, which has now been posted on our Beyond Money Podcast site. It is a comprehensive description of the what and how of transcending the political fiat money regime, and building a new equitable system of value exchange.
Richard Wolff provides an insightful analysis and historical perspective on the present state of capitalism and democracy. Clearly, Franklin Roosevelt saved capitalism in the 1930s by yielding a bit to the masses’ demand for a share of the economic benefits. Will there be a repeat of that in the coming decade under the next President?
That is doubtful. Conditions today are much different than
they were in the 1930s. Big government is no longer in vogue since governments
have ceded most of their power to transnational corporations. People now are
much more aware of the need for structural change in politics, economics and
finance. The vogue today is decentralization of power and restoration of the
I don’t know if Marx has any answers because I’ve never
studied Marxist economics.
I am convinced of one thing however that no one else seems
to recognize, that is the fundamental flaw in the global interest-based,
debt-money, central banking regime. It is the “debt-growth
imperative” that derives from the way banks create money by making loans
that require the payment of interest. One need only look at the empirical
evidence of global debt growth over time to see that it conforms to the
exponential growth function of compound interest. Even the richest countries
have exploding levels of sovereign debt because there are limits to how much
debt the private sector can bear, so governments become the “borrower of
last resort” to keep the money supply from collapsing. That’s the reason
for bank bailouts and “quantitative easing.”
The fundamental need is for a deep restructuring of money,
banking, and finance to decentralize control of credit and eliminate the
“debt-growth imperative.” Such an idea may seem radical in the
extreme and will not be welcomed by the powers that be, but alternative
approaches are already in the works and will be ready to save the day when the
capitalist train crashes off the rails.
Greece and the Global
Debt Crisis Thomas H. Greco, Jr.
The Greek debt crisis is emblematic of a more general, decades-long pattern of economic exploitation and reactionary politics that threatens not only the European Union but the stability of the global financial infrastructure and Western democratic civilization. The situation calls for a different form of globalization, not one that is dominated by transnational banks and corporations, but one that is built upon local self-determination and self-reliance, and based on local and domestic control of money, credit, and finance. Greece (and other debtor countries) can recover a measure of sovereignty and rebuild its economy by combining “debt triage” with public and private actions for creating domestic liquidity.
In the summer of 1977, I first ventured abroad from North America on a journey to explore ancient civilizations, cultures, and religions, and to experience contemporary life in Egypt, Israel, and Greece. During my six-week odyssey, I was able to visit the Pyramids, amble over the Holy Land, and visit the temple ruins of Athens and Delphi.
At one point while in Cairo I came upon a scene that greatly troubled me. There was a small burro hitched to an enormous cart that was laden to the hilt with onions. I felt nauseous as I watched the poor animal lying on its side being flogged by a man in a vain effort to rouse it to the task of moving what seemed to be an impossible load. As a stranger in a strange land, I felt helpless to intervene and quickly moved away. I often wonder what might have been the ultimate outcome, but in my imagination I see the man with the whip standing over the lifeless body of that animal lying in the street, and weeping in worry and frustration.
Now, when I contemplate Greece’s current predicament, that image comes to mind. I see Greece as that beaten and dying animal, overburdened with debt that is beyond its capacity to service, and being ﬂogged by its creditors in a vain attempt to get it to pay up. In my mind’s eye I see a future in which the dead carcass of Greece is being carved up and distributed amongst the creditor institutions. In actuality, Greece will survive, but under new (foreign) management, as she is forced to sell oﬀ her assets at ﬁre-sale prices.
In the eyes of the Germans and other creditors, represented by the so-called “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund), the Greek people are lazy freeloaders who have been living “high on the hog” at their expense, and who now balk at repaying what they borrowed.
But there is another side to the story that paints a different picture, and even if there is a bit of truth in that characterization, what is there to be gained by creditors insisting upon their “pound of ﬂesh”? As civilization has advanced, debtor prisons have been eliminated and bankruptcy laws have been instituted to protect people and companies from creditors who insist upon collecting more than debtors, for whatever reason, are able to pay. Why can’t nations be aﬀorded the same considerations?
First of all, it was not the Greek people who did the borrowing, it was a series of Greek governments that were either corrupted, coerced, or seduced into taking on a series of debts that were increasingly burdensome. Greece was lured into the debt trap from which it seems impossible to escape. Ellen Brown has summarized in her article, The Greek Coup: Liquidity as a Weapon of Coercion, some of the many moves that were made to ensnare the Greek government, and by extension, the Greek people. … more.
I was right about
“quantitative tightening” by Thomas H. Greco, Jr.
Just about two years ago, someone sent me a link to an
article titled, Why
America’s Federal Reserve might make money disappear, that appeared in The Economist on April 17, 2017. The
gist of the article was the predicted move by the Fed to unwind quantitative easing, that is, to sell
off some of the securities that it bought in the wake of the 2008 financial
crisis. The expansion of Fed holdings from the $850 billion it held just prior
to the crisis, to the $4.5 trillion it held at the time the Economist article
was written, was a desperate move that was taken to keep a flawed financial
system from crashing down.
After I read that article, this is what I wrote to my
correspondent on April 25, 2017:
Dear…, Thanks for alerting me to that article in the Economist. Interesting. The sub-head reads, “The Fed has signalled that it will soon reduce the size of its balance-sheet,” yet the article says nothing about how it signalled that move. It seems to be the author’s own speculation based on the Fed’s recent small interest rate increase. To wit, “Today, however, the Fed, now led by Janet Yellen (pictured), is raising short-term rates, as it tries to keep a lid on inflation. So—the logic goes—it should also shrink its balance-sheet, to push up long-term rates.”
You need to ask, why did the Fed load up on government bonds to begin with?
I am reminded of a story about a man who wanted to invest in the stock market. He opened an account with a broker who immediately steered him into some penny stock.
The dialog went something like this: Broker: Welcome aboard. I can get you in on the ground floor of this new company. Their stock is really hot right now and it’s only four dollars a share. Customer: Fine, buy me 1000 shares.
The next day the broker calls and says, Broker: Hey, that stock is now up to eight dollars a share. Customer: Wow, that’s great, buy me 2000 more shares.
A couple days later, the broker calls again and says, Broker: Amazing, that stock is now up to 12 dollars a share. Customer: Fantastic, sell all my shares. Broker: To whom??
In other words, the Fed is locked in to their position, it’s a one way street and there’s no going back.
The answer is that there was not nearly enough available capital in private hands to fund the government budget deficits, at least not at interest rates that would not make the deficits even more gigantic than they have been.
As I’ve written in my books, there is a collusive arrangement between bankers and politicians that goes back more than 300 years. Governments get to spend more than their revenues, while banks get to lend money into circulation by making interest bearing loans. Yes, open market operations by the central banks do distort financial markets as QE critics claim, but that is the fundamental role of central banks, to manipulate financial markets. It’s the biggest scam in history. The central bank is the lender of last resort, and the government is the borrower of last resort to keep the money supply pumped up as bankers suck interest earnings into their capital account.
The Fed will be lucky to get away with small interest rate increases, but unloading their holdings of government bonds will not happen.
The entire article seems disingenuous, suggesting the possibility of actions that cannot be taken without severely unbalancing government budgets and contracting the money supply which will send the economy back into recession.
Now, on March 20, 2019, this Bloomberg article, Powell Signals Prolonged Fed Pause as
Inflation Lags, Risks Loom, acknowledged that the Fed has thrown in the
towel on tightening, saying, “Federal Reserve Chairman Jerome Powell said
interest rates could be on hold for “some time” as global risks weigh on the
economic outlook and inflation remains muted. … Officials also decided to slow
the drawdown of the U.S. central bank’s bond holdings starting in May, then end
them in September. Together, the moves complete the Fed’s 2019 pivot away from
policy tightening and toward a markedly cautious stance.”
What poor people lack, more than intelligence, knowledge or skills, is money, i.e., a way to pay and be paid. Social entrepreneur Will Ruddick tells the story of how community currencies in Africa are enabling the poor to produce, sell, and buy.
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.
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For the past four decades E. C. Riegel has been my primary source of insight and inspiration on the concepts and mechanisms of money and exchange. Writing mainly from the 1920s thru the 1940s, his is vision is acutely penetrating … Continue reading →
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This, my latest article, points out that capitalists now admit that the system is “rigged” in their favor; it argues that Trump and Sanders represent two edges of the populist wave that is now dominating U.S. politics, that a Sanders … Continue reading →