Welcome Ellen Brown (Public Bank Solution) (TruthOut) (HuffingtonPost) and Host, Les Leopold (TruthOut) (Salon) (author, How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America’s Wealth)

The Public Bank Solution: From Austerity to Prosperity

Ellen Brown is our national treasure. While Wall Street increases its grip on America, she is letting us know that it doesn’t have to be that way. No one makes a stronger and clearer case about why it’s time to put an end to Wall Street as we know it. While many progressive analysts (including me) rant and rave about how we’re being robbed blind by large banks and hedge funds, Ellen Brown understands how banking works and what we can actually do about it.

The secrets that Ellen reveals in The Public Banking Solution will completely turn your head around. It did mine and I’ve been writing about banking since the financial crash in 2008. What I never understood until Ellen made it so clear in this book is that about 90% of all money in circulation is created by private banks — not the U.S. mint, not the Federal Reserve, not the Treasury. The secret is this: When banks make loans, they “create money out of thin air.” They’re not just loaning out depositor money. They actually are creating new money that goes into circulation.

By this point you might be thinking, “Who wants to read a technical book about banking?” Trust me. This is not a technical book, nor is it rhetorical. Let me be blunt: You will want to read it because it offers a vision for taking our country back from the banksters and their political flunkies.

Here’s the core of her argument. Because banks create most of our money, they control the very essence of the economy. To regain control of our economic well-being we need public banks that make investments in the public goods, services and jobs that we all need. Public banks can do all that without running up the national debt or raising taxes. Public banks, like private banks, fund investments. But, as Ellen writes:

The difference is that a publicly-owned bank returns the interest to the government and the community, while a privately-owned bank siphons it into private accounts, progressively drawing money out of the productive economy. (pg 204)

Viewed from a macro-level, in too-big-to-fail private banks the returns mainly go to enrich the top 1/100th of the top 1%. In public banks the returns go to enrich the nation.

Pie in the sky? I mean how can she be writing about public banks when Washington is cutting food stamps for the hungry? And even if Washington weren’t entirely gridlocked, isn’t this just another misguided effort towards big government, the kind that so miserably failed in Communist countries?

No.  You’ll find out in a hurry that Ellen is trying to save capitalism, not destroy it. And she’s incredibly practical. In fact, she is making the best case I’ve ever come across that in order to have a vibrant free-enterprise system, we need public banks.

Think about what we have now. The largest banks crashed the economy in 2008. We bailed them out because they were too big to fail and now they are even larger. The economy has barely recovered but the big banks have, making tens of millions for their executives and investors…like nothing much had happened. They now deploy more money on financial gambling (called proprietary trading) than they use for investments in business and consumer loans. When they crash again (a near certainty, don’t you think? ) there will be more bailouts (or bail-ins as Ellen calls them where depositors will have to cough up money to bailout out their own bankers). The bankers get to keep all the winnings while we pick up the losses. Is that capitalism? Adam Smith wouldn’t recognize it.

But more importantly, the current Wall Street banking system is both dangerous and corrupt. The incessant financial gambling threatens the entire global economy. Banks are so large and so powerful that they can’t be adequately regulated or disciplined. Financial wealth distorts democracy as it pours into politics further minimizing any and all regulations.

While so many of us have given up any hope of significantly changing Wall Street, Ellen shows us exactly how it can be done through public banking.

But where is the money going to come from to start public banks? The country is in no mood to run up more debt. First of all, if we had the option, millions of us would probably rush to move our money from Wall Street banks and into public banks. After all, few Americans trust Wall Street. As Ellen points out, our post offices could actually house branches of a national public retail bank similar to the excellent postal bank in Japan.

Don’t trust the Post Office? Then how about a state bank like the one in North Dakota. In fact, starting a state bank requires much less effort and almost no additional funding. Here’s another Brown revelation: Right now every time we pay our state and local taxes, or buy a drivers license, the money doesn’t just sit in a vault in city hall. It usually goes into a Wall Street bank which then provides state and local governments with cash management services. (Local banks are far too small to provide those services.) All in all, about $1 trillion of our tax money each year runs through Wall Street banks in every state….except North Dakota, which has a public bank.

Using those public funds as a base, the Bank of North Dakota supports state investments that have produced the lowest unemployment rate in the country PLUS a robust profit for the state’s treasury. No exorbitant banker salaries, no gambling in Wall Street derivatives. Just honest banking for the public good. That so-called socialist bank (created by the Populists in 1919) is so good that it thrives in one of the most conservative states in the union.

There’s so much more in the book that we don’t have time to explore. It gives us a history of banking and a review of public banking in countries all over the world. (Did you know that the largest bank in the world is publicly owned?) And her chapter on the Reconstruction Finance Corporation, (“The Little-Known Public Financial Institution that Reversed the Depression and Funded World War II.”) is a must read for progressive activists and policy wonks.

Thank you, Ellen, for opening our eyes and lighting the way to ending Wall Street’s rule. Let’s hope a million readers see the light as well.

_________________

Les Leopold is the Executive Director of the Labor Institute in New York and author of, How to Make a Million Dollars an Hour: Why Hedge Funds get away with Siphoning off America’s Wealth (Wiley, 2013)
[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

104 Responses to “FDL Book Salon Welcomes Ellen Brown, The Public Bank Solution: From Austerity to Prosperity”

BevW September 14th, 2013 at 1:48 pm

Ellen, Welcome to the Lake.

Les, Welcome back to the Lake, thank you for Hosting today’s Book Salon.


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Ellen Brown September 14th, 2013 at 1:50 pm

Thanks Bev and Les! Such a nice writeup.

Les Leopold September 14th, 2013 at 1:52 pm
In response to Ellen Brown @ 2

A pleasure.

BevW September 14th, 2013 at 1:59 pm

Ellen, Les, welcome.
Les what is your first question?

Les Leopold September 14th, 2013 at 1:59 pm
In response to BevW @ 4

Welcome Ellen, When did you first start writing about banking and how did you get into it? After all, not many people have the stomach for it, don’t you think? And why this book?

dakine01 September 14th, 2013 at 2:01 pm

Good afternoon Ellen and welcome to Firedoglake this afternoon. Les, welcome back!

Ellen, I have not had an opportunity to read your book but do have a question. Forgive me if you address this in there but what do you perceive as the major trade-offs of having public banks? By trade-offs, I mean things such as the funding for unnecessary building developments or the extraction industry (which I think is a major part of the North Dakota Bank). Mainly, how would the public bank assure that the state investments are for things that are for the common good and not just to benefit the few and poison the many?

Ellen Brown September 14th, 2013 at 2:07 pm

(In reply to Bev – not sure that shows up!) I started writing Web of Debt in 2002, but I had actually researched the subject in the 70s, when I was a young writer in search of a subject, before I went to law school. At that time though we didn’t have the internet, and I just couldn’t find the data. I was living abroad until 2000, and when I came back, it was a whole new world for research. I had written 10 books on health and the politics of health and was a bit bored with the subject by then. I read Ed Griffin’s “World Without Cancer” linking the pharmaceutical cartel with the money cartel, and that set me off. When I discovered that the Wizard of Oz was written as a monetary allegory in the 1890s, I had the hook and was off and running.

Les Leopold September 14th, 2013 at 2:09 pm
In response to Ellen Brown @ 7

Wall Street then is Emerald City?

wigwam September 14th, 2013 at 2:11 pm

Hi Ellen,

Welcome and thanks for all your wonderfully insightful articles. I’ve learned a lot from them.

Per William F. Hummel “Money as Credit”:

Today NBFIs such as mutual funds, pension funds, finance companies, and insurance companies issue far more credit in total than do banks. Indeed, deposits created by banks now comprise less than 20% of the total credit market debt.

Is that true? How / How not?

Ellen Brown September 14th, 2013 at 2:13 pm
In response to dakine01 @ 6

Hi. We have a retired Bank of North Dakota man on our advisory committee, and he insists that they are not politicians and do not cater to politicians. They are bankers doing responsible banking. They make loans to creditworthy borrowers and don’t engage in speculation. They partner with local banks, which deal with the customer directly. The BND just shares in the funding and guarantees the loan. That means in ND they didn’t have to get into the whole subprime mess, selling their mortgages off to investors. The local banks could keep their mortgages on their books and follow through, because the BND helped with capital requirements.

wigwam September 14th, 2013 at 2:15 pm

In 2011, as a way around the debt-limit, Ron Paul suggested that the Tresury and the Fed simply cancel some or all of the government debt owned by the Fed, at least enough of it so that the Treasury could avoid default. And, Dean Baker and others supported that suggestion.

My question is: Would that be legal under existing U.S. law?

Ellen Brown September 14th, 2013 at 2:16 pm
In response to Les Leopold @ 8

In The Wizard of Oz, Oz was Washington. The president then was McKinley, and his strings were allegedly pulled by an advisor behind the scenes. The witches of the East and West were the Wall Street/JPMorgan bankers and the Rockefeller cartel (Rockefeller was in Ohio, then considered the West). There were many other parallels, too many to be coincidence. Frank Baum just had fun with it I think.

TobyWollin September 14th, 2013 at 2:16 pm

Ellen — so, what is really standing in the way of public banking in this country? How do we get it? Is the easiest thing to do to get municipalities to take their funds out of the big banks and start their own?

Ellen Brown September 14th, 2013 at 2:18 pm
In response to wigwam @ 11

Hi, it would be legal for the Fed to buy up the debt, refund the interest (as they do anyway), and roll the debt over from year to year, which would amount to the same thing.

wigwam September 14th, 2013 at 2:19 pm
In response to Ellen Brown @ 14

But not to simply cancel it?

Les Leopold September 14th, 2013 at 2:22 pm

If publicly-owned banks are the solution, what exactly is the problem? Are you actually trying to replace too-big-to-fail banks?

Ellen Brown September 14th, 2013 at 2:23 pm
In response to TobyWollin @ 13

Hi Toby, that would be the easiest thing to do. Some counties are run by 3 commissioners, who could seal the deal over lunch. They wouldn’t have to have a large bank; $20 million is plenty to capitalize a startup bank for purposes of storing their revenues. They wouldn’t even have to make loans, at least to start. They could just use their excess deposits to buy municipal bonds, effectively funding their own development projects interest-free. Multiplied over a long loan, that works out to 35-40% of the cost of every public project.

Phoenix Woman September 14th, 2013 at 2:23 pm

The BND isn’t the only publicly-owned enterprise in North Dakota. Their grain elevators are run that way too.

It’s really interesting — and instructive — to see what enterprises various cultures or countries, in various time periods, decided were far too important to the society as a whole to be entrusted to people whose primary goal is to turn a profit from them.

BearCountry September 14th, 2013 at 2:25 pm

Since the fed is a private institution and our ‘leaders’ seem to be in thrall to it and all that it represents, wouldn’t it be nearly impossible to get a redo of our financial world?

Ellen Brown September 14th, 2013 at 2:25 pm
In response to wigwam @ 15

I don’t actually know. I read the Federal Reserve Act, but it’s pretty impenetrable in places. There was that “exigent circumstances” clause that was inserted after 2008, that allowed them to do pretty extraordinary things. They could probably draw on that. Dodd Frank may have cut some of that leeway though.

wigwam September 14th, 2013 at 2:28 pm
In response to Ellen Brown @ 20

Thanks. I’ll check that clause.

Ellen Brown September 14th, 2013 at 2:29 pm
In response to Phoenix Woman @ 18

Yes when we set up the Federal Reserve, other countries were setting up publicly-owned banks that were actually designed to issue credit on behalf of the nation. Australia was the leader in that. They funded all sorts of development, along with their participation in World War I; and they didn’t have to borrow a dime. This alarmed the City of London so much that they set up the “independent” central banking system we have today — independent of government but catering to the banks — regulated from abroad by the Bank for International Settlements and Financial Stability Board.

wigwam September 14th, 2013 at 2:30 pm

Would publicly owned banks have the same capital and reserve requirements as commercial banks?

eCAHNomics September 14th, 2013 at 2:30 pm

Aren’t the TBTF banks already public in the sense that without sucking off the taxpayer tit they couldn’t survive?

michaelsfb September 14th, 2013 at 2:31 pm

Ellen,
I support your work on public banking and appreciate that you are offering a solutions to the current banking mess that we are in. I do want to comment though that I wouldn’t necessarily attribute all of North Dakota’s current financial stability and low unemployment to the fact that it has a state bank.

There is a huge resource boom in the western half of the state around fracking in the Bakken Shale, which has upped employment in the state. Unfortunately this resource boom is not good for North Dakota or the planet as these are some very dirty carbon intensive oil that is being extracted.

So I would be careful not to attribute too much to the BND…

eCAHNomics September 14th, 2013 at 2:32 pm
In response to Ellen Brown @ 22

I thought Alexander Hamilton’s bank was a public bank. Would be grateful if I am wrong & you correct me. Didn’t pay attention to that kind of detail in my U.S. history.

BearCountry September 14th, 2013 at 2:34 pm

As the big, predatory banks grew larger and started doing all of the tricky things in the housing market, they probably could have been stopped, even without Glass-Steagall, if the regulators were actually regulating. I realize that is “looking back, not forward” so we still had a chance to correct many of the ills by arresting and putting some of the biggies on trial. That would not have crashed the system, but would have brought some sanity.

Ellen Brown September 14th, 2013 at 2:35 pm
In response to BearCountry @ 19

Hi. It might when things are going along reasonably well, but it looks to me like we’ll have another derivatives blowout sometime soon like the one in 2008, and this time Dodd Frank says we the taxpayers won’t bail out the responsible banks. Instead, they’re going to “bail in” our deposits, which means they’ll turn them into bank stock. When people go to the bank and can’t get their money out, that’s when radical change has happened historically. Argentina in 2001 is a prime example. The national government started printing pesos, the local governments issued “debt-cancelling bonds” that circulated as money, and neighborhoods traded in community currencies.

eCAHNomics September 14th, 2013 at 2:35 pm

Would deprivatizing the Federal Reserve, currently owned by the banksters, make a difference to financing the U.S.? Could use FRB’s balance sheet to issue debt for infrastructure projects, for example, without increasing USG debt.

Les Leopold September 14th, 2013 at 2:36 pm

Isn’t this socialism that you are proposing? What about “free markets”?

wigwam September 14th, 2013 at 2:37 pm
In response to eCAHNomics @ 29

Who would be the borrower in that case?

BearCountry September 14th, 2013 at 2:39 pm
In response to Ellen Brown @ 28

That ‘bail-in’ doesn’t make sense to me. Is it really legal to do that and make the depositor that last in line for regaining the funds? Are our funds any safer in credit unions or other savings institutions?

eCAHNomics September 14th, 2013 at 2:41 pm
In response to wigwam @ 31

USG or S&L govts. Say 100-year, zero interest bonds. Govts could sell them at 1% or 2% interest on secondary market. Building govt infrastructure is more profitable than using FRB balance sheet to shore up zombie banks.

eCAHNomics September 14th, 2013 at 2:42 pm
In response to BearCountry @ 32

U.S. is a government of banksters, not a government of laws. Southern European nations are trend setters.

CTuttle September 14th, 2013 at 2:43 pm

Aloha, Ellen and Les…! Ellen, David Dayen had written an excellent article awhile back that the US Postal Service could provide the perfect vehicle for Public Banks, what are your thoughts…?

Ellen Brown September 14th, 2013 at 2:44 pm
In response to Les Leopold @ 16

We might like to replace the TBTF banks, but it seems a bit unlikely. What we want to do is to set up an alternative system and just move quietly into it. The system today serves Wall Street but it doesn’t serve local communities very well. It exploits local communities. Private bankers and the central bank they control have their hands on the credit spigots. They can turn credit on and off at will, creating booms that seduce people into incurring more debt, followed by busts when the loans go into default. The lenders then foreclose on the collateral and wind up with the assets, public and private. They get progressively richer while the poor get progressively poorer. A major portion of the population has been left without banking services or affordable credit, and costs have soared. When the government owns the bank, it can borrow interest-free, saving 35-40% of the cost of public projects; and it can direct credit into those sectors of the economy where it is needed most.

eCAHNomics September 14th, 2013 at 2:47 pm
In response to Ellen Brown @ 36

alternative system and just move quietly into it

Do you think banksters wouldn’t notice? Small efforts are easier to crush than large ones.

Ellen Brown September 14th, 2013 at 2:49 pm
In response to wigwam @ 23

They probably would have the same capital and reserve requirements, but a government bank would have a huge deposit base and a huge potential capital base, so it wouldn’t really have to worry about the requirements. The Bank of North Dakota is set up as “North Dakota doing business as the Bank of North Dakota.” It’s a DBA of the state. That means all of the assets of the state are technically the assets of the bank.

wigwam September 14th, 2013 at 2:50 pm
In response to eCAHNomics @ 37

And Larry Summers is known to be a crusher.

wigwam September 14th, 2013 at 2:50 pm
In response to Ellen Brown @ 38

Wow! Cool!

eCAHNomics September 14th, 2013 at 2:52 pm
In response to wigwam @ 39

Summers would look less intimidating if he would pay a tailor to sew shirts with collars that fit his gargantuan neck. Suppose Summer’s wrinkled attire is not an accident.

Mod Note: Please stay on topic of the Book Salon and not Larry Summers sartorial choices

Ellen Brown September 14th, 2013 at 2:53 pm
In response to eCAHNomics @ 24

Exactly. The TBTF banks can borrow more cheaply than anyone else in the economy, and it’s because their deposits are guaranteed by the FDIC. We the people are underwriting the banks, but we aren’t getting the profits. That’s the whole point of public banking: the public gets the profits and credit is directed to public purposes.

Ellen Brown September 14th, 2013 at 2:54 pm
In response to Les Leopold @ 30

No. “Socialism” is government ownership of the means of production—factories, farms, businesses, land. Public banking is about government oversight of the system of credits and debits that compose our money supply. Banking is economic infrastructure, just as roads and bridges are physical infrastructure. We need credit that is accessible and freely flowing. It’s the grease that allows the wheels of free enterprise to turn.

michaelsfb September 14th, 2013 at 2:54 pm

Claims were made by someone that the BND is responsible for ND’s low unemployment…this analysis of space photography is support for my comment that the Bakken Shale is an area where there is substantial new economic activity in the last 5 years.

Ellen Brown September 14th, 2013 at 2:56 pm
In response to eCAHNomics @ 29

Right. Truly “government” central banks have been used in other countries for truly public purposes. QE could be used to make low-interest loans to local governments or students instead of banks.

eCAHNomics September 14th, 2013 at 2:58 pm

Hey mod, nice sense of humor.

wigwam September 14th, 2013 at 2:58 pm
In response to Ellen Brown @ 43

I’d also argue that the value of the dollars that banks create from thin air is in large part due to the fact that we-the-people accept their thin-air dollars in payment of taxes.

Ellen Brown September 14th, 2013 at 3:00 pm
In response to BearCountry @ 32

“Bailing” in depositor funds, unfortunately, is legal, going back to law established in the 19th century. Before that, depositors were always looking over the banker’s shoulder getting nervous about what the deposits were being used for. The court held that the bankers couldn’t run a business that way and that the deposits were to be considered the property of the banks once deposited. All the depositor had was a checking account and an IOU.

Les Leopold September 14th, 2013 at 3:00 pm

Ellen, At some point in this second hour you might want to explain how private banks “create money out of thin air.” Aren’t they just loaning out the deposits they take in? many thanks

eCAHNomics September 14th, 2013 at 3:01 pm
In response to Ellen Brown @ 45

It is an enduring sense of shame that BHLs (bleeding heart liberals) didn’t glom onto Warren’s proposal for FRB finance of education. It was the camel’s nose under the tent that could have been scalable into full bore use of FRB balance sheet.

BearCountry September 14th, 2013 at 3:03 pm

Ellen, I can just see the ads by the banksters in opposition to such banks as you are advocating. There would be attacks on the ability of the govt to run any economic enterprise effectively and efficiently. All of the past attacks on SS would be rounded up and used here. The wholly owned congress would not approve it. On and on it would go. It doesn’t matter how good the idea is, it would be a change from what is, and, like any large ship at sea, it is very hard to turn in a major new direction.

john in sacramento September 14th, 2013 at 3:04 pm

Wish I had time to stay, but I will come back later to read the comments

I have a couple degrees of separation from the State Bank of ND – my Dad’s Uncle owned the property where the bank is now. He owned the Holiday Inn there

cmaukonen September 14th, 2013 at 3:04 pm

Hi Ellen,

I like the idea of public banking a lot. But taking mortgages and what not away from private for profit banks would leave Wall Street with much less to gable with. Kind of like closing most of a casinos in Los Vegas.

Don’t think they would like that.

wigwam September 14th, 2013 at 3:06 pm
In response to BearCountry @ 51

Ellen, I can just see the ads by the banksters in opposition to such banks as you are advocating. … The wholly owned congress would not approve it.

Specifically, does anything you propose, Ellen, require additional federal legislation? (I hope not.)

Ellen Brown September 14th, 2013 at 3:10 pm
In response to michaelsfb @ 44

That’s one reason I wrote “The Public Bank Solution.” My earlier book, “Web of Debt,” was all about the problem, and concluded with the Bank of North Dakota as a model for the solution. But it’s the only U.S. public depository bank model. Critics said North Dakota is a small state, it has oil, it set up its bank a century ago, etc. I needed more data, so I started looking at what else was out there globally and historically. I was surprised myself to find that 40% of banks globally are publicly owned. The model turned out to be well tested and highly efficient, with a surfeit of material for another book. (Still just a writer in search of a good subject!)

Ellen Brown September 14th, 2013 at 3:11 pm
In response to eCAHNomics @ 41

Right. Don’t get me started on fashion!

BearCountry September 14th, 2013 at 3:13 pm
In response to Ellen Brown @ 55

Please keep on, Ellen. Ms. BearCountry reads or listens to as much of your broadcast work as possible. We’ve heard you on Bonnie Faulkner’s Guns and Butter and other places.

Ellen Brown September 14th, 2013 at 3:14 pm
In response to eCAHNomics @ 37

True, but popular movements have prevailed in the past. It’s all in my book! It takes persistence, lots of networking, and group education. That’s where I’m at — spreading information.

Ellen Brown September 14th, 2013 at 3:15 pm
In response to BearCountry @ 57

Thanks Ms. BC!

wigwam September 14th, 2013 at 3:17 pm
In response to Ellen Brown @ 55

What do you think of the work of Bernard Litaer? As I understand it, he sets up not only local banks, but also local monetary systems? The stuff you mentioned about Argentina reminded me of his stuff.

Ellen Brown September 14th, 2013 at 3:19 pm
In response to eCAHNomics @ 26

Hamilton’s bank started out as a publicly owned bank, but it went into debt and wound up getting sold off to private investors.

Ellen Brown September 14th, 2013 at 3:23 pm
In response to cmaukonen @ 53

Mortgages was last year. This year it’s derivatives. Wall Street isn’t very interested in the small and medium-sized businesses that generate most of the jobs today. Plus, a quarter of the country is unbanked or underbanked. There is actually a huge lending market that Wall Street has virtually abandoned. In Germany, that local market is serviced by public, cooperative and community banks; and the system works very well.

Ellen Brown September 14th, 2013 at 3:25 pm

Very cool!

Ellen Brown September 14th, 2013 at 3:29 pm
In response to BearCountry @ 51

True. That’s why the local level holds a lot more promise. There is also the “promise” of the next Lehman Brothers. If people and politicians understand that there are alternatives out there, next time they won’t be so quick to approve a bailout or a bail-in. We’re actually behind the curve on public banking. China, Korea, Japan, Russia, Argentina and many other Latin countries are running circles around us in development, and their public banks are a major factor in that.

CTuttle September 14th, 2013 at 3:29 pm

Here’s one of David Dayen’s articles… Bring Back Postal Banking: Signed, Sealed, Deposited

Ellen Brown September 14th, 2013 at 3:32 pm
In response to wigwam @ 60

Bernard Lietaer’s work is excellent. I’ve drawn a lot on his research. Community currency systems are great for communities, but they are too limited for use by governments. Governments need a place to park their dollars that is safe and can generate some income. That is where public banks come in.

BearCountry September 14th, 2013 at 3:33 pm

One half of a question I asked got lost. Is our money any safer in credit unions and other, non-commercial savings institutions?

eCAHNomics September 14th, 2013 at 3:35 pm
In response to Ellen Brown @ 62

Derivatives, aka leverage. Leverage is fantastic. Put down a penny on $100 and if it goes to $100.02, you’ve doubled your money.

If it goes to $99.99, have you lost your money. Nuh uh because taxpayer will make up the difference.

What’s not to like.

wigwam September 14th, 2013 at 3:35 pm
In response to CTuttle @ 65

Thanks CT. That looks very interesting.

BearCountry September 14th, 2013 at 3:37 pm

In case I have to leave before the end of the salon, I would like to thank Ellen Brown and Les Leopold for stopping by. I will make sure that our local library or the regional group has your books. Very important material.

Ellen Brown September 14th, 2013 at 3:37 pm
In response to wigwam @ 54

I’ve actually proposed quite a few things, but most of them don’t require additional legislation. I think the Federal Reserve Act should be reformed, and that would require additional legislation. The point in that case is not that it is likely to happen but that Congress has the power to take back the money power if it wishes. Things like the trillion dollar coin option would not require additional legislation, and that’s the beauty of it. The Constitution says Congress shall have the power to coin money and regulate the value thereof. Congress did limit its own power in the 1980s by limiting the amount it could issue in the way of most coins, but they made an exception for the platinum coin, which could actually be issued in trillion dollar denominations without violating any legislation.

Ellen Brown September 14th, 2013 at 3:38 pm
In response to BearCountry @ 70

Thanks and great chatting with you!

Les Leopold September 14th, 2013 at 3:39 pm
In response to BearCountry @ 70

Many thanks for your kind words and support.

Ellen Brown September 14th, 2013 at 3:40 pm
In response to BearCountry @ 67

Money is safer in credit unions and local banks, but still could be at risk. Credit unions use large correspondent banks for “liquidity” and often participate in overnight sweeps, in which their money is lent to Wall Street overnight. The next Lehman Bros will no doubt go bankrupt overnight or on a weekend, and your money could be caught there. This is also true of brokerages. Scottrade engages in overnight sweeps, but you can ask to opt out.

wigwam September 14th, 2013 at 3:41 pm

Things like the trillion dollar coin option would not require additional legislation, and that’s the beauty of it.

BTW, Joe “letsgetitdone” Firestone posted a history of that idea here at FDL. If I recall correctly, he gave a comment by you the credit for having inspired the concept.

Ellen Brown September 14th, 2013 at 3:41 pm
In response to CTuttle @ 65

Cool. I’m just now writing on the postal banking option myself.

Les Leopold September 14th, 2013 at 3:43 pm

Ellen has a way of inspiring a bunch of us.

Ellen Brown September 14th, 2013 at 3:46 pm
In response to Les Leopold @ 49

On banks creating money out of thin air — I’ll just quote from my book!

If every outgoing check must be cleared by drawing from base money created by the Fed and held in the commercial bank’s reserve account, how does the circulating money supply expand? Why do private banks still seem to be creating the vast majority of the money supply today?

In part, the answer has to do with how the money supply is officially tallied up. The figure called “M2” is an attempt to quantify the amount of money in the circulating money supply. It consists of currency in circulation (notes and coins) plus demand deposits, savings deposits, time deposits, and money market deposit accounts for individuals. A deposit is created by double-entry bookkeeping whenever a loan is taken out. The borrower’s promise to pay (his mortgage or other promissory note) is entered on the asset side of the balance sheet, and the sum advanced as a deposit is entered on the liability side. Increasing deposits increases M2. The very act of borrowing from a bank thus increases the official money supply.

The checks written on these new deposit accounts still need to be cleared in the bank’s reserve account, but checks fly back and forth between banks all day, and most of them are netted out. Only the deficit in the reserve account at the end of the day has to be cleared by borrowing from somewhere else.

Consider this example: Bank A issues a loan for $100, which becomes a deposit, which becomes a check, which is written to a customer at Bank B, who deposits it in Bank B. Bank B, meanwhile, issues a loan for $100 to another customer, which becomes a deposit, which becomes a check, which is written to a customer who deposits it in Bank A. The two checks net out, so there is no need for either bank to borrow reserves to cover them at the end of the day. But two new deposits of $100 each have been created, increasing the money supply by $200; and two depositors each have $100 more to spend into the economy.

If there are insufficient reserves within the banking system as a whole to match the checks flying daily between accounts, the Federal Reserve will create more. The Fed was set up to backstop the banks, and it will create all the base money needed.

karenjj2 September 14th, 2013 at 3:47 pm

very delighted to see you here, Ellen. You mentioned that public banking could be started at the county level. Would you expand on that a bit as to how it might be initiated?

Ellen Brown September 14th, 2013 at 3:49 pm
In response to wigwam @ 47

Virtually the entire circulating money supply consists of bank-created thin-air dollars. If they weren’t accepted in taxes, there wouldn’t be any money to pay taxes.

vagreen September 14th, 2013 at 3:49 pm

Ellen, I just read that repackaging debt is starting to make a comeback. It’s like 2008 never happened.

Les Leopold September 14th, 2013 at 3:49 pm
In response to Ellen Brown @ 78

Now if only we had 50 state public banks doing just that.

BevW September 14th, 2013 at 3:52 pm

As we come to the last minutes of this great Book Salon discussion,

Ellen, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book, and the need for a Public Banking system.

Les, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Ellen’s website and book (Public Bank Solution) and (Twitter)

Les’s website and Twitter

Thanks all, Have a great weekend.

Tomorrow – Mark Leibovich / This Town: Two Parties and a Funeral-Plus, Plenty of Valet Parking!-in America’s Gilded Capital; Hosted by Christina Bellantoni, PBS Newshour

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

FDL Book Salon has a Facebook page too

BearCountry September 14th, 2013 at 3:53 pm
In response to vagreen @ 81

It seems to me that if the problem happens again, we should have learned enough to make major changes that would radically alter how the tbtf function. If our ‘leaders’ can’t think this through with pressure from us to make changes, then we truly are done for.

Les Leopold September 14th, 2013 at 3:54 pm

Thanks for making this website available to all of us. And thanks to Ellen for her pioneering work. I look forward to the time when we can name a public bank after her!

Ellen Brown September 14th, 2013 at 3:55 pm
In response to karenjj2 @ 79

Thanks! A number of cities and counties are actually considering moving their deposits into their own banks. Many counties have larger populations than the entire state of North Dakota. Public deposits could be subject to seizure in a bail-in situation just as private deposits could, even though they are secured with collateral. The reason is that derivatives players have super-priority in bankruptcy, which means they could take all the collateral. For that reason alone, it would behoove cities and counties to move their revenues into their own banks. This could be done quite cheaply, since you don’t even need capital if you aren’t making loans. The capital base could then be expanded as needed, if and when loans were made.

karenjj2 September 14th, 2013 at 3:55 pm
In response to Les Leopold @ 85

seconded!

Ellen Brown September 14th, 2013 at 3:56 pm
In response to vagreen @ 81

Yep. The shadow banking system has grown even larger and is even less regulated than before. It looks to me like a disaster waiting to happen.

vagreen September 14th, 2013 at 3:57 pm
In response to vagreen @ 81

I hope that we can do something in the next few years about this. The current financial system is giving us a more severe crisis each time. Employment took much longer to recover its pre-recession peak in the 2001 recession than in 1990-91, and we still haven’t recovered from 2008-09 yet.

Ellen Brown September 14th, 2013 at 3:57 pm
In response to Les Leopold @ 85

Ha ha, thanks Les and FDL! I’d settle for grandchildren!

michaelsfb September 14th, 2013 at 3:58 pm
In response to Ellen Brown @ 55

Thank you Ellen!

CTuttle September 14th, 2013 at 4:00 pm

Mahalo nui loa, Ellen, Les, and Bev, for another excellent Book Salon…!

vagreen September 14th, 2013 at 4:00 pm
In response to Ellen Brown @ 88

I’ve also read that the big banks continued with foreclosure fraud after the settlement that they negotiated with the Government, which allowed them to pay homeowners a whopping $2,000 for the theft of their houses.

If we applied the same logic to grand theft auto, we would allow car theft rings to write a check to the owners for about $200 and they could still keep the cars and avoid jail time.

vagreen September 14th, 2013 at 4:01 pm
In response to Ellen Brown @ 90

Thanks, Ellen!

karenjj2 September 14th, 2013 at 4:01 pm
In response to Ellen Brown @ 86

thank you! looks like i’ll need at least one copy of your book to learn about the progress of the cities and counties exploring your suggestions.

Ellen Brown September 14th, 2013 at 4:02 pm
In response to Les Leopold @ 77

Thanks Les, you’re a great writer yourself and I’m pleased to inspire you!

Ellen Brown September 14th, 2013 at 4:03 pm
In response to vagreen @ 93

Another reason the TBTF banks have to go. They’re not only too big to fail but too big to jail, literally. Bill Black talks a lot about that.

Ellen Brown September 14th, 2013 at 4:04 pm
In response to wigwam @ 75

Yes he did a really good writeup on that.

Ellen Brown September 14th, 2013 at 4:08 pm
In response to wigwam @ 9

Interesting. I would have put it at 50% but wouldn’t question Hummel. It’s another reason a 100% reserve solution wouldn’t work; borrowing will just move further out of the conventional banking system into the unregulated non-banks.

Ellen Brown September 14th, 2013 at 4:15 pm
In response to eCAHNomics @ 50

Agreed. Warren’s was a great proposal for saving the students AND stimulating the economy. Nobody shops like young people!

Ellen Brown September 14th, 2013 at 4:22 pm
In response to Ellen Brown @ 99

Correction; I meant the creation of money-as-credit would just move further into the unregulated non-bank sector.

wigwam September 14th, 2013 at 10:05 pm
In response to Ellen Brown @ 101

The 100% reserve approach, which IIUC is the same as the banks-loan-out-their-deposits-only solution, would make bank deposits the new reserve for what Hummel calls the NBFIs.

Ellen Brown September 15th, 2013 at 7:32 am
In response to wigwam @ 102

Non-banks aren’t banks and don’t take deposits. What makes them “sound” is that derivatives and repos have super-priority in bankruptcy. I’m just now writing on that. See these two links –

http://www.reuters.com/article/2013/09/12/us-lehman-fiveyear-analysis-idUSBRE98B05620130912

http://www.eba.europa.eu/documents/10180/16154/Perotti.pdf

crazyhead September 15th, 2013 at 7:52 am

It’s hard to imagine that states like Texas, Florida, North Carolina, etc. wouldn’t politicize these banks the same way they politicize everything else. They would make them havens for business cronies, climate change deniers, Christian fundamentalists, and gun nuts.

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