SUSTAINABLE MONEY FOR A
SUSTAINABLE ECONOMY
Ellen Brown
TeslaConference
Split, Croatia
July 10-13, 2012
Two competing money systems have vied for
dominance for thousands of years.
• Money created
privately by
moneylenders or banks
• Money created publicly
by communities or
governments
Publicly-created money used as a unit of
account is actually older and more
sustainable than private money trading as a
commodity (gold).
• The ancient Sumerians
and Egyptians used no
money at all – just an
accounting system.
• Money was not a “thing”
but a relation: accounting
and the thing counted
were inextricably joined.
Egyptian grain banks
• Receipts for deposits
were written on pottery,
which served as a
medium of exchange.
• Not valuable in
themselves, and they
didn’t pay interest.
Interest was paid by the
depositor rather than the
bank.
Money as a tool of empire:
gold and silver coins
• With coins and then paper
banknotes, money became a
“thing” independent of the
goods it represented.
• It could be horded,
manipulated, and lent at
usurious interest rates.
• Not sustainable: Unrepayable
debt led to slavery; empires
crumbled under its weight.
Medieval Italian bankers expanded the
money supply with “bank credit” . . .
• But it was sleight of
hand, because
“backed” by
insufficient
quantities of gold;
and the bankers
periodically got into
trouble for it.
Public banks countered the abuses
of the private usury banks
• Bank of Venice and other
city-owned banks
• “Mons pietatis” – charitable
public banks to serve the
poor – evolved into European
local public and cooperative
banks.
Medieval England:
moneylenders’ gold vs. tally sticks
• Abuses caused the
moneylenders to be
evicted in the 13th
century.
• Government-issued tally
sticks were the money of
the people for 700 years
(1100 to 1834).
• A unit of account rather
than store of value.
In the 17th century,
however, the
moneylenders were
readmitted to
England; and in
1694, the Bank of
England was
chartered . . .
The Bank of England
circa 1740
. . . when William III, a Dutchman, needed
money to fight a war. The bank lent
banknotes redeemable in gold, on a
“fractional reserve” system. Only the interest
had to be paid. In effect, the national
currency was rented from private bankers.
American colonies:
The Bank of England’s gold-backed notes
competed with colonial paper scrip
Benjamin Franklin: The
Father of Paper Money
The colonial model
• Precious metals were
scarce, and the colonists
resisted taxation.
• Government-issued bills
of credit solved those
problems but sometimes
created another: inflation.
• Government-issued
credit, repaid at interest,
solved all 3.
The Pennsylvania land bank: bills of credit
were issued by the government and LENT to
the farmers at interest.
The result:
• No taxes
• No inflation
• No government
debt
• Highly sustainable
(vs. today’s
unsustainable
system)
Government prints $105
Lends $100
@ 5% interest
Spends $5 on
budget, infrastructure
$105 circulates in economy; comes back
to government as principal and interest
Government lends $100
@ 5% interest
Spends $5 on
budget, infrastructure
What happened to the colonial model?
Imprudent money-printing in some colonies
led the King to forbid them to create new
issues of scrip.
Pennsylvania was allowed to carry on -- until
Franklin went to London to plead the case. He
let the cat out of the bag: government-issued
money and credit were the road to prosperity
and independence.
The Bank of England leaned on King
George, who forbade new issues of scrip in
the colonies, precipitating a depression and
the American Revolution.
The colonists won the Revolution but lost the
power to issue their own money. Private banks
issued banknotes at interest on the fractional
reserve (counterfeit) model.
Abraham Lincoln restored the governmentissued paper money of the American
colonists but was assassinated.
The Federal Reserve was instituted in 1913 on the
Bank of England model. But public banking was
successfully pursued in other ex-British colonies –
Australia, New Zealand and Canada – until the
Bank of England again suppressed it.
The Commonwealth Bank of Australia was
wildly successful . . .
until Governor Denison
Miller, like Franklin, made
the mistake of touting its
virtues in London, killing
the golden goose.
The birth of “central banking”
• Alarmed, the Bank of England
devised a new plan: it would
arrange for a system of
“central banks” to take over
the power to issue national
currencies.
• This money would be LENT to
the government and people.
• The apex of the system would
be the Bank of England.
Bank of
England
Central
bank
Treasury
• The BOE sent Sir Otto
Niemeyer to advise
Australia and New
Zealand.
• In 1937, he became
chairman of the Bank
for International
Settlements in
Switzerland.
• The apex of the system
also moved to the BIS,
as revealed in 1966 . . .
The BIS game plan was revealed by Prof.
Carroll Quigley of Georgetown Univ., who
wrote in “Tragedy and Hope”:
“The powers of financial
capitalism had another farreaching aim, nothing less
than to create a world
system of financial control in
private hands able to
dominate the political
system of each country and
the economy of the world as
a whole. . . .
“The apex of the system was
to be the Bank for
International Settlements in
Basel, Switzerland, a private
bank owned and controlled by
the world's central banks
which were themselves
private corporations. Each
central bank . . . sought to
dominate its government by
its ability to control Treasury
loans . . . .”
• That was the plan, but the
Reserve Bank of New
Zealand was taken over by a
money reform party and used
to issue “national credit.”
• Again the experiment was
hugely successful, until the
BOE intervened: NZ would be
cut off from trade with the
Commonwealth if it did not
cease these “unsound
practices.”
• The Commonwealth had
no control over the
Germans and the
Japanese, who were also
issuing “national credit”
and thriving, while the
rest of the world suffered
a major depression.
• Like the American
colonists, they were
stopped by war.
Japan gets
universal electrical
power, 1935.
Canada, however, was carrying on with the
public banking model, very successfully.
• In 1935, the Bank of
Canada Act allowed
the Canadian Central
Bank to create the
credit to finance federal
and local projects.
• It did this from 1939 to
1974, again to brilliant
effect.
Major government projects were funded
with national credit
• aircraft production
• education benefits for
returning soldiers
• family allowances
• old age pensions
• the Trans-Canada Highway
• the St. Lawrence Seaway
project
• universal health care.
In 1974, the Canadian Government quit
borrowing from its own central bank. Result: by
2000, the federal debt had shot up to $585B.
What happened in 1974?
The Basel Committee was
established by the central-bank
Governors of the Group of Ten
countries of the BIS.
• Canada joined the BIS and the Basel Committee
the same year.
• One of the key objectives of the Committee was to
“maintain the stability of the currency.”
• That meant no more printing money or borrowing
from the nation’s own central bank. Borrowing
had to be private.
• It was based on a bogus argument . . .
The presumption was that government-issued
money was inflationary, while money borrowed
privately was not.
But private-bankcreated money is
actually MORE
inflationary than
government-created
money, and it comes
with an interest charge.
Private banks create the vast majority of the
money supply today, and they create only the
principal, not the interest, on their loans.
paulgrignon.netfirms.com
.
To find the interest, more debt must be taken out.
It’s an unsustainable pyramid scheme.
•www.answers.com
Without interest, even a large federal debt
might be sustainable.
Without interest, there might not be a
national debt.
• U.S. debt is $15T. $8.2T
has been paid in interest in
24 years.
$15 Trillion
Debt
Interest
$8.2 Trillion
http://www.treasurydirect.gov/govt/reports/ir/ir
_expense.htm
• France’s debt increased
1.35 Euros since 1973.
1.4B Euros paid in interest
since then.
https://www.youtube.com/watch?v=P8fDLyXX
UxM&feature=player_embedded
1.4B Euros
$1 Trillion
$481.5 Billion
1.35B Euros
• Canada had a debt in 2006
of C$ 481.5 billion, and had
paid almost C$ 1 trillion in
interest since 1961.
http://www.enterstageright.com/archive/article
s/1006/1006cdndebt.htm
Could the colonial model eliminate
income taxes today? Yes!
• Total income taxes paid
in 2011: $1,100 billion.
• Total interest collected
by banks: $725 billion.
• Total interest paid on
federal debt: $454
billion.
• Thus interest could
replace income taxes -if banking were a public
utility . . .
1400
1200
1000
800
bank int.
fed int.
600
400
200
0
total
total inc tax
interest
How local governments can cut out interest:
borrow from their own publicly-owned banks.
Only one U.S. state actually owns
its own bank – North Dakota.
• It is also the only state
to escape the credit
crisis, sporting a budget
surplus every year
since 2008.
• It has the lowest
unemployment rate,
foreclosure rate, and
default rate in the
country.
Proving the model globally -The BRIC countries also escaped the credit crisis.
Public sector banks predominate in the BRICs.
The BRIC countries want a new global
reserve system – and have the clout to
get it.
• The Chinese have
proposed a return to
Keynes’ idea – an
International Currency
Union.
• Trade balances would
be cleared, not with a
reserve currency, but
with a global currency
unit (the “bancor”).
How to value the currency yardstick?
• Basket of commodities
(Keynes)
• Basket of currencies
• Green energy units
• Consumer price index
• Purchasing power parity
We will have come full circle . . .
As in Sumeria, money will be simply a unit of
account and medium of trade. If banking were
made a public credit clearing system, with profits
and interest returning to the public, banking would
be sustainable.
For more information –
PublicBankingInstitute.org
WebofDebt.com