Archive for the ‘Ellen Brown’ Category


Ellen Brown

February 27, 2018

One Belt, One Road,” China’s $1 trillion infrastructure initiative, is a massive undertaking of highways, pipelines, transmission lines, ports, power stations, fiber optics, and railroads connecting China to Central Asia, Europe and Africa. According to Dan Slane, a former advisor in President Trump’s transition team, “It is the largest infrastructure project initiated by one nation in the history of the world and is designed to enable China to become the dominant economic power in the world.” In a January 29th article titled “Trump’s Plan a Recipe for Failure, Former Infrastructure Advisor Says,” he added, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”

On Monday, February 12th, President Trump’s own infrastructure initiative was finally unveiled. Perhaps to trump China’s $1 trillion mega-project, the Administration has now upped the ante from $1 trillion to $1.5 trillion, or at least so the initiative is billed. But as Donald Cohen observes in The American Prospect, it’s really only $200 billion, the sole sum that is to come from federal funding; and it’s not even that after factoring in the billions in tax cuts in infrastructure-related projects. The rest of the $1.5 trillion is to come from cities, states, and private investors; and since city and state coffers are depleted, that chiefly means private investors. The focus of the Administration’s plan is on public-private partnerships, which as Slane notes are not suitable for many of the most critical infrastructure projects, since they lack the sort of ongoing funding stream such as a toll or fee that would attract private investors. Public-private partnerships also drive up costs compared to financing with municipal bonds.

In any case, as Yves Smith observes, private equity firms are not much interested in public assets; and to the extent that they are, they are more interested in privatizing existing infrastructure than in funding the new development that is at the heart of the president’s plan. Moreover, local officials and local businessmen are now leery of privatization deals. They know the price of quick cash is to be bled dry with user charges and profit guarantees.

The White House says its initiative is not a take-it-or-leave-it proposal but is the start of a negotiation, and that the president is “open to new sources of funding.” But no one in Congress seems to have a viable proposal. Perhaps it is time to look more closely at how China does it . . . .

China’s Secret Funding Source: The Deep Pocket of Its State-owned Banks

While American politicians argue endlessly about where to find the money, China has been forging full steam ahead with its mega-projects. A case in point is its 12,000 miles of high-speed rail, built in a mere decade while American politicians were still trying to fund much more modest rail projects. The money largely came from loans from China’s state-owned banks. The country’s five largest banks are majority-owned by the central government, and they lend principally to large, state-owned enterprises.

Where do the banks get the money? Basically, they print it. Not directly. Not obviously. But as the Bank of England has acknowledged, banks do not merely recycle existing deposits but actually create the money they lend by writing it into their borrowers’ deposit accounts. Incoming deposits are needed to balance the books, but at some point these deposits originated in the deposit accounts of other banks; and since the Chinese government owns most of the country’s banks, it can aim this funding fire hose at its most pressing national needs.

China’s central bank, the People’s Bank of China, issues money for infrastructure in an even more direct way. It has turned to an innovative form of quantitative easing in which liquidity is directed not at propping up the biggest banks but at “surgical strikes” into the most productive sectors of the economy. Citigroup chief economist Willem Buiter calls this “qualitative easing” to distinguish it from the quantitative easing engaged in by Western central banks. According to a 2014 Wall Street Journal article:

In China’s context, such so-called qualitative easing happens when the People’s Bank of China adds riskier assets to its balance sheet – such as by relending to the agriculture sector and small businesses and offering cheap loans for low-return infrastructure projects – while maintaining a normal pace of balance-sheet expansion [loan creation]. . . .

The purpose of China’s qualitative easing is to provide affordable financing to select sectors, and it reflects Beijing’s intention to dictate interest rates for some sectors, Citigroup’s economists said. They added that while such a policy would also put inflationary pressure on the economy, the impact is less pronounced than the U.S.-style quantitative easing.

Among the targets of these surgical strikes with central bank financing is the One Belt, One Road initiative. According to a May 2015 article in Bloomberg:

Instead of turning the liquidity sprinkler on full-throttle for the whole garden, the PBOC is aiming its hose at specific parts. The latest innovations include plans to bolster the market for local government bonds and the recapitalisation of policy banks so they can boost lending to government-favoured projects. . . .




by Ellen Brown

This is the second in a two-part article on the debt burden America’s students face. Read Part 1 here.

The lending business is heavily stacked against student borrowers. Bigger players can borrow for almost nothing, and if their investments don’t work out, they can put their corporate shells through bankruptcy and walk away. Not so with students. Their loan rates are high and if they cannot pay, their debts are not normally dischargeable in bankruptcy. Rather, the debts compound and can dog them for life, compromising not only their own futures but the economy itself.

“Students should not be asked to pay more on their debt than they can afford,” said Donald Trump on the presidential campaign trail in October 2016. “And the debt should not be an albatross around their necks for the rest of their lives.” But as Matt Taibbi points out in a December 15 article, a number of proposed federal changes will make it harder, not easier, for students to escape their debts, including wiping out some existing income-based repayment plans, harsher terms for graduate student loans, ending a program to cancel the debt of students defrauded by ripoff diploma mills, and strengthening “loan rehabilitation” – the recycling of defaulted loans into new, much larger loans on which the borrower usually winds up paying only interest and never touching the principal. The agents arranging these loans can get fat commissions of up to 16 percent, an example of the perverse incentives created in the lucrative student loan market. Servicers often profit more when borrowers default than when they pay smaller amounts over a longer time, so they have an incentive to encourage delinquencies, pushing students into default rather than rescheduling their loans. It has been estimated that the government spends $38 for every $1 it recovers from defaulted debt. The other $37 goes to the debt collectors.

The securitization of student debt has compounded these problems. Like mortgages, student loans have been pooled and packaged into new financial products that are sold as student loan asset-backed securities (SLABS). Although a 2010 bill largely eliminated private banks and lenders from the federal student loan business, the “student loan industrial complex” has created a $200 billion market that allows banks to cash in on student loans without issuing them. About 80 percent of SLABS are government-guaranteed. Banks can sell, trade or bet on these securities, just as they did with mortgage-backed securities; and they create the same sort of twisted incentives for loan servicing that occurred with mortgages.

According to the Consumer Financial Protection Bureau (CFPB), virtually all borrowers with federal student loans are currently eligible to make monthly payments indexed to their earnings. That means there should be no defaults among student borrowers. Yet one in four borrowers is now in default or struggling to stay current. Why? Student borrowers are reporting widespread mishandling of accounts, unexplained exorbitant fees, and outright deception as they are bullied into default, tactics similar to those that homeowners faced in the foreclosure crisis. The reports reveal a repeat of the abuses of the foreclosure fraud era: many borrowers are unable to obtain basic information about their accounts, are frequently misled, are surprised with unexpected late fees, and often are pushed into default. Servicers lose paperwork or misapply payments. When errors arise, borrowers find it difficult to have them corrected.




by Ellen Brown

Higher education has been financialized, transformed from a public service into a lucrative cash cow for private investors.

The advantages of slavery by debt over “chattel” slavery – ownership of humans as a property right – were set out in an infamous document called the Hazard Circular, reportedly circulated by British banking interests among their American banking counterparts during the American Civil War. It read in part:

Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are glad of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led by England, is that capital shall control labor by controlling wages.

Slaves had to be housed, fed and cared for. “Free” men housed and fed themselves. For the more dangerous jobs, such as mining, Irish immigrants were used rather than black slaves, because the Irish were expendable. Free men could be kept enslaved by debt, by paying them wages that were insufficient to meet their costs of living. On how to control wages, the Hazard Circular went on:

This can be done by controlling the money. The great debt that capitalists will see to it is made out of the war, must be used as a means to control the volume of money. . . . It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that.

The government, too, had to be enslaved by debt. It could not be allowed to simply issue the money it needed to meet its budget, as Lincoln’s government did with its greenbacks (government-issued US Notes). The greenback program was terminated after the war, forcing the government to borrow from banks – banks that created the money themselves, just as the government had been doing. Only about 10% of the “banknotes” then issued by banks were actually backed by gold. The rest were effectively counterfeit. The difference between government-created and bank-created money was that the government issued it and spent it on the federal budget, creating demand and stimulating the economy. Banks issued money and lent it, at interest. More had to be paid back than was lent, keeping the supply of money tight and keeping both workers and the government in debt.





Sovereign Debt Jubilee, Japanese-Style

Japan has found a way to write off nearly half its national debt without creating inflation. We could do that too.

Let’s face it. There is no way the US government is ever going to pay back a $20 trillion federal debt. The taxpayers will just continue to pay interest on it, year after year.

A lot of interest.

If the Federal Reserve raises the fed funds rate to 3.5% and sells its federal securities into the market, as it is proposing to do, by 2026 the projected tab will be $830 billion annually. That’s nearly $1 trillion owed by the taxpayers every year, just for interest.

Personal income taxes are at record highs, ringing in at $550 billion in the first four months of fiscal year 2017, or $1.6 trillion annually. But even at those high levels, handing over $830 billion to bondholders will wipe out over half the annual personal income tax take. Yet what is the alternative?

Japan seems to have found one. While the US government is busy driving up its “sovereign” debt and the interest owed on it, Japan has been canceling its debt at the rate of $720 billion (¥80tn) per year. How? By selling the debt to its own central bank, which returns the interest to the government. While most central banks have ended their quantitative easing programs and are planning to sell their federal securities, the Bank of Japan continues to aggressively buy its government’s debt. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.” As noted by fund manager Eric Lonergan in a February 2017 article:

The Bank of Japan is in the process of owning most of the outstanding government debt of Japan (it currently owns around 40%). BoJ holdings are part of the consolidated government balance sheet. So its holdings are in fact the accounting equivalent of a debt cancellation. If I buy back my own mortgage, I don’t have a mortgage.

If the Federal Reserve followed the same policy and bought 40% of the US national debt, the Fed would be holding $8 trillion in federal securities, three times its current holdings from its quantitative easing programs.

Eight trillion dollars in money created on a computer screen! Monetarists would be aghast. Surely that would trigger runaway hyperinflation!

But if Japan’s experience is any indication, it wouldn’t. Japan has a record low inflation rate of .02 percent. That’s not 2 percent, the Fed’s target inflation rate, but 1/100th of 2 percent – almost zero. Japan also has an unemployment rate that is at a 22-year low of 2.8%, and the yen was up nearly 6% for the year against the dollar as of April 2017.

Selling the government’s debt to its own central bank has not succeeded in driving up Japanese prices, even though that was the BoJ’s expressed intent. Meanwhile, the economy is doing well. In a February 2017 article in Mother Jones titled “The Enduring Mystery of Japan’s Economy,” Kevin Drum notes that over the past two decades, Japan’s gross domestic product per capita has grown steadily and is up by 20 percent. He writes:

It’s true that Japan has suffered through two decades of low growth . . . . [But] despite its persistently low inflation, Japan’s economy is doing fine. Their GDP per working-age adult is actually higher than ours. So why are they growing so much more slowly than we are? It’s just simple demographics . . . Japan is aging fast. Its working-age population peaked in 1997 and has been declining ever since. Fewer workers means a lower GDP even if those workers are as productive as anyone in the world.

Joseph Stiglitz, former chief economist for the World Bank, concurs. In a June 2013 article titled “Japan Is a Model, Not a Cautionary Tale,” he wrote:

Along many dimensions — greater income equality, longer life expectancy, lower unemployment, greater investments in children’s education and health, and even greater productivity relative to the size of the labor force — Japan has done better than the United States.

That is not to say that all is idyllic in Japan. Forty percent of Japanese workers lack secure full-time employment, adequate pensions and health insurance. But the point underscored here is that large-scale digital money-printing by the central bank used to buy back the government’s debt has not inflated prices, the alleged concern preventing other countries from doing it. Quantitative easing simply does not inflate the circulating money supply. In Japan, as in the US, QE is just an asset swap that occurs in the reserve accounts of banks. Government securities are swapped for reserves, which cannot be spent or lent into the consumer economy but can only be lent to other banks or used to buy more government securities.

The Bank of Japan is under heavy pressure to join the other central banks and start tightening the money supply, reversing the “accommodations” made after the 2008 banking crisis. But it is holding firm and is forging ahead with its bond-buying program. Reporting on the Bank of Japan’s policy meeting on June 15, 2017, The Financial Times stated that BoJ Governor Kuroda “refused to be drawn on an exit strategy from easy monetary policy, despite growing pressure from politicians, markets and the local media to set one out. He said the BoJ was still far from its 2 per cent inflation goal and the circumstances of a future exit were too uncertain.”

Rather than unwinding their securities purchases, the other central banks might do well to take a lesson from Japan and cancel their own governments’ debts. We have entered a new century and a new millennium. Ancient civilizations celebrated a changing of the guard with widespread debt cancellation. It is time for a twenty-first century jubilee from the crippling debts of governments, which could then work on generating some debt relief for their citizens.


Ellen Brown is an attorney, founder of the Public Banking Institute, a Senior Fellow of the Democracy Collaborative, and author of twelve books including Web of Debt and The Public Bank Solution. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at <;.

300+ blog articles are posted at

300+ blog articles are posted at




Can We Please Now Try Single Payer?

by Ellen Brown
Web of Debt Blog

The Canadian plan also helps Canadians live longer and healthier than Americans. . . . We need, as a nation, to reexamine the single-payer plan, as many individual states are doing.  

— Donald Trump, The America We Deserve (2000)

The new American Health Care Act has been unveiled, and critics are calling it more flawed even than the Obamacare it was meant to replace. Dubbed “Ryancare” or “Trumpcare” (over the objection of White House staff), the Republican health care bill is under attack from left and right, with even conservative leaders calling it “Obamacare Lite”, “bad policy”, a “warmed-over substitute,” and “dead on arrival.”

The problem for both administrations is that they have been trying to fund a bloated, inefficient, and overpriced medical system with scarce taxpayer funds, without capping its costs. US healthcare costs in 2016 averaged $10,345 per person, for a total of $3.35 trillion dollars, a full 18 percent of the entire economy, twice as much as in other industrialized countries.

Ross Perot, who ran for president in 1992, had the right idea: he said all we have to do is to look at other countries that have better health care at lower cost and copy them.

So which industrialized countries do it better than the US? The answer is, all of them. They all not only provide healthcare for the entire population at about half the cost, but they get better health outcomes than in the US. Their citizens have longer lifespans, fewer infant mortalities and less chronic disease.

President Trump, who is all about getting the most bang for the buck, should love that.

Hard to Argue with Success

The secret to the success of these more efficient systems is that they control medical costs. According to T. R. Reid in The Healing of America, they follow one of three models: the “Bismarck model” established in Germany, in which health providers and insurers are private but insurers are not allowed to make a profit; the “Beveridge model” adopted in Britain, where most healthcare providers work as government employees and the government acts as the single payer for all health services; and the Canadian model, a single-payer system in which the healthcare providers are mostly private.

A single government payer can negotiate much lower drug prices – about half what we pay in the US – and lower hospital prices. Single-payer is also much easier to administer. Cutting out the paperwork can save 30 percent on the cost of insurance. According to a May 2016 post by Physicians for a National Health Program:

Per capita, the U.S. spends three times as much for health care as the U.K., whose taxpayer-funded National Health Service provides health care to citizens without additional charges or co-pays. In 2013, U.S. taxpayers footed the bill for 64.3 percent of U.S. health care — about $1.9 trillion. Yet in the U.S. nearly 30 million of our citizens still lack any form of insurance coverage.

The for-profit U.S. health care system is corrupt, dysfunctional and deadly. In Canada, only 1.5 percent of health care costs are devoted to administration of its single-payer system. In the U.S., 31 percent of health care expenditures flow to the private insurance industry. Americans pay far more for prescription drugs. Last year, CNN reported, Americans paid nearly 10 times as much for prescription Nexium as it cost in the Netherlands.

Single payer, or Medicare for All, is the system proposed in 2016 by Democratic candidate Bernie Sanders. It is also the system endorsed by Donald Trump in his book The America We Deserve. Mr. Trump confirmed his admiration for that approach in January 2015, when he said on David Letterman:

A friend of mine was in Scotland recently. He got very, very sick. They took him by ambulance and he was there for four days. He was really in trouble, and they released him and he said, ‘Where do I pay?’ And they said, ‘There’s no charge.’ Not only that, he said it was like great doctors, great care. I mean we could have a great system in this country.

Contrary to the claims of its opponents, the single-payer plan of Bernie Sanders would not have been unaffordable. Rather, according to research by University of Massachusetts Amherst Professor Gerald Friedman, it would have generated substantial savings for the government:

Under the single-payer system envisioned by “The Expanded & Improved Medicare For All Act” (H.R. 676), the U.S. could save $592 billion – $476 billion by eliminating administrative waste associated with the private insurance industry and $116 billion by reducing drug prices . . . .

According to OECD health data, in 2013 the British were getting their healthcare for $3,364 per capita annually; the Germans for $4,920; the French for $4,361; and the Japanese for $3,713. The tab for Americans was $9,086, at least double the others. With single-payer at the OECD average of $3,661 and a population of 322 million, we should be able to cover all our healthcare for under $1.2 trillion annually – well under half what we are paying now.

The Problem Is Not Just the High Cost of Insurance

That is true in theory; but governments at all levels in the US already spend $1.6 trillion for healthcare, which goes mainly to Medicare and Medicaid and covers only 17 percent of the population. Where is the discrepancy?

For one thing, Medicare and Medicaid are more expensive than they need to be, because the US government has been prevented from negotiating drug and hospital costs. In January, a bill put forth by Sen. Sanders to allow the importation of cheaper prescription drugs from Canada was voted down. Sanders is now planning to introduce a bill to allow Medicare to negotiate drug prices, for which he is hoping for the support of the president. Trump indicated throughout his presidential campaign that he would support negotiating drug prices; and in January, he said that the pharmaceutical industry is “getting away with murder” because of what it charges the government. As observed by Ronnie Cummins, International Director of the Organic Consumers Association, in February 2017:

. . . [B]ig pharmaceutical companies, for-profit hospitals and health insurers are allowed to jack up their profit margins at will. . . . Simply giving everyone access to Big Pharma’s overpriced drugs, and corporate hospitals’ profit-at-any-cost tests and treatment, will result in little more than soaring healthcare costs, with uninsured and insured alike remaining sick or becoming even sicker.

Besides the unnecessarily high cost of drugs, the US medical system is prone to over-diagnosing and over-treating. The Congressional Budget Office says that up to 30 percent of the health care in the US is unnecessary. We use more medical technology then in other countries, including more expensive diagnostic equipment. The equipment must be used in order to recoup its costs. Unnecessary testing and treatment can create new health problems, requiring yet more treatment, further driving up medical bills.

Drug companies are driven by profit, and their market is sickness – a market they have little incentive to shrink. There is not much profit to be extracted from quick, effective cures. The money is in the drugs that have to be taken for 30 years, killing us slowly. And they are killing us. Pharmaceutical drugs taken as prescribed are the fourth leading cause of US deaths, after heart disease, cancer and stroke.  

The US is the only industrialized country besides New Zealand that allows drug companies to advertise pharmaceuticals. Big Pharma spends more on lobbying than any other US industry, and it spends more than $5 billion a year on advertising. Lured by drug advertising, Americans are popping pills they don’t need, with side effects that are creating problems where none existed before. Americans compose only 5 percent of the world’s population, yet we consume fully 50 percent of Big Pharma’s drugs and 80 percent of the world’s pain pills. We not only take more drugs (measured in grams of active ingredient) than people in most other countries, but we have the highest use of new prescription drugs, which have a 1 in 5 chance of causing serious adverse reactions after they have been approved.

The US death toll from prescription drugs taken as prescribed is now 128,000 per year. As Jon Rappaport observes, with those results Big Pharma should be under criminal investigation. But the legal drug industry has grown too powerful for that. According to Dr. Marcia Angell, former editor in chief of the New England Journal of Medicine, writing in 2002:

The combined profits for the ten drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses put together ($33.7 billion). Over the past two decades the pharmaceutical industry has [become] a marketing machine to sell drugs of dubious benefit, [using] its wealth and power to co-opt every institution that might stand in its way, including the US Congress, the FDA, academic medical centers, and the medical profession itself.

It’s Just Good Business

US healthcare costs are projected to grow at 6 percent a year over the next decade. The result could be to bankrupt not only millions of consumers but the entire federal government.

Obamacare has not worked, and Ryancare is not likely to work. As demonstrated in many other industrialized countries, single-payer delivers better health care at half the cost that Americans are paying now.

Winston Churchill is said to have quipped, “You can always count on the Americans to do the right thing after they have tried everything else.” We need to try a thrifty version of Medicare for all, with negotiated prices for drugs, hospitals and diagnostic equipment.



Ellen Brown is the founder of the Public Banking Institute and a Research Fellow at the Democracy Collaborative. She is the author of a dozen books including the best-selling Web of Debt, on how the power to create money was usurped by a private banking cartel; and The Public Bank Solution, on how the people can reclaim that power through a network of publicly-owned banks. She has written over 300 articles, posted at; and co-hosts a radio program on PRN.FM called “It’s Our Money with Ellen Brown.”



A Look at the Green Candidate’s Radical Funding Solution

Ellen Brown

August 2, 2016

Bernie Sanders supporters are flocking to Jill Stein, the presumptive Green Party presidential candidate, with donations to her campaign exploding nearly 1000% after he endorsed Hillary Clinton. Stein salutes Sanders for the progressive populist movement he began and says it is up to her to carry the baton. Can she do it? Critics say her radical policies will not hold up to scrutiny. But supporters say they are just the medicine the economy needs.

Stein goes even further than Sanders on several key issues, and one of them is her economic platform. She has proposed a “Power to the People Plan” that guarantees basic economic human rights, including access to food, water, housing, and utilities; living-wage jobs for every American who needs to work; an improved “Medicare for All” single-payer public health insurance program; tuition-free public education through university level; and the abolition of student debt. She also supports a basic income guarantee; the reinstatement of Glass-Steagall, separating depository banking from speculative investment banking; the breakup of megabanks into smaller banks; federal postal banks to service the unbanked and under-banked; and the formation of publicly-owned banks at the state and local level.

As with Sanders’ economic proposals, her plan has been challenged as unrealistic. Where will Congress find the money?

But Stein argues that the funds can be found. Going beyond Bernie, she calls for large cuts to the bloated military budget, which makes up 55% of federal discretionary spending; and progressive taxation, ensuring that the wealthy pay their fair share. Most controversial, however, is her plan to tap up the Federal Reserve. Pointing to the massive sums the Fed produced out of the blue to bail out Wall Street, she says the same resources used to save the perpetrators of the crisis could be made available to its Main Street victims, beginning with the students robbed of their futures by massive student debt..

It Couldn’t Be Done Until It Was

Is tapping up the Fed realistic? Putting aside for the moment the mechanics of pulling it off, the central bank has indeed revealed that it has virtually limitless resources, as seen in the radical “emergency measures” taken since 2008.

The Fed first surprised Congress when it effectively “bought” AIG, a private insurance company, for $80 billion. House Speaker Nancy Pelosi remarked, “Many of us were . . . taken aback when the Fed had $80 billion to invest — to put into AIG just out of the blue. All of a sudden we wake up one morning and AIG has received $80 billion from the Fed. So of course we’re saying, Where’s this money come from?”

The response was, “Oh, we have it. And not only that, we have more.”

How much more was revealed in 2011, after an amendment by Sen. Bernie Sanders to the 2010 Wall Street reform law prompted the Government Accounting Office to conduct the first top-to-bottom audit of the Federal Reserve. It revealed that the Fed had provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the economic crisis. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else,” said Sanders in a press release.

Then there was the shocker of “quantitative easing” (QE), an unconventional monetary policy in which the central bank creates new money electronically to buy financial assets such as Treasury securities and mortgage-backed securities (many of them “toxic”) from the banks. Critics said QE couldn’t be done because it would lead to hyperinflation. But it was done, and that dire result has not occurred.

Unfortunately, the economic stimulus that QE was supposed to trigger hasn’t occurred either. QE has failed because the money has gotten no further than the balance sheets of private banks. To stimulate the demand that will jumpstart the economy, new money needs to get into the real economy and the pockets of consumers.

Why QE Hasn’t Worked, and What Would

The goal of QE as currently implemented is to return inflation to target levels by increasing private sector borrowing. But today, as economist Richard Koo explains, individuals and businesses are paying down debt rather than taking out new loans. They are doing this although credit is very cheap, because they need to rectify their debt-ridden balance sheets in order to stay afloat. Koo calls it a “balance sheet recession.”

As the Bank of England recently acknowledged, the vast majority of the money supply is now created by banks when they make loans. Money is created when loans are made, and it is extinguished when they are paid off. When loan repayment exceeds borrowing, the money supply “deflates” or shrinks. New money then needs to be injected to fill the breach. Currently, the only way to get new money into the economy is for someone to borrow it into existence; and since the private sector is not borrowing, the public sector must, just to replace what has been lost in debt repayment. But government borrowing from the private sector means running up interest charges and hitting deficit limits.

The alternative is to do what governments arguably should have been doing all along: issue the money directly to fund their budgets.

Central bankers have largely exhausted their toolkits, prompting some economists to recommend some form of “helicopter money” – newly-issued money dropped directly into the real economy. Funds acquired from the central bank in exchange for government securities could be used to build infrastructure, issue a national dividend, or purchase and nullify federal debt. Nearly interest-free loans could also be made by the central bank to state and local governments, in the same way they were issued to rescue an insolvent banking system.

Just as the Fed bought federal and mortgage-backed securities with money created on its books, so it could buy student or other consumer debt bundled as “asset-backed securities.” But in order to stimulate economic activity, the central bank would have to announce that the debt would never be collected on. This is similar to the form of “helicopter money” recently suggested by former Fed Chairman Ben Bernanke to the Japanese, using debt instruments called “non-marketable perpetual bonds with no maturity date” – bonds that can’t be sold or cashed out by the central bank and that bear no interest.

The Bernanke proposal (which he says could also be used by the US Fed in an emergency) involves the government issuing bonds, which it sells to the central bank for dollars generated digitally by the bank. The government then spends the funds directly into the economy, bypassing the banks.

Something similar could be done as a pilot project with student debt, Stein’s favorite target for relief. The US government could pay the Department of Education for the monthly payments coming due for students not in default or for whom payment had been suspended until they found employment. This would free up income in those households to spend on other consumer goods and services, boosting the economy in a form of QE for Main Street.

In QE as done today, the central bank reserves the right to sell the bonds it purchases back into the market, in order to reverse any hyperinflationary effects that may occur in the future. But selling bonds and taking back the cash is not the only way to shrink the money supply. The government could just raise taxes on sectors that are currently under-taxed (tax-dodging corporations and the super-rich) and void out the additional money it collects. Or it could nationalize “systemically important” banks that are insolvent or have failed to satisfy Dodd-Frank “living will” requirements (a category that now includes five of the country’s largest banks), and void out some of the interest collected by these newly-nationalized banks. Insolvent megabanks, rather than being bailed out by the government or “bailed in” by their private creditors and depositors, arguably should be nationalized – not temporarily, but as permanent public utilities. If the taxpayers are assuming the risks and costs, they should be getting the profits.

None of these procedures for reversing inflation would be necessary, however, if the money supply were properly monitored. In our debt-financed system, the economy is chronically short of the money needed to support a dynamic, abundant economy. New money needs to be added to the system, and this can be done without inflating prices. If the money goes into creating goods and services rather than speculative asset bubbles, supply and demand will rise together and prices will remain stable.

Is It in the President’s Toolbox?

Whether Stein as president would have the power to pull any of this off is another question. QE is the province of the central bank, which is technically “independent” from the government. However, the president does appoint the Federal Reserve’s Board of Governors, Chair and Vice Chair, with the approval of the Senate.

Failing that, the money might be found by following the lead of Abraham Lincoln and the American colonists and issuing it directly through the Treasury. But an issue of US Notes or Greenbacks would also require an act of Congress to change existing law.

If Stein were unable to get either of those federal bodies to act, however, she could resort to a “radical” alternative already authorized in the Constitution: an issue of large-denomination coins. The Constitution gives Congress the power to “coin Money [and] regulate the value thereof,” and Congress has delegated that power to the Treasury Secretary. When minting a trillion dollar platinum coin was suggested as a way around an artificially imposed debt ceiling in January 2013, Philip Diehl, former head of the U.S. Mint and co-author of the platinum coin law, confirmed:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

The power just needs to be exercised, something the president can instruct the Secretary to do by executive order.

In 1933, President Franklin Roosevelt engaged in a radical monetary reset when he took the dollar off the gold standard domestically. The response was, “We didn’t know you could do that.” Today the Federal Reserve and central banks globally have been engaging in radical monetary policies that have evoked a similar response, and the sky has not fallen as predicted.

As Stein quotes Alice Walker, “The most common way people give up their power is by thinking they don’t have any.”

The runaway success of Sanders and Trump has made it clear that the American people want real change from the establishment Democratic/Republican business-as-usual that Hillary represents. But real change is not possible within the straitjacket of a debt-ridden, austerity-based financial scheme controlled by Wall Street oligarchs. Radical economic change requires radical financial change, as Roosevelt demonstrated. To carry the baton of revolution to the finish line requires revolutionary tools, which Stein has shown she has in her toolbox.


Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at She can be heard biweekly on “It’s Our Money with Ellen Brown” on PRN.FM.



by Ellen Brown
March 13, 2016

Critics have long questioned why violent intervention was necessary in Libya. Hillary Clinton’s recently published emails confirm that it was less about protecting the people from a dictator than about money, banking, and preventing African economic sovereignty.

The brief visit of then-Secretary of State Hillary Clinton to Libya in October 2011 was referred to by the media as a “victory lap.” “We came, we saw, he died!” she crowed in a CBS video interview on hearing of the capture and brutal murder of Libyan leader Muammar el-Qaddafi.

But the victory lap, write Scott Shane and Jo Becker in the New York Times, was premature. Libya was relegated to the back burner by the State Department, “as the country dissolved into chaos, leading to a civil war that would destabilize the region, fueling the refugee crisis in Europe and allowing the Islamic State to establish a Libyan haven that the United States is now desperately trying to contain.”

US-NATO intervention was allegedly undertaken on humanitarian grounds, after reports of mass atrocities; but human rights organizations questioned the claims after finding a lack of evidence. Today, however, verifiable atrocities are occurring. As Dan Kovalik wrote in the Huffington Post,the human rights situation in Libya is a disaster, as ‘thousands of detainees [including children] languish in prisons without proper judicial review,’ and ‘kidnappings and targeted killings are rampant’.”

Before 2011, Libya had achieved economic independence, with its own water, its own food, its own oil, its own money, and its own state-owned bank. It had arisen under Qaddafi from one of the poorest of countries to the richest in Africa. Education and medical treatment were free; having a home was considered a human right; and Libyans participated in an original system of local democracy. The country boasted the world’s largest irrigation system, the Great Man-made River project, which brought water from the desert to the cities and coastal areas; and Qaddafi was embarking on a program to spread this model throughout Africa.

But that was before US-NATO forces bombed the irrigation system and wreaked havoc on the country. Today the situation is so dire that President Obama has asked his advisors to draw up options including a new military front in Libya, and the Defense Department is reportedly standing ready with “the full spectrum of military operations required.”

The Secretary of State’s victory lap was indeed premature, if what we’re talking about is the officially stated goal of humanitarian intervention. But her newly-released emails reveal another agenda behind the Libyan war; and this one, it seems, was achieved.

Mission Accomplished?

Of the 3,000 emails released from Hillary Clinton’s private email server in late December 2015, about a third were from her close confidante Sidney Blumenthal, the attorney who defended her husband in the Monica Lewinsky case. One of these emails, dated April 2, 2011, reads in part:

Qaddafi’s government holds 143 tons of gold, and a similar amount in silver . . . . This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an alternative to the French franc (CFA).

In a “source comment,” the original declassified email adds:

According to knowledgeable individuals this quantity of gold and silver is valued at more than $7 billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya. According to these individuals Sarkozy’s plans are driven by the following issues: 

  1. A desire to gain a greater share of Libya oil production,
  2. Increase French influence in North Africa,
  3. Improve his internal political situation in France,
  4. Provide the French military with an opportunity to reassert its position in the world,
  5. Address the concern of his advisors over Qaddafi’s long term plans to supplant France as the dominant power in Francophone Africa

Conspicuously absent is any mention of humanitarian concerns. The objectives are money, power and oil.

Other explosive confirmations in the newly-published emails are detailed by investigative journalist Robert Parry. They include admissions of rebel war crimes, of special ops trainers inside Libya from nearly the start of protests, and of Al Qaeda embedded in the US-backed opposition. Key propaganda themes for violent intervention are acknowledged to be mere rumors. Parry suggests they may have originated with Blumenthal himself. They include the bizarre claim that Qaddafi had a “rape policy” involving passing Viagra out to his troops, a charge later raised by UN Ambassador Susan Rice in a UN presentation. Parry asks rhetorically:

So do you think it would it be easier for the Obama administration to rally American support behind this “regime change” by explaining how the French wanted to steal Libya’s wealth and maintain French neocolonial influence over Africa – or would Americans respond better to propaganda themes about Gaddafi passing out Viagra to his troops so they could rape more women while his snipers targeted innocent children? Bingo!

Toppling the Global Financial Scheme

Qaddafi’s threatened attempt to establish an independent African currency was not taken lightly by Western interests. In 2011, Sarkozy reportedly called the Libyan leader a threat to the financial security of the world. How could this tiny country of six million people pose such a threat? First some background.

It is banks, not governments, that create most of the money in Western economies, as the Bank of England recently acknowledged. This has been going on for centuries, through the process called “fractional reserve” lending. Originally, the reserves were in gold.  In 1933, President Franklin Roosevelt replaced gold domestically with central bank-created reserves, but gold remained the reserve currency internationally.

In 1944, the International Monetary Fund and the World Bank were created in Bretton Woods, New Hampshire, to unify this bank-created money system globally. An IMF ruling said that no paper money could have gold backing. A money supply created privately as debt at interest requires a continual supply of debtors; and over the next half century, most developing countries wound up in debt to the IMF. The loans came with strings attached, including “structural adjustment” policies involving austerity measures and privatization of public assets.

After 1944, the US dollar traded interchangeably with gold as global reserve currency. When the US was no longer able to maintain the dollar’s gold backing, in the 1970s it made a deal with OPEC to “back” the dollar with oil, creating the “petro-dollar.”  Oil would be sold only in US dollars, which would be deposited in Wall Street and other international banks. 

In 2001, dissatisfied with the shrinking value of the dollars that OPEC was getting for its oil, Iraq’s Saddam Hussein broke the pact and sold oil in euros. Regime change swiftly followed, accompanied by widespread destruction of the country.

In Libya, Qaddafi also broke the pact; but he did more than just sell his oil in another currency.

As these developments are detailed by blogger Denise Rhyne:

For decades, Libya and other African countries had been attempting to create a pan-African gold standard.  Libya’s al-Qadhafi and other heads of African States had wanted an independent, pan-African, “hard currency.”

Under al-Qadhafi’s leadership, African nations had convened at least twice for monetary unification.  The countries discussed the possibility of using the Libyan dinar and the silver dirham as theonly possible money to buy African oil.

Until the recent US/NATO invasion, the gold dinar was issued by the Central Bank of Libya (CBL).  The Libyan bank was 100% state owned and independent.  Foreigners had to go through the CBL to do business with Libya.  The Central Bank of Libya issued the dinar, using the country’s 143.8 tons of gold.

Libya’s Qadhafi (African Union 2009 Chair) conceived and financed a plan to unify the sovereign States of Africa with one gold currency (United States of Africa).  In 2004, a pan-African Parliament (53 nations) laid plans for the African Economic Community – with a single gold currency by 2023.

African oil-producing nations were planning to abandon the petro-dollar, and demand gold payment for oil/gas.

Showing What Is Possible

Qaddafi had done more than organize an African monetary coup. He had demonstrated that financial independence could be achieved. His greatest infrastructure project, the Great Man-made River, was turning arid regions into a breadbasket for Libya; and the $33 billion project was being funded interest-free without foreign debt, through Libya’s own state-owned bank.

That could explain why this critical piece of infrastructure was destroyed in 2011. NATO not only bombed the pipeline but finished off the project by bombing the factory producing the pipes necessary to repair it. Crippling a civilian irrigation system serving up to 70% of the population hardly looks like humanitarian intervention. Rather, as Canadian Professor Maximilian Forte put it in his heavily researched book Slouching Towards Sirte: NATO’s War on Libya and Africa:

[T]he goal of US military intervention was to disrupt an emerging pattern of independence and a network of collaboration within Africa that would facilitate increased African self-reliance. This is at odds with the geostrategic and political economic ambitions of extra-continental European powers, namely the US. 

Mystery Solved

Hilary Clinton’s emails shed light on another enigma remarked on by early commentators. Why, within weeks of initiating fighting, did the rebels set up their own central bank? Robert Wenzel wrote in The Economic Policy Journal in 2011:

This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences. I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising.

It was all highly suspicious, but as Alex Newman concluded in a November 2011 article:

Whether salvaging central banking and the corrupt global monetary system were truly among the reasons for Gadhafi’s overthrow . . . may never be known for certain – at least not publicly.

There the matter would have remained – suspicious but unverified like so many stories of fraud and corruption – but for the publication of Hillary Clinton’s emails after an FBI probe. They add substantial weight to Newman’s suspicions: violent intervention was not chiefly about the security of the people. It was about the security of global banking, money and oil.


Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at Listen to “It’s Our Money with Ellen Brown” on PRN.FM.