Today I’m posting an excellent – and very important – guest-blog from Simone-Louise Lalande, who has done extensive research into the banking industry and the implications for us all. It’s very comprehensive – longer than the normal post, but the links, quotes and references are just too good to edit out! Thanks so much to Simone-Louise for allowing me to post it. And if it riles you as much as it does me, then pass the link on for others to read.
Banks, mass debt, and monetary reform – the big picture goes public.
This is a blog about money. About banks, and about debt. About how our money supply is currently created by banks “out of thin air” as interest-bearing debt – except for the very small proportion of money that is distributed as notes and coins. It’s about why we, as a country, need to take this huge and nonsensical privilege away from the privately-owned banks – operating primarily in their own best interests – and swap to a logical system in which our government creates and controls 100% of our national money supply and spends and lends it into the economy – making effective use of 100% state-owned banks – for the benefit of our country and its people as a whole.
Why would a government delegate the power to create – and to a large extent control – its national money supply to profit-driven, private companies, thereby putting itself in the bizarre position of having to borrow, at interest, money it could simply have created itself, debt-free?
Why wouldn’t a country want a network of 100% state-owned banks – recognising, and harnessed to, the needs of the people, the greater good of the country – channelling profits from lending not into private pockets but into government accounts to be made available for public spending?
These two questions are not new. Down through the centuries, there has been heated political and public debate, mass protest movements, and wars fought over who gets to issue and control money. 100% state-issued money supplies, 100% state-owned banks – these two models are neither new or radical – right now and also looking back down through history, we can point to successfully implemented systems; we can see the obvious benefits. What is
new, what is
strange and hard to fathom, is the comparative silence. The drying up of the public debate about money supply and about banking in recent history.
This issue of who creates and controls the money supply deeply affects the everyday lives of you and I, and everyone we know. It impacts on our communities, and on communities around the world. It impacts on resources – who owns them, who gets to use them, and whether they are used sustainably and ethically. It shapes our individual lives and it shapes our world as a whole. And yet most people know little or nothing about how money is created and controlled. About how ‘moneypower’ is created from our Money=Debt system. A system in which No Debt = No Money Supply. A system which actually requires us, as a population, to be in debt in order for there to be money in circulation. A system in which if we, as a population, paid off all our debt and started saving – as we are constantly being exhorted to do – the national money supply would dry up.
This is not a 30-second “sound-bite” story, but it is an incredibly important one.
If you are concerned about the cost of the Christchurch rebuild (around $4.5 billion of government spending committed so far), about sell-offs of wealth-creating state-owned or council-owned assets into private ownership, about losing New Zealand land to foreign ownership, about unaffordable housing and ever-increasing council rates, about child poverty and rising student debt and what this means for the future lives of young people, about retirement income and good care of the elderly, about having high quality education and health care available to everyone, about providing money for research and development, about reducing unemployment and providing good working conditions, about caring for our natural environment – our precious native habitats, about having good infrastructure nation-wide, about supporting a vibrant cultural life in New Zealand, about reinstating a non-commercial public-service television channel, and about providing everything else that’s needed for a stable, caring, prosperous and out-reaching society, then this issue of the national money supply – the private bankers gains and our collective losses – is something you’ll want to know about.
If you’re sick of hearing about the need to embrace “austerity measures” because of the global debt crisis, while private banks have received massive bail-outs, and while the global casino continues to stay open for the big-time money-junkies, read on. Then take the time to listen to and watch some on-line interviews and documentaries.
(Scroll down for the website links of on-line video and audio interviews, and documentaries – all available to stream for free.)
There’s plenty of light at the end of the dark economic tunnel, the debt-tunnel, if we make some much-needed changes to our underlying economic structures. And there are plenty of thinkers and leaders – including reform-advocating economists, academics, journalists, authors, film-makers, political leaders, and former high-flying financial sector insiders turned whistle-blowers – who have paved the way in the past or who are leading the way today on this issue.
And an International Monetary Fund (IMF) report has come out recently that gives a big fat tick to getting rid of bank-created debt-money and replacing it with government-created debt-free money. This report potentially represents a huge turnaround in IMF thinking; a belated recognition that the current debt-mate situation (to borrow from chess) is globally unworkable – no way forward, no way back – and it’s time to tip the board over and start again with fresh strategies. (Learn more about this IMF report at: http://www.positivemoney.org.uk/2012/08/imf-working-paper-offers-supports-full-reserve-banking/
The monetary reform debate has well and truly started up again. It’s a rising international tide of informed opinion with a strong history behind it, and a wave of new books, films, interviews, seminars etc. in the forefront. It is a debate that is not easily dismissed by anyone with half a brain and it seems to be reaching the ears of some key decision makers. So there’s good reason to feel optimistic and empowered as you read through this blog and check out the audio and video links, even as you see and hear things that might shock or anger you.
Unlike in the USA, where the so-called “Federal Reserve” is actually privately-owned and itself holds trillions of dollars of US government debt, we here in New Zealand – with our Reserve Bank already an arm of government and with Kiwibank well established (although currently not 100% state-owned) – are in a good position to jump-start a better economic future, with monetary reform as the logical first step.
Banks create money “out of thin air” with a simple computer entry each time they make a loan to a customer. This newly conjured up interest-bearing“debt-money” (which could be, say, a mortgage loan or an overdraft or credit card debt) has not been “earned” in any way by the banks and is backed by only a minimal or “fractional” percentage of actual bank assets held in reserve. (Hence the government guarantees, and the bail-outs when these privately-owned businesses face self-inflicted insolvency). The massive privilege this “fractional reserve” banking system bestows on private banks is at the centre of the call for monetary reform. It has been the pumping heart of a Western financial system that has increasingly put more and more ‘moneypower’ into the hands of fewer and fewer people – and hence more and more political power, to the detriment of people and planet – until we have now reached a situation which is globally unsustainable, a breakdown situation. Along the way, as one American speaker calling for urgent monetary reform puts it: “…millions have died, billions have been harmed, and trillions have been looted…”
The huge problems created because of the use, and misuse, of the “fractional reserve” system of creating a debt-based money supply – and the obvious solutions to these problems – are right there in front of our eyes but are not clearly visible to the vast majority of us. Most of us just don’t have – have never been given – the knowledge to make the connections between this system and the current global financial crisis. We don’t know how it links to the cyclic boom/bust economy, or even to our personal economic circumstances. But people are now gaining that knowledge.
This blog is about giving New Zealanders a “starter-kit” of information – to help join the dots and reveal the big picture. To bring the issues into sharper focus so people can see what’s really been going on and what needs to be changed, by us, the people, using our voices.
Please forward this information to your family, to your friends, to your colleagues, to all your networks etc. Share what you are learning. Add your voice to the call for positive reform in the way our money supply is created and controlled, and encourage those you know to do the same. Help this important information to go right around New Zealand as fast as possible. Help get more people in New Zealand thinking, and talking, and questioning – taking a good, hard look at this issue of money creation and control, of ‘moneypower’, in the past, right now, and into the future – and calling on our political representatives to make the policy changes that will provide a much better future for New Zealand. A richer future. Literally. And a fairer and more sustainable future.
New Zealand is a small country with a small population but we can certainly be in the forefront of an international change for the better. We can take a stand. We’ve done it before – think about women’s suffrage (the first nation in the world to give women the vote), our anti-apartheid stand, and our anti-nuclear stand. We can do it again. We can lift the heavy yoke of debt-money off of our shoulders. We can say no to the bankers, and yes to the people of Aotearoa/ New Zealand.
The website links follow, but first, here are some relevant quotes:
“The process by which money comes into existence is thoroughly misunderstood, and for good reason: it has been the focus of a highly sophisticated and long-term disinformation campaign that permeates academia, media and publishing. The complexity of the subject has been intentionally exploited to keep its mysteries hidden. [The late American industrialist] Henry Ford said it best: ‘It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.’” – Reed Simpson, banker and developer, in his foreword to the 2012 edition of the book The Web of Debt written by American lawyer Ellen Hodgson Brown.
“… [M]y sense is that monetary reformers attach far too much importance to money and measures of it – they certainly put far more weight on it than we central bankers do…” – the (then) Head of Financial Markets, Reserve Bank of New Zealand, speaking at a Victoria University debate on New Zealand Banking Reform, in August 2001, Wellington.
Economist/academic Steve Keen (Australia), writing in his book Debunking Economics, the naked emperor dethroned? : “It may astonish non-economists to learn that conventionally trained economists ignore the role of credit and private debt in the economy – and frankly, it is astonishing. But it is the truth… An economic theory that ignores the role of money and debt in a market economy cannot possibly make sense of the complex, monetary, credit-based economy in which we live. Yet that is the theory that has dominated economics for the last half-century. If the market economy is to have a future, this widely believed but inherently delusional model has to be jettisoned.”
NZ-based reformist-economist Raf Manji, speaking in a radio interview with Kim Hill, on Radio NZ National, on November 12, 2011: “The government bond requirement for next year  is going to be around $13.5 billion. The New Zealand Debt Management Office will issue those bonds. That is going to cost the taxpayer between $600million and $700million a year in interest. It’s absolutely unnecessary. The government can actually create that money itself. It does not need to borrow the money. That is really the key issue. People assume that when they go to the bank to borrow money, that they are borrowing it from someone else. Well, they’re not…. It’s simply a bookkeeping entry… If government spending is thirty to forty percent of the economy, it’s ludicrous that we borrow that [bank-created] money and then pay interest on it. I think that government debt at the moment is about $70billion. We’re paying $4billion a year for no reason… If we go down the current road, we will end up in a situation like Iceland; we will end up in a situation like Greece; we will end up in a situation like Italy…The main problem is the interest.” [Manji was formerly a London-based currency trader with investment banking giant Merrill Lynch where our current prime minister, John Key, had a management role from 1995-2001.]
From the 2011 book The Courageous State – Rethinking economics, society and the role of government , by UK reformist economist Richard Murphy: “[T]he state can create money. Why this is considered shocking in a modern economy is hard to imagine: banks do it every day, which is how they have ended up creating 97% of all the money in circulation… [T]hey literally conjure that money out of thin air. No-one expresses horror at privately owned banks doing this, and yet the idea that the state might create money in the same way is considered abhorrent, precisely because, I suspect, this would challenge the enormous monopoly profits private banks make from this exercise…
…[T]he process known as quantitative easing [some call it ‘governments printing money’]… wholly inappropriately profits those private banks [which actually provide the money] while not delivering the benefit the economy needs at the low cost that is appropriate.”
Murphy – “The #1 economics blogger in the UK.” – is also an accountant, and founder of the Tax Justice Network, which works against tax havens/secrecy jurisdictions. He also writes:
“…[A] few notable exceptions such as Steve Keen apart, economists have either not noticed that they have got their maths wrong, or they have persuaded themselves and their students and the Treasury departments of every government of any significance around the world that they are right despite the errors their models include… One is to ponder whether this whole edifice of [neoliberal] economic theory is in fact a purely political construct that lacks intellectual merit because it entirely lacks the objectivity that the neoliberal economists claim for it. I certainly think that possible. In fact, I would call it a giant con trick…”
[And:] “…[A] shared neoliberal belief [is] that government is inept, the market works… [and ‘markets always know best’]… and that anything and everything that can be done to deliver the services of the state through the mechanisms of the market is of benefit… [T]his policy of transferring the processes of the state to the private sector with the intent that they should never be reclaimed can be argued to have been undertaken over a thirty-year period which appears to have been almost uninterrupted by such niceties as the democratic process.”
From the 2009 book Keynes – the Return of the Master, by UK emeritus professor of political economy, Robert Skidelsky: “… [T]he root cause of the present [global financial] crisis lies in the intellectual failure of economics. It was the wrong ideas of economists which legitimized the deregulation of finance, and it was the deregulation of finance which led to the credit explosion which collapsed into the credit crunch. It is hard to convey the harm done by the recently dominant school of New Classical [neoclassical/neoliberal] economics. Rarely in history can such powerful minds have devoted themselves to such strange ideas… The practices of bankers, regulators and governments, however egregious, can be traced back to the ideas of economists and [political] philosophers.” [Skidelsky is the leading biographer of renowned British economist John Maynard Keynes whose economic thinking was dominant in the post-World War II decades.]
Financial journalist Bernhard Hickey (financial editor of www.interest.co.nz) speaks about quantitative easing: “
The idea of money printing… is starting to get discussed here in New Zealand… [W]e have the Greens coming out and saying… “Why don’t we do quantitative easing in New Zealand to print money and buy earthquake bonds and get the Christchurch earthquake rebuild going?”… This is the real debate for the government and the opposition… [a]s the rest of the world prints money again and again and again… We [have to] decide how we do the money printing. Do we print the money and give it to the banks to buy government bonds on the secondary market, therefore delivering a profit boost to the banks and to those holding assets such as shares and bonds? – which is what’s happening in the rest of the world… [T]he effect of quantitative easing in the rest of the world [is that] it makes rich people even richer… What the Greens are saying is “Let’s print the money and buy government bonds and get the governmen
t to spend the money on infrastructure, which is a different type of money printing to what we’ve seen offshore… Although the government has tried to shut this debate down in the last couple of weeks, this will come back as… central banks and governments have to look for unorthodox monetary policies to try and get their economy going again…” – from Radio New Zealand National’s Afternoons programme, October 17, 2012. http://www.radionz.co.nz/national/programmes/afternoons/audio/2535831/the-panel-with-bernard-hickey-and-anna-chinn-part-2
Leading historian and thinker Professor Tony Judt (UK/USA) says in his 2010 book ILL FARES THE LAND: “…[In] the arena of economic policy, the citizens of today’s democracies have learned altogether too much modesty. We have been advised that these are matters for experts: that economics and its policy implications are far beyond the understanding of the common man or woman – a point of view enforced by the increasingly arcane and mathematical language of the discipline. Not many ‘lay people’ are likely to challenge the Chancellor of the Exchequer, the Secretary of the Treasury or their expert advisers in such matters. Were they to do so, they would be told – much as a medieval priest might have advised his flock – that these are questions with which they need not concern themselves. The liturgy must be chanted in an obscure tongue, accessible only to the initiated. For everyone else, faith will suffice. But faith has not sufficed. The emperors of economic policy in Britain and the US, not to mention their acolytes and admirers everywhere… are naked. However, since most observers have long shared their sartorial preferences [dress sense!], they are ill-placed to object. We need to re-learn how to criticize those who govern us. But in order to do so with credibility we have to liberate ourselves from the circle of conformity into which we, like they, are trapped.”
“Professor Henry C.K. Lui is an economist who graduated from Harvard [and] an investment advisor for developing countries. He calls the current [Western] monetary scheme a ‘cruel hoax.’” – from the book The Web of Debt, 2012 edition, by lawyer/author Ellen Hodgson Brown, USA.
“…The BNZ interim results cap off a stellar results round from the big four Australian owned banks
with all four delivering record half-year cash earnings. Combined half-year cash earnings from the four – ANZ NZ, ASB, BNZ and Westpac NZ – came in at NZ$1.705 billion, up NZ$392 million, or almost 30%, from NZ$1.313 billion in the first half of their previous financial years. All four recorded solid net interest margin rises.” – an excerpt from a Gareth Vaughan news story, posted May 11, 2012, on www.interest.co.nz
“ASB said today its net profit after tax rose NZ$89 million, or 31%,
in the six months to December 31, 2011, to NZ$372 million from NZ$283 million in the same period of 2010 – its previous record high half-year profit. The bank said a NZ$48 million increase in after tax fair value gains on derivatives boosted profit, although without this profit still would’ve been up 13% to a new record high.” – an excerpt from a Gareth Vaughan news story, posted February 15, 2012, on www.interest.co.nz
“The New Zealand Government has stung four Australian-owned banks with a $NZ2.2 billion ($1.76 billion) tax bill in the little country’s largest-ever commercial tax settlement case.
Westpac, Auckland Savings Bank, Bank of New Zealand and ANZ-National have all agreed to the massive repayments after five years of wrangling over a tax minimisation scheme in the courts. New Zealand’s tax office, the Inland Revenue Department, started investigating the banks in 2002 over so-called structured finance, a complex mechanism the banks used to keep their tax bills low. The office claimed the strategy was a form of tax evasion and pursued the institutions through the High Court over several years.” – an excerpt from a story posted on December 24, 2009, on www.news.com.au
“Customers take ANZ to court over fees
– The [Australian] High Court is about to begin hearing Australia’s largest class action case with 38,000 customers taking on the ANZ bank over its fees. Lawyers for the customers are expected to tell the court today that penalty fees charged by the bank are out of proportion with the actual cost. The action covers various fees, including those for overdrafts, overdrawn accounts, dishonour fees and over-the-limit credit card accounts… ‘We’re going to be arguing that a whole range of exception fees constitute unfair penalties,’ said Maurice Blackburn lawyer Andrew Watson. ‘What it costs the banks to process honour fees, dishonour fees, over-limit fees is a fraction of what they charge customers, therefore a penalty under the law, illegal, and something that should be paid back… At stake are more than A$220 million ($286 million) in overcharges allegedly owed to 170,000 customers of eight banks. The High Court agreed to hear the class action by customers of ANZ bank in May, following the May 2010 class action brought against… eight of the largest banks in the country including ANZ Bank, Commonwealth Bank, National Australia Bank, Citigroup and Westpac… The class action… aimed to win back part of an estimated A$5 billion in alleged penalty fees and late fees charged by banks to customers over a six year period…
James Middleweek of Financial Redress, the specialist arm of litigation funder IMF, pointed to the banks’ behaviour since the case began as evidence about the underlying costs faced by the banks. ‘One bank has now reduced most of these charges to zero,’ he said to reporters in Canberra. ‘What does that tell you about what they charged in the past?… One bank chief executive has said that these charges were ‘completely inappropriate’. What does that tell you about the fairness of what the banks have been doing to their customers?’ According to Maurice Blackburn, Australian households paid A$652 million in exception fees in the year to June 2010, down from A$1.3 billion in in the year to June 2009. – BusinessDay.com.au with AAP” [posted on Business Day, August 14, 2012, on www.stuff.co.nz website]
“Our debt levels are so high… Over $600 million a year we are paying on our credit card debt… in interest
… That’s a lot of cash which should be in our pockets rather than going overseas, because most of it’s going overseas as our banks are owned overseas.” – Dr Pushpa Wood, director of the NZ Centre for Personal Financial Education, a joint venture between Massey University and an Australian bank, speaking to Radio New Zealand National journalist Simon Morton, on This Way Up, Oct 13, 2012. http://www.radionz.co.nz/national/programmes/thiswayup
From “Banking on it” – an editorial in the New Zealand Listener, September 1, 2012: “Some farmers have good reason to be grumpy with banks, after a credit boom helped fuel a massive bubble in rural property prices in the two decades before the financial crisis. The country has been left with a $47 billion hangover, which is one of the reasons we now have Chinese conglomerates picking up the pieces. But farmers are not the only ones with gripes against banks. Two years ago, Australians were burning effigies of our own Sir Ralph Norris in the streets, after Australia’s largest bank, CBA, hiked its home-loan rates well above the official increase by the Reserve Bank. Just a few weeks previously it had been revealed that as head of CBA, Norris was being paid more than $400,000 a week. Just this week it was reported that Norris stands to receive more than $12 million for his last five months at the bank. The revelation came just a few days after CBA announced a record annual profit of more than $9 billion. Its New Zealand branch, ASB Bank, also managed a record [profit]…
Australia’s four big banks were once again the most profitable in the developed world last year… At its annual conference this month, BIS [the Swiss-based Bank for International Settlements] argued there was an optimal size beyond which the financial industry drags down the rest of the economy – and Australia’s has far exceeded it… [I]n this part of the world, the banks have every reason to be pleased with their treatment so far by the regulators and the politicians.”
Labour MP and primary industries spokesperson, Damien O’Connor, speaking on Radio New Zealand National, on November 19, 2012, about the ongoing rural nightmare caused by ‘interest rate swaps’ said: “They were aggressively marketed… [and] what this [interest rate] swaps product exposes is that like car salesmen, the banks are just out there to sell products that make them money. And if you have a look at the record profits that the banks have taken offshore from New Zealand… in my view, much of that profit has come from the [contract] ‘break’ fees [and] the escalating, the overinflated interest rates, the 10-12% interest rate payments being paid by farmers who work their butts off to pay the interest so that they can keep farming… [We] can’t allow this to continue into the future. The $49 billion of debt in the agricultural sector, if those farmers are paying 2-3% extra in interest repayments, we’re talking billions of dollars of extra money that goes out of our economy every year, back to the banks… “
Interviewed alongside O’Connor (see above), farming advocate Janette Walker, said: “… [O]ne particular farmer that I can think of, the extra interest that they’ve paid over four years amounts to about a million dollars as opposed to if they just had an ordinary bank rate… [A] million dollars cash out of a rural business is fairly significant, and they’ve now sold one farm and the other farm will be sold this week – they’re finished… Most of the local rural [bankers] didn’t have an understanding of swaps. They relied on bank treasury experts to do most of the talking… [T]hese contracts are 76 pages long.”
An extract from one of the stories written for rural newspaper Straight Furrow about the impact of interest rate swaps:“… [W]atercare’s treasury manager, says companies must have deep balance sheets and high levels of sophistication to take on the risk of complex and volatile interest rate swaps [one type of ‘derivative’ product]. The latest Watercare annual report revealed a $60 million loss on interest rate swap contracts in the year to June 30, highlighting the risks of [taking] derivative positions on interest rates.” – November 5, 2012. [Watercare is a public water/waste-waster services provider owned by the Auckland Council.] Read the Straight Furrow swaps stories here:
From “Foreign banks bleeding us dry” by James Henderson, posted February 14, 2012, on NZ political blog-site The Standard: “The Bankers’ Crisis is hurting people all over the world. From the deepest, darkest austerity in Greece, to the continuing foreclosure tsunami in the US, to cutbacks and job losses here, it’s the ordinary people suffering the hangover for the bankers’ wild decades of unbridled excess and profit. But at least the banks are suffering too, eh? Yeah, nah. Over $3 billion a year in profit. Nearly all of that money is flowing offshore to the foreign banks. That’s equivalent to all exports of wool, wine, and fish put together going just on the profits for the Aussie banks.
Kiwibank has 4% market share but accounts for only 0.4% of the after-tax profits made by the banks. The rest is the Aussies. And don’t forget that we’ve given these poor dears a 5% cut to their corporate tax rate in the past four years, which was worth about quarter of a billion to them last year. Every time you hear of some important service being cut, remember the Aussie banks are pocketing a million dollars per week day in tax cuts. So, how are they making record profits? By getting cheaper funding from offshore and lowering savings rates here, while not passing the full benefits on to their customers. Again, Kiwibank is a stand-out, its interest expense is a much higher portion of its interest income than other banks – it pays better interest to savers and offers lower borrowing rates.
… the [Australian] banks’ profits have grown despite the amount they are lending being steady… what they’ve done is lend less to businesses for productive investment and more to the household sector – which has left the house price bubble still significantly intact (good news for the banks, which don’t want to write down the value of their loans). So, we’re being creamed by the Aussie banks, who are fueling our housing bubble, not passing on their lower cost of capital to us, and reaping record profits, helped by the tax cuts we gave them. Time to switch to Kiwibank, eh?”
[“Kiwibank. It’s ours.” – Right?Well, not quite. Not since March 2010. Most people think that Kiwibank is still 100% owned by the NZ government but about a third of the equity in Kiwibank is now owned by private shareholders. But there will be opportunities – the first in 2015 – for the government to buy back all of these shares, so Kiwibank could again be 100% “ours.”]
“Kiwibank happy with shares offer… The state-owned bank has previously signalled the sale of up to $150 million [non-voting] shares, to be known as Kiwi Income Securities. The offer was oversubscribed…and had been largely allocated to financial intermediaries and institutions… No pool of shares is available for direct sale to the public.” – nzherald.co.nz April 8, 2010
“The dividend rate [for the privately-owned Kiwibank equity shares] for the five year period ending 3 May 2015 is 8.15% per annum, payable in arrears in equal quarterly instalments… On 4 August 2010 the first quarterly dividend of $3m… [= $12 million a year] was paid on the shares…” – from a 2010 directors’ report, Kiwibank website.
The economic “miracle” of the USA’s stand-alone public banking state, North Dakota: “…North Dakota remains fiscally sound when other state governments are swimming in red ink. It is the only state to completely escape the credit crisis, boasting a continuous budget surplus every year since 2008. It has the lowest unemployment rate [3.3% in July 2011 compared to the national rate of 9.1%] and lowest credit card default rate in the country, and no state government debt at all.
Its fiscal track record is particularly impressive considering that its economy consists largely of isolated farms in an inhospitable climate. Ready, low-interest credit from its own state-owned bank helps explain this unusual success… The Bank of North Dakota (BND) was formed in 1919 specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men… The BND has had a return on equity in recent years of 19% to 26%. It pays a hefty dividend to the state… By law, the state must deposit all its funds in the [state] bank… [The NZ Government banks with Australian-owned Westpac bank.]
Publicly-owned banks are common in India, Switzerland, Germany, Canada and other countries…” – from The Web of Debt, 2012 edition, by Ellen Hodgson Brown. For more on the Bank of North Dakota, read Brown’s August 31, 2011, Yes! Magazine story here: http://www.yesmagazine.org/new-economy/the-north-dakota-miracle-not-all-about-oil
“The National Government is dragging its feet on tendering the government master banking contract
– a contract held uncontested by Westpac for 23 years,” said Green Party Co-leader Dr Russel Norman… “It’s time to open up this cosy, uncontested business relationship successive governments have had with the Westpac bank. “Of course, Government ministers might have to give up on some of their corporate box seats and tickets to rock concerts provided courtesy of Westpac.” The Green Party has previously shown that senior National Government ministers and their staff were regularly accepting generous corporate hospitality from Westpac Bank. “Ideally, our Government’s banking should eventually be done by our New Zealand bank, Kiwibank,” Dr Norman said. “Australian-owned banks control 95 per cent of our banking industry and this Government has done nothing to stop the massive capital drain that results from these banks repatriating their record profits offshore each year.” – www.infonews.co.nz , September 5, 2012
In just one of the letters published in the online business section of Britain’s Guardian newspaper on June 28, 2012, under the headline “Shame of Barclays’ Bollinger brigade”, a reader writes: “Barclays Bank has been given a record fine of £290m for lying and for manipulating interest rates on a massive scale (Barclays fined £290m as bid to manipulate rates exposed, 28 June). Barclays – in concert with other banks – rigged the Libor and Euribor rates. This sounds just technical. It isn’t. The Libor rate is the average rate at which UK banks lend to each other. It is also the rate used as a benchmark for everything from the interest due for late payment on many contracts to the interest rate on many mortgages – real payments by millions of real people. These rates also serve as benchmarks for much of the trade in financial “derivatives”: obscure instruments created by financiers whose total value is hundreds of trillions of pounds, an unbelievable amount. The money to be made by fraudulently manipulating this market simply beggars belief.Other major banks in the UK, US and Europe are under investigation for similar allegations, including Lloyds and RBS [Royal Bank of Scotland] – both recently rescued from collapse by the taxpayer. It is clear that finance capital continues to act purely to make huge profits, legally or illegally. The banking system is not a support to the real economy but a criminal conspiracy against it. Instead of propping up the unaccountable private banking system at the expense of ordinary people, we must replace it with a publicly owned, publicly run, publicly accountable national bank.”
British economist Michael Rowbotham, in his book Goodbye America! – Globalisation, debt and the dollar empire, published in 2000, writes: “In 1998, $2,200 billion was outstanding as Third World, or international debt. The great majority of this sum represents money created as credit by commercial banks, in parallel with debt. In no sense do the loans advanced by the World Bank and IMF constitute monies owed to the notional ‘creditor nations’ of the World Bank and IMF. Third World[developing] nations are not ‘in debt to’ the industrialised nations, they are in debt to commercial and multilateral banks and lending institutions. This is reinforced by the fact that, in submitting quotas to the IMF, the creditor nations [like New Zealand which has recently pledged a further $1.2 billion] are themselves obliged to undertake debt, raising these quotas by recourse to their national debt…
Third World debts could be cancelled with little or no cost to anyone. [Of course, banks would lose out on futureincome from interest and fees.] Indeed, cancellation would be not only the simplest process imaginable, but to the general advantage of the world economy. All that is involved is a bit of creative accountancy – something at which the West has shown itself highly adept when this has suited its purpose… [O]nly one factor prevents the immediate and instant cancellation of all Third World debts – the accountancy rules of commercial banks.” [The point here is that bank-created debt conjured up out of thin air can also be ‘disappeared’ if the political will exists to make this happen.]
The 2011 book Africa’s Odious Debts – How Foreign Loans and Capital Flight Bled a Continent, by Léonce Ndikumana and James K. Boyce, tells of the criminal loan-go-round, or greedy money making dirty money while tens of thousands of babies die in Africa: “…[C]apital flight poses a major development challenge for African countries. The issue is at the heart of discussions of development finance, transparency in public resource management, and the sustainability of external borrowing. The magnitude of African capital flight is staggering, both in absolute monetary values and relative to GDP [Gross Domestic Product = total value of goods and services produced annually]. For the thirty-three sub-Saharan African countries for which we have data, we find that more than $700 billion fled the continent between 1970 and 2008. If this capital was invested abroad and earned interest at the going market rates, the accumulated capital loss [was] $944 billion. Comparisons to Asia and Latin America have found that capital flight from Africa is smaller in sheer dollar terms, but larger relative to the size of the African economy. Africa is bleeding money as capital flows into the private accounts of African elites and their accomplices in western financial centres.
Foreign loans can be an important source of illicit wealth, and hence of capital flight… On both sides of international lending agreements there can be perverse incentives, borrowers who contract liabilities in the name of the public with the aim of siphoning funds into private assets, and creditors driven by imperatives to ‘move the money’ and comforted by the prospect of bailouts when their loans go sour… Funds that are acquired illegally, or funnelled abroad illegally, or both, are not entered into the official accounts of African countries…
…We estimate that one more dollar spent on foreign debt service [paying for the loans], means 29 fewer cents spent on health. [In the case of infant mortality alone, this means that for] every $140,000 that sub-Saharan Africa pays in external debt service, another African baby dies…
[There are] other impacts of lower health expenditure: higher mortality of children aged one to five…higher premature deaths of older children and adults, and effects of non-fatal illnesses. [There are also] human costs associated with the other 71 cents that are lost with each dollar of debt service…owing to reduced spending on education, infrastructure and other public goods.
…[For] every dollar of foreign borrowing by African governments in the 1970-2008 period, roughly 60 cents left the country in the same year as capital flight. This means that four of the seven infant deaths associated with each million dollars of debt service can be attributed to loans that funded capital flight. Applying this ratio to the $19.2 billion annual debt service paid in 2005-7, we conclude that the debt-fuelled capital flight resulted in 77,000 excess infant deaths per year. These numbers give new meaning to the phrase ‘blood money.’
…[The] perpetrators of capital flight benefit from the complicity of bankers and other operators who assist in the placement of the funds in foreign [‘off-shore’] havens. The identities of asset holders are often concealed through proxies and by taking advantage of legal screens available in bank secrecy jurisdictions.” [Note: the term ‘odious debt’ is an accepted legal concept. It refers to illegitimate or fraudulent debt and is used as a reason for negating or cancelling debt.]
The island of Jersey is part of the notorious Channel Islands tax haven/ bank secrecy jurisdiction, an ‘off-shore’ outreach of the City of London – London’s tight-knit and strangely self-governing financial district. Economist John Christensen is a ‘former Jerseyeconomic advisor-turned-dissident’. While working on Jersey…”He moved from company to company as the river of money flowing into Jersey became a tide. When he expressed unease about the origins of some of it, much of it from Africa, he was brushed aside. One Friday, ahead of the habitual office binge-drinking session, his section supervisor told him she didn’t want to discuss these things and ‘didn’t give a shit about Africa anyway’. ‘Her attitude was typical. Profitability was sky-high, and nobody made the connection between their actions and criminality and injustice elsewhere…’”– from the 2011 book Treasure Islands – Tax havens and the men who stole the world, by UK financial journalist Nicholas Shaxon.
Also from Shaxson’s book Treasure Islands: “Offshore sometimes feels like a Boys’ Ownfantasy of the world, in which white men sort things out over Scotch whisky and see the rest of the world as a consumable resource.
[Economist John] Christensen continued: ‘The ruling classes realise they don’t need to worry about [what political party is in power in the USA, or Germany or Britain]. They realised they didn’t need to fight the fight at home. They already had this flotsam and jetsam of the empire strewn across the globe, with their red post boxes and British ways of life and incredible subservience to the English ruling class. In Jersey I was amazed by how fawning the local politicians were to outsiders with money. There was this idea: “We can take over our own little places, and the locals will be grateful to us. The checks and balances aren’t there; the press isn’t there; and they resent interference from outsiders.”’
Happy days. The City [of London] gentlemen had found a way round the threat of democracy.”
[And, says Shaxson:] “Just as European nobles used to consolidate their unaccountable powers in castles, to better subjugate and extract tribute from the surrounding peasantry, so financial capital has coalesced in these fortified nodes of unaccountable political and economic power, capturing local politics and turning these [tax haven/bank secrecy] jurisdictions into fast and flexible private law-making machines, defended against outside interference and protected by establishment consensus and the suppression of dissent. Offshore is not just a place, an idea, a way of doing things, or even a weapon for the finance industries. It is also a process: a race to the bottom where the regulations, laws and trappings of democracy are steadily degraded, as one arrangement ricochets from one fortified redoubt of finance to the next jurisdiction, and the offshore system pushes steadily, further, deeper, onshore. The tax havens have become the battering rams of deregulation.” [‘Offshore’ can now mean a business address, a sham company, anywhere outside of the reach of the regulations and constraints of your home turf; any state or country that is prepared to offer regulatory concessions at the expense of its neighbours – so for Wall Street ‘offshore’ can be the City of London and vice-versa.]
And here Shaxon provides an example of the pin-striped whitewashing ‘offshore’ banks can offer clients: “[A]n internal memo at the Riggs Bank brought to light in 2004 by the US Permanent Committee on Investigation [said:] ‘Client is a private investment company domiciled in the Bahamas …used as a vehicle to manage the investment needs of beneficial owner, now a retired professional who achieved much success in his career and accumulated wealth during his lifetime for retirement in an orderly way.’ The ‘retired professional’ was Chilean torturer-in-chief and former dictator Augusto Pinochet.”
“Exhaustive Study Finds Global Elite Hiding Up to $32 Trillion in Offshore Accounts” Excerpts from a July 31, 2012, story broadcast on American independent on-line news channel www.democracynow.org :
“AMY GOODMAN: We turn now to a new report that reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion – conservative estimate – is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts. The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the “offshore economy.” It’s called “The Price of Offshore Revisited.” The study finds private banks are deeply involved in running offshore havens with UBS, Credit Suisse, Goldman Sachs handling the most assets offshore. According to the report, less than 100,000 people worldwide own almost $10 trillion of the wealth held in tax havens. To talk about the implications of these findings, we’re joined by the report’s author, James Henry, economist, lawyer, board member of the Tax Justice Network, former chief economist at McKinsey & Company.
JAMES HENRY: Well, the $21 trillion figure is the headline story, that’s a shock to a lot of people, actually represents about 10 to 15 percent of global wealth. So, from that standpoint, we think it’s a reasonable number. But the interesting thing is that all of this wealth accrues to the top 10 million people on the planet, and a lot of it just to the top 100,000, people with assets over $30 million per household. The second thing that’s striking about this is the role of the great international banks that we’ve all come to know and love, the ones you described – UBS, Credit Suisse, HSBC, JPMorgan – all these banks – Goldman [Sachs] – big recipients of bailout money from taxpayers, and also deeply implicated in the financial crisis of 2008 to the current period. These are the same folks that have specialized in helping the wealthiest people on the planet take their money offshore and hide it from tax authorities.
AMY GOODMAN: You talk about pirate banks.
JAMES HENRY: Right…This is the business of taking money and moving it to secret offshore accounts and sheltering it from taxes…So, basically, we have designed our tax laws – the United States, the U.K., Switzerland – to become the largest tax havens in the world. The actual offshore islands, like the Caymans, are just conduits to these ultimate destinations…The leaders in the pack here historically have been U.K. banks, U.S. banks and Swiss banks.
AMY GOODMAN: Let’s talk about the continent of Africa and what this means for various countries and, most importantly, the majority of the populations there.
JAMES HENRY: Yeah. Well, for example, Nigeria is supposedly a debtor country. But when you look at all the unrecorded capital outflows that have flowed out of Nigeria, it turns out that Nigeria is actually, like many other developing countries, a net creditor of the richest countries in the world…
So the debt problem is not really a debt problem. It’s a tax problem. Developing countries account for about a third, we estimate, of the $21 to $32 trillion of financial assets that’s offshore.
…[I]t’s outrageous for the wealthiest people on the planet to pay zero taxes. And what this does to developing countries…[is that] they end up taxing low- and middle-income people with VAT taxes and sales taxes that are regressive. So, basically, what you’re seeing is that globalization is driving a big hole through the nation state system that was designed to raise tax revenue.
AMY GOODMAN: Name more names of the banks…
JAMES HENRY: Good example is HSBC. They’re number three on our list, a big U.K. bank. They recently had a deferred prosecution agreement with the Department of Justice for laundering $14 billion of cartel drug money. They got off with a $1 billion parking ticket, and their profits per year are about $20 billion. So, you know, this is the Obama administration basically deciding not to close this bank… HSBC is just one of the top 10 banks on this list. Collectively, those 10 banks manage about $6.3 trillion of the $12.3 trillion that we located in these top 50 banks…
AMY GOODMAN: What about large corporations? You talk about…moving intellectual property offshore…corporations like Google and Pfizer.
JAMES HENRY: Right. Well, in our film, We’re Not Broke, which was a Sundance [film festival] documentary, we discussed corporate tax evasion. And this is the latest trend in the software industry and also in the healthcare industry, drug industry. Pfizer, Google, Microsoft, companies like General Electric are parking their intellectual property, their brands and software, offshore in places like Bermuda and paying royalties to themselves and essentially parking the profits in these low-tax jurisdictions and not paying any taxes on it. So, Google last year saved about $3 billion by that…”
Journalist Nicholas Shaxson again, in Treasure Islands: “Why has so much [debt] built up in the world’s richest economies? An article in the [UK’s] Financial Times in June 2009 headed DEBT IS CAPITALISM’S DIRTY LITTLE SECRET provides one answer. “The benefits of economic growth have gone into the pockets of plutocrats [people who rule because of their wealth] rather than the bulk of the population,” it said. “So why has there been no revolution? Because there was a solution: debt. If you couldn’t earn it, you could borrow it.” And the infrastructure was put in place to make this happen. The tax havens are a big part of that.”
In his New York Times best-selling book Griftopia – A story of bankers, politicians, and the most audacious power grab in American history, lauded US journalist Matt Taibbi includes a damning exposé of investment mega-bank Goldman Sachs. Here are some excerpts from that chapter which is titled ‘The Great American Bubble Machine’:
“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates… Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything.
So what you need to know is the big picture: if America is circling the drain, Goldman Sachs found a way to be that drain – an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy…
The bank’s unprecedented reach and power has enabled it to manipulate whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere… the bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on earth, pure profit for rich individuals…
Here’s the real punch line. After playing an intimate role in three historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ in the early part of the 2000’s, after pawning off thousands of toxic mortgages on pensioners and cities [as investments], after helping drive the price of gas up above $4.60 a gallon for half a year [this price spike hit NZ pumps too], and helping 100 million new people around the world join the ranks of the hungry, and securing tens of billions of taxpayer dollars through a series of bailouts, what did Goldman Sachs give back to the people of the United States in the year 2008? Fourteen million dollars. That is what the firm paid in taxes in 2008: an effective tax rate of exactly 1, read it, one percent. The bank paid out $10 billion in compensation and bonuses that year and made a profit above $2 billion, and yet it paid the government less than a third of what it paid [CEO] Lloyd Blankfein, who made $42.9 million in 2008.
How is this possible? According to its annual report, the low taxes are due in large part to changes in the bank’s “geographic earnings mix.” In other words, the bank moved its money around so that all of its earning took place in foreign countries with low tax rates. Thanks to our completely f***ed [my asterisks] corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions up front on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to pay no taxes at all. A Government Accountability Office report, in fact, found that between 1998 and 2005, two-thirds of all corporations operating in the United States paid no taxes at all.
This should be a pitchfork-level outrage – but somehow, when Goldman released its post-bailout tax profile, barely anyone said a word: Congressman Lloyd Doggett of Texas was one of the few to remark upon the obscenity. “With the right hand begging for bailout money,” he said, “the left is hiding it offshore.”” – taken from the 2011 updated edition of Griftopia
In her 2009 book It Takes a Pillage – Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street, former Wall Street insider turned Wall Street critic, Nomi Prins says: “I’m writing about some of these bankers that orchestrated expensive life jackets in a sea of financial debris, because I used to traverse their world. As a managing director at Goldman Sachs… and a senior managing director at Bear, Stearns International (R.I.P.)… I had an upfront and global seat for a lot of the internal politics and power plays that drive the external pillaging…
The acquisition of power comes through the consolidation of money on Wall Street. You need to have a big appetite for power to be truly successful there. I think that when you live outside this world, it’s hard to understand the motivation to act in ways that seem, and often are, so disconnected from reality. As much as their actions are about hoarding money, their strategy is more about consolidating power and influence. Money is a marker. Power is a drug of choice… Success on Wall Street is defined by figuring out how to creatively bend the rules in order to squeeze more money from clients, investors, and the world. So, why would you trust Wall Street to create the rules in the first place?…
You can’t merely wrist slap the very people who wrote the rules and paid themselves… and expect them to change their collective mind-set. The most you can expect is the kind of scripted faux [fake] remorse that Wall Street CEO’s provided to Congress… These executives are very gifted at saying just what they need to, when they need to. It doesn’t mean anything. Believe me. I lived and worked and breathed with Wall Street executives for years. I’ve seen them lie with nary a facial muscle moving. I’ve been at meetings that centred on strategizing about lying…
…Even the bonus payouts that caused such duress to Congress were [post-2007] cloaked in new disguises to avoid detection. For instance, American Express CEO Ken Chenault received $26 million in compensation in 2007, including $1.24 million in salary, $6 million in bonus cash, $6.5 million in stock awards, $8.3 million in options, and approximately $4 million in other forms of compensation. For 2008, he certainly toed the public line and received zero in cash bonuses, but he still made more than in 2007 – ready for this? – $27.3 million… On January 9, 2009, American Express received $3.39 billion in TARP [Troubled Asset Relief Program = bailout] money.”
Financial Times columnist John Tizard had this to say about Prin’s book It Takes a Pillage: “Nomi Prins has applied her unmatched expertise in Wall Street’s arcane methods of turning your money into their bonuses to mapping the recent crisis. In compelling, scathing prose, she shows how the key players escaped being brought to account, and kept their pet officials in power.”
UK economics commentator and activist Ann Pettifor: “I’m right now reading a speech by [a Bank of England board member]… who was at Goldman Sachs… and who’s written a paper saying that the cause of the [financial] crisis had absolutely nothing to do with… unregulated money… When I read that paper it is so deceptive really… That paper, I am convinced, has been written in Goldman Sachs’ research department, and he’s delivered that speech on behalf of Goldman Sachs, and he’s on the board of the Bank of England. Now that’s not a conspiracy – it’s huge political and economic power… I was a bit stunned by [the speech]… He says in it that for every saver there is a borrower. Now this is a man who is on the board of the Bank of England and has no idea, it seems, that we live in a monetary system and have lived in a monetary system since 1694… a bank-money system which is based on credit. And yet he suggests… that our banking system relies on people to deposit some savings in the bank and then to lend it out. If that were the case, we would never have had a credit crisis… What I think is amoral is the fact that the banks finance this, that they churn this stuff out… [His speech is about] defending the ability of Goldman Sachs to lend without regulation and to lend at very high rates of interest.” – excerpt from a 2012 on-line interview with Renegade Economist
Economist/academic Dr Jonathan Aldred, of Cambridge University, UK, says in his 2009 book The Skeptical Economist : “… [M]any of those who call themselves economists peddle a narrow or simplistic view of economics to serve vested or narrow interests and political ends. These people are better described as policy entrepreneurs. Alongside the policy entrepreneurs stand others who are naively confused in their misrepresentation of economics, but equally dangerous. Between them, these groups do a good job of misunderstanding, misrepresenting and misusing economics, with consequences from which we all suffer.”
Also from Ellen Hodgson Brown’s book The Web of Debt: “…[T]he Chinese Communists, who founded the People’s Republic of China in 1949,…retained much of the [already in place] “American system” in creating their monetary scheme. It was a Chinese variation of [former US President Abraham] Lincoln’s Greenback program…[so] Chinahas a government-issued currency and a system of national banks… Besides its “populist” banking system, China is distinguished by keeping itself free of the debt web of the IMF [International Monetary Fund] and the international banking cartel; and by refusing to let its currency float, a policy that has fended off the currency manipulations of international speculators… and China has such a huge store of [US] dollar reserves that it is impervious to the assaults of speculators.” [China has been able to buy up a vast amount of United States government debt and is the USA’s largest foreign creditor.]
President Abraham Lincoln’s Monetary Policy (1865) is a very short document and the UK’s Michael Rowbotham includes it in his book The Grip of Death – A study of modern money, debt slavery and destructive economics (reprinted 2009). Here are some excerpts:
“‘Money is the creature of law, and the creation of the original issue of money should be maintained as the exclusive monopoly of national government… Capital has its proper place and is entitled to every protection. The wages of men should be recognised in the structure of and in the social order as more important that the wages of money.
No duty is more imperative for the government than the duty it owes the people to furnish them with a sound and uniform currency, and of regulating the circulation of the medium of exchange so that labour will be protected from a vicious currency, and commerce will be facilitated by cheap and safe exchanges…
The monetary needs of increasing numbers of people advancing towards higher standards of living can and should be met by the government. Such needs can be met the issue of national currency and credit through the operation of a national banking system… Government need not and should not borrow capital at interest as a means of financing governmental work and public enterprise… The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity…
The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.’ Abraham Lincoln, senate document 23, Page 91. 1865”
[Rowbotham writes:] “…[I]t has been speculated many times that Lincoln’s death [assassination] was connected with the fact that such a monetary policy as he was proposing, if pursued effectively, would have signalled the end of banking and money power in the United States, and very rapidly throughout the developing world. Once that one government was seen to be capable of supplying its nation’s monetary needs, others would certainly have followed. The power and profit which national debts and widespread private industrial debts provided to the world’s most shadowy and powerful elite – bankers and financiers – would have soon vanished.”
“The Remarkable Island of Guernsey” – from Ellen Hodgson Brown’s book The Web of Debt: “While U.S. bankers were insisting that the government must borrow rather than print the money it needed, the residents of a small island state off the coast of England were quietly conducting a 200-year experiment that would show the bankers’ inflation argument to be a humbug. Guernsey is located among the British Channel Islands, about 75 miles south of Great Britain. In 1994, Dr. Bob Blain, Professor of Sociology at Southern Illinois University, wrote of this remarkable island:
‘In 1816 its sea walls were crumbling, its roads were muddy and only 4½ feet wide. Guernsey’s debt was 19,000 pounds. The island’s annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, people were leaving Guernsey and there was little employment.
Then the government created and loaned new, interest-free state notes worth 6,000 pounds. Some 4,000 pounds were used to start the repairs of the sea walls. In 1820, another 4,500 was issued, again interest-free. In 1821, another 10,000; 1824, 5,000; 1826, 20,000. By 1837, 50,000 pounds had been issued interest free for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges. This sum more than doubled the island’s money supply during this thirteen year period, but there was no inflation. In the year 1914, as the British restricted the expansion of their money supply due to World War 1, the people of Guernsey commenced to issue another 142,000 pounds over the next four years and never looked back. By 1958, over 542,000 pounds had been issued, all without inflation.’
[Brown continues… ] Guernsey has an income tax, but the tax is relatively low… It has no inheritance tax, no capital gains tax, and no federal debt… When it wants to create some public work or service, [the Guernsey government] just issues the money it needs to pay for the work. The Guernsey government has been issuing its own money for nearly two centuries. During that time, the money supply has mushroomed to about 25 times its original size; yet the economy has not been troubled by price inflation, and it has remained prosperous and stable…
Many other countries have also successfully issued their own money but Guernsey is one of the few to have stayed under the radar long enough to escape the the covert attacks of an international banking cartel bent on monopolizing the money-making market…” [It is interesting to note that Guernsey is also part of the long-standing Channel Islands tax haven/secrecy jurisdiction operation which funnels big money into the City of London banking district. It makes you wonder… ]
Economics commentator and activist Ann Pettifor (UK) speaking in the documentary film 97% Owned : “… [A] report from the United Nations Environment Programme [says] we need $2 trillion a year… to finance the greening of the economy, to move away from… carbon – which is poisoning the atmosphere – to alternatives to carbon. When the banks collapsed in 2007-09, we found, according to the Bank of England… $14 trillion to bail out the banks. So against that, $2 trillion to bail out the ecosystem is no big deal…
… All that money does is enable us to do what we can do, and once we get our heads around that, we can make money do what we need.”
FREE TO LISTEN TO AND WATCH ONLINE:
documentaries, talks and interviews
97% Owned [UK, documentary, 60 minutes, 2012]
Economists, campaigners and former bankers speak out in this documentary, made by Positive Money UK, about our debt-based monetary system which gives banks the power to create money and manipulate the economy.
This is a link to the ‘director’s cut’ version of this documentary.
The uncut 2-hour version of 97% Owned is also available to watch free on-line.
is a not-for-profit research and campaigning organisation formed in May 2010 to raise awareness of the deep flaws in our current monetary system. We believe therse fundamental flaws are at the root of – or a major contributor to – problems like poverty, excessive debt, growing inequality and the environmental breakdown. We work to identify the links between the current banking and monetary system and the serious social, economic and ecological problems that face the UK and the world today.” www.postivemoney.org.uk
Paul Moore, a top bank executive turned “whistle-blower.” [UK, interview, 20 minutes, 2012]
Moore speaks out about the financial sector and the need for radical reform. He was the former Head of Group Regulatory Risk at Halifax Bank of Scotland. Some of this interview is featured in the film 97% Owned. (see above)
The Secret of Oz [USA, documentary, 120 minutes, 2009]
This is an updated version of the award-winning 1995 documentary The Money Masters. Although low-budget, it gives a riveting account of the (today) little-known but centuries-long history of the fiercely fought back-and-forth struggle – the people and their political leaders versus the private bankers – to control the creation and management of the money supply in Western economies. It’s full of surprises, and plenty of shocks but also strongly advocates for a positive way forward. “As of February, 2010, the film is ranked #15 in the “Top 50 Documentaries” listed at the Movies Found Online website.” – wikipedia.
“The Bank of North Dakota” [USA, documentary, 30 minutes, 2011]
“…This documentary features historians, economists, bank staff members and members of the Industrial Commission discussing how the bank came into existence, how it has responded over the years to its mission, and its evolving role in promoting commerce, agriculture and industry.”
Inside Job [USA, documentary, 110 minutes, 2011]
Charles Ferguson’s film won the Academy Award for Best Documentary in 2011. It narrates the conflicts of interest between the finance industry, politicians, academics and regulators, which eventually led to the multi-trillion-dollar collapse of 2008. Narrated by actor Matt Damon, the film is Wall Street-centred but reaches out across America and around the world.
Inside Job director, Charles Ferguson [USA, interview, 2012]
Charles Ferguson has followed up his Inside Job documentary, and his 2012 book of the same name, with a new book Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America. This is an in-depth interview with Ferguson on the Democracy Now! independent news channel website, posted May 29, 2012.
(note: this 2-part interview is introduced about 36 minutes into the Democracy Now! news hour – the link should take you to this time point but if not, just move the pointer to the right place.)
Super Rich: The Greed Game [UK, BBC documentary, 60 minutes, 2008]
“The BBC’s Robert Peston reveals how the super-rich have made their fortunes, and the rest ofus are picking up the bill.” There is no shortage of high-flying financial sector players, luxury goods, and easy-to-follow explanations in this well-crafted documentary. Watch here: http://www.youtube.com/watch?v=suZb9Z0b05I&feature=related
Wall Street Gain, Main Street Pain: Our Battle for Financial Reform [USA, panel discussion, 85 minutes, October 2009]
At this New York event, Rolling Stone journalistMatt Taibbi, author of Griftopia; Ex-Wall Street executive Nomi Prins, author of It Takes a Pillage; and financial journalist Daniel Gross, author of Dumb Money, are hosted here by PBS senior journalist David Brancoccio in a lively discussion of the causes, effects and context of the financial crisis.
A great companion watch to the Inside Job documentary.
Watch here: http://www.youtube.com/watch?v=4RSu2UHuSKo&feature=related
Ex-Wall Street hedge fund analyst Cathy O’Neil is now an Occupy Wall Street activist. She explains why in this PBS Frontline interview. [USA, 2012]
…the basic cultural assumptions were not pleasant to me. The sort of most basic cultural assumption was that as a smart person, we have the right to take advantage of the system and of “dumb people”… They think about it, like, “Well, of course we’re going to take advantage, because we’re smart, and we can. Like, we have better tools, and our tools are our brains… Take advantage of absolutely everything and everyone that we can, in any way we can… [If]
we could figure out a way to take advantage of pension funds, we would do it… [One of the] u
nderlying assumptions was that there’s smart money, and then there’s dumb money… So the idea was: “You know, this is called dumb money. Let’s just… take their dumb money… I just felt like I was doing something immoral. I was taking advantage of people I don’t even know whose retirements were in these funds… By the way, it should be said that this is during the credit crisis, right. This is 2008, 2009. I mean, this is when you’re seeing the world collapse around us.”
Money, Power, & Wall Street [USA, 4-part documentary series, 2012]
The O’Neil interview (see above) is one of many extended interviews posted alongside this recent PBS (American public broadcasting service) documentary series which investigates the global financial crisis. The reporting seems overly-reverential and go-easy at times, and biased in favour of President Barack Obama, but it’s still good viewing and provides plenty of useful insights.
NZ-based reform-advocating economist Raf Manji [NZ, radio interview, 2011]
Christchurch-based Manji talks with Radio New Zealand National journalist Kim Hill (November 12, 2011) about monetary reform. Manji was formerly a London-based currency trader with investment banking giant Merrill Lynch.
Ross Ashcroft: Renegade Economics [NZ, radio interview, 2012]
The founder of the Renegade Economist on-line talk show and director of the documentary Four Horsemen, Ross Ashcroft (UK), talks to Radio New Zealand National journalist Kim Hill (Saturday Morning programme, May 5, 2012) about the global economic crisis and about his documentary.
Watch Four Horsemen trailer here: http://www.youtube.com/watch?v=wLoB1eCJ93k
(Economists speak out – about the global financial crisis, about how it happened, about what needs to change to turn things around and create a better future for people and planet, and about how to achieve that change. “Four Horsemen
is an important film because it presents a sober picture of what is wrong in a non-hysterical way and will ignite a debate about what can be done to create a fairer, less dysfunctional world.” – Marcus Chown, New Scientist)
Thinkers: Economics [NZ, radio interview, 15 minutes, 2012]
Economist Dr Neville Bennett (PhD, London School of Economics, and economic editor with the National Business Review) talks to Radio New Zealand National journalist Bryan Crump (Nights programme, October 29, 2012) about banking, about debt, and about the failings of the economics profession and the need now for scepticism and re-assessment.
“Somebody like me, our generation… tried to influence people and we got an awful lot of false authority. And politicians and other people actually believed somehow that economists knew what they were doing. But increasingly now I think they didn’t really know and their authority was very misplaced…”
Leading reform-advocating economist Steve Keen [UK, BBC radio interview, 2012]
Australian Steve Keen is an associate professor of economics and finance at the University of Western Sydney, and author of the lauded, ground-breaking book Debunking Economics – the naked emporor dethroned?Keen was one of a small number of economists who predicted there would be a major financial crisis before the 2008 crash. He argues that if we keep the “parasitic banking sector” alive the economy dies, and says that conventional economics provides an unwitting cover for “the greatest ponzi schemes in history.” Keen is interviewed here by the BBC’s Newsnighteconomics editor, Paul Mason, in front of an audience at the London School of Economics for a BBC Radio 4 “Analysis”programme: ‘Why Economics Is Bunk’.
Steve Keen: “Banks can expand the money supply. It’s a double-entry bookkeeping exercise to expand the money supply. We have to remove that one massive flaw in capitalism to avoid perennial financial crises.”
Paul Mason: “But banks have rigid capital ratios. They have ceilings in terms of the amount of debt they can create…?”
Steve Keen: “Fundamentally, banks manage to evade most of those controls.”
Renegade Economist : Steve Keen [UK, on-line interview, 25 minutes, 2011]
Economist Steve Keen talks to documentary-maker Ross Ashcroft on this on-line talk show.
Renegade Economist : Ann Pettifor [UK, on-line interview, 31 minutes, 2012]
Economics commentator and activist Ann Pettifor (UK) talks to documentary-maker Ross Ashcroft on the Renegade Economist Talk Show. Pettifor has written books on government debt and international finance including her 2006 book The Coming First World Debt Crisis. She is a fellow of the New Economics Foundation, London, and director of PRIME Economics [UK].
British financial journalist Nicholas Shaxon [USA, on-line interview, 2011]
‘ author Nicholas Shaxson is interviewed on the Democracy Now!
independent, global news channel on April 15, 2011. ( http://www.democracynow
. org )
John Christensen, of the Tax Justice Network, UK [on-line interview, 9 minutes, 2012]
Economist turned activist John Christensen, who worked intensively with Nicholas Shaxson on the book Treasure Islands gives a concise overview of tax havens and the damage they cause.
‘The Rise and Rise of Britain’s Tax Haven Empire’ [UK, public talk, 45 minutes, 2011]
John Christensen, of the Tax Justice Network ( http://www.taxjustice.net/ )
gives an incisive, enlightening, fact-packed public talk on the global reach and operation of tax havens, including their role in the creation of the global financial crisis. The video has been uploaded in 6 parts. Part 5 is a post-talk interview with Christensen. Part 6 is the post-talk question and answer session.
Treasure Islands [NZ, 60 Minutes television story, 18 minutes, 2012]
Journalist Guyon Espiner reveals in this story (October 7, 2012, on TV3) that New Zealand operates as a tax haven/ secrecy jurisdiction via government-sanctioned “foreign trust funds”.
Catastroika – the privatisation of everything [Greece, documentary, 87 minutes, 2012]
This eye-opening documentary reveals a story of super-sized arrogance, greed and corruption; of the undermining and the over-riding of democracy, time and time again, and happening right now, especially in debt-bogged European Union countries. It shows the net effect of the ‘privatise everything’ doctrine that is part of the ‘neo-liberal’ ideology. It takes you to the United States, to Britain, to Germany, to Russia, to France, to Italy, to Spain and to embattled Greece, the home of the film’s makers. It is a story of corporate raiding and profiteering, and the degradation and destruction of publicly-funded infrastructure, aided and abetted by self-interested politicians, government officials and bankers. Public assets, built up over generations with taxpayers’ money, are swept into grasping private hands – often at ludicrous fire-sale prices – with severe, and often disastrous, results for whole populations of people. The documentary has English sub-titles but a lot of the spoken dialogue is also in English as academics, financial journalists, political observers, politicians, industry insiders etc. from various countries are interviewed. The section, towards the end, about the sell-offs of publicly-owned railway, water and power companies is particularly relevant to New Zealand right now as we face yet more selling off of our taxpayer-bought, profit-generating public assets.
…[I]ncreasing criticism has been levelled at the media over failure to provide adequate warning of the impending economic turmoil, as well as accusations of sensationalist coverage. Did the media fail in its scrutiny? Or are the workings of international finance now so complex and secretive that the media can no longer provide effective oversight? We ask some of the journalists and commentators who have been credited with providing early warning of the collapse of the markets for their assessment…”
Gillian Tett, of the Financial Times, and British Business Journalist of the Year in 2008: “Let’s face it, the banks PR teams are extremely well-resourced and funded compared to the media.”
Ann Pettifor: “[T]he media had been captured by what I regard to be… an ideological dominance in the profession of economics… and they need to know that they are captured when they are captured, and they need to know not to be captured…”
– Filmed Nov, 2008; uploaded Aug 29, 2012, by the Frontline Club, London.
The Frontline Club is the London hub for a diverse group of people united by their passion for the best quality journalism. It is home to over 200 talks and screenings a year.” www.frontlineclub.com
Leading New Zealand businessman Hugh Fletcher [NZ, radio interview, 33 minutes, 2012]
Former chief executive of Fletcher Challenge, and just stepped down from directorships with Fletcher Building and the Reserve Bank, Hugh Fletcher (MBA Stanford University, and a former chancellor of Auckland University) talks to Radio New Zealand journalist Kathryn Ryan (Nine to Noonprogramme, October 19, 2012) about the New Zealand business environment, foreign takeovers and investment, employment, deluded economic thinking and policies, banking, public and private debt, and monetary policy, and firmly puts the case for attitude and policy changes.
“New Zealand head-quartered corporations have not had a level playing-field for thirty years… The theories for international comparative advantage and the theories for perfect competition, which underlie laissez-faire economics, are patently riddled with many, many flaws in the assumptions. So they are hollow. They are the emperor without his clothes, and yet they’ve been slavishly adopted by New Zealand governments and civil servants for the last thirty years… We are slowly draining wealth out of this country and we are getting into a more vulnerable financial position. The laissez-faire status quo position is not acceptable… “ [The French term ‘laissez-faire’ refers here to a ‘let them do as they want’ non-interventionist, anti-regulation approach by government towards private economic transactions – the ‘free market’ / ‘markets know best’, hands-off approach of neoliberalism.]
Some further reading:
The Keynes Solution, The Path to Global Economic Prosperity – by Prof. Paul Davidson (USA, 2009)
Debt, The First 5000 Years – by David Graeber (USA, 2011)
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About Simone-Louise Lalande:
I was born in the UK but came to New Zealand as a child. I am a former print journalist with both newspaper and magazine experience and have done communications work for a high-profile humanitarian organisation. I am not a member of a political party. It was my idea to write this one-off article, and no payment was involved. You can contact me at email@example.com
I really appreciate your interest in the issues talked about in this blog. I hugely welcome your support for monetary reform/banking reform – both here in New Zealand and globally. I’m very happy to receive emails from readers of this but – my apologies – I may not be able to reply to each and every one.
Simone-Louise Lalande – November, 2012
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