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Health Care & Environment
06.19 Engineers boost output of solar desalination system by 50% [Trump fires scientist. It would be far better to enable their good work.]
06.19 We’ll Never Solve Immigration If We Don’t Solve Climate Change [Why is our President so willfully stupid?]
06.18 The Worst Patients in the World [Is THIS the dumbest thing we can do? Then let's do it!]
06.18 Navy Contaminates Local Groundwater and Sewer System in Maryland [Is THIS the dumbest thing we can do? Then let's do it!]
06.18 Trump's order to trim science advisory panels sparks outrage [Is THIS the dumbest thing we can do? Then let's do it!]
06.17 Hopes for climate progress falter with coal still king across Asia [Governments must subsidize very rapid installation of renewable energy to displace all fossil energy—aka DEATH ENERGY—power plants that must be made illegal ASAP]
06.17 Oil companies double down on plastics as public outcry grows [Obscene!]
06.15 So much plastic is being made that "recycling has no impact" [Non-recyclable plastic must be made illegal to manufacture, use]
06.15 We must transform our lives and values to save this burning planet [Increased ice melt in polar latitudes has been disguising reality in the middle latitudes. This effect will soon be replaced by record heat as ice volume and seasonal melting increasingly declines.]
06.15 This all-male council in Texas just voted to ban abortion [1:59 video; Bad assumptions foment ignorant actions...]
News Media Matters
US Politics, Policy & 'Culture'
06.19 America has never gone this long without hiking the federal minimum wage [The poor would spend every penny and help the economy and decrease health costs. Only dummies don't understand the costly effects of penury.]
06.19 When migrants arrived in droves, this poor New Mexico city opened its arms [A good example for us all: This is the way we must respond to human suffering]
06.18 It's A Horrible Idea To Privatize The Tennessee Valley Authority And Other Public Energy Assets [Is THIS the dumbest thing we can do? Then let's do it!]
06.18 Tobacco's 'Special Friend': What Internal Documents Say About Mitch McConnell [His immorality is in complete control]
06.17 Climate change leadership would create a new 'American century' [We must incentivize the strategic good, again, before it's too late.]
06.17 Drug Cop Worth $400 Million After Bets on Brooklyn Real Estate [A better role-model than Trump or Kushner!]
06.15 White House physicist sought aid of rightwing thinktank to challenge climate science [When your President is a quack he naturally surrounds himself with sycophants]
06.18 As promised, Trump slashes aid to Central America over migrants [Is THIS the cruelest thing we can do? Then let's do it!]
06.18 ‘The Saudis couldn’t do it without us’: the UK’s true role in Yemen’s deadly war [If you act psychopathic you are psychopathic; 3:40 Video: Where have all the flowers (and morals and young men) gone, long time passing, sung by Marlene Dietreich]
06.17 'Blatant Theft': Netanyahu Unveils Illegal Settlement Named 'Trump Heights' in Occupied Syrian Territory [Great deal: the U.S. gives Israel $Billions every year, and they name an illegal settlement—to be built on Palestinian land—after Trump]
Economics & Corrupt Capitalism
06.15 'Eye-Popping': Analysis Shows Top 1% Gained $21 Trillion in Wealth Since 1989 While Bottom Half Lost $900 Billion [More equality or bring back the guillotines!]
International & Futurism
06.19 Trump Enabled an ‘Act of Organized Crime’ in Guatemala [Trump and other mafia-dons cause refugees and migrants as much as global warming]
06.19 Madrid’s new rightwing council suspends low-emissions zone [“Stupid is as stupid does.” –Forrest Gump]
06.19 Donald Trump’s reckless Iran policy casts doubt on the US as global leader [America's reputation has plummeted more speedily since Trump's dubious election, with professionals willfully replaced with less competent appointees or left unfilled in many federal government agencies]
06.18 'If This Is True, They Are Even Bigger Lunatics Than We Realized': UN Officials Reportedly Believe Trump Planning 'Massive' Bombing Campaign in Iran [Never underestimate the stupidity of the Trump Administration]
06.18 Iran will not wage war against any nation, says Hassan Rouhani [Economic sanctions are cruel punishment to innocent civilians causing hate for generations. We will reap what Trump sows.]
06.17 Saudi Arabia May Execute Teenager for His Protests — Including When He Was 10 [America's “best ally” is psychopathically insane]
06.17 Why Venezuela Is the Vietnam of Our Time [Powerful, clear writing!]
Central Banking 101: What the Fed can do as “Lender Of Last Resort”
We’ve seen behind the curtain, as the Fed waved its magic liquidity wand over Wall Street. Now it’s time to enlist this tool in the service of the people.
Sunday, 19 December 2010
The Fed’s invisible hand first really became visible with the bailout of AIG. House Speaker Nancy Pelosi said in June 2009:
How much more -- $800 billion? $8 trillion?
Not only did he not use “tax money;” it seems he hardly used “money” at all.
The stage magician smiles coyly and rolls up his sleeves to show that there is nothing in them. “Try $12.3 trillion,” he says.
That was the figure recently revealed for the Fed’s “emergency lending programs” to bail out the banks.
“$12.3 trillion of our taxpayer money!” shout the bemused spectators as pigeons emerge from the showman’s gloved hands. “We could have used that money to build roads and bridges, pay down the state’s debts, keep homeowners in their homes!”
“Not exactly tax money,” says the magician with his mysterious Mona Lisa smile. “When did you have $12.3 trillion in tax money sitting idle?”
Not only did he not use “tax money;” it seems he hardly used “money” at all. He just advanced numbers on a computer screen, amounting to credit against collateral, replacing the credit that would have been advanced by the money market before the Fatal Day the Money Market Died. According to CNNMoney –
Or so it is reported in the media. . . .
The pigeons slip back up the sleeve from whence they came, a sleeve that was empty to start with.
The Central Bank as Lender of Last Resort
Where did the Fed get this remarkable power? Central banks are “lenders of last resort,” which means they are authorized to advance as much credit as the system requires. It’s all keystrokes on a computer, and the supply of this credit is limitless. According to Wikipedia:
Why is this backup necessary? Because, says Wikipedia matter-of-factly, “Due to fractional reserve banking, in aggregate, all lenders and borrowers are insolvent.” The entry called “fractional reserve banking” explains:
All commercial banks are insolvent. They are unable to pay their debts when they come due, because they have double-counted their deposits. A less charitable word, if this hadn’t all been validated with legislation, might be “embezzlement.” The bankers took your money for safekeeping, promising you could have it back “on demand,” then borrowed it from the till to clear the checks of their borrowers. Modern banking is a massive shell game, and the banks are in a mad scramble to keep peas under the shells. If they don’t have the peas, they borrow them from other banks or the money market short-term, until they can come up with some longer-term source.
Ann Pettifor writes, “the banking system has been turned on its head, and become a borrowing machine.” Rather than lending us their money, they are borrowing from us and lending it back. Banks can borrow from each other at the fed funds rate of 0.2%. They get the very cheap credit and lend it to us as much more expensive credit.
They got away with this shell game until September 2008, when the Lehman Brothers bankruptcy triggered a run on the money markets. Panicked investors pulled their short-term money out, and the credit market suddenly froze. The credit lines on which businesses routinely operated froze too, causing bankruptcies, layoffs and general economic collapse.
The shell game would have been exposed for all to see, if the Federal Reserve had not stepped in and played its “lender of last resort” card. Quoting Wikipedia again:
If all central banks do it, it must be okay, right? Or is it just evidence that the entire international banking scheme is sleight of hand? All lenders are insolvent and are kept in the game only by a lender-of-last-resort power given to central banks by central governments -- given, in other words, by we-the-people. Yet we-the-people are denied access to this cornucopia, and are forced to pick up the tab for the banks. Most states are struggling with budget deficits, and some are close to insolvency. Why is the Fed’s magic wand not being waved over them?
QE3: Some Creative Proposals
According to financial blogger Edward Harrison, that might soon happen. He quotes a Bloomberg article by David Blanchflower, whom Harrison describes as “a former MPC [Monetary Policy Committee] member at the Bank of England but also an American-British dual citizen professor who is very plugged in at the Fed.” Blanchflower wrote on October 18:
You don’t need to understand all this financial jargon to pick up that a central banking insider who has sat in on the Fed’s meetings says that for the Fed’s next trick, it could and “may well” fund the bonds of local governments. Harrison comments:
A big story indeed, opening very interesting possibilities. The Fed could use its QE tool not just to buy existing assets but to fund future productivity and employment, stimulating the depressed economy the way Franklin Roosevelt did but without putting the nation in debt at high interest to a private banking cartel.
The Fed could, for example, buy special revenue bonds issued by the states to finance large-scale infrastructure projects. They might build a high-speed train system of the sort seen in Europe and Asia. The states could issue special revenue bonds at 0% or 0.5% interest to finance the project, which could be repaid with user fees generated by the finished railroad. The same could be done to build modern hospitals, develop water projects and alternative energy sources, and so forth. All this could be done at the same extremely low interest rates now afforded to the banks, saving the states enormous sums in taxes.
Wouldn’t that sort of program be inflationary though? Not under current conditions, says author Bill Baker in a recent post. He notes that over 95% of the money supply is created by bank lending, and that when credit is destroyed, the money supply shrinks. The first round of QE did not actually increase the money supply, because the money printed by the Fed was matched by the destruction of money caused by debt default and repayment. To replace the debt-money lost in a shrinking economy, the Fed has already elected to embark on a program of quantitative easing. The question addressed here is just where to aim the hose.
Closing the Social Security Gap
Another interesting idea for QE3 was proposed by Ted Schmidt, associate professor of economics at Buffalo State College. Writing in early November, Schmidt anticipated the cut in social security taxes now being debated in Congress. Worried observers see these cuts as the first step to dismantling social security, which will in the future be called “underfunded” and too expensive for the taxpayers to support. Schmidt notes, however, that social security is a major holder of federal government bonds. The Fed could finance a $400 billion tax cut in social security by buying bonds directly from the social security trust fund, allowing the fund to maintain its current level of benefits. Among other advantages of this sort of purchase:
The Fed’s lender-of-last-resort power has so far been used only to keep rich bankers rich and the rest of the population in debt peonage, a parasitic and unsustainable endeavor. If this power were directed into projects that increased productivity and employment, it could become a sustainable and very useful tool. We the People do not need to remain subject to a semi-private central bank that was ostensibly empowered by our mandate. We can take our Money Power back.
Ellen Brown is an attorney and the author of eleven books. In Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free, she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.
Ms. Brown's stories are republished in the Baltimore Chronicle with permission of the author.
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Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.This story was published on December 19, 2010.