Ellen Brown continues to travel the world, telling people in various nations that there is no such thing as government spending; only government borrowing. For her, all money is lent into existence by banks, and the national debt is our debt to the banks.
Ellen Brown is currently in Switzerland, having presented her nonsense in Reykjavik Iceland, plus London, Manchester, and Cardiff in the U.K.
Not all of what she says is nonsense, since she is pitching for more publicly-owned banks, which I strongly support. She notes that on the 1990s, 40% of the banks worldwide were publicly owned. Today it is only 25%.
But she still has false delusions about money. By falsely claiming that the U.S. government must borrow all its money, Ellen Brown supports the lie that the U.S. government has a “debt crisis.” This opens the door to the lie that average people must have more austerity.
Below, she spreads her nonsense in Iceland (13 Feb 2016). I’ll note some key points, so you don’t have to sit through the two-hour video.
Amazingly, no audience member in any country ever raises his hand to ask, “So there is no government spending? Only government borrowing?” (Ellen Brown would erroneously answer, “That’s right.”)
At 16:27 she claims that “Credit is the lifeblood of all business.” For her, there would be no business at all if banks did not lend, since (for her) the U.S. government does not create money; it only borrows money. For her, all money except coins and currency notes is created by banks as loans.
Thus, when the Social Security Administration instructs your bank to credit your account (and thereby creates money out of thin air), Ellen Brown thinks this is a loan to you from your bank, and a loan from your bank to the government.
Curiously, you never have to pay off these monthly “loans,” but let’s not let facts get in the way of nonsense.
16:56: “Banks create virtually the entire money supply.”
17:10: “Most people think that money is created by governments. You see the pictures of presidents and kings and queens on the coins and dollar bills, but the coins and dollar bills are the blue line.”
Like I said, for Ellen Brown, the only money created by government is coins and currency notes, the total of which represent less than three percent of the overall money supply. Everything else (in her mind) is created by banks as loans.
Ellen is stuck on this statement from the Bank of England…
“Contrary to popular belief, banks do not lend their deposits. Commercial banks create money, in the form of bank deposits, by making new loans.”
That statement is true, but it omits the fact that Monetarily Sovereign governments likewise create money and create bank deposits by spending. Ellen Brown denies the second part. And people all over the world believe her nonsense.
19:57: “Banks create the principle, but not the interest.”
Really? Then who creates the money to make interest payments? For Ellen, the federal government doesn’t create it, since the federal government borrows all its money. So if it isn’t the government, and it isn’t the banks, then who is it? She doesn’t know, and she never asks.
For Ellen, since all money (except coins and currency bills) is a loan, the aggregate debt load keeps expanding faster than the money to pay it off.
Got it? The loan debt keeps expanding faster than the loan money, which also debt. (The debt keeps rising faster than the debt. Wait…what?)
She says the debt grows exponentially, but the economy grows arithmetically. That is actually true when the government spends too little money into existence. The result is the business cycle. But for Ellen, the government doesn’t spend at all. It merely creates only coins and currency notes.
She says that eventually the debt load becomes so high that the entire system will collapse. (Ellen should work for Peter Schiff, selling his snake oil).
21:30: “When you put your money in a bank, it is no longer your money. It now belongs to the bank.”
Got that? If you want to pull your money out of your bank account, the bank (according to Ellen) says, “Get lost; it’s all ours now!” (And people all over the world actually believe this silliness.) Later in her speech she correctly calls depositors creditors. So when you deposit money in a bank, you lose your money but you don’t. (Huh? Run that by me again.)
22:25: “In 2008 the taxpayers ended up bailing out the banks.”
For Ellen, banks create all the money. Thus, banks bailed out themselves. And yet, “taxpayers bailed them out.” (She never stops to think these things through.)
24:15: “There is a theory, a sovereign money proposal, which is a good proposal, that we should prevent private banks from creating the money supply.”
For Ellen, there is no such thing as government spending, although it would be nice if there were. For her, all businesses run on credit. Therefore, when the U.S. government gives a billion dollars to Lockheed to make a weapon, that billion dollars (for Ellen) is a loan to the U.S. government from some bank somewhere.
It just gets more and more ridiculous.
Ellen correctly notes that economies have a continual growth imperative, but she incorrectly says this occurs because (according to her) all money is created by banks as loans (including the money to pay off the loans). Thus, for her, the economy must keep growing in order to keep the debt game going.
She would be correct if all money were created by banks as loans. But it isn’t.
The reason why economies have a continual growth imperative is that no economy truly “treads water.” At any point in time, an economy is expanding or contracting. If it isn’t expanding, it is contracting. The growth imperative is simply that if you don’t keep expanding, you will start contracting. This is true regardless of where the money comes from.
The sad thing is that Ellen wants banks to be publicly owned (as I do) but her case would remain just as strong if she spoke correctly. The U.S. government creates money out of thin air, but not enough of it. At least, not enough of money gets into the real economy. This forces us to take on debt for things like student loans. Privately owned banks are indeed parasitical.
At 27:50 Ellen tells a whopper. She says that because North Dakota has a publicly owned state bank (the only such bank in the USA) North Dakota has “the lowest unemployment rate in the country.”
Whoa! When oil prices were high, jobs were plentiful, and businesses prospered in North Dakota. High-school graduates earned six-figure salaries in the Bakken oil fields. Cash flowed into the hands of those lucky enough to own the mineral rights to land rich with oil. North Dakota’s sudden success coincided with an economic slump in the rest of the country. Job seekers rushed to North Dakota, fleeing hard times. For seven straight years, North Dakota boasted the lowest unemployment rate in the country. And then the bottom fell out of oil prices. Of the 192 drilling rigs active in April of 2014, just 94 were open one year later. The downturn in oil prices produced a ripple effect that spread from drilling to fracking, from the workers on the rigs to the small communities where those workers live. Entire towns that sprang up are now ghost towns. Crime rates and divorce rates took off.
Yet Ellen falsely says that North Dakota still has the lowest unemployment rate in the USA. (Ellen, get a clue.)
At 35:00 she says that banking crises are making public banks more popular. Yet, earlier in her speech she said that public banks are disappearing.
The rest of her speech is a pitch for publicly owned banks, which I agree with. If a state has a public bank, then the state can raise money by borrowing from itself, rather than selling bonds, or borrowing from Wall Street. The state bank can create money as loans. If there are economic downturns, the state bank can modify the terms of the loans to the state.
Clearly we need public banks, but politicians are owned by private bankers. The lack of public banks is one reason why we are getting poorer. Private banks are sucking the life from us.
By the way, in past times I tried to straighten Ellen out concerning where money comes from, but she wouldn’t hear of it. She has everything “all figured out.”