Mon 2010-09-20 09:49 EDT

Escaping the Sovereign Debt Trap

Ellen Brown

...Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. In Great Britain, where the Bank of England is owned by the government, 97% of the money supply is issued privately by banks as loans. In the U.S., where the central bank is owned by a private consortium of banks, the percentage is even higher. The Federal Reserve issues Federal Reserve Notes (or dollar bills) and lends them to other banks, which then lend them at interest to individuals, businesses, and local and federal governments...n the past there have been successful models in which the government itself issued the national currency, whether as paper notes or as the credit of the nation. A stellar example of this enlightened approach to money and credit was the Commonwealth Bank of Australia, which operated successfully as a government-owned bank for most of the 20th century. Rather than issuing ``sovereign debt'' -- federal bonds indebting the nation to pay at interest in perpetuity -- the government through the Commonwealth Bank issued ``sovereign credit,'' the credit of the nation advanced to the government and its constituents... The Commonwealth Bank was able to achieve so much with so little because both its first Governor, Denison Miller, and its first and most ardent proponent, King O'Malley, had been bankers themselves and knew the secret of banking: that banks create the ``money'' they lend simply by writing accounting entries into the deposit accounts of borrowers...Today there is renewed interest in reviving a publicly-owned bank in Australia on the Commonwealth Bank model. The United States and other countries would do well to consider this option too.

escape; Sovereign Debt Trap.

naked capitalism Fri 2010-09-17 19:42 EDT

Auerback: TARP Was Not a Success -- It Simply Institutionalized Fraud

Marshall Auerback

...the only way to call TARP a winner is by defining government sanctioned financial fraud as the main metric of results. The finance leaders who are guilty of wrecking much of the global economy remain in power -- while growing extraordinarily wealthy in the process. They know that their primary means of destruction was accounting ``control fraud'', a term coined by Professor Bill Black, who argued that ``Control frauds occur when those that control a seemingly legitimate entity use it as a `weapon' to defraud.'' TARP did nothing to address this abuse; indeed, it perpetuates it. Are we now using lying and fraud as the measure of success for financial reform?...Money was ``repaid'', not because the banks were accumulating massive profits as a consequence of their revival, but largely as an outgrowth of the accounting tricks sanctioned by Congress and the White House in the wake of the 2008 financial crisis...When we lie about accounting and leave zombie banks in the hands of those that looted them and caused trillions of dollars of losses we eviscerate our integrity and our efforts at economic recovery...

Auerback; naked capitalism; Simply Institutionalized Fraud; Success; TARP.

naked capitalism Fri 2010-03-19 16:42 EDT

Indefensible Men

From the December 2009 issue of The Baffler (no online version of this article available). For those not familiar with The Baffler, this is the revival of a magazine of business and culture edited by Thomas Frank that had previously been published from 1988 to 2007. This issue was called ``Margin Call'' and included articles by Matt Taibbi, Naomi Klein, Michael Lind. I believe readers will find this piece to be relevant. Enjoy! Since inequalities of privilege are greater than could possibly be defended rationally, the intelligence of privileged groups is usually applied to the task of inventing specious proofs for the theory that universal values spring from, and that general interests are served by, the special privileges which they hold. Reinhold Niebuhr, Moral Man and Immoral Society

Indefensible Men; naked capitalism.

Fri 2010-02-26 16:26 EST

Risk taking, regulatory capture and bailouts: The doomsday cycle | vox - Research-based policy analysis and commentary from leading economists

Peter Boone and Simon Johnson

Over the last three decades, the US financial system has tripled in size, as measured by total credit relative to GDP (see Figure 1). Each time the system runs into problems, the Federal Reserve quickly lowers interest rates to revive it. These crises appear to be getting worse and worse -- and their impact is increasingly global. Not only are interest rates near zero around the world, but many countries are on fiscal trajectories that require major changes to avoid eventual financial collapse. What will happen when the next shock hits? We believe we may be nearing the stage where the answer will be -- just as it was in the Great Depression -- a calamitous global collapse. The root problem is that we have let a `doomsday cycle' infiltrate our economic system...

Bailout; commentary; doomsday cycle; leading economists; regulatory capture; research-based policy analysis; risk take; Vox.

Mon 2009-05-04 00:00 EDT

Terms of Service

Flawed Credit Ratings Reap Profits as Regulators Fail, by David Evans and Caroline Salas, Bloomberg.com; ``As the U.S. has spent, lent or pledged about $12.8 trillion in efforts to revive the slumping economy...no one has taken steps that would substantially fix a broken ratings system.''

services; term.

Tue 2009-02-24 00:00 EST

CounterPunch

Obama's Awful Financial Recovery Plan, by MICHAEL HUDSON; Trying to Revive the Bubble Economy

counterpunched.