Recovering from Controlled Demolition of Our Economy: Structural Solutions are Easy, Removing the Demolition Criminals is Hard
synergist Fri, 05/28/2010 - 9:55pm
Attorney and author of the brilliant Web of Debt, Ellen Brown, is among the leading US advocates of monetary reform and state-owned banks. Among Ellen’s articles is one worth highlighting for how quickly a national economy can turn from ruin to astounding productivity: Nazi Germany’s direct creation of money to pay for public goods and services.
This fundamental shift allows central government to create debt-free money to pay for full-employment and renewed infrastructure. In addition, if the infrastructure investment causes greater overall productivity than its cost (historically true), then society has the included benefit of decreasing prices.
The monetary system we still have today doesn’t create debt-free money; it allows privately-owned banks to create loans (credit, not money) that along with its interest cost causes societal ever-increasing and unpayable debt. The US national debt is ever-increasing; no political “leader” speaks of the obvious and only solution: stop having and increasing a national debt-supply rather than a money-supply and create a money-supply to pay the debt (details here).
As Ellen explains in detail below, Germany suffered from tragic-comic hyperinflation caused by a privately-owned central bank and short-selling of the nation’s currency, and high unemployment; three central features of our “modern” economic system today. As soon as Germany created a form of money in exchange for productive goods and services, the government could respond to the market failure of unemployment while addressing the nation’s public service needs.
Of course, the point of this article is not a history lesson, but an application of history to the US economy of the present. Full-employment is possible and available now as a policy response (details here).
The idea of government-created money has been advocated by many of America’s brightest historical minds; the absence of its consideration in “leadership” conversation, I assert, is evidence that the US is under an Orwellian government that has chosen the economic policies of an oligarchy rather than the public good. That’s a cognitive dissonance evoking conclusion, I understand, but the evidence to prove it is here if this topic of trillions of our dollars is of sufficient interest for you.
Ellen Brown and I agree that a powerful entry-point to break open the oligarchy is through state-owned banks. This allows opportunity for state government (or county, city, university, etc.) to use existing bank law to create credit at cost. The only solvent state in the US today, North Dakota, uses this strategy. I recommend perusing Ellen’s articles to understand further. Ellen is interviewed in and consulted for the creation of the outstanding economics film, Zeitgeist Addendum, below.
Here’s her article of how quickly a nation’s economy can become powerfully productive. Of course, economic power is amoral and must be focused with policy for productive ends.
THINKING OUTSIDE THE BOX:
HOW A BANKRUPT GERMANY SOLVED ITS
INFRASTRUCTURE PROBLEMS
"We were not foolish enough to try to make a currency [backed by] gold of which we had none, but for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced. . . .we laugh at the time our national financiers held the view that the value of a currency is regulated by the gold and securities lying in the vaults of a state bank."
- Adolf Hitler, quoted in "Hitler's Monetary System," www.rense.com, citing C. C. Veith, Citadels of Chaos (Meador, 1949)
Guernsey wasn't the only government to solve its infrastructure problems by issuing its own money. (See E. Brown, "Waking Up on a Minnesota Bridge," August 4, 2007.) A more notorious model is found in post-World War I Germany. When Hitler came to power, the country was completely, hopelessly broke. The Treaty of Versailles had imposed crushing reparations payments on the German people, who were expected to reimburse the costs of the war for all participants — costs totaling three times the value of all the property in the country. Speculation in the German mark had caused it to plummet, precipitating one of the worst runaway inflations in modern times. At its peak, a wheelbarrow full of 100 billion-mark banknotes could not buy a loaf of bread. The national treasury was empty, and huge numbers of homes and farms had been lost to the banks and speculators. People were living in hovels and starving. Nothing quite like it had ever happened before - the total destruction of the national currency, wiping out people's savings, their businesses, and the economy generally. Making matters worse, at the end of the decade global depression hit. Germany had no choice but to succumb to debt slavery to international lenders.
Or so it seemed. Hitler and the National Socialists, who came to power in 1933, thwarted the international banking cartel by issuing their own money. In this they took their cue from Abraham Lincoln, who funded the American Civil War with government-issued paper money called "Greenbacks." Hitler began his national credit program by devising a plan of public works. Projects earmarked for funding included flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. This government-issued money wasn't backed by gold, but it was backed by something of real value. It was essentially a receipt for labor and materials delivered to the government. Hitler said, "for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced." The workers then spent the Certificates on other goods and services, creating more jobs for more people.
Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries, circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Germany's economic experiment, like Lincoln's, was short-lived; but it left some lasting monuments to its success, including the famous Autobahn, the world's first extensive superhighway.1
Hjalmar Schacht, who was then head of the German central bank, is quoted in a bit of wit that sums up the German version of the "Greenback" miracle. An American banker had commented, "Dr. Schacht, you should come to America. We've lots of money and that's real banking." Schacht replied, "You should come to Berlin. We don't have money. That's real banking."2
Although Hitler has rightfully gone down in infamy in the history books, he was quite popular with the German people, at least for a time. Stephen Zarlenga suggests in The Lost Science of Money that this was because he temporarily rescued Germany from English economic theory — the theory that money must be borrowed against the gold reserves of a private banking cartel rather than issued outright by the government.3 According to Canadian researcher Dr. Henry Makow, this may have been a chief reason Hitler had to be stopped: he had sidestepped the international bankers and created his own money. Makow quotes from the 1938 interrogation of C. G. Rakovsky, one of the founders of Soviet Bolsevism and a Trotsky intimate, who was tried in show trials in the USSR under Stalin. According to Rakovsky, Hitler had actually been funded by the international bankers, through their agent Hjalmar Schacht, in order to control Stalin, who had usurped power from their agent Trotsky. But Hitler had become an even bigger threat than Stalin when he had taken the bold step of printing his own money. Rakovsky said:
“[Hitler] took over for himself the privilege of manufacturing money and not only physical moneys, but also financial ones; he took over the untouched machinery of falsification and put it to work for the benefit of the state . . . . Are you capable of imagining what would have come . . . if it had infected a number of other states . . . . If you can, then imagine its counterrevolutionary functions.”4
Economist Henry C K Liu writes of Germany's remarkable transformation:
“The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.”5
In Billions for the Bankers, Debts for the People (1984), Sheldon Emry commented:
“Germany issued debt-free and interest-free money from 1935 and on, accounting for its startling rise from the depression to a world power in 5 years. Germany financed its entire government and war operation from 1935 to 1945 without gold and without debt, and it took the whole Capitalist and Communist world to destroy the German power over Europe and bring Europe back under the heel of the Bankers. Such history of money does not even appear in the textbooks of public (government) schools today.”
Another Look at the Weimar Hyperinflation
What does appear in modern textbooks is the disastrous runaway inflation suffered in 1923 by the Weimar Republic (the common name for the republic that governed Germany from 1919 to 1933). The radical devaluation of the German mark is cited as the textbook example of what can go wrong when governments are given the unfettered power to print money. That is what it is cited for; but in the complex world of economics, things are not always as they seem. The Weimar financial crisis began with the impossible reparations payments imposed at the Treaty of Versailles. Schacht, who was currency commissioner for the Republic, complained:
“The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . . [T]he Reich could not find any way of holding its head above the water other than by the inflationary expedient of printing bank notes.”
That is what he said at first. But Zarlenga writes that Schacht proceeded in his 1967 book The Magic of Money "to let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted wisdom' the financial community has promulgated on the German hyperinflation."6 Schacht revealed that it was the privately-owned Reichsbank, not the German government, that was pumping new currency into the economy. Like the U.S. Federal Reserve, the Reichsbank was overseen by appointed government officials but was operated for private gain. What drove the wartime inflation into hyperinflation was speculation by foreign investors, who would sell the mark short, betting on its decreasing value. In the manipulative device known as the short sale, speculators borrow something they don't own, sell it, then "cover" by buying it back at the lower price. Speculation in the German mark was made possible because the Reichsbank made massive amounts of currency available for borrowing, marks that were created with accounting entries on the bank's books and lent at a profitable interest. When the Reichsbank could not keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.7
According to Schacht, then, not only did the government not cause the Weimar hyperinflation, but it was the government that got it under control. The Reichsbank was put under strict government regulation, and prompt corrective measures were taken to eliminate foreign speculation, by eliminating easy access to loans of bank-created money. Hitler then got the country back on its feet with his Treasury Certificates issued Greenback-style by the government.
Schacht actually disapproved of this government fiat money, and wound up getting fired as head of the Reichsbank when he refused to issue it (something that may have saved him at the Nuremberg trials). But he acknowledged in his later memoirs that allowing the government to issue the money it needed had not produced the price inflation predicted by classical economic theory. He surmised that this was because factories were sitting idle and people were unemployed. In this he agreed with John Maynard Keynes: when the resources were available to increase productivity, adding new money to the economy did not increase prices; it increased goods and services. Supply and demand increased together, leaving prices unaffected.
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1
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Matt Koehl, "The Good Society?", www.rense.com (January 13, 2005); Stephen Zarlenga, The Lost Science of Money (Valatie, New York: American Monetary Institute, 2002), pages 590-600.
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2
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John Weitz, Hitler's Banker (Great Britain: Warner Books, 1999).
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3
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S. Zarlenga, op. cit.
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4
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Henry Makow, "Hitler Did Not Want War," www.savethemales.com (March 21, 2004).
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5
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Henry C. K. Liu, "Nazism and the German Economic Miracle," Asia Times (May 24, 2005).
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6
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Stephen Zarlenga, "Germany's 1923 Hyperinflation: A 'Private' Affair," Barnes Review (July-August 1999); David Kidd, "How Money Is Created in Australia," http://dkd.net/davekidd/politics/money.html (2001).
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7
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S. Zarlenga, "Germany's 1923 Hyperinflation," op. cit.
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Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.
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Ellen's work is vital to the survival of the US Economy-meaning the real economy, you and me and all the millions of working people in this land. Please take this a step further and visit her blog site
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Sign the petition and call your state representatives and governors. 7 states are working on various forms of state banking right now. North Dakota has been doing the state bank since the last depression. We can beat the greed machine. Historically, it's been done before.
Thanks synergist!
Stimulus
Very good analysis of our problem, but wasn't a large part, if not most, of the mid-30s German economic miracle brought on by rearmament that, it was anticipated, would be paid off by an expected war of conquest? And isn't over-rearmament a major factor in our predicament?
Exactly!
Hitler was banking on winning his war of conquest. He was still, for all intents and purposes, following the same Keynesian quackery that has brought the U.S. (and Europe) to the brink of disaster, as Lew Rockwell explains here: http://www.lewrockwell.com/rockwell/hitlers-economics.html
While Hitler's politics--or at least his rhetoric--were slightly to the right of Lenin & Stalin, the underlying ideology of National Socialism is still based on the same Leftist paradigm that has undergirded all of the totalitarian ideologies going back 160+ years. The differences are more tactical than anything else. Jon Ray explains a lot of this here: http://ray-dox.blogspot.com/2006/08/this-article-is-published-on-interne...
The Neocons that have taken over the country, posing as Conservatives (What the hell are these crackpots trying to "conserve"?) are no less descended from the same ideological core. They were known as "liberals" in the 1960s, and "Straussians" before that, but they are basically the next generation Trotskyites. To the extent that they were "opposed to Communism" it was more of a partisan opposition, not based on genuine ideological differences.
The Neocons, who brought us 9/11, are extremely dangerous, no less than their Nazi or Communist cousins. As the PNAC documents openly demonstrated, they are determined to rule the whole planet, and they absolutely must be stopped.
Centralized fiat banking, of course, enables all of this trash. It must be stopped as well. Money must be returned to a value-backed system that is based on a free market.
back to the money
The US has a lying fascist government with wars of empire. Hitler's 2nd book detailed his goal of a German-governed Europe. But back to the money:
A goal of monetary policy is controlled value of money. With transparency, this can be done with money supply and not have the dangerous variable of linkage to a commodity that can then fluctuate the value of the money and limit its creation. This Catch-22 is that we can't now trust government at all to be truthful or transparent, but a monetary system will depend on it. Government can, and I argue should, create money from nothing to be the employer of last resort in the present and immediate future. Infrastructure needs a lot of work. It's also the most cost-effective option because infrastructure investment more than pays for itself. In addition, all cost-benefit studies (over 50) show taking people off the streets and GIVING them shelter, food, medical care and job training costs less than leaving them on the streets. Having them provide productivity increases the public benefit: http://www.examiner.com/x-18425-LA-County-Nonpartisan-Examiner~y2009m9d3...
isms
Keynes published his would-be life-saver for capitalism well after Hitler made his moves. So-called "military Keynesianism" was the product of opportunistic industrialists there and here. As for "communism," remember that Stalin's first order of business after consolidating power was to kill the leading Marxists. He learned his authoritarianism in seminary and used "communism" like Hitler used "socialism" and capitalists use "democracy."
Terminology . . .
Keynes's General Theory wasn't published until three years after Hitler's takeover, but his prior works (such as End of Laissez-Faire) had been praised by Mussolini a decade earlier. Nor were Keynes's ideas new or unique. Nazi Prof. Carl Fohl had already expounded the "gist" of Keynes's theory in Germany before the GT was published.
Does it really matter what terms we use to describe this nonsense? I'm less concerned about what "ism" we employ for convenience than the overall effect the advance of this quackery is exerting on us today.
agreed
in full.
war and prosperity
last word:
http://rawstory.com/rs/2010/0529/argentinas-president-bush-claimed-the-r...