Bill Totten's Weblog

Tuesday, August 31, 2010

America Facing Depression and Bankruptcy

by Stephen Lendman (August 27 2010)

Long-time economic, political and market analyst Bob Chapman publishes the International Forecaster, offering incisive analysis absent through mainstream sources, especially important now given America's deepening economic crisis getting harder to conceal as evidence mounts.

His August 25 issue says the following:

Twenty countries (including America) are headed into bankruptcy and more will follow. That brings up the subject of state debt in the US. America has been in an inflationary depression for eighteen months. States have been cutting back for two years, but still face huge budget gaps required to be closed ... 2011 will be a terrible year (with) eighty percent of states expect(ing) deficits of more than $200 billion. 2012 looks even worse. Most worrisome, there is no recovery and there never has been ... the US economy and financial system is comatose. The worst is yet to come and will hit hard on arrival.

On August 24, economist David Rosenberg said, "Now (I'll) tell you why this is a depression, and not just some garden-variety recession", what he's been repeating for months unlike few others, corporate analysts claiming the fall 2007 downturn "ended sometime last year". Not so, it's deepened, growing evidence providing more clarity.

Offering a historical perspective, Rosenberg said the Great Depression wasn't marked by declining GDP each quarter. The 1929 to 1933 recession lasted four years, followed by recovery and another "deep downturn" in 1937 and 1938.

During the first one, "there were no fewer than six - six! - quarterly bounces in GDP data", averaging eight percent at an annual rate, accompanied by sharp market increases, then declines confirming false positives. So "guess what? We may be reliving history (now). If you're keeping score, we have recorded four quarterly advances in real GDP", averaging only three percent. The late 1930s reversal showed "how fragile the post-bubble recovery really was", a faux one again repeated in a weaker economy now than then, one headed for serious trouble ahead, harming millions more Americans as a result.

The Fed cut interest rates to near zero with no effect, at best buying time, resolving nothing. "Then the Fed tripled the size of its balance sheet - again with little sustained impetus to a broken financial system".

Weeks back, then confirmed with new data, Rosenberg stressed weakness, numerous indicators turning down, including production, retail sales, consumer confidence, and housing, a bellwether industry impacting the entire economy. New reports show it's collapsing, some readings to record lows, others disturbingly weak throughout the country.

July existing home sales dropped 26%, the largest monthly decline since records began in 1968, bringing annualized sales back to 1995 levels, and signaling worse trouble ahead. Other housing data confirm the malaise, including new home sales, housing starts and permits.

As worrisome were increasing layoffs and first-time unemployment claims hitting 500,000, flashing red for trouble nearly three years after the initial downturn, combined with a near-22% unemployment rate, not the bogus ten percent headline number, the 1980 calculation reengineered to conceal weakness like all other fake economic data, putting lipstick on an economy, increasingly looking and smelling more like a pig, a sick one.

According to Rosenberg, You know you are in a depression when:

Congress (extends) jobless benefits seven times (in the past two years) when almost half (of those) unemployed have been looking for at least a half year;

the adult male unemployment rate (25 - 54 years) hit a post-World War Two (high and still tops) the 1982 peak, the worst then since the Great Depression;

youth unemployment is stuck near 25%, and for inner-city black youths it's eighty percent or higher; these developments will have profound long-term consequences - social, economic and political;

the depression's fiscal costs keep mounting, the federal deficit soaring with no end to it in sight;

for over a year into a supposed recovery, the Fed still contemplates new ways to stimulate growth, its tool, of course, printing money (funny money, or as one analyst calls it, "toilet paper") and quantitative easing, compounding the deficit, or the equivalent of throwing fuel on a fire instead of monetary and fiscal sanity plus sound economy policies to extinguish it;

after two years of record trillion dollar plus deficits to kick-start the economy, interest rates are shockingly low, flashing weakness, not strength; to wit, on August 24, the five-year note was 1.36%, seven-year at $1.95%, ten-year at 2.50%, and thirty-year at 3.57%; as well as thirty-year fixed mortgage rates at record lows below 4.5% (4.42% on August 24), despite no fewer than eight (government) programs to put a floor under the housing market; we're in big trouble when (Washington) can expend so many resources (on) one sector in vain;

the FDIC keeps shuttering more banks; again, the carnage keeps spreading, yet most economists cling tenaciously an economic recovery theme, at most hit by a soft patch; Rosenberg's response - "Some recovery (when) the private credit market is basically defunct ... what replaced it was rampant government intervention (buying time) by trying to (put) a floor under the economy"; once it stops, and it will, they'll be no hiding the dire truth, and no end of pain for growing millions.

The Worst Is Yet to Come

Financial expert and investor safety advocate Martin Weiss began warning about a major economic decline long before it began and keeps at it, citing evidence most analysts downplay or ignore, including:

America's worst ever housing depression showing no signs of abating; since January 2006, housing starts alone have plunged from 2.3 million annually to a recent 477,000 low that may not yet reflect a bottom because demand is so weak for this bellwether industry;

record long-term unemployment, its worst since first officially tabulated over sixty years ago; and

the most chronic credit squeeze ever recorded ... suffer(ing) its deepest plunge since World War Two.

As a result, he sees deepening economic trouble ahead, no matter what steps the administration, Congress or the Fed undertake. He expects little more stimulus, just another futile central bank attempt to print money (lots of it) to buy time. "These paper dollars will not create real prosperity", just an illusory, "temporary, false prosperity", but none at all for most people, hung out to dry on their own.

He also expects a sovereign debt crisis to hammer Europe and the US, saying America's plight exceeds the dire situation of PIIGS countries (Portugal, Italy, Ireland, Greece and Spain), citing the Bank of International Settlements (the central bank of central bankers) saying US debt will hit 400% of GDP, more than triple Greece's burden at 129% that plunged the country into (undeclared) bankruptcy. Indeed the worst for America is yet to come.

America Is Already Bankrupt

Boston University Economics Professor Laurence Kotlikoff explains it in his August 10 article, titled "US Is Bankrupt and We Don't Even Know It", saying:

Let's get real. The US is bankrupt. Neither spending more nor taxing less will help the country pay its bills.

What's needed, he says, is reengineering the economy by "radically simplify(ing) its tax, healthcare, retirement and financial systemsn..." Revitalization depends on it with unfunded liabilities topping $110 trillion and growing. Even the IMF is worried, saying "closing (America's) fiscal gap requires a permanent annual fiscal adjustment equal to about fourteen percent of US GDP", meaning, of course, from working households, not corporate interests or national security, the most glaring areas needing reform.

The fiscal gap represents "the difference between projected spending (including debt service) and projected revenue in all future years. (It's) the government's credit-card bill and each year's fourteen percent GDP is the interest on that bill."

When it's not paid, it increases the balance owed. And each trillion the Fed prints bailing out bankers compounds it. Make them pay, not the public they robbed, starting with shutting them down, breaking them up, seizing their assets, and nationalizing them for the collective good.

Kotlikoff is scary saying "Uncle Sam's Ponzi scheme will stop, (perhaps) in a very nasty manner", citing three possibilities:

(1) massive benefit cuts on retirees;

(2) huge tax increases hitting working Americans hardest, and/or

(3) printing vast amounts of money ad infinitum until debt overload crashes the economy eventually.

Calling America "Worse than Greece", he believes "Most likely we will see a combination of all three responses with dramatic increases in poverty, tax(es), interest rates and consumer prices", the path we're on heading us for the worst of all possible worlds.

Based on the latest Congressional Budget Office (CBO) data, he calculates a $202 trillion fiscal gap - "more than fifteen times the official debt" because Congress "label(s) most of its liabilities 'unofficial' to keep them off the books, (out of sight) and far in the future" to concern other officials, not them. Labeling, of course, isn't fixing. It's just concealing unpleasant realities, letting others, not them, face the music in out years.

Current federal revenue totals $14.9% of GDP, the IMF saying that closing it requires "an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act".

Such policy would produce a five percent surplus this year, the IMF prescribing ad infinitum fiscal austerity, saying delay will make it tougher ahead. "Is the IMF bonkers?" Not at all, just preferential, wanting workers, not special interests hit hardest, the way it's raped and mauled economies for years, serving capital, not people, now aiming at America, the biggest plum of all ripe for plucking with millions of vulnerable households, easy pickings for the powerful, harming, not relieving their needs by:

cutting wages and benefits;

destroying, not creating jobs; privatizing everything for private gain; and

turning America into Guatemala, a corporatist's dream.

Indeed let's get real. Bad policy begets bad results, and bad solutions makes it worse. For sure, America is "broke and can no longer afford no-pain, all-gain 'solutions' "

It needs responsible ones, too many to list, but here's a few:

* end imperial wars and a bloated defense budget;

* reinvent government to make it responsive to public needs and democratic values;

* make offenders pay most, starting with Wall Street, defense contractors, Big Oil, Big Pharma, Agribusiness, and other corporate predators profiting at public expense for decades;

* make now the time for payback, assuring their victims fair and equitable reimbursements;

* reinvigorate industrial America;

* end Wall Street's financial chokehold;

* return money creation power to Congress as the Constitution mandates;

* encourage publicly-owned state banks like North Dakota's, making it prosperous when most states are debt-strapped and faltering;

* create full-time, good-paying jobs with benefits; don't destroy them;

* bring back those offshored;

* protect homeowners from foreclosure;

* re-institute progressive taxes, including a Tobin tax (perhaps one percent) on all speculative financial transactions, a millionaire's/Wall Street bank levy generating a huge windfall, enough to smack if not close the budget gap, making those most able pay; for example, the Bank for International Settlements estimated annual 2008 global over-the-counter derivatives trading at $743 trillion; a one percent tax would yield $7.43 trillion, and if taxes curbed speculation, the take would still be enormous;

* dismantle corporate predators;

* think small and local, not big and global;

* reinstitute financial, environmental, and other consumer-friendly regulations;

* get money out of politics;

* end the two-party monopoly;

* institutionalize a free, open, fair media and Internet;

* assure equitable social benefits for all, including universal, single-payer health care, government-supported public and higher education, and more; and

* reinvigorate an eroding democracy before it's too late to matter.

Responsible policies, all of the above and more, will reinvigorate America. The unsustainable fiscal crisis is reason enough to do it.


Stephen Lendman lives in Chicago and can be reached at Also visit his blog site at and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10 am US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening:

Bill Totten

Creating New Money

Some Frequently Asked Questions

by James Robertson

Prosperity (January 2003)

In the introduction to Creating New Money (2000), co-authored by Joseph Huber and James Robertson, which we reviewed here the (then) Executive Director of the New Economics Foundation Ed Mayo, wrote, "We look forward to monetary reform moving to the centre stage of public and policy debate in the way that eco-taxes, stakeholding and debt cancellation have done".

Here James Robertson presents a short summary of answers to frequently asked questions on the reform proposed in his book.

1. What exactly is debt free money?

Debt-free money is exactly what it says. It is not an interest-free debt. It does not have to be paid back. It is money created and issued as a gift.

2. How is debt-free money to be issued?

The amount of debt-free money to be created and put into circulation at intervals, in order to increase the money supply, should be decided by an agency of the state and given to the government to be spent into circulation. In the present situation, this agency will be the central bank, in a further stage in its continuing historical evolution as a central monetary authority. As it already does in the UK, it will make its decisions on a professional basis, independently of elected politicians but in accordance with objectives published by them.

3. If the new money is deposited in banks, what's to stop them issuing more credit on the back of it?

It will be made illegal for anyone other than the central bank to create new non-cash money (traditionally known as "credit"), just as it already is illegal to counterfeit and forge new notes and coins. Banks and all others who lend money will have to lend money that exists already. It will either be theirs already or they will have borrowed it from elsewhere. In Creating New Money we spell out what this will mean.

4. How will the new money be repayable?

Non-cash money issued in the new way will not have to be repaid. It will remain in circulation. On any occasion when it becomes necessary to reduce the money supply, the central bank will require the government to pay the required sum to it out of tax revenues and will then destroy it, by returning it whence it originally came - that is, by wiping it off the books and turning it back into thin air.

5. Will it cut the cost of government investment?

It could do, yes. The government could use this money for investment. But alternatively it could use it to cut taxes, or to cut the existing level of government debt, or to increase spending on public services like education, health, et cetera. So there probably won't be enough of this money to cover all the government's investment needs, and some government borrowing will still be necessary. But the commercial banks will no longer be allowed to create money out of thin air in order to lend it to the government at interest.

6. Why isn't it inflationary?

Controlling the growth of the money supply by having a professional agency of the state deciding directly how much it should be increased, rather than indirectly, as at present, by regulating the price at which borrowers borrow from banks and banks lend to borrowers, will give better control of inflation - and bring other important economic and social benefits as well.

Please print out, photocopy and distribute these articles. Also copy and paste them to emails, and circulate widely, and please include all the essential contact information below. Thank you.

Essential Further Reading:

PROSPERITY: Freedom from Debt Slavery is a four-page quarterly Journal which campaigns for publicly-created debt-free money. PROSPERITY is edited and published by Alistair McConnachie and a four-issue subscription is available for GBP 10 payable to PROSPERITY at 268 Bath Street, Glasgow, Scotland, UK, G2 4JR. Tel: 0141 332 2214; Fax: 0141 353 6900, Email: All back-issues are still available:

The forty-page Report, Clarifying our Money Reform Proposals, launched at the 2006 Bromsgrove Conference, is available for GBP 10 payable to PROSPERITY and is essential reading for beginners.

The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics by Michael Rowbotham (Jon Carpenter Publishing, 1998). Available from PROSPERITY.

Goodbye America! Globalisation, Debt and the Dollar Empire by Michael Rowbotham (Jon Carpenter Publishing, 2000). Available from PROSPERITY.

Creating New Money: A Monetary Reform for the Information Age by Joseph Huber and James Robertson (New Economics Foundation, 2000). Available from PROSPERITY.

Bill Totten

Monday, August 30, 2010

Creating New Money (2000) by James Robertson

A Book Review

by Alistair McConnachie

Prosperity (August 2000)

Many people today think that the State creates all the money in circulation. It doesn't. Almost all money in circulation, around 97%, is created by the banking sector "out of nothing" and circulates as electronic and cheque book money - see Prosperity, April 2000 for the process by which money comes into circulation:

The three per cent created by the State is the notes and coins, and the only cost to the taxpayer is the relatively insignificant cost of minting. However, taxpayers benefit directly because an amount equivalent to the face value of those notes and coins is spent by the State, into the economy, as a direct, debt-free input.

It would not be practical to return to a state of affairs where everyone dealt in cash. But if the State can issue money debt-free in the form of cash then it can extend that principle and issue electronic money in the same way also.

This would mean that when the State found itself short of money raised from taxes then - instead of printing Treasury Bonds, selling them to the banking and non-banking sector in order to raise money, and then having to pay them back when they become due, and with interest attached, and with money that has been raised from taxpayers and the sale of even more Bonds - it could simply create the money required "out of nothing", in the way that banks create money today, and spend it into society as public revenue.

Instead of the benefits of our money system accruing to banking interests, it would accrue to the whole of society. That is a just and democratic goal worth aiming for.

A new and valuable book from the New Economics Foundation entitled Creating New Money: A Monetary Reform for the Information Age, by Joseph Huber and James Robertson, makes the case that the value created by issuing new money should be a common, not a private, resource. New money should be put into circulation as public spending, not as profit making loans by commercial banks, and that the result would be equivalent to twelve per cent off income tax.

The authors term this seigniorage reform and it is twofold:

1. A Central Bank should create the amount of new non-cash money (as well as cash) it decides is needed to increase the money supply. It should credit it to the government as public revenue. Government should then put it into circulation as public spending. In deciding how much new money to create, a central bank should operate with a high degree of independence from the government.

2. It should be illegal for anyone else to create new money denominated in the official currency. Commercial banks will then be excluded from money creation. They will be limited to credit-broking as other financial intermediaries are - borrowing, but no longer creating, the money they need to lend.

This reform will restore seigniorage, that is, the prerogative of the State to issue money, and to capture the value that arises from issuing it, and use it as public revenue.

This reform will mean that the whole stock of national currency circulating in the economy will have been issued by the central bank, including all money in everyone's current accounts, together with everyone's cash.

They argue that this reform will not only bring benefits in terms of increased public revenue, but will also bring lower interest rates and lower inflation.

It will create greater economic stability, by enabling the central bank to smooth out the peaks and troughs of business cycles more effectively than it does today.

It will have administrative benefits also, as it will be easy to calculate how much money there is. Instead of monetary statistics such as M0, M1, M2, M3, M3 extended, and M4, there will simply be one amount of plain money M.

It will make the system more understandable and transparent and will make it easier for more people to participate in economic policy debate.

The book is a very thorough presentation of the authors' case including chapters on implications for public finance, banking, and, especially useful, replies to suggested objections. At only 92 pages, it is also easily and quickly read.

The authors state that support for money reform will be needed from the following helpful list:

- politicians and public officials, not necessarily connected with banking and financial affairs;

- the banking industry itself, the central banks, and other national and international monetary and banking institutions;

- the community of respected monetary academics, monetary historians and other specialist monetary and banking experts;

- the wider community of individuals, NGOs [Non-Governmental Organisations] and pressure groups, who are committed to the support of proposals for greater economic efficiency which involve a fairer sharing of resources, but who may as yet be unfamiliar with - the relevance of monetary reform; and

- the community of already committed supporters of monetary reform.

Ed Mayo, the Executive Director of the New Economics Foundation writes in his introduction, "We look forward to monetary reform moving to the centre stage of public and policy debate in the way that eco-taxes, stakeholding and debt cancellation have done".

This book is an immensely important and significant step towards that goal.

See also James Robertson's articles:

Creating New Money: Some Frequently Asked Questions

A Summary of Seigniorage Reform

Creating New Money is available for GBP 7.95 from The New Economics Foundation, 3 Jonathan Street, London, SE11 5NH. Tel: 0207 820 6300.

James Robertson's presentation at "The Alternative Mansion House Speech 2000", on 15 June 2000, entitled Financial and Monetary Policies for an Enabling State, is on the web at

Bill Totten

A Summary of Seigniorage Reform

by James Robertson

Prosperity (April 2003)

The following is from the Speaking Notes of James Robertson, co-author of Creating New Money (2000), for his address at the Earth Emergency meeting, London School of Economics, May 07 2003, entitled Monetary Reform, Economic Justice and Political Democracy.

Creating New Money
is reviewed here: It is available from the New Economics Foundation, 3 Jonathan Street, London, SE11 5NH, Tel: 020 7820 6300.

People all over the world have become increasingly aware that money is power, and that our institutions of money and finance use their power to exploit people and keep them dependent.

This threatens the 200-year progress of political democracy across the world. The credibility of political democracy is being eroded by the power of money.

Money should provide a fair scoring system for our economic activities. But the scoring system it provides today is systematically perverse and corrupt.

* It rewards undesirable activities

* It penalises desirable ones

* It biases economic activity against the poor in favour of the rich

* It frustrates desirable change

* It compels people to work for purposes not of their own choosing, for people and organisations and nations richer and more powerful than themselves

NGOs and other campaigners for change are beginning to see monetary and financial reform as essential for

* genuine democracy,

* poverty reduction,

* healthier societies,

* renewable energy,

* sustainable development in agriculture and transport,

* more local production to meet local needs,

* and so on - you name it.

So the "Earth Emergency Call To Action" at the Johannesburg World Summit on Sustainable Development last year included a demand for reform of worldwide monetary and financial systems.

That is, in fact, a historic challenge now facing the world at every level - local, national, international and global.

Monetary reform is about currencies. Taxation, public spending, and other aspects of finance are related and very important, but separate.

My subject this evening is reform of the 'mainstream' monetary system, which includes official currencies like the dollar, pound, euro, et cetera.

And the need for an official currency that is genuinely global, to provide the world's peoples with money that will support fair dealing between them.

I also strongly support the development of local and other complementary currencies, like LETS, co-existing with official currencies.

Key Questions

There are some key questions to keep in mind when we think about monetary reform.

1. Who should create the money supply?

2. Should money be created as debt, by lending it into existence as interest-bearing loans?

3. Is there a difference between money and credit?

UK National Monetary Reform

Less than five per cent of today's national money supply has been created debt-free by public service agencies - in the form of banknotes by the Bank of England and coins by the Royal Mint - and over 95% has been created by commercial banks.

The commercial banks create the non-cash money out of thin air, calling it credit and writing it into their customers' current accounts as profit-making loans.

That gives them over twenty billion GBP a year in interest, while the taxpayer gets less than three billion GBP a year from the issue of banknotes and coins.

However, if

* the commercial banks were prohibited from creating non-cash money,

* and if the Bank of England took on responsibility for creating it,

* and if the Bank of England were to give the money debt-free to the government to spend into circulation, the result would be extra public revenue of about 45 billion GBP a year.

That is the reform proposed in Creating New Money: A Monetary Reform for the Information Age (New Economics Foundation, London, 2000 - download from ).

Among other things this reform would mean that:

1. Taxation and government debt could be reduced, or public spending could be increased, by up to 45 billion GBP a year.

2. The value of a common resource - the national money supply - would become a source of public revenue rather than private profit. That would remove an economic injustice.

3. Withdrawing the present hidden subsidy to the banks would result in a freer market for money and finance, a more competitive banking industry, and better service to bank customers.

4. A debt-free money supply would help to reduce present levels of public and private debt, which are partly caused by the fact that virtually all the money we use has been created as debt that has to be repaid with interest.

5. The economy would become more stable. Banks want to lend more and bank customers want to borrow more at the peaks of the business cycle and less in the troughs. So now, when the amount of money put into circulation depends on how much the banks are lending, booms and busts are automatically amplified.

6. The central bank would be better able to control the money supply and inflation if it itself decided and directly created the quantity of new money entering the economy. It now tries to control inflation indirectly, by raising the interest rates at which people can borrow from banks. But raising costs in that way actually helps to cause inflation - as well as directly damaging people and businesses.

Seigniorage Reform

We called this reform "seigniorage reform".

Seigniorage was the profit made by monarchs and local rulers from minting and issuing coins.

The proposed reform will restore to today's democratic state the prerogative of collecting as public revenue the profit arising from putting the national money supply into circulation.

Some opponents of this reform, including MPs who should know better, have claimed that the money the banks create isn't really money, it's only credit - although official monetary statistics and monetary policy-makers recognise it as constituting over 95% of the money supply.

In fact, the reform will exactly parallel the nineteenth-century reform which led to paper banknotes being recognised as money, along with gold coins and bullion.

Banknotes, along with coins, are now "cash". British banknotes still say "I promise to pay ...", but that is a meaningless survival from past history. Everyone knows that banknotes are not just credit notes. They are cash, and there is nothing they could be redeemed in except themselves or other banknotes and coins of the same value.

So the answer to the question about the difference between money and credit is that, when what was originally credit has become widely used as a means of payment, it has become money and is money.

That happened to paper banknotes in the nineteenth century. It has happened to electronic credits in bank accounts now. The continuing creation of this kind of money by private sector profit-making companies is now an anachronism - a throwback to an earlier time.

Seigniorage and the Global Economy

Just as, under the proposed national reform, the benefit from creating national-currency money would go to the national community as a whole, so a comparable global reform would benefit the world community as a whole.

The present use of the US dollar and other national currencies like the yen, the euro and the pound as so-called 'reserve currencies', would be replaced by a world currency issued by a world monetary authority.

The profit from issuing it would be public revenue to be spent on behalf of the world community by the UN or a similar body.

Criticism of the 'dollar hegemony' of the United States is growing. For example, three reports:

1. "To build up reserves, poor countries have to borrow hard currency from the US at interest rates as high as eighteen per cent and lend it back to the US in the form of Treasury Bonds at three per cent interest". (R Greenhill and A Pettifor, "The United States as a HIPC [heavily indebted prosperous country] - how the poor are financing the rich", NEF, 2002)

2. "The dollar is a global monetary instrument that the United States, and only the United States, can produce by fiat [that is, out of thin air] ... World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies compete in exports to capture dollars needed to service dollar-denominated foreign debts and accumulate dollar reserves." (Henry C K Liu, "US Dollar Hegemony Has Got To Go", Asia Times Online Co Ltd, 2002)

3. Studies by Richard Douthwaite and the Irish NGO Feasta confirm that the total annual subsidy (or 'tribute') received by the US from the rest of the world from dollar seigniorage is at least $400 billion a year. This has been justified by one Pentagon analyst as a payment by the rest of the world to the US as the 'policeman' who keeps world order! (The Foundation for the Economics of Sustainability, 9 Lower Rathmines Road, Dublin 6, Republic of Ireland;

Studies like these demonstrate the need for international monetary reform to serve the interests of the world community as a whole.

As international campaigning grows stronger for reform on these lines, it will help to strengthen the pressure for comparable reform at national level.


1. Study this fascinating topic for yourselves. It is on the move.

2. Help to persuade groups like WDM, FOE, Christian Aid and many others to get into it seriously.

3. Write to your MPs about it. For example, ask them to support EDM 854. It "calls upon the Government and the Treasury Select Committee to commission and publish independent reviews on the procedures for and benefits of increasing the proportion of publicly created money in the economy".

Please print out, photocopy and distribute these articles. Also copy and paste them to emails, and circulate widely, and please include all the essential contact information below. Thank you.

Essential Further Reading:

PROSPERITY: Freedom from Debt Slavery is a four-page quarterly Journal which campaigns for publicly-created debt-free money. PROSPERITY is edited and published by Alistair McConnachie and a four-issue subscription is available for GBP 10 payable to PROSPERITY at 268 Bath Street, Glasgow, Scotland, UK, G2 4JR. Tel: 0141 332 2214; Fax: 0141 353 6900, Email: All back-issues are still available:

The forty-page Report, Clarifying our Money Reform Proposals, launched at the 2006 Bromsgrove Conference, is available for GBP 10 payable to PROSPERITY and is essential reading for beginners.

The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics by Michael Rowbotham (Jon Carpenter Publishing, 1998). Available from PROSPERITY.

Goodbye America! Globalisation, Debt and the Dollar Empire by Michael Rowbotham, (Jon Carpenter Publishing, 2000). Available from PROSPERITY.

Creating New Money: A Monetary Reform for the Information Age
by Joseph Huber and James Robertson (New Economics Foundation, 2000). Available from PROSPERITY.

Bill Totten

Sunday, August 29, 2010

Google Can Use Toilet to Track Your Movements

Bill Totten

The Government Can Use GPS to Track Your Moves

by Adam Cohen (August 25 2010)

Government agents can sneak onto your property in the middle of the night, put a GPS device on the bottom of your car and keep track of everywhere you go. This doesn't violate your Fourth Amendment rights, because you do not have any reasonable expectation of privacy in your own driveway - and no reasonable expectation that the government isn't tracking your movements.

That is the bizarre - and scary - rule that now applies in California and eight other Western states. The US Court of Appeals for the Ninth Circuit, which covers this vast jurisdiction, recently decided the government can monitor you in this way virtually anytime it wants - with no need for a search warrant. {1}

It is a dangerous decision - one that, as the dissenting judges warned, could turn America into the sort of totalitarian state imagined by George Orwell. It is particularly offensive because the judges added insult to injury with some shocking class bias: the little personal privacy that still exists, the court suggested, should belong mainly to the rich.

This case began in 2007, when Drug Enforcement Administration (DEA) agents decided to monitor Juan Pineda-Moreno, an Oregon resident who they suspected was growing marijuana. They snuck onto his property in the middle of the night and found his Jeep in his driveway, a few feet from his trailer home. Then they attached a GPS tracking device to the vehicle's underside.

After Pineda-Moreno challenged the DEA's actions, a three-judge panel of the Ninth Circuit ruled in January that it was all perfectly legal. More disturbingly, a larger group of judges on the circuit, who were subsequently asked to reconsider the ruling, decided this month to let it stand. (Pineda-Moreno has pleaded guilty conditionally to conspiracy to manufacture marijuana and manufacturing marijuana while appealing the denial of his motion to suppress evidence obtained with the help of GPS.)

In fact, the government violated Pineda-Moreno's privacy rights in two different ways. For starters, the invasion of his driveway was wrong. The courts have long held that people have a reasonable expectation of privacy in their homes and in the "curtilage", a fancy legal term for the area around the home. The government's intrusion on property just a few feet away was clearly in this zone of privacy.

The judges veered into offensiveness when they explained why Pineda-Moreno's driveway was not private. It was open to strangers, they said, such as delivery people and neighborhood children, who could wander across it uninvited. {2}

Chief Judge Alex Kozinski, who dissented from this month's decision refusing to reconsider the case, pointed out whose homes are not open to strangers: rich people's. The court's ruling, he said, means that people who protect their homes with electric gates, fences and security booths have a large protected zone of privacy around their homes. People who cannot afford such barriers have to put up with the government sneaking around at night.

Judge Kozinski is a leading conservative, appointed by President Ronald Reagan, but in his dissent he came across as a raging liberal. "There's been much talk about diversity on the bench, but there's one kind of diversity that doesn't exist", he wrote. "No truly poor people are appointed as federal judges, or as state judges for that matter". The judges in the majority, he charged, were guilty of "cultural elitism". {3}

The court went on to make a second terrible decision about privacy: that once a GPS device has been planted, the government is free to use it to track people without getting a warrant. There is a major battle under way in the federal and state courts over this issue, and the stakes are high. After all, if government agents can track people with secretly planted GPS devices virtually anytime they want, without having to go to a court for a warrant, we are one step closer to a classic police state - with technology taking on the role of the KGB or the East German Stasi.

Fortunately, other courts are coming to a different conclusion from the Ninth Circuit's - including the influential US Court of Appeals for the District of Columbia Circuit. That court ruled, also this month, that tracking for an extended period of time with GPS is an invasion of privacy that requires a warrant. The issue is likely to end up in the Supreme Court.

In these highly partisan times, GPS monitoring is a subject that has both conservatives and liberals worried. The US Court of Appeals for the District of Columbia Circuit's pro-privacy ruling was unanimous - decided by judges appointed by Presidents Ronald Reagan, George W Bush and Bill Clinton.

Plenty of liberals have objected to this kind of spying, but it is the conservative Chief Judge Kozinski who has done so most passionately. "1984 may have come a bit later than predicted, but it's here at last", he lamented in his dissent. And invoking Orwell's totalitarian dystopia where privacy is essentially nonexistent, he warned: "Some day, soon, we may wake up and find we're living in Oceania".


{1} See a TIME photoessay on Cannabis Culture:,29307,1899641,00.html

{2} See the misadventures of the CIA:,29307,1918651,00.html

{3} Read about one man's efforts to escape the surveillance state:,8599,1976541,00.html

{4} Comment on this story:,8599,2013150,00.html#comments

Cohen, a lawyer, is a former TIME writer and a former member of the New York Times editorial board.

Copyright (c) 2010 Time Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.,8599,2013150,00.html?artId=2013150?contType=article?chn=us#ixzz0xig4ImAv

Bill Totten

US Strategy: Control the World by Controlling the Internet

A Chinese Perspective

by Chen Baoguo

Global Times (August 23 2010)

Global Research (August 24 2010)

US controls threaten Internet freedom

In May 2009, Microsoft announced on its website that they would turn off the Windows Live Messenger service for Cuba, Syria, Iran, Sudan and North Korea, in accordance with US legislation.

In January 2010, Google, the company which owns the largest Internet information resources, declared that in order to establish a more open Internet environment, they had to abandon the Chinese market.

What is even more worrying is that Senator Joseph Lieberman, chairman of US Homeland Security Committee, recently presented to the US Senate a bill titled "Protecting Cyberspace as a National Asset".

To control the world by controlling the Internet has been a dominant strategy of the US.

From the network infrastructure protection of the Clinton era to the network anti-terrorism of the Bush era and to the "network deterrence" of the Obama era, the national information security strategy of the US has evolved from a preventative strategy to a preemptive one.

Meanwhile, the methodology has moved from trying to control Internet hardware to control of Internet content.

The ultimate goal is for the US to hold the ability to open and shut parts of the Internet at will.

In 1993, the Clinton administration proposed to build up "the national information infrastructure" and listed six possible enemies who might attack US key network infrastructure, including sovereign states, economic competitors, as well as all kinds of criminals, hackers, terrorists and insiders. It was a defensive strategy.

After the 9/11 attacks, the Bush administration officially upgraded Internet security to the strategic height of national security. Anti-terrorism was the theme of Internet security during the Bush era.

In 2004, the US cut off the ".ly" domain name by using the root server, resulting in Libya's disappearance in Internet for three days. It generated worldwide criticism of the US hegemony on the Internet and concerns over Internet security.

In 2009, according to the network security assessment announced by Obama, the threat to the Internet had become one of the most serious economic and military threats that the US was confronted with.

Obama made two important decisions.

The first was to cut conventional weapons, including the F22 fighters, while the second was to build up network commands and substantially increase investment in network offensive weapons.

So far the network security strategy of the Obama administration has been "focusing on attack and assisting with deterrence".

At present, the five core areas of Internet infrastructure are monopolized by US Information Technology ("IT") giants, including high-performance computers, operating systems, database technologies, network switching technologies and information resource libraries.

Across the world, around 92 percent of personal computers and eighty percent of super computers use Intel chips, while 92 percent of personal computers use Microsoft operating systems, and 98 percent of core server technology lies in the hands of IBM and Hewlett-Packard.

Meanwhile, ninety percent of database software is controlled by Oracle and Microsoft, and 94 percent of core patented network switching technology is held by US companies.

After the control of Internet infrastructure and hardware and software systems, the US is now turning to Internet content.

The US government has adopted macro-control and focus-funding to actively use IT giants to create a global Internet infrastructure which could be manipulated by the US.

The US actively promotes the participation of IT giants in Internet content control work.

In May 2009, Microsoft announced on its website that they would turn off the Windows Live Messenger service for Cuba, Syria, Iran, Sudan and North Korea, in accordance with US legislation.

In January 2010, Google, the company which owns the largest Internet information resources, declared that in order to establish a more open Internet environment, they had to abandon the Chinese market.

What is even more worrying is that Senator Joseph Lieberman, chairman of US Homeland Security Committee, recently presented to the US Senate a bill titled "Protecting Cyberspace as a National Asset."

Under this proposal, whenever an emergency occurs in the US, the president could order Google, Yahoo and other search engine operators to suspend Internet services.

And other US-based Internet service providers could also be under the control of the president when "Internet security emergencies" occur.

If so, the US president would officially have the power to open or close the Internet.

Although there is no international law to regulate Internet sovereignty, the Internet is founded to benefit all mankind across the globe.

If the US, which invented and controls the Internet, cut off or shut down the Internet in the name of national security, it would certainly neglect and violate the interests and benefits of international netizens.


The author is a researcher at the Development Research Center of the State Council of China.

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

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Bill Totten

Saturday, August 28, 2010

A Banking System We Can Trust

by Laurence J Kotlikoff and Edward Leamer

Forbes (April 23 2009)

Turn all financial firms into mutual funds.

Before throwing more money at Wall Street, let's understand what our financial system was supposed to deliver, what it did deliver and what price it charged.

The system was supposed to channel our hard-earned savings into the best real investments: new homes, offices, factories, equipment and research. And it was supposed to correctly price our assets.

It did neither. Instead, Wall Street morphed into a vast gambling enterprise, generating massive trades of existing securities without, in fact, raising the investment rate or growing the economy.

During the dot-com bubble, Wall Street funded all manner of silly businesses, and during the housing bubble, it put millions of people in homes they couldn't afford. This "expertise", which cost one-tenth of our output, was delivered by the best and brightest, with half of Harvard's graduating classes becoming high-class croupiers.

As for pricing assets, the stock market's been on a five-decade roller coaster, notwithstanding a relatively stable real economy. The market rose dramatically from 1950 through the mid-1960s. It then spent the next decade and a half falling through the floor. Then it rose like crazy in the late 1990s, crashed, soared and crashed again.

We need a financial sector but not one like this. Nor do we need Wall Street hitting us up for its gambling debts. What we need is Limited Purpose Banking (LPB), which would transform all financial corporations, including insurance companies and hedge funds, into mutual funds. They would, henceforth, be called banks.

Under this system, banks would never fail for a simple reason. They'd never hold any financial assets and they'd never borrow except to finance their mutual fund operations. Instead, they'd be limited to their legitimate purpose - financial intermediation. Under LPB, people, not companies, bear risk as their mutual funds do well or poorly.

A new Federal Financial Authority (FFA) - would rate, verify, supervise custody, disclose and clear all securities purchased, held and sold by LPB mutual funds. Private rating companies could stay in business, but no one would need to trust them ever again.

Banks would initiate personal and business loans (including mortgages), send them to the FFA for processing and then sell them to mutual funds, including their own. Loans would activate when sold, so no bank would ever have an open position.

All mutual funds would break the buck with one exception: cash mutual funds. These funds would strictly hold cash and be valued at $1 per share. Owners of these funds would write checks against their balances and never have to worry about a bank run. Fractional reserve banking and the FDIC would be history.

LPB would include insurance mutual funds. These funds would pay off based on the losses experienced by contributors. If losses are larger than expected, less is paid out per loss. Hence, LPB prevents insurance companies from insuring the uninsurable, for example, claiming they'll pay the same life insurance claims even if there's a plague.

All risk allocation arrangements can be run through mutual funds, including credit default swaps. Take a bank that markets the GE-Defaults-On-Its-Bonds-In-2010 fund. Under this closed-end fund, shareholders specify in advance if they want to get paid off if GE does default on its bonds in 2010 or paid off if GE doesn't default. All money put into the fund, less the mutual fund's fee, would be held in one-year Treasuries and paid out at the end of the year to the winning shareholders in proportion to their holdings.

Hence, Limited Purpose Banking can accommodate credit default swaps (CDS) as well as any other risk product. But what Limited Purpose Banking won't do is leave any bank exposed to CDS risk since people, not banks, would own the CDS mutual funds.

If such mutual funds sound revolutionary, they're not. Funds of this kind have been around for centuries. They go by the name "tontines", or systems of "pari-mutuel betting".

Limited Purpose Banking would enhance liquidity, since all funds would trade in the market even if their underlying assets are illiquid. It would permit the extension of as much credit as the public - which is the ultimate source of credit - wishes to provide by buying mutual funds that purchase household and business loans. And it would force banks to charge fees and pay their employees based on their mutual fund performances as determined by the market.

What LPB will eliminate is insider rating, free-riding on FDIC insurance, self-custody arrangements, no-doc loans, institutionalized gambling, me-now compensation plans, financial malfeasance and the possibility of future financial collapse. In other words, it would be a system we can trust.


Laurence J Kotlikoff and Edward Leamer are professors of economics at Boston University and UCLA.

Bill Totten


Three digital myths

by Christian Christensen

Le Monde diplomatique (August 09 2010)

The release of the Afghan War Diaries on Wikileaks, with stories published in The Guardian, the New York Times and Der Spiegel by agreement with Wikileaks, has made news around the world. Le Monde Diplomatique, in conjunction with Owni and, have also made the documents available online via a dedicated website. The security implications of the leaked material will be discussed for years to come. Meanwhile the release of over 90,000 documents has generated debate on the rising power of digital journalism and social media. Many of the discussions are rooted in what I call internet or digital myths - myths which are rooted in romantic, deterministic notions of technology.

Myth 1: The power of social media

Media experts and commentators are commonly asked what the Wikileaks case tells us about the power of social media in contemporary society, particularly in the coverage of war. There is nothing wrong with this question, but it does illustrate a troubling tendency to place all forms of social media (blogs, Twitter, Facebook, YouTube, Wikileaks) under the same huge umbrella. The myth is that social media are homogenous by virtue of their technologies. But Wikileaks is nothing like Twitter or YouTube. What separates it from other forms of social media is the review process that submitted material must go through in order to be posted to the site. This might seem like a detail, but it strikes at the heart of "techo-utopian" notions of an "open commons" where anyone and everyone can post (almost) anything for all to read, hear and see.

The real power of Wikileaks is not so much the technology (it helps, but there are millions of websites out there) but the trust readers have in the authenticity of what they are reading; they believe that those working at Wikileaks stand behind the veracity of the material. There are literally hundreds of videos on YouTube from Iraq and Afghanistan showing coalition forces engaged in questionable, and in some cases obviously illegal, acts of aggression. Yet none of these clips have had anything like the impact of the single video posted to Wikileaks showing scores of civilians (and two Reuters journalists) gunned down by high-powered aircraft artillery in a Baghdad suburb. Why? Because while complete openness might be attractive in theory, information is only as valuable as its reliability, and Wikileaks has an organisational review structure in place that Twitter, Facebook, YouTube and most blogs (for obvious reasons) do not. All social media are not created equal, and so their power is far from equal.

Myth 2: The nation-state is dying

If the Wikileaks case has taught us anything, it is that the nation-state is most certainly not in decay. A great deal of discourse surrounding the internet, and social media in particular, revolves around the premise that we now live in a borderless digital society.

The notion of the nation-state in decline has had a great deal of currency within certain spheres of academia for a number of years, but the events of the past few weeks should give us pause. Those in charge of Wikileaks clearly understand the vital role of the nation-state, particularly when it comes to law. Despite New York University media scholar Jay Rosen's claim that it is "the world's first stateless news organisation", Wikileaks is very much territorially bound.

Wikileaks is semi-officially based in Sweden and has all the protection offered to whistleblowers and guarantees regarding anonymity of sources under Swedish law (although some doubt has been cast on whether or not Swedish law actually offers protection to Wikileaks). As the New Yorker reported in June 2010, Wikileaks is hosted on a Swedish ISP called PRQ. Material submitted to Wikileaks first goes through PRQ, and then to servers located in Belgium. Why Belgium, you may ask? Because Belgium has the second strongest laws for the protection of sources. And Wikileaks founder Julian Assange chose Iceland as the location for decrypting the aerial video footage of the killings in Baghdad. Iceland recently passed the Icelandic Modern Media Initiative, devised to make the country a global haven for whistleblowers, investigative journalism and freedom of speech.

Beyond Wikileaks, we have other reminders of the importance of states and laws in the fluid digital world: the recent decisions by the United Arab Emirates and Saudi Arabia to instigate bans on the messenger function on BlackBerry handsets, or the seemingly never-ending legal ban on YouTube Turkey. While it's true that the Wikileaks structure is set up to bypass the laws of certain countries (enabled by digital technology), it also makes use of other countries' laws. Wikileaks isn't lawless - it's just moving the entire game to places where the rules are different.

Myth 3: Journalism is dead (or almost)

Reports of the death of journalism have been greatly exaggerated (to borrow from Mark Twain). The Wikileaks case speaks to the power of technology to make us re-think what we mean by "journalism" in the early 21st century. But it also consolidates the place of mainstream journalism within contemporary culture. Wikileaks decided to release the Afghan documents to The Guardian, the New York Times and Der Spiegel weeks before they were released online - mainstream media outlets, not "alternative" (presumably sympathetic) publications such as The Nation, Z Magazine or IndyMedia. The reason is surely that these three news outlets are top international news agenda-setters. Few outlets (leaving aside broadcasters such as the BBC or CNN) have so much clout as the New York Times and the Guardian - and being published in English helps exposure. The Wikileaks people were savvy enough to realise that any release of the documents online without prior contact with select news outlets would lead to a chaotic rush of unfocused articles the world over.

As it was, attention turned straight to the three newspapers in question, in which a large number of the documents had already been analysed and summarised. And the role of Wikileaks was not lost in an information maelstrom. In the death of journalism thesis (as in that of the death of the nation-state), change is mistaken for elimination. The release of the Afghan Diaries shows that mainstream journalism still holds a good deal of power, but the nature of that power has shifted (compared to twenty or thirty years ago). An example is Executive Editor Bill Keller's recounting of the contact between New York Times editorial staff and the White House following the release of the documents:

The administration, while strongly condemning WikiLeaks for making these documents public, did not suggest that The Times should not write about them. On the contrary, in our discussions prior to the publication of our articles, White House officials, while challenging some of the conclusions we drew from the material, thanked us for handling the documents with care, and asked us to urge WikiLeaks to withhold information that could cost lives. We did pass along that message.

This is an astonishing admission by the executive editor of the US's most respected newspaper. For two reasons. The description of the encounter with the White House shows pride in the White House's praise, at odds with traditional notions of the press as the watchdogs over those in power. Second, the New York Times's role as intermediary between the US government and Wikileaks illustrates an interesting new power dynamic within news and information in the US.

At the heart of the death of journalism myth (and that of the role of social media) is the presumption of a causal relationship between access to information and democratic change. The idea that mere access to raw information de facto leads to change (radical or otherwise) is as romantic as the notion that mere access to technology can do the same. Information, just as technology, is only useful if the knowledge and skills required to activate such information are present. Wikileaks chose its three newspapers not because they necessarily represented ideological kindred spirits for Julian Assange and his colleagues, but because they were professionally, organisationally and economically prepared for the job of decoding and distributing the material provided.

In a digital world that is constantly being redefined as non-hierarchical, borderless and fluid, Wikileaks has reminded us that structure, boundaries, laws and reputation still matter.


Christian Christensen ( is associate professor of Media and Communication Studies in the Department of Informatics and Media at Uppsala University in Sweden. His work focuses on political, economic and cultural aspects of global media.

Bill Totten

Friday, August 27, 2010

Why the Wars Can't be Won

by Professor John Kozy

Global Research (August 20 2010)

Edmund Burke's statement, "Those who don't know history are destined to repeat it" is frequently cited, but in truth, even history's obvious lessons are unrecognized by many who know history very well.

There was a time when every school child could recite the Gettysburg Address from memory, especially its famous peroration: "we here highly resolve that these dead shall not have died in vain, that this nation shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth". But that resolution has largely gone unfulfilled. So exactly what did the Civil War accomplish?

Most certainly, it preserved the union territorially and abolished slavery - two noteworthy things. But the slaves who were freed, rather than being benefited by their freedom, were left in the lurch, and the prejudicial attitudes of Confederate whites were most likely hardened; they certainly were not softened. So although the war united the nation territorially, it failed to unite its peoples, and that division is still evident today.

After the 2004 Presidential election, The Dallas Morning News ran a feature about this division titled Beyond the Red and Blue. Using the red states that went to President Bush and the blue states that went to Senator Kerry, it pointed out how red and blue states ranked in various categories.

People in red states are less healthy than those in blue states.

People in red states earn less than those in blue states.

People in red states are less educated than those in blue states.

More people in red states live in mobile homes than those in blue states.

The red states have higher birth rates among teens than the blue states.

More people are killed by guns in the red states than in the blue states.

And the Dallas Morning News missed a number of other inferior attributes of the red states.

The red states have higher rates of poverty, both generally and among the elderly, higher rates of crime, both general and violent, have higher rates of infant mortality and divorce, and have fewer physicians per unit of population than do the blue states.

These statistics do not paint a pretty picture. And since the red states are commonly referred to as the conservative heartland, one would think that the people who live in these states would vote against conservative candidates merely on the basis of their own rational, self interests. But they don't.

There's an obvious clash here, for the red states are the home of that group that calls itself "moral America". But how can a moral viewpoint countenance poverty, crime, and infant mortality? What kind of morality is it that doesn't care for the welfare of people? Just what moral maxim guides the lives of these people? Certainly not the Golden Rule, the Decalogue, or the Second Commandment of Christ. From what I have been able to gather, moral America needs a new moral code. The one it has is, to use a word the members of this group dislike, relative.

So what motivates the conservative nature of the people in the red states? Let's look at some history.

For a century after the Civil War, the south voted Democratic, but not because the people shared any values in common with the rest of the nation's Democrats. (Southerners even distinguished themselves from other Democrats by calling themselves "Dixiecrats.") These people were Democrats merely because the political party of the war and reconstruction was Republican. And when, in the mid-twentieth century, the Democratic Party championed an end to racial discrimination, these life-long Democrats quickly became Republicans, because the Republican party had in the intervening years become reactionary.

What motivates these people even today, though most likely they don't recognize it, is an unwillingness to accept the results of the Civil War and change the attitudes held before it. When a society inculcates beliefs over a long period of time, those beliefs cannot be changed by a forceful imposition of others. The beliefs once practiced overtly continue to be held covertly. Force is never an effective instrument of conversion. Martyrdom is preferable to surrender, and even promises of a better future are ineffective.

So what did the Civil War really accomplish? It united a nation without uniting its people. The United States of America became one nation indivisible made up of two disunited peoples; it became a nation divided, and the division has spread.

Therein lies a lesson all nations should have learned. By the force of arms, you can compel outward conformity to political institutions and their laws, but you cannot change the antagonistic attitudes of people, that can remain unchanged for decades and longer waiting for opportunities to reassert themselves.

Any astute reader can apply this lesson to the present day's activities in the Middle East. Neither force nor promises of a future better than the past can win the hearts and minds of people. And soldiers who die in an attempt to change another people's values always die in vain.

All wars, even when carried on by the strongest of nations against weak opponents, are chancy, and their costs, in every respect, are always much more than anticipated, even putting aside the physical destruction and the lives lost.

Nations that have started wars with the psychological certainty of winning rarely have, and when they have, the results were rarely lasting or those sought. As Gandhi once observed, "Victory attained by violence is tantamount to a defeat, for it is momentary".

The Crusaders, fighting under the banner of Christ, could not make Palestine a part of Christendom. France, under Napoleon, conquered most of Europe but lost it all and Napoleon ended up a broken man. Prussian militarism prevailed in the Franco-Prussian War, but in less than a century Germany had lost all. The Austrians in 1914 could not only not subdue the Serbs, the empire and its monarchial form of government were lost. The Germans and Japanese after 1939 and astounding initial successes were reduced to ruin.

But even the winners are losers.

Americans won the Mexican War and acquired the southwestern United States, but that conquest brought with it unfathomable and persistent problems - racial prejudice, discrimination, and an irresolvable problem of immigration and border insecurity. Americans likewise won the falsely justified Spanish American war and acquired a number of colonial states but were unable to hold most of them. The allies won the Second World War, but France and England lost the colonies they were fighting to preserve, and these two powers, which were great before the war, were reduced to minor status (although both still refuse to admit it). Israel has won five wars against various Arab states since 1948, but its welfare and security have not been enhanced, and Arab hatred and intransigence has grown more common.

People need to realize that after a war, things are never the same as they were before, and that even the winners rarely get what they fight for. War is a fool's errand in pursuit of ephemera.

At the end of World War Two, American leaders wrongly assumed that America's superpower status gave it the means to impose its view of what the world should be like on others everywhere. Then came Korea and the assumption proved false. Despite all of the destruction and death inflicted on the North Koreans, their attitudes went unchanged. The lesson went unlearned. It went unlearned again in Viet Nam, after which Henry Kissinger is reported to have naively said, "I could not believe that a primitive people had no breaking point". The Vietnamese never broke. Now again Americans are foolishly assuming that the peoples of the Middle East will change their attitudes if enough force is imposed for a long enough time and enough promises of a better future are made. History belies this assumption.

Unfortunately, history teaches its lessons to only those willing to learn, and the American oligarchy shows no signs of having such willingness.

So let's start singing bye-bye, Miss American Pie

Warring is nothing but a bad way to die!


John Kozy is a retired professor of philosophy and logic who writes on social, political, and economic issues. After serving in the US Army during the Korean War, he spent twenty years as a university professor and another twenty years working as a writer. He has published a textbook in formal logic commercially, in academic journals and a small number of commercial magazines, and has written a number of guest editorials for newspapers. His on-line pieces can be found on and he can be emailed from that site's homepage.

Bill Totten

A Modest Proposal

Limited Purpose Banking

Dallas Morning News (March 15 2009)

by Scott Burns and Laurence J Kotlikoff

In case you hadn't noticed, the foxes are still guarding the banking henhouse. The only change: President Obama is reducing how many hens the foxes can kill while on guard duty.

The foxes, of course, are the financial wizards whose leadership almost entirely wiped out the capital of the banking system.

The old system relied on trusting people who lied and cheated. They are still running the show. They will lie and cheat again. We will be called upon to pay the bill, again.

We need a new financial system. We need limited-purpose banking. It should be transparent, trustworthy and unsinkable. The key is to limit banks to their legitimate purpose. Not gambling, but financial intermediation, connecting savers to investors and lenders to borrowers.

Is this possible? Yes, it already exists in the only part of old system still above water - the mutual fund industry. Mutual fund companies like Fidelity, Vanguard, and TIAA-CREF stuck to their knitting. They didn't leverage themselves thirty-to-one and promise things they could never deliver. These companies didn't gamble with their own fortunes or the nation's future. Instead, they bought mortgages, stock, real estate, and other securities. They packaged these assets in mutual funds. And they sold the mutual funds to the public.

The public, not the mutual fund companies, held the securities and took the risk. In so doing, the fund companies ensured their solvency and prevented runs on their funds. They avoided the double jeopardy of conventional banking - financial shipwrecks that drown both the ships and the public. The one revealing exception was money market funds. There the mutual fund companies promised something they couldn't deliver - that their money market funds would never lose money.

Mutual fund companies also have other safeguards. They use third-party custodians to hold the securities purchased by their mutual funds. This precludes a Bernie Madoff or an Allen Stanford from selling claims to securities they neither owned nor purchased. Mutual fund companies divulge their investments. Whether the assets in their mutual funds are toxic or nutritional, the mutual fund companies say what they hold.

The two things mutual funds can't guarantee are the prices of the securities they purchase or the quality of the securities themselves. This can be improved (but not guaranteed) by compelling disclosure.

The compulsion must come from Uncle Sam. Sam needs to do what we proposed a year ago - set up a Federal Financial Authority (FFA) to verify, fully disclose, and rate securities, as well as audit the Fortune 500 companies. As we've seen, our private, insider-rating agencies are not to be trusted. Neither is insider-accounting.

The FFA should also appoint and pay independent directors to the Fortune 500 companies to determine compensation for top management. This is the only way to stop top management from bribing their directors to let them steal from shareholders. The FFA would also supervise all custodial arrangements.

With an FFA in place, here's how the new mutual fund-based banking system would work. Banks (our shorthand for all financial companies) would initiate mortgage, commercial, auto, credit card, and other loans. They would send them to the FFA for rating, package them in mutual funds, and sell them to the public.

Banks would not hold their loans. They would never be exposed to default risk. They'd provide no guarantee on their money market funds. Banks would also sell equity and real estate mutual funds. There would still be risk, but it wouldn't be in the financial institutions that put our money to work.

Finally, banks would accept checking account deposits. To ensure they have zero exposure to a bank run, the banks would be required to hold 100 percent reserves (in cash and short-term Treasuries) against these deposits. Incidentally, this aspect of the plan - moving from the current 10 percent to 100 percent reserve requirements - is called Narrow Banking. It was proposed by Irving Fisher, Frank Knight, and other leading economists during the 1930s. It was also advocated by Nobel Laureate Milton Friedman.

By requiring banks to stick to their fundamental purpose - financial intermediation - and to proscribe their taking risk of any kind, we will never again have either bank runs or the specter of major financial companies going under.


Find more on Limited Purpose Banking at

Bill Totten

Thursday, August 26, 2010

Forty Bizarre Statistics

That Reveal the Horrifying Truth about the Collapse of the US Economy (July 20 2010)

Most Americans still appear to be operating under the delusion that the "recession" will soon pass and that things will get back to "normal" very soon. Unfortunately, that is not anywhere close to the truth. What we are now witnessing are the early stages of the complete and total breakdown of the US economic system. The US government, state governments, local governments, businesses and American consumers have collectively piled up debt that is equivalent to approximately 360 percent of GDP. At no point during the Great Depression (or at any other time during our history) did we ever come close to such a figure. We have piled up the biggest mountain of debt that the world has ever seen, and now that gigantic debt bubble is beginning to pop. As this house of cards comes crashing down, the economic pain is going to become almost unimaginable.

Already, things are really, really, really bad out there. Unemployment is at shockingly high levels. Foreclosures and personal bankruptcies continue to set new all-time records. Businesses are being shut down at a staggering rate, more than forty million Americans are on food stamps, and the US government continues to pile up debt at blinding speed.

There is no use sugar-coating it.

The US economy is collapsing.

The following are forty bizarre statistics that reveal the truth about the collapse of the US economy ...

1 - According to one shocking new survey, 28% of US households have at least one member that is looking for a full-time job {1}.

2 - A recent Pew Research survey found that 55 percent of the US labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began {2}.

3 - There are 9.2 million Americans that are unemployed but that are not receiving an unemployment insurance check {3}.

4 - In America today, the average time needed to find a job has risen to a record 35.2 weeks {4}.

5 - According to one analysis, the United States has lost 10.5 million jobs since 2007 {5}.

6 - China's trade surplus (much of it with the United States) climbed 140 percent in June compared to a year earlier {6}.

7 - This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour {7}.

8 - According to a poll taken in 2009, 61 percent of Americans "always or usually" live paycheck to paycheck. That was up significantly from 49 percent in 2008 and 43 percent in 2007 {8}.

9 - According to a recent poll conducted by Bloomberg, 71% of Americans say that it still feels like the economy is in a recession {9}.

10 - Banks repossessed 269,962 US homes during the second quarter of 2010, which was a new all-time record {10}.

11 - Banks repossessed an average of 4,000 South Florida properties a month in the first half of 2010, up 83 percent from the first half of 2009 {11}.

12 - According to RealtyTrac, a total of 1.65 million US properties received foreclosure filings during the first half of 2010 {12}.

13 - The Mortgage Bankers Association recently announced that demand for loans to purchase US homes has sunk to a thirteen-year low {13}.

14 - Only the top five percent of US households have earned enough additional income to match the rise in housing costs since 1975 {14}.

15 - 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008 {15}.

16 - Back in 1950 each retiree's Social Security benefit was paid for by sixteen workers. Today, each retiree's Social Security benefit is paid for by approximately 3.3 workers. By 2025 it is projected that there will be approximately two workers for each retiree {16}.

17 - According to a new poll, six of ten non-retirees believe that Social Security won't be able to pay them benefits when they stop working {17}.

18 - 43 percent of Americans have less than $10,000 saved for retirement {18}.

19 - According to one survey, 36 percent of Americans say that they don't contribute anything to retirement savings {19}.

20 - According to one recent survey, 24% of American workers say that they have postponed their planned retirement age in the past year {20}.

21 - The Conference Board's Consumer Confidence Index declined sharply to 52.9 in June. Most economists had expected that the figure for June would be somewhere around 62 {21}.

22 - Retail sales in the US fell in June for a second month in a row {22}.

23 - Vacancies and lease rates at US shopping centers continued to get worse during the second quarter of 2010 {23}.

24 - Consumer credit in the United States has contracted during fifteen of the past sixteen months {24}.

25 - During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the sixteenth consecutive quarter {25}.

26 - Things are now so bad in California that in the region around the state capital, Sacramento, there is now one closed business for every six that are still open {26}.

27 - The state of Illinois now ranks eighth in the world in possible bond-holder default. The state of California is ninth {27}.

28 - More than 25 percent of Americans now have a credit score below 599, which means that they are a very bad credit risk {28}.

29 - On Friday, US regulators closed down three banks in Florida, two in South Carolina and one in Michigan, bringing to 96 the number of US banks to be shut down so far in 2010 {29}.

30 - The FDIC's deposit insurance fund now has negative 20.7 billion dollars in it, which represents a slight improvement from the end of 2009 {30}.

31 - The US federal budget deficit has topped $1 trillion with three months still to go in the current budget year {31}.

32 - According to a US Treasury Department report to Congress, the US national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015 {32}.

33 - The M3 money supply plunged at a 9.6 percent annual rate during the first quarter of 2010 {33}.

34 - According to a new poll of Americans between the ages of 44 and 75, 61% said that running out money was their biggest fear. The remaining 39% thought death was scarier {34}.

35 - One study found that as of 2007, the bottom eighty percent of American households held about seven percent of the liquid financial assets {35}.

36 - The bottom forty percent of all income earners in the United States now collectively own less than one percent of the nation's wealth {36}.

37 - The number of Americans with incomes below the official poverty line rose by about fifteen percent between 2000 and 2006, and by 2008 over thirty million US workers were earning less than $10 per hour {37}.

38 - According to one recent study, approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in twenty years {38}.

39 - For the first time in US history, more than forty million Americans are on food stamps, and the US Department of Agriculture projects that number will go up to 43 million Americans in 2011 {39}.

40 - A new Rasmussen Reports national telephone survey has found that just 23% of American voters nationwide believe the federal government today has the consent of the governed {40}.










































Bill Totten