Wednesday, May 20, 2015

Reforms that the Banking System Needs

Reuters reports that "Global banks admit guilt in forex probe, fined nearly $6 billion". Loretta Lynch, the new Attorney General announced today that:

“Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” said Attorney General Lynch. “The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.” [http://www.justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas]

Except it's not. If Loretta Lynch really wants to do something about Banker Fraud she has to start prosecuting individuals. And if we want some permanent changes we need to hold individuals and their management accountable for their actions. As someone said on the Ed Show today [paraphrasing] if we start frog marching management the rank and file will stop breaking the law. I believe that all bonuses, stock options, etc... should be put up against a Bond for Good Behavior for all officers of company doing business with the Government or having government powers over other people's money. Then when something like this happens the Taxpayer gets back his and her money from those bonuses instead of the thief conning the Government to give him/her more bonuses to fix the fraud he or she had committed. An article in US News notes:

“The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers. Cutting that amount in half to allow for the fact that some customers benefited from the fraud while others lost still gives implied damages of $1.5 trillion, greater than the combined capital of all of the too-big-too-fail banks in the United States. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers.” [http://www.usnews.com/opinion/blogs/economic-intelligence/2012/07/23/libor-fraud-may-be-the-mother-of-all-bank-scandals]

5 Billion to settle 3 Trillion in damages is that "cost of doing business" that the Banksters talk about openly when they are telling their employees to commit fraud and break the law. They will continue breaking the law until they start being frog marched. And some of them will continue to do so until we stop rewarding them for their fraud and letting them pocket profits they never earned.

Real Reforms

Every person with a job that gives them control over Other People's Money, or supervisory power over such people, should be bonded for the amount of money they are handling. They should pay an insurance premium based on the risk of their portfolio. That bond should be owned by an organization (company or agency) with power to make good any losses from their behavior from that bond and to raise or lower the premium on the bond. Every one of those bonds should be secured by any promises of bonuses, stock options, etc.... and the bonding agency have the power to freeze, seize or put a lien on those securities. And when that person breaks the law unless the supervisor reports the infraction to the bonding agency and takes disciplinary action both the employee and the supervisory should be subject to action from the bonding agency. Want a safe secure system? That would do it as long as the bonding agency isn't "owned" by the executive wall street body handling people's money but is owned by the people of the country and/or the customers of the Financial Industry. A law can be crafted to that effect. It would be one that finally would have real teeth. Every employee or supervisor involved in the Financial Industry would sign an agreement binding him or her to the terms of this oversight and to pay premiums based on the risk of their portfolio. And the bonding agency would arbitrate disputes between investors and consumers, etc... If customers don't agree they can take them to court. Only the employees and supervisors would be bound by such arbitration agreements, not the customers. This is the reverse of how they operate now where they mostly stiff their less powerful customers -- such as pension plans.

Further Reading

I've been writing on this for several years now. So here are some related blog entries:
Corruption American Style
Hightower on our Corrupt system
Wall Street's Long Con Swindle of America
Freebooters Stealing Homes
Our Officers earned a Black Spot
Occupy Coordinated
Why Summers and Wall Street should not run the Federal Reserve
General Material (and fixes) on the subject:
Satans Usury
Depreciation Stock Sustainability
Postal Banking, Stamp Scripts and Fixing the Economy
Saving Europe
Hamilton's 1781 Bank Plan
Irving Fisher and Stamp Script
Organizing Communities Around the Post Office
Hamilton's Revenge II

Monday, May 18, 2015

Zuckerman Speaks or Why our privateers should stay out of politics

Mortimer Zuckerman wades into the policy debate, and in the process demonstrates why he and fellow executives need to stop interfering with US politics and trying to make themselves Oligarchs. All but one of his 5 suggestions either are the result of laws passed by Corporate Lobbyists in the past, out of touch with what mainstream America needs, or are downright opposite of what the country needs. Still some of his suggestions make sense and some make a great segue to real suggestions.

All References here come from:
US News Article: http://www.usnews.com/opinion/mzuckerman/slideshows/five-sure-fire-ways-to-create-more-jobs/1
  • Education
  • Education in the USA (and America in General) has problems for three reasons that have nothing to do with the line of bull we are getting from our oligarchs. He would say we need to:

    "Arrest and reverse the decline in American education that has left a workforce less able to compete in the new world. Skills, not muscle, are the only reliable path to high-wage jobs in an era when technology and globalization allow companies to make new investments in regions where labor is cheap and the newly emerging middle classes are eager for their products. We have let the education of our young people slide. America’s university graduation rates have slipped from near the top of the world to the middle."

    Demented HR

    But the trouble is that we still produce millions of graduates with thinking skills and education. If they lack specific skills that is as much due to our faulty policies towards training and hiring as their "lack of education." Zuckerman and company make a big deal of educating "new" programmers, while people with those educations can't get a job because they don't have the "latest and greatest" credentials demanded by poor quality Human Resources Departments who prefer to hire abroad anyway because the Government gives them benefits for doing so and they can send immigrants back home if they ask for too much money. I know a lot of older workers with the training to do those jobs if they won't hire younger people -- and HR Departments won't hire them! Zuckerman confuses getting an education with learning the skills for a particular job. A well educated person can work anywhere. Yet our companies prefer not to hire them, train them, or keep them. And that has nothing to do with their education, but with our demented HR departments.

    Corporations are unwilling to train employees

    In former times training new employees was a responsibility of employers. Folks would learn their jobs. In our country folks are sent to colleges where they pay thousands of jobs to learn skills that the HR departments then reject because they aren't a 100% match for the opening. The HR folks then hire foreign folks who sometimes are no better than their US counterparts but come highly recommended and with training tailored to the job. That is what we need here. Not deprecation of our people. Our people can learn if the resources are devoted to the schools so they can do so.

    Make Education Free to the Student

    For years now our privateering companies (including the one Zuckerman started) have been paying their pet politicians to defund public education and "privatize it", which means that education has gone from a public service model to a profit centered model. The result is schools that bilk parents, taxpayers, students and employers alike for the sake of salaries and profits. The growth in education costs has mainly occurred in "overhead" and that "overhead" has mostly been in the form of increased numbers of "managers" rather than teachers and private profits. Jefferson dreamed of education as a public right for all young students capable of passing entrance exams or passing the classes.

    His next one is the reason he deprecates US schools:

  • Visas
  • "Approve many more H-1B visas to permit highly educated graduate students in the hard sciences to work in engineering and technology. Contrary to popular perception of immigrants, these are people who would create more jobs rather than cost jobs. And make it easier, too, for tourists to get visas, as these are people who increase consumer spending here in the United States. In theory, skilled workers in America should benefit from globalization, given their skills and what they produce. But as countries like China rapidly upgrade their workforces through education, we find workers competing with those who get much lower pay."

    Foreign countries also limit US visas to their own countries. So there is no quid pro quo. And the H-1B programs are universally abused. I've been used for proposals from companies I later found out did all their hiring from abroad. It's a way of getting cheap labor. No more. If the program is restricted to actual scientists and very smart people maybe it would have some integrity. But this is just Mort's desire for cheap labor being expressed.

    His next recommendation is the product of laws written by corporations 20 years ago that now need to be reformed such as the Digital Millennium Copyright Act (DMCA) which made it easier for companies to sue people for even the most honest uses of content from others. He'd like to do create similar monopolies with patents so that it would be easier for companies to use frivolous lawsuits to enforce monopolies.

  • Patents
  • "Rationalize the stumbling process of certifying patents, which could and would unleash thousands of start-ups, the single greatest source of new employment."

    We grant too many patents as it is, and for too long. They are more a stumbling block than the innovation is, since too many products get sued for having someone elses old patent as part of the design.

  • Eliminate Uncertainty
  • Code for do away with the ACA and other social programs:

    "The elimination of a negative impact of policy uncertainty would also help the economy. A metric devised by economists at Stanford University and the University of Chicago shows that policy uncertainty accounts for about 2.5 million jobs lost. For example, they assert there is a widespread view in business that the healthcare bill makes it burdensome to hire and underscores how political uncertainty has made it much more difficult to plan ahead, a key need for every business. The National Federation of Independent Business asked small businesses their biggest problem. Sixteen percent of small businesses cited "government requirements and red tape."

    But it is an argument for single payer.

    His final proposal is the only one that makes sense:

  • Infrastructure
  • "Invest in a national infrastructure bank. Investing in overdue maintenance and repairs would create jobs in the short term and raise the efficiency of our private sector economy. Some infrastructure projects could be tolled so that the users would ultimately pay for them, and the projects should be chosen based on merit rather than on patronage. We ought to undertake new projects of the kind that built America. But we are not even keeping up with repairs, which means it will cost much more when our bridges, roads, dams, schools, and sewage and water systems collapse.

    The key here is that we need a revised Federal Reserve that includes an infrastructure bank. But this has to be owned by the people of the USA and the benefits of returns from such investments rebated to ordinary citizens. We could pay for all our infrastructure with fiat money backed by notes and retire the notes with paper money from the economic stimulus.

    The American Society of Civil Engineers has spelled out the need in convincing detail, but investment is now called that dirty word “spending.” So while millions sit idle and interest rates are historically low, the air is filled not with the sound of men at work but with fatuous slogans. We look askance at the Europeans fiddling while Rome burns, and maybe Madrid and Paris next, but Washington is the graveyard of American dreams."

    Such a bank should be a cooperative chartered bank, run under republican principles with 52+ member state Infrastructure Banks and branches in every county and municipality.

    Pardes/Paradise/The Treasure Tower

    Note:

    Sunday, May 17, 2015

    Why Opposition to the Trans Pacific Partnership "Trade Promotion Authority" is warranted

    I get offended when folks condemn criticism of the current effort to pass "Trade Promotion Authority" as undemocratic. As I've noted before my principle concerns have been about the TPSD provisions and the intense secrecy around it. But now I have to ad the viciousness of the campaign to try to get it passed. The promoters don't seem to mind offending and alienating half the Democratic party and 90% of labor. Anyway these are some of the objections I've gathered.

    My Friend Matt Turner lists ten reasons:

    Matt Turner posting in Occupy Economics writes, "10 Ways that TPP would hurt Working Families":
    1. TPP will allow corporations to outsource even more jobs overseas.
    2. According to the Economic Policy Institute,
      "if the TPP is agreed to, the U.S. will lose more than 130,000 jobs to Vietnam and Japan alone. But that is just the tip of the iceberg. ·∙ Service Sector Jobs will be lost. At a time when corporations have already outsourced over 3 million service sector jobs in the U.S., TPP includes rules that will make it even easier for corporate America to outsource call centers; computer programming; engineering; accounting; and medical diagnostic jobs.
      ·∙ Manufacturing jobs will be lost. As a result of NAFTA, the U.S. lost nearly 700,000 jobs. As a result of Permanent Normal Trade Relations with China, the U.S. lost over 2.7 million jobs. As a result of the Korea Free Trade Agreement, the U.S. has lost 70,000 jobs. The TPP would make matters worse by providing special benefits to firms that offshore jobs and by reducing the risks associated with operating in low-wage countries.
    3. U.S. sovereignty will be undermined by giving corporations the right to challenge our laws before international tribunals.
    4. The TPP creates a special dispute resolution process that allows corporations to challenge any domestic laws that could adversely impact their “expected future profits.” These challenges would be heard before UN and World Bank tribunals which could require taxpayer compensation to corporations.
      This process undermines our sovereignty and subverts democratically passed laws including those dealing with labor, health, and the environment.
    5. Wages, benefits, and collective bargaining will be threatened.
    6. NAFTA, CAFTA, PNTR with China, and other free trade agreements have helped drive down the wages and benefits of American workers and have eroded collective bargaining rights. The TPP will make the race to the bottom worse because it forces American workers to compete with desperate workers in Vietnam where the minimum wage is just 56 cents an hour.
    7. Our ability to protect the environment will be undermined.
    8. The TPP [ISDS provisions] will allow corporations to challenge any law that would adversely impact their future profits. Pending claims worth over $14 billion have been filed based on similar language in other trade agreements. Most of these claims deal with challenges to environmental laws in a number of countries. The TPP will make matters even worse by giving corporations the right to sue any of the nations that sign onto the TPP. These lawsuits would be heard in international tribunals bypassing domestic courts.
    9. Food Safety Standards will be threatened.
    10. The TPP would make it easier for countries like Vietnam to export contaminated fish and seafood into the U.S. The FDA has already prevented hundreds of seafood imports from TPP countries because of salmonella, e-coli, methyl-mercury and drug residues. But the FDA only inspects 1-2 percent of food imports and will be overwhelmed by the vast expansion of these imports if the TPP is agreed to.
    11. Buy America laws could come to an end.
    12. The U.S. has several laws on the books that require the federal government to buy goods and services that are made in America or mostly made in this country. Under TPP, foreign corporations must be given equal access to compete for these government contracts with companies that make products in America. Under TPP, the U.S. could not even prevent companies that have horrible human rights records from receiving government contracts paid by U.S. taxpayers.
      Note from Chris: This is already happening with other previous trade deals
    13. Prescription drug prices will increase, access to life saving drugs will decrease, and the profits of drug companies will go up.
    14. Big pharmaceutical companies are working hard to ensure that the TPP extends the monopolies they have for prescription drugs by extending their patents (which currently can last 20 years or more). This would expand the profits of big drug companies, keep drug prices artificially high, and leave millions of people around the world without access to life saving drugs. Doctors without Borders stated that “the TPP agreement is on track to become the most harmful trade pact ever for access to medicines in developing countries.”
    15. Wall Street would benefit at the expense of everyone else.
    16. Under TPP, governments would be barred from imposing “capital controls” that have been successfully used to avoid financial crises. These controls range from establishing a financial speculation tax to limiting the massive flows of speculative capital flowing into and out of countries responsible for the Asian financial crisis in the 1990s. In other words, the TPP would expand the rights and power of the same Wall Street firms that nearly destroyed the world economy just five years ago and would create the conditions for more financial instability in the future. Last year, I co-sponsored a bill with Sen. Harkin to create a Wall Street speculation tax of just 0.03 percent on trades of derivatives, credit default swaps, and large amounts of stock. If TPP were enacted, such a financial speculation tax may be in violation of this trade agreement.
    17. The TPP would reward authoritarian regimes like Vietnam that systematically violate human rights.
    18. The State Department, the U.S. Department of Labor, Human Rights Watch, and Amnesty International have all documented Vietnam’s widespread violations of basic international standards for human rights. Yet, the TPP would reward Vietnam’s bad behavior by giving it duty free access to the U.S. market.
    19. The TPP has no expiration date, making it virtually impossible to repeal.

    ISDS Dance

    For example one person claimed:

    “Direct challenges to the government’s legislative or regulatory powers have occasionally been made, but have always been unsuccessful. In the NAFTA case, Chemtura v. Canada, the investor challenged Canadian pesticide regulations. The tribunal ruled against Chemtura on all claims and the panel expressly recognized Canada’s right to make scientific and environmental regulatory decisions. In another NAFTA case, Methanex v. United States, the tribunal dismissed all of Methanex’s claims of discriminatory treatment and expropriation, noting that “as a matter of general international law, a nondiscriminatory regulation for a public purpose, which is enacted in accordance with due process and affects foreign investors, ‘is not deemed expropriatory and compensable unless specific commitment had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.’ Finally, there is no evidence that any government has changed a policy position or refrained from acting in a policy area for fear of potential ISDS claims. To the contrary, many BITs (including all U.S. agreements since 2004) stipulate that, “except in rare circumstances, nondiscriminatory regulatory actions that are designed and applied to protect legitimate public welfare objectives…do not constitute an indirect expropriation.”

    He claimed to be quoting from https://csis.org/files/publication/141029_investor_state_dispute_settlement.pdf And he also claims:

    "Many of the criticisms of ISDS are overblown. Some claim that ISDS gives investors “special rights,” yet most treaty protections are identical to universal civil rights accorded most citizens. Further, critics exaggerate the notion that investors “sue to overturn regulations;” BITs explicitly limit awards to monetary damages. Finally, conflating ISDS with “big corporations” ignores the fact that the majority of U.S. investors who have filed investment arbitration claims are firms with fewer than 500 employees." [PDF]

    But this was smoke. The very name "Investor State Dispute Settlement" and it's constitution under arbitrators selected from Investor lawyers gives an advantage to investors over consumers, labor, and environmental concerns. The number of employees of a firm is irrelevant to this equation of power. Moreover the outcome in the Chemtura case the one person cited was less clearcut than he claimed:

    Chemtura versus Canada Redux

    "COMMENT: The case has been cited by some proponents of investment arbitration as putting to rest concerns that NAFTA Chapter 11 impedes public health and the environmental regulation. Yet the award itself is troubling on this point."
    "First, the tribunal, like the earlier Glamis Gold v United States tribunal, rejected submissions by Canada that tribunals should defer to good faith regulatory measures of governments."
    "Second, the tribunal noted repeatedly that lindane was banned in many other countries, making it unclear whether the ban would have been upheld had Canada been a regulatory first-mover in limiting the pesticide on health or environmental grounds."
    "Third, the tribunal declined to adopt the approach of the earlier Glamis Gold tribunal, which required the claimant to provide affirmative evidence of any alleged expansion of the NAFTA minimum standard of treatment beyond its established content in international custom. Canada, Mexico, and the U.S. have argued that claimants must satisfy this requirement. However, arbitrators in numerous NAFTA cases have rejected this position, thus facilitating investor claims." © Gus Van Harten 2011. www.iiapp.org.

    Union Access to TPP?

    The White House claims that TPP would extend ISDS access to Labor:

    "If TPP is passed by Congress, it will also create strong, enforceable new labor protections that would allow the United States to take action – on its own, or on the basis of a petition from labor unions or other interested parties – against TPP governments that don't honor their labor commitments. The same is true for enforcing environmental commitments." [https://www.whitehouse.gov/blog/2015/02/26/investor-state-dispute-settlement-isds-questions-and-answers]

    Someone tried to tell me that the TPP would give Labor access to the ISDL arbitration, but that's not true. The AFL-CIO notes:

    "An "investor-to-state dispute settlement" (ISDS) is a special legal right that only those who invest in a foreign country can use to challenge a law, regulation, judicial or administrative ruling or any other government decision. Investors are those who buy property—whether it’s an acre of land, a factory or stocks and bonds."

    But this arbitration is not available to Unions, Labor, etc... I'd be surprised if it were. The whole purpose of the courts is to protect investors **against** labor.

    "ISDS allows the foreign property owner to skip domestic courts, administrative procedures, city hall hearings and the like (all the processes that home-grown property owners use) and sue the host-country government before a panel of private “arbitrators” (like judges, arbitrators have the power to make decisions in cases, but they are not democratically elected or appointed, and they are not subject to stringent conflict of interest rules). Not only that but the foreign property owners don’t lose access to the domestic U.S. processes—they can “double dip” to get what they want."

    We've seen this Venue Shopping in numerous cases.

    What’s the risk?

    The AFL-CIO states the risk of ISDL courts pretty baldly:

    "The risk is that foreign property owners can use this system of "corporate courts" to challenge anything from plain packaging rules for cigarettes to denials of permits for toxic waste dumps to increases in the minimum wage. For any law, regulation or other government decision that the foreign investor does not like, all it has to do is think of an argument for why the decision somehow violated its right to “fair and equitable treatment” or why it might reduce its expected profits and it’s got a case. And, sometimes, just threatening the case is enough for the proposed law or regulation to be withdrawn."

    And they cite some examples withthe Metaclad case:

    "The North American Free Trade Agreement (NAFTA): In the Metalclad case, a U.S. corporation sued the Mexican federal government over a local government’s decision to deny a permit to operate a toxic waste dump. Local citizens felt the dump would pollute their water supply and petitioned their government to deny the permit. Metalclad won more than $15 million."

    And they note that the problem with ISDS is not with direct challenges to laws, but with the fact that investors can seek impunity for their money.

    See, these decisions don’t, by themselves, “overturn” the law, regulation or decision that was challenged. But if the country loses a case and wants to keep the decision that was challenged, it has to pay a fine (sometimes a substantial fine: Ecuador was recently ordered to pay more than $2 billion to Occidental Petroleum). And many countries will just change the rule instead of paying the fine.

    And I'm not even against TPP necessarily. I just don't want it rammed down my throat.

    Further Reading:

    Jim Hightower:

    http://www.hightowerlowdown.org/node/3402#.VVlVsvlViko
    https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/AdvancedSearch.aspx
    Obama:
    http://ustr.gov/tpp
    http://www.euractiv.com/sections/trade-society/malmstrom-only-minor-adjustments-isds-trade-deal-canada-309906
    http://www.aflcio.org/Issues/Trade/What-Is-ISDS

    Saturday, May 16, 2015

    The ineffable One

    The ineffable one doesn't play favorites.
    He's quite willing to give hell to Christians or Muslims.
    ...or anyone.
    The ineffable one doesn't belong to us.
    We are the property of the ineffable Universe.
     
    Our authorities tell us tales,
    but the truth is on our heads.
    If we believe a myth or lie,
    we are in mortal peril not denial.
     
    Faith is an act of courage,
    but it shouldn't be deceit.
    The ineffable one hates false teachers,
    even more than he hates disloyal followers.
    ...no matter how elite.
     
    There may be a burning Bush
    There may be a beckoning pillar of fire
    But we won't be able to see it
    If we are blinded by cynicism
    or falsehoods.
     
    Christopher H. Holte 5/16/2015

    Part of the Burning Bush Poem

    There ain't no burning bush,
    no beckoning pillar of fire.
    There ain't no Bearded God,
    to pull us from our mire.
     
    Everything we do.
    Has consequences in every way.
    And we judge ourselves
    at the end of the day.

    This poem was written long ago. Ironically one major set of poems was inspired by 9/11, when I finally beheld my Burning Bush and Pillar of fire, horrifyingly burning in the South of Manhattan. When the ineffable one talks to us. Do we even listen?

    Sunday, May 10, 2015

    Tu Puedes

    Tu Puedes

    My love still burns bright with her light,
    though her embers were buried years ago.
    Like a single candle still burning in the night.
    warm memories of her carry me through.
     
    Maybe I can't ride a horse or be a brave knight.
    But she sowed good things in my heart from knowing her.
    And I honor her by living my life with integrity.
    til my chores are done and my day is thru;
    and I can rest beside her once again.
     
    She said "this you can do." "tu puedes."

    Christopher H. Holte

    Friday, May 8, 2015

    Satan's Usury, John Turmel and some basic observation about our Banking system

    I've heard John Turmel before. I'd even seen a debate between him and someone else. But I hadn't actually listened to what he had to say until today (2/13/2015). (Or if I had, his delivery had prevented me from taking him seriously.) His poetry is even more corny than mine. I think he's from my Father's generation and he's interesting to listen to. I'd suggest he has 5 important observations:

    Turmel's principles as far as I can understand them:
    1. Interest causes inflation. It doesn't moderate inflation.
    2. Banks should be more like an honest casino.
    3. Deposits should be a bailment.
    4. Banks should not be allowed to print money and lend it at interest.
    5. Because "One cannot pay p + i when only p exists."

    Turmel makes a lot of important points, one's he's been making for years. In fact he talks so much his words fly by and I probably will have to go back and listen to him several more times before I get everything coming out of him. My first exposure to Turmel that I can recall was with a rival "outsider" economist who was accusing all around him of plagiarizing his ideas. But Turmel has been talking since 1980, so it's possible that he was inspired by the guy, or that the guy was inspired by him. I could have heard Turmel before 2000 myself, and just hadn't "thunk" of it. But that's why I'm writing this series. I'm not blowing smoke out of my rear end. These aren't ideas I thunk of myself. And this is too important a matter to be either trying to own or to plagiarize. His arguments are similar to those of the MMT folks. For people having trouble being taken seriously, too many of the people in the anti-Money Usury crowd are too flinty. When they agree, instead of arguing over who said it first, they should debate together and agree on commonalities. Turmel doesn't seem too self conscious in his speech. I guess that is why I didn't take him serious at first. He seems comfortable with getting 400 votes for PM of Canada. Personally I'd prefer that he be listened to.

    Demand Deposits "Money Multiplier" and the Money Printing Swindle

    Turmel demonstrates that the reserve system is a bait and swindle. The banking system pretends we have a reserve system for our currency, and that having "reserves" actually protects the system, when we don't and it doesn't. Turmel explains that the money supply is equal to the sum of all those fractional reserve loans. Every penny of money in our system starts as a loan, with interest rent being collected from it. Thus the money supply equals

    The Money Multiplier

    Yes there is a "money multiplier" as I was taught in Econ 101. At one time I accepted it verbatim as a good thing. But it depends on a con that pretends that our deposits are a bailment, when we find out that banks don't treat deposits as a bailment.

    I was taught that banks loaned our deposits and that created a "money multiplier". We deposit a Dollar. They can loan 90 cents (c). The loanee deposits 90c. They can loan another 81c of the 90c. Etc... The original idea was that because it takes a while for loans to be paid back, and so banks needed that 10c (10%) on hand in case people wanted their money at the til. The 90c ends up deposited in a bank and then 81c of that is loaned. As money is loaned and spent it passes through various hands until it inflates the economy. All Well and Good.

    The Risk of Reserve Banking

    When I studied about the money multiplier and reserve banking I also learned how that multiplier unwinds and how that used to create bank panics, recessions and even depressions.

    If the money multiplier inflates the economy on the upswing. It deflates the economy on the downswing. As depositors take their money out of the system, suddenly banks are missing reserves. This contracts the money supply. Usually at the moment that it is most stressed and people are most vulnerable to not being able to pay back their loans. Essentially the Fractional Reserve system baits us with the notion of having sufficient money to keep the economy moving. But the switch comes when the business cycle inevitably heads downward due to natural events (floods, droughts, crop failures) or simply due to the banks being over-extended and no longer having sufficient "fractional reserves" to make loans. Suddenly people don't have the ability to pay payrolls, banks can't make loans, and this creates a cascading effect. Turmel refers to the consequences in his quote:

    "This period of outstanding material prosperity experienced by the U.S.A. was terminated by the action of the Federal Reserve Banking system by foreclosing on most overdrafts. President Hoover drew attention to the disastrous consequences and requested reconsideration. He was ignored. The demand of the banks for repayment in cash of loans that existed only as entries in their ledgers caused the financial credit system to collapse. Yet, the real credit of the people hadn't changed. This proves that financial credit is a misrepresentation of the real credit. Those factories, raw materials and skilled people were still there but the money that represented them had disappeared. The people were so used to trusting their banker's money dial that when the dial read empty, they turned off their machines rather than check the engines." [http://turmelpress.com/watch80.htm]

    The Fractional Reserve system aggravates the business cycle, just by it's existence. But it gets worse.

    An Honest Casino

    Turmel explains in his "Wachitsuh Hussle" article:

    "Any casino is an example of inflation-free banking at work. The casino banker knows that the fundamental rule for avoiding the inflation of his chips is to make sure that all wealth coming into the game gets its own chips to represent it. There is no limit to the number of chips issued so long as wealth is stored to back them up." From The WACHITSUH HUSSLE, 1980 [http://turmelpress.com/watch80.htm]

    Turmel explains that Casinos operate relatively fairly because they treat their chips as a bailment. Essentially each Casino has it's own money supply which an honest casino treats as a bailment. As long as the money stays within the casino it can be cashed in at it's stated value at any time. Banks on the other hand don't treat money as a bailment. This avoids inflating the number of chips beyond the value of the consideration (real money, credit, assets) the chips represent.

    An Honest casino doesn't charge gamblers interest on their chips. Banks do.

    The dishonest Casino

    The For Profit banks treat the system as if it were a casino, but not an honest one. Indeed when we buy something with a credit or a debit card, they may deduct it from our balance, but they treat the transaction as a credit transaction. Our money is not treated as a bailment, but as their property and they loan it out like it was their property -- at interest they collect as rent on every money based transaction.

    Turmel explains that banks essentially print the 90c they loan out. When the receiver deposits 90c, they Print the 81 cents they next loan out. And they then loan each amount at interest. By issuing money at interest they are collecting economic rent on nearly every transaction of the economy as a whole. Since the banks essentially have a monopoly on money this has to go on to ensure that there is enough money for all the transactions that people need to engage in. Money is created as loans, but consumed as purchases, investment and payrolls. The banks thus can collect rents on every transaction in the economy. Legal theft anyone?

    By issuing money based on deposits that aren't really theirs banks are doing a bait and switch. If the banks were investing investor funds at their request, with say a money lender, then the investor wouldn't expect to be able to withdraw "his money" on demand.

    Interest as Inflationary Rent collection

    Thus our "Fractional Deposit System" is essentially as various people describe it, a means to collect rents. Most of the money circulating in our country starts in the form of loans. While the Treasury may have the monopoly on coined money, the banking system has a monopoly on notes. And so when someone needs money to do something they haven't already done, they have to borrow money at interest. If they were borrowing treasury money or from actual deposits they'd be borrowing their own money, but this money is that of the banks. And they have to pay money back at interest.

    Because all the money available in the system originates in some form of credit. The total money supply necessary for transactions is equal to the sum of this money before interest. But as he notes for the economy as a whole the money supply usually equals the sum of that Money multiplier, which equals the loans outstanding and that is 100% of the sum of the deposits. This puts a drag on people's ability to payback the interest. Thus Turmel demonstrates that it is interest that causes inflation, since people have to pay back loans at interest when the money they are receiving for their investment rarely adds up to the amount of money to pay back p + i. If as he shows "p" is equal to the total amount of money in the system. Then as Turmel explains in his "Wachitsuh Hussle" article:

    "This use of savings to finance new goods means that someone must deprive himself of his current purchasing power and hence creates his demand for interest. The industrialist who finances his plant with someone's savings must pay it back quicker than it depreciates and when it is paid off, again, there is real wealth in the game but no money to represent it. Again, the barter of that wealth is hampered because it is unrepresented by money. Keeping money in short supply deludes people into believing that wealth is in short supply." [From The WACHITSUH HUSSLE, 1980 [http://turmelpress.com/watch80.htm]]

    Principle plus Interest becomes usury when the increase in value never keeps up with the interest rates.

    Essentially fiat money, or any money issued as loans at interest, is a dishonest Casino Chip. Good money is money that faithfully represents the wealth in the game. In the old days people wanted "good money" to be gold or silver because they wanted to be sure to get their original value back. But in a dishonest casino there is never any chance they'll get paid what they are worth because someone is always taking value from their wages, payday loans, etc... We don't have good money because the banks can charge interest on every transaction they are middle-men in. To have good money we need money that is interest free as long as it is in the game. Others have explained the same thing using different explanations. The numbers never add up as long as interest is being charged.

    Money should be a bailment not a source of economic rent.

    Turmel recommends that deposits should go into a "bailment" type account for the use of the depositor. Not be instantly loaned up to 90% so that the economy can be artificially expanded. If deposits are the bailment most of us see our bank accounts as, then when we have money we can spend money and when we don't have money, then we have to prove we have some kind of way to earn it. Loans should be based on some kind of evidence of ability to pay, not on deposits. Money should be applied to markets to keep money flowing. Not to make banksters incredibly wealthy.

    Interest should not be a source of Inflation

    Essentially fiat money, or any money, is like a Casino Chip. And Good money is money that faithfully represents the wealth in the game. This is a clearer idea of what Good money is than what you hear from folks who want money to be some commodity like gold because if money is directly a commodity it tends to be pulled out of the game and kept in treasure boxes. The "better" money pushes the "worse" money out of circulation. But the issue is not what the money is made of, but the wealth backing that money. From Turmel's view (which I can support) wealth is:

    "All real wealth is energy. It is the sum total of the energy expended in its fabrication. It is the cost in energy units of man, material and tool while interest is not an energy cost." [watch80.htm]

    This may be a variant on the "labor theory of value," only updating for horsepower, automation and machinery. This is part of an argument that notes that when people labor for a master they are expending energy, and their pay is a compensation for energy expended. The costs of that energy, if our system were fair would be deductible from income not considered income.

    Conclusion

    Now he gets featured on Alex Jones, and Alex Jones believes the Federal Reserve is the Hellmouth and should be ended. Much as did Andrew Jackson in the 1800's. But the problem with the banking system isn't that we have one, but The Way that it is constituted This should have been fixed way back at the beginning of the country. But privateering through usury has been a lucrative employment since Hamilton wrote his first two reports on the economy. Why would you have to equip an expensive pirate ship when you can loot and steal by lending at interest? It wasn't the Federal Reserve system (or national banks) that was at fault. It was the constitution of the banking system as a whole that was the problem and the systems ability to charge interest on every transaction that made Planters feel poor and rightly paranoid about Eastern bankers. But it's also why doing away with the first, second and third National Banks didn't get those planters out of trouble or make the economy stable.

    Creating money by issuing notes

    Turmel and many others agree that we should create money to pay for "future contracts" and labor, not for the self aggrandizement of the banks. Money should always be backed up by tangible things and actual values. We should issue notes to pay for production and retire those notes on delivery. My friend Rick DiMare suggests that we coin money and back our notes with that. But in any case money should be spent for worthwhile enterprise and paid back. We can either pay it back through taxes or by delivering on promises to pay. The list of things that money notes and eMoney should fund, in my mind, includes roads and infrastructure, farmer equipment & fuel, and the like. That way money doesn't become a drain on the economy.

    Further Reading

    End Fractional Reserve Banking:
    http://www.positivemoney.org/2013/09/can-money-be-converted-to-everlasting-tokens/
    John Quiggin and MMT:
    https://modernmoney.wordpress.com/2014/01/23/john-quiggin-and-mmt/

    So what is important is the economic argument, not who said it first:

    Turmel is Canada. Quiggin in Britain and Australia. I wonder who borrowed from whom? When Keynes was talking in London, there were economists in the United States who were preaching the same principles. Keynesianism wasn't invented solely by Keynes, and the "children" of Keynesianism aren't bedazzled by some Godlike Authority of Keynes, but by the common sense and logic of his arguments. Many "neo-Keynesians" are starting to sound like Turmel. The one thing that anyone who is honest should do is to re-examine premises. A lot of our premises about money are faulty.

    Continued:
    http://holtesthoughts.blogspot.com/2015/02/postal-banking-stamp-scripts-and-fixing.html
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    Originally published 2/13/2015 at 9:33 PM, revised 5/7/2015