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Interview with Ellen Brown
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James
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Oct 30, 2009 03:23 PST
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The interview with Ellen Brown below is a "must" read for all of us who want to get a solid grip on the present financial crisis and how to resolve it.
She speaks sharply and clearly. Most importantly, she deals in fundamentals.
One of the many proofs she gives is that she is almost unique in her contention that a rise in interest rates is more likely to increase than reduce price inflation: "An increase in interest rates is more likely to raise prices. Merchants raise their prices to cover their costs, and interest is a major cost."
This is the essence of what I wrote in my book "The Indigent Rich" in 1971 and expanded in several books and articles afterwards. I underlined it again in "America's Suicidal Statecraft" published in 2006.
I know of only one economist/author, Geoffrey Gardiner in his book "Towards True Monetarism" who expressed the same view of the effect of hikes in interest rates. That was in 1993.
Is it important that we get our assessment of the impact of interest rates on the productive economy right?
Yes, it is vital, as we should long ago have appreciated.
But in the present context, it is especially important because it shows the way in which Ellen Brown's work stands out from that of virtually all her contemporaries.
Her insights are unique.
That applies to the whole body of her thinking but her thinking on the role that could and should be played by publicly-owned banks again demonstrates the practicality of her approach.
She also has some interesting things to say about exchange rates and linking the value of currencies to gold as we did between the mid 1940s and 1971 or some other standard of value. She says "allowing people to trade in any currency they want - doesn't solve anything and just creates new problems. What's the exchange rate going to be between these various domestic currencies, and who is going to set it? Are you going to allow shortselling between currencies, derivative bets, etc.?"
In this again, she is on the verge of identifying one of the most crucial factors if we are to create a stable global financial system.
The evolution of the casino economy with its Ponzi and self-destructive financial arrangements of recent decades has been made possible or magnified by volatility - often extreme volatility - across the international currency exchanges.
A massive global financial industry has been erected on this volatility. That speculative monster is still operating today, with substantial movements almost daily in the value of the US dollar, the Euro, yen and many other currecies such as the rouble, the real, the Australian dollar and so on.
This volatility has been largely the product of free-floating exchange rates which have created opportunities for short-term, speculative gain and a massive flow of funds whose purpose has been less to support traditional trade and real investment and more to place bets on relative movements in major and minor currencies.
This has, inter alia, corrupted efforts to construct a world system of relatively free, non-discriminatory trade and has contributed also to the unsustainable imbalances in international trade and payments we have known in recent decades.
These are fundamental issues with which we must deal, sooner or later . They won't vanish because we warm ourselves with thoughts that the "recession is over", "recovery is on the way" or other expressions of our refusal to identify and deal with the fundamental issues of our time.
James Cumes
Web of Debt author Ellen Brown on debt money, why money is collapsing and why central banks need adult supervision
The Daily BellThe editors of The Daily Bell are pleased to present this exclusive interview conducted by Scott Smith with Web of Debt author Ellen Brown.
Introduction: Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown developed an interest in the developing world and its problems while living abroad for eleven years in Kenya, Honduras, Guatemala and Nicaragua. She returned to practicing law when she was asked to join the legal team of a popular Tijuana healer with an innovative cancer therapy, who was targeted by the chemotherapy industry in the 1990s. That experience produced her book Forbidden Medicine, which traces the suppression of natural health treatments to the same corrupting influences that have captured the money system. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.
Daily Bell: Nice to meet you.
Brown: My pleasure!
Daily Bell: Can you tell us your book's thesis in a nutshell?
Brown: Our money is an illusion. Except for coins, which compose only one ten-thousandth of the money supply, all of our money today consists of debt to private banks. Banks always take back more money in principal and interest than they put into the money supply as principal, making the system basically a pyramid scheme. After 300 years, this scheme has spread around the world and has now reached its mathematical limits. The whole world has been captured in the debt trap of a private international banking monopoly.
Daily Bell: These are clearheaded deductions about economics. How did you get interested?
Brown: In my earlier books, which were on health and the politics of health, I saw the pharmaceutical industry as the force to be reckoned with and exposed. I was on the legal team of a Tijuana cancer therapist named Jimmy Keller, who showed Ed Griffin's documentary "World Without Cancer" to all his patients. I read Griffin's book of the same name and realized that the banking, drug and oil cartels were basically the same entities, and that their power came from the power to create money that they had usurped from the people themselves. This was such a mind-boggling insight that I felt I had to write about it.
Daily Bell: How did you make the jump from nutrition to finance?
Brown: My first book was on nutrition but my later books focused on the politics of health and what is wrong with our health care system. I feel we have been misled about drugs and healing, and I wanted to expose that and set it right. After reading "World Without Cancer," I read Ed Griffin's book "The Creature from Jekyll Island," which I thought was great right up to the end; but I felt his solution would not work. I then read other books on the subject and got my grounding in it. I actually got interested in writing on economics and the Federal Reserve in the seventies, but that was before the Internet, and I wasn't able to follow my hunches to the end. When that remarkable tool became available, the missing puzzle pieces fell into place and I could see the larger picture and had to write about it.
Daily Bell: Tell us some more about your background, where you grew up and when you traveled.
Brown: I was born in California, grew up in the Detroit and Denver suburbs, graduated from UC Berkeley in English and then from UCLA Law School. I met my husband Cliff in law school, and we worked as attorneys in L.A. for 10 years (11 for him), until he burned out on Beverly Hills law and decided to join the U.S. Agency for International Development. He always wanted to go abroad, and it gave me a chance to write and have more time with the kids (we have two). From 1989 to 2000, we lived in Kenya, Honduras, Guatemala and Nicaragua. Then I got divorced and returned to the States, where I discovered this most interesting of writing subjects. I'm still good friends with my ex; I just ran out of topics overseas! There was more to it than that, of course, but I do feel I had to come back to the States to find this topic du jour. My daughter now works for a U.N. N.G.O. and my son is a graduate student in economics in Michigan.
Daily Bell: What's been the reaction to your book?
Brown: Remarkably good. I get flooded with email, which is great. With my other books, I didn't have much contact with readers and felt like a ghostwriter. With this one, I feel like a lightning rod, attracting ideas from everywhere. I credit it to the Internet, an amazing historical development that has changed the game worldwide.
Daily Bell: Are you familiar with Austrian finance? What do you think of it?
Brown: I am, and I enjoyed reading Murray Rothbard; but I don't think the Quantity Theory of Money is correct. Prices do not benignly adjust to a contraction in the money supply; this has been shown historically. When the money supply contracts, workers get laid off, businesses shut down, and the economy goes into a recession or a depression. It's a fallacy to think you can control prices by controlling the money supply - or even that you can control the money supply ("you" meaning, of course, the central bank). In the 1970s and 1980s, when Milton Friedman's monetarism was popular, attempts were made to regulate prices by regulating the money supply, and they didn't work. Some major recessions resulted, and Third World countries got locked hopelessly in debt from a radical increase in interest rates, but the money supply couldn't be controlled.
The Federal Reserve doesn't create money; banks do. The Federal Reserve just responds by providing the reserves they need after the fact if they come up short. And adding money to the system doesn't raise prices - not if workers and materials are available to make goods. If you add money to the system, the money will go looking for goods, and merchants will respond by making more. Supply and demand will go up together and prices will remain stable. An increase in interest rates is more likely to raise prices. Merchants raise their prices to cover their costs, and interest is a major cost.
Daily Bell: Are you a free-market economist or something else?
Brown: I believe in free markets, but I don't believe we have them today. Virtually every market now is manipulated and controlled. We lost our free markets when we gave away the power to create money to a private banking elite. They got their power through sleight of hand, and it can be reversed only by reversing the sleight of hand. Ironically, to get back our free markets, we need some government intervention. The economy has been captured by thieves, and we need some rules and regulations to put the genie back in the bottle.
Daily Bell: What's wrong with a gold or silver monetary system?
Brown: To answer that question properly will take more than a few sentences, but I'll try to be succinct. There are three ways a precious metal system could be set up: (1) a "gold-backed" fiat currency, of the sort we had until 1933 domestically and until 1971 internationally; (2) 100% gold coins, as Ed Griffin recommends; or (3) gold, silver and anything else trading freely with dollars, as recommended by Ron Paul.
The first alternative failed historically and doesn't work mathematically. Nixon had to take the dollar off the gold standard internationally after DeGaulle traded in his dollars for gold and the British then tried to trade in theirs, and the U.S. was about to run out of gold. In a "fractional reserve" system, only a fraction of the gold necessary to cash in all the dollars "backed" by gold is actually held in the banks' vaults. When people figure that out, you get runs on the banks and the banks have to close their doors. Roosevelt was faced with the same problem. People had panicked and were trading in their dollars for gold at the banks. The dollar was then 40% backed by gold, so whenever anyone cashed in $2 in paper money, $3 in loans had to be called in. The result was a radical collapse in the money supply.
Option #2, an all-gold currency, won't work for a number of reasons, but I'll just mention one: where are you going to get the gold? To be fair, the government would have to swap all the dollars in the money supply for gold. Assume a $13 trillion money supply (M3) and that there is $4 trillion worth of gold in the world (per the last report I saw). Even if you could acquire every penny's worth of gold, you'd have to revalue the gold so that it was worth $3000/ounce. Goldbugs say that's doable, but here's my question: how are you going to get the gold? What are you going to buy it with? Your paper dollars are going to be worthless. What Indian woman wearing that gold around her neck is going to be foolish enough to trade it for your paper dollars?
Ed Griffin would just divide the outstanding money supply by the gold in Fort Knox, but we don't know if there's any gold left in Fort Knox, and even assuming there is, the dollar value per ounce is going to be so far from anything resembling the real market value of gold that tying the dollar to gold will lose all meaning. If you want a fixed money supply, why not just have Congress order up X number of dollars, forbid any more to be issued, and make it illegal for banks to create credit on their books? Let them lend what they have and no more. Even that won't work though; you'll quickly degenerate into recession or depression, because there won't be enough money for innovation, development and the like. The ability to create and extend credit is a good thing and is necessary to a thriving economy. It's just a question of who gets to create it, private banks (which then proceed to charge interest on it that they siphon off the top as profits) or public banks, drawing on the "full faith and credit of the United States" because they are the United States and can return the profits to the United States, maintaining a mathematically sound system?
The third idea - allowing people to trade in any currency they want - doesn't solve anything and just creates new problems. What's the exchange rate going to be between these various domestic currencies, and who is going to set it? Are you going to allow shortselling between currencies, derivative bets, etc.? If you have silver and gold coins trading together, what happens if gold goes up in value relative to silver? Will you have to change the face value of the coins? They could be left unstamped, but then you won't really have coins; you'll just have round gold bars. Then why not just keep your gold bars and sell them for paper dollars as needed? If the paper dollars lose value, as goldbugs are sure they will, the gold bars will fetch more dollars when sold, so value will have been preserved just as it would have been if the gold were actually turned into gold coins.
Daily Bell: You are somewhat cynical about government, yet your solutions feature government involvement. Can government really be trusted to do the right thing?
Brown: I have faith in the sort of government "of the people, by the people, for the people" described by Abraham Lincoln; but we don't have that now. What we have is government controlled by a few giant corporations, and they got their power by acquiring the power to create the national money supply. "Allow me to issue and control a nation's currency," Amschel Mayer Rothschild allegedly said in the 18th century, "and I care not who makes its laws." That statement may be apocryphal, but that is how they did it, and that is the power we have to get back if we want a just and trustworthy government that represents people rather than wealthy corporations.
Daily Bell: Do you believe in a business cycle - and that central banks aggravate it by printing too much money?
Brown: We had obvious business cycles in the 19th century when we were on the gold standard. Banks would issue banknotes that were many multiples of the gold they held in their vaults, until the paper money supply so far outstripped its backing that people realized the banks could not make good on all their gold-backed notes and there would be runs on the banks. "Fiat money" was not the problem though. The whole system was a ruse. The gold backing allowed private bankers to create paper money on a printing press and lend it at interest, pretending it represented gold the bankers did not really have in their vaults. Privately-issued paper money that is only partially backed by precious metals is a form of counterfeiting whether the sums are prudently managed or not.
Daily Bell: Was central banking over-printing of money the proximate cause of the economic crisis?
Brown: No. Alan Greenspan did lower interest rates to ridiculously low levels in 2001, precipitating the housing bubble that precipitated the current crisis; and he gave his blessing to derivatives, which allowed banks to move loans off their books, package them up, and sell them to investors, making room on their books for more loans and fanning the housing bubble. But it wasn't the central bank that over-printed money. It was the commercial banks, and of course they don't actually "print" it. They just create it as accounting entries on their books. The "crisis" came when there was a sudden shift in accounting rules, from "mark to fantasy" to "mark to market". The idea was to rein in the over exuberance\ of the banks; but the banks were just doing what they had to do to keep the Ponzi scheme going: create ever more loans. The real cause of the crisis was the Ponzi scheme itself: it just ran out of its food source.
Daily Bell: What are the best investments to make throughout the business cycle, and do they change over time?
Brown: They change over time, and because markets are so heavily manipulated, you can't really know what they are unless you're an insider. The rest of us just have to pay very close attention and ride the roller coaster. A case in point was a year ago, when gold was about to break through $1000, oil was hovering near $150/barrel, bank stocks were plummeting, and so was the dollar. Suddenly in July, everything miraculously reversed - the dollar and bank stocks shot up, and gold and oil plunged. What happened? The Japanese central bank later admitted in its local paper that the central banks had colluded to manipulate the markets.
Daily Bell: What do you think of the current economic crisis. Are Western countries handling it well?
Brown: Yes and no. The credit system has collapsed and Western central banks are trying to pump it back up with "quantitative easing," which is a better approach than President Hoover took when he tried to tighten the government's belt and "balance the budget" in the early 1930s. But bailing out the banks is the wrong approach. Governments should be using quantitative easing (essentially money-printing) to build infrastructure and pay the government's bills rather than trying to clean up the toxic books of failed banks. The problem is that the central banks are there to serve the banking system, not the people. We need truly national central banks. England and Canada technically own their central banks, but their governments still borrow from private banks. They don't use their central banks as if they owned them. China, Malaysia, and South Korea do; and they're faring quite well these days.
Daily Bell: Do you believe in the bailouts taking place in America?
Brown: No. We've been extorted into them. We've been made to believe the only way we can save our credit system is to spend our hard-earned taxpayer money to save the banks that got us into the mess, but that's not true. We can set up our own public credit system and let the private parasitic cartel fend for itself. They made billions in the free market; let them go down in the free market.
Daily Bell: Can you explain the genesis of the financial crisis?
Brown: Taking the long view, it's the end of a 300 year Ponzi scheme. Virtually all of our money is created by banks as loans; but banks create only the principal, not the interest necessary to pay their loans back. More is always owed back than is created in the first place, and new borrowers must continually be found to take out new loans to create the money to pay this extra interest. After 300 years, the whole world has been locked in debt, and the parasitic pyramid has run out of its food source.
All sorts of scams and schemes were devised to plunder the last dollar out of borrowers - securitization of subprime mortgages to move them off the banks' books and make room for more, derivatives to supposedly eliminate the risk of subprime default and induce investors to buy, etc. But the schemes have been exposed, and the "shadow lenders" - the investors induced to buy these bundles of subprime debt - have gone away and they aren't coming back any time soon.
The shadow lenders made up $10 trillion worth of the mortgage market. Virtually all of our money consists of credit (or debt), and a big chunk of this credit has disappeared. The money supply is collapsing, and that is what has caused the financial crisis. The solution is to put money back into the system; but the banks can't do it, because the Bank for International Settlements has imposed a tourniquet on lending with the Basel Accords.
We need to set up our own public banks, which cannot run short of "the full faith and credit of the United States" because they ARE the United States (or whatever local government is setting them up). In the U.S., we should nationalize the Federal Reserve and let it operate like a real government-owned bank, issuing money and credit on behalf of the public for infrastructure and other government expenditures. States could also set up their own credit mechanisms by setting up their own banks.
Daily Bell: Do you believe that some of your ideas will be taken up officially?
Brown: I keep trying, knocking at any doors I see; but it's a slow-moving machine. The first step is mass education and popular understanding.
Daily Bell: Have you heard from Wall Street about your ideas?
Brown: No.
Daily Bell: Are you at all worried about the reaction to your ideas?
Brown: I try to suggest solutions that are good for everyone. I think the private banking business has actually come to the end of the line. They're scrambling desperately to hold it all together, but there's not much more they can do. The whole multi-trillion dollar derivatives edifice was constructed in an attempt to bring business back that the banks were losing to their competitor non-bank institutions, but it didn't work in the end. I think the bankers might be relieved to pass the baton. Not that they want to lose their existing fortunes, but they might be ready to retire to their favorite islands and let the next generation tackle the problem; or to take jobs exercising their expertise in a new public banking arrangement with the stable backing of the government.
Daily Bell: You do a great deal of public speaking. What do you emphasize most in your talks?
Brown: Solutions, solutions, solutions. This nut can be cracked. We've been looking at the problem wrong. When we step outside the box and look again, it's all quite simple. Truth is simple.
Daily Bell: What are the most important - seminal -- articles of yours that you would encourage everyone to read? Where can they be found?
Brown: My articles can all be found on my website at WebofDebt.com. I try to write one every week or two, and they're quite topical, but the most popular (per the OpEdNews ratings) have been "It's the Derivatives, Stupid!", written in September 2008 after the Lehman/AIG collapse; "Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme Called Fractional Reserve Banking" (December 29, 2008); and "Toward a Solution to the Debt Crisis in California" (July 13, 2009). My latest article is "The Public Option in Banking: How We Can Beat Wall Street at Its Own Game" (August 8, 2009), posted on the Huffington Post among other places.
Daily Bell: On behalf of all of our readers we thank you for sharing your views with us - and for your courageous and important work.
Brown: You're welcome. I don't feel courageous; I just write. I live with my 90-year-old mother in a senior village. I need the excitement!
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<DIV><FONT face=Arial size=2>
<H1><FONT size=4>The interview with Ellen Brown below is a "must" read for all
of us who want to get a solid grip on the present financial crisis and how to
resolve it.</FONT></H1>
<DIV><FONT size=4>She speaks sharply and clearly. Most importantly,
she deals in fundamentals. </FONT></DIV>
<DIV><FONT size=4>One of the many proofs she gives is that she is almost unique
in her contention that a rise in interest rates is more likely to increase than
reduce price inflation: "An increase in interest rates is more likely to raise
prices. Merchants raise their prices to cover their costs, and interest is a
major cost."</FONT></DIV>
<DIV><FONT size=4>This is the essence of what I wrote in my book "The Indigent
Rich" in 1971 and expanded in several books and articles afterwards. I
underlined it again in "America's Suicidal Statecraft" published in
2006.</FONT></DIV>
<DIV><FONT size=4>I know of only one economist/author, Geoffrey Gardiner in his
book "Towards True Monetarism" who expressed the same view of the effect of
hikes in interest rates. That was in 1993.</FONT></DIV>
<DIV><FONT size=4>Is it important that we get our assessment of the impact of
interest rates on the productive economy right?</FONT></DIV>
<DIV><FONT size=4>Yes, it is vital, as we should long ago have
appreciated.</FONT></DIV>
<DIV><FONT size=4>But in the present context, it is especially important because
it shows the way in which Ellen Brown's work stands out from that of virtually
all her contemporaries.</FONT></DIV>
<DIV><FONT size=4>Her insights are unique.</FONT></DIV>
<DIV><FONT size=4>That applies to the whole body of her thinking but her
thinking on the role that could and should be played by publicly-owned banks
again demonstrates the practicality of her approach.</FONT></DIV>
<DIV><FONT size=4>She also has some interesting things to say about exchange
rates and linking the value of currencies to gold as we did between the mid
1940s and 1971 or some other </FONT><FONT size=2> </FONT><FONT
size=4>standard of value. She says "allowing people to trade in any currency
they want - doesn't solve anything and just creates new problems. What's the
exchange rate going to be between these various domestic currencies, and who is
going to set it? Are you going to allow shortselling between currencies,
derivative bets, etc.?"</FONT></DIV>
<DIV><FONT size=4>In this again, she is on the verge of identifying one of the
most crucial factors if we are to create a stable global financial
system.</FONT></DIV>
<DIV><FONT size=4>The evolution of the casino economy
with its Ponzi and self-destructive financial arrangements of
recent decades has been made possible or magnified by volatility - often extreme
volatility - across the international currency exchanges.</FONT></DIV>
<DIV><FONT size=4>A massive global financial industry has been erected on this
volatility. That speculative monster is still operating today, with substantial
movements almost daily in the value of the US dollar, the Euro, yen and many
other currecies such as the rouble, the real, the Australian dollar and so on.
</FONT></DIV>
<DIV><FONT size=4>This volatility has been largely the product of free-floating
exchange rates which have created opportunities for short-term, speculative gain
and a massive flow of funds whose purpose has been less to support traditional
trade and real investment and more to place bets on relative movements in
major and minor currencies.</FONT></DIV>
<DIV><FONT size=4>This has, inter alia, corrupted efforts to construct a
world system of relatively free, non-discriminatory trade and has contributed
also to the unsustainable imbalances in international trade and payments we have
known in recent decades.</FONT></DIV>
<DIV><FONT size=4>These are fundamental issues with which we must deal, sooner
or later . They won't vanish because we warm ourselves with thoughts that the
"recession is over", "recovery is on the way" or other expressions of our
refusal to identify and deal with the fundamental issues of our
time.</FONT></DIV>
<DIV><FONT size=4></FONT> </DIV>
<DIV><FONT size=4></FONT> </DIV>
<DIV><FONT size=4>James Cumes</FONT></DIV>
<DIV> </DIV>
<H1>Web of Debt author Ellen Brown on debt money, why money is collapsing and
why central banks need adult supervision </H1><SPAN class=dailyBellArticleText>
<DIV class=photo style="PADDING-RIGHT: 10px; FLOAT: left; PADDING-TOP: 6px"><IMG
src="http://thedailybell.com/images/Articles/Ellen%20Browne.jpg"><BR>The Daily
Bell</DIV>
<P>The editors of The Daily Bell are pleased to present this exclusive interview
conducted by Scott Smith with Web of Debt author Ellen Brown.</P>
<P><STRONG><EM>Introduction:</EM></STRONG><EM> Ellen Brown developed her
research skills as an attorney practicing civil litigation in Los Angeles. In
Web of Debt, her latest book, she turns those skills to an analysis of the
Federal Reserve and "the money trust." She shows how this private cartel has
usurped the power to create money from the people themselves, and how we the
people can get it back. Brown developed an interest in the developing world and
its problems while living abroad for eleven years in Kenya, Honduras, Guatemala
and Nicaragua. She returned to practicing law when she was asked to join the
legal team of a popular Tijuana healer with an innovative cancer therapy, who
was targeted by the chemotherapy industry in the 1990s. That experience produced
her book Forbidden Medicine, which traces the suppression of natural health
treatments to the same corrupting influences that have captured the money
system. Brown's eleven books include the bestselling Nature's Pharmacy,
co-authored with Dr. Lynne Walker, which has sold 285,000 copies.</EM></P>
<P><STRONG>Daily Bell:</STRONG> Nice to meet you.</P>
<P><STRONG>Brown:</STRONG> My pleasure!</P>
<P><STRONG>Daily Bell</STRONG>: Can you tell us your book's thesis in a
nutshell?</P>
<P><STRONG>Brown: </STRONG>Our money is an illusion. Except for coins, which
compose only one ten-thousandth of the money supply, all of our money today
consists of debt to private banks. Banks always take back more money in
principal and interest than they put into the money supply as principal, making
the system basically a pyramid scheme. After 300 years, this scheme has spread
around the world and has now reached its mathematical limits. The whole world
has been captured in the debt trap of a private international banking
monopoly.</P>
<P><STRONG>Daily Bell:</STRONG> These are clearheaded deductions about
economics. How did you get interested?</P>
<P><STRONG>Brown:</STRONG> In my earlier books, which were on health and the
politics of health, I saw the pharmaceutical industry as the force to be
reckoned with and exposed. I was on the legal team of a Tijuana cancer therapist
named Jimmy Keller, who showed Ed Griffin's documentary "World Without Cancer"
to all his patients. I read Griffin's book of the same name and realized that
the banking, drug and oil cartels were basically the same entities, and that
their power came from the power to create money that they had usurped from the
people themselves. This was such a mind-boggling insight that I felt I had to
write about it.</P>
<P><STRONG>Daily Bell: </STRONG>How did you make the jump from nutrition to
finance?</P>
<P><STRONG>Brown:</STRONG> My first book was on nutrition but my later books
focused on the politics of health and what is wrong with our health care system.
I feel we have been misled about drugs and healing, and I wanted to expose that
and set it right. After reading "World Without Cancer," I read Ed Griffin's book
"The Creature from Jekyll Island," which I thought was great right up to the
end; but I felt his solution would not work. I then read other books on the
subject and got my grounding in it. I actually got interested in writing on
economics and the Federal Reserve in the seventies, but that was before the
Internet, and I wasn't able to follow my hunches to the end. When that
remarkable tool became available, the missing puzzle pieces fell into place and
I could see the larger picture and had to write about it.</P>
<P><STRONG>Daily Bell:</STRONG> Tell us some more about your background, where
you grew up and when you traveled.</P>
<P><STRONG>Brown:</STRONG> I was born in California, grew up in the Detroit and
Denver suburbs, graduated from UC Berkeley in English and then from UCLA Law
School. I met my husband Cliff in law school, and we worked as attorneys in L.A.
for 10 years (11 for him), until he burned out on Beverly Hills law and decided
to join the U.S. Agency for International Development. He always wanted to go
abroad, and it gave me a chance to write and have more time with the kids (we
have two). From 1989 to 2000, we lived in Kenya, Honduras, Guatemala and
Nicaragua. Then I got divorced and returned to the States, where I discovered
this most interesting of writing subjects. I'm still good friends with my ex; I
just ran out of topics overseas! There was more to it than that, of course, but
I do feel I had to come back to the States to find this topic du jour. My
daughter now works for a U.N. N.G.O. and my son is a graduate student in
economics in Michigan.</P>
<P><STRONG>Daily Bell:</STRONG> What's been the reaction to your book?</P>
<P><STRONG>Brown: </STRONG>Remarkably good. I get flooded with email, which is
great. With my other books, I didn't have much contact with readers and felt
like a ghostwriter. With this one, I feel like a lightning rod, attracting ideas
from everywhere. I credit it to the Internet, an amazing historical development
that has changed the game worldwide.</P>
<P><STRONG>Daily Bell:</STRONG> Are you familiar with Austrian finance? What do
you think of it?</P>
<P><STRONG>Brown:</STRONG> I am, and I enjoyed reading Murray Rothbard; but I
don't think the Quantity Theory of Money is correct. Prices do not benignly
adjust to a contraction in the money supply; this has been shown historically.
When the money supply contracts, workers get laid off, businesses shut down, and
the economy goes into a recession or a depression. It's a fallacy to think you
can control prices by controlling the money supply - or even that you can
control the money supply ("you" meaning, of course, the central bank). In the
1970s and 1980s, when Milton Friedman's monetarism was popular, attempts were
made to regulate prices by regulating the money supply, and they didn't work.
Some major recessions resulted, and Third World countries got locked hopelessly
in debt from a radical increase in interest rates, but the money supply couldn't
be controlled.</P>
<P>The Federal Reserve doesn't create money; banks do. The Federal Reserve just
responds by providing the reserves they need after the fact if they come up
short. And adding money to the system doesn't raise prices - not if workers and
materials are available to make goods. If you add money to the system, the money
will go looking for goods, and merchants will respond by making more. Supply and
demand will go up together and prices will remain stable. An increase in
interest rates is more likely to raise prices. Merchants raise their prices to
cover their costs, and interest is a major cost.</P>
<P><STRONG>Daily Bell: </STRONG>Are you a free-market economist or something
else?</P>
<P><STRONG>Brown: </STRONG>I believe in free markets, but I don't believe we
have them today. Virtually every market now is manipulated and controlled. We
lost our free markets when we gave away the power to create money to a private
banking elite. They got their power through sleight of hand, and it can be
reversed only by reversing the sleight of hand. Ironically, to get back our free
markets, we need some government intervention. The economy has been captured by
thieves, and we need some rules and regulations to put the genie back in the
bottle.<BR><BR><STRONG>Daily Bell: </STRONG>What's wrong with a gold or silver
monetary system?</P>
<P><STRONG>Brown: </STRONG>To answer that question properly will take more than
a few sentences, but I'll try to be succinct. There are three ways a precious
metal system could be set up: (1) a "gold-backed" fiat currency, of the sort we
had until 1933 domestically and until 1971 internationally; (2) 100% gold coins,
as Ed Griffin recommends; or (3) gold, silver and anything else trading freely
with dollars, as recommended by Ron Paul.</P>
<P>The first alternative failed historically and doesn't work mathematically.
Nixon had to take the dollar off the gold standard internationally after
DeGaulle traded in his dollars for gold and the British then tried to trade in
theirs, and the U.S. was about to run out of gold. In a "fractional reserve"
system, only a fraction of the gold necessary to cash in all the dollars
"backed" by gold is actually held in the banks' vaults. When people figure that
out, you get runs on the banks and the banks have to close their doors.
Roosevelt was faced with the same problem. People had panicked and were trading
in their dollars for gold at the banks. The dollar was then 40% backed by gold,
so whenever anyone cashed in $2 in paper money, $3 in loans had to be called in.
The result was a radical collapse in the money supply.</P>
<P>Option #2, an all-gold currency, won't work for a number of reasons, but I'll
just mention one: where are you going to get the gold? To be fair, the
government would have to swap all the dollars in the money supply for gold.
Assume a $13 trillion money supply (M3) and that there is $4 trillion worth of
gold in the world (per the last report I saw). Even if you could acquire every
penny's worth of gold, you'd have to revalue the gold so that it was worth
$3000/ounce. Goldbugs say that's doable, but here's my question: how are you
going to get the gold? What are you going to buy it with? Your paper dollars are
going to be worthless. What Indian woman wearing that gold around her neck is
going to be foolish enough to trade it for your paper dollars?</P>
<P>Ed Griffin would just divide the outstanding money supply by the gold in Fort
Knox, but we don't know if there's any gold left in Fort Knox, and even assuming
there is, the dollar value per ounce is going to be so far from anything
resembling the real market value of gold that tying the dollar to gold will lose
all meaning. If you want a fixed money supply, why not just have Congress order
up X number of dollars, forbid any more to be issued, and make it illegal for
banks to create credit on their books? Let them lend what they have and no more.
Even that won't work though; you'll quickly degenerate into recession or
depression, because there won't be enough money for innovation, development and
the like. The ability to create and extend credit is a <EM>good</EM> thing and
is necessary to a thriving economy. It's just a question of who gets to create
it, private banks (which then proceed to charge interest on it that they siphon
off the top as profits) or public banks, drawing on the "full faith and credit
of the United States" because they <EM>are</EM> the United States and can return
the profits to the United States, maintaining a mathematically sound system?</P>
<P>The third idea - allowing people to trade in any currency they want - doesn't
solve anything and just creates new problems. What's the exchange rate going to
be between these various domestic currencies, and who is going to set it? Are
you going to allow shortselling between currencies, derivative bets, etc.? If
you have silver and gold coins trading together, what happens if gold goes up in
value relative to silver? Will you have to change the face value of the coins?
They could be left unstamped, but then you won't really have coins; you'll just
have round gold bars. Then why not just keep your gold bars and sell them for
paper dollars as needed? If the paper dollars lose value, as goldbugs are sure
they will, the gold bars will fetch more dollars when sold, so value will have
been preserved just as it would have been if the gold were actually turned into
gold coins.</P>
<P><STRONG>Daily Bell:</STRONG> You are somewhat cynical about government, yet
your solutions feature government involvement. Can government really be trusted
to do the right thing?</P>
<P><STRONG>Brown:</STRONG> I have faith in the sort of government "of the
people, by the people, for the people" described by Abraham Lincoln; but we
don't have that now. What we have is government controlled by a few giant
corporations, and they got their power by acquiring the power to create the
national money supply. "Allow me to issue and control a nation's currency,"
Amschel Mayer Rothschild allegedly said in the 18th century, "and I care not who
makes its laws." That statement may be apocryphal, but that is how they did it,
and that is the power we have to get back if we want a just and trustworthy
government that represents people rather than wealthy corporations.</P>
<P><STRONG>Daily Bell:</STRONG> Do you believe in a business cycle - and that
central banks aggravate it by printing too much money?</P>
<P><STRONG>Brown: </STRONG>We had obvious business cycles in the 19th century
when we were on the gold standard. Banks would issue banknotes that were many
multiples of the gold they held in their vaults, until the paper money supply so
far outstripped its backing that people realized the banks could not make good
on all their gold-backed notes and there would be runs on the banks. "Fiat
money" was not the problem though. The whole system was a ruse. The gold backing
allowed private bankers to create paper money on a printing press and lend it at
interest, pretending it represented gold the bankers did not really have in
their vaults. Privately-issued paper money that is only partially backed by
precious metals is a form of counterfeiting whether the sums are prudently
managed or not.</P>
<P><STRONG>Daily Bell:</STRONG> Was central banking over-printing of money the
proximate cause of the economic crisis?</P>
<P><STRONG>Brown:</STRONG> No. Alan Greenspan did lower interest rates to
ridiculously low levels in 2001, precipitating the housing bubble that
precipitated the current crisis; and he gave his blessing to derivatives, which
allowed banks to move loans off their books, package them up, and sell them to
investors, making room on their books for more loans and fanning the housing
bubble. But it wasn't the central bank that over-printed money. It was the
commercial banks, and of course they don't actually "print" it. They just create
it as accounting entries on their books. The "crisis" came when there was a
sudden shift in accounting rules, from "mark to fantasy" to "mark to market".
The idea was to rein in the over exuberance\ of the banks; but the banks were
just doing what they had to do to keep the Ponzi scheme going: create ever more
loans. The real cause of the crisis was the Ponzi scheme itself: it just ran out
of its food source.<BR><BR><STRONG>Daily Bell:</STRONG> What are the best
investments to make throughout the business cycle, and do they change over
time?</P>
<P><STRONG>Brown: </STRONG>They change over time, and because markets are so
heavily manipulated, you can't really know what they are unless you're an
insider. The rest of us just have to pay very close attention and ride the
roller coaster. A case in point was a year ago, when gold was about to break
through $1000, oil was hovering near $150/barrel, bank stocks were plummeting,
and so was the dollar. Suddenly in July, everything miraculously reversed - the
dollar and bank stocks shot up, and gold and oil plunged. What happened? The
Japanese central bank later admitted in its local paper that the central banks
had colluded to manipulate the markets.</P>
<P><STRONG>Daily Bell:</STRONG> What do you think of the current economic
crisis. Are Western countries handling it well?</P>
<P><STRONG>Brown:</STRONG> Yes and no. The credit system has collapsed and
Western central banks are trying to pump it back up with "quantitative easing,"
which is a better approach than President Hoover took when he tried to tighten
the government's belt and "balance the budget" in the early 1930s. But bailing
out the banks is the wrong approach. Governments should be using quantitative
easing (essentially money-printing) to build infrastructure and pay the
government's bills rather than trying to clean up the toxic books of failed
banks. The problem is that the central banks are there to serve the banking
system, not the people. We need truly national central banks. England and Canada
technically own their central banks, but their governments still borrow from
private banks. They don't use their central banks as if they owned them. China,
Malaysia, and South Korea do; and they're faring quite well these days.</P>
<P><STRONG>Daily Bell:</STRONG> Do you believe in the bailouts taking place in
America?</P>
<P><STRONG>Brown: </STRONG>No. We've been extorted into them. We've been made to
believe the only way we can save our credit system is to spend our hard-earned
taxpayer money to save the banks that got us into the mess, but that's not true.
We can set up our own public credit system and let the private parasitic cartel
fend for itself. They made billions in the free market; let them go down in the
free market.</P>
<P><STRONG>Daily Bell:</STRONG> Can you explain the genesis of the financial
crisis?</P>
<P><STRONG>Brown: </STRONG>Taking the long view, it's the end of a 300 year
Ponzi scheme. Virtually all of our money is created by banks as loans; but banks
create only the principal, not the interest necessary to pay their loans back.
More is always owed back than is created in the first place, and new borrowers
must continually be found to take out new loans to create the money to pay this
extra interest. After 300 years, the whole world has been locked in debt, and
the parasitic pyramid has run out of its food source.</P>
<P>All sorts of scams and schemes were devised to plunder the last dollar out of
borrowers - securitization of subprime mortgages to move them off the banks'
books and make room for more, derivatives to supposedly eliminate the risk of
subprime default and induce investors to buy, etc. But the schemes have been
exposed, and the "shadow lenders" - the investors induced to buy these bundles
of subprime debt - have gone away and they aren't coming back any time soon.</P>
<P>The shadow lenders made up $10 trillion worth of the mortgage market.
Virtually all of our money consists of credit (or debt), and a big chunk of this
credit has disappeared. The money supply is collapsing, and that is what has
caused the financial crisis. The solution is to put money back into the system;
but the banks can't do it, because the Bank for International Settlements has
imposed a tourniquet on lending with the Basel Accords.</P>
<P>We need to set up our own public banks, which cannot run short of "the full
faith and credit of the United States" because they ARE the United States (or
whatever local government is setting them up). In the U.S., we should
nationalize the Federal Reserve and let it operate like a real government-owned
bank, issuing money and credit on behalf of the public for infrastructure and
other government expenditures. States could also set up their own credit
mechanisms by setting up their own banks.</P>
<P><STRONG>Daily Bell:</STRONG> Do you believe that some of your ideas will be
taken up officially?</P>
<P><STRONG>Brown:</STRONG> I keep trying, knocking at any doors I see; but it's
a slow-moving machine. The first step is mass education and popular
understanding.<BR><BR><STRONG>Daily Bell: </STRONG>Have you heard from Wall
Street about your ideas?</P>
<P><STRONG>Brown:</STRONG> No.</P>
<P><STRONG>Daily Bell:</STRONG> Are you at all worried about the reaction to
your ideas?</P>
<P><STRONG>Brown:</STRONG> I try to suggest solutions that are good for
everyone. I think the private banking business has actually come to the end of
the line. They're scrambling desperately to hold it all together, but there's
not much more they can do. The whole multi-trillion dollar derivatives edifice
was constructed in an attempt to bring business back that the banks were losing
to their competitor non-bank institutions, but it didn't work in the end. I
think the bankers might be relieved to pass the baton. Not that they want to
lose their existing fortunes, but they might be ready to retire to their
favorite islands and let the next generation tackle the problem; or to take jobs
exercising their expertise in a new public banking arrangement with the stable
backing of the government.</P>
<P><STRONG>Daily Bell:</STRONG> You do a great deal of public speaking. What do
you emphasize most in your talks?</P>
<P><STRONG>Brown:</STRONG> Solutions, solutions, solutions. This nut can be
cracked. We've been looking at the problem wrong. When we step outside the box
and look again, it's all quite simple. Truth is simple.</P>
<P><STRONG>Daily Bell: </STRONG>What are the most important - seminal --
articles of yours that you would encourage everyone to read? Where can they be
found?</P>
<P><STRONG>Brown:</STRONG> My articles can all be found on my website at <A
title="Web of Debt Article Archive" href="http://www.webofdebt.com/articles"
target=_blank>WebofDebt.com</A>. I try to write one every week or two, and
they're quite topical, but the most popular (per the OpEdNews ratings) have been
"It's the Derivatives, Stupid!", written in September 2008 after the Lehman/AIG
collapse; "Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme Called
Fractional Reserve Banking" (December 29, 2008); and "Toward a Solution to the
Debt Crisis in California" (July 13, 2009). My latest article is "The Public
Option in Banking: How We Can Beat Wall Street at Its Own Game" (August 8,
2009), posted on the Huffington Post among other places.</P>
<P><STRONG>Daily Bell:</STRONG> On behalf of all of our readers we thank you for
sharing your views with us - and for your courageous and important work.</P>
<P><STRONG>Brown</STRONG><STRONG>: </STRONG>You're welcome. I don't feel
courageous; I just write. I live with my 90-year-old mother in a senior village.
I need the excitement!</P></SPAN></FONT></DIV></BODY></HTML>
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