[A-List] The Single Most Important Reform

[Tony B.]

Just thinking out loud here....

I'm not as familiar with the Fed (though I believe it operates roughly 
similarly) as with the Bank of Canada. The latter floats money into 
circulation by buying bonds from the Gov't of Canada, issuing a cheque drawn 
on itself and then printing new notes in the amount of the debt. It deposits 
these in a commercial bank account (or accounts).

Now, the point is that it is with these new accounts that the commercial 
banks then lend out money limited only by their reserve requirements. Let's 
say the original amount deposited was $2 million, then by the time the 
original 2 million is lent out successively to other banks and 
institutions - each making loans limited only by a, say, 8% reserve 
requirement - the total multiplier effect results in $100,000,000 of new 
credit..new money. And it is on this money that the commercial banks extract 
interest, i.e. on money that they created from 'nothing', and received 
profit on for free.

Now what's worse is when these same commercial banks loan money (!) to the 
gov't (which, because of the 'risk-based capital reserve' system instituted 
by the Basel Accords that Canada signed onto in an ammendment to the Bank 
Act - legislated in the dead of night - in the late '80's early 90's, 
induced the commerical banks to load up on Bank of Canada bonds in 
preference over the making of loans to business) 'we' the citizens of Canada 
end up paying the private commercial banks - and paying through the nose - 
for holding gov't debt which, of course, could just have easily been held by 
the Bank of Canada for virtually nothing (and, indeed, all minimal interest 
accruing to the gov't in any case).

[It was precisely this process which, due to the excessive, usorious 
interest rates of the '80s led to the gov't of Canada acquiring roughly 90% 
of its present debt load.]

So perhaps it is in this less literal sense (a process lately and eloquently 
ariculated by Ellen Brown) that Rowbotham is expostulating that, 'How dare 
the gov't claim...when they do not create any money?'

And, of course, the 'democratization' theme is the crucial point. But 
really, can we even talk about economic (or its corollary, political) 
'democratization' under capitalism? Well, I guess we can talk about it - but 
the two being entirely antithetical rather makes the discussion a tad moot.

Tony





----- Original Message ----- 
From: "Bill Totten" <shimogamo at ashisuto.co.jp>
To: "The A-List" <a-list at lists.econ.utah.edu>
Sent: Wednesday, May 06, 2009 7:39 PM
Subject: Re: [A-List] The Single Most Important Reform


> Todd, the Federal Reserve may return most of the interest it receives on 
> US Treasury Bonds it holds, but most of those bonds are held by foreign 
> governments and private foreign and domestic individuals and corporations. 
> Google, for example, on "holders of US treasuries" where you will find 
> http://www.treas.gov/tic/mfh.txt and other good informaton.
>
> Those foreign governments and private foreign and domestic individuals and 
> corporations DON'T return to the US government the interest the US 
> government pays them on those bonds. Since the US government and other 
> governments borrow most of the money they could just as easily spend into 
> circulation, the dominant portion of US and other nations' public debt is 
> the cost of serving that debt, primarily the interest governments pay on 
> that debt. Bill
>
>
> Todd Boyle wrote:
>> Thanks, Bill, for forwarding this...
>>
>>> by Michael Rowbotham - Prosperity (January 2002)
>>>
>>> ...How dare a government claim it cannot find the money to pay for this 
>>> or
>>> that essential service when they do not bother to create any money?
>>
>> Just for the record- the Federal Reserve is a classic central bank.
>> It is a government agency and it prints money on a massive scale.
>> The FAQ is here. http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm
>> The Financial Statements of just the NY Fed, are at
>> http://www.newyorkfed.org/aboutthefed/annualreports.html
>>
>> Does anybody on this list, first of all, dispute any of the statements
>> in the FAQ or Financial Statements?   Do you accept that its earnings
>> in excess of its costs are returned to the Treasury --not its member 
>> banks?
>> Do you then, agree, that it issues money out of nothing, "lends" it to 
>> the
>> Treasury at "interest" --- then, returns the "interest" to the Treasury?
>>
>> To me, that is called printing money.   That is NOT "money as debt".
>>
>> Myths die hard.  The myths we cling to, say more about us than they
>> do about the Federal Reserve.   There's much to be reformed!
>> But Rowbotham's proposal is laughably too simple-- that the government
>> create money by spending it into circulation (It already does! ).
>>
>> His statement of the problem is also pathetic-- Doesn't see the
>> larger global picture?   that Americans are either *privileged* to create
>> the world's money, or complicit in a grand theft, in the creation and
>> export of dollars to the rest of the world, where they pile up and
>> of course will never be repaid.   I think the imbalance in value
>> rendered from one region of the planet to another, is the problem.
>> The dollars are just a reflection of systemic injustice, which is
>> maintained at the point of a gun, really.
>>
>> The people on the A-List need to be absolutely well informed, to be
>> effective.  We are getting a dangerous excess of generalization
>> and opinion, and not enough hard research here on this list...
>> For example look at the Financial Statement of 2008 and 2007
>> http://www.newyorkfed.org/aboutthefed/annual/annual08/NewYorkfinstmt2009.pdf 
>> The numbers just JUMP OUT at you they are so huge!  The size of
>> the Federal Reserve balance sheet tripled in just one year.  The
>> Loans to depository institutions increased 7 times (2008)
>> 300,665,000,000    (2007) 39,845,000,000 and there are
>> whole new areas totaling $530 billion that didn't even exist 2007.
>> Look at the liability section.  Money deposited at the Fed by member
>> banks jumbed from 9 billion to 500 billion in one year, what the hell
>> does that mean?  Seems, they are hoarding funds.  They either cant
>> or wont lend, so they leave it to rot in the central bank.  This
>> is what it looks like when the global banksters do their periodic
>> liquidity destruction of the world, pulling liquidity out of the entire
>> world.   In due course, after we are all bankrupt and foreclosed,
>> they will reflood the money---down thru the channels to the banks
>> on every corner, down to the county and city levels to control
>> whose profits and property values explode most, decide who
>> gets rich, and to engineer another vast flood of patronage money
>> into the Republican Party in 2012 just exactly as it happened
>> in 2000 and 2004.
>>
>> The most important reforms surely include-- opening to public
>> scrutiny and *democratizing* the process of loan approvals.
>> This is part and parcel of making financial transactions public.
>> Until we break the hypnosis, the indoctrination, that people
>> somehow need secrecy in their income and expense information,
>> there's not going to be much progress, folks.   we need be
>> able to login to any bank, and surf the accounts and see who
>> is payor and payee of every transaction.
>>
>> todd
>>
>>
>>
>> Todd
>
>