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The Bankers’ “Power Revolution”: How the Government Got Shackled by Debt
by Ellen Brown / June 1st, 2019
This article is excerpted from my new book Banking on the People: Democratizing Money in the Digital Age, available in paperback June 1.
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The U.S. federal debt has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $22 trillion in April 2019. The debt is never paid off. The government just keeps paying the interest on it, and interest rates are rising.
In 2018, the Fed announced plans to raise rates by 2020 to “normal” levels — a fed funds target of 3.375 percent — and to sell about $1.5 trillion in federal securities at the rate of $50 billion monthly, further growing the mountain of federal debt on the market. When the Fed holds government securities, it returns the interest to the government after deducting its costs; but the private buyers of these securities will be pocketing the interest, adding to the taxpayers’ bill.
사실, 급증하는 연방 부채에 관한 한 문제가 되는 것은 부채 자체가 아니라 이자 입니다. 원금은 해마다 이월됩니다. 그러나 이자는 납세자가 매년 민간 채권자에게 지불해야하며 연방 예산에서 가장 큰 항목 중 하나입니다. 현재 Fed의 "양적 긴축"계획은 보류 중입니다. 그러나 그것들을 따라 가면, 2027 년까지 미국의 납세자들은 연방 부채에 대한 이자만으로 매년 1 조 달러의 빚을 지게 될 것이라는 전망이 나온다. 이는 매년 도널드 트럼프 (Donald Trump) 대통령의 1 조 달러 인프라 계획에 자금을 지원하기에 충분하며, 중산층에서 대부분의 채권을 보유하고 있는 부유한 투자자에게로 부 (富)를 직접 이전하는 것입니다
In fact, it is the interest, not the debt itself, that is the problem with a burgeoning federal debt. The principal just gets rolled over from year to year. But the interest must be paid to private bondholders annually by the taxpayers and constitutes one of the biggest items in the federal budget. Currently the Fed’s plans for “quantitative tightening” are on hold; but assuming it follows through with them, projections are that by 2027 U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Donald Trump’s trillion-dollar infrastructure plan every year, and it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.
이 돈은 어디서 나올까요? 세금의 기형적 증가, 공공 자산의 대량방매를 통한 민영화, 사회 서비스의 폐지로는 이 돈을 감당하기에 충분하지 않을 것이다.
Where will this money come from? Crippling taxes, wholesale privatization of public assets, and elimination of social services will not be sufficient to cover the bill.
Bondholder Debt Is Unnecessary
The irony is that the United States does not need to carry a debt to bondholders at all. It has been financially sovereign ever since President Franklin D. Roosevelt took the dollar off the gold standard domestically in 1933. This was recognized by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a 1945 presentation before the American Bar Association titled “Taxes for Revenue Are Obsolete.”
“The necessity for government to tax in order to maintain both its independence and its solvency is true for state and local governments,” he said, “but it is not true for a national government.” The government was now at liberty to spend as needed to meet its budget, drawing on credit issued by its own central bank. It could do this until price inflation indicated a weakened purchasing power of the currency.
Then, and only then, would the government need to levy taxes — not to fund the budget but to counteract inflation by contracting the money supply. The principal purpose of taxes, said Ruml, was “the maintenance of a dollar which has stable purchasing power over the years. Sometimes this purpose is stated as ‘the avoidance of inflation.’”
The government could be funded without taxes by drawing on credit from its own central bank; and since there was no longer a need for gold to cover the loan, the central bank would not have to borrow. It could just create the money on its books. This insight is a basic tenet of Modern Monetary Theory: the government does not need to borrow or tax, at least until prices are driven up. It can just create the money it needs. The government could create money by issuing it directly; or by borrowing it directly from the central bank, which would create the money on its books; or by taking a perpetual overdraft on the Treasury’s account at the central bank, which would have the same effect.
The “Power Revolution” — Transferring the “Money Power” to the Banks
The Treasury could do that in theory, but some laws would need to be changed.
현재 연방 정부는 연준으로부터 직접 차용 할 수 없으며 이를 사용하기 전에 그 돈을 계좌에 가지고 있어야합니다. 1933 년 달러화가 금 본위제을 벗어난 후, 의회는 연방 준비 은행으로 하여금 돈을 인쇄하여 정부에 빌려 주도록 할 수도 있었습니다. 은행을 배제하고. 그러나 월스트리트는 연방 준비 이사회 (Federal Reserve Act) 개정안에 대해 로비를 했고, 그 결과 연준이 과거에했던 것처럼 재무부로부터 직접 채권을 사는 것을 금지하게 되었습니다.
재무부는 사회 보장국과 재무부의 후원하에 있으면서 잉여가 있는 사회 안전 기금과 다른 정부 신탁 기금 ( "정부 간 계좌")에서 돈을 이체함으로써 빌릴 수도 있습니다. 그러나 정부에 대출 할 수있는 연방 준비 은행은 여기에 포함되어 있지 않고, 연준은 채권 상인으로부터 연방 증권을 매입해야만 중앙정부에 돈을 빌려줄 수 있습니다. 연준은 정부와 독립된 것으로 간주됩니다. 그것의 웹 사이트에는 다음과 같이 쓰여 있습니다, "재무부 증권의 연방 준비 이사회의 지분은 그것이 정부 계좌에 있지 않기 때문에 '공중에 의해 소유 된 것으로 분류된다.
Currently the federal government is not allowed to borrow directly from the Fed and is required to have the money in its account before spending it. After the dollar went off the gold standard in 1933, Congress could have had the Fed just print money and lend it to the government, cutting the banks out. But Wall Street lobbied for an amendment to the Federal Reserve Act, forbidding the Fed to buy bonds directly from the Treasury as it had done in the past.
The Treasury can borrow from itself by transferring money from “intragovernmental accounts” — Social Security and other trust funds that are under the auspices of the Treasury and have a surplus – but these funds do not include the Federal Reserve, which can lend to the government only by buying federal securities from bond dealers. The Fed is considered independent of the government. Its website states, “The Federal Reserve’s holdings of Treasury securities are categorized as ‘held by the public,’ because they are not in government accounts.”
According to Marriner Eccles, chairman of the Federal Reserve from 1934 to 1948, the prohibition against allowing the government to borrow directly from its own central bank was written into the Banking Act of 1935 at the behest of those bond dealers that have an exclusive right to purchase directly from the Fed. A historical review on the website of the New York Federal Reserve quotes Eccles as stating, “I think the real reasons for writing the prohibition into the [Banking Act] … can be traced to certain Government bond dealers who quite naturally had their eyes on business that might be lost to them if direct purchasing were permitted.”
정부는 월스트리트 중개인을 통해 채권을 매각해야 합니다. 그리고 FRB는 사적 채권 시장에서 매수할 수있는 "공개 시장 운영"을 통해서만 채권을 살 수 있었다. 공개 시장 운영은 FOMC (Federal Open Market Committee)에 의해 수행됩니다. FOMC는 폐쇄 된 문 안에서 만나고 민영 은행가의 이익에 의해 지배됩니다. FOMC는 정부의 부채를 구입할 의무가 없으며, 일반적으로 연방 준비 은행 및 은행의 목적에 복무할 때만 그렇게 합니다.
The government was required to sell bonds through Wall Street middlemen, which the Fed could buy only through “open market operations” – purchases on the private bond market. Open market operations are conducted by the Federal Open Market Committee (FOMC), which meets behind closed doors and is dominated by private banker interests. The FOMC has no obligation to buy the government’s debt and generally does so only when it serves the purposes of the Fed and the banks.
1963 년부터 1975 년까지 은행 및 통화에 대한 하원 의장을 지낸
공화당 의원 Wright Patman은 1933 년과 1935 년의 은행법을 통한 권력의 혁명 -금전 권력을 은행으로 옮겨준 연방 공개 시장위원회 (Federal Open Market Committee)에 대한 공식 재제를 요청하였습니다. Patman은 "공개 시장은 실제로 굳게 닫힌 시장이다."라고 언급했습니다. 재무부가 매주 경매에 부친 채권에 대해 선정 된 소수의 채권 딜러만 입찰 할 자격이 있습니다. 그는 실질적인 효과는 납세자로부터 돈을 빼앗아 이들 딜러들에게 주는 것이라고 그는 말했습니다.
Rep. Wright Patman, Chairman of the House Committee on Banking and Currency from 1963 to 1975, called the official sanctioning of the Federal Open Market Committee in the banking laws of 1933 and 1935 “the power revolution” — the transfer of the “money power” to the banks. Patman said, “The ‘open market’ is in reality a tightly closed market.” Only a selected few bond dealers were entitled to bid on the bonds the Treasury made available for auction each week. The practical effect, he said, was to take money from the taxpayer and give it to these dealers.
Feeding Off the Real Economy
That massive Wall Street subsidy was the subject of testimony by Eccles to the House Committee on Banking and Currency on March 3-5, 1947. Patman asked Eccles, “Now, since 1935, in order for the Federal Reserve banks to buy Government bonds, they had to go through a middleman, is that correct?” Eccles replied in the affirmative.
Patman then launched into a prophetic warning, stating, “I am opposed to the United States Government, which possesses the sovereign and exclusive privilege of creating money, paying private bankers for the use of its own money. … I insist it is absolutely wrong for this committee to permit this condition to continue and saddle the taxpayers of this Nation with a burden of debt that they will not be able to liquidate in a hundred years or two hundred years.”
이 언급의 진실성은 오늘 날 결코 상환될 수 없는 22 억 달러의 부채를 지게 되었을 때 고통스럽게 분명하게 드러납니다. 정부는 그저 부채를 이월해 가며 은행과 채권소유자들에게 이자를 지불 계속할 따름이고, 새로운 재화와 서비스를 창출하지 않으면서 돈이 돈을 버는 "금융화된" 경제에 영양을 공급합니다. 금융화된 경제는 실물 경제를 먹고 사는 기생충이 되어, 생산자와 근로자를 더욱 더 많은 부채를 지도록 몰아 가고 있습니다.
The truth of that statement is painfully evident today, when we have a $22 trillion debt that cannot possibly be repaid. The government just keeps rolling it over and paying the interest to banks and bondholders, feeding the “financialized” economy in which money makes money without producing new goods and services. The financialized economy has become a parasite feeding off the real economy, driving producers and workers further and further into debt.
In the 1960s, Patman attempted to have the Fed nationalized. The effort failed, but his committee did succeed in forcing the central bank to return its profits to the Treasury after deducting its costs. The prohibition against direct lending by the central bank to the government, however, remains in force. The money power is still with the FOMC and the banks.
A Model We Can No Longer Afford
스위스의 "중앙 은행의 은행"인 국제 정착 은행 (Bank for International Settlements)조차 인정하듯이, 오늘날 부채 증가 모델은 한계에 도달했습니다. 2016 년 6 월 연례 보고서에서 BIS는 부채 수준이 너무 높고 생산성 증가율이 너무 낮으며 정책 책략의 여지가 너무 좁다고 말했습니다. BIS는 "세계 경제는 현재의 국면을 야기한 부채가 동력이 되는 성장 모델에 더 이상 의존 할 여력이 없다"고 경고했습니다.
Today, the debt-growth model has reached its limits, as even the Bank for International Settlements, the “central bankers’ bank” in Switzerland, acknowledges. In its June 2016 annual report, the BIS said that debt levels were too high, productivity growth was too low, and the room for policy maneuver was too narrow. “The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture,” the BIS warned.
But the solutions it proposed would continue the austerity policies long imposed on countries that cannot pay their debts. It prescribed “prudential, fiscal and, above all, structural policies” — “structural readjustment.” That means privatizing public assets, slashing services, and raising taxes, choking off the very productivity needed to pay the nations’ debts. That approach has repeatedly been tried and has failed, as witnessed, for example, in the devastated economy of Greece.
한편 미네아폴리스 연방 총재 닐 카슈 카리 (Neel Kashkari)에 따르면 2008 년 이후 금융 규제로 인해 정부의 구제 금융 가능성이 84 %에서 67 %로 완만하게 낮아졌습니다. 이는 여전히 주요 시스템 전체 위기가 발생할 가능성이 67 %라는 것을 의미합니다.이 위기 상황은 지난 번 보다 심각 할 수 있습니다. 가장 큰 은행은 더 크지고, 지역 은행은 더 적으지며, 국제적 채무 수준은 더 높아지고 있습니다. 경제는 더 추락할 것입니다. 규제자 모델은 오래 전에 폐기되어 버려진 "구식 금융"형태를 목표로 하고 있습니다.
우리는 공공의 비용으로 주주 이익을 극대화하기보다는, 대중과 경제의 요구에 부응하도록 설계된 새로운 모델이 필요합니다.
Meanwhile, according to Minneapolis Fed president Neel Kashkari, financial regulation since 2008 has reduced the chances of another government bailout only modestly, from 84 percent to 67 percent. That means there is still a 67 percent chance of another major systemwide crisis, and this one could be worse than the last. The biggest banks are bigger, local banks are fewer, and global debt levels are higher. The economy has farther to fall. The regulators’ models are obsolete, aimed at a form of “old-fashioned banking” that has long since been abandoned.
We need a new model, one designed to serve the needs of the public and the economy rather than to maximize shareholder profits at public expense.
• An earlier version of this article was published in Truthout.org.
https://dissidentvoice.org/2019/06/the-bankers-power-revolution-how-the-government-got-shackled-by-debt/
Banking on the People: Democratizing Money in the Digital Age
By Ellen Brown
Global Research, May 26, 2019
Ellen Brown has just released a new book that is available for pre-order.
Today most of our money is created, not by governments, but by banks when they make loans. This book takes the reader step by step through the sausage factory of modern money creation, explores improvements made possible by advances in digital technology, and proposes upgrades that could transform our outmoded nineteenth century system into one that is democratic, sustainable, and serves the needs of the twenty-first century.
Reviews
“Banking on the People is a compelling and fast-moving primer on the new monetary revolution by the godmother of the public banking movement now emerging throughout the country. Brown shows how our new understanding of money and its creation, long concealed by bankers and others capturing the benefits for their own purposes, can be turned to support the public in powerful new ways.” — Gar Alperovitz, professor emeritus at the University of Maryland, Co-Founder of The Democracy Collaborative and author of America Beyond Capitalism and other books
“More lucidly that any other expert I know, Ellen Brown shows in Banking on the People how we can break the grip of predatory financialization now extracting value from real peoples’ productive activities all over the world. This book is a must read for those who see the promising future as we seek to widen democracies and transform to a cleaner, greener, shared prosperity.” — Hazel Henderson, CEO of Ethical Markets Media and author of Mapping the Global Transition to the Solar Age and other books
Quantitative Easing and Universal Basic Income
“Ellen Brown shows that there is a much better alternative to Citibank, Wells Fargo and Bank of America. Public banks can safeguard public funds while avoiding the payday loans, redlining, predatory junk-mortgage loans and add-on small-print extras for which the large commercial banks are becoming notorious.” — Michael Hudson, Research Professor of Economics at the University of Missouri, Kansas City, and author of Killing the Host and other books
“Banking on the People offers a tour de force for those activists, NGOs, and academics wanting to understand the forces at play when we talk about the democratization of finance. A must read!” — Thomas Marois, Senior Lecturer, SOAS University of London, author of States, Banks and Crisis and other publications