Web of Debt

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Book: Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free (Revised and Updated) By Ellen Hodgson Brown.

URL = http://www.webofdebt.com/


"Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions -- including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices -- and robbing you of the value of your money. Web of Debt unravels the deception and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln. If you care about financial security, your own or the nation's, you should read this book." (http://astore.amazon.com/crealm/detail/0979560810)

From the publisher:

" Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures, but the scheme has reached its mathematical limits. There isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. When the investors realize that the "insurance" against catastrophe that they have purchased in the form of derivatives is worthless, they are liable to jump ship and bring the whole shaky edifice crashing down.

Web of Debt unravels the deceptions in our money scheme and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln. If you care about financial security, your own or the nation's, you should read this book." (http://www.webofdebt.com/)


Daily Bell: For those new to this subject, what is Web of Debt’s main thesis?

Ellen Brown: The thesis is that the power to create money has been usurped by a private international banking cartel, which issues our money as debt and lends it back to us at interest. The cartel makes it appear that governments are creating our money, and governments get blamed when things go wrong; but they are actually just pawns of the cartel. We the people can get back our government and our republic only by reclaiming the power to create our own money. We can use the same credit system that private banks use, but administered as a public utility, monitored and overseen by public servants on the model of libraries and courts. To be a sustainable system, profits need to be returned to the community rather than siphoned off into private coffers.

Daily Bell: Can you expand on debt-based money versus money that is issued into the economy without debt – and why the latter is preferable. Some would say the latter exercise comes with debt as well …

Ellen Brown: I don’t think debt is necessarily bad. The flip side of debt is credit, which is a very good thing. Inventing credit is probably the most innovative thing bankers ever did. But because the Italian bankers who first came up with that scheme were on a gold-based system, they had to do it essentially by cheating, pretending to have more money than they actually had. There would be periodic runs on the banks and the system would collapse. A public banking system would acknowledge credit to be just a legal agreement to pay over time. Creditworthy borrowers would get credit. Their access to credit needn’t be contingent on someone else’s agreement to give it up. The system would be mathematically sustainable.

Daily Bell: Let’s back up. You believe that gold and silver only circulated as money once government got involved? True? Can you expand on this?

Ellen Brown: I think that’s true by definition. Webster’s dictionary defines a “coin” as “a usually flat piece of metal issued by governmental authority as money.” Wikipedia says: “King Croesus, ruler of Lydia (560–546 BC), began issuing the first true gold coins, . . . with a standardized purity, for general circulation. They were quite crude, and were made of electrum, a naturally occurring pale yellow mixture of gold and silver.”


Daily Bell: Why do you believe that government is superior to the free market?

Ellen Brown: Why do you believe that I believe government is superior to the free market? I believe government is necessary to have a free market. Otherwise you have the law of the jungle, the exploitation of the weak by the strong.

Daily Bell: Do you believe that government is effective at all levels big and small?

Ellen Brown: Without meaning to be rude, I have to say I’m slapping my forehead at some of these questions. Government can be effective at a variety of levels. Not all government is effective. Some government is very ineffective. It depends largely on the political structure.

Daily Bell: Do you believe in central banking so long as it is publicly controlled?

Ellen Brown: A publicly-owned central bank can be very effective in serving the people. The Commonwealth Bank of Australia is my favorite model. Not all publicly-owned banks, however, are effective for that purpose. I often hear British money reformers complaining that the publicly-owned Bank of England is still serving the interests of the private banking establishment, just as when it was private. It is public in name only.

Daily Bell: Do you believe that government was responsible for a good deal of mayhem in the 20th century?

Ellen Brown: Sure, but somebody manipulates governments into wars and other mayhem. I believe a government could be structured so that it actually served the people; but first, it would have to recapture control of its monetary system. Few governments are in that position today.


Daily Bell: How can anyone know how much money is enough money? Or when to stop lending in your paradigm?

Ellen Brown: Lending is an organic process, responding to the needs of the borrowers. Contrary to popular belief, banks do not lend their own money or their depositors’ money; they create new money on their books every time they make a loan. I think lending is a much more natural and efficient way to get new money into the money supply than to have an independent body trying to dictate what the economy needs. But private banking institutions have proven they cannot be trusted with this powerful tool. Except for coins, which are a very marginal part of the money supply, all money today is just credit – the credit of the people. It should be a public utility, administered through publicly-owned banks.

Daily Bell: Won’t your paradigm end up injecting too much money into the economy nonetheless?

Ellen Brown: No. Loans grow organically in response to the demands of trade, and that credit-money disappears when the loans are paid off. When demand for loans is low, the money supply shrinks naturally. You may be thinking of the paradigm of another school, which in your last article you referred to as representing a “Brownian Schism.” I’m flattered, but they actually came first.

Daily Bell: How will you value the land and other goods used to secure the loan?

Ellen Brown: Just as bankers do now. I’m not talking about putting politicians in charge of running the banks. Publicly-owned banks are run by bankers, just as privately-owned banks are. See, e.g., the very well run Bank of North Dakota. The Commonwealth Bank of Australia worked so well because it was set up by a professional banker who decided to apply his insider knowledge to serve the public interest. Knowing that banks simply created credit on their books, he proceeded to finance massive infrastructure with this sort of book-created credit – and it worked, brilliantly well.


Daily Bell: What makes you think that a government based public money system wouldn’t be taken over by powerful private forces just like this one has been? We call it mercantilism. If you give government power, won’t the wealthiest end up with their hands on the levers of government?

Ellen Brown: That hasn’t happened in North Dakota, which currently has the only state-owned bank in the country. Certainly a public institution that returns its profits to the public, which has full public accountability and transparency, and employs civil servants who make no bonuses or commissions for churning loans, has a better chance of serving the public than the corrupt private system we have now.

Daily Bell: Would you be in favor of one world government?

Ellen Brown: Definitely not of the sort projected by that group. I think national and state sovereignty is very important, particularly in matters of money. But the internet and global trade are increasingly bringing us closer together, and we probably do need some sort of international rules to keep things running smoothly. For example, I think there needs to be a global yardstick for measuring the value of currencies against each other – not the “floating” exchange rates we have now, which are subject to speculative manipulation, but something based on the real cost of goods and services in each country. I have a chapter on that in Web of Debt, including a proposed model.

Daily Bell: OK, thanks for answering the tough questions again. How is your movement doing?

Ellen Brown: Very well, thank you! I did two presentations in the California Bay Area in December, which generated so much interest that we have just launched a Public Banking Institute to follow though. The website is http://www.publicbankinginstitute.org." (http://2020speculator.wordpress.com/2011/01/17/really-good-discussion-on-public-banking/)


Reviewed by Jamie Walton, American Monetary Institute (AMI) researcher:

"Ellen Brown spins a captivating tale about our present money system, particularly for readers who were unaware that most of our money is created and controlled by the banking system, as a ‘debt’. Indeed, the book’s main value has been as an introduction to some of the problems with the debt-based money system, and some of the potential of monetary reform. Brown certainly deserves credit for this. However, through twists and turns, the book ends up promoting what could be an even stickier web of debt, as we’ll see below.

The storyline begins with a sweeping coverage of the turbulent period of political, economic and monetary debate arising from the spate of banking ‘panics’ and recessions experienced from the aftermath of the Civil War through the early 20th century. Various ‘Populist’ political movements with calls for monetary reform arose during this period of upheaval, but what emerged from the confusion was the Federal Reserve System, followed by the disaster of the ‘Great’ Depression. The following chapters go forwards and backwards through monetary history from the present Federal Reserve System to colonial America, medieval Britain and Europe, the ancient Middle East, and then back again, up to the early stages of the ‘sub-prime crisis’. This yo-yo time-traveling is disorienting, but it’s the ‘missing links’ that are the main cause for concern.

The title of the book correctly suggests debt is a trap. Brown provides an adequate explanation of how the debt trap is set in this passage highlighting the essentially fraudulent nature of present banking conventions:

“When you lend someone your own money, your assets go down by the amount that the borrower’s assets go up. But when a bank lends you money, its assets go up. Its liabilities also go up, since its deposits are counted as liabilities; but the money isn’t really there. It is simply a liability – something that is owed back to the depositor. The bank turns your promise to pay into an asset and a liability at the same time, balancing its books without actually transferring any pre-existing money to you.

The spiraling debt trap that has subjected financially-strapped people to usurious interest charges for the use of something the lenders never had to lend is a fraud on the borrowers.” [p. 284*]

Brown is clearly saying here it is banks lending “the use of something the lenders never had to lend” which “is a fraud” because people are made to think they’re borrowing money that’s there to be lent.

Surprisingly then, Brown ends up wanting to enshrine this “fraud” by inserting it into the U.S. Constitution. Furthermore, Brown would enthrone the biggest Wall Street banks inside the U.S. Government to continue perpetrating it on the people.

Let’s track how Brown reaches her ‘conclusion’ proposing to protect the system that contains what she calls a “fraud” – the debt-based money system (also called a ‘debt-money’ or ‘credit-money’ system).

Earlier on, Brown admits the debt-based money system is unsustainable and can’t go on:

“We have reached the end of the line on the debt-money train and will have to consider some sort of paradigm shift if the economy is to survive.” [p. 199]

Readers might expect from this statement that Brown would conclude by proposing something to get us out of this dead-end system and into one that’s more just and sustainable. Instead Brown proposes to keep the same system in place and entrench it, rather than reform it. This is the opposite of a solution.

And this is despite Brown showing us she knows roughly what’s needed to get us out with this passage questioning the unjustifiable money-creating privilege presently usurped by the banking system:

“Wouldn’t it be cheaper and safer to give the power to create dollars to Congress itself, with full accountability and full disclosure to the public? … It could just create the money in full view in an accountable way. The power to create money is given to Congress in the Constitution. … the cheapest and most honest way to do it is by creating the money directly and then spending it on projects that ‘promote the general welfare.’” [p. 388/9]

These suggestions are close to what all serious monetary reformers advocate. But instead of pursuing them any further, Brown almost immediately begins to retreat from this real reform.

Finally, after hundreds of pages telling us how bad the debt-money system is, Brown turns around and starts ‘justifying’ the present unsustainable (and unjust) debt-based money system, telling us it:

“… would be sorely missed if banks could no longer engage in it.” [p. 403]

Brown completes her remarkable U-turn by rejecting what she’d just said is “the cheapest and most honest way” to create money in favor of keeping the system she earlier said had “reached the end of the line” and jumps to the ‘conclusion’ that we could somehow fix the problem by ‘nationalizing’ the banking business:

“What is wrong with the current system is not that money is advanced as credit against the borrower’s promise to repay but that the interest on this advance accrues to private banks that gave up nothing of their own to earn it. This problem could be rectified by turning the extension of credit over to a system of truly national banks … authorized both to deal with deposits and to create credit-money with accounting entries, … as an agent of Congress.” [p. 404]

Notice Brown has shifted her definition of the problem from the “fraud” itself to the interest on the “fraud”. She then asserts that taking interest on ‘loans’ of “nothing” would be okay if only “national” banks took it. In one paragraph, Brown redefines the problem and turns the “fraud” into her ‘solution’.

But her flawed argument misses the point entirely: it turns our government into a banker, the ‘owner’ of our indebtedness, but does nothing to change the ill effects caused by a debt-based money system.

Brown ends up keeping the problem in place.


In summary, the book is very disappointing (from a monetary reform perspective) because Brown’s conclusion proposes a non-solution: to keep the unsupportable debt-based system in place and consolidate it by embedding the fraudulent ‘debt-money’ accounting mechanism within the apparatus of government.

That’s not effective reform and certainly not a “paradigm shift”. Instead, Brown proposes to entrench the very same system she’s been “shocking” us with. This is not “how we can break free” – it’s the same trap.

This is the same pattern that we observe so many times in numerous publications on monetary matters: identifying the problems (effects) reasonably accurately, but not identifying the cause accurately, and so not offering a permanent solution that prevents the problems from continuing or recurring.

Brown fails to recognize it makes absolutely no difference who runs a faulty system: if the system is faulty, then the same undesirable results will keep on happening. All serious monetary reformers should know this." (http://www.monetary.org/review-of-ellen-browns-the-web-of-debt/2010/12_


From Matriarchies of Abundance to Patriarchies of Debt

By Ellen Brown:

(excerpted from chapter 5)

"Located where Iraq is today, Sumer was a matriarchal agrarian economy with a financial system based on abundance and shared wealth. One of the oldest known bronze coins was the Sumerian shekel, dating from 3,200 B.C. It was inscribed with the likeness of the Goddess Inanna-Ishtar, who bestowed kingship in Sumer and was the goddess of fertility, life and death. Inanna wore the horns of a cow, the sacred animal that personified the Great Mother everywhere in ancient myth. Hathor, the Egyptian equivalent, had cow ears and a human face and was the goddess of love, fertility and abundance. Her horn was the “cornucopeia” from which poured the earth’s plenty. Isis, an even more powerful Egyptian mother figure, was portrayed wearing the horns of a cow with the sun disc between them. In India, the cow goddess was Kali, for whom cows are sacred to this day. Cows were also associated with money, since they were an early medium of exchange. The Sumerian word for “interest” was the same as the word for “calf.” It was natural to repay advances of cattle with an extra calf, because the unit of exchange itself multiplied over the loan period. This was also true for grain, for which the temples served as storehouses. Grain advanced over the growing period was repaid with extra grain after the harvest, in gratitude to God for multiplying the community’s abundance.

The temples were public institutions that also served welfare functions, including the support of widows, orphans, the elderly and infirm. Temples were endowed with land to provide food for their dependent labor, and resources such as herds of sheep to provide wool for their workshops. They operated autonomously, supporting themselves not through taxation but by renting lands and workshops and charging interest on loans. Goods were advanced to traders, who returned the value of the goods plus interest. The temples also acted as central banks. Sacrificial coins inscribed “debt to the Gods” were paid to farmers in acknowledgment that wheat had been contributed to the temple. These coins were also lent to borrowers. When interest was paid on the loans, it went back to the temple to fund the community’s economic and social programs and to cover losses from bad loans.

It was only after the Indo-European invasions of the second millennium B.C. that moneylending became the private enterprise of the infamous moneychangers. The Goddess Inanna was superseded as the source of supreme kingship by the male god Enlil of Nippur, and the matriarchal system of shared communal abundance was forcibly displaced by a militant patriarchal system. The cornucopia of the Horned Goddess became the bull horns of the Thunder God, representing masculine power, virility and force.

In the temple system, the community extended credit and received the money back with interest. In the system that displaced it, interest on debts went into private vaults to build the private fortunes of the moneychangers. Interest was thus transformed from a source of income for the community into a tool for impoverishing and enslaving people and nations. Unlike corn and cows, the gold the moneylenders lent was inorganic. It did not “grow,” so there was never enough to cover the additional interest charges added to loans. When there was insufficient money in circulation to cover operating expenses, farmers had to borrow until harvest time; and the odd man out in the musical chairs of finding eleven coins to repay ten wound up in debtor’s prison. Historically, most slavery originated from debt." (http://www.webofdebt.com/excerpts/chapter-5.php)

The Tally System: Governmental Origins of Money

By Ellen Brown:

(from chapter 5 of the book, Web of Debt):

"According to Stephen Zarlenga, who has traced the origins and history of money in his revealing compendium The Lost Science of Money, the use of coins as money did not originate with merchants trading in the marketplace. The first known coins were issued by governments; and their value was the value stamped on them, not the price at which the metal traded.

Zarlenga quotes Aristotle, who said:

- Money exists not by nature but by law. [It acts] as a measure [that] makes goods commensurate and equates them. . . . There must then be a unit, and that fixed by agreement.

Money was a mere fiat of the law. Fiat means “let it be done” in Latin. “Fiat money” is money that is legal tender by government decree. It is simply a “tally,” something representing units of value that can be traded in the market, a receipt for goods or services that can legally be tendered for other goods or services. In Mandarin China, where paper money was invented in the ninth century, this sort of fiat currency funded a long and prosperous empire. Fiat money was also used successfully in medieval England, but in England it was made of wood.

The English tally system originated with King Henry I, son of William the Conqueror, who took the throne in 1100 A.D. The printing press had not yet been invented, and taxes were paid directly with goods produced by the land. Under King Henry’s innovative system, payment was recorded with a piece of wood that had been notched and split in half. One half was kept by the government and the other by the recipient. To confirm payment, the two halves were matched to make sure they “tallied.” Since no stick splits in an even manner, and since the notches tallying the sums were cut right through both pieces of wood, the method was virtually foolproof against forgery. The tally system has been called the earliest form of bookkeeping.

According to historian M. T. Clanchy in From Memory to Written Record, England 1066-1307:

- Tallies were . . . a sophisticated and practical record of numbers. They were more convenient to keep and store than parchments, less complex to make, and no easier to forge.

Only a few hundred tallies survive, Clanchy writes, but millions were made. Tallies were used by the government not only as receipts for the payment of taxes but to pay soldiers for their service, farmers for their wheat, and laborers for their labor. At tax time, the treasurer accepted the tallies in payment of taxes. By the thirteenth century, the financial market for tallies was sufficiently sophisticated that they could be bought, sold, or discounted. Tallies were used by individuals and institutions to register debts, record fines, collect rents, and enter payments for services rendered. In the 1500s, King Henry VIII gave them the force of a national currency when he ordered that tallies must be used to evidence the payment of taxes. That meant everyone had to have them. In War Cycles, Peace Cycles, Richard Hoskins writes that by the end of the seventeenth century, about 14 million pounds’ worth of tally-money was in circulation.

Zarlenga cites a historian named Spufford, who said that English coinage had never exceeded half a million pounds up to that time. The tally system was thus not a minor monetary experiment, as some commentators have suggested. During most of the Middle Ages, tallies may have made up the bulk of the English money supply. The tally system was in use for more than five centuries before the usury bankers’ gold-based paper banknotes took root, helping to fund a long era of leisure and abundance that flowered into the Renaissance." (http://www.webofdebt.com/excerpts/chapter-5.php)

Medieval Prosperity and the Absence of Usurious Lending Practices

"Modern schoolbooks generally portray the Middle Ages as a time of poverty, backwardness, and economic slavery, from which the people were freed only by the Industrial Revolution; but reliable early historians painted a quite different picture. Thorold Rogers, a nineteenth century Oxford historian, wrote that in the Middle Ages, “a labourer could provide all the necessities for his family for a year by working 14 weeks.” Fourteen weeks is only a quarter of a year! The rest of the time, some men worked for themselves; some studied; some fished. Some helped to build the cathedrals that appeared all over Germany, France and England during the period, massive works of art that were built mainly with volunteer labor. Some used their leisure to visit these shrines. One hundred thousand pilgrims had the wealth and leisure to visit Canterbury and other shrines yearly. William Cobbett, author of the definitive History of the Reformation, wrote that Winchester Cathedral “was made when there were no poor rates; when every labouring man in England was clothed in good woollen cloth; and when all had plenty of meat and bread . . . .” Money was available for inventions and art, supporting the Michelangelos, Rembrandts, Shakespeares, and Newtons of the period.

The Renaissance is usually thought of as the flowering of the age; but the university system, representative government in a Parliament, the English common law system, and the foundations of a great literary and spiritual movement were all in place by the thirteenth century, and education was advanced and widespread. As one scholar of the era observes:

We are very prone to consider that it is only in our time that anything like popular education has come into existence. As a matter of fact, however, the education afforded to the people in the little towns of the Middle Ages, represents an ideal of educational uplift for the masses such as has never been even distantly approached in succeeding centuries. The Thirteenth Century developed the greatest set of technical schools that the world has ever known. . . . These medieval towns, . . . during the course of the building of their cathedrals, of their public buildings and various magnificent edifices of royalty and for the nobility, succeeded in accomplishing such artistic results that the world has ever since held them in admiration.

The common people had leisure, education, art, and economic security.

According to The Catholic Encyclopedia:

- Economic historians like Rogers and Gibbins declare that during the best period of the Middle Ages – say, from the thirteenth to the fifteenth century, inclusive – there was no such grinding and hopeless poverty, no such chronic semi-starvation in any class, as exists to-day among large classes in the great cities . . . . In the Middle Ages there was no class resembling our proletariat, which has no security, no definite place, no certain claim upon any organization or institution in the socio-economic organism.

Richard Hoskins attributes this long period of prosperity to the absence of usurious lending practices. Rather than having to borrow the moneylenders’ gold, the people relied largely on interest-free tallies. Unlike gold, wooden tallies could not become scarce; and unlike paper money, they could not be counterfeited or multiplied by sleight of hand. They were simply a unit of measure, a tally of goods and services exchanged. The tally system avoided both the depressions resulting from a scarcity of gold and the inflations resulting from printing paper money out of all proportion to the goods and services available for sale. Since the tallies came into existence along with goods and services, supply and demand increased together, and prices remained stable. The tally system provided an organic form of money that expanded naturally as trade expanded and contracted naturally as taxes were paid. Bankers did not have to meet behind closed doors to set interest rates and manipulate markets to keep the money supply in balance. It balanced the way a checkbook balances, as a matter of simple math. The system of government-issued tallies kept the British economy stable and thriving until the mid-seventeenth century, when Oliver Cromwell needed money to fund a revolt against the Tudor monarchy . . . ." (http://www.webofdebt.com/excerpts/chapter-5.php)

More Information

Video and audio: Ellen Brown on the Web of Debt

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