Web of Debt by Ellen Hodgson Brown, J.D.

Well Mary for starters there is a lot of skpeticism that the Wizard of Oz story was even really about banking. It's kind of an urban legend. Many experts think it was/is and many do not. Both make good arguments. Asf or the Lost Science of Money. It's out of print but you can youtube and goodle Stephen Zarlenga.

By the way I completely agree with you. Our history needs to be revised and sometimes history is just a matter of prespective and opinion depending on what side of the issue you were/are on. Everyone should read Ellen's Book as it is by the best and most honest book out there on the Federal Reserve.

Originally posted by Mary Rose
Chapter 30 of this book is entitled "The Lure in the Consumer Debt Trap: the Illusion of Home Ownership."

Also in Chapter 30:

The larger a pyramid scheme grows, the greater the number of investors who need to be brought in to support the pyramid. When the "prime" market was exhausted, lenders had to resort to the riskier "sub-prime" market for new borrowers. Risk was off-loaded by slicing up these mortgages and selling them to investors as "mortgage-backed securities." "Securitizing" mortgages and selling them to investors was touted as "spreading the risk," but the device backfired. It wound up spreading risk like a contagion, infecting investment pools ranging from hedge funds to pension funds to money market funds.

So predatory lending practices are followed by the sale of these "mortgage- backed securities." I recognize that term "mortgage-backed security" (MBS). It is a type of derivative, which according to my research, is the primary cause of the global financial meltdown.

Originally posted by Zosynspiracy
Well Mary for starters there is a lot of skpeticism that the Wizard of Oz story was even really about banking. It's kind of an urban legend. Many experts think it was/is and many do not. Both make good arguments.

Okay; thanks for the info.

It's not important at all whether or not the story is really about banking. Ellen is only using it as a literary device to illustrate concepts.

The important thing is whether her understanding of economics and money creation is correct.

Originally posted by Zosynspiracy
Asf or the Lost Science of Money. It's out of print but you can youtube and goodle Stephen Zarlenga.

Okay. I look forward to posts on his concepts.

Originally posted by Mary Rose
Chapter 30 of this book is entitled "The Lure in the Consumer Debt Trap: the Illusion of Home Ownership."

I'm struck by the conclusion of Chapter 30:

The ability to adjust interest rates is considered a necessary and proper tool of the Fed in managing the money supply, but it is also a form of arbitrary manipulation that can be used to benefit one group over another. The very notion that we have a "free market" is belied by the fact that investors, advisers and market analysts wait with bated breath to hear what the Fed is going to do to interest rates from month to month. The market is responding not to supply and demand but to top-down dictatorial control. That would not be so bad if it actually worked, but a sinking economy can't be kept afloat merely by adjusting interest rates. The problem has been compared to "pushing on a string": when issuing more debt is the only way to keep money in the money supply, once borrowers are "all borrowed up" and lenders have reached their lending limits, no amount of lowering interest rates will get more debt-money into the economy. The only solution to this conundrum is to get "real" money into the system -- real, interest-free, debt-free, government-issued legal tender of the sort first devised by the American colonists.

By 2005, financial weather forecasters could see two economic storm fronts forming on the horizon, and both were being blamed on the market manipulations of the Fed...

I hope that the United States will be able to get some "real" money into the system before the New World Order controllers come in with their solution.

reply to post by Mary Rose


...I will repost Wookilia's negative review from Amazon.com regarding her book. If you'd like to take the time to read through the 104 replies to his review it might help you understand that everything Ellen Brown says in her book is hardly "gold" no pun intended. Although it's a good book it only portrays HER view of monetary reform and monetary history. Some of it is conjecture, opinion, fact, revisionist history whatever. I agree with much of what she says but some of she says is downright naive and impractical.


Couple examples of the errors:

There is a difference between a gold exchange standard and a gold standard, but this distinction is not made. The gold exchange standard which Brown repeatedly refers to as a gold standard did not fail because nations "ran out of gold" (as she claims in some form at least a dozen times), it failed because nations comitted fraud by printing more "gold backed" paper notes than they had gold reserves. That doesn't mean the gold standard is perfect or the ultimate solution, but how can one take an author who misses such a basic point seriously?

Brown deplores the fact that a gold standard causes gold to flee a nation that is importing more than it exports. That is what it is supposed to do! In such a system, nations that produce little but consume much go broke, as any individual should and would. The solution is to import less or export more, and correct the imbalance, but this elementary solution is not even mentioned.

The old "there isn't enough gold and silver" myth is repeated. An ounce of gold can be worth a car or can of coke, and society will prosper either way, as long as the free market is allowed to set the price. The problem arises when the monetary unit is rapidly inflated, and this is difficult to do with gold (or any commodity) because it must be dug out of the earth (or produced with real labor). Brown considers this the chief failure of gold, but it is its chief virtue.

When a government raises ALL revenue by printing money, that is not "no taxes," as she states numerous times. It is government funded via the inflation tax. A government with "no" tax revenue either does not exist or is borrowing continually and won't exist long. While some money printing can be absorbed in an economy that isn't redlined, Brown consistently and naively overestimates the capacity of the economy to absorb newly printed money without causing price increases. You fund a government as large as ours almost entirely from creating new money, there will be price increases. It is either extremely stupid or extremely dishonest to pretend otherwise. Yes, Pennsylvania in the 1700s funded government totally from this method, but they didn't have Social Security, Medicare, Welfare, an Empire, etc.

Brown's ultimate solution is gobley-gook socialism. A bungling, corrupt government should be trusted with full money printing powers, allowed to control banking, mortgages, scientific R&D, give universal sustinence wages, etc., and then all will be better and prosperity will of course ensue. This view is pitifully naive. The history of money teaches one bedrock lesson: the power to print it out of thin air will ALWAYS, ALWAYS, ALWAYS be abused. The solution is not to take the power from corrupt bankers and give it to equally corrupt politicians who will simply engage in the same abuses, but to abolish the fraud completely by abolishing the power completely. It is mind blowing that Brown identifies the fraud, identifies the corruption in government and banking, charts they way bankers and politicians collude to shaft the people, and then advocates turning the inflation power over to the politicians she just identified as being as corrupt as bankers.

Somewhere in all the OZ metaphors and newspaper clippings she includes, a tenth grade understanding of the origin of money is neglected, or perhaps lost. People accept money in the first place because it has intrinsic value as a commodity, and is a commodity. Real commodities can't be created out of thin air the way paper or "computer" money is. Commodities require real labor to produce. When working stiffs are forced to accept money which can be produced without real work, they get shafted when it is produced and spent by those who do no work and produce no real commodities. Politicians fall in this category, yet Brown suggests giving them a blank check that the money creation power represents.

Brown believes government can be trusted to use this power benevolently, but this belies a fundamental miscalculation about human nature. Leaders with the integrity of Franklin are the exception, not the rule. She believes that eliminating bond printing by the Fed, and allowing government to print money would eliminate a huge wealth transferral to the rich. It couldn't be that corrupt politicians in bed with bankers would just print five times as much money to make up for the lost bonds and interest payments, and then give this money to the elite for endless boondoggles. . .

The same quotes are used repeatedly, and the same points repeated. . .repeatedly. It was tiresome, especially since the errors were so eggregious.

Some sections are well written, useful, and balanced, but the most fundamental conclusions were erroneous, and fanciful. Just abolish the income tax. Love to, but ask anyone who's spent five minutes in DC how politically difficult that would be. Brown naively endorses a socialist government that provides housing, sets wages, targets full employment, gives food--all funded by endless money creation that will produce no inflation. Puh-lease.

Government is the problem, not the solution. The answer is not more government. What about those who actually want to take responsibility for their own lives? What about a limited government that just gets out of people's way and let's them be free, merely preventing crime and enforcing contracts? Maybe a tax levied in ways besides money printing is better, so I always know how much is taken, rather than wondering how many trillions of dollars the government printed out of thin air this year? The inflation tax is the most insidious form of taxation there is, and it should be abolished completely. Brown's solution is no solution at all because it misses this glaring point

[edit on 15-5-2010 by Zosynspiracy]

. The solution is not to take the power from corrupt bankers and give it to equally corrupt politicians who will simply engage in the same abuses, but to abolish the fraud completely by abolishing the power completely. It is mind blowing that Brown identifies the fraud, identifies the corruption in government and banking, charts they way bankers and politicians collude to shaft the people, and then advocates turning the inflation power over to the politicians she just identified as being as corrupt as bankers.


I think this statement pretty much sums up Brown's book! We need to clean up government as much as we do private banks.

[edit on 15-5-2010 by Zosynspiracy]

Originally posted by Zosynspiracy
I will repost Wookilia's negative review from Amazon.com regarding her book.

Please provide the link.

Originally posted by Zosynspiracy
. The solution is not to take the power from corrupt bankers and give it to equally corrupt politicians who will simply engage in the same abuses, but to abolish the fraud completely by abolishing the power completely. It is mind blowing that Brown identifies the fraud, identifies the corruption in government and banking, charts they way bankers and politicians collude to shaft the people, and then advocates turning the inflation power over to the politicians she just identified as being as corrupt as bankers.


I think this statement pretty much sums up Brown's book! We need to clean up government as much as we do private banks.

I agree that politicians are corrupt.

I think the reason why they're corrupt is our system of elections. I think we need tax payer funded elections and that political contributions should be banned. (I would like to see political parties eliminated, too, but I guess that cannot be legislated.)

Any reform of money will have to be in tandem with election reform.

reply to post by Mary Rose


www.amazon.com...=cm_cr_pr_pdp

Originally posted by Zosynspiracy
reply to post by Mary Rose

 

www.amazon.com...=cm_cr_pr_pdp

From the link:

It is cool that the Wizard of Oz was a money allegory, but the constant references to Oz grow strained, and consume probably 5 - 10% of the book before all is said and done.

I have to smile reading this because when I first got Ellen's book, I got really sick of the Wizard of Oz stuff and put the book away without getting very far into it.

Later I pulled it back out and skipped around in the book trying to get answers without reading all the supporting detail. Then I decided I needed to start all over again from page one. Now I'm riveted by it.

I don't have the patience to deal with the criticism yet. I think I'll wait till I've finished the book...

Read all the comments and not the book OP.

I had macro and micro economics classes in college and several other courses involved with business mathematics and statistics.

I found in college and almost all referencing material back then to be slanted completely on the Keynesian theories.

Of course they were. Back then people were high on the bubbles created by the credit highs.

I tend to disbelieve everything put to me. I had a history teacher in high school that the first 3 days of class was a lecture on historical data and manipulation. He went over the fact that all information is historical in nature and unless you specifically saw something happen, it is history. Now, when you talk about what you saw, it becomes history.

Everything must be taken into context of who, where, why, when, how etc of the information.

History is always being revised. Hell, according to the bankers now, society could not exist without their version of usury and currency. Currency based on debt does one thing and one thing only, makes the bankers money and strips everyone else of assets. Period.

I just wrote a thread on the destruction of capitalism. Capitalism is a very simple and basic premise. Two entities commit trade. Period. The free trade of one item for another item.

What has been created with a debt currency, even though two entities may have no connection with the bank in a transaction, the very use of the debt currency creates a profit for the bank.

This is hard to follow but the premise is, when assets are traded through the currency, over time the inflation caused by the debt currency creates profit for the banks.

I had a hard time wrapping my head around a lot of the concepts in fractional banking, debt currency and the like. The main reason, the banks do not make it easy to understand what is going on. They purposefully make things complex so you cannot understand what is going on.

The easiest way I have found to understand this, is this description.

If a dollar now is worth 3 cents of what it was back in 1913. Where did that value go? Where did that 97 cents go. I believe that the devaluation to this degree is the best descriptor of how much value the banks steal from society in this system. It is like the exponential game of doubling 1 penny every day. The more currency, the more debt, the more assets the banks strip off the system.

It is the only way I can describe the method they use to strip the societies wealth. It is much more complex than this, but I think you can get my drift.

S&F by the way. Think I may try this book out.

Chapter 31 is entitled "The Perfect Financial Storm."

Under the heading "Fannie and Freddie: Compounding the Housing Crisis with Derivatives and Mortgage-Backed Securities," Ellen states:

In a June 2002 article . . . the housing bubble was the largest bubble in history . . . and . . . it had been pumped up to its gargantuan size by Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Mortgage Corporation) . . . it all added up to another Ponzi scheme, and it was reaching its mathematical limits.

Focusing on the larger of these two institutional cousins, Fannie Mae . . . if it were a bank, it would be the third largest bank in the world; and . . . it made enormous amounts of money in the real estate market for its private owners. Contrary to popular belief, Fannie Mae is not actually a government agency. It began that way under Roosevelt's New Deal, but it was later transformed into a totally private corporation. It issued stock that was bought by private investors, and eventually it was listed on the stock exchange. Like the Federal Reserve, it became "federal" only in name.

Before the late 1970s, there were two principal forms of mortgage lending. The lender could issue a mortgage loan and keep it; or the lender could sell the loan to Fannie Mae and use the cash to make a second loan, which could also be sold to Fannie Mae, allowing the bank to make a third loan, and so on . . . a mortgage-lending financial institution that made five successive loans in this way for $150,000 each, all from an initial investment of $150,000 . . . sold the first four loans to Fannie Mae, which bought them with money made from the issuance of its own bonds. The lender kept the fifth loan. At the end of the process, the mortgage-lending institution still had only one loan for $150,000 on its books, and Fannie Mae had loans totaling $600,000 on its books.

In 1979-81, however, policy changes were made that would flood the housing market with even more new money. Fannie Mae gathered its purchased mortgages . . . and pooled them together, producing a type of lending vehicle called a Mortgage-Backed Security (MBS). . . It would put a loan guarantee on the MBS, for which it would earn a fee . . . The MBS would then be sold . . .to outside investors, including mutual funds, pension funds, and insurance companies. . . The MBS succeeded in extending the sources of funds that could be tapped into far into U.S. and international financial markets. It also substantially increased Fannie Mae's risk.

Then Fannie . . . took the securities and pooled them again . . . into an instrument called a Real Estate Mortgage Investment Conduit or REMIC (also known as a "restructured MBS" or collateralized mortgage obligation). REMICS are very complex derivatives . . . "They are pure bets, sold to institutional investors, and individuals, to draw money into the housing bubble." . . . "what started out as a simple home mortgage has been transmogrified into something one would expect to find at a Las Vegas gambling casino . . . "

"Transmogrified" - that's a new one for me.

I looked it up: "To change into a different shape or form, especially one that is fantastic or bizarre."

Yes, indeed.

Originally posted by Mary Rose

Chapter 31 is entitled "The Perfect Financial Storm."

Under the heading "Fannie and Freddie: Compounding the Housing Crisis with Derivatives and Mortgage-Backed Securities" . . .

Continuing, I'm struck by the next paragraph, because I keep seeing this word "leveraging" when I read about the financial crisis. And I recall the term "leveraged buyout" from years ago. I got sick of hearing it. It didn't sound like a good thing.

Only the first of these devices was an "asset," something on which Fannie Mae could collect a steady stream of principal and interest. The others represented very risky obligations. These investment vehicles fed the housing bubble and fed off it, but at some point . . . a wave of mortgage defaults was inevitable; and when that happened, the riskier mortgage-related obligations would amplify the crisis. They were particularly risky because they involved leveraging (making multiple investments with borrowed money). That meant that when the bet went wrong, many losses would have to be paid instead of one.

Chapter 33 is entitled "Maintaining the Illusion: Rigging Financial Markets."

What a mess!

This is so discouraging.

This chapter includes information about the "Plunge Protection Team (PPT), which is formally called the Working Group on Financial Markets (WGFM); it was created by President Reagan's Executive Order 12631 in 1988 after the October 1987 stock market crash.

Ellen quotes the order:

To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.

Ellen translates this into plain English:

. . . taxpayer money is being used to make the markets look healthier than they are. Treasury funds are made available, but the WGFM is not accountable to Congress and can act from behind closed doors. It not only can but it must, since if investors were to realize what was going on, they would not fall for the bait . . .

Originally posted by Mary Rose
Chapter 33 is entitled "Maintaining the Illusion: Rigging Financial Markets."

I'm struck by this statement!

The stock market was to be the Roman circus of the twenty-first century, distracting the masses with pretensions of prosperity. Instead of fixing the problem in the economy, the PPT would just "fix" the investment casino.

Originally posted by Mary Rose
Chapter 33 is entitled "Maintaining the Illusion: Rigging Financial Markets."

In addition to the PPT, there is the Exchange Stablilization Fund (ESF), which Ellen says was authorized by Congress to keep sharp swings in the dollar's exchange rate from "upsetting" financial markets. She quotes market analyst Jim Sinclair:

Don't think of the ESF an an investment type, or even as a hedge fund. The ESF has no office, traders, or trading desk. . . It seems that orders come from the US Secretary of the Treasury, or his designate (which could be a partner of one of the international investment banks he comes from), to intervene in the markets . . . Have you ever wondered how these firms seem to be trading for their own accounts on the side of the government's interest? Have you wondered how these firms always seem to be profitable in their trading accounts, and how they wield such enormous positions? . . . Not only [are they] executing ESF orders, but in all probability, [they are] coat-tailing trades while pretending there is a Chinese Wall between ESF orders and their own trading accounts.

Ellen says that this all highly annoying to investors trying to place their bets based on what the market "should" be doing.

I'm uncomfortable with the idea of investors "placing bets," though. Investing in companies that provide goods and services and making a profit by being one of those investors feels right to me; placing bets sounds like trying to get rich while producing nothing.

Chapter 34 is entitled "Meltdown: The Secret Bankruptcy of the Banks."

Ellen states:

. . . John Hoefle wrote in 2002 that the Fed had been quietly rescuing banks . . .He contended that the banking system actually went bankrupt in the late 1980s, with the collapse of the junk bond market and the real estate bubble of that decade. The savings and loan sector collapsed, along with nearly every large Texas bank; and that was just the tip of the iceberg . . .

I remember that term "junk bond" and I remember the savings and loan debacle. If my memory serves, the taxpayer spent $500,000,000,000 on the savings and loan rescue.

Ellen goes on to quote John Hoefle:

Citicorp was secretly taken over by the Federal Reserve in 1989, shotgun mergers were arranged for other giant banks, backdoor bailouts were given through the Fed's lending mechanisms, and bank examiners were ordered to ignore bad loans. These measures, coupled with a headlong rush into derivatives and other forms of speculation, gave the banks a veneer of solvency while actually destroying what was left of the U.S. banking system.

Originally posted by Mary Rose
If my memory serves, the taxpayer spent $500,000,000,000 on the savings and loan rescue.

According to what I'm reading now in Chapter 34, it was $150,000,000,000.

In Chapter 35, "Stepping from Scarcity into Technicolor Abundance," Ellen states:

. . . The prevailing scarcity mentality focuses on shortages of oil, water and food. But the real shortage, as Benjamin Franklin explained to his English listeners in the eighteenth century, is in the medium of exchange. If sufficient money could be made available to develop alternative sources of energy, alternative means of extracting water from the environment, and more efficient ways of growing food, there could be abundance for all. The notion that the government could simple print the money it needs is considered unrealistically utopian and inflationary; yet banks create money all the time. The chief reason the U.S. government can't do it is that a private banking cartel already has a monopoly on the practice.

In my opinion, the above quote is one that we should read more than once, and give it a chance to really sink in.

Imagine.

reply to post by Mary Rose


Ben Franklin was ahead of his time.

I mentioned in one of the threads somewhere here, that if a bank is allowed to use fractional banking methods, why could not every individual do the same?

A bank creates currency by the signature of an individual.

Why not just remove the banks and let the individual create the fractional currency?

Of course there is problems with this, but what would REALLY be the difference between the individual doing it and the bank?

edit to add-

Thanks for this thread OP. Keep up the snippets. Enjoying the play by play.

[edit on 5/17/2010 by endisnighe]