U.S. Close to Nationalizing the Fed
Congress Close To Nationalization of Federal Reserve
by Ellen Brown
Mainstream politicians have long insisted that Medicare for all, a universal basic income, student debt relief and a slew of other much-needed public programs are off the table because the federal government cannot afford them. But that was before Wall Street and the stock market were driven onto life-support by a virus. Congress has now suddenly discovered the magic money tree. It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. Beyond that, the Federal Reserve is making over $4 trillion available to banks, hedge funds and other financial entities of all stripes; it has dropped the fed funds rate (the rate at which banks borrow from each other) effectively to zero; and it has made $1.5 trillion available to the repo markeIt is also the Federal Reserve that will be picking up the tab for this bonanza, at least to start. The US central bank has opened the sluice gates to unlimited quantitative easing, buying Treasury securities and mortgage-backed securities “in the amounts needed to support smooth market functions.” Last month, the Fed bought $650 billion worth of federal securities. At that rate, notes Wall Street on Parade, it will own the entire Treasury market in about 22 months. As Minneapolis Fed President Neel Kashkari acknowledged on 60 Minutes, “There is an infinite amount of cash at the Federal Reserve.”
In theory, quantitative easing is just a temporary measure, reversible by selling bonds back into the market when the economy gets back on its feet. But in practice, we have seen that QE is a one-way street. When central banks have tried to reverse it with “quantitative tightening,” economies have shrunk and stock markets have plunged. So the Fed is likely to just keep rolling over the bonds, which is what normally happens anyway with the federal debt. The debt is never actually paid off but is just rolled over from year to year. Only the interest must be paid, to the tune of $575 billion in 2019. The benefit of having the Fed rather than private bondholders hold the bonds is that the Fed rebates its profits to the Treasury after deducting its costs, making the loans virtually interest-free. Interest-free loans rolled over indefinitely are in effect free money. The Fed is “monetizing” the debt.
What will individuals, families, communities and state and local governments be getting out of this massive bailout? Not much. Qualifying individuals will get a very modest one-time payment of $1,200, and unemployment benefits have been extended for the next four months. For local governments, $150 billion has been allocated for crisis relief, and one of the Fed’s newly expanded Special Purpose Vehicles will buy municipal bonds. But there is no provision for reducing the interest rate on the bonds, which typically runs at 3 or 4 percent plus hefty bond dealer fees and foregone taxes on tax-free issues. Unlike the federal government, municipal governments will not be getting a rebate on the interest on their bonds.
The taxpayers have obviously been shortchanged in this deal. David Dayen calls it “a robbery in progress.” But there have been some promising developments that could be harnessed for the benefit of the people. The Fed has evidently abandoned its vaunted “independence” and is now working in partnership with the Treasury. In some sense, it has been nationalized. A true partnership, however, would make the printing press available for more than just buying toxic corporate assets. A central bank that was run as a public utility could fund programs designed to kickstart the economy, stimulate productivity and generally serve the public.
Harnessing the Central Bank
The reason the Fed is now working with the Treasury is that it needs the Treasury to help it bail out a financial industry burdened with an avalanche of dodgy assets that are fast losing value. The problem for the Fed is that it is only allowed to purchase or lend against securities with government guarantees, including Treasury securities, agency mortgage-backed securities, debt issued by Fannie Mae and Freddie Mac, and (arguably) municipal securities. To get around that wrinkle, as Wolf Richter explains:
[T]he Treasury will create (or resuscitate) a series of special-purpose vehicles (SPVs) to buy all manner of financial assets, backed by $425 billion in collateral conveniently supplied by the US taxpayer via the Exchange Stabilization Fund. The Fed will lend to SPVs against this collateral which, when leveraged, could fund $4-5 trillion in asset purchases.
That includes municipal bonds, non-agency mortgages, corporate bonds, commercial paper, and every variety of asset-backed security. The only things the government can’t (transparently, yet) buy are publicly-traded stocks and high-yield bonds.
Unlike in QE, in which the Fed moves assets onto its own balance sheet, the Treasury will now be buying assets and backstopping loans through SPVs that the Treasury will own and control. SPVs are a form of shadow bank, which like all banks create money by “monetizing” debt or turning it into something that can be spent in the marketplace. The SPV decides what assets to buy and borrows from the central bank to do it. The central bank then passively creates the funds, which are used to purchase the assets backing the loan. As Jim Bianco wrote on Bloomberg:In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades. This scheme essentially merges the Fed and Treasury into one organization. …
In effect, the Fed is giving the Treasury access to its printing press. This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election.
Of the designated SPVs, none currently serves a public purpose beyond buoying the markets; but they could be designed for such purposes. The taxpayers are on the hook for replenishing the $425 billion in the Exchange Stabilization Fund, and they should be entitled to share in the benefits. Congress could designate a Special Purpose Vehicle to fund its infrastructure projects, and to fund those much-needed public services including Medicare for all, a universal basic income, student debt relief, and similar programs. It could also purchase a controlling interest in insolvent or profligate banks, pharmaceutical companies, oil companies and other offenders and regulate them in a way that serves the public interest.
Another possibility would be for Congress to fund these programs in the usual way by issuing government bonds, but to enter into a partnership agreement first by which the central bank would buy the bonds, roll them over indefinitely, and rebate the interest to the Treasury. That is how Japanese Prime Minister Shinzo Abe has funded his stimulus programs, with none of the predicted inflationary effects on consumer prices. In fact the Japanese consumer price index is hovering at a very low 0.4%, well below even the central bank’s 2 percent target, although the Bank of Japan has monetized nearly half of the government’s debt. Half of the US debt would be over $11 trillion. Assuming $6 trillion for the current corporate bailouts, that means another $5 trillion could safely be monetized for programs benefiting individuals, families and local governments. (How to do this without driving up consumer prices will be the subject of another article.)
Relief for State and Local Governments
State and local governments, which are on the front lines for delivering emergency services, have for the most part been left out of the bailout bonanza. While we are waiting for action from Congress, the Fed could make cheap loans available to local governments using its existing powers under Federal Reserve Act Sec. 14(2)(b), which authorizes the Fed to purchase the bills, bonds, and notes of state and local governments having maturities of six months or less. Since local governments must balance their budgets, these loans would have to be repaid, but the loans could be extended by rolling them over for a reasonable period, as is done with repo loans and the federal debt; and the loans could be made at the same near-zero interest rate banks can borrow at now. State and local governments are at least as creditworthy as banks – they have a taxpayer base and massive assets. In fact the private banking industry would have been insolvent long ago if it were not for the deep pocket of the central bank and the bailouts of the federal government, including the FDIC insurance scheme that rescued the banks from bankruptcy in the Great Depression.
There is a way state and local governments can take advantage of the near-zero interest rates available to banks even without federal action. They can set up their own publicly-owned banks. Besides giving them the ability to borrow much more cheaply, having their own banks would allow them to leverage their loan funds. A $100 million revolving fund issuing loans at 3% would gross the state $3 million per year. If that same $100 million were used to capitalize a bank, it could issue ten times that sum in loans, grossing $30 million per year. Costs would need to be deducted from those earnings, including the cost of funds; but the cost of funds is quite low for banks today. They can borrow to meet their liquidity needs from their own deposit pool, or at 0.25% in the fed funds market, or at about the same rate in the repo market, which is now backstopped by the central bank.
The blatant disparities in the congressional response to the current crisis have shone a bright light on how our financial system is rigged against the people in favor of a wealthy elite. Crisis is when change happens; this is the time for advocates to unite in demanding change on behalf of the people. As Greek economist Yanis Varoufakis admonished in a recent post:
[T]his new phase of the crisis is, at the very least, making it clear to us that anything goes – that everything is now possible.… Whether the epidemic helps deliver the good or the most evil society will depend … on whether progressives manage to band together. For if we do not, just like in 2008 we did not, the bankers, the spivs [petty criminals], the oligarchs and the neofascists will prove, again, that they are the ones who know how not to let a good crisis go to waste.
India Jacks Up Customs Tax on Gold To 12.5 %
Customs Tax Goes From 10% to 12.5%
Gold Buyers in India Are Being Gouged By Modi Government
The Modi Government of India has just raised the Customs tax on Gold to an astounding 12.5 %. India, after confiscating billions of dollars of wealth from it’s citizens is now desperate to protect its failing fiat currency by jacking the Customs tax from 10% to 12.5%. This is a huge premium for India’s citizens to pay, but it shows that the people are not stupid. They know what the Modi Government is doing to them through fiat currency and want to own physical gold. The huge demand proves that gold is way too cheap, and is the subject of huge taxes to suppress the price.
The Secret to Funding the Green New Deal
Some Thoughts on Monetary Policy and How It Can Work
by Ellen Brown
As alarm bells sound over the advancing destruction of the environment, a variety of Green New Deal proposals have appeared in the U.S. and Europe, along with some interesting academic debates about how to fund them. Monetary policy, normally relegated to obscure academic tomes and bureaucratic meetings behind closed doors, has suddenly taken center stage.
The 14-page proposal for a Green New Deal submitted to the U.S. House of Representatives by Rep. Alexandria Ocasio-Cortez, D-N.Y., does not actually mention Modern Monetary Theory (MMT), but that is the approach currently capturing the attention of the media—and taking most of the heat. The concept is good: Abundance can be ours without worrying about taxes or debt, at least until we hit full productive capacity. But, as with most theories, the devil is in the details.
MMT advocates say the government does not need to collect taxes before it spends. It actually creates new money in the process of spending it; and there is plenty of room in the economy for public spending before demand outstrips supply, driving up prices.
Critics, however, insist this is not true. The government is not allowed to spend before it has the money in its account, and the money must come from tax revenues or bond sales.
In a 2013 treatise called “Modern Monetary Theory 101: A Reply to Critics,” MMT academics concede this point. But they write, “These constraints do not change the end result.” And here the argument gets a bit technical. Their reasoning is that “the Fed is the monopoly supplier of CB currency [central bank reserves], Treasury spends by using CB currency, and since the Treasury obtained CB currency by taxing and issuing treasuries, CB currency must be injected before taxes and bond offerings can occur.”
The counterargument, made by American Monetary Institute (AMI) researchers, among others, is that the central bank is not the monopoly supplier of dollars. The vast majority of the dollars circulating in the United States are created, not by the government, but by private banks when they make loans. The Fed accommodates this process by supplying central bank currency (bank reserves) as needed, and this bank-created money can be taxed or borrowed by the Treasury before a single dollar is spent by Congress. The AMI researchers contend, “All bank reserves are originally created by the Fed for banks. Government expenditure merely transfers (previous) bank reserves back to banks.” As the Federal Reserve Bank of St. Louis puts it, “federal deficits do not require that the Federal Reserve purchase more government securities; therefore, federal deficits, per se, need not lead to increases in bank reserves or the money supply.”
What federal deficits do increase is the federal debt; and while the debt itself can be rolled over from year to year (as it virtually always is), the exponentially growing interest tab is one of those mandatory budget items that taxpayers must pay. Predictions are that in the next decade, interest alone could add $1 trillion to the annual bill, an unsustainable tax burden.
To fund a project as massive as the Green New Deal, we need a mechanism that involves neither raising taxes nor adding to the federal debt; and such a mechanism is proposed in the U.S. Green New Deal itself—a network of public banks. While little discussed in the U.S. media, that alternative is being debated in Europe, where Green New Deal proposals have been on the table since 2008. European economists have had more time to think these initiatives through, and they are less hampered by labels like “socialist” and “capitalist,” which have long been integrated into their multi-party systems.
A Decade of Gestation in Europe
The first Green New Deal proposal was published in 2008 by the New Economics Foundation on behalf of the Green New Deal Group in the U.K. The latest debate is between proponents of the Democracy in Europe Movement 2025 (DiEM25), led by former Greek finance minister Yanis Varoufakis, and French economist Thomas Piketty, author of the best-selling “Capital in the 21st Century.” Piketty recommends funding a European Green New Deal by raising taxes, while Varoufakis favors a system of public green banks.
Varoufakis explains that Europe needs a new source of investment money that does not involve higher taxes or government deficits. For this purpose, DiEM25 proposes “an investment-led recovery, or New Deal, program … to be financed via public bonds issued by Europe’s public investment banks (e.g., the new investment vehicle foreshadowed in countries like Britain, the European Investment Bank and the European Investment Fund in the European Union, etc.).”
To ensure that these bonds do not lose their value, the central banks would stand ready to buy them above a certain yield. “In summary, DiEM25 is proposing a re-calibrated real-green investment version of Quantitative Easing that utilizes the central bank.”
Public development banks already have a successful track record in Europe, and their debts are not considered government debts. They are financed not through taxes but by the borrowers when they repay the loans. Like other banks, development banks are money-making institutions that not only don’t cost the government money but actually generate a profit for it. DiEM25 collaborator Stuart Holland observes:
While Piketty is concerned to highlight differences between his proposals and those for a Green New Deal, the real difference between them is that his—however well-intentioned—are a wish list for a new treaty, a new institution and taxation of wealth and income. A Green New Deal needs neither treaty revisions nor new institutions and would generate both income and direct and indirect taxation from a recovery of employment. It is grounded in the precedent of the success of the bond-funded, Roosevelt New Deal which, from 1933 to 1941, reduced unemployment from over a fifth to less than a tenth, with an average annual fiscal deficit of only 3 percent.
Roosevelt’s New Deal was largely funded through the Reconstruction Finance Corporation (RFC), a public financial institution set up earlier by President Hoover. Its funding source was the sale of bonds, but proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms and much more; and it funded all this while generating income for the government.
A System of Public Banks and “Green QE”
The U.S. Green New Deal envisions funding with “a combination of the Federal Reserve [and] a new public bank or system of regional and specialized public banks,” which could include banks owned locally by cities and states. As Sylvia Chi, chair of the legislative committee of the California Public Banking Alliance, explains:
The Green New Deal relies on a network of public banks — like a decentralized version of the RFC — as part of the plan to help finance the contemplated public investments. This approach has worked in Germany, where public banks have been integral in financing renewable energy installations and energy efficiency retrofits.
Local or regional public banks, Chi says, could help pay for the Green New Deal by making “low-interest loans for building and upgrading infrastructure, deploying clean energy resources, transforming our food and transportation systems to be more sustainable and accessible, and other projects. The federal government can help by, for example, capitalizing public banks, setting environmental or social responsibility standards for loan programs, or tying tax incentives to participating in public bank loans.”
U.K. professor Richard Murphy adds another role for the central bank—as the issuer of new money in the form of “Green Infrastructure Quantitative Easing.” Murphy, who was a member of the original 2008 U.K. Green New Deal Group, explains:
All QE works by the [central bank] buying debt issued by the government or other bodies using money that it, quite literally, creates out of thin air. … [T]his money creation process is … what happens every time a bank makes a loan. All that is unusual is that we are suggesting that the funds created by the [central bank] using this process be used to buy back debt that is due by the government in one of its many forms, meaning that it is effectively canceled.
The invariable objection to that solution is that it would act as an inflationary force driving up prices, but as argued in an earlier article of mine, this need not be the case. There is a chronic gap between debt and the money available to repay it that needs to be filled with new money every year to avoid a “balance sheet recession.” As U.K. professor Mary Mellor formulates the problem in her book “Debt or Democracy” (2016):
A major contradiction of tying money supply to debt is that the creators of the money always want more money back than they have issued. Debt-based money must be continually repaid with interest. As money is continually being repaid, new debt must be being generated if the money supply is to be maintained. … This builds a growth dynamic into the money supply that would frustrate the aims of those who seek to achieve a more socially and ecologically sustainable economy.
In addition to interest, says Mellor, there is the problem that bankers and other rich people generally do not return their profits to local economies. Unlike public banks, which must use their profits for local needs, the wealthy mostly hoard their money, invest it in the speculative markets, hide it in offshore tax havens or send it abroad.
To avoid the cyclical booms and busts that have routinely devastated the U.S. economy, this missing money needs to be replaced; and if the new money is used to pay down debt, it will be extinguished along with the debt, leaving the overall money supply and the inflation rate unchanged. If too much money is added to the economy, it can always be taxed back; but as MMTers note, we are a long way from the full productive capacity that would “overheat” the economy today.
Murphy writes of his Green QE proposal:
The QE program that was put in place between 2009 and 2012 had just one central purpose, which was to refinance the City of London and its banks. … What we are suggesting is a smaller programe … to kickstart the UK economy by investing in all those things that we would wish our children to inherit whilst creating the opportunities for everyone in every city, town, village and hamlet in the UK to undertake meaningful and appropriately paid work.
A network of public banks, including a central bank operated as a public utility, could similarly fund a U.S. Green New Deal—without raising taxes, driving up the federal debt or inflating prices.
This article originally appeared in TruthDig.com
Ellen Brown
Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including “Web of Debt” and “The Public Bank Solution.”
IN THIS ARTICLE:
alexandria ocasio-cortez debt or democracy europe federal reservegreen new deal modern monetary theory thomas picketty united kingdomyanis varoufakis
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GLOBAL VOICESTruthdig Women Reporting
MAR 18, 2019 |TD ORIGINALS
Tunisian Children Pay for Jihadist Parents’ Sins
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Tunisians gather at an anti-terrorism protest. Many oppose repatriating IS families, and the country doesn’t have a structure in place to rehabilitate radicals once they return. (Wikimedia Commons)
<i>Truthdig is proud to present this article as part of its Global Voices: Truthdig Women Reporting, a series from a network of female correspondents around the world who are dedicated to pursuing truth within their countries and elsewhere.</i>
“I lost them forever. I can’t get my grandchildren back from Syria.”
Tahia Sboui cries as she talks about her son’s children living in a Syrian camp after their father, a Tunisian Islamic State (IS) fighter, was killed. He had been fighting in Boukamal, a city in eastern Syria.
Sboui, who lives in Kairouan in central Tunisia, tells the distressing story of how she fought for months to bring her grandchildren home but ultimately lost contact with them.
Sboui’s grandchildren are among the estimated 200 Tunisian children and 100 Tunisian women detained in refugee camps and prisons in Libya, Syria and Iraq, according to Human Rights Watch (HRW). A recent HRW report says these IS family members are being held in squalid—and sometimes violent—conditions and that “Tunisia officials have been dragging their feet on helping bring [them] home.”
The Tunisian women and children are part of a larger problem that began in 2016 as IS started to suffer military defeats in the region. Currently, an estimated 2,000 children and 1,000 women from 46 nations are detained in Iraqi and Libyan prisons and in Syrian camps. Repatriating these detainees has been painfully slow—hampered by fear of terrorism at home and by a complex web of international relations.
<b>Pleading Over the Phone</b>
A year ago, Sboui received a phone call. At the other end of the line was a young woman speaking in a Syrian dialect. The woman told Sboui that she was the first wife of Sboui’s son, Awas, and that she was with his five children in a camp in northern Syria. Three of the children were hers; the two others were the children of Awas’ now-deceased second wife, a Tunisian. (Awas had two wives at the same time.) The 18-year-old Syrian woman pleaded for Sboui’s help to move to Tunisia with the children, ages 7 months to 4 years (pictured below).
Awas had left Tunisia in 2012 to fight in Syria, and Sboui was surprised to learn he had married two women and had five children. The call began a long struggle as she tried to get Tunisian authorities to repatriate the youngsters. She made contact with the Tunisian Ministry of Foreign Affairs, but it didn’t provide help.
Her other son went to Turkey to ask for help at the Tunisian Consulate in Istanbul. The consulate said it could not enter Syrian territories and that he had to arrange for the children and the woman to enter Turkey. Awas’ brother sent money to his sister-in-law to pay smugglers to bring her to the Turkish border, but when the woman and children arrived there, Turkish authorities sent them back to the camp in Syria.
In the meantime, one of the five children died in the camp. (Sboui says her grandchild was malnourished and suffered from disease, but she doesn’t know what caused the death.)
The grandmother blames the Tunisian authorities for not cooperating. “We told the Ministry of Foreign Affairs that we [the father’s family in Tunisia] … welcome them and [will] take care of them, but it refused to help us,” she says.
Sboui is very angry. In 2012, she had warned government authorities that her son was leaving Tunisia to join IS in Syria (via Libya), and she is upset they didn’t stop him at the Libyan border. “My son was killed with his second wife” in the Boukamel fighting, she says. “I’m the only family that remains to those children, [their only chance] to live in a safe place.”
Moncef Abidi, who lives in Kef in northwestern Tunisia, also is trying to bring home relatives following IS defeats. His sister Wahida and his 4-year-old nephew Baraa are imprisoned in Mitiga Prison in Tripoli, the capital of Libya. The prison is under the control of the Special Deterrence Force, a radical Islamist militia organization. “The last call that I got from my sister was three months ago,” Abidi says. “She was asking me to help her to come back with her sick child, even if she will be imprisoned in Tunisia.”
In 2012, Wahida’s husband took her to live in Libya, and he joined IS two years later. According to Abidi, his sister didn’t know her husband was an IS fighter, and when she discovered it and wanted to go back to Tunisia, he “threatened to take away their son.”
In 2016, Wahida, her husband and other IS fighters were running away from an armed confrontation and were caught in a U.S. raid. Wahida’s husband was killed, and she and Baraa were hurt. The boy’s injuries were especially severe—a bullet entered his back and exited through his stomach.
Wahida and Baraa. (Zineb Benzita)
The Special Deterrence Force moved Wahida to Mitiga, where she was imprisoned with 14 other IS women and 22 of their children, says Mohamed Ikbal Ben Rejab, president of the Rescue Association of Tunisians Trapped Abroad (RATTA). This nongovernmental organization works to help Tunisian citizens abroad and repatriate them into Tunisian society.
Baraa spent four months in a hospital and underwent five surgeries. The boy needs additional medical care that isn’t available in Libya. “His situation is critical,” Abidi says. “It’s unacceptable to let him [remain] in prison.”
<b>Problems With Repatriation</b>
Some countries are moving forward to repatriate IS family members—Russia, Kazakhstan, Uzbekistan, Indonesia, Egypt and Sudan have made the most progress, according to HRW. Other countries, from the U.S. to Tunisia, have done very little.
Tunisia has had one of the highest rates of nationals going to Syria, Iraq and Libya to join terrorist groups. From 2011 to 2013, Ennahdha, the Muslim Brotherhood party that held power in Tunisia, facilitated the process of sending fighters through Libya and Turkey to Syria. Tunisian authorities estimate the country’s number of jihadists at 3,000, but other sources report more than 6,000, including 1000 women.
After IS defeats in Syria and Libya, some Tunisian fighters and family members started to return home. Some came back on their own, while Turkish authorities handed over others to Tunisian authorities. Most of the fighters are in prison or under police supervision. Officially, the number is 800, but it could be higher because all of them haven’t been declared to the Tunisian authorities. Among them, 25 women and 30 children came back from Syria, according to a source in Tunisia’s Ministry of the Interior. (The source spoke to this reporter but asked to remain anonymous.)
Since 2017, Libyan authorities have put pressure on Tunisia to repatriate the women and children imprisoned in Libya, but the two countries haven’t reached an agreement, according to Ikbal. He says Tunisian authorities want to allow children back without their mothers, while the Libyan government wants Tunisia to take back all its citizens—and even 80 corpses of Tunisian IS fighters. (Other countries have recently made moves to repatriate children while leaving their mothers behind.)
For its part, the Tunisian government is reluctant to repatriate IS women for fear of social disruption at home. “We are afraid that they will bring terrorist ideas with them,” says the source at the Interior Ministry.
That source adds that Tunisia doesn’t have a structure in place to rehabilitate radicals once they return.
In 2014, Moncef Marzouki, then the president of Tunisia, suggested rehabilitating some returnees, but the idea was abandoned due to social opposition. Popular sentiment at the time held that the jihadists were dangerous and should be imprisoned. Government action—plus a community support system—is essential for a rehabilitation plan to succeed, according to the Carnegie Endowment for International Peace. However, it’s not clear whether the public would support that kind of effort at present.
Khaoula Ben Aicha, a member of Tunisia’s legislature, is actively involved in the move to repatriate Tunisian IS children. She gives another explanation of the impasse between Libya and Tunisia, one based on international politics. “Tunisian authorities don’t want to deal with Libyan militias [such as the Special Deterrence Force] that are imprisoning children, because it will be considered as a form of recognition to them,” she says. But “children [should] not continue to pay for this situation.”
The political situation with Syria is complex, as well. Like many countries, Tunisia doesn’t have official relations with the Syrian government, and the camps housing IS families are controlled by Kurdish authorities—not by a formally recognized government.
<b>Pressure Leads to Some Action</b>
Under pressure from Libyan authorities and concerned Tunisian citizens, the Tunisian government has sent three delegations to Libya since April 2017. Negotiations resulted in the repatriation of Tamime, a 4-year-old orphan, in October 2017 and two other children at the end of 2018.
Tunisian authorities acted in these cases after major efforts on the part of the children’s families.
Tamime’s grandfather, Fawzi Trablesi, went to Libya four times and engaged in direct negotiations with representatives of the Special Deterrence Force. “It was difficult to repatriate him,” Trablesi says. “But now he’s here, and I’m very happy that he will be raised in Tunisia within his family.”
In the case of the two other children—siblings ages 7 and 10—their family hired a Libyan lawyer to negotiate with Libyan authorities.
Last January, another delegation went to Libya to take the DNA of six orphans who had been cared for by the Libyan Red Crescentsince December 2016. The DNA tests established that the children were Tunisian. By law, a child born to a Tunisian mother in another country is a Tunisian citizen.
According to the recent HRW report, international law dictates that everyone “has the right to a nationality,” and the document adds that the “Tunisian Constitution prohibits denying or revoking citizenship or preventing citizens from returning home.” However, HRW points out that the Tunisian women and children detained in other countries are unable to return home without help from their government.
Libya and Tunisia agreed that the orphans would be transferred to Tunisia in February, but the transfer hasn’t taken place yet. Tunisian authorities acted because the Libyan Red Crescent warned them it could no longer take care of the children.
“It was a good initiative [by] Tunisian authorities, but it is not enough,” Ikbal says. “It is necessary to repatriate all the Tunisian children abroad.” RATTA, one of the few groups working on this issue, has stepped up activities since 2017. Its efforts to pressure the Tunisian government range from press conferences to sit-ins.
Human rights activists feel Tunisian IS children and mothers should be repatriated together, even if the mothers are imprisoned when they return home. “Legitimate security concerns are no license for governments to abandon young children and other nationals held without charge in squalid camps and prisons abroad,” according to Letta Tayler, senior HRW researcher on terrorism and counterterrorism. Quoted in the organization’s report last month, Tayler added: “Tunisian children are stuck in these camps with no education, no future, and no way out while their government seems to barely lift a finger to help them.”
Sboui, the grandmother who tried to bring her son’s children back to Tunisia last year, has no hope of seeing them again. Her former daughter-in-law has remarried and cut off communication with her former husband’s family.
“For me, I lost them forever,” Sboui says.
Hanene Zbiss
Hanene Zbiss has been an investigative journalist since 2011 and has written a variety of articles on Tunisia and Iraq. She received the European Union’s Samir Kassir Award for Freedom of the Press in 2014 and…
IN THIS ARTICLE:
children families human rights watch iraq islamic state libyarepatriation syria td originals terrorism tunisia
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MAR 18, 2019 |
Corporate Media Has Learned Nothing From Iraq
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Screen shot / New York Times
Glenn Greenwald (The Intercept, 3/10/19) exposes the media’s role in parroting the U.S. government’s pro-war propaganda against Venezuela.
Readers will likely know by now, that the late February story, complete with vivid video footage, about the forces of elected Venezuelan President Nicolás Maduro burning trucks that were trying to bring the besieged country food and medicine was false. Weeks later, the New York Times (3/10/19) reported that the humanitarian trucks were not set on fire by Maduro’s forces, but instead by anti-Maduro protestors who threw a Molotov cocktail. The Times outlined how the fake story took root, passing from US officials to media that simply reported their claims as fact with no investigation—and does any of this sound familiar?
Folks like CNN‘s Marshall Cohen noted the Times debunking as if it were just an interesting development—a “classic example of how misinformation spreads,” Cohen said in a tweet. Except, as The Intercept‘s Glenn Greenwald pointed out (3/10/19), it was Cohen’s own network, CNN, that led the way in spreading the lie around the world.
And not simply by parroting official claims. On February 24, the network told viewers that “a CNN team saw incendiary devices from police on the Venezuelan side of the border ignite the trucks.” It was then we got to Mike Pence claiming that “the tyrant” Maduro “danced as his henchmen…burned food and medicine”; Marco Rubio’s comment that “each of the trucks burned by Maduro carried 20 tons of food and medicine. This is a crime and if international law means anything, he must pay a high price for this”; Mike Pompeo’s fist-shaking, “What kind of a sick tyrant stops food from getting to hungry people?”
It isn’t merely that corporate media will never, in a million years, go back to each of these people and demand to know why they won’t insist on the same sort of response, now that it appears it was Maduro’s opponents who were to blame. It’s more that the very news dissemination process here superficially being indicted will not itself be reconsidered.
Max Blumenthal (Grayzone Project, 2/24/19) questioned the US government’s claim that Maduro burned the aid trucks weeks before the New York Times.
After all, this false story arrived embedded within another false story: that the Venezuelan government is blocking needed humanitarian aid to the country. The Venezuelan government has and does allow aid into their country—from countries that are not actively and vituperatively threatening to overthrow the elected president with an external coup. Groups from the Red Cross to the UN have challenged the US’s earnest claims of humanitarian concern. NPR (2/16/19) acknowledged that US moves are not simply humanitarian, but “also designed to foment regime change in Venezuela—which is why much of the international aid community wants nothing to do with it.”
That, plus the evidence that it was in fact opposition protesters that burned the trucks, would suggest a real flipping of the current script, and with it some consideration of how that script got written in the first place. But, as happened with those raising questions about evidence of Saddam Hussein’s possession of weapons of mass destruction—or the Cuban airfield in Grenada, or Iraqis throwing babies out of incubators, or North Vietnam firing on US ships in the Gulf of Tonkin—the outlets that vigorously pushed the false story will not extend any new skepticism toward the official sources that sold it to them. Nor will they offer any new respect—or platform—to the people (like Max Blumenthal, like Boots Riley) who questioned the claim…not weeks later, but in real time.
Those official sources will still be central and those asking questions will still be marginal. Those who cannot believe that the US government is working, with corporate media support, to set up a false storyline to push the public to support another war on another country might at this point ask themselves: If they were doing that, how would that look different than what we’re seeing now?
Janine Jackson / FAIR
IN THIS ARTICLE:
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Top Economist La Rouche Passes
LaRouche Was Opponent of Crooked Banking System
This obituary was originally published by EIR magazine. See also, “A Talent Well Spent.”
Lyndon H. LaRouche, Jr., the American economist and statesman who compiled, between 1957 and 2007, the most accurate record of economic forecasting in the world, passed away on February 12, 2019. The author of thousands of articles and over 100 books and book-length pamphlets and strategic studies, LaRouche was one of the most controversial political figures in all of American history.
One reason for this was LaRouche’s proud, vigorous, and enduring Presidential campaign, 1976–2004, to re-establish American Constitutional self-government following the 1963–1968 assassinations of John F. Kennedy, Malcolm X, Martin Luther King, Jr., and Robert F. Kennedy. Another reason was his successful establishment of an independent news service and intelligence gathering capability that allowed him and his associates an unfiltered evaluations capability, which equipped them to accurately report the true state of the American economy, and often, the true nature of otherwise mysterious American and international political processes.
LaRouche also created an international philosophical association, on the basis of re-creating the knowledge about the millennia-old controversy between the Platonic tradition and the school of Aristotle, the fight between the republican model of state and the oligarchical system of empire.
LaRouche’s reach outside the United States was the result of his successful recruitment of hundreds of politicized students from many nations, particularly in Europe, Canada, and Central and South America. This self-selected intelligentsia gave him the power to originate and implement policy shifts through the deployment of modest but well-trained and extremely well-informed units that catalyzed much larger forces in various nations to sometimes act as “one mind across many continents.”
LaRouche was known for his insistence that each citizen of the United States, as well as citizens of any sovereign nation, have the responsibility to educate themselves on the crucial matters of policy that affect the future of their nations, and of humanity; to propose and defend only those policies that “promote the General Welfare of ourselves and our posterity;” and to defeat predatory financial measures enacted in the pursuit of racialist depopulation policies, sometimes disguised as “environmentalism” or “sustainable development” aimed particularly at the nations of Africa, Asia, and Central and South America.
Though prominent international persons and institutions have recently begun reporting about LaRouche, despite his having been one of America’s most prolific writers, no “major media source” has yet dared to quote Lyndon LaRouche’s actual views on any policy matter for which he was noted. This fear of LaRouche is notable, but not new. It was always true that the power of the ideas of LaRouche, as much as, or even more than the person of LaRouche, were deeply feared by his opponents. That fear will not abate with his physical demise.
LaRouche’s Four Laws, his proposal for a United States-Russia-China-India Four Powers Agreement, his invention of the 1983 Strategic Defense Initiative (SDI) announced by then-President Ronald Reagan, and his unique five-decade advocacy of thermonuclear fusion power cannot be allowed to be mentioned by “mainstream media” today, even upon the occasion of LaRouche’s death. Were the American people to now know about these policies, and therefore what they had been denied by the decades-long enforced conspiracy of silence around LaRouche, particularly during the financial crises and useless predatory wars of the past 15 years, they would immediately conclude that someone has been trying very hard all these years to keep them away from Lyndon LaRouche’s ideas.
“He’s a bad guy, but we can’t tell you why” will no longer suffice as an explanation for these people, as to why they should not, even now, know “who Lyndon LaRouche is.” In successfully breaking the confines of fake news at this moment, the real Lyndon LaRouche can finally be heard and become known. To that end, the following brief, very incomplete account of his life and work is supplied.
The Development of a World Statesman
LaRouche established himself over more than four decades as the foremost enemy of the British Imperial System, in both its pre-World War II and ongoing post-war Commonwealth incarnations. LaRouche’s service in World War II, particularly in the Burma theatre was personally decisive. “It was the experience in Calcutta, in 1946, which defined my principal lifelong commitment, that the United States should take postwar world leadership in establishing a world order dedicated to promoting the economic development of what we today call ‘developing nations,’ ” LaRouche wrote in his autobiography, The Power of Reason: 1988. LaRouche began to do battle with the “political economic theorists” and slave-traders of the modern-day British East India Company, whose theories dominated American university Economics departments in the aftermath of World War II.
LaRouche fiercely opposed the conception of man-as-a-beast advocated by Francis Bacon, Thomas Hobbes, Parson Thomas Malthus, and John Locke. Instead, LaRouche re-established the science of physical economy in the United States, a science invented in 1672 by the German philosopher Gottfried Leibniz, inventor of the calculus and co-inventor of the steam engine. Through an intensive period of study between 1948 and 1952, LaRouche advanced his independent studies in physical science in order to develop his method of economic forecasting. The 1983 book, LaRouche: Will This Man Become President? states: “What LaRouche first recognized during 1952, was that by adopting a conception of energy which is fully consistent with [bernhard] Riemann’s 1854 dissertation, ‘On the Hypotheses Which Underlie Geometry,’ it is possible to measure both technology and economic growth in terms of energy so defined. In LaRouche’s work, economic value—real economic growth—is measured primarily in terms of increases of the potential relative population density of society.”
LaRouche, however, looked at all of his work on physical economy as the specific expression of a deeper epistemological task. In his 1988 article “Beethoven as a Physical Scientist,” LaRouche writes:
“My most important discoveries, in every field which I have contributed, are based upon my successful refutation of the famous Kantian paradox reasserted in Immanuel Kant’s Critique of Judgment. Kant asserted two things of relevance here.
“First, he insisted that although creative processes responsible for valid fundamental scientific discoveries exist, these processes themselves are beyond all possible human understanding. That I proved to be false, and from that proof developed an approach to intelligible representation of those creative processes, and hence the implicit measurement of technological progress as such.
“Second, on the basis of the first assumption, Kant argued that there were no intelligible criteria of truth or beauty in aesthetics. The toleration which has been gained so generally by all modern irrationalism in matters of art, has depended upon German and other acceptance of this thesis on aesthetics advanced by Kant and Friedrich Carl von Savigny later.”
The prolific nature of Lyndon LaRouche’s writings, in the fields of music, economics, history, language, and the physical sciences, inspired many collaborations and exchanges with people throughout the world. LaRouche, importantly, was a statesman—not a politician—a practitioner of statecraft, in the Socratic-Athenian sense. He established organizations through teaching, starting with a several-part lecture series in 1966, through which he advanced and debated his method of economic forecasting, especially on university campuses. Many first encountered LaRouche on one side of a debate, held with campus economic and political authorities of the 1970s. This stopped after LaRouche’s famous 1971 debate with economist Abba Lerner, who lost by admitting that if the austerity policies of German Finance Minister Hjalmar Schacht had been implemented in the 1920s, “Hitler would not have been necessary.” Within months, no one could be found to debate LaRouche, and no such debates ever again occurred.
LaRouche’s lectures on what were at the time called “dialectical economics,” were precisely that—dialogues between LaRouche and philosophical, economic and scientific figures from history, portrayed by him with storyteller precision, always done without notes, and often done without any books at all. Students were supplied with an extensive syllabus of reading material, with suggested readings detailed week by week. One student recalled that “passages were referred to from a work like Kant’s Critique of Practical Reason, for example. You would be told to read it. If you did so, and came to the class the next week, he would first describe what his idea was of the passage, which was persuasive as well as accurate. He would then proceed to destroy it piece by piece, and because you had read it, and accepted it, you got to discover the fallacies lurking at the bottom of your own mind. He demonstrated to you the difference between reading and thinking. They weren’t classes: they were soliloquies. And that’s how we got interested.”
LaRouche’s primary organization was the National (later International) Caucus of Labor Committees, a philosophical association organized as a “system of conferences,” usually held twice yearly. From this association sprang many other organizations, such as the Fusion Energy Foundation, the U.S. Labor Party, the National Democratic Policy Committee, the Anti-Drug Coalition, and others. LaRouche also founded and worked with organizations in France, Germany, Italy, Sweden, Canada, Denmark, Mexico, Colombia, Peru, Australia, and many other nations.
In December of 1977, LaRouche married Helga Zepp of Germany, later the creator of the Schiller Institute, a policy institution for the promotion of statecraft and a renaissance of Classical culture.
“In the fall of 1977, I suggested that we marry…. I was a little surprised, but pleasantly, when she agreed…. There was nothing ordinary about the lives of either of us, nor was it ever likely to be otherwise. We married in Wiesbaden on December 29, 1977. The service was in German; the official of the Standesamt asked me in German, if I knew what was happening. There was laughter about that question among my friends for weeks afterward.”They remained married for 41 years.
The combative nature and polemical style of the campaigns, electoral and non-electoral, of LaRouche and his associates were unique in American political life in the 1970s, 1980s, and 1990s. LaRouche’s 1976 half-hour broadcast, “Emergency Address to the Nation,” was the first time an independent candidate had ever purchased that quantity of television time in a U.S. federal election. LaRouche appeared on television fifteen times during the Presidential election of 1984 in 30-minute segments, virtually inventing what would later be imitated as the “infomercial.” The LaRouche Presidential candidacies, and the candidacies of his associates, including the running of 1,000 candidates for office in 1986 alone, both terrified LaRouche’s opponents in the United States, and inspired others to have the courage not merely to run for office, but to support policies designed to benefit all of humanity, not merely “their local mud-hole.”
One such policy was the International Development Bank (IDB), a 1975 LaRouche proposal to replace the International Monetary Fund, and to develop what was then termed “the Third World” through providing for the export of, not only American-built technology, but entire cities. These cities were to be built as training sites for the rapid development of the skills of developing-sector populations, enabling them to create their own “full-set” economies, rather than become debt-slaves, as in fact occurred.
Persons such as Frederick Wills, the former Foreign Affairs Minister of Guyana, advocated LaRouche’s IDB proposal in a 1976 session of the United Nations. Mexico’s President José López Portillo and India’s Prime Minister Indira Gandhi met with Lyndon and Helga LaRouche and adopted aspects of his proposals, many of which were presented as book-length treatments, such as “Operation Juárez” for Mexico and “The Industrialization of India: From Backwardness to Industrial Power in Forty Years” and a “A Fifty-Year Development Policy for the Indian-Pacific Oceans Basin”—all papers written by LaRouche in the early 1980s, and whose central outlook is still current, not only for today, but for the next decade or more.
The unorthodox method for dispersing these ideas advocated by LaRouche was Socratic: talking to people one on one. This daily street organizing occurred at unemployment centers, post offices, airports and traffic intersections, street corners, downtown areas and shopping malls. This direct contact with the American population resulted in LaRouche having a better reading on what was happening in the United States “from on the ground” than any other political force in the country. Corrupt elements of the Justice Department, and “quasi non-governmental organizations” who were given the green light to illegally disrupt the Constitutionally-guaranteed right of LaRouche’s associates to organize were forced to resort to characterizing the organization as a “cult” in order to dissuade citizens from contributing to companies associated with the LaRouche political movement.
None of LaRouche’s detractors are able to deny his record of successful economic forecasts, including the collapse of the Bretton Woods System on August 15, 1971, the October 1987 collapse of the Wall Street stock market (which LaRouche forecast in May of that year), and his July 25, 2007 forecast, captured in webcast format, of what later became the September 2008 “trillions-dollar bailout.” Some of the most stunning of LaRouche forecasts, though, were not, strictly speaking, economic. On Columbus Day, October 12, 1988, Lyndon LaRouche, speaking at Berlin’s Kempinski Hotel Bristol, said:
“By profession, I am an economist in the tradition of Gottfried Wilhelm Leibniz and Friedrich List in Germany and of Alexander Hamilton and Mathew and Henry Carey in the United States. My political principles are those of Leibniz, List, and Hamilton, and are also consistent with those of Friedrich Schiller and Wilhelm von Humboldt. Like the founders of my republic, I have an uncompromising belief in the principle of absolutely sovereign nation-states, and I am therefore opposed to all supranational authorities which might undermine the sovereignty of any nation. However, like Schiller, I believe that every person who aspires to become a beautiful soul, must be at the same time a true patriot of his own nation, and also a world citizen.
“For these reasons, during the past 15 years I have become a specialist in my country’s foreign affairs. As a result of this work, I have gained increasing, significant influence among some circles around my own government on the interrelated subjects of U.S. foreign policy and strategy. My role during 1982 and 1983 in working with the U.S. National Security Council to shape the adoption of the policy known as the Strategic Defense Initiative, or ‘SDI,’ is an example of this. Although the details are confidential, I can report to you that my views on the current strategic situation are more influential in the United States today that at any time during the past. Therefore, I can assure you that what I present to you now, on the subject of prospects for the reunification of Germany, is a proposal which will be studied most seriously among the relevant establishment circles inside the United States. Under the proper conditions, many today will agree, that the time has come for early steps toward the reunification of Germany, with the obvious prospect that Berlin might resume its role as the capital.”
Targeted for Destruction
Two days after his Kempinski Hotel speech, federal indictments were issued against Lyndon LaRouche and several associates. Later, LaRouche, in speaking at the National Press Club on the indictments, stated: “One could say of the indictment itself, that all those that perpetrate offenses against God, or humanity, or both, are sooner or later punished.” The indictments followed by two years an October 6, 1986 assassination attempt against LaRouche, about which LaRouche wrote in his 2004 pamphlet titled “ ‘Convict Him, or Kill Him!’ The Night They Came To Kill Me,” the following:
“On October 6, 1986, a virtual army of more than four hundred armed personnel descended upon the town of Leesburg, Virginia, for a raid on the offices of EIR and its associates, and also deployed for another, darker mission. The premises at which I was residing at that time were surrounded by an armed force, while aircraft, armored vehicles, and other personnel waited for the order to move in shooting. Fortunately, the killing did not happen, because someone with higher authority than the Justice Department Criminal Division head, William Weld, ordered the attack on me called off. The forces readied to move in on me, my wife, and a number of my associates, were pulled back in the morning.
“This was the second fully documented case of a U.S. Justice Department involvement in operations aimed at my personal elimination from politics.”
Though LaRouche and six others were found guilty in an Alexandria, Virginia court in December of 1988, and were imprisoned on January 27, 1989, the international and national outcry against those corrupt convictions continues to this very day. Former U.S. Attorney General Ramsey Clark characterized the LaRouche case as “involving a broader range of deliberate cunning and systemic misconduct over a longer period of time using the power of the federal government resources than any other prosecution by the U.S. government in my time or to my knowledge.” Executive Intelligence Review’s September 2017 dossier, “Robert Mueller Is an Amoral Legal Assassin: He Will Do His Job If You Let Him” comprehensively reviews how the current special prosecutor against Donald Trump was a key component of the political persecution of Lyndon LaRouche in the 1980s.
During his time spent in prison, LaRouche continued to write, but by often dictating whole chapters of book manuscripts on phone calls, again without reference works of any kind. Apart from the collection titled The Science of Christian Economy and Other Prison Writings, LaRouche wrote or recorded many other documents, some of which have been compiled with other never-before-published writings.
During 1989, as it became clear that the Soviet Union’s Comecon sphere was experiencing increasing economic difficulties, LaRouche and his wife Helga cooperated intensely on a program called the “Productive Triangle Paris-Berlin-Vienna,” which after the disintegration of the Soviet Union was extended into the “Eurasian Land-Bridge.” After the elimination of the Iron Curtain, this program suggested the integration of the population and industrial centers of Europe with those of Asia through so-called development corridors. It was the only comprehensive peace plan for the 21st Century on the table at that time, an option which was fiercely countered by British and the Anglophile neo-cons in the United States, who instead pushed their policy of a unipolar world and neoliberal system. The Eurasian Land-Bridge, very early on, became known as “The New Silk Road.” Over two decades later, the Chinese Belt and Road Initiative, which grew out of this concept, has become the primary locomotive of world physical economy.
Changing Thousands of Lives
Upon his release from prison on January 26, 1994, LaRouche continued his career as a forecaster. He developed his “Triple Curve” pedagogy in 1995 to illustrate to non-economists how the process of “Weimar Germany-like hyperinflation” had gripped the trans-Atlantic world, and had so looted it that nothing could be done to preserve the dominant money system; It would have to be reorganized from the top down, utilizing Franklin Roosevelt’s New Deal-era Glass-Steagall Act to begin the process of bank reorganization. He warned in January 2001 of the danger of a violent terrorist attack on one or more American cities, placing this warning within the context of reviewing why and how the financial system had entered a phase of a “high-tech bubble” during 1999–2000.
LaRouche spoke of a “Reichstag Fire” possibility in light of the emerging ungovernability of the United States, under conditions of deepening economic ruin. And, as with his May 1987 forecast of a collapse of the stock market in October of 1987, on July 25, 2007 LaRouche stated, one year before the Lehman Brothers/AIG meltdown of September 2008:
“The world monetary financial system is actually now currently in the process of disintegrating. There is nothing mysterious about this; I’ve talked about it for some time, it’s been in progress, it’s not abating. What’s listed as stock values and market values in the financial markets internationally is bunk! They are purely fictitious beliefs. There is no truth to it; the fakery is enormous. There is no possibility of a non-collapse of the present financial system—none! It’s finished, now!
“The present financial system cannot continue to exist under any circumstances, under any Presidency, under any leadership, or any leadership of nations. Only a fundamental and sudden change in the world monetary financial system will prevent a general, immediate chain-reaction type of collapse. At what speed we don’t know, but it will go on, and it will be unstoppable. And the longer it goes on before coming to an end, the worse things will get.”
LaRouche, as evidenced from the above forecast, produced at 84 years of age, not only continued to be uniquely productive. At the turn of the millennium, LaRouche spearheaded a movement to recruit youth—a movement which became so successful that the Democratic Party in various parts of the country even attempted to co-opt it. Thousands of youth went through this educational process. Groundbreaking contributions in the presentation of the work of physicist Johannes Kepler, in the practice of bel canto Classical singing both for general secondary school education and as an antidote to cultural self-degradation, and the presentation of American history, including American current history (rather than “current events” or the even more degrading term, “news”), in video format such as the program 1932, were produced by the LaRouche Youth Movement.
From the time of his emergence as a public figure over fifty years ago, the only tragedy that characterized Lyndon LaRouche’s life, is that he was never permitted to carry out, either as President or as an adviser to the serving President, the economic reforms that would have improved the lives of tens of millions of Americans and hundreds of millions around the world.
Although Lyndon LaRouche has many friends who were leaders in the fields of science, music, economy, and politics, his greatest friend, apart from his wife, Helga, were the forgotten men and women of America and other countries.
Public Banking Made Simple – New Video
Short Video Explanation
Close Loss For L.A. Public Bank
Ellen Brown on the public banking measure: Hi, I’ve gotten inquiries on the outcome of the Los Angeles ballot measure to approve a city-owned bank , so thought I would send a quick update. Unfortunately it did not pass, but it did get 42 percent of the vote. It was a remarkable outcome considering that the dynamic young Public Bank LA advocacy group effectively only had a month to educate 4 million voters on what a public bank is and why passing the measure was a good idea. If they had had another month, the bill could well have passed.
The City Council took supporters by surprise when it put the charter amendment on the ballot in July, leaving only four months to promote it. Passing a ballot measure typically takes a campaign war chest of $750,000 or more, and the all-volunteer PBLA group began with no funding and no formal group. The first challenge was clearing the legal requirement of forming a campaign committee, which itself takes funding and some expertise. The committee only began amassing campaign funds a month before the November 6 vote, after which it managed to bring in $60,000.
Most of the campaign, however, was conducted with sheer people power. According to PBLA political director Ben Hauck, in that short time the all-volunteer team managed to gain endorsements from over 100 organizations and community leaders, text message 350,000 voters, hand out over 50,000 flyers, reach over 500,000 voters through social media campaigns, get included in three mailers reaching over 1,200,000 voters, put up hundreds of yard signs and banners across L.A., talk with thousands of voters at events, universities, rallies and gatherings across the city, get featured in dozens of major news stories, articles and TV coverage, manage their own paid social media campaign, drive over 150,000 video views on a YouTube campaign, contact 200,000 voters via a robocall from the Chairman of the California Democratic Party, put on several significant campaign events, get featured in a press event with senatorial candidate Kevin de León and City Council President Herb Wesson, and create several featured videos, dozens of ads, and countless pieces of written content.
The PBLA team is pressing on undaunted. Leader Trinity Tran wrote after the vote, “Over a quarter million Angelenos voted in support of Measure B and the conversation on public banking has now been amplified across the country. This is just the beginning of the national movement. And it’s a fight we are certain will be won.”
We’re hugely proud of the PBLA team! Their dramatic achievements in a very short time are a testament to the power of a committed group of volunteers working together at the local level for a cause they feel strongly about.
If you would like to follow the progress of the public banking movement across the country, please sign up for the Public Banking Institute newsletter, linked here.
Best wishes,
Ellen
http://EllenBrown.com
http://PublicBankingInstitute.org
How Los Angeles Can Have It’s Own Bank & Free Itself From Wall Street
The Movement to Public Banking
by Ellen Brown
Wall Street Owns The Country
(From Ellen Brown’s article on TruthDig.com) Wall Street owns the country. That was the opening line of a fiery speech that populist leader Mary Ellen Lease delivered around 1890. Franklin Roosevelt said it again in a letter to Colonel House in 1933, and Sen. Dick Durbin was still saying it in 2009. “The banks—hard to believe in a time when we’re facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill,” Durbin said in an interview. “And they frankly own the place.”
Wall Street banks triggered a credit crisis in 2008-09 that wiped out over $19 trillion in household wealth, turned some 10 million families out of their homes and cost almost 9 million jobs in the U.S. alone. Yet the banks were bailed out without penalty, while defrauded home buyers were left without recourse or compensation. The banks made a killing on interest rate swaps with cities and states across the country, after a compliant and accommodating Federal Reserve dropped interest rates nearly to zero. Attempts to renegotiate these deals have failed.
In Los Angeles, the City Council was forced to reduce the city’s budget by 19 percent following the banking crisis, slashing essential services, while Wall Street has not budged on the $4.9 million it claims annually from the city on its swaps. Wall Street banks are now collecting more from Los Angeles just in fees than it has available to fix its ailing roads.
Local governments have been in bondage to Wall Street ever since the 19th century despite multiple efforts to rein them in. Regulation has not worked. To break free, we need to divest our public funds from these banks and move them into our own publicly owned banks.
L.A. Takes It to the Voters
Some cities and states have already moved forward with feasibility studies and business plans for forming their own banks. But the city of Los Angeles faces a barrier to entry that other cities don’t have. In 1913, the same year the Federal Reserve was formed to backstop the private banking industry, the city amended its charter to state that it had all the powers of a municipal corporation, “with the provision added that the city shall not engage in any purely commercial or industrial enterprise not now engaged in, except on the approval of the majority of electors voting thereon at an election.”
Under this provision, voter approval would apparently not be necessary for a city owned bank that limited itself to taking the city’s deposits and refinancing municipal bonds as they came due, since that sort of bank would not be a “purely commercial or industrial enterprise” but would simply be a public utility that made more efficient use of public funds. But voter approval would evidently be required to allow the city to explore how public banks can benefit local economic development, rather than just finance public projects.
The L.A. City Council could have relied on this 1913 charter amendment to say “no” to the dynamic local movement led by millennial activists to divest from Wall Street and create a city owned bank. But the City Council chose instead to jump that hurdle by putting the matter to the voters. In July 2018, it added Charter Amendment B to the November ballot. A “yes” vote will allow the creation of a city owned bank that can partner with local banks to provide low-cost credit for the community, following the stellar precedent of the century old Bank of North Dakota, currently the nation’s only state-owned bank. By cutting out Wall Street middlemen, the Bank of North Dakota has been able to make below-market credit available to local businesses, farmers and students while still being more profitable than some of Wall Street’s largest banks. Following that model would have a substantial upside for both the small business and the local banking communities in Los Angeles.
Rebutting the Opposition
On Sept. 20, the Los Angeles Times editorial board threw cold water on this effort, calling the amendment “half-baked” and “ill-conceived,” and recommending a “no” vote.
Yet not only was the measure well-conceived, but L.A. City Council President Herb Wesson has shown visionary leadership in recognizing its revolutionary potential. He sees the need to declare our independence from Wall Street. He has said that the country looks to California to lead, and that Los Angeles needs to lead California. The people deserve it, and the millennials whose future is in the balance have demanded it.
The City Council recognizes that it’s going to be an uphill battle. Charter Amendment B just asks voters, “Do you want us to proceed?” It is merely an invitation to begin a dialogue on creating a new kind of bank—one geared to serving the people rather than Wall Street.
Amendment B does not give the City Council a blank check to create whatever bank it likes. It just jumps the first of many legal hurdles to obtaining a bank charter. The California Department of Business Oversight (DBO) will have the last word, and it grants bank charters only to applicants that are properly capitalized, collateralized and protected against risk. Public banking experts have talked to the DBO at length and understand these requirements; and a detailed summary of a model business plan has been prepared, to be posted shortly.
The L.A. Times editorial board erroneously compares the new effort with the failed Los Angeles Community Development Bank, which was founded in 1992 and was insolvent a decade later. That institution was not a true bank and did not have to meet the DBO’s stringent requirements for a bank charter. It was an unregulated, non-depository, nonprofit loan and equity fund, capitalized with funds that were basically a handout from the federal government to pacify the restless inner city after riots broke out in 1992—and its creation was actually supported by the L.A. Times.
The Times also erroneously cites a 2011 report by the Boston Federal Reserve contending that a Massachusetts state-owned bank would require $3.6 billion in capitalization. That prohibitive sum is regularly cited by critics bent on shutting down the debate without looking at the very questionable way in which it was derived. The Boston authors began with the $2 million used in 1919 to capitalize the Bank of North Dakota, multiplied that number up for inflation, multiplied it up again for the increase in GDP over a century and multiplied it up again for the larger population of Massachusetts. This dubious triple-counting is cited as serious research, although economic growth and population size have nothing to do with how capital requirements are determined.
Bank capital is simply the money that is invested in a bank to leverage loans. The capital needed is based on the size of the loan portfolio. At a 10 percent capital requirement, $100 million is sufficient to capitalize $1 billion in loans, which would be plenty for a startup bank designed to prove the model. That sum is already more than three times the loan portfolio of the California Infrastructure and Development Bank, which makes below-market loans on behalf of the state. As profits increase the bank’s capital, more loans can be added. Bank capitalization is not an expenditure but an investment, which can come from existing pools of unused funds or from a bond issue to be repaid from the bank’s own profits.
Deposits will be needed to balance a $1 billion loan portfolio, but Los Angeles easily has them—they are now sitting in Wall Street banks having no fiduciary obligation to reinvest them in Los Angeles. The city’s latest Comprehensive Annual Financial Report shows a Government Net Position of over $8 billion in Cash and Investments (liquid assets), plus proprietary, fiduciary and other liquid funds. According to a 2014 study published by the Fix LA Coalition:
Together, the City of Los Angeles, its airport, seaport, utilities and pension funds control $106 billion that flows through financial institutions in the form of assets, payments and debt issuance. Wall Street profits from each of these flows of money not only through the multiple fees it charges, but also by lending or leveraging the city’s deposited funds and by structuring deals in unnecessarily complex ways that generate significant commissions.
Despite having slashed spending in the wake of revenue losses from the Wall Street-engineered financial crisis, Los Angeles is still being crushed by Wall Street financial fees, to the tune of nearly $300 million—just in 2014. The savings in fees alone from cutting out Wall Street middlemen could thus be considerable, and substantially more could be saved in interest payments. These savings could then be applied to other city needs, including for affordable housing, transportation, schools and other infrastructure.
In 2017, Los Angeles paid $1.1 billion in interest to bondholders, constituting the wealthiest 5 percent of the population. Refinancing that debt at just 1 percent below its current rate could save up to 25 percent on the cost of infrastructure, half the cost of which is typically financing. Consider, for example, Proposition 68, a water bond passed by California voters last summer. Although it was billed as a $4 billion bond, the total outlay over 40 years at 4 percent will actually be $8 billion. Refinancing the bond at 3 percent (the below-market rate charged by the California Infrastructure and Development Bank) would save taxpayers nearly $2 billion on the overall cost of the bond.
Finding the Political Will
The numbers are there to support the case for a city owned bank, but a critical ingredient in effecting revolutionary change is finding the political will. Being first in any innovation is always the hardest. Reasons can easily be found for saying “no.” What is visionary and revolutionary is to say, “Yes, we can do this.”
As California goes, so goes the nation, and legislators around the country are watching to see how it goes in Los Angeles. Rather than criticism, Council President Wesson deserves high praise for stepping forth in the face of predictable pushback and daunting legal hurdles to lead the country in breaking free from our centuries-old subjugation to Wall Street exploitation.
Hear Ellen Brown in Santa Monica
DATE: Thursday October 4, 2018
LOCATION: The Satellite Flexible Workspace 3110 Main St., Annex Building C 2nd Floor Santa Monica, CA 90405
TIME: 7:30 PANEL BEGINS!
6:30-7:30 Please arrive EARLY for NETWORKING and snacks
Followed by Q & A with the members of our Public Bank LA panel & more snacks and networking! (we will wrap it up by 9:30/10)
COST: $10 (donation for location and snacks)
Central Banks Have Gone Rogue
Central Banks Have Put Us All At Risk
by Ellen Brown
marcokalmann / Flickr
Excluding institutions such as Blackrock and Vanguard, which are composed of multiple investors, the largest single players in global equity markets are now thought to be central banks themselves. An estimated 30 to 40 central banks are invested in the stock market, either directly or through their investment vehicles (sovereign wealth funds). According to David Haggith at Zero Hedge:
Central banks buying stocks are effectively nationalizing U.S. corporations just to maintain the illusion that their “recovery” plan is working. … At first, their novel entry into the stock market was only intended to rescue imperiled corporations, such as General Motors during the first plunge into the Great Recession, but recently their efforts have shifted to propping up the entire stock market via major purchases of the most healthy companies on the market.
The U.S. Federal Reserve, which bailed out General Motors in a rescue operation in 2009, was prohibited from lending to individual companies under the Dodd-Frank Act of 2010, and it is legally barred from owning equities. It parks its reserves instead in bonds and other government-backed securities. But other countries have different rules, and central banks are now buying individual stocks as investments, with a preference for big tech companies like Amazon, Apple, Facebook and Microsoft. Those are the stocks that dominate the market, and central banks are aggressively driving up their value. Markets, including the U.S. stock market, are thus literally being rigged by foreign central banks.
The result, as noted in a January 2017 article at Zero Hedge, is that central bankers, “who create fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” Or at least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48 percent privately owned, and most central banks have declared their independence from their governments. They march to the drums not of government but of private industry.
Marking the 10th anniversary of the 2008 collapse, former Fed Chairman Ben Bernanke and former Treasury Secretaries Timothy Geithner and Henry Paulson wrote in a Sept. 7 New York Times op-ed that the Fed’s tools needed to be broadened to allow it to fight the next anticipated economic crisis, including allowing it to prop up the stock market by buying individual stocks. To investors, propping up the stock market may seem like a good thing, but what happens when the central banks decide to sell? The Fed’s massive $4 trillion economic support is now being taken away, and other central banks are expected to follow. Their U.S. and global holdings are so large that their withdrawal from the market could trigger another global recession. That means when and how the economy will collapse is now in the hands of central bankers.
Moving Goal Posts
The two most aggressive central bank players in the equity markets are the Swiss National Bank and the Bank of Japan. The goal of the Bank of Japan, which now owns 75 percent of Japanese exchange-traded funds, is evidently to stimulate growth and defy longstanding expectations of deflation. But the Swiss National Bank is acting more like a hedge fund, snatching up individual stocks because “that is where the money is.”
About 20 percent of the SNB’s reserves are in equities, and more than half of that is in U.S. equities. The SNB’s goal is said to be to counteract the global demand for Swiss francs, which has been driving up the value of the national currency, making it hard for Swiss companies to compete in international trade. The SNB does this by buying up other currencies, and because it needs to put them somewhere, it’s putting that money in stocks.
That is a reasonable explanation for the SNB’s actions, but some critics suspect it has ulterior motives. Switzerland is home to the Bank for International Settlements, the “central bankers’ bank” in Basel, where central bankers meet regularly behind closed doors. Dr. Carroll Quigley, a Georgetown history professor who claimed to be the historian of the international bankers, wrote of this institution in” Tragedy and Hope” in 1966:
[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks, which were themselves private corporations.
The key to their success, said Quigley, was that they would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. The goal was to establish an independent (privately owned or controlled) central bank in every country. Today, that goal has largely been achieved.
In a paper presented at the 14th Rhodes Forum in Greece in October 2016, Dr. Richard Werner, director of international development at the University of Southampton in the United Kingdom, argued that central banks have managed to achieve total independence from government and total lack of accountability to the people, and that they are now in the process of consolidating their powers. They control markets by creating bubbles, busts and economic chaos. He pointed to the European Central Bank, which was modeled on the disastrous earlier German central bank, the Reichsbank. The Reichsbank created deflation, hyperinflation and the chaos that helped bring Adolf Hitler to power.
The problem with the Reichsbank, said Werner, was its excessive independence and its lack of accountability to German institutions and Parliament. The founders of postwar Germany changed the new central bank’s status by significantly curtailing its independence. Werner wrote, “The Bundesbank was made accountable and subordinated to Parliament, as one would expect in a democracy. It became probably the world’s most successful central bank.”
But today’s central banks, he said, are following the disastrous Reichsbank model, involving an unprecedented concentration of power without accountability. Central banks are not held responsible for their massive policy mistakes and reckless creation of boom-bust cycles, banking crises and large-scale unemployment. Youth unemployment now exceeds 50 percent in Spain and Greece. Many central banks remain in private hands, including not only the Swiss National Bank but the Federal Reserve Bank of New York and the Italian, Greek and South African central banks.
Banks and Central Banks Should Be Made Public Utilities
Werner’s proposed solution to this dangerous situation is to bypass both the central banks and the big international banks and decentralize power by creating and supporting local not-for-profit public banks. Ultimately, he envisions a system of local public money issued by local authorities as receipts for services rendered to the local community. Legally, he noted, 97 percent of the money supply is already just private company credit, which can be created by any company, with or without a banking license. Governments should stop issuing government bonds, he said, and instead fund their public sector credit needs through domestic banks that create money on their books (as all banks have the power to do). These banks could offer more competitive rates than the bond markets and could stimulate the local economy with injections of new money. They could also put the big bond underwriting firms that feed on the national debt out of business.
Abolishing the central banks is one possibility, but if they were recaptured as public utilities, they could serve some useful purposes. A central bank dedicated to the service of the public could act as an unlimited source of liquidity for a system of public banks, eliminating bank runs since the central bank cannot go bankrupt. It could also fix the looming problem of an unrepayable federal debt, and it could generate “quantitative easing for the people,” which could be used to fund infrastructure, low-interest loans to cities and states, and other public services.
The ability to nationalize companies by buying them with money created on the central bank’s books could also be a useful public tool. The next time the mega-banks collapse, rather than bailing them out, they could be nationalized and their debts paid off with central bank-generated money.
There are other possibilities. Former Assistant Treasury Secretary Paul Craig Roberts argues that we should also nationalize the media and the armaments industry. Researchers at the Democracy Collaborative have suggested nationalizing the large fossil fuel companies by simply purchasing them with Fed-generated funds. In a September 2018 policy paper titled “Taking Climate Action to the Next Level,” the researchers wrote, “This action might represent our best chance to gain time and unlock a rapid but orderly energy transition, where wealth and benefits are no longer centralized in growth-oriented, undemocratic, and ethically dubious corporations, such as ExxonMobil and Chevron.”
Critics will say this would result in hyperinflation, but an argument can be made that it wouldn’t. That argument will have to wait for another article, but the point here is that massive central bank interventions that were thought to be impossible in the 20th century are now being implemented in the 21st, and they are being done by independent central banks controlled by an international banking cartel. It is time to curb central bank independence. If their powerful tools are going to be put to work, it should be in the service of the public and the economy.
Why Interest Rates Are Rising
FED Agressively Raising Rates
By Ellen Brown
The Fed is aggressively raising interest rates, although inflation is contained, private debt is already at 150% of GDP, and rising variable rates could push borrowers into insolvency. So what is driving the Fed’s push to “tighten”?
On March 31st the Federal Reserve raised its benchmark interest rate for the sixth time in 3 years and signaled its intention to raise rates twice more in 2018, aiming for a fed funds target of 3.5% by 2020. LIBOR (the London Interbank Offered Rate) has risen even faster than the fed funds rate, up to 2.3% from just 0.3% 2-1/2 years ago. LIBOR is set in London by private agreement of the biggest banks, and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.
Alarmed commentators warn that global debt levels have reached $233 trillion, more than three times global GDP; and that much of that debt is at variable rates pegged either to the Fed’s interbank lending rate or to LIBOR. Raising rates further could push governments, businesses and homeowners over the edge. In its Global Financial Stability report in April 2017, the International Monetary Fund warned that projected interest rises could throw 22% of US corporations into default.
Then there is the US federal debt, which has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $21 trillion in April 2018. Adding to that debt burden, the Fed has announced that it will be dumping its government bonds acquired through quantitative easing at the rate of $600 billion annually. It will sell $2.7 trillion in federal securities at the rate of $50 billion monthly beginning in October. Along with a government budget deficit of $1.2 trillion, that’s nearly $2 trillion in new government debt that will need financing annually.
If the Fed follows through with its plans, projections are that by 2027, US taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Trump’s original 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. Where will this money come from? Even crippling taxes, wholesale privatization of public assets, and elimination of social services will not cover the bill.
With so much at stake, why is the Fed increasing interest rates and adding to government debt levels? Its proffered justifications don’t pass the smell test.
“Faith-Based” Monetary Policy
In setting interest rates, the Fed relies on a policy tool called the “Phillips curve,” which allegedly shows that as the economy nears full employment, prices rise. The presumption is that workers with good job prospects will demand higher wages, driving prices up. But the Phillips curve has proven virtually useless in predicting inflation, according to the Fed’s own data. Former Fed Chairman Janet Yellen has admitted that the data fails to support the thesis, and so has Fed Governor Lael Brainard. Minneapolis Fed President Neel Kashkari calls the continued reliance on the Phillips curve “faith-based” monetary policy. But the Federal Open Market Committee (FOMC), which sets monetary policy, is undeterred.
“Full employment” is considered to be 4.7% unemployment. When unemployment drops below that, alarm bells sound and the Fed marches into action. The official unemployment figure ignores the great mass of discouraged unemployed who are no longer looking for work, and it includes people working part-time or well below capacity. But the Fed follows models and numbers, and as of April 2018, the official unemployment rate had dropped to 4.3%. Based on its Phillips curve projections, the FOMC is therefore taking steps to aggressively tighten the money supply.
The notion that shrinking the money supply will prevent inflation is based on another controversial model, the monetarist dictum that “inflation is always and everywhere a monetary phenomenon”: inflation is always caused by “too much money chasing too few goods.” That can happen, and it is called “demand-pull” inflation. But much more common historically is “cost-push” inflation: prices go up because producers’ costs go up. And a major producer cost is the cost of borrowing money. Merchants and manufacturers must borrow in order to pay wages before their products are sold, to build factories, buy equipment and expand. Rather than lowering price inflation, the predictable result of increased interest rates will be to drive consumer prices up, slowing markets and increasing unemployment – another Great Recession. Increasing interest rates is supposed to cool an “overheated” economy by slowing loan growth, but lending is not growing today. Economist Steve Keen has shown that at about 150% private debt to GDP, countries and their populations do not take on more debt. Rather, they pay down their debts, contracting the money supply; and that is where we are now.
The Fed’s reliance on the Phillips curve does not withstand scrutiny. But rather than abandoning the model, the Fed cites “transitory factors” to explain away inconsistencies in the data. In a December 2017 article in The Hill, Tate Lacey observed that the Fed has been using this excuse ever since 2012, citing one “transitory factor” after another, from temporary movements in oil prices, to declining import prices and dollar strength, to falling energy prices, to changes in wireless plans and prescription drugs. The excuse is wearing thin.
The Fed also claims that the effects of its monetary policies lag behind the reported data, making the current rate hikes necessary to prevent problems in the future. But as Lacey observes, GDP is not a lagging indicator, and it shows that the Fed’s policy is failing. Over the last two years, leading up to and continuing through the Fed’s tightening cycle, nominal GDP growth averaged just over 3%; while in the two prior years, nominal GDP grew at more than 4%. Thus “the most reliable indicator of the stance of monetary policy, nominal GDP, is already showing the contractionary impact of the Fed’s policy decisions,” says Lacey, “signaling that its plan will result in further monetary tightening, or worse, even recession.”
Follow the Money
If the Phillips curve, the inflation rate and loan growth don’t explain the push for higher interest rates, what does? The answer was suggested in an April 12th Bloomberg article by Yalman Onaran, titled “Surging LIBOR, Once a Red Flag, Is Now a Cash Machine for Banks.” He wrote:
The largest U.S. lenders could each make at least $1 billion in additional pretax profit in 2018 from a jump in the London interbank offered rate for dollars, based on data disclosed by the companies. That’s because customers who take out loans are forced to pay more as Libor rises while the banks’ own cost of credit has mostly held steady.
During the 2008 crisis, high LIBOR rates meant capital markets were frozen, since the banks’ borrowing rates were too high for them to turn a profit. But US banks are not dependent on the short-term overseas markets the way they were a decade ago. They are funding much of their operations through deposits, and the average rate paid by the largest US banks on their deposits climbed only about 0.1% last year, despite a 0.75% rise in the fed funds rate. Most banks don’t reveal how much of their lending is at variable rates or is indexed to LIBOR, but Oneran comments:
JPMorgan Chase & Co., the biggest U.S. bank, said in its 2017 annual report that $122 billion of wholesale loans were at variable rates. Assuming those were all indexed to Libor, the 1.19 percentage-point increase in the rate in the past year would mean $1.45 billion in additional income.
Raising the fed funds rate can be the same sort of cash cow for US banks. According to a December 2016 Wall Street Journal article titled “Banks’ Interest-Rate Dreams Coming True”:
While struggling with ultralow interest rates, major banks have also been publishing regular updates on how well they would do if interest rates suddenly surged upward. . . . Bank of America . . . says a 1-percentage-point rise in short-term rates would add $3.29 billion. . . . [A] back-of-the-envelope calculation suggests an incremental $2.9 billion of extra pretax income in 2017, or 11.5% of the bank’s expected 2016 pretax profit . . . .
As observed in an April 12 article on Seeking Alpha:
About half of mortgages are . . . adjusting rate mortgages [ARMs] with trigger points that allow for automatic rate increases, often at much more than the official rate rise. . . .
One can see why the financial sector is keen for rate rises as they have mined the economy with exploding rate loans and need the consumer to get caught in the minefield.
Even a modest rise in interest rates will send large flows of money to the banking sector. This will be cost-push inflationary as finance is a part of almost everything we do, and the cost of business and living will rise because of it for no gain.
Cost-push inflation will drive up the Consumer Price Index, ostensibly justifying further increases in the interest rate, in a self-fulfilling prophecy in which the FOMC will say, “We tried – we just couldn’t keep up with the CPI.”
A Closer Look at the FOMC
The FOMC is composed of the Federal Reserve’s seven-member Board of Governors, the president of the New York Fed, and four presidents from the other 11 Federal Reserve Banks on a rotating basis. All 12 Federal Reserve Banks are corporations, the stock of which is 100% owned by the banks in their districts; and New York is the district of Wall Street. The Board of Governors currently has four vacancies, leaving the member banks in majority control of the FOMC. Wall Street calls the shots; and Wall Street stands to make a bundle off rising interest rates.
The Federal Reserve calls itself “independent,” but it is independent only of government. It marches to the drums of the banks that are its private owners. To prevent another Great Recession or Great Depression, Congress needs to amend the Federal Reserve Act, nationalize the Fed, and turn it into a public utility, one that is responsive to the needs of the public and the economy.