Transcript THE POWER TO CREATE MONEY: How We the People Lost It …

Real Wealth:
A Future We Can Bank On
Ellen Brown, JD
Public Banking Institute
The Economics of Happiness Conference
Feb 27-Mar 1, 2015
The Elliott Center, Portland, OR
www.localfutures.org
The Piketty bombshell:
exploding
theismyths
of capitalism.
capitalism
not sustainable.
The flaw –
markets do not self-correct.
A more fundamental flaw:
Money is created by private banks
as a debt at interest.
Exploding another myth of capitalism:
‘[B]anks do not act simply as intermediaries,
lending out deposits that savers place with
them, and nor do they ‘multiply up’ central
bank money to create new loans and
deposits … Commercial banks create
money, in the form of bank deposits, by
making new loans.’
 ‘Money creation in the modern economy’,
Quarterly Bulletin,2014 Q1, Bank of England.
Then why do they need deposits?
• They balance their books by
borrowing:
• Deposits @ 0.1%
• Money market @ 0.15%
• Fed Funds @ 0.25%
• Fed Reserve @ 0.75%
• Profit = the spread.
Where does the interest come from?
It can only come from more debt.
It’s a pyramid scheme.
Where does the interest go? Mostly
into more money-making-money
schemes -- loans, rents, offshore tax
havens.
The debt overhang:
debt-at-interest always grows faster
than the real economy.
Exponential growth is unsustainable.
Found in:
• cancer
• parasites
• compound
interest
Eventually, the
parasite runs out
of its food source.
How to solve the interest flaw:
return the profits to the people.
The public model was proven in
colonial Pennsylvania.
The result:
Government prints $105
Lends $100
@ 5% interest
Spends $5 on
budget, infrastructure
• No taxes
• No price inflation
$105 circulates in economy; comes back
• No government
to government as principal and interest
debt!
Spends $5 on
Government lends $100
@ 5% interest
budget, infrastructure
In the US, we have one state-owned
depository bank — in North Dakota.
• ND also has:
• the nation’s lowest
unemployment rate
• one of the lowest
foreclosure rates
• lowest default rate
• only state to escape
the 2008 credit crisis
Globally, 40% of banks
are publicly-owned.
They are mainly in the high-growth
BRIC countries, which also largely
escaped the credit crisis.
The BND model:
• Depository for all state revenues.
• DBA of the state.
• $40M annual dividend (major for a pop. of
740K; compare 584K for Portland).
• Average ROE of 20%, 2009-2014.
• Mandate to serve the public.
• 1% loans to startup farms, businesses,
schools; 1.74% variable rate loans to students.
Why so profitable?
They have lower costs.
•
•
•
•
•
No bonuses, fees, commissions.
No high-paid CEOs.
No private shareholders.
No advertising (captive deposit base).
No branches or ATMs (BND partners
with local banks, which act as the front
office).
How to turn a profit overnight:
the magic of leverage
Capital:
$20M from rainy day fund or bond issue
x 3% interest
= $.6M cost of capital
Deposits: $200M
x 0.3% interest
= $0.6M cost of deposits
Loans:
$200M - $20M reserve
= $180M to lend or invest
$180M invested in municipal bonds earning 3%
= $5.4M profit
- $1.2M (cost of funds)
Net profit: $4.2M (21%)$4.26M (21%)
How to cut infrastructure costs
in half – own the bank.
Bay Bridge retrofit:
principal, $6 billion;
interest, $6 billion.
Bullet train:
principal, $9.95 billion;
interest, $9.5 billion
Public banks are also safer.
FDIC
insurance?
Don’t count on
it. Derivatives
have superpriority in
bankruptcy.
Public banks return the profits to the
people and the economy, making
banking sustainable.
For more information –
PublicBankingInstitute.org
EllenBrown.com