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Ending Third World Debt Today most of it is held by giant US-based banks like Citigroup and JP Morgan Chase. If they're placed in receivership, the "US government could declare a 'Day of Jubilee' " of debt forgiveness, and if done, it "would not be an entirely selfless act." For America to pay off its international debt, it needs all the goodwill it can get. Forgiving other debts would encourage our creditors to forgive ours as world nations have no interest in seeing major economies collapse. What affects one, harms others. "Our shiny new monetary scheme, rather than appearing to be a slight of hand, could unveil itself as a millennial model for showering abundance everywhere" for the mutual benefit of everyone. It's simple to do - just void out debts on banks' books with a click of a mouse. "No depositors or creditors would lose money, because (none) advanced their own money in the original loans." They were created out of thin air through accounting entries. On banking financial statements, they're liabilities because accounting rules say books must balance. Once old debts are gone, new ones can be avoided by stabilizing national currencies to prevent devaluation by speculators. Bretton Woods protected against this. A new system is now needed, one that "retains the virtues of the gold standard while overcoming its limitations." One now in use is to peg currencies to the dollar but with it comes loss of flexibility to compete in international markets or be able to budget enough for domestic needs - with a fixed money supply. Argentina's "currency board" in the 1990s forced its eventual bankruptcy in 1995 and again in 2001 as earlier mentioned. A global currency is another proposal - one that creates more problems than it solves. The world "is not one nation or one region," and who's to be boss and in charge. Further, if all governments issued the same currency, "the global money supply (would be) vulnerable to irresponsible governments (issuing) too much." Strong ones would end up dominating the weak, and national sovereignty would be weakened, perhaps ended. A "fully dollarized" world is a prescription for trouble enough to make scarcity "the order of the day." Rather than one currency, "a single global yardstick" is needed "against which governments can value their currencies - some independent measure (by) which merchants can negotiate their contracts and be sure of getting what they bargained for." How to do it is the question? A New Bretton Woods Michael Rowbotham picked up on John Maynard Keynes idea of pegging currencies to a basket of commodities, calling it "a profoundly democratic idea." He states: "Today, wheat grown in one country may, due to a devalued currency, cost a fraction of wheat grown in another. This leads to (cheap wheat producers) becoming (heavy exporters) regardless of need, or the capacity to produce better quality wheat in other locations. In addition, currency values can change dramatically and the situation can reverse. Critically, such wheat 'prices' bear no relation to genuine comparative advantage of climate, soil type, geography and even less to indigenous/local/regional needs." Nor does it stabilize production in relation to need. By "imputing value to a nation's produce, and allowing this to determine the value of (its) currency, one is imputing value to its resources, its labourers and acknowledging its own needs." Various proposals involve "private international currency exchanges, but the same (type) reference unit (could) stabilize exchange rates among official national currencies." One calls for: -- a new fixed exchange rate system;
-- a treaty banning speculation in derivatives;
-- canceling or reorganizing international debt; and
-- having governments issue enough "credit" to create full employment, then used for technical innovation and infrastructure development. Other plans are around as well, all stressing the same idea - "the urgent need for change" because the current system is corrupted and broken. How then to stabilize national currencies? "The simplest and most comprehensive....international currency yardstick (measure) seems to be the Consumer Price Index....modified to reflect" real consumer expenditures, not the quantity of currencies traded in international markets by speculators. Henceforth, currencies "would just be coupons for units of value recognized globally" - stable enough for "commercial traders (to) 'bank' on them." National currencies "would become what (they) should have been all along - (contracts) or promise(s) to return value in goods and services of a certain worth, as measured against a universally recognized yardstick for determining value." Government without Taxes or Debt Only a "radical shift in our concepts of money and banking will save us from the cement wall looming ahead" - an abyss otherwise named. Letting bankers hold "an illusory sum of gold," to be multiplied many times over by fractional reserve alchemy, entraps everyone in debt bondage. "The result was a (giant) Ponzi scheme that has pumped the global money supply into a gigantic credit bubble" now imploding. Everything of value is at risk, including our futures and that of our loved ones - unless we can reverse the corrupted system entrapping us, and think of the benefits: expanded government services and prosperity, inflation and tax free. Today's "web of debt" is based on fraud, deceit, and manipulative sleights of hand, including: -- fractional reserve alchemy - pure hocus-pocus witchcraft hokum;
-- the gold standard of an earlier time letting bankers dangerously inflate the money supply "on the same gold reserves;"
-- the private banking cartel Federal Reserve owned by major banks in each of 12 Fed districts empowered to create money and charge the government, business, and individuals interest on it - the result being everyone put in permanent debt bondage to world-class predators;
-- the federal debt and money supply; both continually expand under a highly inflationary scheme;
-- the federal income tax to pay interest to bankers;
-- the FDIC and IMF to ensure mega-banks get bailed out no matter what unwarranted risks they take; the IMF is also a sort of knee-cap breaking enforcer for the monied interests - extracting multiple pounds of flesh in as part of a giant extortion racket;
-- a "free market" for those who own it under a corrupted, manipulated system of socialized risks and privatized profits, enforced by the Pentagon's long arm;
-- the Plunge Protection Team (PPT) and Counterparty Risk Management Policy Group (CRMPG) - created to rig and manipulate markets along with colluding Wall Street bankers bailed out whenever they get in trouble; the notion that markets move randomly is rubbish - about as real as the tooth fairy or Mother Goose;
-- "floating" exchange rates - for more manipulation and collusion in international currency markets;
-- short selling - for speculators in all type assets; when used against currencies, it can artificially force them down enough to cause economic havoc the way it was done to Asian Tiger countries in 1997 and many others as well;
-- "globalization" and "free trade" - a predatory system benefitting America and the West under WTO rules; countries also become vulnerable to speculative assaults when their currencies are convertible and economies opened to "free trade;"
-- inflation myths - money creation isn't the problem; speculative currency attacks force destructive devaluations, meaning prices rise as a result; American inflation is "caused by private banks inflating the money supply with debt," not by printing money; also by productive growth not keeping up;
-- the "business cycle" - responsible financial managements produce stable prosperity; when irresponsibly done by a private banking cartel, booms and busts result; it's an unnatural "monetary scheme in which money comes into existence as a debt to private banks for 'reserves' of something lent many times over;"
-- the home mortgage boondoggle - monetizing home mortgages today creates most money; borrowers think they're using "pre-existing funds, when the bank is just turning one's promise to pay into an 'asset' secured by real property;" when paid off, the interest usually exceeds the original loan, and in cases of default, banks seize the homes;
-- the housing bubble - it was caused by easy credit in the 1990s and post-2000 by an irresponsible Fed and Wall Street bankers' plan, including massive fraud like issuing up to 10 mortgages on a single home when its owner had only one;
-- adjustable rate mortgages (ARMs) - affecting about half of all US ones, it was a scam through subprime lending and low "teaser" rates, later ratcheted to unaffordable levels and catching buyers unawares;
-- the secret bankruptcy of banks - they gambled hugely on risky derivatives and housing loans, far afield from traditional banking of borrowing low and lending higher for modest, stable profits; the result - all major banks are insolvent with only government bailouts keeping them afloat;
-- "vulture capitalism" and derivatives - the former amounts to predatory banks and hedge funds "buying out shareholders and bleeding businesses of profits, using loans of 'phantom money' created on a computer screen" out of thin air; the latter turned banks into casinos making huge bets that went sour; and
-- moral hazard, once called the "Greenspan put;" substitute Bernanke and Geithner now for the maestro of misery; it lets banking giants take outsized risks knowing bailout backups await any that go sour. The federal debt is another problem - at "its mathematical limits, (it's) forcing another paradigm shift if the economy is to survive." We have a choice: let a debt-based house of cards collapse or have it be a wake-up call for radical change. Again, imagine the possibilities: -- ending personal income taxes and stimulating stable economic growth at the same time;
-- eliminating the federal debt entrapping us and future generations in permanent bondage;
-- returning money creation power to the government as the Constitution mandates with a cornucopia of benefits to follow;
-- strengthening universal Social Security for everyone in place of disappearing private pensions;
-- fostering stable, inflation-free prosperity with no booms and busts;
-- keeping borrowing costs fair and affordable, not subject to private bank manipulation; and
-- ending destructive currency devaluations and economic warfare for private gain; with stable exchange rates, the "dollar becomes self-sustaining, and the United States and other countries become self-reliant," free from foreign creditors and one-way market rules benefitting the strong over the weak. Nothing short of a populist revolution for radical change is needed - bubbling up from the grassroots to an unstoppable force. "Reviving the 'American system' of government-issued money" would return us to our colonial roots, and like Dorothy in the Wizard of Oz, "we the people would finally have come home." More on that topic in a follow-up article.
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Stephen Lendman, a contributing editor to MWC News, is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen[at]sbcglobal.net.
Also listen to The Global Research News Hour on RepublicBroadcasting.org Monday through Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.
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