The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.
— Former Fed Chairman Alan Greenspan on Meet the Press, August 2011
In a post on “Sovereign Man” dated August 14th, Simon Black argued that Donald Trump may be the right man for the presidency:
Something’s profoundly wrong with our global financial system. Pope Francis is only the latest to raise the alarm: “Human beings and nature must not be at the service of money. Let us say no to an economy of exclusion and inequality, where money rules, rather than service. That economy kills. That economy excludes. That economy destroys Mother Earth.”
What the Pope calls “an economy of exclusion and inequality, where money rules” is widely evident. What is not so clear is how we got into this situation, and what to do about it.
The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.
Pope Francis’ revolutionary encyclical addresses not just climate change but the banking crisis. Interestingly, the solution to that crisis may have been modeled in the Middle Ages by Franciscan monks following the Saint from whom the Pope took his name.
In a recent The Daily Bell interview, Dr. Antal Fekete, who is always a compelling figure (he consistently champions thinking over doctrinaire recitations), suggested that deflation is “a pathological slowing in the velocity of money.” Even though Dr. Fekete perhaps misplaces the locus of this pathology, he deserves kudos for highlighting the overriding behavioral dimension of the current deflation.
On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking.
Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.
Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:
When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.
Financial reform didn’t work. The Wall Street banks today are bigger and more opaque than ever and they continue to trade in derivatives in many of the same ways as before the crash – but on a larger scale and with the same unknown risks.
You can always count on Americans to do the right thing, after they’ve tried everything else.
— Winston Churchill
