Why the U.S. Need Not Fear a Sovereign Debt Crisis: Unlike Greece, It Is Actually Sovereign

Last week, a Chinese rating agency downgraded U.S. debt from triple A and number one globally, to “double A with a negative outlook” and only thirteenth worldwide. The downgrade renewed fears that the sovereign debt crisis that began in Greece will soon reach America. That is the concern, but the U.S. is distinguished from Greece in that its debt is denominated in its own currency, over which it has sovereign control. The government can simply print the money it needs, or borrow it from a central bank that prints it. We should not let deficit hawks and short sellers dissuade the government from pursuing that obvious expedient.

We did not hear much about “sovereign debt” until early this year, when Greece hit the skids. Investment adviser Martin Weiss wrote in a February 24 newsletter:

On October 8, Greece’s benchmark 10-year bond was stable and rising. Then, suddenly and without warning, global investors dumped their Greek bonds with unprecedented fury, driving its market value into a death spiral.

Likewise, Portugal’s 10-year government bond reached a peak on December 1, 2009, less than three months ago. It has also started to plunge virtually nonstop.

The reason: A new contagion of fear about sovereign debt! Indeed, both governments are so deep in debt, investors worry that default is not only possible — it is now likely!

So said the media, but note that Greece and Portugal were doing remarkably well only 3 months earlier. Then, “suddenly and without warning,” global investors furiously dumped their bonds. Why? Weiss and other commentators blamed a sudden “contagion of fear about sovereign debt.” But as Bill Murphy, another prolific newsletter writer, reiterates, “Price action makes market commentary.” The pundits look at what just happened in the market and then dream up some plausible theory to explain it. What President Franklin Roosevelt said of politics, however, may also be true of markets: “Nothing happens by accident. If it happens, you can bet it was planned that way.”

That the collapse of Greece’s sovereign debt may actually have been planned was suggested in a Wall Street Journal article in February, in which Susan Pullian and co-authors reported:

Some heavyweight hedge funds have launched large bearish bets against the euro in moves that are reminiscent of the trading action at the height of the U.S. financial crisis.

The big bets are emerging amid gatherings such as an exclusive ‘idea dinner’ earlier this month that included hedge-fund titans SAC Capital Advisors LP and Soros Fund Management LLC. …

It is impossible to calculate the precise effect of the elite traders’ bearish bets, but they have added to the selling pressure on the currency—and thus to the pressure on the European Union to stem the Greek debt crisis.

There is nothing improper about hedge funds jumping on the same trade unless it is deemed by regulators to be collusion. Regulators haven’t suggested that any trading has been improper.

Regulators hadn’t suggested it yet; but on the same day that the story was published, the antitrust division of the U.S. Justice Department sent letters to a number of hedge funds attending the dinner, warning them not to destroy any trading records involving market bets on the euro.

Represented at the dinner was the hedge fund of George Soros, who was instrumental in collapsing the British pound in 1992 by heavy short-selling. Soros was quoted as warning that if the European Union did not fix its finances, “the euro may fall apart.” Was it really a warning? Or was it the sort of rumor designed to make the euro fall apart? A concerted attack on the euro, beginning with its weakest link, the Greek bond, could bring down that currency just as short selling had brought down the pound.

These sorts of rumors have not been confined to the Greek bond and the euro. In the Financial Times, Niall Ferguson wrote an article titled “A Greek Crisis Is Coming to America,” in which he warned:

It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies.

America, he maintained, would suffer a sovereign debt crisis as well, and this would happen sooner than expected.

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

The catch is that the U.S. does not need to satisfy the IMF. …

“Sovereign Debt” Is an Oxymoron

America cannot actually suffer from a sovereign debt crisis. Why? Because it has no sovereign debt. As Wikipedia explains:

A sovereign bond is a bond issued by a national government. The term usually refers to bonds issued in foreign currencies, while bonds issued by national governments in the country’s own currency are referred to as government bonds. The total amount owed to the holders of the sovereign bonds is called sovereign debt.

Damon Vrabel, of the Council on Renewal in Seattle, concludes:

[T]he sovereign debt crisis … is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London…. It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders? A true sovereign is in debt to nobody …

Unlike Greece and other EU members, which are forbidden to issue their own currencies or borrow from their own central banks, the U.S. government can solve its debt crisis by the simple expedient of either printing the money it needs directly, or borrowing it from its own central bank, which prints the money. The current term of art for this maneuver is “quantitative easing,” and Ferguson says it is what has so far “stood between the US and larger bond yields” – that, and China’s massive purchases of U.S. Treasuries. Both are winding down now, he warns, renewing the hazard of a sovereign debt crisis.

“Explosions of public debt hurt economies …,” Ferguson contends, “by raising fears of default and/or currency depreciation ahead of actual inflation, [pushing] up real interest rates.”

Market jitters may be a hazard, but if the U.S. finds itself with government bonds and no buyers, it will no doubt resort to quantitative easing again, just as it has in the past – not necessarily overtly, but by buying bonds through offshore entities, swapping government debt for agency debt, and other sleights of hand. The mechanics may vary, but so long as “Helicopter Ben” is at the helm, dollars are liable to appear as needed.

Hyperinflation: A Bogus Threat Today

Proposals to solve government budget crises by simply issuing the necessary funds, whether as currency or as bonds, invariably meet with dire warnings that the result will be hyperinflation. But before an economy can be threatened with hyperinflation, it has to pass through simple inflation; and today the world is struggling with deflation. The U.S. money supply has been shrinking at an unprecedented rate. In a May 26 article in the Financial Times titled “US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus,” Ambrose Evans-Pritchard observed:

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of institutional money market funds fell at a 37pc rate, the sharpest drop ever.

So long as workers are out of work and resources are sitting idle, as they are today, money can be added to the money supply without driving prices up. Price inflation results when “demand” (money) increases faster than “supply” (goods and services). If the new money is used to create new goods and services, prices will remain stable. That is where “quantitative easing” has gone astray today: the money has not been directed into creating goods, services and jobs but has been steered into the coffers of the banks, cleaning up their balance sheets and providing them with cheap credit that they have not deigned to pass on to the productive economy.

Our forefathers described the government they were creating as a “Common Wealth,” ensuring life, liberty and the pursuit of happiness for its people. Implied in that vision was an opportunity for employment for anyone wanting to work, as well as essential social services for the population. All of that can be provided by a government that claims sovereignty over its money supply.

A true sovereign need not indebt itself to private banks but can simply issue the money it needs. That is what the American colonists did, in the innovative paper money system that allowed them to flourish for a century before King George forbade them to issue their own scrip, prompting the American Revolution. It is also what Abraham Lincoln did, foiling the Wall Street bankers who would have trapped the North in debt slavery through the exigencies of war. And it is what China itself did successfully for decades, before it succumbed to globalization. China got the idea from Abraham Lincoln, through his admirer Sun Yat-sen; and Lincoln took his cue from the American colonists, our forebears. We need to reclaim our sovereign right as a nation to fund the Common Wealth they envisioned without begging from foreign creditors or entangling the government in debt.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 400+ blog articles are posted at EllenBrown.com. This article was first published in Scheer Post. Read other articles by Ellen.

25 comments on this article so far ...

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  1. MichaelKenny said on July 24th, 2010 at 10:09am #

    The title, of course, is a silly anti-EU smear, but the rest of the article is not too bad. Unlike the economic gurus we’ve had in hordes, all of whom are hung up on their neo-liberal TINA argument, Ms Brown has grasped that the attack on the euro was deliberate and politically-motivated, which, by the way, gives the lie to the TINA argument. Greece was targeted because,unlike the other Member States, its debt is owed to banks, not in Greece, but in other Member States and specifically, Germany.The “stunt” was to force Greece to default to German banks, force the German Government to bail out its banks and then try to foment a taxpayers revolt in Germany against the euro. It failed because EU leaders didn’t panic.
    Just for accuracy, Greece is not “forbidden” to issue a currency! Its currency is called the euro and it isues it in common with the other eurozone countries. Thus, the idea that Greece is not “sovereign” is a nonsense put about by the neo-liberal gurus I referred to above (and one of them in particular!). Frankly, I would have expectede a lawer not to make a silly mistake like that!

  2. Cameron said on July 24th, 2010 at 1:20pm #

    It’s irrational in many ways but the one thing that’s so noticeable these days is this: trillions of dollars is currently not employed in production of goods and services while millions of workers cannot find work. The more unemployed workers the more corporations extract more out of the employed. It would be rational to put idle capitals to work and reduce the number of working hours.
    Okay so EHB’s solution is to print new money out of thin air and
    “If the new money is used to create new goods and services, prices will remain stable”.
    Here are the problems as to why the “if” is a very big one. First of all there is excess capacity already. If there was demand then we wouldn’t be where we are now so creating additional capacity to produce more goods doesn’t make sense. This is capitalism and that’s what capitalists do. They put their capital to work to produce goods and services to make profit. Why are they not doing it? They have more money at their disposal than one can imagine? What’s broken? Second who is going to buy these goods and services? The days of borrow and spend are over!!!! Not only that, wages are falling, fees and taxes are increasing and then there is unemployment and underemployment. Where is this money going to come from? Out of thin air? I wish it was that simple.
    Keynesian understanding of money is the converse of what it actually is. Money doesn’t create value. Value creates money. Creation of money does not necessitate creation of goods and services. However, when goods and services are created it necessitates money to be created to facilitate exchange. Money is a measure of value in goods. One of its functions is to facilitate exchange of goods and services. Without goods and services fiat money is just a piece of paper or computer digits that are worthless because you can’t eat them or wear them.
    I can create my own currency and print it then try to buy things with it. No one would accept it. Now if I produce food and try to exchange it then I might have a buyer.
    Governments around the world have spent trillions of dollars on the one hand and have set discount rates to zero on the other and what have they to show for after all this time? You’re blaming the government for mishandling and abuses to justify why Keynesian policies hasn’t work. That’s not the case. They just didn’t succeed. The reason the country got out of previous depression was not Keynesian policies. It was destruction of factories and work places around the world and opening new untapped markets that in sum created a big market/demand for US manufacturers.
    Think about it. This crisis didn’t start because of money supply. Capitalists are not finding any reason to expand capacity because there is already excess capacity. They’d rather use the money in speculative activities such as derivatives and create bubbles. That’s trillions of dollars out there in speculation rather than production. This is nothing new. This is an old pattern. The same pattern existed in previous depressions.
    Production is the starting point not the money. We need to transcend capitalism and start producing goods and services to satisfy needs of people not satisfy the needs of capital.

  3. lupita said on July 24th, 2010 at 11:11pm #

    “China got the idea from Abraham Lincoln”

    This is a bit US-centric since paper money was first issued in China during the Song dynasty.

    “the U.S. government can solve its debt crisis by the simple expedient of either printing the money it needs directly, or borrowing it from its own central bank, which prints the money”

    And the Arabs, who know nothing about finance (they probably learned double entry accounting from George Washington) will surely give you all the oil you need in exchange for devalued dollars. The rest of the world are such idiots that they will surely keep on shipping their diamonds, gold, pâté de foie gras, and computers.

    Instead of fantasizing, why not simply work for your keep like the rest of the world?

  4. lupita said on July 25th, 2010 at 9:11am #

    Ellen Brown has a weird definition of sovereignty, being able to take advantage of the dollar’s status as a reserve currency (which she does not mention) to intentionally defraud buyers of US Treasurys by using “sleights of hand” – offshore entities and creative accounting – to mask insolvency. Add mentions of freedom and the Founding Fathers to the mix and the result is an argument for fraud, perhaps similar to what went through Madoff’s head when he was putting together his Ponzi scheme, real estate agents when they were flipping condos, bankers when they were granting lie loans, and fund managers when they were peddling CDOs.

    Issuing debt when you do not have the intent or ability to fully repay is fraud, not sovereignty.

    The problem with this definition is that there can only be one soveriegn nation on Earth and that would be Ellen Brown’s country! How is her definition of sovereignty different from financial hegemony?

    Writing books arguing that “we are not indebted because we can print dollars” is like building McMansions of the mind: wasteful

  5. Ellen Hodgson Brown said on July 25th, 2010 at 9:18am #

    To MichaelKenney who says Greece can issue euros — this is not true. Only the European Central Bank can issue euro banknotes. Coins can be issued by the member states, but only in the modest amounts authorized beforehand by the ECB, certainly not enough to handle the national budget. This is from Wikipedia, “European Central Bank”:

    The key tasks of the ECB are to define and implement the monetary policy for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves of the European System of Central Banks and promote smooth operation of the financial market infrastructure under the Target payments system[5] and being currently developed technical platform for settlement of securities in Europe (TARGET2 Securities). Furthermore, it has the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins but the amount must be authorised by the ECB beforehand (upon the introduction of the euro, the ECB also had exclusive right to issue coins[5]).

  6. MichaelKenny said on July 25th, 2010 at 10:05am #

    When I studied law, I was taught to read things carefully! What I said was that Greece’s “currency is called the euro and it isues it in common with the other eurozone countries”. The European Central Bank is an organ of the EU and every aspect of its activities are therefore controlled by the EU Member States, who act “in common” with each other. Thus Greece is not “forced” to accept anything in regard to its currency, the euro. It participates fully in all decisions. It participated in the adoption of the ECB Statute, it participates in the appointment of its Governing Council. If the ECB exceed its powers, Greece could take it to the EU Court of Justice. Ms Brown quotes verbatim (footnotes and all!) a paragraph from Wikipedia. The ECB’s own website (lawyers normally go to primary sources!) states that “[t]he ECB’s main task is to maintain the euro’s purchasing power and thus price stability in the euro area”. Maintain purchasing power? Price stability? Good God! How could the hapless Greeks submit to having such horrible repression imposed on them from “Brussels” (in fact, it’s Frankfurt)!
    The smear and sneer that Ms Brown is trying to pull off is that there is something external to Greece called the ECB over which Greece has no control and whose decisions Greece is forced to comply with whether it wants to or not. That is utter nonsense.

  7. Ellen Hodgson Brown said on July 25th, 2010 at 10:55am #

    The fact that Greece is a member of the ECB does not give it the right to “issue euros” any more than U.S. states can issue dollars; nor is it “sovereign” over its money supply any more than U.S. states are. As for borrowing from its own central bank, Article 123 of the Lisbon Treaty says:

    1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as “national central banks”) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.

  8. lupita said on July 25th, 2010 at 11:58am #

    Based on Ellen’s logic, I just thought up of a simple way for poor, non-sovereign countries to get rid of their debt just as easily as rich, sovereign countries can. It is easy!

    First, print pesos, rubles, or whatever. Second, exchange your currency for dollars. Third, pay your dollar debt. Easy!

  9. Don Hawkins said on July 25th, 2010 at 1:06pm #

    ABC aired a prime time special “Earth 2100”, 6/2/2009. My question is, “Is Earth 2100 a definite occurrence that will happen, or is ‘Earth 2100’ just a story made of speculation…perhaps fiction?”. In my opinion, the concept could happen, but it is not believable.

    Earth 2100 is based on the opinion of the worlds top scientists, articles in publication, and other sources. It is not a prediction, the program is simply a possibility, of what might happen should the population not make drastic changes now, in the area of population growth, resources and climate change. Objectivism on line

    By 2015, there are expected to be hopeful signs. Experts predict alternative energy solutions that are currently in their infancy will gain momentum. Windmills may sprout up everywhere. Off the coast of Scotland, a sprawling wave farm will harvest renewable energy from the ocean. Vatican City will meet all of its energy needs with solar power. And the U.S. will produce cleaner, more fuel efficient vehicles in accordance with newly unveiled emissions guidelines.

    But just how bad could things get? In one scenario, scientists imagine that by the year 2100, immense storms irreparably damage major metropolises. Streets, subway tunnels, and buildings would flood and begin to rot. The stagnant water would breed filth and displace residents, forcing them into homelessness. Poverty levels and death rates could skyrocket. A new and virulent strain of disease might develop — then mutate and spread around the globe, potentially claiming tens of thousands of lives.
    In this scenario, as the crisis explodes, looting grows rampant, major world powers go to war over water, and millions of people die from famine. Civilization literally collapses under its own weight. ABC

    Yes paper money great for starting a fire at night sitting under the stars after a long day finding food and water. By 2015, there are expected to be hopeful signs. Experts predict alternative energy solutions that are currently in their infancy will gain momentum and Newt in 2012 drill baby drill off to the stars.

  10. Don Hawkins said on July 25th, 2010 at 1:31pm #

    Production is the starting point not the money. We need to transcend capitalism and start producing goods and services to satisfy needs of people not satisfy the needs of capital. Cameron

    One way to transcend capitalism and start producing goods and services to satisfy needs of people not satisfy the needs of capital is to fight it kind of like a war. Just on the off chance what we now see with our own eye’s is true when should we get started?

    From the beginning of preparedness in 1939 through the peak of war production in 1944, American leaders recognized that the stakes were too high to permit the war economy to grow in an unfettered, laissez-faire manner. American manufacturers, for instance, could not be trusted to stop producing consumer goods and to start producing materiel for the war effort. To organize the growing economy and to ensure that it produced the goods needed for war, the federal government spawned an array of mobilization agencies which not only often purchased goods (or arranged their purchase by the Army and Navy), but which in practice closely directed those goods’ manufacture and heavily influenced the operation of private companies and whole industries. eh dot net


    A kind of a war a different war where we use imagination to create not to destroy.

    The “Carbon Tax and 100% Dividend” chart warrants discussion. Tax and dividend is
    the policy complement that must accompany recognition of fossil carbon reservoir sizes
    for strategic solution of global warming (the physics: reservoir sizes imply the need to
    phase-out coal emissions promptly and quash unconventional fossil fuels).
    Tax and 100% dividend can drive innovation and economic growth with a snowballing
    effect. Carbon emissions will plummet far faster than in top-down or Manhattan projects.
    A clean environment that supports all life on the planet can be restored. Hansen

  11. Ellen Hodgson Brown said on July 25th, 2010 at 2:28pm #

    You laugh. That’s exactly what Argentina did between 2001 and 2004, and it worked. They told the IMF to come back later when they had the money; then they quietly printed pesos and bought up dollars with them. THEN they paid off the debt — with the dollars. It didn’t work for Zimbabwe because the speculators knew what they were up to and collapsed the Zimbabwe dollar by short selling.

  12. lupita said on July 25th, 2010 at 4:18pm #

    “the speculators knew what they were up to and collapsed the Zimbabwe dollar by short selling.”

    Good point. I think speculators are very much aware that the US may take the Argentina/Zimbabwe/3rd world route out of debt and are combing through statistics, statements, and rumors in order to pinpoint the moment to flee, if necessary.

    What I do not understand is that if you think the US should default on its debt, why not just say it? Why all the sovereignty, Founding Fathers, and freedom rhetoric? Is it because you think it would be unethical? Déclassé perhaps?

  13. Ellen Hodgson Brown said on July 25th, 2010 at 4:45pm #

    Sigh. You missed my point. Zimbabwe owed its debt in U.S. dollars and other foreign currencies over which it had no control. U.S. debt is owed in U.S. dollars. We always pay the debt when it comes due — in dollars. But then we roll it over into more debt. I’m saying pay it off, rip up the bonds, and start issuing dollars, not bonds, to pay for the government’s budgetary needs. As Thomas Edison said:

    If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.

  14. lupita said on July 25th, 2010 at 9:00pm #

    “I’m saying pay it off, rip up the bonds, and start issuing dollars, not bonds, to pay for the government’s budgetary needs”

    Is that what your essay is about? About paying your debt in full and then implementing your no bond/print cash economy? You do know that if you set aside 10% of your budget to buy back your bonds (pay your debt) starting right now you will be done by around the year 2040, no? It is then when you could start the second part of your plan of “issuing dollars to pay for the government’s budgetary needs”.

    However, your essay did not strike me as so airy and futuristic. I still think your intent was to offer an immediate justification that sounded technical, even patriotic, for taking advantage of the reserve status of the US dollar to debase it so as not to pay your debt in full. I find it very suspicious that, despite your topic being the global financial crisis and how it affects the US specifically, you fail to mention that the US and its currency is at the center of the global system and has been for the past 65 years, the role military might has played in keeping the system in place, and seem oblivious to the role the US has played in past financial crises in all those un-sovereign 3rd world countries the US is so unlike in that they had to repay their debts to you in full and with interest.

    One of the nicer terms this system goes by is American hegemony. By the way, it is crumbling.

  15. Ellen Hodgson Brown said on July 25th, 2010 at 9:12pm #

    I think all countries should be sovereign. Greece should break away from the EU. The IMF and the G20 are attempting to wrest financial sovereignty from all countries, making us all subservient to the international banking cartel. The IMF and the international bankers have forced their debts on the third world, not “us,” the people of the U.S. We don’t want those wars, and we now have a 22% real unemployment rate here in the U.S. We’re in a depression; the press just isn’t talking about it. You can buy a house in Detroit, Michigan, where I just was, for $200; but nobody wants those homes. The place looks like a war zone. If we the people of the U.S. don’t stand up to our own Wall Street bankers, who will? The bankers today are sovereign, because they issue the money; but Congress has the legal power to take the reins again. That’s what I’m arguing for, taking back our sovereign power by issuing our own money rather than borrowing from bankers who issue it and charge us interest for our own public credit.

  16. Ellen Hodgson Brown said on July 25th, 2010 at 9:19pm #

    I need to restructure this sentence for clarity — “The IMF and the international bankers have forced their debts on the third world, not ‘us,’ the people of the U.S.” I meant that intractable debt has been forced on the third world, not by us the people of the U.S., but by the IMF and the international bankers, a private cartel without borders or national loyalty. As Napoleon said a couple of centuries ago:
    “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”

  17. lupita said on July 25th, 2010 at 10:57pm #

    “That’s what I’m arguing for, taking back our sovereign power by issuing our own money rather than borrowing from bankers who issue it and charge us interest for our own public credit.”

    I think it is naive to sustain that in a democracy the people, collectively, are not responsible for the actions of their state, more since we are talking about an educated population in the age of google. Specifically, Americans reelected Bush despite knowing by then that he had militarily occupied Iraq with no evidence of WMD. Your government could not have a military budget the size of the world combined, an empire of military bases around the world, and two wars going on without the approval of the people. Despite your preoccupation with US financial solvency, you have not mentioned the cost of empire. Why? I believe it is a telling omission.

    As to countries becoming sovereign by emitting their own currency, this is also naive. The world needs stable and reliable international currencies in order to trade, fund its development, and free itself from an increasingly iffy dollar, which is why countries are banding together to form regional monetary funds.

    Actually, several 3rd world countries have become sovereign, not by following your monetary prescriptions, but by amassing savings in order to withstand attacks from, yes, Anglo-American hedge funds. Others are building nuclear weapons because non-nuclear nations have been threatened with nuclear attack by, yes, the US.

    The current global system is called American hegemony. You seem to be fighting against George III.

  18. Ellen Hodgson Brown said on July 26th, 2010 at 7:32am #

    I’ll let my friend Gillian respond to that. She just posted this comment in the Daily Telegraph to an article by Liam Halligan —

    Liam Halligan writes: “The principal function of a financial services industry is to link savers with investors and creditors with borrowers, so facilitating broader commercial activity.”

    Exactly. So how come the “socially useful” businesses called banks have also ended up enjoying the privilege of creating and allocating, for purposes of their choosing, the nation’s entire non-cash money supply (now, with the decreased use of notes and coins, amounting to 97% of our means of exchange)?

    It’s this usurpation by default of what Abraham Lincoln called “the supreme prerogative of Government” and “the Government’s greatest creative opportunity” that has made the banks “too big to fail”. As long as they enjoy a monopoly over the creation and distribution of purchasing power, they not only have the means to put governments in their pockets: they can also plead indispensability, and confidently order taxpayers to stand and deliver.

    The Bank of England (Creation of Currency) Bill 2010 proposes a simple reform that would rectify this aberration. By establishing the universal principle that “Throughout the entire banking and deposit-taking sector … every credit to an account must be matched by an equal debit from a different account”, and exempting only the Bank of England from this requirement, enactment of the Bill will effectively nationalise all of the UK’s non-cash money – just as The Bank Charter Act of 1844 nationalised banknotes. New, non-cash money will, in future, be issued as a public utility, and spent into circulation by elected governments, free of any debt at source.

    A switch to publicly-created money would transfer the subsidy of around £200bn a year currently enjoyed by the commercial banks to the Exchequer, making the ‘inevitable’ cuts in public services completely unnecessary, reducing the tax burden by up to 30% and allowing gradual repayment of the national debt.

    Released from their bondage to the priorities of private, profit-making businesses, “The taxpayers will,” (again in the words of Lincoln), “be saved immense sums of interest, discounts and exchanges.” In addition, “The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration.”

    What a pity nobody has told Obama about any of this!

    Well, at least the collapse of the present system offers us a great opportunity to stop “drawing regulatory lines in the sand” in the certain knowledge that they must, sooner or later, be breached by a lobby group endowed with the power of money creation. As CosmicBuddha says, it’s time to “completely remodel the financial system”.

    The Bank of England (Creation of Currency) Bill 2010 shows how this may be done. It can be read online, with full explanation of the practicalities involved and FAQs, at http://www.bankofenglandact.co.uk/.

  19. MichaelKenny said on July 26th, 2010 at 7:54am #

    The surest way that I know for lawyer to make fools of themselves is to start spouting about branches of law they know nothing about! Indeed, she can’t even get the legal terminology right! (The ECB doesn’t have “members”!) What is however evident from Ms Brown’s reply to my reply and to other comments is that this article is really just the latest attempt to smear the EU by repeating the claim of an earlier author that eurozone countries, if not all EU Member States, are not sovereign and are therefore to be assimilated to US states.
    That postulates that the sovereign Greek people do not have the right to exercise their sovereignty in common with other sovereign European peoples if the want to! Who gave Ms Brown the right to dictate to the Greek people (or any other people, for that matter) how they should exercise their sovereignty? Equally, why is what the Greeks do in Greece a matter of concern to a Los Angles attorney? What adverse effect does she suffer by virtue of Greece being an EU Member State? None, as far as I can see. We lawyers call that “relevance”.
    Ms Brown is just (yet another!) American bully, claiming the master race right to strut up and down the planet pushing people around in their own countries. In 2010, that is, if nothing else, absurdly old-fashioned!

  20. Ellen Hodgson Brown said on July 26th, 2010 at 7:59am #

    You realize of course that you’re only motivating me to write more articles, reaching more people. I’m wasting my efforts here. Over and out.

  21. Ellen Hodgson Brown said on July 26th, 2010 at 8:48am #

    See Gardiner and Bessamer, page 4 —


    Where are you from? I do appreciate good feedback. I’m not trying to smear anyone. I’m trying to help. I have a pretty large reach these days, and I’m always glad to learn; I have many friendly editors, and I learn a lot from them.

  22. MichaelKenny said on July 26th, 2010 at 12:06pm #

    Go to primary sources!!! There is no Article 123 in the Lisbon Treaty. The authors of the paper you link to are slightly less inaccurate in their citation than you, but they have still missed the point, precisely because they got the citation wrong! However large your “reach” may be, as I said in my previous reply, it doesn’t reach Europe, so I don’t see how you can claim to “help”, nor indeed, by what right you meddle in other countries’ affairs.

  23. lupita said on July 26th, 2010 at 1:58pm #

    “I’ll let my friend Gillian respond to that.”

    Neither you nor your friend Gillian responded to my question as to why your silence on US military expenditures when you seen so preoccupied with the financial solvency of your country. Your response seems to be a cut and paste from something else you had written. The Bank of England (Creation of Currency) Bill 2010? More quotes from Lincoln? CosmicBuddha?

    Admit it, yours is a desperate intent to bury the functioning of American hegemony under technical monetarist jargon and pious references to paying your debt and the sovereignty of all nations.

  24. Ellen Hodgson Brown said on July 26th, 2010 at 10:04pm #

    What you talkin’ about? It’s in there!


    You haven’t answered my question: who are you and where are you from? And who do you work for? I’m being interrogated by a computer screen. You can learn everything about me on my website, http://www.webofdebt.com.

  25. Ellen Hodgson Brown said on July 26th, 2010 at 10:14pm #

    Actually what interests me about that article 123 is the section after that:

    2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.

    I read that as saying Greece could set up some publicly-owned development banks and use them to generate credit — in Euros — as all banks do. Then they could start doing some developing and hiring and getting the economy churning again. I’d recommend that before withdrawing from the EU; they CAN have economic sovereignty by generating their own credit through a publicly-owned bank, even if they can’t issue drachmas or Euro bills.