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OpEdNews Op Eds    H3'ed 10/19/11

Economic Reform Newsletter: Occupy Everything Movement, What Is Money?, A Banker-Led Lincoln Assassination?, Iceland

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Hello Fellow Economic Reformers:

As the Occupy Wall Street (OWS) Movement here in NYC turns into the Occupy Everything, and the Arab Spring and European Summer turns into the American Autumn, we are reminded that the kind of gross wealth inequity currently in place is almost always a precursor to riots and revolutions.  It is almost a natural law that when CEOs make over 300X the average workers, when social mobility has become frozen, and when policies make speculators and monopolists the top income producers (I hesitate to call them "earners" because what have they actually "earned"?), we're going to have serious unrest.  It's worth examining the charts from the link above to see how far we've strayed from the norms of American culture.  You can almost overlay these charts on pre-Great Depression America, and we know how that turned out.  As for why a special ire is directed at the banks, it may have something to do with the fact that banks make 30% of all corporate profits, cost households some $20 trillion in lost wealth (obligingly recapitalized by a complicit Federal the banks), and that 5,000 $1 million+ bonuses were given out in 2008.  Read more reasons here.

I've been down to the OWS site 4 times, twice with another member of Common Ground-NYC (once with a new HG student too), and once with a member of the Public Banking Group from California who flew in just to present the public banking case.  We handed out hundreds of fliers and some Robert Schalkenbach Foundation donated books, had dozens of stimulating conversations, and tried to present our cases.  In nearly every case the solutions of Public Banking, Land Value Taxation, Greenback/debt-free money were completely new to them.  And these are typically people who care a great deal about our economy, our society!  What has the MSM media been feeding them?  Well, lies, pessimism, tales of shortages with moral solutions based on austerity (for what the OWS crowd calls the 99%, not the top 1%, no, never them . Well, I think the next 10% facilitates the top 1%, but why quibble...).  I was interviewed by an independent media producer here.  I don't come in until the 3:30 mark, and even then, only my comments about State Banking were included.  What?  It's wrong to have more than one solution?  Don't we have more than one problem?

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In the past month I've also tried the opposite tack from to-the-people outreach, by taking the case for Single Tax and Public Banking Reform directly to the politicians (they are just not ready for Greenbacking - more on that in a moment), both in a public forum at 2 town hall meetings, where I had an opportunity to present an alternative funding proposal for a 1 mile esplanade project in my neighborhood, based on a local Land Value Tax, and also directly to a local assembly member in his office.  Although no promises were made, it is good to have the opportunity to make these cases.  Read more about the effort here.

Some pictures I took at OWS are here.

If I had to rank proposals to fix the economy in order of acceptability - that is, believability in the cure - on the part of the OWS crowd and the hundreds of tourists and New Yorkers who took my fliers and dozens who engaged me in conversation, I'd say it goes something like this:

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1.  State Banks .  We have the undeniable success of the Bank of North Dakota here.  Better yet, people have actually heard of this in some cases, and sort of know it works.  The Public Banking Institute has produced a nice 2-page flier, 56-page legislative guide, and website here, and PBI leader Ellen Brown has been a promotional whirlwind, so that certainly helps.  Also, there is just something people get at a gut level about returning money collected in the state back to the people of the state. 
The only objections I hear are that North Dakota is after all, a tiny population state (672,591 as of the last census) , and that a state bank - particularly in NY because it is the headquarters for virtually all the country's major banks - would be a source of corruption and cronyism.  We cannot let a State Bank become an Economic Development Corporation or a slush fund for pet projects.  It has to be run prudently, and with conservative oversight, as the BND is.  Of course, we also need to get to the underlying source of the bubble-bust phenomena....

2.  Land Value Taxation .  It helps to talk to people outside, in the heart of the valuable NYC Financial district.  I can literally point to skyscrapers and ask people to imagine what they would be worth in the middle of Wyoming.  This makes the case for the value of the underlying land vs. the building better than any flier or dry statistics could.  The objection here is that people just don't think it is large enough.  When I point out that the Single Tax would be a tax on the raw value of ALL natural resources and locations, and that this is estimated to be over 1/3 of GDP, they listen, but are still skeptical.  The idea that people should be allowed to keep what they produce, OTOH, goes over quite well, even among the supposedly "socialist" left students and young people who are mainly behind the OWS movement.  The mass media has this wrong too.  From what I can see, no one is opposed to an honest worker or entrepreneur keeping most of what they earn, they simply don't believe the big banks and those who work there have earned what they take in honestly .  In this I agree, as I think do the majority of Americans.

3.  Greenbacking, or producing U.S. Notes.  This seems to be the toughest sell.  I got into a protracted argument with a young man about whether it would be destructively inflationary to release billions, maybe trillions, of fresh new money into the economy.  My point is that such money would be put into depressed areas where there is underinvestment, so it is constructively inflationary.  This young fellow was very sure of himself, no doubt having learned his lessons well about the evils of inflation in traditional B-school.  It was hard to convince him that commodity speculation on the part of hedge funds and other financial gamblers was mostly what was causing price appreciation there, not demand (See Zarlenga's article below).  It was even harder to convince him that inflation could be contained mostly to the depressed areas.  Well, perhaps wage inflation will be a problem (though wages for the bottom 80% have lagged for years and need to catch up) down the road, but first we have to keep the road from crumbling .  See here for just one tiny infrastructure problem on the east coast of Manhattan, where the esplanade is literally falling into the East River. 
Either by Greenbacking new dollars, or by imposing a Land Value Tax to pay for it, areas like this need some sort of fresh funding to fix them.  Is there really any doubt about the need to repair our D-rated infrastructure?  Yes, we need Land Value Taxation to properly focus our attention on what's valuable land worth improving and what isn't - no more abandoned housing developments that way.  But there can be no doubt that Something Needs to be Done!  Here's something...

Staying Local
A Georgist-type proposal to tax the land near Manhattan's west side Hudson River Park faces challenges, but also support from the neighborhood, which may not be able to get park improvements any other way.
Hudson River Park Tax Bid Could Affect More Properties
When I gave my little 3-minute presentation to the Town Hall, hosted by an assembly member, a State Senator, and a Council member, I used this proposal as a local example of what could be done.  For now, however, an agreement has been made to do a complicated land swap for money with the U.N. and that trumps all other alternatives.  Stay tuned....

A Fine Site to See
A quick plug to one of our brethren from down under in New Zealand, Resource Rentals, for no other reason than to point out a good website and resource base.  As we look for ways to get our solutions out there, we should look for good, clean examples of branded messaging like this.

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And, a personal plug for my new semi-serious article on unserious politicians: The H.Y.P.O.C.R.I.S.Y. Act: Making Politicians Mean What They Say, or Else... and a new article on the Occupy Wall Street movement, including an update from my activist friend in Madrid.
I hope to set up a collaboration with Op Ed News where I am a Senior Editor/Blogger so we can swap articles with each other.  OEN is covering the OWS movement like no one else, but the truth is the OWS people are very media savvy already, and have posted their demands for all to see ( and they have a large online Yahoo Group too - some 500 people in just the first day!

Modern Monetary Theory and Georgism, Greenbacking and State Banking
I've been having a rousing debate with two of the founders of a movement called Modern Monetary Theory.  You can read in detail what it's about here (click here) but like all good theories these days, it rejects conventional notions of most mainstream economics.  Unlike many theories, however, it is actually getting some mainstream traction because it doesn't seek to overthrow current practice as much as to explain what goes on differently and truthfully.  Even CNBC had a positive review, here
Here are some highlights:
1.  We have lived under a fiat system since at least 1971, when Nixon finally removed us completely from the gold standard (see below for why gold doesn't work as a basis for money).  Under a fiat money system, of course, where federal Governments are the sole creators of money, money cannot run out, since more can always be created.  This is a double-edged sword, but at least it is a sword.  Well, sharp readers will be asking "Well, what about the money the banks create when they make loans?"  Clearly we do have a credit-money contraction when that is curtailed, as now.  I would agree, and one of my ongoing arguments with the MMT people is the degree to which we really do have a fully sovereign money system.  It is certainly not the money system envisioned by Greenbackers like Henry George, Lincoln or today, Kucinich and Zarlenga (MMT people have problems with the last three of these, and only approve of George on the Land issue; I recently got Warren Mosler, a key MMT proponent, to agree to "consider" changing his call for a Real Estate Tax to just one on Land .  I'll let you know what this thought-leader finally decides.  It may lead to a significant synthesis between MMT people and Georgists).

2.  They agree with Greenbackers in that in a fiat money system, money gets its legitimacy by being the only way to pay your financial obligations, most importantly, taxes.  So far, I have not gotten economist Randell Wray or Finance specialist Warren Mosler to agree that issuing Greenbacks directly is a good idea, or indeed, that it is any different from simply allowing the deficit to run up without paying back the debt - which they argue is a fiction anyway, in a fiat money system.  But if enough people believe the debt is real, isn't it real?  If this existential question is answered affirmatively, even the MMT people seem to agree, it will determine whether deficit hawks plunge us into a depression in an effort to "balance the budget," or else find some way to live with expanding the money supply, even if it means "adding to the debt" in conventional thought.  They differ from the Keynesians in this crucial way, by not accepting that government spending can create true debt in the first place, when the government can simply create new money.  Money, which they say, is the origin of all money in circulation for later use.  What of the banks?  Well, they borrow on the interbank market, and in fact, compete with each other in a way that causes interest rates to go down, not up, as is commonly believed.  At least that was how it worked until the Fed started paying 2% interest for banks to park their reserves with them.  MMT doesn't say that this parking is causing the drop in lending, even between banks themselves, but it seemed that way to me when the Fed started it in 2008, and still seems that way.  In any case, MMT agrees with Ellen Brown and other honest analysts in that banks lend money first , and then worry about how to borrow it at a cheaper rate later.  

Maybe the most important takeaway from MMT, or Greenbacking, is the understanding that we are not only not broke, it is actually impossible for a truly sovereign* (*Our loss of sovereignty can be traced from 1913 when the mostly private Federal Reserve was created .) country to be broke.  Unfortunately, the Left ( as well as the Right buys into this fiction, which makes us into a nation of Pie Slicers .  The Left wants more of the pie for social programs and the Right wants more for defense and well, frankly, some pet projects they won't admit to (neither party has a good track record in reducing the deficit, especially lately).  What we need is to bake a new pie with new ingredients, with bigger slices for most people.

Perhaps it's worth stepping back and asking...

What is Money?
I get into pretty constant debates with people about this question.  I'll state my view here and then let others make my larger points with a couple of links:
1.  Money is a "Legal Creation."  This view goes back to Aristotle, and its modern equivalent are the legal tender laws we all live by when we use "cash."
2.  The value of money is controlled by its quantity.  This is not strictly a definition, but it does make clear that Money has no intrinsic value of its own.  What about gold, you ask.  Well....
For a good explanation of why gold won't work, read this.

And I'll let Henry George explain the reason for Greenback money here.

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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is a former President of Common Ground-NYC (, a Geoist/Georgist activist group. He has written dozens of articles for (more...)

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