 Here we are back with Ellen Brown, part two of our conversation, about the monetary system under which we live, and which is responsible for so many things on planet Earth that you may not be aware of. I always say, going back to 1694, when the Bank of England was created and the Western World was put on a debt-money system, which means when money comes into existence, it comes because somebody borrowed it. And that's how money is created in the Western World, and the Western Bankers don't like it when countries either try to create or try to maintain their non-debt systems. You know that in the Middle East, debt is considered, it's illegal, it's considered usury. And so when those countries enter the modern world, they collide with the debt-money system, and one of the ways that the Western World has trapped them is the petrodollar. And whether or not we want to get into that is another matter. But we covered, or Ellen covered, a lot of very complicated material in the first half hour. And what I'm going to ask first is something that pertains to all of you, all of us, all the time, which is kind of a mystery to most people. And that is, if you look at a bank balance sheet, it's always perfectly balanced between their liabilities and their assets. And so we're going to go over a little bit about what is a liability and what is an asset to a bank. And Tom Seguros explains it very well in Checking the Banks is his book. And he lays out what capital is. And capital, by the way, is the money a bank has that it doesn't owe to anybody. And your deposit is certainly at risk because the bank owes you the deposit back and when the bank lends money, that's called an asset because the bank is going to get that back. So what you're going to get back is a liability to the bank. What the bank is going to get back is an asset to the bank. I don't know, I can't say it any more clearly, but maybe Ellen can. So we'll go to that. And then hopefully we'll have a little time to explain how public money can be such a great benefit to the world as it has proved to be in places where it has been utilized. Okay, take it away, Ellen. Great money is the age old practice of double entry bookkeeping. So when you go to the bank to take out a loan, they will write your, they will just give you a deposit account and a checkbook and they will write the sum that you want to borrow into your checkbook or into your deposit account and you can now write checks on it. So that is a liability to themselves, to the bank, because the bank will have to cover the check whenever you write it, but they don't have to have the money in the beginning. They create the deposit before they have the money and they're going to have checks coming in and out all day. And so on a good day, they'll get as much coming in as going out and they won't have to borrow anything. But if they dip into their reserves, then they're going to have to borrow. But anyway, so that's a liability to themselves. And then on the other side of the balance sheet, they will write the same amount as an asset to themselves because you are going to pay that back over time. And in fact, you're going to pay more than that. In 30 years, you're probably, if it's a 30-year mortgage, you'll probably pay twice that much back to the bank. So it's an asset and a liability. And they say, it turns out to zero. They say, well, we haven't created anything. But your check, when your check goes into another bank, that bank is going to call that a new deposit. And deposits are counted in the money supply. So if you look at a chart of the money supply, the part that the government creates is real, it's a line like this at the bottom. And then there's this other line, the M2 line, the circulating money supply. Where does that come from? That is all the money created by banks as loans just written into accounts done by double and two-board keeping. So you could have, so for example, let's say you have two banks. One makes a $500,000 loan to the customer to buy a house. And the other does the same thing. And both of the sellers of the houses are in the opposite banks. So one bank has $500,000 coming in and $500,000 going out. And so does the other bank. So they both say, well, our books balance. We had as much deposits coming in as went out. But a million dollars just got created that weren't there before. There's $500,000 in deposits coming into one bank and $500,000 coming into the other. And that's how money gets created. And that's also how it gets extinguished when those loans are paid off. And so that's why the Fed and the banks have to keep this model going by pumping more and more money out there. And then the businesses have to keep the model going because they, their loans and the money, there's never enough money in the whole money supply to pay off all the loans plus interest. So everybody's scrambling, competing for a limited money supply in the local circulating real productive economy to pay off their loans, which means they have to lay off workers and cut costs and do whatever they can to have some profits left over in order to pay back their loans. So you've got this whole debt growing faster than the money supply and an exponential curve. And then you've got the model where companies have to grow and grow in more and more profits in order to pay back their shareholders and keep the shareholders happy so they'll, so they can do new issues and shares and people invest because I think the company is a good company. Although the stock market has absolutely nothing to do with the company. I mean, the money does that, the money that when you buy a stock of a stock market, that money does not go back to the company. It goes to the previous dollar, but it just looks good for the company to have to have its stock being the people willing to invest in a new IPO, a new initial public offering, a new step. All right, so that's where you want me to go after that. No, that's great. And I think there's a part of that that we could explain a little more thoroughly to help people, which is that the money that banks create is based on their balance sheet assets. So when Ellen and I talk about all money that is created through a loan, I just want to make sure that listeners understand that they're not lending their deposits, they're lending new money that is based on deposits and reserves. They can lend their reserves as long as they can cover it. And that's what bank examiners are for, is to make sure that a bank doesn't go bankrupt and that a bank actually has money, but the money that a bank has is its capital and its reserves. So could you explain, did I say that correctly? And could you make that a little clearer to people than what I just did? So 10% reserve requirement and 8% to 12%, I mean there's that, it varies a bit, but let's say there's a 10% capital requirement and a 10% reserve requirement roughly. So your 10% capital requirement, as you pointed out, is money you actually own. You don't owe it back to anyone. And that's money, if some of your loans go bad and they go into default and you've still got to pay back somebody, then that's money that you could draw on because you don't have to borrow from somebody else. And then we have a reserve requirement of 10%, sorry, a capital requirement of 10%. So if you've got capital of, for example, I always use the example of the California Infrastructure and Development Bank, they're called a bank, but they're actually just a revolving fund. So they've got $400 million in their revolving fund that they lend out, the money comes back and they lend it out, but it's their money. It's been allocated by the government to the entity. So that $400 million, if you turned it into capital, you could make $4 billion in loans. So you could suddenly become a $4 billion bank if you were a depository bank. And so that's the advantage of leverage. You could leverage your capital instead of just lending it out directly and waiting for it to come back and make 3% on the loans. You could lend it out 10 times and make 30%, although you would, of course, have costs. So that's why you're not really going to make 30%. But so you're going to, you could lend it out 10 times as much, but then you have a reserve requirement and you've got to cover your deposits and your deposits are going to be the money that will let you all use the payback loans. So technically, if you're a relatively small bank like that would be, you should have, should really probably keep 20% in reserve. And so you could lend out 80% of your deposits, or a sum equal to 80% of your deposits, since you're not really lending your deposits. So if you had a $400 million capital creating a $4 billion bank, a potential $4 billion in loans, you would want to have $4 billion in deposits drawn from somewhere. If it was on the model of the Bank of Ontario, it would come from the state and maybe city entities that wanted to put their deposits there, or it might even be your pension funds or whatever that had extra deposit money. So you've got to build up your deposit base. But again, you're not really, and you're going to have to pay something on the deposits. So that's one of your costs. But anyway, so you've got, you need to, you've got a 10% reserve requirement that covers the deposits. So you can technically lend out 90% of your deposits. If you want to look at it that way, your sum equal to 90% of your deposits. Or with a small bank, let's say 80% of your deposits, but you've got to hold that reserve that 10% in reserves. So if you go below 10%, say you make a loan and the loan becomes a check and that, or you make a loan, it becomes a deposit, which becomes a check, which goes to do another bank. And that brings you down below your 10% reserve requirement. Then the Federal Reserve, the reserve requirement is at the Fed. It's where you include cash, you've gotten the vault, but it's either vault cash or reserves that are actually at the Fed in your Fed account. So if the Federal Reserve sees that you're going below your 10% reserve requirement, they will count that as an automatic overdraft on your reserve account. And they will charge you some interest. So they'll lend you the money temporarily. I think you have like two weeks to cure it. And then you've got to scramble around and find the money to fill up that hole in your reserve account. So that's the way this system works. Well, all right. Where are we? Okay, now. I'm sorry. It is complicated. It's hard to, you know, finally fix it. What is it about banking, about all the mess that we've been talking about, that Benjamin Franklin and Andrew Jackson and Lincoln and I guess Chase, it was. And then Garfield, what is it about banking that these guys went after and the quotes from them are just mind blowing. You know, Lincoln said that he's got two enemies. He's got the enemy in the south trying to shoot at him. And he's got the enemy in New York, the bankers. And he said the bankers are by far the worst of the two enemies. And Benjamin Franklin explained how the currency act is what created the War of Independence because they cut off the colony's ability to make money. And Andrew Jackson just ripped the banks to shreds. Garfield was going to, was planning a form of public money. And he was assassinated. There were assassination attempts against Andrew Jackson. And of course, we know what happened to Lincoln. And some people suggest that the main reason that Lincoln was assassinated was he helped to create the Greenback government-backed money system. And we have these countries that I mentioned at the beginning who were the object of central bank aggression. Now, that's another thing that people, I don't expect people to swallow that hearing it from me, that Afghanistan and Iraq and now Iran, the rumblings against Iran and the attacks against Syria and Libya and Venezuela and all of that. People, I don't expect to believe me when I say that these are bankers' wars. Some who have followed the history of banking will know that that's correct. They are, at least to a large extent, bankers' wars. World War I, which is another topic that I'll go into in another program, was also a bankers' war. And so could you explain what you think it is that Benjamin Franklin and Thomas Jefferson and Thomas Payne and President Lincoln and Garfield, what were they trying to change, trying to stop? And what did they bring to the table that was such a god-awful threat to these people that they had to be assassinated or that it, through the banking world, they did. It, through the banking world, into a tizzy. And as I said to John Root, they certainly got their knickers in a twist when these experiments, if you will, were so successful. So, see if you can sort that one out for me. Themselves were very successful. And, well, some of the colonies did tend to print too much money and inflated the currency and the merchants were complaining that the currency was not retaining its value, that all the colonies had their own paper money that they were issuing. And so, originally, the king just forbade those colonies from issuing their own money. And they left the sounder colonies, like Pennsylvania, to issue theirs. But then Benjamin Franklin made the mistake. One reason the Pennsylvania system was so much sounder was that rather than just printing the money and spending it and printing and spending it, they set up a public banking system where they printed the money and lent it to the farmers and then the money would come back. So, it was a sustainable system and they could print a little extra, cover the interest. So, because they had the power of the printing press and they were lending, not just spending. So, they were making a business out of it. They actually made some money on these loans that we could then reuse to pay taxes. So, the colonists didn't have to pay taxes. At that time, Pennsylvania, before they set up that system, Pennsylvania, not much was happening there because they didn't have any money to get businesses started, to get the farms going. It's not like today where you had a bank on every corner. They didn't, even the Bank of England, wasn't really there. That was practically the only banking source and they didn't have gold to speak of. They did have some silver. So, when they started this new banking system, and they printed money and issued it and spent it out there, that got the colony going and then it became the most profitable of the colonies and that's sort of the stellar model. So, Benjamin Franklin made the mistake in I think the 1760s or so of going to England and arguing the case before the king and the Bank of England and said, you know, we don't need to borrow from anyone. This is working really well. We're really flourishing because we have this money system. We need to be able to issue our own money and the bankers or the Bank of England people were quite alarmed and leaned down the king because the purpose of the colonies was not supposed to be to make money and flourish by themselves. The purpose was supposed to be to feed the mother country. So, the king then forbade all the colonies to issue their own money and then we had that revolution. And then as part of this currency war, the currency issued by the Continental got to the Continental Congress setting up the new constitution. There were so many institutions says is the going money, although some people argue that to coin actually meant to create money because the veteran coins were the only officially recognized money. So, but, you know, we had paid debts in gold like we are the French in gold. So, Alexander Hamilton, who set up the party originally meant it to be a public bank. He didn't mean it to be privatized, but it wound up anyway. He followed the Bank of England model, which was a model where you would take your gold and issue like 10 times as much paper as you had gold and these were US notes. So, it's really actually not a bad idea, but it did get corrupted and then Andrew Jack, and then there was the second US bank, which I guess was the more corrupt and Andrew Jackson then shut down the bank. As you no longer had this credit machine that was creating credit for the economy. And then we went through a big depression and while kept banking, which were very dangerous, you know, banks that were just shooting from the hip and blending away and then you'd have runs on the banks. So it's a very dangerous time. He would have had to borrow participation and in the 36% interest like hugely exorbitant interest rates. So instead, you don't really have to have to borrow money. You're the government, you can print the money. And so he went back to the system of the American Polynes and actually doubled the money supply with the greenbacks. So I mean, the 1970s, we can talk about what happened there. Backing up just a little bit. There's the War of 1812 that came about according to some scholars because of Alexander Hamilton's banking system that was not, Jefferson put an end to that. And then the bankers said, well, we'll show you, we're going to start another war. We'll start American, we'll invade again, and that will force you to come back to the bankers. But they didn't, which was one of the most exciting stories to me, monetarily ever, that the people were able to say, no, we're not going to fall through that. And so there was a fight ever since the War of 1812. You have the Andrew Jackson fight and then you have the Lincoln fight. And then finally, you have the Federal Reserve in 1913 when the bankers won. We've never come out of that mess since 1913, but there was an interesting battle during all those other years because the people and the Congress were not completely bought out by the banks. Does that make sense? Yeah. In my old age, I've got more sympathetic to Alexander Hamilton. I think that model was actually good. He was trying, I mean, that's really what we should do. We should have a central bank that creates money on behalf of the government and works with the government and actually funds the projects of the government instead of being independent, which is what happened in the 1970s. And that's when you had this whole private money creation thing which shot up debt rates, debt levels all over the world to the point where now they're unsustainable and we're heading for another bus. But yeah. Okay. Well, the continental was doing great, as you said, until the Brits counterfeited it and counterfeited it and counterfeited it. But then the Hamilton people bought it up for two cents on the dollar knowing that they could then persuade the government to pay it back fully. And that may have been the people learn a reverse lesson from stuff like that. Instead of learning that it was counterfeited out of existence, they learned that it was dangerous to print your own money. And that's unfortunate because people still, oh, it ain't worth the continental. People still think the continental was no good, not because the Brits counterfeited it to death, but because it was just printed out of nothing. Whoops, it's time to go. So anyway, we didn't quite get to all the benefits of a public bank that farmers could benefit from, saving the environment and reducing global warming. And by the way, my take is exactly yours, that warming comes first, carbon dioxide is a product of the warming, not vice versa, but that's another matter altogether. So let's let you wrap it up and remind us of your two talks coming up in Massachusetts. So in order to fund all these things that we think we can't fund but that we really can fund, we could use, this was actually in the original Green New Deal of Alexandria Ocasio-Cortez. I mean, this is why we, I've written about it and stuff that for the first time ever they introduced at the federal level that we could fund things with the public money system either through the Federal Reserve, which would do like quantitative easy for the people, or through a national public bank, which I assume meant something like a National Public Development Bank, like other countries have, or like the Reconstruction Finance Corporation that we had in the 1930s that worked brilliantly well, or through a network of public banks. And that's what we're working, we work with in the public banking institute, we're trying to get public banks set up all across the country. And we have a number of active bills right now in various states. And California just passed ABA 57. I don't have time to talk about all that. Fifteen seconds. But anyway, so just guessing all that. And it will be on Saturday and Sunday, 16th and 17th. 17th and 17th, yeah. And the place is? It's, I don't actually even know that area that well. It's Southbridge, Massachusetts. Sorry, it's Bionutrient Conference and you could, you know, Google that. You can Google Bionutrient Conference and find where Ellen is speaking. Okay, thanks a lot. We'll see you this weekend, or that weekend. Okay, bye-bye. Bye. Thanks for watching the House at Poo Corner. And thank you, everybody else. All right.