Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Ellen Brown Response to Gary North: QE2 IS the Populist Solution

Economics / Quantitative Easing Nov 25, 2010 - 07:02 AM GMT

By: Ellen_Brown


Diamond Rated - Best Financial Markets Analysis ArticleGary North, who purports to be an expert on the errors in my book “Web of Debt,” has evidently not actually read it.  In an article posted on the Market Oracle on November 23, he says that in calling QE2 (the Fed’s new quantitative easing program) a “bold precedent,” I have switched sides.  He apparently missed the entire chapter I wrote on this subject, first published in “Web of Debt” in 2007, saying exactly what I am saying now.

The Federal Reserve is finally using its quantitative easing tool to good purpose, and I’m endorsing that, not just for our central bank but for any central bank anywhere that would be so bold.  We are trapped in a web of debt devised by an international banking cartel that has hoodwinked us into believing that we have no recourse but to use money created by their banks as loans.  We do have recourse.  Money today is simply a legal agreement, an acknowledgment of services performed and debt owed.  Every country can and should issue its own money and its own national credit.  This would NOT inflate prices, for reasons I have explained again and again.  If  “money” originates as a receipt for goods and services delivered to the government -- rather than in speculative leveraging by banks not attached to real productivity -- supply and demand will increase together, and prices will remain stable.  If the money supply increases beyond GDP, the excess can be taxed or otherwise drawn back to the government.       

North writes:   

Ellen Brown initially stood with the Greenbackers in their call to end the Federal Reserve. . . . She now says that the FED is on the government's side. "It is the Fed funding the government virtually interest-free, allowing the government to do what it needs to do without driving up the interest bill on the federal debt – an interest bill that need not have existed in the first place." . . .

If she tries to defend herself by saying, "This is consistent with what I have always said," then she is dumber than dirt, or else she thinks her followers are dumber than dirt. If she says, "Yes, I switched. So what?" then she is just another lawyer. . . .

She never had a clue about economic theory or monetary theory. She has therefore switched sides with ease – we might call this intellectual quantitative easing.

Her only hope now is to insist that she never meant anything like this. "No, no, no, I meant something completely different. It's all a big misunderstanding." A lawyer who can't make herself clear needs to find another career – maybe as an economic guru.

I have not switched sides, as anyone who had actually read my book “Web of Debt” would know.  Chapter 40, which is all about Ben Bernanke’s helicopter money, says in part (again this was first published in 2007):

[I]n a speech he delivered when he had to be less cautious about his utterances, Dr. Bernanke advocated what appeared to be a modern-day version of Lincoln’s Greenback solution: instead of filling the balloon with more debt, it could be filled with money issued debt-free by the government. 

The speech was made in Washington in 2002 and was titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” Dr. Bernanke stated that the Fed would not be “out of ammunition” to counteract deflation just because the federal funds rate had fallen to 0 percent.  Lowering interest rates was not the only way to get new money into the economy.  He said, “the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” 

He added, “One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies.”2  If the government was inexperienced with the policies, they were not the usual “open market operations,” in which the government prints bonds, the Fed prints dollars, and they swap stacks, leaving the government in debt for money created by the Fed.  Dr. Bernanke said that the government could print money, and that it could do this at essentially no cost.  The implication was that the government could create money without paying interest, and without having to pay it back to the Fed or the banks. 

Later in the speech he said, “A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Dropping money from helicopters was Professor Friedman’s hypothetical cure for deflation.  The “money-financed tax cut” recommended by Dr. Bernanke was evidently one in which taxes would be replaced with money that was simply printed up by the government and spent into the economy. 

QE2 is not quite replacing taxes with money printed up by the government, but as I wrote in the article criticized by Mr. North, in our current system it is the functional equivalent and the next best thing.  The Fed is funding the federal deficit by buying long-term government bonds with money created with a computer keystroke, and the Fed rebates its profits to the government after deducting its costs, so this funding is nearly interest-free.  These bonds never have to be paid back, because the federal debt is never paid back.  An interest-free debt rolled over indefinitely is the functional equivalent of debt-free, government-issued money. 

As Dick Cheney famously said, “Deficits don’t matter.”  The federal debt not only never DOES get paid back but it CAN’T be paid back under our current debt-based monetary regime.  This is because, in some sense, it IS our money supply.  As I’ve explained in another article I’m writing now:

Virtually all money today originates as debt, and private debts eventually get repaid, so somebody has to be in “permanent” debt to maintain a stable money supply.  The federal debt serves this role.  (Compare charts below.)  The federal debt has been the basis of the U.S. money supply ever since the Civil War, when the National Banking Act authorized private banks to issue their own banknotes backed by government bonds deposited with the U.S. Treasury.

To meet the demands of an expanding economy, the money supply must be able to expand; and when the money supply is created as a debt (as it is today), that means the federal debt must be able to expand.  This was confirmed by Marriner Eccles, Governor of the Federal Reserve Board, in hearings before the House Committee on Banking and Currency in 1941.  Representative Wright Patman asked Eccles how the Federal Reserve got the money to buy government bonds. 

“We created it,” Eccles replied.

 “Out of what?”                                                               

 “Out of the right to issue credit money.”

“And there is nothing behind it, is the­re, except our government’s credit?”

“That is what our money system is,” Eccles replied.  “If there were no debts in our money system, there wouldn’t be any money.”

That explains why the federal debt never gets paid off but just continues to grow.  The federal debt hasn’t been paid off since the presidency of Andrew Jackson nearly two centuries ago.  On Jan. 8, 1835, six years into Jackson's presidency, the debt actually reached zero.  According to the Bureau of Public Debt, this officially lasted one day.  Not long after, America plunged into a depression.  By 1838, the debt was $3.3 million.  By the end of the Civil War, America owed $2.7 billion.

Economist John Kenneth Galbraith wrote in 1975:

In numerous years following the [civil] war, the Federal Government ran a heavy surplus.  [But] it could not pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes.  To pay off the debt was to destroy the money supply.

In all but five fiscal years since 1961 (1969 and 1998 through 2001), the U.S. government has actually exceeded its projected budget, adding to the national debt.  The debt soared to record proportions during World War II.  By the end of the war, the U.S. debt was more than 100 percent of GDP.

This obviously did not hurt the economy.  The productivity generated by record government spending during World War II created the infrastructure that allowed the country to dominate industry globally for the next half century.  We are seeing the same sort of rapid infrastructure development today in China, which may well fill the role of world productivity leader in this century.

The U.S. debt incurred during World War II was never paid off but just continued to rise.  This too did not hurt the economy; the debt just became a smaller and smaller percentage of GDP as the economy expanded.

Indeed, that is the secret to adding “money” to the system without inflating prices: it needs to be used for productive rather than speculative purposes.  Inflation results when “demand” (money) exceeds “supply” (goods and services).  When money is used to “make money” (speculation) without adding to goods and services, prices are driven up.  When the money is used to produce goods and services, supply and demand increase together and prices remain stable.

The issue posed by QE2 is the sovereign right of a country to print its own money, debt-free and interest-free.  Whether conservative, liberal, or populist, any true patriot would support that; and we should support it not just for the United States but for all countries. 

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from “the money trust.” Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are and

© Copyright Ellen Brown 2010 - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


26 Nov 10, 21:32
Have No Fear Ellen, Gary Has a Poor history

Ellen: Gary has been so confused for so long he doesn't know which way is up. As credit creation was exploding in 2007-8, he maintained that the Fed was too tight - because the Fed's balance sheet wasn't expanding. He missed the obvious: that since little to no reserves were required, the banking system could expand without base money from its central bank. Missing the obvious, but lecturing at length is his specialty. rgds.

02 Dec 10, 22:10

Ellen, you are charitable to be taking Gary so seriously. He is a remarkably creepy guy, whose "religious" views are enough to make anyone's hair stand on end; e.g. he is an

enthusiastic proponent of stoning as a method of execution -- for such public enemies as adulterers. I'm serious! I'm not making this up! See:

Post Comment

Only logged in users are allowed to post comments. Register/ Log in