05. June 2012

Out of the Mouths of Babes: Twelve-Year-Old Money Reformer Tops a Million Views

Published on Wednesday, May 30, 2012 by Common Dreams

The youtube video of 12 year old Victoria Grant speaking at the Public Banking in America conference last month has gone viral, topping a million views on various websites.

Monetary reform—the contention that governments, not banks, should create and lend a nation’s money—has rarely even made the news, so this is a first. Either the times they are a-changin’, or Victoria managed to frame the message in a way that was so simple and clear that even a child could understand it.

Basically, her message was that banks create money “out of thin air” and lend

it to people and governments at interest. If governments borrowed from their own banks, they could keep the interest and save a lot of money for the taxpayers.

She said her own country of Canada actually did this, from 1939 to 1974. During that time, the government’s debt was low and sustainable, and it funded all sorts of remarkable things. Only when the government switched to borrowing privately did it acquire a crippling national debt.

Borrowing privately means selling bonds at market rates of interest (which in Canada quickly shot up to 22%), and the money for these bonds is ultimately created by private banks. For the latter point, Victoria quoted Graham Towers, head of the Bank of Canada for the first twenty years of its history. He said:

Each and every time a bank makes a loan, new bank credit is created — new deposits — brand new money. Broadly speaking, all new money comes out of a Bank in the form of loans. As loans are debts, then under the present system all money is debt.

Towers was asked, “Will you tell me why a government with power to create money, should give that power away to a private monopoly, and then borrow that which parliament can create itself, back at interest, to the point of national bankruptcy?” He replied, “If Parliament wants to change the form of operating the banking system, then certainly that is within the power of Parliament.”

In other words, said Victoria, “If the Canadian government needs money, they can borrow it directly from the Bank of Canada. The people would then pay fair taxes to repay the Bank of Canada. This tax money would in turn get injected back into the economic infrastructure and the debt would be wiped out. Canadians would again prosper with real money as the foundation of our economic structure and not debt money. Regarding the debt money owed to the private banks such as the Royal Bank, we would simply have the Bank of Canada print the money owing, hand it over to the private banks, and then clear the debt to the Bank of Canada.”

Problem solved; case closed.

But critics said, “Not so fast.” Victoria might be charming, but she was naïve.

One critic was William Watson, writing in the Canadian newspaper The National Post in an article titled “No, Victoria, There Is No Money Monster.” Interestingly, he did not deny Victoria’s contention that “When you take out a mortgage, the bank creates the money by clicking on a key and generating ‘fake money out of thin air.’” Watson acknowledged:

Well, yes, that’s true of any “fractional-reserve” banking system. Even before they were regulated, even before there was a Bank of Canada, banks understood they didn’t have to keep reserves equal to the total amount of money they’d lent out: They could count on most depositors most of the time not showing up to take out their money all at once. Which means, as any introduction to monetary economics will tell you, banks can indeed “create” money.

What he disputed was that the Canadian government’s monster debt was the result of paying high interest rates to banks. Rather, he said:

We have a big public debt because, starting in the early 1970s and continuing for three full decades, our governments spent more on all sorts of things, including interest, than they collected in taxes. . . . The problem was the idea, still widely popular, from the Greek parliament to the streets of Montreal, that governments needn’t pay their bills.

That contention is countered, however, by the Canadian government’s own Auditor General (the nation’s top accountant, who reviews the government’s books). In 1993, the Auditor General noted in his annual report:

[The] cost of borrowing and its compounding effect have a significant impact on Canada’s annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.

In other words, 91% of the debt consists of compounded interest charges. Subtract those and the government would have a debt of only C$37 billion, very low and sustainable, just as it was before 1974.

Mr. Watson’s final argument was that borrowing from the government’s own bank would be inflationary. He wrote:

Victoria’s solution is that instead of paying market rates the government should borrow directly from the Bank of Canada and pay only token rates of interest. Because the government owns the bank, the tax revenues it raises in order to pay that interest would then somehow be injected directly back into the economy. In other words, money literally printed to cover the government’s deficit would be put into circulation. But how is that not inflationary?

Let’s see. The government can borrow money that ultimately comes from private banks, which admittedly create it out of thin air, and soak the taxpayers for a whopping interest bill; or it can borrow from its own bank, which also creates the money out of thin air, and avoid the interest.

Even a 12 year old can see how this argument is going to come out.

Tags: Roger, 12Jun, Econ-Theory, Canada

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Fri

Nov

2015

Are Languages Products of their Environment?

shutterstock_222422665_151112

DISCOVER MAGAZINE published this very interesting article:

Languages Are Products of Their Environments

The characteristics that make each language unique may actually be adaptations to the acoustics of different environments.

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Thu

Jun

2014

Fun with Newspaper Headlines

Newspaper Headlinigs

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Tue

Jun

2014

The Case for Reparations

The Case for Reparations

Two hundred fifty years of slavery. Ninety years of Jim Crow. Sixty years of separate but equal. Thirty-five years of racist housing policy. Until we reckon with our compounding moral debts, America will never be whole.

By Ta-Nehisi Coates

May 21, 2014

Chapters

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Mon

Jun

2014

A Look At 19th Century Children In The USA

PHILADELPHIA — DINNER with your children in 19th-century America often required some self-control. Berry stains in your daughter’s hair? Good for her. Raccoon bites running up your boy’s arms? Bet he had an interesting day.

As this year’s summer vacation begins, many parents contemplate how to rein in their kids. But there was a time when Americans pushed in the opposite direction, preserved in Mark Twain’s cat-swinging scamps. Parents back then encouraged kids to get some wildness out of their system, to express the republic’s revolutionary values.

The New York Times

Sunday Review

By JON GRINSPAN MAY 31, 2014

A late 19th century family taking a stroll down a set of railroad tracks

American children of the 19th century had a reputation. Returning British visitors reported on American kids who showed no respect, who swore and fought, who appeared — at age 10 — “calling for liquor at the bar, or puffing a cigar in the streets,” as one wrote. There were really no children in 19th-century America, travelers often claimed, only “small stuck-up caricatures of men and women.”

This was not a “carefree” nation, too rough-hewed to teach proper manners; adults deliberately chose to express new values by raising “go-ahead” boys and girls. The result mixed democracy and mob rule, assertiveness and cruelty, sudden freedom and strict boundaries. Visitors noted how American fathers would brag that their disobedient children were actually “young republicans,” liberated from old hierarchies. Children were still expected to be deferential to elders, but many were trained to embody their nation’s revolutionary virtues. “The theory of the equality” was present at the ballot box, according to one sympathetic Englishman, but “rampant in the nursery.”

Boys, in particular, spent their childhoods in a rowdy outdoor subculture. After age 5 or so they needed little attention from their mothers, but were not big enough to help their fathers work. So until age 10 or 12 they spent much of their time playing or fighting.

The writer William Dean Howells recalled his ordinary, violent Ohio childhood, immersed in his loose gang of pals, rarely catching a “glimpse of life much higher than the middle of a man.” Howells’s peers were “always stoning something,” whether friends, rivals or stray dogs. They left a trail of maimed animals behind them, often hurt in sloppy attempts to domesticate wild pets.

And though we envision innocents playing with a hoop and a stick, many preferred “mumbletypeg” — a game where two players competed to see who could throw a knife closer to his own foot. Stabbing yourself meant a win by default.

Left to their own devices, boys learned an assertive style that shaped their futures. The story of every 19th-century empire builder — Carnegie, Rockefeller, Vanderbilt — seems to begin with a striving 10-year-old. “Boy culture” offered training for the challenges of American manhood and a reprieve before a life of labor.

But these unsupervised boys also formed gangs that harassed the mentally ill, the handicapped and racial and ethnic minorities. Boys played an outsize role in the anti-Irish pogroms in 1840s Philadelphia, the brutal New York City draft riots targeting African-Americans during the Civil War and attacks on Chinese laborers in Gilded Age California. These children did not invent the bigotry rampant in white America, but their unrestrained upbringing let them enact what their parents mostly muttered.

Their sisters followed a different path. Girls were usually assigned more of their mothers’ tasks. An 8-year-old girl would be expected to help with the wash or other physically demanding tasks, while her brother might simply be too small, too slow or too annoying to drive the plow with his father. But despite their drudgery, 19th-century American girls still found time for tree climbing, bonfire building and waterfall-jumping antics. There were few pretty pink princesses in 19th-century America: Girls were too rowdy and too republican for that.

So how did we get from “democratic sucklings” to helicopter parents? Though many point to a rise of parental worrying after the 1970s, this was an incremental change in a movement that began a hundred years earlier.

In the last quarter of the 19th century, middle-class parents launched a self-conscious project to protect children. Urban professionals began to focus on children’s vulnerabilities. Well-to-do worriers no longer needed to raise tough dairymaids or cunning newsboys; the changing economy demanded careful managers of businesses or households, and restrained company men, capable of navigating big institutions.

Demographics played a role as well: By 1900 American women had half as many children as they did in 1800, and those children were twice as likely to live through infancy as they were in 1850. Ironically, as their children faced fewer dangers, parents worried more about their protection.

Instead of seeing boys and girls as capable, clever, knockabout scamps, many reconceived children as vulnerable, weak and naïve. Reformers introduced child labor laws, divided kids by age in school and monitored their play. Jane Addams particularly worked to fit children into the new industrial order, condemning “this stupid experiment of organizing work and failing to organize play.”

There was good reason to tame the boys and girls of the 19th century, if only for stray cats’ sake. But somewhere between Jane Addams and Nancy Grace, Americans lost track of their larger goal. Earlier parents raised their kids to express values their society trumpeted.

“Precocious” 19th-century troublemakers asserted their parents’ democratic beliefs and fit into an economy that had little use for 8-year-olds but idealized striving, self-made men. Reformers designed their Boy Scouts to meet the demands of the 20th century, teaching organization and rebalancing the relationship between play and work. Both movements agreed, in their didactic ways, that playtime shaped future citizens.

Does the overprotected child articulate values we are proud of in 2014? Nothing is easier than judging other peoples’ parenting, but there is a side of contemporary American culture — fearful, litigious, controlling — that we do not brag about but that we reveal in our child rearing, and that runs contrary to our self-image as an open, optimistic nation. Maybe this is why sheltering parents come in for so much easy criticism: A visit to the playground exposes traits we would rather not recognize.

There is, however, a saving grace that parents will notice this summer. Kids are harder to guide and shape, as William Dean Howells put it, “than grown people are apt to think.” It is as true today as it was two centuries ago: “Everywhere and always the world of boys is outside of the laws that govern grown-up communities.” Somehow, they’ll manage to go their own way.

________________________________

A National Endowment for the Humanities fellow at the Massachusetts Historical Society who is writing a book on the role of young people in 19th-century American democracy.

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Mon

Apr

2014

Investigating Family's Wealth, China's Leader Signals a Change

From The New York Times

By CHRISTOPHER DREW and JAD MOUAWAD

APRIL 19, 2014

HONG KONG — His son landed contracts to sell equipment to state oil fields and thousands of filling stations across China. His son’s mother-in-law held stakes in pipelines and natural gas pumps from Sichuan Province in the west to the southern isle of Hainan. And his sister-in-law, working from one of Beijing’s most prestigious office buildings, invested in mines, property and energy projects.

In thousands of pages of corporate documents describing these ventures, the name that never appears is his own: Zhou Yongkang, the formidable Chinese Communist Party leader who served as China’s top security official and the de facto boss of its oil industry.

A visitor at the Zhou family's ancestral graves in Xiqliantou, eastern China. Intrigue surrounds the family after a spate of arrests. Sim Chi Yim for the New York Times

But President Xi Jinping has targeted Mr. Zhou in an extraordinary corruption inquiry, a first for a Chinese party leader of Mr. Zhou’s rank, and put his family’s extensive business interests in the cross hairs.

Even by the cutthroat standards of Chinese politics, it is a bold maneuver. The finances of the families of senior leaders are among the deepest and most politically delicate secrets in China. The party has for years followed a tacit rule that relatives of the elite could prosper from the country’s economic opening, which rewarded loyalty and helped avert rifts in the leadership.

Zhou Family Ties

Zhou Yongkang, a member of China’s ruling Politburo Standing Committee from 2007 to 2012, is the subject of one of the highest-level corruption investigations in the history of the People’s Republic of China. Several members of his family, over the years Mr. Zhou was in power, made investments in companies with ties to the China National Petroleum Corp., the state oil company formerly run by Mr. Zhou, although there is no evidence to show that Mr. Zhou was personally involved in the dealings.

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Fri

Nov

2015