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The following article appeared in Left Business Observer #119, July 2009. Copyright 2009, Left Business Observer.

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Web of nonsense

Financial crises always spark interest in marginal critics of the system. One that’s attracted interest on the left is Ellen Brown, who’s got a book and a website called Web of Debt. She and her kind should be given wide berth.

Brown is a fine example of a mode of thinking that sees the problems of capitalism—like the polarization of rich and poor and the system’s vulnerability to periodic crises—as primarily financial in origin. She writes on her website:

Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions—including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices—and robbing you of the value of your money.

How people can spend the time it takes to write a book and still get so much wrong? For much of the 19th century, our money system was largely private. Individual banks issued notes of varying reliability, with limited geographic acceptance. And the national and international monetary system was based on gold, an entirely private and stateless standard.

The Federal Reserve is a public–private hybrid, but it’s a lot more public than the system that preceded it. And it’s also brought a measu