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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 measure of stability to the system that was badly lacking in the 19th century. Almost half of the last decades of the 19th century were times of recession or depression. Commodity prices declined steadily, putting great strain on farmers in particular. There is absolutely nothing about the monetary system of the late 19th century that offers a model, unless you’re a wacko libertarian.

Brown’s critique of the Fed as an inflationary force is deeply odd. The standard populist critique of the Fed is that it’s too adamant about keeping down inflation—and to drive the economy into recession to do so. That’s not really been true of the Fed for more than twenty years, but it was true of how Paul Volcker ran the institution in the 1980s. The last thing we need to worry about right now is inflation—and the Fed is busily pumping money into the system to keep things from going down completely down the drain. There’s a lot wrong with they way they’re doing it, but it’s better than letting it all go, 19th-century style.

To argue that the only way that interest can be paid is by issuing more new loans is also deeply odd. Presumably businesses borrow from banks to invest and expand. Higher profits from those expanded activities should more than cover the interest. If not, then you’ve got a problem, but that’s how things work when an economy is functioning more or less normally.


Brown festoons her site with approving quotes. One is from a magazine called Nexus, which promises “the latest information on a variety of topics including e-smog, The Ringing Cedars phenomenon, crop circles, hemp, The Mitchell-Hedges Crystal Skull, spirituality, white powder gold, ancient mysteries and extraterrestrials.” Solid stuff!

Another comes from The American Free Press. AFP is a successor to Spotlight, then published by the now-defunct Liberty Lobby. The Liberty Lobby was founded by Willis Carto, a big supporter of George Wallace’s presidential campaign in 1968 who is perhaps most famous for having said “If Satan himself...had tried to create a...force for the destruction of the nations, he could have done no better than to invent the Jews.”

The AFP is fond in turn of the Barnes Review, whose book club features books on Jewish influence, the wisdom of Robert E. Lee, and a history of the white race “presented from a white man’s perspective” that “would make a meaningful gift for anyone who is tired of seeing the white race ignored, trampled upon, denigrated and defamed.”

Maybe Brown just has poor taste in blurbs, though you'd think that a conscientious author would avoid this sort of creep. Still, it’s quite amazing to see how crackpot monetary theories are so often found in proximity to extreme nationalism, racism, and xenophobia. Here’s a fine example, from a social critic writing in the early 20th century:

Thus, the task of the state toward capital was comparatively simple and clear; it only had to make certain that capital remain the handmaiden of the state and not fancy itself the mistress of the nation…. The sharp separation of stock exchange capital from the national economy offered the possibility of opposing the internationalization of the…economy without at the same time menacing the foundations of an independent national self-maintenance by a struggle against all capital. The development of [the national economy] was much too clear in my eyes for me not to know that the hardest battle would have to be fought, not against hostile nations, but against international capital.

That was Hitler, from Mein Kampf, with only the words “Germany” and “German” removed. Cheap trick, yes, but revealing. This sort of pseudo-radicalism treats financialization and internationalization as problems, and not capitalism itself.


Why is this wrong? Starting with the easy part: isn’t internationalism a good thing? Shouldn’t people and ideas and art should be free to move around without being blocked by borders or suspicious provincial minds?

The financialization part is harder, but here’s a quickie version. The whole point of production under capitalism is not the satisfaction of needs, but the accumulation of money. In other words, it’s impossible to separate the economic world into a good productive side and a bad financial side; the two are inseparable. The monetary surpluses generated in production—the profits of capitalist businesses—accumulate over time and demand some sort of outlet: bank deposits, bonds, stocks, whatever. It’s going to be that way until we replace capitalism with something radically different.

And we have a consumer debt problem not because of some sinister conspiracy of bankers, but because our managerial class has kept wages down for the last 35 years. In order to maintain some semblance of a middle-class lifestyle, people have borrowed from the rich who’ve claimed most of the gains of an expanding economy. In other words, you can’t easily separate finance from the so-called real economy.

There’s also a curious affinity between these financially oriented critiques and classical anti-Semitism that helps explain why the two go together so nicely. Several writers (like Moishe Postone and Slavoj Zizek) have noted that a lot of the imagery of classic anti-Semitism—greed, deviousness, the hunger for money—separates out some of the bad features of capitalism and pins them all to the mythical demonized figure of “The Jew.”

Let’s leave the paranoid oversimplifications to the far right, where they belong.

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