Banking on the People: Democratizing Money in the Digital Age

by Ellen Brown

Today most of our money is created, not by governments, but by banks when they make loans. This book takes the reader step by step through the sausage factory of modern money creation, explores improvements made possible by advances in digital technology, and proposes upgrades that could transform our outmoded nineteenth century system into one that is democratic, sustainable, and serves the needs of the twenty-first century. Ellen Brown is the founder and chairman of the Public Banking Institute and a Fellow at The Democracy Collaborative.

426 pages, Paperback

First published May 1, 2019

Reviews

[Debbie Notkin · Rating 4 out of 5]

I read this for a book group, and because I am passionately involved in the public banking movement, of which Ellen Brown is a lead foremother. She's not the best writer in the world, and she sometimes (it seems) leaves steps out of her explanations. Nonetheless, she's generally very clear, and she understands the complexities of modern banking in a truly integrated and deep way. I'm very glad I read this.

[Jack Hicks]

Banking on the People, Democratizing Money in the Digital Age
Ellen Brown, 2019
The Federal reserve and the commercial banking system of the US is a very esoteric and confusing system for those not privy to the terminology, history. and repeated abuses over time. Yet. this system has tremendous impact on the wealth and economic future of all Americans and the country as a whole. And yet, when politicians and reformers try to modernize and make the system more equitable as they tried to do with the Dodd-Frank Wall Street Reform Act of 2010, they are swamped by powerful financial interests who want to minimize or neuter any changes to their immense influence and profits. The issues are so arcane and mind numbing that common citizens without CPA degrees just cannot comprehend what is happening. People are familiar with their interactions with the banking system such as with mortgages or saving accounts but have no idea the machinations that transpire beneath the veil of obscurity. Ellen Brown has been researching and writing on this topic since her first great book on the Federal Reserve; “Web of Debt” and is a recognized expert on the topic.
One would think that the US government would have control of issuing its own currency and the creation of the money supply. But that would be wrong! Our whole banking system dates to The Federal Reserve Act of 1913. The Fed was established as a private institution with the shareholders being the private money center banks. The government regained some control in 1935 by requiring a Federal Reserve board of governors appointed by the President and confirmed by the Senate. Money center banks can borrow from the Fed but the government cannot so the government and the people are not in control of the money supply. The money supply is controlled by commercial banks and is increased when a bank loans money whether it be by credit card purchase or mortgage or other loans. “ We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If banks create ample synthetic money we are prosperous; if not we starve”. The original JP Morgan had a large influence on the Federal Reserve Act so it was no mistake that this system was was set up to guarantee large profits to the banking system. Brown takes you through all the inside workings of the banking system and the huge shadow banking system that now operates outside any effective government control. Firms in the shadow system such as Blackrock, Goldman Sachs and other Wall Street entities and hedge funds control hundreds of trillions of dollars in assets and derivatives and are a constant looming threat to our financial stability. What happened in 2008 was not a one-off event. Brown makes clear that our current financial system is poised as an existential threat to the wealth and welfare of all US citizens. “We have a 25 trillion debt that cannot be possibly repaid. The government just keeps rolling it over and paying the interest to banks and bondholders. Feeding the financialized economy in which money makes money without producing any new goods and services. The financialized economy has become a parasite feeding off the real economy, driving producers and the public further and further into debt”.
The second half of the book asks the question: Are there other money creation and banking systems that would serve the citizens and taxpayers of this country in a more equitable way? A number of alternative systems are explored, but Brown comes down firmly on the side of nationalizing the federal reserve, the money center banks and the creation of a network of state-owned banks. She argues that banking and money creation should be a public utility, that the federal government should not have to borrow money and pay interest to fund public infrastructure, education and other public investments. The Bank of Japan has recently embarked of just such a course, retiring government debt and creating a network of postal banks utilizing existing post offices. The creation of the money supply should be returned to the government and Japan has done this without creating any inflation while providing low cost liquidity to business and government investment. States should not have to float muni-bonds to build roads and schools but should be able to borrow from their own state banks. There is a relevant test case; the Bank of North Dakota which has been financing public and private economic projects in North Dakota since it was chartered in1919 and has reliably returned a profit each year to the state. Brown advocates for a system of state banks throughout the country and asks; why should states have to pay exorbitant fees and let commercial banks use taxpayer’s deposits for their own profit? Another intriguing possibility centers around the Treasury Departments Constitutional mandated authority to issue coinage. For an example the Treasury could issue 20 trillion-dollar coins, credit it’s accounts and then finance a 5 trillion dollar infrastructure investment, pay off all college debt and finance free higher public education, pay for universal pre-school and have 10 trillion left over to pay down the debt. This would not require Congressional approval, only a compliant Treasury Secretary and President. Of course the Congress would have to appropriate the spending but that would be the easier part.
This is an extremely important book and I wish all politicians and seekers of office would read it. Our current system is corrupted almost beyond belief and is impoverishing most of the populous exempting of course the fat cats at Chase JP Morgan, Blackrock, Goldman Sachs to name a few. As far as general readership, because of arcane terms and accounting speak, I think it would help if one had some accounting or financial knowledge to get through this book. Can the system be revamped to serve the people instead of the few? Thomas Jefferson had an answer in the Declaration of Independence; “ All experience has shown that mankind is more disposed to suffer – than to right themselves by abolishing the forms to which they are accustomed.” Unfortunately, he’s probably right. The question is how much are we willing to suffer before we force our politicians to change this unbelievably corrupt system? JACK

[Rob · Rating 5 out of 5]

It's a lot of information to take in, but i feel like I am at the ground floor of understanding how actual banking works. There's really no way to make it a super fun read, but I'm definitely more interested in learning more about economics, and its role in a more equitable future.

[Nick]

Pretty decent description of the modern American banking system, but it could have been beefed up with more material to cover a broader range of topics in greater detail. New proposals garnered a large share of the book, as well, which was useful for the author's narrative.