Jason Hartman hosts Ellen Brown as they center a discussion on Universal Basic Income, UBI. Brown gives us a brief look at her background and then discuss spending and how money is lent into existence. She explains what a financialized economy is. The discussion moves towards debt and a conversation about deflation setting us up for depression. Brown reminds us that all our money is credit.
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Jason Hartman 1:00
It’s my pleasure to welcome a returning guests back to the show. And that is none other than Ellen Brown. She’s the author of 13 books, I first found out about her great work when I discovered the book web of debt. And more recently, she’s author of public bank solution and banking on the people democratizing money in the digital age. And she recently published an article about UBI, universal basic income. As you know, we had presidential candidate Andrew Yang on the show talking about that. And interestingly, I’ll just kind of start with this one, and you’ll probably disagree with me. But, you know, philosophically, I don’t want to agree with this. It feels like another expansion of the welfare state a handout, blah, blah, blah. And you know, you’ve heard that trope more than enough times, I’m sure. But interestingly, in the pandemic, situation we find ourselves in there really isn’t an efficient mechanism or there’s really no mechanism to get money to people. So what you have happen, and I’m sure you’re going to elaborate on this quite a bit, is you have all of these corrupt big banks that are now already being sued, thankfully, you know, getting their hand in the till and the money’s not going where it was intended to go. It’s a mess. Where do you want to go with that?
Ellen Brown 2:22
Yeah, well, I agreed. And the other problem is that you can think about these long range things that people need, like, obviously, we need Medicare for all and things such I mean, we’ve we’ve seen that how bad our medical system has been in responding to this crisis. But all that stuff is sort of spotty, you’re going to get some money here, some money there, and they’re going to still be people left out. So the reason I like the universal basic income, at least to talk about it on a theoretical level is that it goes to everybody equally and you don’t it’s very easy to distribute in the sense of you don’t have to go and show that you’re worthy of you know that you’re under a certain income level or whatever it takes you don’t, you don’t have to have all kinds of bureaucracy deciding who gets what, it just goes to everyone equally. Now a lot there is 25% of the population is unbanked or underbanked. So they might still have trouble accessing it if it just goes right into your bank account. But we’ve been pushing for postal banking, you could just have it go right to your post office, and anybody can open an account at the post office, which is what we used to have from 1911 to 19. What’s
Jason Hartman 3:36
going on? What is a postal account? What do you mean an account to the post office? What does that mean?
Ellen Brown 3:41
Yeah, well, we don’t have them right now. But it used to be that we had postal banks. So it was just another window in the post office. We’ve already got the infrastructure, you’ve got a post office in every little town, even little towns where they didn’t have banks, you know, rural areas, and it used to be the You could just went to one window and mailed your packages and then you went to the other window and deposited your check or put checks or pulled out some money. You know, it’s just basic banking not not like elaborate mortgage loans or anything like that. So they could do that on an emergency basis. Again, just say you couldn’t go to the post office and get your check, just open an account, which, you know, you could do it on your cell phone or whatever, you know, you could make it quite easy. And another option is there is something called Treasury direct where anybody who wants to can open an account and that’s you know, it’s digital online, and it’s where, where you can go to buy treasury bonds right now. So anyway, it’s possible to get do some very fast, efficient way to get this money into people’s pockets. But what I was really writing about wanted to write about it. It seems to me that the obvious way to fund this is Just issued the money the way, you know, basically, quantitative easing, theoretically, quantitative easing is reversible. But we’ve just seen that you can’t reverse it. It’s just like the federal debt, theoretically, we’re gonna pay up federal debt. But everybody knows we’re not going to pay off a $24 trillion federal debt. It just sits there. And the thing that grows is the interest. I mean, you could just Other than that, it just keeps rolling over and over and over. And you could just fund it through the Federal Reserve and roll the whole thing over. In other words, basically, it’s just issued MONEY MONEY issued by the government. So that’s what I think we should also do with a universal basic income. And any argument that we don’t have the money has just been killed by the fact that the Federal Reserve is just promised $4 trillion to basically corporate America, to bail out everything and say all sorts of big and little businesses and hedge funds and the riskiest dodgiest of things. It used to be that. I mean, technically, when the federal reserve funds something like when they did quantitative easing, they can only use things that are backed by the government. So it was supposed to be very safe things backed by the government. So they were supposed to take as collateral or in other words, what they did was buy these federal bonds federal securities or mortgage backed securities from Fannie Mae and Freddie Mac, who, which are government agencies, so our government backed agencies. Anyway, so now they’ve expanded that and the way they expanded it was that the Treasury has set up these special purpose vehicles which the Treasury that’s us we the taxpayers are funding this. We are putting up 450 $4 billion as capital for this. What’s basically a shadow bank? I could go into that but you know, it’s not like a Chartered Bank, but it has the function to a bank where
Jason Hartman 7:06
when you say it, what is it? Okay, this
Ellen Brown 7:10
special purpose vehicles is the
Jason Hartman 7:13
car,
Ellen Brown 7:14
right? Yes, you know, pseudo bank. So what these spvs they’re called what they do so you’ve got him for like commercial paper and municipal paper and all kinds of different corporate debt. And what, and it’s run by minuchin. Steve minuchin, the Treasury Secretary so obviously another bureaucrat, another appointee, not somebody we elected, and it’s, who decides what they buy is BlackRock, which is the world’s largest asset manager. BlackRock is bigger than the economies of many countries. I mean, it’s this huge entity that does not have the best record. But anyway, so you’ve got all these private entities in there are raking out. So this $454 billion, billion dollars that we’re putting up for this, these spvs will then be used to leverage $4 trillion in credit or debt or whatever it that so they can buy up all these bonds and various dodgy sorts of assets that the Federal Reserve is not allowed to buy up itself.
Jason Hartman 8:31
But it’s going to do it by hook or by crook, I guess I’ll say, and what’s so terrible and scary about this other than the massive amount of corruption and the greedy hands that will be in the cookie jar. And all of that stuff is even if it was a clean program, the fact that they’re just doing it, the the powers that be, you know, I wouldn’t say the government normally but it’s not just the government, right? It’s the it’s the Fed and the government In the spvs, they’re all picking the winners and losers. What the heck is their right to pick the winners and losers? Shouldn’t the marketplace sort that stuff out? No, they don’t. You know, you get political cronyism. And it’s just, it’s just absolutely terrible,
Ellen Brown 9:17
right? We don’t actually have capitalism anymore. We have crony capitalism, or corporatocracy, or whatever. Yeah. So anyway, they’re gonna tap into this $4 trillion of credit that the Fed has available. And without blinking an eye, I mean, the Congress voted, unanimously passed this bill in the space of a few days, basically, because they didn’t want to have to come back into, you know, meet in person. So they all just passed it by the internet. I mean, even a postman, half the work, you would think Congress could come in for a couple of days and argue about this. So they’ve passed that without even worrying about where we’re going to get $4 trillion something Come up with $4 trillion for all these entities. Oh, and another thing is they make these loans. And that’s what the purpose of our capital, if they’re making loans like to buy asset backed securities or which are, say, auto loans, like half of those are going to default. And when they do, it’s, we are, it’s our capital that’s going to fill in the hole there. So, so there’s plenty of money out there that they can get from the Federal Reserve. And they could just as well get it for universal basic income for the people. But then what everybody says
Jason Hartman 10:34
in a side note, you know, Larry Fink Of course, as chairman CEO of BlackRock or at least he was, I don’t know. And revenue 2018 was 15, almost $15 billion rounding with an operating income of 5 billion. Unbelievable.
Ellen Brown 10:51
I just did you know, also as an aside, you know, BlackRock on December 31 added increased their investment in moderner, the lead vaccine producer on December 31, the first day we ever even heard about a problem in Wu Han. And then on the day that the market crashed in March, after the market went way, way down. BlackRock alone made $68 million on moderner because you know that stock shot up while everything else collapse So anyway, these it’s an interested party. So BlackRock gets to choose which bond funds they buy, and obviously, they’ve got their fingers in these bond funds. So anyway, yeah, totally corrupt. Yeah, the whole system is just it’s amazing.
Jason Hartman 11:41
Ellen, I want to let’s just jump away from this direct topic for a moment. Okay. What is the endgame of the money spending, conventional wisdom, or at least modern conventional wisdom, would say that all of this spending is inflationary. pressure, you can’t just create money out of thin air forever. You can’t just run up the debt forever. You can’t just run deficits forever. The chickens have to come home to roost. You know, we got to pay the piper, whatever expression you want to use, or can we?
Ellen Brown 12:15
Yeah, that’s what I was reading this article about is that Yes, we can. And I mean that this is in terms of a universal basic income, let’s assume that we, that it takes another $3 trillion to give a 1200 dollar a month universal basic income to the people. The problem is people think of this as like a picture of bucket of coins and you just keep pouring more buck more coins in and eventually it’s gonna overflow or it’s gonna deflate the value of the coins. But that’s not what our money system is. It’s not a fixed amount of money. It’s a credit system a credit and debit system. 95% of the money supply is created by banks when they make loans and this has been confirmed by the Bank of England. The In this bank, the International Monetary
Jason Hartman 13:01
Fund listen to my listeners will not deny that because they have an understanding of how this whole games work, smoke and mirrors game works, right? Money is lent into existence. But your act, the way you’re talking about that is almost like bats. Okay. And I think the first question is, is that okay, it seems really Hocus Pocus.
Ellen Brown 13:26
Okay, well, that my premises that’s the system we’ve got. And, you know, we have to deal with that we can’t we’re not gonna
Jason Hartman 13:32
change. You’re just being practical is what
Ellen Brown 13:35
I actually think it’s not a bad system. What’s wrong with it is that it’s run by private banks, and they are interested parties and they’re corrupt and their goal is to make as much money as they can for their shareholders. You say that?
Jason Hartman 13:46
Do you include the Federal Reserve as being a private bank though?
Ellen Brown 13:50
Yes. Okay. But, but they could be public that’s and they should be. So that’s what I think if so, anyway, the problem is that banks create the principal but They don’t create the interest. So that always grows faster than the money supply, which means you’re always in a deflationary situation and with the money supply, and it debt grows faster than the money supply for another reason, there’s at least the money available to repay the debt is not there for another reason. And that’s because people don’t put their money back into the money supply. In other words, if all of our money is created by banks as loans, it’s all going to have to go back to the bank to pay off the loan. So it has to be made available to repay the loan, otherwise, you’re going to have this increasing deficit on the one side of the balance sheet. And the reason it doesn’t there’s two reasons. First of all, we have two economies essentially, we have producer consumer economy, which is where you want to keep the money. And then the financialized economy where you have money making money, it’s parasitic, draining money out of the real economy. And because of the Fed put which is you know, it used to be the Greenspan put and now it’s the Fed put where the Fed just isn’t going to let the market go down the stock market go down whenever they do everybody screams bloody murder and and then the Fed jumps back in and reverse you know lowers the interest rate yet more and does you have more quantitative easing etc so the Fed put means that you really can’t lose money in the financialized economy or at least you couldn’t right up until recently. So investors and well even bankers or whatever people in general savers put their money into the financial economy because that’s where the money is. That’s where you make money because the Fed has protected it and made sure that you make more money there then by putting money into factories and you know, producing things so therefore, the real economy is always chronically short of money because there’s a hole in the bucket for one thing leaked out into the financialized economy or a lot of people just save their money. Or they might just be sitting in a bank account not doing anything. I think
Jason Hartman 16:03
I think that’s kind of important what you just said. You said the real economy is always short of money. Because there’s a hole in the bucket where those quarters that you talked about are those coins drain, always into the financial economy in mind, listeners have heard me talk about this before. There’s two economies sometimes I say there’s the main street economy and the Wall Street economy, and they’re completely different. There’s the financial economy and the real economy in the real economy. People in companies produce things imagine that when a concept in the financial economy they just move crap around, rename it, you know, leverage it, dude, I don’t know you explain more about the financialized economy I get so annoyed by the whole thing. Sound I just sound angry. But you know what, go ahead and go into that a little bit. What is the financial lized economy, the financial ization of so many things parts of the economy. I mean, it is truly shocking. How many things Elon have become a derivative. It’s absolutely amazing. Talk on that for a moment. Yeah. It’s worth elaborating on.
Ellen Brown 17:10
Well, I’d say the stock market and all these well derivative market which is what? Up to a quadrillion or something like that. But and then people would say, well, so the money goes into the financialized economy, but then they’ll spend it back into the real economy, but they don’t that’s the thing. That big money is not going into consumer goods, they’ve got all the consumer goods they need or want, where it goes, they use their big money for big things like buying off politicians, you know, buying oil companies or you know, just buying up really big things. That’s what they want with their money. Not Okay, Okay,
Jason Hartman 17:46
wait, wait, wait a second. Let me play devil’s advocate with you on that one, right. Is that really true though, because the idea that Money Never Sleeps when the rich pay off a politician which is absolutely disgusting. Or, you know, they buy a yacht or they buy in a wheel company or whatever they do. The money doesn’t go away. it trickles down to us a cliche into I mean, it doesn’t go away. It
Ellen Brown 18:15
does trickle down. Now, if you look at a chart, it just keeps trickling up, they just keep sucking more and more out and it, it goes into, well, it’s probably sitting in offshore tax havens or it’s gone offshore and other ways.
Jason Hartman 18:31
Well, you know, in that way, it does sort of evaporate, right go when it goes off shore. That’s Yeah,
Ellen Brown 18:36
and a lot of I think there are trillions of dollars that are being held by corporations just in cash. I mean, I have a course I have an IRA and, and half that money is just sitting there and cash in my stockbroker account. I mean, they’re not even like it’s always in a bank. The bank might be using it for loans but not my stockbroker. So there’s a lot of money. That’s just Not in the market you know, it’s just held off the market I’m just saying that people rich people who have many many times as much money as poor people aren’t going to go out there and spend many many times as much money on buying trinkets and groceries and gas and all this things they but they’re gonna buy this
Jason Hartman 19:19
knows that only buying trinkets and gasoline and paying rent is real really beneficial to the economy. I mean,
Ellen Brown 19:28
well, they will go buy houses I agree that will drive up the price of house and
Jason Hartman 19:33
it will employ construction people and it will by
Ellen Brown 19:36
assuming there’s room to build I’m taking things that are already there, you know, I said
Jason Hartman 19:42
okay, so take an expensive place take you know, they go buy houses in Manhattan or Beverly Hills, right, which is where they buy them. Okay, so a real estate broker, a real mortgage company gets paid and decorator gets paid. You know, money does, it doesn’t give the seller gets Pay, the seller uses those proceeds somewhere. It doesn’t evaporate. I think that’s a fair statement.
Ellen Brown 20:05
True. But you still have all this money being sucked out that doesn’t go back into the local economy, I mean debt, all those things could happen at the same rate they were happening before. And it’s not going to increase the money. And you know, the overall money in wage earners pockets. They’re the ones that they want to pay their wage earners as little as possible. And that’s the problem. That’s why, particularly in times like this 80% of the population lives paycheck to paycheck. So what are those people going to do on the second month when they don’t get their 1200 dollar check? I mean, I haven’t seen my 1200 dollar check. I don’t know. I guess some people have. Anyway, you know, people are desperate out there right now. So you’re gonna do some.
Jason Hartman 20:49
So we covered a little bit about the financialized economy. Do you want to say anything more on that before we go back and then let’s get back to your article because I think this article is really interesting. And let’s talk more about Are you bi but anything else about the financialization of the economy?
Ellen Brown 21:04
No, I think that’s okay. All I had to say,
Jason Hartman 21:06
Okay, let’s go back to the article.
Ellen Brown 21:08
Okay, so with the UBI.
Ellen Brown 21:12
Because there’s this growing gap, what happens routinely and this has happened for thousands of years is that debt grows and grows and grows until it gets so high that people can’t borrow anymore. And what they do instead is they pay down their debts, but they’re not taking out new debts. And that shrinks, the money supply shrinks and shrinks, and then you go into deflation, which turns into depression. And that’s that syndrome that the that everybody’s afraid of, or that you know, that the big the Fed and all the regulators are afraid of. So there are two options you can what they used to do in antiquity was just forgive the debt periodically because
Jason Hartman 21:53
Jubilee right,
Ellen Brown 21:55
yeah, because the lender was the king or the or the temple. But you can’t do that anymore because the lender is private, you know, their private lenders. And even if they wanted to forgive the debts that would that would put them into bankruptcy because they they’re supposed to balance their books. So the other one,
Jason Hartman 22:14
I hate the idea of any sort of debt Jubilee, and why I hate it is it would be totally unfair and unequal distribution of benefits. For example, you know, there’s a lot of talk now about forgiving student loans. Look, if student loans are a huge rip off, believe me, you’ve got my sympathy. But the problem is, I don’t have a student loan. So if they forgive student loans, and all the taxpayers pay for it, why do I have to contribute to that I didn’t get any benefit.
Ellen Brown 22:42
Right? And then they’re the people that just finished paying off their student loans, they’re gonna be upset. Yeah, so I totally agree. That’s the problem with all these different programs that give some here some there, so that but you do have to fill that bucket that just got drained and there’s and so that To me, the fairest way to do it is to just figure out call it a national dividend. It’s the extra money that we need to put into the economy to balance the books to, you know, to pay off all the old debt. So, so if you get an UBI, and you’re in debt, you could even make it mandatory that the money goes first to pay off your debts, like your credit card debt. Your bank knows what credit card debt you have, and it would just go automatically to pay that debt off. Well, when it goes to pay off debt, it disappears. That’s the catch. The thing that people aren’t recognizing is that money evaporates when it pays off debt. So if you give the people randomly, you know, everybody gets the same, but if the people use it to pay down their debt, that money that portion of the money is going to disappear. And I saw somebody somebody wrote a whole book on this and he said he figured that at least 50% of a UBI would go to pay pay back debt. And and then he well he actually figured more like two thirds of it would either that or it would be saved or pulled off the mic. I don’t make
Jason Hartman 24:04
sure Elena, we catch your position on that. Are you saying that? That is though it’s good or bad?
Ellen Brown 24:10
I’m saying it’s good. I mean, it’s given the system we have, we’ve got to do something about that debt. If we give people
Jason Hartman 24:17
in the debt you’re talking about is just personal. That’s right.
Ellen Brown 24:19
Yeah, everybody’s well, business, whatever, you know, any kind of debt, the money will, if the money goes to, to the extent that the money goes to pay off debt, it will disappear, because that’s the way the system works. It’ll go, it’ll just go into the bank account, like you’ll go to your credit card thing and your credit card balance will be gone, but you won’t have like extra money to spend. And there’s actually at least room for 10% growth in the money. Well, we used to be that we said we were at full employment, but everybody knew we weren’t really, but now we’re clearly not at full employment. So there’s clearly a lot of room to grow. So any extra that actually did go into buying goods and service services would go to stimulate production of goods and services, which would be good for the economy.
Jason Hartman 25:06
Okay, so how does this relate to if it relates to what we’re starting to hear a lot about, and millennials would like it. And that’s modern monetary theory, otherwise known as mmt.
Ellen Brown 25:23
Well, mmt actually says you can go that the government can go into debt a lot more deeply than it’s doing right now or thinks it can, because the effect of it is to just borrow from the Federal Reserve and to create new money. I don’t actually agree with that, because that I don’t think that is the effect would that Treasury is not allowed to go directly to the Federal Reserve and borrow Not right now. I mean, it could be that you couldn’t change the law and say that, you know, the government can just print extra money and I would agree with that. That’s good. We need extra money out there. In the system. But to say that it doesn’t matter if the government goes further and further into debt, and particularly the way it’s set up now, or whether the debt has to be sold on the open market first. And that means it goes to private bondholders and they’re going to want their interest and you’re going to have the interest burden. I mean, I’ve seen projections that in like, 10 years, we’ll be paying a trillion dollars, just an interest rate. Now, I think it’s 554,000,000,560 5 billion, something like that. Annually, just an interest and there’s no need to be paying interest. We could be borrowing it directly from that central bank at interest free because they rebate the interest to to the Treasury when after detecting costs.
Jason Hartman 26:44
So Ellen, it sounds too good to be true. I mean, we can just give people money. Have the Federal Reserve pay for it. Don’t we have to? Doesn’t someone pay for that a foreign country buying a treasury bill or something? Can we just create money out of thin air? Or do we create inflation? Is that how we all pay for it?
Ellen Brown 27:06
And what you’re creating is credit, all of our money is credit. And we need more credit out there. This is the way the Chinese do it, and they prove it in the model. The Chinese increase their money supply by 1800 percent, like 18 times in 20 years, and they did not run into hyperinflation. But what they do is, this state owns 80% of banking assets. So what they do is they go right to their big banks, borrow from the bank, the bank creates the money on its books, they use that money to build a high speed rail, let’s say, and then the proceeds from the high speed rail, pay off the loan. That’s the way our system works. You’ve got to get the credit out there first, pay all the workers materials, make some money, pay the thing off, the end of the money comes back. And there isn’t enough money out there right now. So that’s what the helicopter Money does, its gets more money out there to pay off the loans and to build more stuff. So it’s not going for nothing. It’s going for real goods and services. It’s the counterparty to the goods and services that we will be making in the future. That’s what all loans are. It’s monetization of your own future promise to repay
Jason Hartman 28:19
very interesting. I know you’ve got to run to another interview, give out your website.
Ellen Brown 28:24
Ellen brown calm is my own website. And then there’s public banking Institute dot o RG and my books are available on Amazon, among other places.
Jason Hartman 28:35
Ellen, thanks so much for joining us.
Ellen Brown 28:37
Thank you. Always good to talk to you, Jason.
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