Jason Hartman deals with issues in his introduction such as how to deal with your property manager, what we need to know about monetary policy and considers just how intricate the links between politics and real estate investment really are.

In the interview portion of the show, he talks to author Ellen Brown about her books Web of Debt and The Public Bank Solution about public banks worldwide, whether we need a Central Bank and if there can ever be a realistic option for funding which doesn’t include Wall Street.

 

Key Takeaways

02.58 – We have to really understand monetary policy because it always has a direct impact on real estate investors and their tenants

05.00 – Politics and real estate are so interlinked you just can’t have one without the other.

10.51 – You need to ensure you retain the control position with your property manager.

18.08 – The US only has one state-owned bank, compared with 40% of publicly owned banks worldwide.

22.28 – The public banks have always done better when they’re in the small community-style markets that they know. As soon as they branch out, the problems arise.

27.50 – The main difference between a credit union and a public bank is the size of the depositor. Credit unions are great for individual depositors, where public banks have a city or state as its main depositor.

31.50 – Historically, countries like Australia have shown us when Central Banks do and do not work.

36.35 – Jason Hartman takes the matter and asks “Do we even really need a Central Bank?”

37.35 – Ellen Brown remarks that she would opt for a bottom-up government where each level is selected by people that personally know the individual.

40.04 – People are using money to work their way higher and higher, and now we’re at a point where banks own businesses which they really shouldn’t. They should be in banking.

41.35 – There may be a chance that crowd-funding initiatives can remove Wall Street from the funding equation.

44.45 – For more information about Ellen Brown and her published works, head to www.EllenBrown.com

 

 

Mentioned in this episode

Web of Debt by Ellen Brown

The Public Bank Solution by Ellen Brown

www.EllenBrown.com

www.PublicBankingInstitute.org

Tweetables

The free market should decide on supply and demand of money and property, but it doesn’t work like that. Tweet this!

There’s a tyrannical aspect that when it’s everybody’s money, it’s nobody’s money. Tweet this!

If ever you hear ‘financial innovation’, run because it means you’re in trouble. Tweet this!

Central Banks all have a way of just destroying the wealth of everybody who is trading in their currency Tweet this!

All money is debt. Tweet this!

Transcript

Introduction:
Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing. Fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years, and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it, and now, here’s your host, Jason Hartman, with the complete solution for real estate investors.

 

Jason Hartman:
Welcome to the Creating Wealth Show, this is your host, Jason Hartman. This is episode number 435, thank you so much for joining me today.

Today we’re going to talk with Ellen Brown. Ellen has been on the show a few times before, and she’s done some great work in talking about banking and the Federal reserve. All of this stuff is just really, really interesting and it totally affects us as real estate investors because think about the power our Central Bank has and Central Banks around the world have on the real estate market. I remember talking with one of my agents who worked at my traditional real estate company in the early 2000s. Her name was Martie and she still actually works at that company – the one that I sold at Coldwell Banker in 2005.

I remember her really struggling, as so many real estate agents were at the time, in terms of trying to get inventory. They had no properties to sell! And why did they have no properties to sell? It was because of Alan Greenspan, commonly considered the maestro, the hero, the Keynesian fool, frankly. If you wanted to blame the financial crisis on one single person, and there are many people at fault, I would say Alan Greenspan’s right up there in the Top Three of people to blame if you’re trying to pin it on one person. He just made this massively easy money policy after 9/11 – they were just flooding the markets with money and real estate prices were sky-rocketing. This is artificial, folks. This is completely ridiculous that it should be this way. The free market should decide on the rates, the free market should decide on the supply and demand of money and of property. Instead, it’s this completely manipulated system that Ellen Brown talks about in her book – I think it’s her first book that I interviewed her on the first time, a few years back – which was called The Web of Debt. It’s critically important that we have some real understanding of monetary policy and that we understand that this is not some crazy esoteric theory. This matters. It has real, direct, practical impact on us every day as real estate investors. It has impact on our tenants and on whether our tenants want to renew their leases or they want to jump ship and go buy a property because it’s counter-cyclical. When the money is easy, it makes the prices go up, but it generally puts downward pressure on rents. I talk about this when I discuss the 3 dimensions of real estate – how these things are non-correlating indicators.

Ellen Brown’s big thing, lately, is about public banking. I like her work a lot. My only real criticism of her would be that she has too much trust for the government, and that’s just my view of her. You can judge for yourself. I think I brought this up in this interview with her that you’re about to hear. I guess, if I had to decide between government and some secretive, private banking cartel known as the Federal Reserve, which as we know is about as federal as Federal Express – that’s just a name. You know what’s interesting? No member of Congress, no member of the Supreme Court – the government is not allowed to come inside and examine the Federal Reserve. I hate to mention the name again because I know I’ll get criticism for this.. Remember the one review that I mentioned a couple of days ago on the show where it was talking about too much politics, but you see from my last episode how much politics matters. If you don’t think real estate investing is just replete with political issues that totally affect our bottom line as investors, you’ve really got to think again.

Look at what I did in talking about Rich Karlgaard’s article on the last show; that great article that he did where he talked about the impact of regulation. Basically, the country and all the people in it would be twice as wealthy today if we had just a little bit less government regulation. Granted, it’s a thesis, it’s a hypothesis. We can’t say for sure that that would have happened that way, but I’ll tell you, there’s a pretty good case for it! Why is it that some people thought Ron Paul was some outlandish freak by saying that we should be able to audit the Federal Reserve? This is nuts! This is just crazy that people would think that’s crazy, right? It makes no sense at all.

Anyway, we’ll get into some of this stuff and talk with Ellen Brown about public banking, we’ll talk about North Dakota which is really interesting – they have a public bank, and it’s seemingly well managed and very solvent. What a concept! Another thing is I got a note on one of our social media pages; I think it was on Facebook today. It was one of our listeners – thank you for posting this, I appreciate your comments for sure. He said “Why have you only been talking about Little Rock and Birmingham lately?” The reason is that I’m responding to you, our listeners and our clients, because those are the areas that you are really interested in nowadays. Of course, Arkansas is the most landlord-friendly state in the entire country. You heard that when I played the soundtrack of that video about it several episodes ago – very interesting.

Of course, we also had a property tour there recently, and then we have our upcoming property tour in Birmingham, along with our Creating Wealth Seminar there. We got two more people just registering for that today, so I’m glad to see that a lot of you are attending that and I look forward to seeing you in just a couple of weeks. That’s why we’re talking about it, but we’ve still got lots of clients purchasing properties in Memphis, Atlanta, Houston, Kansas City, Indianapolis, so there’s more to the world that just Birmingham and Little Rock, I completely understand that. We just haven’t been talking about those a lot lately because, number 1: We’re responding to you, our listeners. Number 2: We’ve got tours and events which are really a response to your interest. We try to do very informal surveys and listen to your feedback and think about where we want to do our next Creating Wealth Seminar and Property Tour, and so we picked Little Rock and Birmingham in that order, because that’s what you told us you wanted. We do have other stuff, and we have other stuff even beyond those. When you go to www.JasonHartman.com/Properties and you’ll see there are 7 featured markets. Those are the markets that are the busiest for us now and they’re where we’re doing most of our business nowadays, but there are other properties. We have properties in Illinois, in Ohio, of course in Florida we’ve got a little bit – Florida is a frothy kind of difficult market to work in in some ways, but there are definitely other properties besides the markets that I’ve been talking about lately.

When we’ve got a tour coming up, I like to get the experts in that market and the people in the know to give you details about it and to just fill you in in advance before the tour. For those of you attending, I know it’s good to answer a lot of your questions up front and it’ll make it a lot easier and a lot more enjoyable and educational for you. That’s that.

Also, thank you to those of you who have been purchasing the Creating Wealth Home Study Course and the Meet the Masters Home Study Course. We’re also looking forward to formally announcing our Meet the Masters event coming up in January in Irvine, California. That’ll be another great event. We used to do that twice a year and it just became too much work and too time consuming for us so we’re only doing it once a year nowadays, as you know. I think this will be our 15th or 16th Meet the Masters weekend event, so that’s going to be a great event too. Plan on that in January – just save the date. We haven’t formally announced it yet, but hopefully we’ll do that very, very shortly.

Without further ado, let’s just jump over to Ellen Brown. Oh, one more thing I do want to mention to you before we get to Ellen Brown. This came out of a conversation I had with one of our clients today – his name is Jason, and he asked me to review a property management deal in one of our markets in Texas. I took a look at the property management deal that he was being offered, and there was one thing I really wanted to say. It’s not like I haven’t said this before, but sometimes it can take a few times, maybe you didn’t catch that episode. With your property management agreements, the property manager always retains discretion for small repair and improvement items, whether they be redecorating the property (in terms of some paint or some cosmetic work) or doing repairs or maintenance issues and things like that. I want you to tighten the reins on your property manager. Our property managers are probably not going to love me saying this, but trust me, in the long term it’s better for you and the client. The way I want you to tighten the reins here is I want you to go ahead and look at your property management agreements and look for the clause that says they can do discretionary repairs, maintenance and improvements to the property without getting your approval first. It probably says something like ‘They have discretion for $200-300 per occurrence to do repairs and improvements to the property without seeking your approval first.’

In today’s world, we are all so connected no matter where we travel in the world – we’ve got our email, we’ve got our phones with us. I think you should tighten the reins on your property manager and keep them from spending your money. How should you do this? Number 1: I think you should negotiate in your property management agreements that this is not per item or occurrence. It’s per month. You should limit their monthly budget for discretionary items to maybe $200 per month per property, or per unit. If you own apartments, and usually those are handled a little differently depending on how large the apartment complex is, and that’s a different discussion. I’m talking mostly about single family homes, duplex, fourplexes, that kind of stuff. I want you to limit that to $200 per month, not per item or per occurrence, or per issue. I want it to be per month. They can take the time to send you a quick email, and you can take the time to send them a response. That way they seek out your approval and you’re not getting these deductions from your monthly rent check. Your property manager is probably doing a great job – most of them are great people, there are problems with some of them here and there for sure – but I just want you to get more control so you can manage your expenses better and net more money from your investments.

If there’s a repair item that requires discretion, I want you to set some business rules for yourself. For example, if it’s a $200 item, I want your property manager to actually attach the scanned document to an email that they send you, and I want you to open that attachment and look at it. That is a quote for fixing the item. Say it’s $300 in this example, because maybe you’re at a $200/month limit and they haven’t exceeded that yet. I want you to get a quote in writing from the actual vendor doing the work, not from the property manager. Most property managers do it this way; they send you the quote from the actual vendor doing the work. If it’s something that’s done in arrears, I want you to get the receipt from the actual vendor that did the work. The difference is that will say ABC Air Conditioning Repair, or John Doe Plumbing, or Joe’s Painting Service, rather than ABC Property Management. That’s what it’s going to say on this document, on this quote form or on this receipt. It’s going to have their address and it’s going to have the phone number of the person or company actually performing the work. It’s not going to be a document the property manager creates, and there is a difference, so understand that.

Set some business rules for yourself, and if the repair is over maybe $250, you want to see two quotes, possibly. You set your own numbers, I’m not setting the numbers for you. I’m just giving you the idea. Maybe if it’s over $500 or $600, you want to see 3 quotes before approving the work. You might not want to be bothered or bother your property manager with all this, depending on how the relationship has gone. Your business rule might be ‘Look, if it’s under $1000, 2 quotes is fine. If it’s over $1000, then I need 3 quotes”, so you decide on this, but just be reasonable. Use your experience and your common sense as a guide and get quotes before the work is done. On the discretionary items, tighten it up to an amount per month, not per incident. A lot of these property management agreements in the standard form, it says ‘per occurrence’ or ‘per incident’. I want it to be ‘per month’, so you can control your expenses and your budget. That’s your tip for the day on property management.

Let’s get to our guest today, Ellen Brown. We’ve got a bunch of great show coming up after this, by the way. I hope you like our Monday, Wednesday, Friday publishing schedule – we’ve been putting out a lot of shows, and I hope you’re keeping up with them. One more thing – we did have that iTunes problem with our feed a couple of weeks ago, so you may have missed up to 6 episodes. Make sure you go back and find those. Bill Bonner’s in there, there are some really great episodes in there. Just make sure you go back and listen to those if you missed them when we had our technical problems in the first part of October. Here’s our guest, Ellen Brown.

It’s my pleasure to welcome Ellen Brown back to the show. She is President of the Public Banking Institute and Third Millennium Press. She’s a candidate for California Treasure with the Green Party and author of The Public Bank Solution: From Austerity to Prosperity. Ellen, welcome back, how are you?

Ellen Brown:
Thanks Jason, I’m fine. I have to correct you on the candidacy, actually. We had that primary, and it was a top two primary here in California, so of all offices, only the Democrat and Republican will get to the top.

Jason:
Typical.

Ellen:
But I did get more votes than any other third party candidate for any office.

Jason:
Well that’s awesome, that’s good to hear. The two party system is something we could spend a day talking about, it’s such a scam.

Ellen:
I know.

Jason:
It’s obvious that the whole system is rigged in so many ways, but let’s talk about banking. When it came to Ron Paul and Ralph Nader over the years, we’ve seen in so many times and it’s disgusting. Let’s talk about public banks. First of all, if you would, Ellen, tell us what a public bank is and what North Dakota does that’s interesting, how we can adopt this and why we should for other states.

Ellen:
In the US, we have only one state-owned bank, and that is the bank of North Dakota. Globally, however, 40% of banks are publicly owned. They’re largely in BRIC countries – Brazil, Russia, India and China – which all escaped the credit crisis at least for the first few years, though now they’re getting dragged down like everybody else. North Dakota is the only US state that escaped the credit crisis, having a budget surplus every year since 2008. They have the lowest unemployment rate in the country, the lowest default rate on credit card debt, one of the lowest foreclosure rates and they’re doing really well on many parameters. I saw one study that said something like they had the best quality of life, which is hard to believe considering the weather.

Jason:
Yeah, it is. Before you move on, just about North Dakota, I have to be a little skeptical with you on that because certainly that’s all great, but North Dakota does have oil. Also, probably nobody moves to North Dakota, unless they’re moving for a job, so that would help with unemployment, right? How would you address that?

Ellen:
That’s a good point. The oil boom did not really hit until 2010 and in the Spring of 2009, there were already collapses in the Spring of 2008. By the Spring of 2009, every other state but North Dakota had gone in the red, so that’s one thing. I think it was as late as early 2010 and there was a little routine on why North Dakota was rolling in it when everybody else was bankrupt, and they couldn’t figure it out. In the little routine, they said it was because they were hijacking tourists, which of course, they obviously weren’t. At that point, oil was still not a significant factor, so that came later. There are other states that do have oil but they don’t have the same unemployment rate and they didn’t escape the credit crisis etc. I agree, and that’s the reason I wrote my second book on banking, which is The Public Bank Solution, in order to look at public banking models both globally and historically, and I was actually shocked to find that there were so many. You don’t learn that at school – who knew? I’ve forgotten the percentage, but a majority of commercial banks are publicly owned in countries like Germany. The private banks just can’t compete with them; they’ve got the government backing, they give better loans, they’re safer for depositors.

Jason:
Let’s understand what a public bank is a little bit more. It’s owned by the government?

Ellen:
Yes, that’s what it means – publicly owned.

Jason:
A lot of people would just instantly object and say ‘Well, isn’t that socialism or communism or a dictatorship?’ What distinguishes this idea of a public bank from a central planning type economy?

Ellen:
First of all, you could look at North Dakota, which is an extremely Republican state, or Germany, or many countries with publicly owned banks which are definitely not socialist. In fact, my daughter lives in Switzerland, and they’re like Germany. You could either go to a public bank or a private bank and people don’t even think anything about it. There are a couple of banks which are out there and you can pick whichever you like. In Germany, for example, the publicly owned banks tend to be the local community banks, and they have a mandate to serve the community.

I was just at a conference in Santa Fe and there was a man there from Germany who was talking about the German public bank model and he said the public banks had just done brilliantly well until they got bigger and branched into markets with which they were unfamiliar. They actually do commercial zones, whereas the banks of North Dakota follow a different model. In Germany, they’re literally competing with the private banks and they have always been better than the private banks, except when they got into market that they weren’t familiar with, and it then turned out that there was risk. Their mandate is to serve their local community; they know these people and their community, they know your father and your grandfather, and they know you’re an honest, hard-working person and that you’re going to pay it back and so forth. They’ve just like local cooperatives, but they are owned by the local government, and the profits go back to the local government. That’s the main advantage. Plus, they can give loans to the local government, so you can cut out interest, which is 50% of the cost of public projects. For example, in California, the Bay Bride retrofit was supposed to be $6 billion but it turned out to be $12 billion by the time you add on interest. The bullet train was supposed to be $10 billion as just the initial outlay (it’s going to be a lot more now), but with interest, just that outlay is going to be $20 billion. You double the cost by having to pay interest.

If you are the bank or you own the bank, you get that interest back, and so it’s a huge thing for the local government.

Jason:
Well, okay, so pardon my skepticism here for a moment. We all look around and most people think that the government doesn’t do a very good job at running things. It’s kind of that tyranny of when it’s everybody’s money, it’s nobody’s money. I don’t like greedy bankster CEOs that I think operate in a government-sponsored monopoly on Wall Street. I think that’s disgusting and I don’t like the way it is now.

Ellen:
There are a lot of countries like Korea, Japan, China, which all have virtually major public banking sectors, if not total public banking sectors. They certainly know how to run their economies. They’re running circles around us in terms of growth and exports, I suppose. It’s pretty hard to catch up with.

Jason:
Yeah, that’s a Pandora’s Box because it’s so complex, but yeah, absolutely.

Ellen:
The advantage is that if the government owns the bank, it mandates or supports its local industry. That’s one of its functions: to support the export business against other countries. That’s compared to our banks, where their mandate is to make as much money as they can off of our businesses and off or our local governments. They’re sort of serving a parasitic function; they’re sucking profits out and they don’t turn that profit right around and give it back to the people. They put it in off-shore tax savings, they pay their wealthy CEOs – it’s always put into more money-making schemes, so it’s actually an unsustainable system where you’re always expecting to take more out than you put in. In the public banks, they actually use those profits to build roads and bridges and all the things that people need.

Jason:
I suppose you could argue that with any type of business with ideas to make a profit and to take that out of the system, but in order to do that, you’ve got to get customers to come to you. The idea is that they won’t come unless you’re providing a decent value.

Ellen:
In North Dakota, that particular model is that virtually their sole customer is the state itself. They set it up in 1919 when the farmers were losing their farms to the Wall Street bankers. It was basically a Rockefeller bank, which was connected to the Rockefeller railroad, which was connected to the granary and that was all a cartel, which was closing on their homes. The grain that they were trying to sell was perfectly good grain, but of course they needed the railroads to export the grain out of the state so they decided they wanted to keep their money in the state and use it for their own purposes. That’s what the whole model is. Instead of giving away our deposits virtually for free and letting Wall Street gamble with them in all these risky ways – and we’re now seeing how risky it is, having our money in Wall Street –

Jason:
You won’t get any disagreement from me on that!

Ellen:
As opposed to the local community banks. None of them are saints. Nobody’s a saint in the whole system, but they’ve been allowed to get away or they’ve lifted the rules so they can get away with all these things. In North Dakota they say they’re not saints, they just do certain things – and the same happens in Germany. That’s what the German expert who came to our seminar said – we’re not saints, he said, but that’s all we can do. We’re only allowed to serve our local community and so that’s what we do. That’s their mandate and if they don’t do it, they get fired.

Jason:
You keep mentioning ‘local’. Is ‘local’ the issue? Certainly, credit unions are a pretty good model, I think. I’ve always found that credit unions offer better deals than the big, institutional banksters. Credit unions are usually locally-orientated – not always, I guess, but they seem to be a lot of the time. Is that the answer? Distinguish maybe a credit union and a public bank. Let’s talk about that.

Ellen:
A credit union is an excellent thing for individual depositors, but we’re talking about where the state or the city is the depositor, which is a huge amount of revenue. In California there’s something like $600 billion in rainy day funds all around the state. There’s $60 billion for California sitting in the Treasurer’s investment pool, currently earning 0.23%, earning almost nothing. Who’s making money off that money? Wall Street. That money is going into Wall Street, and then they are doing all these elaborate and very risky things with it. When they collapse, we’re going to have to bail them out again, or they will bail in our deposits like in Cyprus and we won’t see any of that again. That’s the whole idea – there’s no reason why in this modern age, we can’t be doing our own banking and leveraging those funds for our own purposes, expending credit into the community. In North Dakota, the model is that the Bank of North Dakota partners with those local banks, so that the local bankers are sort of like the front office that goes out and deals with the customer, finds the goods, loans and so forth, and then the Bank of North Dakota allows them to make much larger loans than a local bank could make. Credit unions are very circumscribed in what kinds of loans they can make and what kind of business they can give.

Jason:
Right.

Ellen:
If you’ve got the Bank of North Dakota behind you, you are almost a big bank. You can compete with the Wall Street banks, so there are now more banks per capita in North Dakota than in any other state, and the Wall Street banks are actually losing market shares, whereas in every other state, they are just gobbling up the small banks and gaining market shares.

Jason:
Here’s one reason I think that’s really important. I’m sure you’re familiar with Catherine Austin Fitts, and I had her on the show.

Ellen:
Yeah, she’s great.

Jason:
I’m a fan of hers too, and I had her on the show and she explained a story which you’ve probably heard, Ellen, and that is how she was sitting in a luncheon with a few different ladies, and one was talking about where she invests money, and another was talking about her credit card statement, and another was talking about where she borrows money, and it was interesting that at that table, they could have all done business with each other and had basically the same result, yet they’re sending it to Wall Street to take a giant handling fee off the top to relend this money, invest this money and so forth. This is really a matter of disintermediation in a way, isn’t it?

Ellen:
Yeah. It’s just taking it to the public level. In other words, it’s taking it to the state and local governments, rather than the citizens individually. The state and local government should be doing all that and cutting out the middle man – we’ve seen that the middle man has done very bad service for state and local governments. They’ve lost huge amounts of money in interest rates, they’ve lost huge amounts of money on all kinds of riggings that have gone on.

Jason:
Yeah, all kinds of ‘financial innovation’. Whenever you hear that, run for the hills, you’re in trouble. Ellen, let’s take this to the bigger level, if possible. I don’t know if it applies or if it’s a different conversation, but I originally became familiar with your book Web of Debt and some of your earlier work where you talked about central banking and so forth. I found that work to be fascinating, and that’s why I had you on the show before a long time ago. What should be done about the central banking cartel? Could that be a big public bank?

Ellen:
It could, and that’s what it should be, I would say. I loved writing Web of Debt and it was so interesting for me to research. As everyone knows, Wall Street owns Congress, and so they’re kind of dead-locked and there’s not much you can do at the Federal level, but yes, ideally. There are a number of models historically, starting with the Commonwealth Bank of Australia. It was a totally publicly-owned Central Bank – before that, of course, we had the Bank of England and other privately owned Central Banks. In the 1890s there had been this great crash and the Australian government decided that the bankers had failed them and they needed to take over that business as a public utility. The man that they put in charge made the bankers a bit alarmed because this was going to be competition for them. The powers made sure that a real banker got put in charge and he knew how banking worked. The bankers came to him and said he’d need to borrow for the start-up capital, but he said ‘No, we’re not going to do that, we’re just going to issue the credit’, so that’s what they did. They just issued credit for everything in sight. Look at the Federal Reserve now – it’s so blatant what they’re doing. It used to be more discrete when they called them open-market operations, but now they’re just saying ‘Okay, we just created $1 trillion and nobody bats an eyelash.’ That’s what banks do. They create virtually our whole circulating money supply. It’s our money supply and we’re the ones backing it, it’s our IOUs, so we, the people, should be getting the benefit of that. That’s what they did. They funded roadways, seaways, all that stuff, and there was Australia’s participation in World War One, and that governor – Denison Miller, I think his name was – made the mistake of going to the city of London and boasting that anything Australian people wanted they could have. He said it was all just a matter of issuing credit, and that quite alarmed the Bank of England because making them all borrow from the Bank of England was their last form of control over their former colonies. He died suddenly of a heart attack after that, and then they set up this new Central Bank system where at the head would be the Bank of England, and under them would be all these Central Banks which would be basically privately owned and would print and lend the money to the government.

Jason:
Here’s the thing – Central Banks all have a way of just destroying the wealth of everybody who is trading in their currency and they just quietly, slowly steal everybody’s wealth through inflation. People are playing the same game the Central Banks are playing, which means they’re controlling real assets with long-term, low, cheap, fixed-rate debt. They’re going to get burned. They’re going to just see their wealth evaporate. It’s an amazing thing, and this money is all created out of debt.

Ellen:
Well, actually that’s what money is. All money is debt. It’s all IOUs. When you go to the bank and you buy your groceries, you could write an IOU and say ‘I’ll pay you on Friday’, but the grocer’s not going to take it because he doesn’t know me and he doesn’t know if I’m going to get paid on Friday like I said I would, or if I’m even going to come back. If you go to a bank, they basically guarantee your IOU – you get a loan from a bank and they’ll figure out who you are and how you’re going to pay it back and the little IOUs they give you are exchangeable. It doesn’t matter whether you pay it back, the grocer could still spend it. That’s really what all our money is. If you go back to Colonial script, they didn’t have silver and gold and they needed to pay their soldiers and so forth so they figured out they could pay with these little IOUs, which supposedly were an advance against taxes. Really, it was the people who were the government and since it was their government and their roads and bridges, they would just take an advance.

Jason:
Yeah, so my question is: Do we even need that though? I agree with you that it would be better. Listen, I’m not a government guy. You seem like you’re a little more willing and tolerant of government, but I don’t like government, generally speaking. We’ve got to have a little bit of it, but let’s keep it at a minimum in my eyes. However, I do think that it would be better for the Central Banking to be in the hands of the government than a pseudo-governmental private organization where no-one really understands who owns it exactly. The real question is: Do we ever need a Central Bank at all? Does there even need to be a public bank? Can’t we just have the economy run without one, or is it just necessary in a modern, highly complex society to have Central Banks.

Ellen:
You could totally restructure our current system and get rid of Central Banks, but how are you going to pull that off? It seems that we have to work with the hand we are dealt so like you say, the best thing would be to take it and first turn it into something that we have a little bit of control over. I agree there are governments and there are governments. The first thing we want to do is make our government actually represent the people, which it doesn’t at the moment. We, collectively, are all going to make different decisions, and if you do it individually, someone has to make the decision. I would be for a bottom-up government, where you elect somebody that you know personally, like in your neighborhood, and then they move up to the next level and they elect somebody they know personally. Everybody in the world knows twenty people who they think would be a better government official than the ones that we have to deal with. There are so many qualified people in the world – how is it that we get the people that we get? There’s something wrong with our system. You could envision a system, like the Indians, who had real, venerable leaders who were actually wise or old men who knew what they were doing and were acting on behalf of the people.

Jason:
That just goes to show that the system is rigged, and that’s why we don’t get good people.

Ellen:
I would say that is partly because of our banking system. They’ve got the power to create money and that’s where they get their initial power. If we could get their power back, we might be able to un-rig it.

Jason:
Tell us about that. That’s interesting what you’re saying. What, you think they could finance their campaigns better or finance their businesses better, and that’s how they grow into holding public office? Do they usually have successful businesses? What do you mean when you say that?

Ellen:
At one time – I just heard this from a lecturer – it used to be that in the 40s and 50s, the top tax bracket was 91%, and at that time, everybody thought the 50s and 60s (when I was little) was when life was good. Everybody had a job and you could support your family on one income and education was really cheap. I went to the University of California, Berkeley for free, tuition was free in the 60s. Now, you’re probably not into taxes..

Jason:
Oh, sure I am. I’m into them, trust me.

Ellen:
I think you could fund it through your banking system and you wouldn’t need taxes at all; that’s what they did in Pennsylvania in Colonial times, but anyway, given that at the moment the only way you can fund the government is through taxes, the top tax rate dropped way down. Somehow, the very rich managed to change the system so that they’re in control. Somehow, the fact that they’ve got all this money and now it means that the banks can gamble with our money, etc. How did they get all those rules eliminated? They basically bought Congress. How did they do that? With money. They have the power to generate as much money as they want because they can borrow against our deposits. Our deposits are sitting there and they become excess reserves. They use those to buy treasuries and then they use the treasuries as collateral in the repo market. They get loans for themselves to buy stocks in commodities and ports that people really shouldn’t be owning. It doesn’t seem proper that a bank could own a port.

Jason:
Why are the banks in all of these businesses? Shouldn’t they be in the banking business?

Ellen:
Exactly. Why did we relax the rules so that they could do all that? They control the regulators because they’ve got the money to buy them off.

Jason:
Yeah. That’s unfortunate. I always think if we just eliminated the lobbyists, in a few years the country would just heal a lot and become a much better country, but many people disagree with me. Especially the lobbyists and especially the politicians who get the perks from the lobbyists! It’s amazing that still happens in today’s age. It’s just unbelievable and ridiculous. Yes, Wall Street does own Congress, they run the government. It doesn’t matter if it’s Democrat or Republican, they run the government and they bought them off and they have all these regulations to preserve their virtual or semi-monopolies. It’s just really unfortunate. I do hold out some hope that the crowd-funding revolution might put a dent in that a bit. It seems like now, businesses might be able to be funded and real estate deals can be funded without Wall Street and without going that way. You can go to the crowd directly in a peer-to-peer sort of system. Do you have any thoughts about crowd-funding? I think that’s a bit of a game-changer, ultimately.

Ellen:
There certainly are all sorts of new possibilities popping up. Everybody knows there’s something wrong with our current system which wasn’t true before. Just since these last two collapses in 1997-1998 and 2008, people have gotten more and more suspicious of our existing financial structure and there are all sorts of experiments going on. I don’t know that crowd-funding as it exists right now would do it. It’s just like moving your money; it was a good idea but did it really dent Wall Street? Not really. They didn’t even bat an eyelash as we moved our deposits away. It does show the possibilities and even with bitcoin, it just shows the possibility that you could have a whole monetary system without these things, so watch out. When we get the right model, we’ll just move into it and we can just ignore them. We don’t have to bring them down, we can just choose the better mousetrap.

Jason:
We can take our business elsewhere, if you will. We’ll see. It’s in the early stages for all of this stuff. Since you did mention bitcoin, Ellen, before you go, what are your thoughts on bitcoin?

Ellen:
There’s two ways to look at it. As an investment, I’m a little afraid because it’s sort of my investment history to jump in right at the top and then see how it goes, but it’s so volatile. It’s an interesting thing to watch. I don’t own any, for that reason. I don’t even have time to watch my investments so I’m not the person to ask for what to invest in. Just as a model, it’s very interesting to see how far they’ve gone with something that’s totally independent of the banking system.

Jason:
I would love nothing more than to be wrong about what I’m about to say. Unfortunately, I just don’t think bitcoin or any alternative currency is really going to make it in any significant way without the support of the powers that be. I just think they’re going to find a way to manipulate it or squash it. They basically do that to gold. They’re manipulating the heck out of the metals. They just won’t let that become an alternate currency, unless the government and the Central Banking’s unholy alliance has a hand in it and gets to exert control over the populous and gets to steal and extract wealth that way. Good luck! They’re just way too powerful. So you agree with me on that?

Ellen:
I do. It’s just interesting to watch. If you’ve got in early, that would be great; there are plenty of bubbles where you’d be glad to get in early, but in hindsight, I don’t know that now is the time.

Jason:
Well, I heard tulips were hot at one point!

Ellen:
Exactly.

Jason:
Good stuff. Ellen, give out your website and tell people where they can find out more about your work and your latest book.

Ellen:
My blog is www.EllenBrown.com, and I have over 200 articles on it. I’ve actually published 12 books, but my banking books are Web of Debt and The Public Bank Solution, and they’re both available on Amazon, and the Public Banking Institute Website is www.PublicBankingInstitute.org

Jason:
Excellent. Ellen Brown, thank you for joining us.

Ellen:
Thanks, Jason.

Outro A:
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be.

Outro B:
Really? Well how is that possible at all?

Outro A:
Simple, Wall Street believes that real estate investors are dangerous to their schemes because the dirty truth about income property is that it actually works in real life.

Outro B:
I know. How many people do you know, not including insiders, who created wealth with stocks, bonds and mutual funds? Those options are for people who only want to pretend they’re getting ahead.

Outro A:
Stocks and other non-direct traded assets are a losing game for most people. The typical scenario is you make a little, you lose a little, and spin your wheels for decades.

Outro B:
That’s because the corporate crooks running the stock and bond investing game will always see to it that they win. This means, unless you’re one of them, you will not win.

Outro A:
And, unluckily for Wall Street, Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.

Outro B:
Yup, and that’s why Jason offers a one-book set on Creating Wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.

Outro A:
We can pick local markets untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely.

Outro B:
I like how it teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government.

Outro A:
And this set of advanced strategies for wealth creation is being offered for only $197.

Outro B:
To get your Creating Wealth Encyclopaedia Book One, complete with over 20 hours of audio, go to www.jasonhartman.com/store.

Outro A:
If you want to be able to sit back and collect cheques every month, just like a banker, Jason’s Creating Wealth Encyclopaedia series is for you.

Outro:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

Episode: CW 435: Central Banks vs Public Banks with Ellen Brown Author of ‘The Public Bank Solution’ & ‘Web of Debt’

Guest: Ellen Brown

iTunes: Stream Episode

Comments are closed.