10 Nov 2012

Ellen Brown : It's the Interest, Stupid!

Ellen Brown, the author of "The Web of Debt" (which is probably N° 1 on my list of must read books!), has just posted another very good piece called "It's the Interest, Stupid! Why Bankers Rule the World".

She takes some figures from the 2012 edition of Margrit Kennedy's book "Occupy Money", which came out last week, and which show that "a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our GDP."

It's a stunning revelation. People naturally think that if they pay their credit card bills on time, and keep out of debt, that they are avoiding interest charges. But it's not true. The reason is that virtually everything you buy includes hidden costs for interest charges. That's because the farmer who produces the milk is nearly always in debt to the bank, and paying interest. And so is the transport company that takes the milk to the bottling plant. And so is the company doing the bottling. And the shop that sells the milk. At every step on the way, the banking system is taking a major slice of the pie. And that is because of the insane way in which the banking system has been given an effective monopoly on creating the money in the system.

Margrit Kennedy's numbers actually come from the work by Helmut Creutz, author of "The Money Syndrome" and she cites interest charges that range from 12% for garbage collection, to 38% for driking water and 77% for rent in public housing in Germany.

But it is clear that the situation is the same everywhere. And it is particularly obvious in the case of government debt - where the interest charges are costing taxpayers vast sums every year. For example, the interest payments on US Government debt since 1988 total $8.58 trillion - more than half the entire national debt. And in Europe, the interest payments on government debt for the 27 European Union countries since 1995 total €5.6 trillion - again more than half the total government debt. 

Just imagine what would happen if the money supply was created debt free, rather than being created by the commercial banks. Given the figures, it is clear that once the interest charges have been  worked out of the system, we can expect a 35-40% drop in the cost of everything. The economy would be liberated. People would get the just rewards for their work. And we would not have to accept the obscene situation where 1% of the population have been creaming off all the rewards.

It is now clear why this situation exists. It is because the entire financial system has been rigged. It is high time that citizens took the initiative to fix the system for good.


  1. The idea that US national debt costs US citizens vast sums is nonsense, and for the simple reason that the REAL INTEREST RATE (i.e. inflation adjusted rate) is around zero. That is, the yield on US debt is around 2%, while inflation is around 2%. Indeed in the UK for the last two years or so inflation has actually been ABOVE the yield. I.e. the UK has made a profit out of its creditors. Same goes for Germany.

  2. Ralph,

    Take a look at the US Treasury figures on Interest Payments http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

    Add the figures since 1988. You get $8.58 trillion - half the total government deficit. If the US government had created the money debt free, like Abraham Lincoln, instead of allowing a consortium of private banks (i.e. the Federal Reserve) to create the money, lend it to the US government, and charge interest, then the US national debt would be half what it is.

    I don't care whether the interest rates offered by the FED are below inflation. It is still a complete racket. Since the FED (and the banks) create the money supply out of thin air, it is no big deal for them to charge a super friendly interest rate below inflation. They would still have "made" $8.58 trillion even if the interest rates are below inflation, because they didn't have to borrow the money they lent from savers.


  3. I’m all for the Abraham Lincoln / Irving Fisher “full reserve banking” idea. However, I’m not sure that the Fed being a technically private institution is of much relevance because the Fed remits all profits to the US Treasury at the end of the year.

    If the private banks with a stake in the Fed get anything more out of it than reasonable claims for expenses and a salary for private bank staff involved in doing something at the Fed, then that should be cut. That would be the same as the Goldman Sachs fellow who is currently on the Bank of England Monetary Policy Committee: I assume he gets nothing other than a salary plus expanses.

    The question as to who owns a central bank is a difficult one: the title deeds of the Bank of England are actually in the ownership of the British Treasury. Now you could argue that that’s a problem in that the BoE is supposed to be independent of the treasury. In short, I suggest the question as to who owns a central bank is immaterial: the important question is the rules under which it operates.