QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street

QE Is a Sham

Richard Werner (economics professor at University of Southampton) is the inventor of quantitative easing (QE).

Werner previously said that QE has failed to help the economy. (Former long-time Fed chair Alan Greenspan agreesNumerous academic studies confirm this. And see this.)

But Werner is now taking off the gloves …

He said recently:

  • It’s easy for central banks to take steps which would quickly create “full-blown recovery” for the economy
  • But the central bankers are instead choosing to act in a way which creates massive profits for the big banks, instead of stabilizing the economy. Werner blames the revolving door between central bankers and private bankers
  • The central banks have twisted the whole concept of easing … pretending that they’re trying to help the economy, when they’re doing something else entirely
  • Credit should be extended to the productive economy – businesses which create goods and services – and not to financial speculators or high levels of consumer debt.  Extending credit to small businesses former creates prosperity; lending to financial speculators only leads to economic instability and soaring inequality; and when too high a percentage of lending goes to luxury consumer consumption, it’s bad for the economy
  • Banks create money and credit out of thin air when they make loans (background)
  • It’s a myth that interest rates drive the level of economic activity. The data shows that rates lag the economy

Indeed, economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.

A high-level Federal Reserve official says QE is “the greatest backdoor Wall Street bailout of all time”. And the “Godfather” of Japan’s monetary policy admits that it “is a Ponzi game”.

And – as counter-intuitive as it sounds – QE actually hurts the economy and leads to deflation in the long-run.

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  • Big Bear

    Surely in America THE central element of this problem is the “central bank,” the Federal Reserve, which is privately owned and privately controlled and operated for profit. The “public” element in the central board is completely captive to the private financial sector, as a review of appointees shows, and the vast bulk of the funds are held and controlled by the NYC “branch,” which operates exactly as pleases the private financial sector. Public banking is the obvious solution, as thinking people have been saying for a century and more — Louis Brandeis in 1913, for example.

    • TimeToWakeUpAmerica

      If I am not mistaken, North Dakota is the sole State in the Union, with a public bank, and, oddly enough, a fiscal SURPLUS. Go figure.

      • jadan

        The Bank of North Dakota is not a public bank. It is a banker’s bank, like a “mini Fed”, that backstops private banks, “participating” in their loans, essentially guaranteeing their profitability. This bank is capitalized with public revenues and assets. The BND does not compete with private bankers, it supports them. The BND’s “fiscal surplus” depends on the fracking activity in the state. With the collapse of oil prices, the BND’s investments are not looking so hot. And you know what happens when these private banks that are loaning to frackers go bust? Public money bails them out! Sound familiar? This is America’s only “public” bank. It’s just the sort of thing John Boehner and Mitch McConnell would dream up. In this hyper-conservative state, this is about as close to public interest you’re going to get.

        • Big Bear

          It sounds like we agree that credit is a public utility that needs to be publicly owned and operated in the public interest, the interest of the commonwealth, rather than the interest of the predatory 1% that owns and operates the present privately owned so-called “Federal” Reserve System in its own interest and to the despoiling and wreckage of the commonwealth. Certainly the Bank of North Dakota is closer than the Fed to this goal, but I’m sure you’re right it’s not perfect — nor could it be as long as it’s operating in a larger situation that is organized, controlled and operated by the private interests that own and control the Fed and the American financial system at large. And it sounds like we agree that this is the core of the problem that needs to be addressed by total alteration.

          • jadan

            You speak truth, Bear who is Big, but I doubt that the BND better serves the public interest than the Fed. I doubt that it is substantially different than the Fed. The Fed rebates some profits from operations to the Treasury. The BND does the same. The Fed serves all private member banks, regulating their activities, providing loans and so on. Private banks that enter into relationship with the BND are subject to certain rules and oversight, no doubt. The public does not do its banking business with the Fed, nor does the BND engage in retail banking. The BND is a member of the Minneapolis Fed system, so it can avail itself of Fed services. As the Fed is not transparent, so the BND’s relationships with private banks are not transparent. Like the Fed, the BND exists to support the private banking cartel in North Dakota. It keeps ND money in the state under the control of ND bankers. So what are ND bankers doing with the support and backstopping of their “public” bank? What is the most profitable part of the ND economy? Fracking and the booming fracking economy.. If this is not the “despoiling and wreckage of the commonwealth”, I don’t know what is.Did the people of ND vote that this is how they want their money to be used? Do the people of that shivering fetus worshiping Republican backwater even know that their taxes and public property are all being used to backstop the private banking system in their state? How then does this BND monstrosity call itself a “public bank”? Ellen Brown and her Public Banking Institute will rue the day they tried to sell the BND as a model of public banking to be immitated.

          • jadan

            Just a note on despoliation of the commonwealth: another train of crude oil going up in black smoke, originating from North Dakota. Seems like this happens on e a week!

          • Big Bear

            OK, so that’s your criticism of the BND. But staying focused on the negative just preserves the status quo. You say you favor public ownership of credit so, what proposal to establish it do you favor, and in what form, and how? I like the idea of Congress minting a trillion dollar coin and buying out the plutocracy. Then we can start spending public credit on putting our half-ruined country back to rights, instead of paying usury and profit tolls to the 0.01%, the one in ten thousand, the 16,000 families who have, by criminal means such as financial fraud and corruption of government, made themselves and kept themselves the hereditary rulers of our country.

          • jadan

            I like the American Monetary Act as a basis for real monetary reform. Dennis Kucinich proposed HR2990, co-sponsor, John Conyers, in the last congress, which is based on the American Monetary Act. HR 2990, the NEED Act (National Emergency Employment Defense Act) would completely change the system if enacted. I am focused on solutions. We may want to change the system, but we need to agree on what is reform and what isn’t. Ellen Brown is not talking genuine reform. She is a supporter of the Fed.

          • Big Bear

            Can you briefly explain the American Monetary Act for us?

          • jadan

            Briefly, the American Monetary Act and HR 2990, are models of monetary reform that would remove the money power from private hands and return it to the people’s government per the Constitution so that the government would no longer have to fund itself with borrowed money. In other words, these proposals would eliminate debt money and free the nation from the “web of debt” that currently ensnares us all. The private banking system would no longer create and control the money supply. This would be accomplished through the US Treasury. At http://monetary.org you will find any questions answered. HR 2990 is legislation, so this bill is a practical demonstration of what monetary reform means in terms of institutional changes. Change is possible and monetary reform is revolutionary change….anything less is a cop out……

          • Big Bear

            Thank you Jadan. I agree this looks like a solid proposal. The two questions that arise — which are really one — is, how to get it passed and how to keep the resulting system from being operated by the same hereditary fraudsters who have usurped our government at large. The ideas informing this bill have been around since before the creation of the Federal Reserve. Longterm California progressive congressman Jerry Voorhis proposed a similar solution in the late 30s — which is why Wall Street funded his defeat by Nixon (his first campaign). We need to figure out a way to bring the power of our votes to bear on the legislative process from outside the party system, which has succeeded in thwarting progressive legislation generally for over a hundred years, and before that a way to inform our fellow citizens face to face and one by one, so that money and organizations and leaders don’t step in between us and start the same old round of cooptation and corruption and diversion all over again, and focus our votes on electing legislators pledged to passage of specific policies, and monitor their performance and get rid of them if they fail to follow through — because our votes are the ONLY power that we have that cannot inevitably be controlled by the money power. How?

          • jadan

            That’s the question, Bear of large size. Look what happened to Kucinich! Got himself redistricted and out of a job, from hero to zero. Speaking for myself only, I like to know that there is another way, just for the consolation of knowing. Ellen Brown’s decision not to confront the Fed or the American Banker’s Association is a political calculation so far as I can tell. I want to get rid of debt money, nothing less. I want democracy, too. Whether this happens is not up to me. I enjoy thinking it through just the same. It is remarkable that Kucinich tried to put monetary reform on the agenda. There was never the expectation that it would make it to the floor for a vote. The Fed’s power seems absolute, but there is a problem with the Fed system. It doesn’t work! It failed dramatically in ’08 and the vast inequality we see is a glaring and painful reminder of its failure to manage the nation’s finances. It won’t evolve because the wealthy elite will never willingly relinquish power. The failure has to happen again until people are sufficiently traumatized to say: Enough is enough! That time will come. And those of us who understand the promise of monetary reform will be ready to speak when the people are ready to listen!

          • Big Bear

            Right, Kucinich was trying to work within the system — not meaning the Constitution but the entire “political” structure that has been built up around it to prevent exactly such initiatives as his. Moreover, it works great and has worked great for 120 years. We’re not the first Americans to confront these exact same problems and entertain these same ideas for solutions. In 1914 at least 20% of American adults were very well acquainted with this discussion — many times more than today. To actually make real changes we need to figure out a way to use the legislative and executive tools provided by the Constitution — a way that goes completely around the entire “political” system — not only the Two Parties, but Parties period — and around institutional controls on public discussion (media etc.etc.) — and around MONEY. The entire predatory economic system is based on financial and corporate law — mostly written by graduates of Harvard Law — and these laws can be replaced. What’s needed is a set of policies to initiate change — to create the American Dream to replace the American Fleece — , a program of specific legislation plainly and clearly conceived and presented that can win the assent of enough of our fellow citizens to enact them as laws. This has to be done by direct citizen action — working ‘through the system’ always fails because the system is designed to make it fail — and does, over and over and over, as we can learn by reading history (which means first recovering it from where it has been hidden by that same system). Direct citizen action needs a “platform” not for a Party but for specific action, and not just one “plank” — e.g. public banking — but eight or ten that thinking adults can assent to — single-payer health care — publicly bank funded zero-interest home-purchase and renovation and mandatory renter buy-outs — publicly owned public utilities — a 20-hour work week. For example. Ten thinking adults in face to face discussion could readily add another four or five. We need to learn to talk to each other one by one and face to face, as adults. That is, we need to actually trust democracy. If we can’t persuade enough of our fellow citizens to genuine legislative — which in reality means about 10% of us — then we’re not doing it right. And the history of the last 100 years of America prove that we’re not doing it right. Because here we are. One definition of insanity is doing the same thing over and over and expecting different results. But our problem isn’t insanity, it’s induced amnesia.

          • jadan

            Thanks for your heartfelt perspective. Above all, democracy is the cure for what ails us. I don’t believe we can create the Populist agenda you’ve got in mind unless we can fix the voting apparatus. It’s a black box system right now. People do not vote because they have no confidence their votes count. If we had a direct election of our leaders by means of a hack proof system in which each voter can confirm that his or her vote did get counted, turnout would be much larger and the results of elections would reflect genuine public opinion. George Bush would never have been elected. We need to use computer technology to make voting easy, hack-proof, and accountable to each voter. This would accomplish what you want to do, go completely around the rigged political party system that is designed to prevent choice and provide the electorate with a done deal before the election ever happens. Direct elections via a hack proof system would dramatically change the political landscape in one election cycle.

          • Big Bear

            Absolutely there are problems with the contemporary administration of voting. So that has to be among the first items on the action list. But the action first requires actors who understand the act. For this, see again what I wrote above.

            Also, it’s crucial that we learn from our mistakes and trouble-shoot our plans and processes, but if we just stop at pointing out the problems and the difficulties and go no further we’re defeating ourselves. Before we can address the problem of the vote we have to have the means to do it — voters paying attention one by one in concert. And that means informed engaged adults, one by one. We have to start from scratch. And we have to start smart. And we have to start.

      • Guest

        The Bank of England was nationalised (bought for public ownership) by the Labour Party for the princely sum of £7million in 1946.

        This means any profits or losses accrue to the government of the day. And Gordon Brown – clown – sold off 50% of our nation’s gold holdings at what would be the lowest point since 1977.

        Whose interests was HE serving?

    • jadan

      There’s “public” banking and there’s public banking. Ellen Brown is an advocate of the faux public banking which leaves control of the Federal Reserve in private hands. The American Monetary Institute, AKA Stephan Zarlenga, the brains behind HR2990, the monetary reform legislation proposed by Dennis Kucinich in the last Congress, eliminates private control of the monetary system. No matter one’s opinion of government, if monetary policy were decided in the public interest rather than the interest of the investor class, there would be no austerity and blood sacrifice to bond holders and central bankers.

  • TimeToWakeUpAmerica

    “…But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street”

    Of course, if your two stated, primary goals are 1) to debt-enslave every nation, man, woman, and child on the entire planet, and 2) global depopulation, then, clearly, the objective is NOT to help Main Street.

  • steve

    If were to give a million to every tax payer an eliminate all social security economy would boom all loans repaid fresh start

    • If you gave a million to every taxpayer, nobody would go to work and we would all starve!

  • steve

    Or can go to work an create your own economy. http://moneymaps.biz

  • B. Miles Teg

    … financial imperialism was tolerated in the African, Latin American and Asian countries… now it comes home to roost… is it possible to be an empire and a republic? Madison, Paine would say not.

  • ME

    One thing, if you don’t like what the banks are doing take;
    MONEY out of banks into CREDIT UNIONS….
    http://en.wikipedia.org/wiki/Credit_union
    In part;
    Tension has always existed between member-owned cooperative credit unions and for-profit banks in the United States. When credit unions were first organizing in the US in the early 20th century, the banking industry was opposed, remaining so ever since.
    The FDIC does not provide deposit insurance for credit unions, which are insured by the National Credit Union Administration (NCUA).
    https://en.wikipedia.org/wiki/National_Credit_Union_Administration
    The National Credit Union Administration (NCUA) is the independent federal agency created by the U.S. Congress to regulate, charter, and supervise federal credit unions
    http://en.wikipedia.org/wiki/Credit_union
    A credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.[1][2][3]….
    Not-for-profit status
    In the credit union context, “not-for-profit” should not be confused with “non-profit” charities or similar organizations.[20] Credit unions are “not-for-profit” because they operate to serve their members rather than to maximize profits.[21][22][23]
    Another interesting thing;
    http://www.gemworld.com/US-TAXRepealed.html

    Internal Revenue Laws Were Repealed
    By Al Thompson
    althompsonca@cs.com
    December 11th, 2003
    Background
    When Congress passes laws, there is a very specific procedure that they follow. Laws are enacted by either a Bill or a Resolution that may originate in the House or the Senate. “A bill that has been agreed to in an identical form by both bodies becomes the law of the land only after: 1. Presidential approval; or 2. failure by the President to return it with objections to the House in which it originated within 10 days, (Sundays excepted) while Congress is in session; or 3. the overriding of a presidential veto by two-thirds vote in each House.”
    For a full explanation see
    http://thomas.loc.gov/home/lawsmade.bysec/formsofaction.html
    Once a bill or resolution is enacted it must be published. “One of the important steps in the enactment of a valid law is the requirement that it shall be made known to the people who are bound by it.” This makes sense, since the people must have a place to refer to, in order to find out what their obligations are, if any, to the Government.
    When the bills and resolutions are enacted, they are first published as a “slip law”, which means they are published in an “unbound pamphlet.”
    These slip laws become “competent evidence” in all federal and state courts, tribunals, and public offices.
    They then become published in the United States Statutes at Large, and these are “legal evidence” of the laws, and are accepted as proof of the laws in any court in the United States.
    For a full explanation see: http://Thomas.loc.gov/home/lawsmade.bysec/publication.html
    The statutes are then codified by the Law Revision Counsel of the House of Representatives. The codes become “prima facie” evidence of the law, and they stand as law, unless rebutted or challenged. However, the codes are not law, but simply prima facie (on its face) evidence of the law. This kind of evidence should be rebutted or challenged, especially when dealing with any alleged internal revenue code.
    However, when communicating with the Internal Revenue Service, literally thousands upon thousands of people have been asking the simple question, “Show me the law”, and have been stonewalled by that agency without any apparent recourse. People have been thrown in prison for violating a “law” that hasn’t been disclosed when
    demanded.
    Why does this happen? It would seem to be obvious, that the Government would put forth the law when requested. Why don’t they do it? I submit that the reason is these laws simply do not exist because they were repealed in 1939. Yes, that is correct, the internal revenue laws were repealed in that year.
    It Happened February 10th, 1939……

    • Guest

      And that means you live in a Fascist state (Nation)

  • jd

    Your article today in ZeroHedge http://www.zerohedge.com/news/2015-12-16/why-fed-wrong-about-interest-rates cites two economists that are the leading economic thinkers. These are Keen & Werner. They point out important things going on in the economy are two of three (EIR being my third one) sources I’ve found leading thinking today. Nice going.

    Keen points out the Private (yours and mine) debt. Werner (who invented the term QE) tries again to make clear that QE was supposed to go to the PRODUCTIVE SECTOR. (EIR has been saying this since the ’70’s.) Neither Japan or the US have followed the most obvious advice. Historically, Kennedy, FDR, Garfield, Lincoln, J.Q. Adams and WASHINGTON did follow such advice.

    And, of course, this is, after all WASHINGTON’S BLOG. If Helga LaRouche had also been quoted in this fine article I could suggest that this was Hamilton and Franklin’s Blog as well. Just sayin’. I don’t know why we all have to pretend EIR isn’t there…