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[Music] [Music] okay our crews going to come out and move the route of things around a little bit and get going are you enjoying the conference yeah alright and by the way in the midst of all the shouting and dancin I think literally it was good I think we've got some good arguments on both sides we want to hear that and I think if that lively discussion is particularly helpful right now and by the way speaking of that we're going to be talking about blockchain which is the core of all of this interesting that no matter what we say Oh think about Bitcoin or the crypto currencies we also hear others saying blockchain yeah it's going to be around still many of us feel blockchain and the currencies would be there but we see this going to be there well how is that point affect public banks public banks and blockchain is the subject of our next presentation Ellen Brown is here to talk to us about that ladies and gentlemen join me in welcoming Ellen Brown [Music] okay okay I guess I was just introduced I'm not sure what was that so my name is Ellie Brown and I'm gonna I'm chairman of the public banking Institute and I'm going to talk about public banking and blockchain how we can become our own bankers okay so we're living in revolutionary times not counting what's going on in Washington there's the IT revolution which we can now go online and figure out how to do all sorts of things ourselves basically becoming sovereign in we can become our own plumbers we can fix their own cars for some people can we can become our publishers I've actually written 12 books and three of them I published myself we can become around doctors our own lawyers and I'm gonna argue that we can become our own bankers that was actually the goal of Bitcoin independence from banks and governments and it did this through two revolutionary features or purported to do it it's not clear it's totally done it one is that it's a cryptocurrency I defined as a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds operating independently of essential bank so that's the critical feature in independent of banks and it's built on a blockchain which is a distributed ledger which is a ledger or something that keeps track of accounts which is online and it's distributed over many computers at once so the blockchain revolution allows us to have currency that is trustless meaning you eliminate the trusted allegedly trusted third-party middlemen notably Baker's it's borderless it can be traded across borders without government interference its keeps track of transactions in a way that is immutable meaning it can't be changed it's uncorruptible so you can't be rehoming duplicating rehypothecation fraudulently hiding things and it's fully transparent and it's anonymous so although it's transparent meaning you can track it from one place to another and anybody can anybody who's allowed to see it can see where it's where it's gone you still are you the user are anonymous so it's like cash like you can't tell who had the cash before you did but you know that the cash is good however Bitcoin can't yet or that particular model has it yet replaced banks and governments one reason is it's too slow and expensive for widespread commercial use and another reason is that banks actually or that financial sovereignty would actually mean allowing us to become our own Baker's what banks do for us is to allow us to turn our own IO user credit into money Bitcoin is currently only 2% of the US dollar money supply and it's only 0.2% of m2 which is the circulating money for the supply including all the digital money and yet it can take up to an hour for a transaction hmm and it can cost like $25 if you want to get in the front of the line so if you multiplied that up by 500 which is what you would have to do in order to create a currency that was good that was equivalent to the US dollar you would be standing in line for days to get your coffee but but the model itself is good or that the cryptographic technological developments has the potential of replacing banks and governments in our financial sessions so the reason that bitcoin is slow is that it's based on what I would call an obsolete economic model which is the gold model the idea that money is a is a thing that has to be kept scarce and it has to come into existence in a difficult expensive way and then it has to be tracked from like once it comes into existence then it's chocked from place to place to place and you have to keep track of all the money in the whole system in in this whole distributed ledger that would be universal but there is another way that money can come into existence and that's actually how many is created today and that is on the mutual credit model where money is just I owe use or debits and credits so we can see this most easily in the community currency model where in a digital community currency for example they the example they always use is say I baked cookies for Sam for five community credits so I've got a plus five and he's got a minus five and then he mows Joe's lawn and so now his his minus five zeros out and Joe has got a minus five and then Joe washes my car for five units and then all of our money zeros out so you had money that came into existence was there temporarily and when all the credits were extinguished it all went back to zero so in a if you were keeping track of that cryptographically you don't need you can ignore that particular transaction you only need to keep track of the digits that are outstanding so it has an unlimited supply there can be as much money as there are transactions in the system and they are created in response to the demand for credit and they're extinguished when they're paid off so it arises extinguish that naturally so you don't have to worry about inflation and in a in a mutual credit system you don't need this single distributed ledger that would that would cover all transactions you only need to cover those particular local transactions in your particular system and then whatever the the plusses and minuses that are outstanding would be matched to other systems so you have clearing systems at various levels and that's actually how banks work today and we have a number of cryptocurrencies and platform platforms protocols that are being developed that do actually track this sort of mutual credit system in a way that's very efficient very cheap and very fast one of them is ripple which is what banks are using today I think about 70 banks are on the ripple system which ripple is actually originally designed as a community for community currencies but the designer realized that you can't really get community currencies to talk to each other because they're based on trust within the local community and that just doesn't compute across or at least he thought so and so so he developed something that banks could use based on that model and they are using it there's hollow chain which does connect community currencies or they say they do I'm not it I'm not it I'm programming myself so I don't totally understand all these technical details and then there's Bank or which was it was a hundred and forty six million dollar ICO they came online in the spring that I don't really understand that either but they say that you can use it to value any currency that has any sort of market without a market maker so it's it's valued it's sort of it's an internal market maker so you can have a price you can sell it and buy it without having a counterparty so that would allow a variety of currencies to to each other trade across trade across the whole system but so in order to have true financial sovereignty we the people need to be able to create our own money and that is actually possible with these new cryptographic techniques as Hyman myths he said he was an economics professor he said anyone can create money the trick is to get it accept it so if you went to the grocer for example and you tried to pay with your IOU the grocer is not going to take it because he doesn't know you and he doesn't know whether you have the ability to pay doesn't know how to follow up but if you go to the bank the bank will take your IOU and that's because they will have you sign papers they'll figure out whether you can pay it back they know where to find you they then turn your money into a negotiable instrument which is simply bank credit but we recognize that bank credit as money and then they're willing to do it because they're going to charge some nice interest for it banks actually operate on the mutual credit model they don't operate on there most people think including bankers themselves that they take in money and lend it out again but that's not actually how banks work what they actually do is turn the credit of the borrower into money and this was acknowledged by the Bank of England in the spring of 2014 in their quarterly report in which they said banks do not act simply as intermediaries lending out deposits that savers placed with them commercial banks create money in the form of bank deposits by making new loans bank deposits in fact they said make up 97% of the money currently in circulation so basically they just write the money into your account without regard to what money they have on hand and then you can write checks on that account or use your debit card and the US money supply is Priya is about equivalent about 95% is created by banks it's actually 10% of the of the m2 money supply is actually paper money but half of it is held abroad so if you're only counting what circulates in within the US it's about ninety five percent is created by banks mm-hmm so they do it by double entry bookkeeping if you sign a mortgage you go to the bank and you sign a mortgage for $500,000 they will write that $500,000 in two on one side of their books as an asset to themselves because you're going to pay them that over time plus interest and then they'll write it as a liability to themselves because when you write your check to the seller if it the sellers in another Bank they will have to clear that check but they don't really have to come up with the money until that happens and that's only assuming they don't have the money coming in from somewhere else so you could arguably have like the bank next door could also have a $500,000 mortgage that they just created and then check finds its way into so Bank a receives the check for $500,000 and Bank B receives a check for $500,000 both created on the books of another Bank so all banks have money coming in and out all day and they only have to keep track at the end of the day so the books only have to balance at the end of the day and so if they're lucky they will have gotten as much NS went out and there's no problem but that five hundred thousand times - that was created on the books of the banks will have added a million dollars to em - because m2 includes checkbook money so if their books don't balance what they do is they borrow but they just borrow overnight and they borrow very cheaply so they can borrow from other banks that's what they used to do now they've started borrowing from the Federal Home Loan Banks because the Fed is paying interest on excess reserves or they can borrow from the money market and then of course they and then they give it back the next day and they do that over and over and over and childer until they no longer have deficit so what's wrong with this system it's actually a good system in in that we are turning our own credit into money the problem is the bank's the big four middlemen which legally they own the deposits they control where they go they can gamble with them they can lend to their cronies very cheaply and lent to us very expensively or they can refuse to lend it off and in fact it serves them not to create enough money to to satisfy the needs of the economy because that will force people to borrow to pay off their loans and it forces governments to borrow and then when they run out of assets or revenues then they have to sell their utilities and they sell them very cheaply and then private financier can buy them up plus we these are supposedly trusted third parties third-party intermediaries but we don't actually trust the banks because they have been caught in multiple frauds over just recently they've been caught in over a dozen felonies including interest rate rigging bid rigging on muni bond debt concealing risk from investors mortgage fraud and then the latest was Wells Fargo's creating 2 million in fake accounts so that's not really where we want our money or that's we it would be great if we could do that ourselves turn our own credit into money ourselves and I think we can another problem is the growth imperative when banks lend money at interest if they lend it over but to say it's a 30-year loan you will pay as much in interest as you pay in principle but the bank only created the in the principal so where is the interest going to come from somebody somewhere needs to borrow so it's it's an exponential curve debt always grows faster than they're really kind of me I know there's an argument to be made that because you only pay it back month after month that if the bank were to return the money to you in some way like if they were to hire you to scrub their floors then you could pay month after month the same money and pay off the debt but the problem is that first of all they don't hire their borrowers and most bank profits actually just go into more money making money schemes like more loans that would incur more interest or they go into offshore tax havens etc speculative investments so you have this whole speculative economy built on top of the productive economy the productive economy is supporting both of them so you have exponential growth in this in debt which is unsustainable and then the third problem with the current system is risk that we have we've seen bailouts in 2008 and now it's bail-ins where they actually legally are required if they're insolvent the biggest banks are required to take the money of their creditors and turn it into bank equity and the largest class of creditor of any bank is its depositors so they can actually confiscate our money and we particularly saw this risk with the 2008 collapse which cost us 9 million jobs 10 million foreclosures 19 trillion in lost in household wealth and local governments forced into privatization and it was actually in response to that crisis the Bitcoin was developed so we've seen this over and over for the last two centuries where booms and busts booms and busts and yet we continue to support these banks most businesses that routinely become insolvent wind up going out of business so why is it that Wall Street is still in control the answer was provided by Robert Hemphill credit manager the Federal Reserve Bank of Atlanta in 1934 during the Great Depression he said we are completely dependent on the commercial banks someone has to borrow every dollar we have in circulation cash or credit if the bank's create ample synthetic money we are prosperous if not we starve so how can we get that power back collectively we can get it back by actually owning the banks I mean I think we can get it back individually and I'll go into that but the first step would be to turn the banks into public utilities or at least some of them the original model for this was in Benjamin Franklin's colony of Pennsylvania during colonial times all the colonies issued their own money in the form of paper script which was it was supposedly advanced and advanced against taxes so they would issue the money and then pull it back issued and pull it back but it was a lot easier to issue the money than to pull it back at a time when you didn't have records of these French years when you it was hard to find them and to collect the taxes so a lot of the colonies wound up inflating their money supplies and the money supply devalued but in Pennsylvania the money supply held its value because they set up the system where they actually the government owned a bank it was a land bank and what they did was lend to farmers at 5% interest which was actually a better rate well they couldn't there weren't it's not like they had a bank
in every corner there weren't banks then but the Bank of England was charging 8% so 5% was a good rate then so what they could do hypothetically say they they printed up 105 dollars you could lend $100 at 5% interest to spend the five dollars on things that governments are expected to do so you'd have a hundred and five out there to pay principal and interest it would all come back as principal and interest you could lend the hundred all over again spend the five all over again it would all come back as principal and interest and you could do that over and over without inflating the system and they actually did do that there was no inflation caused by money printing there were certain products did because of scarcity they did not they did not pay taxes there was no government debt and well they paid an excise tax on liquor that was the only tax and there was no growth impairment imperative today we have one publicly owned bank that's the Bank of North Dakota publicly owned depository bank in California we have an infrastructure bank but it's not it's not a depository bank that actually create much creates money on its books as depository banks do so the Bank of North Dakota was established in 1919 when farmers were going through a depression and they were losing their farms to the big out-of-state banks and they decided they wanted to keep their money in the state for their own purposes so they formed a political party called the nonpartisan League managed to win an election set up this Bank and it's been going ever since and North Dakota is a very Republican state so this is not about socialism it was about state sovereignty keeping our money locally for our own purposes they had by mandate to serve the public and yet they're extremely profitable in fact according to The Wall Street Journal in the fall of 2014 the Bank of North Dakota is actually more profitable than Goldman Sachs and JP Morgan Chase and had a return on equity of eighteen point five percent which was about seventy percent higher than Goldman Sachs and JP Morgan so how did they do it according to that writer it was because of oil profits but right after that there was a an oil bust which significantly hurt the economies of all the oil states including North Dakota and yet the Bank of North Dakota has reported record profits every year so in 2016 they reported profits for 2015 of 7.4 bill or they sorry asked total assets of 7.4 billion and that in a state with six hundred and seventy thousand people so if you scaled that up to the size of California which is where I'm from you could have a three hundred and seventy billion dollar bank which it would be right up there with the big Wall Street banks um the reason they are so profitable it's not oil it's because of their business model which is very efficient by law all of the state's revenues are deposited in the bank and then those the that capital and deposits is used to generate credit for the purposes of the community they don't pay bonuses fees or commissions they have no high paid CEOs they have no private shareholders they don't advertise they don't need to because they have a captive deposit base and they don't actually for the most part they don't make loans directly they make loans through the local banks they don't compete with the local banks but partner with them so the local bank acts as the front office and that Bank of North Dakota is more like a banker's Bank that provides credit and liquidity and capital allowing them to make much larger loans than they could otherwise and with their savings they make low-interest loans for the community including 2% loans for infrastructure compared to like four or five percent in other states they make student loans that are two percent below what the federal government is making them at they make 1% loans for start-up farms and businesses which they want to support and they make low-interest loans for affordable housing so even with these low-interest loans because of the way banking works because they can leverage their capital by a factor of up to ten they still are a very profitable being so we now have 31 states that have introduced bills of one sort or another for state owned or publicly owned banks and also a number of municipalities but none of them has actually achieved that yet but it's not like the Bank of North Dakota is the only model globally I think in the 70s 50% of banks were publicly owned now it's down to 22% because of this big push for a privatization but still there are a lot there are a lot of models globally including in Germany where the spark has and banks have half the commercial market and are doing very well and support their local businesses but the one I want to talk about is India because they have gotten the closest to a system in which the people themselves can actually create their own credit on a cellphone turn their own credit into money so I know in his I'm quite controversial because of this new monetization thing they did but that was because I think 78 percent of their economy was then running on cash and so the effort was to get them all onto a digital system which many people said it wasn't necessary it was too fast it was destructive but not counting that and the rest of their system is really very impressive in fact they're far ahead of Silicon Valley and what they've done there they've been working on Financial Inclusion ever since 1955 when the State Bank of India was nationalized but before that in 1943 they achieved independence from the UK and they had this massive famine before that where I think it was a hundred and forty three million people died so they've got a very large very poor population that they have to service so they have the political will to do things that we don't have the political will to do partly because we've already got this big financial infrastructure that we would have to change so they just went right for the right for the jugular and did went right for a peer-to-peer cellphone type lending but the first stage in this in this development was that in 2010 at that bit in 20 before 2010 50 percent of the population did not have IDs and this was because they were born outside of hospitals they're very poor and so they couldn't get bank accounts they were borrowing like that sixty percent interest and payday lender rates so the first thing they did was to give everybody a bank account there's 1.2 billion people in India 1.1 billion now I'm sorry to give them ID IDs 1.1 billion they did this in five and a half years which was quite remarkable and the way they did it was with digital eye scans and fingerprints so everybody now can prove who they are and they've got all that data in their cell phone so and then this the second thing they did was to make bank accounts very easy to get and they encourage people to get bank accounts then they developed that something called the unified payment interface which actually bypasses banks and allows users to transfer money peer-to-peer like if you know somebody's phone number you can transfer money directly and it doesn't go through a bank I mean I assume it comes from I think it probably comes from the cell phone company and then you pay the bill at the end of the month but that the coup de Grasse the tour de force is something called India stock where they have put all your data into one stack I guess my son is I don't really understand these terms myself but a stack is where you stack up all this data so you've got your medical history you can have your what you own like real estate and truck real estate but you can also have your payment history in this India stack so it shows whether you paid your utility bills and so you can prove that you are a good credit risk and now they know who you are and where to find you so now it is actually possible for this I forget what they called this woman this and this is an example from their India stack website so here's this little sole practitioner you know one person business who previously was borrowing at 60% now she can take her cell phone and say I need a loan for five hundred dollars and that will go out to lenders surely banks but peer-to-peer lenders like anybody that wants to lend her money and they will give to say what the terms are on the cell phone and then she'll pick the best terms and in five minutes she'll have a loan so she is actually monetized her own she has actually turned her own loan into money but of course there is a third party involved I mean there's a bank or probably most likely it's the phone company that's how they do it in India I'm sorry in Africa with an peso where you pay the bill goes on your phone bill and then you pay at the end of the month so it's very like a credit card but so you could have a totally interest-free system instead of charging interest if you don't pay what you can do is just cut off the phone service and this would be such a big threat that of course everybody would do their best to pay but interest is also a good way to keep you from losing your credit so basically you have instant credit through your cell phone with all your data in there and your data is controlled by you so you can share it or not whether so you can choose to share it with these whichever lender you choose so arguably you could use these new systems blockchain and crypto cryptography or something like blockchain in order to do that on a cell phone without without borrowing the money from somewhere else now that we know that the way banks work is that they actually create the money and just they create the money in an account and they just lend it to you it could be created in the cloud in fact I think ideally it would be denominated in dollars because everybody trusts the dollar and many central banks including the Fed are looking into central bank digital currencies so if the central bank is the backer so it's basically the central bank has this unlimited deep pocket they can't go bankrupt and you are basically drawing from the central bank's deep pocket or from the cloud you're turning your own credit into money your bar or whoever you're you're the merchant whoever you're paying knows that you're good for the money because it will be tracked in your cell phone if you don't pay you'll be cut off from the system in which and you want to keep the system so of course you will pay so in effect we will be monetizing our own credit which is which would actually give us financial sovereignty which i think is all very exciting so I guess I have time for I'm not even sure what time it is but for questions or comments so if you want more information on public banking our website is public banking Institute that orgy or my books around Ellen Brown dot-com and these are my two in this subject I guess I I'm sorry I don't see a clock I guess they have more time but sorry I could talk a little bit about central bank digital currencies I know that's quite controversial but they're talking they're looking into blockchain and the reason they're looking at it is that they want to open up the the central bank already has a digital currency but it's only available to other banks it's where the reserves come from but the way they're talking about is opening that up to everybody so we could all have an account at the central bank and the advantage would be the central bank is a deep pocket you don't need Deposit Insurance the bank can't go bankrupt everybody probably would move or most people would move their accounts into the central bank because it's so much more secure you don't have to have this big repo market that's built on having a place for people with more than $250,000 to park their money and make a little interest they could be doing it right at the central bank and so that but that would just be what they're talking about is just for deposits and then the concern is well then they'll be stealing the deposits from the other banks and then the other banks won't be able to have have the liquidity they need to create loans but it seems to me that there's no reason the central bank couldn't open up their they're lending window as well as their deposit window so basically you would be doing all these transactions on your cell phone if if you had a program that were was set up such that it was all in the algorithm in smart contracts the central bank really wouldn't be in there I mean we everybody alarm bells go off when you say central bank but the the national currency is accepted by everyone and if if it were immutable all those things that you get with the blockchain then you could trust the system it couldn't be manipulated by central bankers or by anyone else so I think that's what's coming and that we will in fact become our own sovereign become our makers a question [Music] I don't think I think it would be the dollar be digital dollars oh okay it would be digital dollars it would it be basically shifting what banks do now what private banks do now shifting it to a public system of course ideally you would want to make it a public system in other words make the Federal Reserve a truly public institution required to serve the interest of the public but if you put it on a blockchain with smart contracts the central bankers aren't going to be able to manipulate it anyway so yeah well you could set it up either as yes you would but you could set it up either as a public system or a private system I saw a central banker and from the ECB talking about this and he said you could do it either as a private thing like Bitcoin where it would be digital cash but the problem is I mean there are certain advantages to making a public and one is that you would have recourse and right now with Bitcoin your money's gone if the product you get and return for your Bitcoin is not what you were expecting there's nobody to sue you can't take it take them to court so you would have all the you would have all the protections of a public system okay any other question oh yes or some eligibility and then go up and down based on their new repayment well it seems like you could design it however you want it that would be up to whoever is sort of a maybe up to Congress I don't know whoever decides what parameters we want baked into this algorithm okay thank you very much you
