I probably shouldn't, but I will

Reading Ellen Brown's Amend the Fed: We Need a Central Bank that Serves Main Street (as noted yesterday). I don't usually read Ellen Brown, and I'll tell you why. I probably shouldn't, but I will.

She irritates me when she says things like this:

The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. It is their own private club, and its legal structure keeps all non-members out. A century after the Fed’s creation, a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends...

That's not economics. It's just political trash talk, a clit tingler. I know, I know, it probably helps boost her readership. I don't care. It's still garbage.

I have to say, the facts do not lead me to Ellen Brown's conclusion, and I'm sober at least half the time.


The trash didn't turn up till the next-to-last paragraph, so I did read almost the whole article. And (so you know) it's not the trash talk that inspires this post. It's something good that Brown wrote, some economics she wrote before she got to the trash. She wrote:

A Helicopter Drop That Missed Its Target

All this is far from the helicopter drop proposed by Ben Bernanke in 2002 as a quick fix for deflation. He told the Japanese, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

But there has been no cloudburst of money raining down on the people. The money has gotten only into the reserve accounts of banks. John Lounsbury, writing in Econintersect, observes that Friedman’s idea of a helicopter drop involved debt-free money printed by the government and landing in people’s bank accounts. “He foresaw the money entering the economy through bank deposits, not through bank reserves...”

The ideas that underlie my thinking are:

1. There's too little circulating money, relative to GDP; and
2. There's too much total debt, relative to circulating money.

The solution to the problem as I see it is to increase the quantity of debt-free money in people's bank accounts. So I have to say Ellen Brown has this exactly right.

Quoting (or possibly paraphrasing) Lounsbury further, Brown writes:

The helicopters dropped all the money into a hole in the ground (excess reserve accounts) and very little made its way into the economy.

Yeah, that's pretty much exactly the right criticism of monetary policy since the crisis.

Brown goes on to talk of the legal options and how things need to change so that what needs to be done is legal. I don't know about any of that. I presume she's right. That's fine, but it's not my focus. I focus on what's wrong with the economy and what in the economy must change to fix the problem. And I have to say that in this article, Ellen Brown has it exactly right.