Economic Error #16: The Federal Government Should Build a Larger Welfare State with Fiat Money Printed by a Nationalized Federal Reserve.

Gary North

Ellen Brown cannot be described as a conservative. People who support the expansion of the welfare state are not conservatives.

The Federal Reserve System would be incorporated into the U.S. Treasury, and all new money would be created by these merged government agencies. New money would be spent into circulation by the government to promote the general welfare, monitored in a way so that it was neither inflationary or deflationary. It would be spent on infrastructure, including education and health care, creating jobs, re-invigorating local economies, and re-financing government at all levels. [Web of Debt, p. 397]

The astounding fact is this: Ellen Brown is getting a hearing in conservative circles. Because she opposes fractional reserve banking and the Federal Reserve System, some conservatives ignore the fact that her book is a 500-page call for the establishment of the welfare state. Conservatives who like her book are oblivious to what the book actually teaches. So enraged are they at bankers that they are willing to swallow anything, just so long as the author says that she hates the bad guys.

Hitler hated the Communists. So what? That did not make Hitler a conservative. It also did not make him a defender of freedom. He was a National Socialist. Yet Ellen Brown believes that Hitler's economy was a beacon of light during the second half of the Great Depression. For evidence that she really says this, click here:

How big a welfare state is she talking about? She tells us in Chapter 44.

What could you do with $1.7 trillion ($1,700 billion)? According to a United Nations report, in 1995 a mere $80 billion added to existing resources would have been enough to cut world poverty and hunger in half, achieve universal primary education and gender equality, reduce under-five mortality by two-thirds and maternal mortality by three-quarters, reduce the spread of HIV/AIDS, and halve the proportion of people without access to safe water worldwide. For comparative purposes here are some typical U.S. government outlays: $76 billion went for education in FY 2005, $26.6 billion went for natural resources and the environment, and $69.1 billion went for veterans benefits. Under our projected scenario, these and other necessary services could have been expended and many others could have been added, while at the same time eliminating federal income taxes and the federal debt, without creating creating inflation (pp. 427-28).

This is only the beginning.

A more equitable and satisfying solution than taxing the people would be for the government to invest in productive industries that returned income to the public purse. Affordable public housing that generated rents would be one possibility. The development of sustainable energy solutions (wind, solar, ocean wave, geothermal) are other obvious examples. Unlike scarce oil resources that are nonrenewable can come from a plot of ground someone owns, these natural forces are inexhaustible and belong to everyone; and once the necessary infrastructure is set up, no further investment is necessary beyond maintenance to keep these energy generators going. They are perpetual motion machines, powered by the moon, the tides and the weather. Wind farms could be set up on publicly-owned lands across the country (p. 431).

No, Virginia, this is not conservatism.

For a detailed critique of Ellen Brown's economics, go here:

http://www.garynorth.com/public/department141.cfm|