Recently by Gary North: Smart Money, Honest Voters

Ellen Brown is a lawyer. Lawyers are trained to settle a case when they are losing. Brown just settled with me.

She has just switched sides. Instead of becoming an Austrian School critic of the Federal Reserve, she has become its cheerleader.

This is Bernanke’s loss and the Tea Party’s gain.

In my criticism, I kept saying that she is a leftist. She wants a welfare State funded by zero-interest loans from the government. She wants a big Federal government. She does not care how we get it. Now that the FED will inflate enough to pay for it, she has switched sides. Her primary commitment was always to the welfare State, not the battle against the FED.

In my detailed critique of her economics, I made it clear that she was never a conservative. Now she proves it. She praises Bernanke and the FED. She says that QE2 is not fiat helicopter money, and that Bernanke is not “Helicopter Ben,” which he obviously is.

Hard to believe? Let me quote her.

A Bold Precedent

QE2 is not a “helicopter drop” of money on the banks or on Main Street. It is the Fed funding the government virtually interest-free, allowing the government to do what it needs to do without driving up the interest bill on the federal debt — an interest bill that need not have existed in the first place. As Thomas Edison said, “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also.”

The Fed failed to revive the economy with QE1, but it could redeem itself with QE2, a bold precedent that might inspire other countries to break the chains of debt peonage in the same way. QE2 is the functional equivalent of what many countries did very successfully before the 1970s, when they funded their governments with interest-free loans from their own central banks.

Countries everywhere are now suffering from debt deflation. They could all use a good dose of their own interest-free national credit, beginning with Ireland and Greece.

As the kid said to Shoeless Joe Jackson after he threw the World Series, “Say it ain’t so, Joe.” (In the interest of historical accuracy, this quotation cannot be verified, but a non-exchange between a silent Joe and a group of boys did take place, and the words of one of them were close.)

Ellen Brown initially stood with the Greenbackers in their call to end the Federal Reserve. She parroted the Greenback Party line. She said that the FED is private, which is not really true. The Board of Governors is a government agency, as its website address reveals. It ends in .gov. She said that the government — Congress — should print money without interest rates.

Now that Treasury bond rates are low — but not at zero percent, contrary to what she implies — she has scrapped it all in full public view. She now says that the FED is on the government’s side. “It is the Fed funding the government virtually interest-free, allowing the government to do what it needs to do without driving up the interest bill on the federal debt — an interest bill that need not have existed in the first place.” She wants the present enormous Federal government to continue doing “what it needs to do.” She is a welfare State leftist, which I kept saying in my criticisms of her economics.

She praises QE2. She calls it “a bold move.” She writes: “The Fed failed to revive the economy with QE1, but it could redeem itself with QE2, a bold precedent that might inspire other countries to break the chains of debt peonage in the same way.” Got that? QE 2 is self-redemption.

If she tries to defend herself by saying, “This is consistent with what I have always said,” then she is dumber than dirt, or else she thinks her followers are dumber than dirt. If she says, “Yes, I switched. So what?” then she is just another lawyer.

In The Web of Debt, she repeatedly quotes Greenbacker Stephen Zarlenga as the world’s expert in money. As I pointed out, Zarlenga posted a critical review of Brown, saying that she was a compromiser. He did not write it, but he posted it. I called attention to this review here.

Here is what the reviewer said.

Brown is clearly saying here it is banks lending “the use of something the lenders never had to lend” which “is a fraud” because people are made to think they’re borrowing money that’s there to be lent. Surprisingly then, Brown ends up wanting to enshrine this “fraud” by inserting it into the U.S. Constitution. Furthermore, Brown would enthrone the biggest Wall Street banks inside the U.S. Government to continue perpetrating it on the people. . . .

In summary, the book is very disappointing (from a monetary reform perspective) because Brown’s conclusion proposes a non-solution: to keep the unsupportable debt-based system in place and consolidate it by embedding the fraudulent ‘debt-money’ accounting mechanism within the apparatus of government.

That’s not effective reform and certainly not a “paradigm shift”. Instead, Brown proposes to entrench the very same system she’s been “shocking” us with. This is not “how we can break free” — it’s the same trap.

Now she has proven his case. She never had a clue about economic theory or monetary theory. She has therefore switched sides with ease — we might call this intellectual quantitative easing.

Her only hope now is to insist that she never meant anything like this. “No, no, no, I meant something completely different. It’s all a big misunderstanding.” A lawyer who can’t make herself clear needs to find another career — maybe as an economic guru.

I have received many emails from Tea Party people telling me I am an economically ignorant fool for having criticized Brown publicly. These poor souls were her targets from day one, as I said repeatedly in my series. I called them victims. I said over and over, she was putting the shuck on the rubes. But they had committed to her emotionally. They refused to listen to my warnings.

This is what happens in every movement. Followers become committed emotionally to some guru, and will not listen to anyone who criticizes the guru. This is always a mistake. They risk winding up like Max Keiser.

The Tea Party movement claims to be a free enterprise movement, but its members have so little economic knowledge that they are vulnerable to loose canons like Ellen Brown. These naive people are sitting ducks.

Ellen Brown has now publicly set sail on board the cruise ship QE2 just as Captain Bernanke takes it out of port. She will be lost at sea.

She has always been intellectually lost at sea. This latest switch is part of her original lack of understanding. I offered 52 pieces of original evidence and 30 responses to prove it.

Can you hear me now?

November 23, 2010

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2010 Gary North