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Subject:[socialcredit] Re: a "well-researched" article
Date:Friday, May 29, 2009  14:11:09 (-0700)
From:william_b_ryan <william_b_ryan @.....com>

Thank you for these numbers, Jamie, and the links to their source.  £620.7
billion and £671.4 billion are both significantly greater than the number
Hutchinson uses, £454 billion.  £300 billion per annum in gilts, accepting this
number as accurate, and I'm not prepared to accept it without verification, is
considerably less than fifty percent of spending, not the sixty-five percent that
Hutchinson claims.  And the percentage of "seigniorage" spending by Weimar was,
according to Sennholz, was 99.2 percent, not the fifty percent that Hutchinson
claims.  It appears that his argument is way off base, when the actual numbers
are considered, not the numbers he apparently dreamed up.  So Hutchinson's
argument, and Ms. Brown's essay based on Hutchinson's argument, are just up there
in La La Land. 
I would like for someone to address both Schacht's and the Zimbabwe Central
Bank's arguments that their respective hyperinlations were caused by outsiders
short selling their currencies, rather than their own respective incompetences. 
---------------------original message--------------------- 
Subject: Re: [socialcredit] a "well-researched" article 
Date: Friday, May 29, 2009  08:13:17 (+0100) 
From: Jamie Walton <eurojamie @.....com> 
Hi all, 
As I understand the 'quantitative easing' plan in the UK, - as I recall it from
reading the articles on it in the (UK) Financial Times that I bought on the day
after it was agreed (I don't have the copy with me now) - the Bank of England
would create money to buy UK Treasury bonds (called 'gilts') from
In this case, I would think that the money would go to the
bondholders/bondsellers, and what they do with it after that is up to them (they
may buy more UK Treasury bonds?).  I'm not sure how this could be funding the UK
government's budget deficit (except perhaps indirectly, through more taxation and
I don't know where the figure of British government spending of £454 billion
comes from, the estimate for the current FY 2008-09 (budgeted) figure was a total
of £620.7 billion (from page 238 of the report/page 246 of the file: http://www.hm-treasury.gov.uk/d/Budget2009/bud09_completereport_2520.pdf),
and the projection for the next FY 2009-10 (budgeted) figure is a total of £671.4
billion (from: http://budget.treasury.gov.uk/where_taxpayers_money_is_spent.htm).

With regard to the North's 'Greenbacks'; that period was during a war, and as
far as I know the general rule is that wars are inflationary.  I'm not sure if
it's possible for an 11% portion of government expenditure (maybe 6% of total
'national' expenditure at the time??) to be the cause of the 75% inflation rate
stated.  I would think other factors would have a greater effect.  I understand
that $450 million were authorised, and slightly less than $450 million were ever
issued (except for replacements of worn 'notes'), and this was later limited to
$300 million authorised to be outstanding and in circulation at any one time. 
With regard to the South's 'Greenbacks' (obviously also during a period of war),
I understand that these were issued as promises to pay (with interest) later
(after the war), not issued to pay now (like the North's 'Greenbacks'), and that
about $1,550 million (more than 3.4 times more) of these promises were issued,
with no limit (there may have been counterfeits as well?).  I have heard that the
Southern States were not all happy families; they did not co-operate very
effectively and tried to compete with each other, even when they were supposed to
be allies. 
The comparisons with Weimar Germany seem unfortunate, and I'm not sure if there
are any parallels between what happened then and what's happening now (or what
happened during the American Civil War).  I think that to do that question
justice would take many months of research and end up being a book, and who has
time to do that? - not me! 
2009/5/28 <william_b_ryan@yahoo.com> 
Ellen Brown's recent essay, "Another look at the Weimar Hyperinflation" is
archived at 
http://www.geocities.com/new_economics/brown-05-19-09.txt and elsewhere on the
I think it would be interesting for us to discuss some points in the essay. 
The first I would to discuss is this assertion, which she attributes to a
"well-researched article" by Martin Hutchinson.  Now, the article may in
fact be "well-researched," but Hutchinson supplies absolutely no sources or
references for any of the assertions in the article, which is archived at 
http://www.geocities.com/new_economics/hutchinson-04-09-09.txt  so we must
take as a matter of faith that it is "well researched".  We must give complete
credence to what this goldbug marketer of "investment advice" has to say. 
According to Huntchinson, "The really chilling parallel is that the United
States, Britain and Japan have now taken to funding their budget deficits through
seigniorage. In the United States, the Fed is buying $300 billion worth of U.S.
Treasury bonds (T-bonds) over a six-month period, a rate of $600 billion per
annum, 15% of federal spending of $4 trillion. In Britain, the Bank of England
(BOE) is buying 75 billion pounds of gilts over three months. That's 300 billion
pounds per annum, 65% of British government spending of 454 billion pounds. Thus,
while the United States is approaching Weimar German policy (50% of spending)
quite rapidly, Britain has already overtaken it!" 
Ms. Brown informs us that "seigniorage" means that government is effectively
printing and spending money. 
I do not find it astounding that some 15% of federal spending is being
effectively printed and spent.  We do have some precedent.  The Greenbacks that
were famously printed and spent during the Civil War represented only about 11%
of federal spending during that time.  My source for this number is a book
published in 2004, *An Empire of Wealth,* by John Steele Gordon, page 196. 
During that time the annual inflation rate was about 75%, which Gordon described
as being "manageable," which it was, certainly in comparison to the contemporary
experience in the Confederacy.  The Confederacy printed and spent, through their
central and state governments, more than half of their budgets, in a much higher
rate of inflation, approaching hyperinflation in the later stages of the war. 
The Greenbackers are silent on the experience of the Confederacy's "greenbacks." 
What I do find astounding is the assertion that Britain is currently funding 65%
of its spending through the printing of money, rather than conventionally,
through taxation and borrowing. 
I do not reject this remarkable assertion out of hand, but I do expect to see
some proof that it is in fact occurring.  I would like to see the actual numbers
in their original sources.  Any help in this regard from our list members would
be welcomed. 
I have been directed to an essay, "Hyperinflation in Germany, 1914-1923," by
Hans Sennholz, which is archived at 
http://www.geocities.com/new_economics/sennholz-2006.txt , 
which has numbers that are quite contrary to the numbers presented by Mr.
"While government expenditures rose by leaps and bounds, the revenue suffered a
gradual decline until, in October 1923, only 0.8 percent of government expenses
were covered by tax revenues. For the period from 1914 to 1923 scarcely fifteen
percent of the expenses were covered by means of taxes. In the final phase of the
inflation the German government experienced a complete atrophy of the fiscal
So, according to Sennholz, in October 1923, only 0.8% of government expenses
were covered by tax revenues, which means that 99.2% were not.  I would presume
that most if not all of that 99.2% was covered by the printing of money rather
than conventional borrowing.  In any case that would be far greater that the 50%
that Huntchinson claims was "Weimar policy." 
And would put the lie to the premise to Ms. Brown's question: 
"If Britain is already meeting a larger percentage of its budget deficit by
seigniorage than Germany did at the height of its hyperinflation, why is the
pound now worth about as much on foreign exchange markets as it was nine years
The second point I would like to discuss is the assertion that Weimar's
hyperinflation was caused by the short selling of the mark: 
"What actually drove the wartime inflation into hyperinflation, said Schacht,
was speculation by foreign investors, who would bet on the mark's decreasing
value by selling it short." 
In this Ms. Brown is quoting Stephen Zarlenga who is supposedly sourcing Hjalmar
Schacht's 1967 book, *The Magic of Money.*  Now, I don't know if Schacht said
that or not in his book.  The University of Houston Anderson Library has the
book, which I plan to consult shortly.  If Schacht indeed did say it, I would be
inclined to believe it was self-serving, inasmuch as he was very much involved
with the German central bank during the time of the hyperinflation.  It would be
a way of shifting blame away from himself and his colleagues. 
While I find it believable that short selling of the currency may have been
involved during a time of hyperinflation, I find it difficult to understand how
it could be the cause of the hyperinflation. 
I would welcome anyone explaining to me how this could be the case. 
I find it ludicrous that Ms. Brown refers to Henry C. K. Liu as an "economist." 
He is by educational and professional background an architect, who runs an
investment fund out of New York.  He can barely put together a coherent sentence
in English, as is evidenced by various postings to the old Post Keynesian list,
but employs teams of researchers who put together quite literate multi-thousand
word essays that he posts under his name all over the Internet.  I've found that
they are predominantly cut and paste efforts from other people's work.  Whatever
they are, they can hardly be considered to be authoritative on any subject. 
He has for years pushed Warren Mosler's "State Theory of Money" theory to the
Chinese Communist regime.  I've called, for good reason, Mosler's theory to be
warmed over Nazism.  There's nothing original in it, though in the beginning
Mosler thought he was a genius who discovered something new. Mosler's and Liu's
presentation of Hitler as being a Lincoln Greenbacker is not mere apologetic for
Nazism, but for Greenbackerism, which, in its very essence, certainly large
aspects of it, is Nazism in disguise. 
And, finally, Zimbabwe.  Now, that unfortunate land, is experiencing the worst
hyperinlation in the history of the world.  Ms. Brown attributes this not to the
incompetence of the Zimbabwean authorities, but takes--lock, stock and
barrel--the statement from the Zimbabwean central bank that: 
"the hyperinflation was caused by speculators who manipulated the
foreign-exchange market, charging exorbitant rates for U.S. dollars, causing a
drastic devaluation of the Zimbabwe currency." 
It is more reasonable to believe that the crisis was precipitated in 2001, with
the confiscation of the white-owned farms.  The farms were handed over to
Mugabe's cronies, who knew nothing and cared little about farming.  And the
farms' employees were not loyal to their new overseers.  Farm production and
exports plummeted, which were the main source of foreign exchange.  Tax revenues
declined significantly.  It is reasonable to suppose that Mugabe tried to keep
things going by printing and spending money, and things continued to spiral out
of control from that point onward.


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