Venezuelan Government Increases Banking Sector’s Obligation to Fund Construction and Mortgages

Ewan Robertson – The Venezuelan government has increased the banking sector’s financial obligation to fund construction and provide low-interest mortgages as part of policies to broaden access to affordable housing.

The financial obligation applied to both state-owned and private banks (Minci)

Banco de Venezuela

The financial obligation, known as the “mandatory mortgage portfolio”, requires both state-owned and private banks to assign a percentage of their gross annual loans toward housing construction and controlled-interest mortgages to low-income Venezuelans.

It is an important means through which Venezuelans are able to get affordable priced mortgages or loans for housing construction.

The government announced on Wednesday that the mandatory mortgage portfolio was to be increased from 15 to 20%.

With the change, the portfolio is expected to raise around 80.4 billion bolivars (US $12.8 billion), of which 65% must fund housing construction, 30% go towards mortgages, and 5% for self-construction, housing improvements and extensions.

The percentage of the fund destined toward mortgages has increased 4% from last year, with the president of Venezuela’s National Housing Bank (Banavih), Mario Isea, explaining that the move is aimed at “increasing the people’s access to mortgages”.

Further, the head of the government’s Housing Commission, Rafael Ramirez, reported that the funds raised will be important for achieving the government’s goal of constructing 380,000 new homes in 2013.

Venezuela has long suffered from a structural shortage in housing, something President Hugo Chavez’s government is attempting to remedy through a mass housing building program, launched in 2011.

Over 300,000 new housing units have been constructed by the program so far, with the aim being to construct as many as 3 million by 2019 to end the country’s housing deficit.

Officials also confirmed that mortgages granted under the mandatory mortgage portfolio will continue to have their interest rates regulated; at 4.33% for those earning between one and four times the monthly minimum wage, currently at 2,047 bolivars ($325), and 10.66% to those earning between eight and fifteen times the minimum wage.

The government also announced that for the first time mortgages granted to wealthier Venezuelans, those earning over fifteen times the minimum wage (30,712 bolivars / $US 4875), would also be legally capped, at 16.4%. Officials claim that banks had been charging speculative interest rates to this sector, at an average of around 24%.

Speaking in an interview with public channel VTV, Isea responded to concerns that forcing banks to put such a high percentage of their credit toward construction and low-interest mortgages would threaten their stability.

Explaining the government’s continued increasing of the mandatory mortgage portfolio, he said, “We went from 10% to 12%, 12% to 15%, and now to 20%, even last year when demands for loans increased and some in the banking sector said we were going to put their liquidity at risk, which didn’t happen”.

“They (the banks) have very high profits and a great deal of liquidity that they must invest, and we knew they could support the increase,” he continued.

Isea further argued that the government had calculated the controlled interest rates for mortgage lending carefully, and that “there’s no reason this year that banks can’t fulfill their obligation”.

He added that if any bank did not fulfill its contribution to the fund, the state would take the corresponding legal actions.

Via: Venezuelanalysis.Com

Posted in Latin America - Caribic, News | Tagged , ,

National Dialog in Syria continues with Regional Initiatives

Christof Lehmann (nsnbc) The national dialog in Syria, to end the crisis, national reconciliation and political as well as social reform, continues making progress. Although the process is largely being ignored by mainstream media in those countries who are backing the armed subversion and the foreign-backed, pro-interventionist opposition, the national dialog is increasingly derailing attempts to force a foreign agenda on the people of Syria.

Homs Sub-Committee Meeting. Photo:SANA

Homs Sub-Committee Meeting. Photo by SANA

After months of initial, all-inclusive meetings, and after recent, successful talks between Prime Minister Al-Halaki and delegations from political parties and ethnic communities, the initiative is branching out to a regional and community level.

In Homs, the sub-committee, which is tasked with with the preparation of the mechanisms for dialog between the political parties and other stakeholders in Homs, has held its first meeting on Friday.

Participants a the meeting stressed the need for dialog, and the importance of, that the needs of the Syrian society are met.  The participants called for a continuation of the meetings on a weekly basis, to reach an appropriate vision of, how to involve all segments of the Syrian population, and how best to solve the crisis on a regional level. Homs governor, Ahmad Munir Mohammad, stressed the importance of involving the people of Syria and denounced those who are attempting to sabotage the national dialog by terrorism.

On Friday, the sub-committee in Tartous continued its meetings. The sub-committee in Tartous has held meetings for three consecutive days. Tartous governor Nizar Ismael Mousa, stressed the importance of holding meetings with all segments of society and all political forces. Participants stressed the necessity of developing a program for solving the crisis, and stressed, that any program had to preserve Syria´s national sovereignty. Participants at the meeting in Tartous also stressed the need for aiding those families, who have been afflicted by acts of terrorism.

In Sweida the sub-committee met with the region´s religious leaders, to discuss how to make further progress with the dialog. Sweida governor Dr. Atef Naddaf stressed, that the committee will continue meeting and that all participants stand united against the violence and the terrorism. The clergymen and Dr. Naddaf  called on all Syrians to take part in the dialog and to stand against violence and terrorism.

While the national dialog is making steady progress, the militants behind the attempted subversion are making increasingly desperate attempts to derail the program. Mainstream media, particularly in those countries whose governments are backing the pro-interventionist, rejectionist opposition and the armed insurgency are reporting as if the national dialog was non-existing.

In a recent interview on Russia Today, the Russian Foreign Minister Sergei Lavrov stressed, that the crisis in Syria, after two years of failed attempts to subvert the country by supporting militants, has come to a critical point, where those, who continue their attempts to derail the peaceful resolution of the crisis must be held accountable.

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Posted in Middle East, Politics | Tagged ,

Tunisia, Revolt and Revolution or Reform. Tackling the Challenges of the Arab Spring Hang-Over

christof-lehmann-20112Two years after Tunisia became the first country to undergo regime change and the ousting of President Ben Ali through the phenomenon which was to be doubt “The Arab Spring”, the assassination of the prominent opposition leader Shokri Belaid has cast Tunisia, and with it the An-Nahda government of Prime Minister Hamadi Jebali into the worst crisis since early 2011. With Egypt in turmoil, Libya far from stable, Mali in a state of war, Mauritania having experienced the first  fire-fights between purported Al-Qaeda troops and “French” military forces, and a growing influence of Salafist groups in Tunisia and the region, who sweep or are being swept into the ensuing power vacuum, the security, stability and integrity of Tunisia is increasingly becoming more vulnerable. Tunisia urgently needs an inclusive political leadership and reform.

Neither the identity of the assassin of Shokri Belaid, nor his eventual affiliation to an organization are yet known with any certainty. What is certain however, is that Tunisians, and especially those, who belong or support Tunisia´s coalition of opposition parties, can`t be convinced, that Shokri Belaid was murdered by a lone assassin.

The comparison with a Tunisian Lee Harvey Oswald, the purported lone assassin of former US-President John F. Kennedy, who killed the American president with a magic bullet that after causing several wounds in two people and dented a car, landed in pristine condition on the coroners table comes to mind. Tunisian´s “understandably” have a hard time believing, that the assassination of Belaid was not a conspiracy, and even the majority of An-Nahda supporters subscribe to, that the assassination of Balaid was politically motivated and a conspiracy.

The question that plagues the country and its people is, whether anyone within the administration has been involved in the foul play by playing the Salafist card, whether the assassination is to be blamed on extremists, Salafists, who acted without any coordination with An-Nahda, or without coordination with any of the foreign intelligence services, who would benefit from a destabilized Tunisia. These are important questions and there are few answers that could satisfy Tunisian´s need to know. An unbiased and full investigation is needed.

A fact that speaks in favor of the hypothesis that Salafist elements and elements within An-Nahda planned a joint operation is, that both the Salafist groups in Tunisia and An-Nahda share many of their political goals. Salafism is, after all, not exclusively armed Jihad. It is a religious and political philosophy; a strange hybrid of fascism, socialism, religious puritanism, and for the most radical among its subscribers, it is spiced with the concept of armed struggle. In that sense, An-Nahda and Salafists have much in common.

If Tunisia had serious problems with socio-economical imbalances before “The Arab Spring” arrived in 2011, the situation of the unemployed, the working class and anyone in the low-income range has gotten worse since 2011. Also the middle class has suffered considerably. Social injustice, high unemployment, underemployment, poverty and corruption are the perfect spawning ground for Salafist extremism as, well as for the Muslim Brotherhood.

Both Salafist charities and Muslim Brotherhood associated charities thrive in environments, where people are driven to them because they can´t make both ends meet with their meager or non-existent paycheck. Especially the young ones are easy targets for recruitment.Some of them are then carefully being vetted and indoctrinated, and recruited to wage holy war.

The difference between Salafists and Muslim Brothers in this regard is philosophical, hypothetical, and without much practical consequence other than, that one is financed by Saudi-Arabia and the other by Qatar, and that the one is predominantly recruiting for Jihad and Al-Qaeda associated organizations, while the other is surrounding itself with an aura of international respectability establishes political parties, and organizes the recruitment into militant organizations with a little more of a charade.

How hypothetical the difference is with regard to the militant aspect, is best demonstrated by the fact that the Muslim Brotherhood dominated Freedom and Justice Party of Turkey´s Prime Minister R. Tayyip Erdogan, in 2007, received a check of USD 10 billion, to prepare the Muslim Brotherhood of Turkey for the “coincidentally appearing Arab Spring” in 2011 and the war on Syria.

Forget about terrorism theories like those of the US-American, Iranian born scholar Fathali M. Moghaddam, who writes about “perceived injustice” as the first step on a staircase to terrorism. The operand factor is not perceived injustice, but the question whether there is injustice that can be perceived. Radicalism of almost any brand thrives when there is a sufficient amount of injustice to be perceived. On the other hand, also the exaggeration of “The Salafist Threat” is potentially dangerous.

Not only does it easily lead to Islamophobia; it also lends an aura of mystique to extremist groups, which can be as attractive for impoverished, disenfranchised  and identity seeking youths, as the candlelight for the moth.

Many of the youth, who experienced the intoxicating rush of the Arab Spring in 2011, the frenzy and ecstasy of masses in motion, who never had the chance to study the differences between political and economical philosophies, who know nothing about scientific socialism and even less about the true character of An-Nahda, who have no work, no money for education, no money to get married or even to go out to meet a partner and pay a decent dinner once per month, are fatally attracted by the almost mythological tales of the glorious resistance fighters in Afghanistan, of Chechen heroes who protect Muslim brothers and sisters from the satanic, atheist Russian empire, and then, of course, there is always the promise of money.

Go and fight Jihad for three years, come back and have enough money to start a family and a life. The difference between the motivational factors, which make some to join Salafist Jihad organizations, and those, which make others join the French Foreign legion are minimal; also the differences in the utility of the French Foreign legion or other NATO countries all volunteer corps and the “terrorists” are minimal. There is no draft in NATO countries. Soldiers, NATO and Salafists alike, are predominantly recruited in the under-privileged social strata.

Post-modern terrorist organizations, “Al-Qaeda, and NATO. The one is the reason for the procurement of the other, and at the very top of the pyramid, in the lobby of government, the need to know meetings of intelligence services, and the suburban apartments in high-rise buildings, with garage and good traffic connections to main roads, the two interface in a joint command structure.

Knowing these facts, it can hardly be surprising, that those political parties in Tunisia, whose political philosophy is based in the separation of religion and state, are weary, and suspicious that An-Nahda and Tunisia´s Salafists ultimately, at the rogue government level, at the need to know only level, and in the suburbia apartment,  are sharing joint goals, are developing joint strategies.

In spite of regime change and a security vacuum, in spite of mass strikes and severe economic problems, in spite of increased poverty and social injustice, the return of large numbers of Jihadis from deployment abroad, and in spite of the fact, that Salafist organizations have perfect recruitment conditions in Tunisia, the country and Tunisians have so far, gotten away with being the butter-front of the Arab Spring´s Jihad. It has in a certain sense, remained the land of milk and honey, where wary Jihadis return to, relax and drink camel milk and tea or worse, when the Imam can´t see it.

Tunisia has so far been spared for mass armed violence. No major terrorist attack has chocked the nation and its people. An-Nahda and the Salafists have enough in common to keep a volatile balance of power, law and order and an informal form of power sharing. Dialog between Salafists and Muslim Brothers and shared aspects of their philosophy, have kept the balance, even though there are divisions, even within An-Nahda and within Salafist organizations. The problems for both arise at the interface between realpolitic and religious philosophy, between international respectability and and their real islamo-fascist nature and identity.

The assassination of Shokri Belaid however, has provoked a response; even from the feel-good secularists who would be content with a Muslim Brotherhood government as long as something would be done about unemployment, poverty, social injustice and the already chronic instability of the country´s economy.

The Trade Union of Tunisia has 500,000 members who can, given there is a need to do so, be activated within days. It still has the potential to paralyze the country. The assassination of Belaid has most likely made even the most placid left-wingers understand, that the Islamic radicalism which has been in Tunisia for a long time, while using Tunisia as the land of milk and honey, has begun to sap the milk and honey of liberalism, tolerance, diversity and respect out of the country´s political and social discourse.

Tunisia is, even though it may seem relatively calm, at a political boiling point. The pressure could at any moment explode the pressure cooker  The problem for Tunisia and those who want to solve, rather than to aggravate the country´s situation is, that the pressure-cooker is so hot, that  anyone who wants to remove it from the fire risks to burn his fingers, and to drop the entire situation on the floor.

Attempts by An-Nahda, to appease radicals among its own ranks as well as among the Salafists, by either ignoring the fact that radical militants are slowly but progressively establishing regional autonomy, or by cracking even harder down on the opposition parties and secularists will lead to violent confrontations. The cooker will burst and the hot water and steam will envelope the entire country.

Attempts by An-Nahda to appease the opposition parties and secularists, by marginalizing moderate Muslim Brothers or moderate Salafists would backfire, and backfire badly for An-Nahda. It would create a revolution from within as well as and external revolution.

Taking it for granted that any move in any direction will aggravate some aspects of the problem, the worst that can be done however, is to freeze in fear of the consequences. Tunisia needs politicians with integrity, who share the burden of burning their fingers and who remove that pressure-cooker all together before it explodes. Tunisia urgently needs a courageous political leadership that acts proactively and with integrity rather than on the basis of populism.

The establishment of an interim, broad coalition government of technocrats is not only a feasible solution, it is urgently necessary. That is, provided that the technocrats are motivated to act in the best interest of all Tunisians. A grand coalition government would  carry the confrontation of ideas from the streets into a politically manageable framework.

A grand coalition government could establish a ministerial commission for national dialog to end the violence and prevent the recurrence of violence. The commission could chair meetings between all segments of Tunisia´s political, social, ethnic and religious discourse.

The establishment of a constitutional council with participation of all political parties to draft a new constitution, would reduce many of the anxieties that worry Tunisians on all sides of the political discourse. As a basis for the work of the constitutional council, the principles of equality, diversity, protection of minorities, the division of religion, state and law, but the identification of Tunisia as a culturally Northern African Muslim nation could potentially transform many of the anxieties which currently are driving the conflict, into a potential for driving progress and stability.

Tunisia also, and urgently so, needs to remedy its social and economical problems. Interest-free, government guarantied loans for construction and social housing projects, for the development of infrastructure, for research and development, for feasible tourism projects, for and other job-creating measures are urgently needed.

Guarantied minimum wages that are sufficient to bolster a middle class are as urgently needed, as social programs which integrate the socio-economically vulnerable and underprivileged into the main-stream. Interest-free loans for agricultural programs which  turn parts of Tunisia´s desert into fertile land, which make the country more self-sustaining, are urgently needed.

Government funding for education, including higher education to create a Tunisia that will be able to compete with neighboring Europe is one other program that could help turn Tunisia around. A coalition government that would focus on progress, Tunisian national identity and reform, rather than on nuances in law, oppression of minorities and differences, would be the best way to steal the winds from those who sail best in a climate of uncertainty, poverty, division and extremism.

Christof Lehmann 17.02.2013

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Posted in Africa, Analysis | Tagged , , ,

Saudi-Arabia the Prime Suspect behind Suicide Bomb that killed Iraqi Brigadier General Awni Ali

Christof Lehmann (nsnbc) On Saturday, 16 February, a suicide bomber killed the senior Iraqi army intelligence officer, Brigadier General Awni Ali, and two of his bodyguards in his home, in northern Iraq. So far, nobody has claimed responsibility for the assassination. Analysts suspect the hand of Saudi-Arabia and the “Islamic State of Iraq“, which is the Iraqi branch of the international network of terrorist and mercenary organizations under the umbrella of Al Qaeda, behind the suicide attack.

High-ranking Iraqi officials, including Iraq´s Prime Minister Nouri Al-Malaki, have over the past months repeatedly warned about an influx of terrorists, supported by Saudi-Arabia in Iraq and against a Saudi attempt to destabilize the country.

In December, FNA reported, that Saudi Arabia has reactiveted its old smuggling routes, which were used during the wars on Iraq, to smuggle weapons, drugs, and various types of military equioment to insurgents in Syria. The smuggling route starts from Al-Nakhib, in the western A-Anbar province, near the Ar´ar border crossing. From there, the deadly contraband is shipped to the variety of terrorist organizationsin Syria. However, analysts and security experts, such as the Pakistani, retired major Agha H Amin, state, that many of the supplies will also be used to sustain and build up the insurgency in Iraq.

Also in December 2012, a senior Iraqi legislator, issued a warning against plots which are being hatched by Tyrkey, Qatar and Saudi Arabia against Iraq, calling the citizens of Iraq to be vigillant. In an interview with the Lebanese al-Mayyadeen satellite network in 2012, P.M. Nouri al-Malaki stated:

Nouri Al Maliki nsnbc archives

Nouri Al-Maliki, Photo: nsnbc archives

” Qatar and Saudi Arabia which are meddling to topple the Syrian government are now doing the same meddling to topple the Iraqi regime. Their goal is overthrowing the Iraqi government. Their goal is overthrowing the Iraqi ruling system and not overthrowing me”.

Analysts expect two principle reasons for the aggravation of the Gulf-Arab Nations subversive activities in Iraq. Subsequent to the ousting of the Baath Party government of former President Saddam Hussein, Iraq has been building increasingly close ties with Iran. Another, and most likely the principle reason is, that Iraq is part of the cartel behind the 10 billion USD PARS gas-pipeline project, which, if completed, would deliver gas from Iran, through Iraq and Syria to the eastern Mediterranean coast. The geo-political and energy-security related aspects of an eventual completion of the project, is by many analysts, inclyding the scribe, and F William Engdahl, meant to be one of the primary reasons for the attempted subversion in Syria.

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Posted in Middle East, News | Tagged , ,

FARC released captured Policemen as Peace-Talks in Havana continue.

FARC Febr 2013 3 nsnbc archivesChristof Lehmann (nsnbc) The Revolutionary Armed Forces of Colombia-Peoples´Army in Miranda, in southern Cauca, have released the two policemen, Cristian Yate and Victor Gonzáles as agreed during the ongoing peace-talks in Havana, Cuba. The policemen were captured by the FARC and have been held, since 25 January. The release of a captured soldier is expected later  today.

The Colombian senator Piedad Córdoba stated, that a humanitarian commission would leave to southern Narino today, where the FARC-EP has agreed to also release the captured soldie Josué Alvarez.

So far, neither the FARC nor the Colombian government have released information, whether the release of the three captured servicemen would be followed by a show of goodwill from the side of the government, by enabling Simon Trinidad to be present at the continued peace-talks in Havana.

Representatives of the FARC have at several occasions, over the last month, stated that the presence of Simon Trinidad, who is serving a 60 years prison sentence in the USA after he was extradited to the USA in 2004, at the peace-talks, would be a catalyst for achieving a solid and lasting peace accord.

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Posted in Latin America - Caribic, News, World | Tagged , ,

First Images Released of Venezuela’s Chavez since His Operation

First Images Released of Venezuela’s Chavez since His Operation

(prensa presidencial)Ewan Robertson ( – The Venezuelan government has released the first photographs of Venezuelan President Hugo Chavez since his cancer operation last 11 December. The images show a smiling Chavez lying down in his hospital bed, flanked by his two daughters, and reading yesterday’s copy of Cuba’s official newspaper Granma. The images were taken for Valentine’s Day, or “the day of love and friendship” as it is commonly referred to in Venezuela.

Chavez had not been directly seen or heard from since his operation, communicating through government ministers and official documents.

Private media outlets, particularly Spanish papers ABC and El País, had been increasingly speculating over the state of Chavez’s health, including the publication by El País of a photo purporting to be Chavez undergoing treatment, which turned out to be false.

(prensa presidencial)

Photo: Prensa Presidencial

Official sources have recently shown themselves to be optimistic about Chavez’s recovery, while repeating that the Venezuelan president is undergoing “complex and difficult” treatments, after what was his fourth cancer operation in eighteen months.

In an official statement released with the photgraphs, communication minister Ernesto Villegas reported that while Chavez had now moved out of the post-operatory phase, “Chavez currently breaths through a tracheal tube, which temporarily makes it difficult for him to speak”. has translated the full statement below.


The government of the Bolivarian Republica of Venezuela informs on the evolution of President Hugo Chavez’s health, following the surgical intervention undergone in Havana, Cuba, last 11 December.

After two months of a complicated post-operatory process, the patient (Chavez) is conscious, with the integrity of his intellectual functions, in close communication with his governmental team and at the head of the fundamental tasks inherent to his position.

As was opportunely informed, the respiratory infection which emerged in the course of the post-operatory treatment was controlled, although a certain grade of (respiratory) insufficiency persists.

Given this circumstance, that is being duly treated, President Chavez is currently breathing through a tracheal tube, which temporarily makes it difficult for him to speak.

The medical team is applying an energetic treatment for the base illness (cancer), which is not exempt from complications.

The patient is cooperating with the treatment and rehabilitation in close coordination with his medical team.

The government of the Bolivarian Republic of Venezuela thanks the Venezuelan people for the love, serenity, maturity and integrity in which they have accompanied President Chavez in this battle and invites them to continuing praying for his health.

This year, when the bicentenary of the Admirable Campaign is celebrated, this example-setting attitude of the Venezuelan people confirms that this is about, in effect, the same admirable people who fought with our Liberator Simon Bolivar for the cause of independence.

The Bolivarian government ratifies, likewise, its gratitude towards the Fidel Castro and President Raul Castro, to the medical team and the whole Cuban people, for the love and care offered to our president.

We trust, together with the Venezuelan people and the other peoples of the world, that President Chavez will overcome, sooner rather than later, these delicate circumstances, to then accompany his people in the path to new victories in the construction of the good Homeland.

Long live Chavez!

Venezuelan Ministry of Communication


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Posted in Latin America - Caribic, News | Tagged , ,

It’s The Interest, Stupid! Why Bankers Rule The World

It’s The Interest, Stupid! Why Bankers Rule The World

Ellen Brown-Ellen Brown – In the 2012 edition of Occupy Money released last week, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our GDP. That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.

This hidden tribute to the banks will come as a surprise to most people, who think that if they pay their credit card bills on time and don’t take out loans, they aren’t paying interest. This, says Dr. Kennedy, is not true. Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills. They must pay for labor and materials before they have a product to sell and before the end buyer pays for the product 90 days later. Each supplier in the chain adds interest to its production costs, which are passed on to the ultimate consumer. Dr. Kennedy cites interest charges ranging from 12% for garbage collection, to 38% for drinking water to, 77% for rent in public housing in her native Germany.

Her figures are drawn from the research of economist Helmut Creutz, writing in German and interpreting Bundesbank publications. They apply to the expenditures of German households for everyday goods and services in 2006; but similar figures are seen in financial sector profits in the United States, where they composed a whopping 40% of U.S. business profits in 2006. That was five times the 7% made by the banking sector in 1980. Bank assets, financial profits, interest, and debt have all been growing exponentially.

Exponential growth in financial sector profits has occurred at the expense of the non-financial sectors, where incomes have at best grown linearly.

By 2010, 1% of the population owned 42% of financial wealth, while 80% of the population owned only 5% percent of financial wealth. Dr. Kennedy observes that the bottom 80% pay the hidden interest charges that the top 10% collect, making interest a strongly regressive tax that the poor pay to the rich.

Exponential growth is unsustainable. In nature, sustainable growth progresses in a logarithmic curve that grows increasingly more slowly until it levels off (the red line in the first chart above). Exponential growth does the reverse: it begins slowly and increases over time, until the curve shoots up vertically (the chart below). Exponential growth is seen in parasites, cancers . . . and compound interest. When the parasite runs out of its food source, the growth curve suddenly collapses.

People generally assume that if they pay their bills on time, they aren’t paying compound interest; but again, this isn’t true. Compound interest isbaked into the formula for most mortgages, which compose 80% of U.S. loans. And if credit cards aren’t paid within the one-month grace period, interest charges are compounded daily.

Even if you pay within the grace period, you are paying 2% to 3% for the use of the card, since merchants pass their merchant fees on to the consumer. Debit cards, which are the equivalent of writing checks, also involve fees. Visa-MasterCard and the banks at both ends of these interchange transactions charge an average fee of 44 cents per transaction—though the cost to them is about four cents.

How to Recapture the Interest: Own the Bank

The implications of all this are stunning. If we had a financial system that returned the interest collected from the public directly to the public, 35% could be lopped off the price of everything we buy. That means we could buy three items for the current price of two, and that our paychecks could go 50% farther than they go today.

Direct reimbursement to the people is a hard system to work out, but there is a way we could collectively recover the interest paid to banks. We could do it by turning the banks into public utilities and their profits into public assets. Profits would return to the public, either reducing taxes or increasing the availability of public services and infrastructure.

By borrowing from their own publicly-owned banks, governments could eliminate their interest burden altogether. This has been demonstrated elsewhere with stellar results, including in CanadaAustralia, andArgentina among other countries.

In 2011, the U.S. federal government paid $454 billion in interest on the federal debt—nearly one-third the total $1,100 billion paid in personal income taxes that year. If the government had been borrowing directly from the Federal Reserve — which has the power to create credit on its books and now rebates its profits directly to the government — personal income taxes could have been cut by a third.

Borrowing from its own central bank interest-free might even allow a government to eliminate its national debt altogether. In Money and Sustainability: The Missing Link (at page 126), Bernard Lietaer and Christian Asperger, et al., cite the example of France. The Treasury borrowed interest-free from the nationalized Banque de France from 1946 to 1973. The law then changed to forbid this practice, requiring the Treasury to borrow instead from the private sector. The authors include a chart showing what would have happened if the French government had continued to borrow interest-free versus what did happen. Rather than dropping from 21% to 8.6% of GDP, the debt shot up from 21% to 78% of GDP.

“No ‘spendthrift government’ can be blamed in this case,” write the authors. “Compound interest explains it all!”

More than Just a Federal Solution

It is not just federal governments that could eliminate their interest charges in this way. State and local governments could do it too.

Consider California. At the end of 2010, it had general obligation and revenue bond debt of $158 billion. Of this, $70 billion, or 44%, was owed for interest. If the state had incurred that debt to its own bank—which then returned the profits to the state — California could be $70 billion richer today. Instead of slashing services, selling off public assets, and laying off employees, it could be adding services and repairing its decaying infrastructure.

The only U.S. state to own its own depository bank today is North Dakota. North Dakota is also the only state to have escaped the 2008 banking crisis, sporting a sizable budget surplus every year since then. It has the lowest unemployment rate in the country, the lowest foreclosure rate, and the lowest default rate on credit card debt.

Globally, 40% of banks are publicly owned, and they are concentrated in countries that also escaped the 2008 banking crisis. These are the BRIC countries — Brazil, Russia, India, and China — which are home to 40% of the global population. The BRICs grew economically by 92% in the last decade, while Western economies were floundering.

Cities and counties could also set up their own banks; but in the U.S., this model has yet to be developed. In North Dakota, meanwhile, the Bank of North Dakota underwrites the bond issues of municipal governments, saving them from the vagaries of the “bond vigilantes” and speculators, as well as from the high fees of Wall Street underwriters and the risk of coming out on the wrong side of interest rate swaps required by the underwriters as “insurance.”

One of many cities crushed by this Wall Street “insurance” scheme is Philadelphia, which has lost $500 million on interest swaps alone. (How the swaps work and their link to the LIBOR scandal was explained in an earlier article here.) Last week, the Philadelphia City Council held hearings on what to do about these lost revenues. In an October 30th article titled “Can Public Banks End Wall Street Hegemony?”, Willie Osterweil discussed a solution presented at the hearings in a fiery speech by Mike Krauss, a director of the Public Banking Institute.

Krauss’ solution was to do as Iceland did: just walk away. He proposed “a strategic default until the bank negotiates at better terms.” Osterweil called it “radical,” since the city would lose its favorable credit rating and might have trouble borrowing. But Krauss had a solution to that problem: the city could form its own bank and use it to generate credit for the city from public revenues, just as Wall Street banks generate credit from those revenues now.

A Radical Solution Whose Time Has Come

Public banking may be a radical solution, but it is also an obvious one. This is not rocket science. By developing a public banking system, governments can keep the interest and reinvest it locally. According to Kennedy and Creutz, that means public savings of 35% to 40%. Costs can be reduced across the board; taxes can be cut or services can be increased; and market stability can be created for governments, borrowers and consumers. Banking and credit can become public utilities, feeding the economy rather than feeding off it.

Via Seeking Alpha

Please give a warm welcome to our new nsnbc contributor Ellen Brown.
Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from “the money trust.” Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are and
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