We Can Change!


We Can Change Our Wicked Problems!

Economy, Banking and Finance

The U.S. economy is the largest, at least in terms of GDP, and likely the most influential of any nation.  Most think of that as a measure of our economic prosperity.  Yet, the economy and that prosperity are seriously skewed, with most of their benefits accruing to our wealthiest people.  It’s full of corruption, unfairness and suffering.  Our economy is artificial, and all of us within it, directly or indirectly, are enslaved to our economic and banking systems.  They are not sustainable and will inevitably collapse.

Economics is less a science and more a study of individual and aggregate human behaviors in commerce, hoping to be able to divine future behaviors and act to make it work better?  Physics finds foundational relationships and patterns in the relatively slowly changing physical world.  Economics seeks patterns in relatively quickly changing human production and exchange behaviors.  They aren’t always predictable and logical, so economics isn’t always predictable.  We expand into areas we have not been before, so we can’t reliably predict how things will work.  Our economic values can change as whims, as in explosively growing and fading fads.  Economic predictions are often wrong,[1] except about the past.

In the same ways we get caught up in irrational self-destructive behaviors, like mob psychology that causes people to destroy our own public property in anger, or addictions that destroy our productivity and relationships, we also do illogical things that destroy our economic well-being, like getting caught up in speculative bubbles, investing in things growing in monetary value unreasonably, only to lose when we wake up one day, realizing those valuations are silly, and it collapses, leaving many with losses.

Really, economics is more of an invented domain, a set of models that may or may not work, based on what people think and believe, and how we behave, based on what we think and believe, about our economy and roles within it.  It’s mass psychology, informed by controlled education and messaging.

Traditional economic measures, like inflation, unemployment and GDP we hear on the news every day, thinking they are important guides for our economic lives, are flawed, misunderstood and misused. 

We hear a lot about inflation, how quickly prices or costs of living are growing.  Wage and benefit increases are often based on inflation.  We’re told inflation is low, 2% per year in recent years.[2]  Mostly, that’s the Consumer Price Index (CPI), an imaginary average basket of stuff people consume.  That doesn’t necessarily include what we really consume, or how prices change where we actually live. 

Overall CPI in the San Francisco Bay Area was 4.5%; food and beverage CPI was 5.7%, and rent was 4.6%, at the end of 2018, for example.[3]  If Bay Area rent and food are our big expenses, our cost of living is increasing more than twice the 2% inflation we hear we’re experiencing in our media and workplaces.  Assuming rates stayed the same and we accepted wages increasing 2% a year, we’d lose purchasing power every year, at least half of our purchasing power in less than 20 years.  That’s happening to many.

We hear the unemployment rate is low, 3.7% at the end of 2018.  Except that doesn’t count everybody.  It doesn’t count those working part-time or doing contract work, but wanting full-time jobs and benefits.  It doesn’t count those disillusioned with prospects, who haven’t looked for a job in the last 4 weeks.  Adding those doubles the unemployment rate to 7.5%.[4]  It also doesn’t count the 1 in 110 adults we imprison in the largest prison industrial system in the world.[5]  Assuming they’d rather work than be imprisoned would increase unemployment to 8.4%.  It doesn’t include 3.5% of us working in poverty,[6] which is probably low.  That’s at least 12%, 1 in 8 inadequately employed, with the economy booming.

Gross Domestic Product (GDP), is a measure of economic output, largely manufacturing production.  Supposedly, it’s the value added in an economy, adjusted for inflation.  We’ve already seen a little of how inflation is tricky, so those adjustments are suspect.  GDP only measures things we pay money for.  It does not value efforts spent for things like raising children or our own labor to improve our property.  It doesn’t measure qualitative improvements that make something better or more valuable than before, like a smartphone being more capable than a dumb phone.  It measures advertising and jails, but not “the beauty of our poetry or the strength of our marriages.”

GDP doesn’t count the exploitation or using up of our exhaustible environmental resources, or costs for environmental damage creating global climate change, and leading to huge destruction and extinctions.  It doesn’t count how we poison our environments and make life sick, or the value of free things, like government services, music we make, or incremental information and entertainment available via public libraries or the public Internet.  It doesn’t count illicit trade, like drugs, or volunteer work.[7]  It doesn’t count whether we’re satisfied, fulfilled or happy.  It doesn’t count whether we’re informed or dumb.

Imagine driving a vehicle with 3 dashboard gauges, a speedometer, gas gauge and temperature light, only none of the gauges provide accurate measurements.  That’s roughly what we are doing with these 3 economic measurements, as we try to make use of them in economics.

We’ve learned to assume, as a matter of blind faith, that more is better.  “Rising tides float all boats.”  But, in the U.S., at least, that increasingly isn’t true.  Increasingly, the wealthy harvest most of the economic benefits, the poor remain poor, and the middle class is being squeezed out.  1980-2015, income for the top 0.01% grew 322%; for the bottom 90% income grew 0.03%.[8]  The top 10% get as much total income as the bottom 90%.[9]  The poorest 90% own 25%, and the richest 10% own 75% of all U.S. wealth.[10]  Rising tides float a few boats far, far higher than most, and most boats are sinking.

The concentration of wealth and wealth and income inequality are enormous and growing problems.  The haves have most of it, and are getting more and more of it, and the have-nots are increasingly left out and suffering.  That creates real harm, social unrest and negative emotions and energies.  It’s not sustainable.  It will inevitably collapse, with tremendous disruption, destruction, pain and suffering.

Our economy depends on artificially cheap fossil fuel energy for prosperity; we’ll definitely run out of it; and international or business politics disrupt its availability or price with little warning.  We’re dragged into wars over it, as we’ll be dragged into wars over water if global warming continues.  Not sustainable.

Across most industries, market power is increasingly concentrated in fewer and fewer, bigger and bigger corporations.  Big companies dominate, and smaller enterprises are eliminated.  “Mom and pop” smaller farms and businesses all over the country are being ruthlessly and continuously driven out of business.

Consider Walmart.  Its giant box stores offer huge displays of cheap stuff, much of it sourced off-shore, in cheap labor places like China.  That offshore sourcing displaces tens of thousands of businesses and hundreds of thousands of jobs.  For every two jobs Walmart creates, it destroys three.[11] 

Local businesses that sold the kinds of things sold in Walmart are callously driven out of business, because they can’t compete with Walmart’s cheap prices and benefits of scale.  So, their economic activities and benefits are removed from the economy.  People with lower incomes and wealth are increasingly driven to buy cheap goods; we can’t afford to pay more, perpetuating Walmart traffic.  Local economic multiplier effects are destroyed.

A local economic multiplier effect describes virtuous economic behavior.  In a community, one person gives a dollar bill to another in exchange for what they have or do.  Then, that person gives it to another, for what they have or do, and so forth.  As long as that money stays in the community, everyone benefits, and shares what we have and do in exchange for what others have and do in the community.  The money just eases the exchanges.  If we keep doing that, we have a healthy economy.  People are busy doing what the community values, and are generally satisfied, getting what we need and want in the community, just passing fake money around and doing real things with and for each other.  Nice.

When a big business enters the community, bringing wares from outside the community, displaces local businesses, pays few people as little as possible to stock wares and run cash registers, then pulls most of the money out of the community, community economic multiplier effects collapse.  Too many local people no longer have money to pay locals for what we do, so we stop doing what we do.  This exploitation of the local community and economy extracts wealth from the many to benefit the few.  These vampire extractions of wealth, sucking the life out of local communities and economies, are prevalent all over the U.S.  The Walmart family alone now has as much wealth as the bottom 40% of people in the U.S.[12]  It’s not just Walmart.  Many big businesses are doing this.  It’s not sustainable.

Many of those locals later feel compelled to move to expensive cities, where there are opportunities to “make money.”  Local economies and communities die.  Even though people there still have the same real resources and capabilities we’ve always had in the real world.  Artificial money, exploitative economic behaviors and local people’s reactions to them cause lives to change and be harmed.

In many industries, production of goods has been outsourced or located abroad, where labor is cheap.  That lets sellers offer lower prices, making it easier and more profitable to sell stuff, but it also destroys livelihoods of people formerly employed making goods and providing materials in the goods at home.  They no longer have money to buy much, creating a downward economic spiral.  Increasingly, ever fewer people with ever more of the money are the only ones with money to buy increasingly cheap goods and services they mostly don’t need, because they already have plenty.  They save, invest and speculate more than spend new money for goods and services, making it unavailable to workers.

This behavior has destroyed millions of jobs across steel, clothing, furniture, electronics, hardware, tools, parts, machines, supplies, and most other industries.  Jobs left in the country are higher level positions in management, sourcing goods abroad and selling them through huge distribution networks, and lower level jobs transporting goods, stocking shelves and operating cash registers.  Good middle-class manufacturing jobs in the country are destroyed, collapsing local economies and multiplier effects, degrading middle- and lower-class lives, and concentrating wealth in fewer and fewer hands. 

That isn’t sustainable.  It leads to economic failures and suffering, so severe it’s killing U.S. white people without college educations at rising epidemic rates, via despair-related self-destructive behaviors, like suicide, alcohol and drug abuse, and various health problems.[13]  These are reducing lifespans for this group, and the whole U.S., and destroying families.  This poorly educated white working-class group is largely responsible for electing the current U.S. President, voting uninformed, desperate expressions of anger, resentment and despair.[14]  All parts of the country have been affected by this.[15]


There is a possibility of refocusing economic activity and retraining displaced workforce in higher value and higher skill pursuits:  information, knowledge and innovation economy jobs, in science, math, technology, computers and engineering.  However, there’s been little effort to do so. 

Public education isn’t doing it.  Tragically, employers in those fields are unable to find enough skilled workforce in the U.S., and often have to source workforce abroad, or locate efforts abroad, where there are suitably educated and skilled workers.  45% of U.S. small businesses can’t find qualified applicants to fill job openings.[16]  The U.S. isn’t adequately growing its own workforce for the kinds of good jobs that do exist, and could be rapidly growing, harming the economy and people.  That’s not sustainable.

For almost a decade, interest rates paid to people for insured savings in banks have been under 2%,[17] near or below inflation.[18]  That means savers would be losing money in real terms putting it in banks, at low risk, creating problems for fixed income retirees and other savers.  That incents people to put money into real property, or give it to “Wall Street” to speculate with for higher returns on investment. 

That’s led to huge sums of money speculating in real estate, and large price increases for real property.  Those increases in property prices have priced many people out of the housing market, making it unaffordable for young families and people with middle class incomes and wealth to own a home.[19]  That is not sustainable and will eventually collapse.

Big money available to Wall Street for speculation leads to increasingly complex financial maneuvers to create quick returns, like the credit default swaps and other toxic phantom financial vehicles that led to the recent global financial and economic crisis and recession.  Speculation does not create real wealth.  It moves wealth from some to others.[20]  It’s not real, except in harm it does and exploitation it enables.

Financial speculation and creating artificial money and economic games do not produce real wealth.  Real wealth is in things like healthy, productive, sustained lands, waters, air and ecosystems; happy, healthy and engaged people; functional and supportive communities; thriving and balanced sharing; effective and efficient social systems; well-being and spiritual fulfillment.  Speculative wealth is just control of fake money.  Money, getting it and much of what we do with it, is fictional, make-believe; yet, for most that’s a main focus of our attentions and efforts in life.  Money is just pieces of paper, metals and numbers on paper and in machines.  It’s not real.  It only has value if we agree to give it value.

Why do we assume converting natural living wealth to financial wealth creates real value, or maximizing financial return maximizes real value creation?  Real wealth has intrinsic value.  Financial wealth doesn’t.  We easily confuse phantom financial assets with real wealth for which they can be traded.  Those who benefit from phantom wealth creation are unfairly diluting everyone else’s claim to available supplies of real wealth.  Wall Street and its international peers have generated total phantom-wealth claims far greater than the value of all the world’s real wealth combined, creating expectations for future security and comforts that can never possibly be fulfilled.  Economic mumbo jumbo.  That’s not sustainable.

The deceptions are baked into our language. We call speculation “investment” and phantom financial wealth “capital.”  When we hear words like wealth, capital, assets or resources, we don’t know if we’re talking about real or phantom financial assets.  Our language has no way to make this crucial distinction.  It’s no surprise we get confused and fail to see Wall Street does not produce things of real value.[21]

Most of us think our government makes our money.  We save it in banks.  Banks loan that out, keeping enough in reserve so we can take out and use what we need, when we need to.  We benefit by people needing money to build a house or start a business being able to use money they don’t have yet, paying it back over time, with interest to support bank’s abilities to exist, and provide some reasonable profit.  Sorry, folks.  It’s far weirder than that.  Our system has gone much further out into the twilight zone of mumbo jumbo make-believe with money and banking. 

3% of U.S. money is minted by the U.S. government, as bills and coins; but the U.S. Federal Reserve Bank tells our government how much money to print, pays for the minting service and owns all the money.[22]  All money is created by banks.  All money is debt, an IOU.[23]  All money is make-believe.

All of our money originates with our largely independent, private Central Bank, the U.S. Federal Reserve, and through its system of banks.  The Fed loans banks and government money, for which it receives interest payments, at interest rates it determines, which has enormous impacts on economic behavior.  It has inordinate power, yet few understand how it works, what influences it and what its true agenda is. 

It works to manage the economy and money for the benefit of its owners, which are banks in its system, which share in its profits, and for the economy and its participants.  Its 7-member Board of Governors is appointed by the U.S. government.  Its 12 banks and 24 branches (“bankers’ banks”) are regional, with leaders largely appointed by their bank member owners.  3,000 of 8,000 U.S. commercial banks are Fed members, who invest 3% of their capital in the Fed and receive dividends.  5,000 other banks and 17,000 other depository institutions use Fed system services for borrowing money and executing transactions.

The Federal Open Market Committee (FOMC) makes Fed monetary policy, manages U.S. money supply and value, determines interest rates banks charge for money they create, tells government how much cash to mint, regulates banks (that own it), and buys and sells financial vehicles.  FOMC voting members are 7 Board Governors, and 5 rotating Reserve Bank Presidents.[24]  5 of 12 are bank appointed.

That is structurally corrupt, because Reserve Bank Presidents are appointed by the banks which own it, are affected by its decisions, and are supposedly being regulated and overseen by it.  Banks appointed people who bailed them out in the Great Recession, because they were “too big to fail.”  The banking system has provided case after case of regulated entities selecting their own regulator, and the Federal Reserve has repeatedly been unwilling to accept efforts to improve transparency for the System.[25]

3% of money is cash in circulation, in piggy banks and bank vaults.  All other money is just numbers in computers at banks.  Banks create all that money and have taught and acculturated us to be singularly focused on it.  We buy into the model that we need fake money to have good lives in the real world.

Say a local bank has $100 and rules require it to keep 10% of loans in reserves.  It can then loan $90, which that borrower deposits at the bank, or another bank, or pays another who deposits it in another bank in the closed bank system.  That bank then loans another $81, keeping ($90*10%) $9 in reserves.  That borrower deposits it at a bank.  That bank can then loan out another $72.90, keeping ($81*10%) $8.10 in reserves...[26]  Our government guarantees they will remain solvent by guaranteeing the loans, with our taxpayer money, or money they will borrow from other banks, at interest.

By the time they’ve loaned all they can, keeping required reserves, bank records have $651 as deposits; they’ve lent a total of $586 and hold reserves of $65.  They created $551 of artificial money from the $100 of artificial money they started with.  That’s called a money multiplier effect.  Say they get 10% interest on money loaned.  That’s $65 (a 100% return on reserves) in interest from borrowers in a year, less expenses for property, personnel, taxes, and so forth.  It’s all imaginary voodoo, creating imaginary money using imaginary money.  Banks literally create all of our money with computer keys, out of debt.

That’s where all money comes from.  That’s beneficial, if we understand, go along with it and use it to do real things that benefit real people.  It lets people in a local community come up with $551 we can trade with each other to do real things, like build homes, buy goods to trade and pay each other for services.  When local banks are doing it to help local people do real things in the local community to benefit real people there, it facilitates real things happening that are good for people.  The money isn’t real, though.  The real things we create and do in the real world, for and with each other, are real. 

Banks aren’t required to keep 10% of loans on reserve.  Manipulations of rules have reserves very low.  Third quarter 2018, this reserve requirement was 1.22%.[27]  That means banks can create far more money than in our previous 10% reserve example above.  With $100, banks can now create $8,197.[28]  That $100 can come from customer deposits, subject to requirements to keep liquidity reserves for checking accounts.  If banks don’t have money for reserves, they can just borrow it from the Federal Reserve or other banks, at the Fed Funds rate,[29] 2.4% in January 2019.[30]  It’s just cheaper to get reserves from depositors, because banks only pay us 1% interest on retail savings accounts now.[31]

Inflation is a product of how much money banks create.  The more they create, the less it is worth.  There are relatively few constraints on how much they create.  The Fed is supposed to maintain a stable currency value.  Prices today are 2,436% higher than in 1913, when the Fed was created.  $100 in 1913 was equivalent in purchasing power to $2,536 in 2018.[32]  That’s a result of excess bank money and debt (same thing) creation.  M2 money supply went from $2 trillion in 1983 to 14.5 trillion in 2018.[33]

In a further wrinkle to the system, banks create money as principle for loans.  They do not create money for interest that can be used to repay loans.  Interest payments on a $100,000, 30-year mortgage, at 5%, for example, are $93,000.  To borrow $100,000 under those terms, you pay back $193,000 by the end.  Banks created $100,000 for the loan with a few keystrokes.  Where does money for interest come from?  It comes from more loans made to others in the future, which we hustle to get some of.  This system collapses if banks don’t always loan more money in the future than they do today,[34] creating inflation.

That’s what happened in the Great Depression.  Banks quit loaning money; the money supply dried up; and, suddenly, there was no money to pay people to do real work.  The entire country, with exactly the same real resources, and exactly the same numbers of real people, with exactly the same capacities and willingness to work, ground to a halt, because banks stopped making loans.  How did we get out of it?  The U.S. Federal Government borrowed a bunch of money, especially for war, to get it going again.  Banks can do this at any time, and they hold that power over governments.

Altogether, we now have something like a million dollars in debt per U.S. household, which has to keep growing for the system to survive, creating more and more bondage, stress and interest.  Unsustainable.

You’d think banks would be satisfied with an ability to earn interest on an almost unlimited supply of money they loan out after creating it from nothing?  Banks don’t stop there.  If you can’t pay the loan, they seize the real assets pledged as collateral to get the loans.  Fake money turns into real wealth. 

Banks also speculate with money, essentially gambling.  They bet on $5 trillion (25% of GDP) in currency exchanges daily, some winning and some losing.[35]  They buy and sell stocks, bonds and real estate.  They create and gamble on more than $500 trillion in financial derivatives, 25 times U.S. GDP.[36]  They buy and sell debt/money they’ve created, our loans.  We have no way to prevent it and may not know it.  They create obtuse financial instruments, like the credit default swaps that led to the Great Recession. 

In the 2000s, there was a real estate bubble.  Real estate prices were going up.  Lenders cut standards and would lend to almost anyone, making risky “subprime” loans.  Many wanted in, because so many were “making money.”  Big banks knowingly bundled these high-risk loans into investment vehicles with names and rationales few understood, rated them like top quality investments and sold them to people, institutions and groups, like public pension funds.  They were insured.  Meanwhile, they bet against the investments in their own accounts.  Government rules had been manipulated to get away with it.

Predictably, in hindsight, it blew up.  We realized those investments were worth less, and values fell.  Individuals, institutions and groups, like public pension funds, lost billions.  Loans were called in, or their variable rates increased, so borrowers couldn’t make payments and defaulted.  We had a financial crisis, called the Great Recession, the biggest since the Great Depression.  It spread through most of the world.  We then spent $700 billion (60% of FADS) bailing out banks that were “too big to fail.”[37] 

Together, it cost at least $23 trillion in government bailouts, $7 trillion in real estate losses, $11 trillion in stock market losses, $3 trillion in retirement account losses, $3 trillion in reduced GDP, unquantified lost productivity, the earnings of 12 million unemployed people, and untold suffering – just in the U.S.[38]  That’s at least $47 trillion in the U.S. (4,062% of FADS).  A single person went to jail for these crimes, [39] in the world’s biggest prison state.[40]  In the real world, there were the same real people and houses.  The phantom eco-world, that we submit power to by going along with, caused devastating real harm. 

“A too-big-to-fail firm is one whose size, complexity, interconnectedness, and critical functions are such that, should the firm go unexpectedly into liquidation, the rest of the financial system and the economy would face severe adverse consequences.” - Ben Bernanke, Former Fed Chair


Big financial institutions offer economies of scale keeping banking prices low, and may be worth having, as long as risks are controlled by good regulation, which they diligently work hard to effectively disable.  They’re known as global systematically important banks (G-SIBs.):  Bank of America, JP Morgan Chase, Bank of New York Mellon, Citigroup, Goldman Sachs, Morgan Stanley, State Street, and Wells Fargo. 

But wait, there’s more!  Another 20 other banks, called “domestic systematically important banks” are protected:  Ally, American Express, BB&T, BBVA Compass, BMO, Capital One, Comerica, Discover, Fifth Third, Huntington, KeyCorp, M&T, Northern Trust, PNC, RBS Citizens, Regions, SunTrust, U.S. Bancorp, UnionBanCal, and Zions.[41]  They have license to gamble, but we’ll bail them out if they lose.  If they know they’ll get bailed out in a crisis, they have little incentive to be careful in their pursuits of profits. Why not gamble big if you keep the winnings but don’t have to bear the losses?  (“Fifth Third Bank”?)

Banks launder money for criminals, helping them convert illicit gains into money for use in legal trade.  In 2008, Wells Fargo was busted for laundering $378 billion (33% of FADS) for Mexican drug cartels, more than the Federal government pays for welfare in a year.  It was fined 2% of its $12 billion in profits on those deals.  The criminal U.S. government illegally laundered money through the BCCI bank during the Iran-Contra affair to illegally provide arms to Iran and fund the Contras guerrilla group in Nicaragua.

Banks manipulate markets for gain.  In 2015, five of the world’s largest banks, JPMorgan Chase, Citicorp, Barclays, The Royal Bank of Scotland and UBS, were fined $5.7 billion in a settlement over charges of rigging foreign currency exchanges.  Who knows how much they made on that?  In 2012, banks were busted for manipulating the LIBOR interest rate used in trillions of dollars of financial contracts around the globe, by just conspiring to make the number whatever they wanted, one of the biggest crimes ever.

Banks steal money.  Banks were complicit in stealing the wealth of Jews and others disappeared by the Nazis in Germany.  In 2011, Bank of New York Mellon took $2 billion from U.S. pension funds by inflating foreign exchange fees, defrauding customers out of that money, paying a $180 million settlement.[42]  Bank white collar crimes often end in “settlements,” agreements with the government that let criminals not admit guilt, not disclose crime details, and avoid prison, for a fraction of the profits from the crimes.  Meanwhile, we run the world’s largest prison system for crimes committed by real people.  Not fair.

Banks scam customers for fees and unwanted services.  In 2016, Wells Fargo signed up customers for 2 million accounts and credit cards, opened without knowledge of customers, and charged with the same fees as regular accounts.  They settled, were fined $200 million, and fired 5,300 employees, while their market capitalization was $250 billion.[43]  Nobody went to jail,[44] as they might for a weed joint.

Banks profiteer from (and love) wars.  Banks finance governments in all wars, and most businesses needing capital to profit from wars, and banks profit hugely from that, on both sides of conflicts.[45]  Almost all money for wars comes from banks, because almost all money comes from bank debt creation.

“We the People” currently owe banks more than $30 trillion in federal debt (2,593% of FADS, 26 years of the total annual discretionary spending of the Federal Government), $120,000 per U.S. household, and we paid about $456 billion in interest on that in 2018 (39% of FADS), 4 times as much as the Federal Government spends on education.[46]  That debt and interest mostly grow. 

The Fed kept interest rates near zero, almost a decade, ostensibly, to help the economy recover from The Great Recession.  It made it cheap for banks, financial institutions and others with credit to borrow for speculation and other purposes, and virtually eliminated safe bank savings vehicles, because of historic low yields, incenting everyone to speculate in real estate and/or financial investment vehicles.  That creates financial and economic instability and increases financial and economic risk.

The U.S. financial system has created retirement savings systems that all but force retirement savings into big banks and Wall Street financial institutions.  Tax laws only defer taxes on retirement investment returns in qualified speculative investment vehicles, or bank deposits with low or negative real returns.  It’s not possible for a citizen without the means for expensive lawyers to evade laws, for example, preventing retirement account investments in a home to live in, rather than speculative vehicles.[47]

Large banks and financial institutions have created enormous artificial consumer credit card systems, which dominate as U.S. consumer spending vehicles.  It’s called “revolving debt,” because it doesn’t have to keep being applied for; it’s in our wallets.  Credit cards have usurious interest rates, maybe 20 times what a citizen can earn on a savings deposit in a bank, averaging 18.76%.  If consumers don’t pay credit card bills in full each month, they pay these enormous returns to banks and financial companies.  Usury, lending at interest, is a sin in most world religions; yet, our money and economy are based on it.

An average U.S. family has over $17,000 in credit card debts, $1 trillion altogether[48] (86% of FADS).  Families making 2% average minimum monthly payments[49] on that debt, at 18.76% annual interest, would take more than 30 years to pay it off and spend a total of $62,000, almost 4 times the debt.[50]  For many, credit card debt becomes a burden we can’t escape.  We’re trapped in debt, paying extreme interest rates, essentially indentured servants.  35% of card holders pay our bill in full each month.[51]  Half of U.S. adults carry credit card debt.[52]  We paid $104 billion in credit card fees and interest in 2018 (9% of FADS), 11% more than in 2017.[53]

Credit card debt rates are high when things are good, and they’re high when things are bad.  The biggest reason for such high debt is high credit availability.  When someone offers you credit, it’s hard to say no.  Available credit seems to be the #1 driver of debt, in both the short and long term.  To “revolvers,” who don’t pay bills in full each month, credit limit increases are invitations to spend more; a 10% increase in credit is followed by a 1.3% increase in debt within one quarter, and a 10% increase in long term debt. 

Part of the problem is how easy it is to get many credit cards, each with a chance to build more debt.  Cards offer teaser rates, bonus miles, or cash back incentives.  The addiction typically starts in our 20s, when most don’t earn much.  The availability of money through credit seems like extra wealth, so we spend more.  Paying off credit card debt has a riskless return averaging 14%, which little else can match.  There’s almost never a better investment for someone with credit card debt than to pay it off.[54] 

This is, at least, abuse of the financially illiterate.  In the U.S., 57% of adults are financially literate.  Globally, 33% of adults are.  U.S. college grads are 28% more financially literate than high school grads.  Interest is the least understood financial concept in the U.S.  43% of adults with credit cards don’t understand interest.  42% of adults saving at financial institutions don’t understand compound interest.  U.S. men are 10% more financially literate than women, twice the global gender gap.[55]  Only 5 states have a personal finance requirement in high school.[56]  Only 16% of high school students are required to take a financial course; 76% of Millennials lack basic financial knowledge; and 4 of 5 U.S. adults say they were never given an opportunity to learn about personal finance.[57]  Is this deliberate?

But wait, there’s more!  Credit card fees are built in to all consumer prices, because merchants assume customers will be paying with credit cards, which we often do.  These fees are typically 2.5-3.5%,[58] essentially an invisible tax of 2.5-3.5% on everything we buy in the U.S. economy, going to banks for card payments and to businesses for cash or check payments.  This creates a huge drag on the economy, reducing economic multiplier effects, and producing huge profits for already wealthy bank and financial company owners.  That’s about $50 billion a year (4% of FADS) added to the price of goods every year, $1 to $2 on every $50 purchase, more than $400 a year per household.  We just go along with it.  Rubes.

These fees have become most U.S. merchants’ fastest growing expenses, and 2nd or 3rd highest costs, behind payroll and healthcare.  Passed on to customers, people in the U.S. pay more for these fees than all the people in the rest of the world combined.[59]  Europe limits these fees, but the U.S. does not.  The credit card system is so fundamentally corrupt, it’s morally equivalent to theft or mobster activities?  Credit card companies buy consumer complicity through kickback schemes, like airline or hotel loyalty program miles or cash back.  They try to make it illegal to disclose credit card fees on consumers’ bills.

In 2018, Europe began enforcing new antitrust rules that make the market more competitive and ban this type of price-fixing.  Under new rules, swipe fees on European credit cards are limited to 0.3% of each transaction, swipe fees on debit cards to 0.2%.  The E.U. estimates this policy will save merchants and consumers at least $6 billion annually.  Benefits would be much higher in the U.S., but Congress has not addressed it, and likely won’t, because it’s corrupt.[60]  Card companies complain rules like these in Europe are unfair and bad for business.  Yet, Visa recently bought a European subsidiary for $23 billion, because the new E.U. limitations still leave room for plenty of profits.  They still get $3 on a $1,000 transaction that costs them less than a nickel to process.[61]  In the U.S., they get $25 to $35.

In the U.S., instead of limiting credit card fees, there’s movement toward not accepting cash money.  There are already many cashless stores and restaurants.  That means potential job losses for cashiers, but also risks from cybersecurity and IT failures.  Imagine encountering non-working systems in stores in the panic of disasters, like earthquakes, storms and fires.  It creates digital surveillance for all purchases.  

Amazon Go has cashless stores.  Walmart and Tesco are exploring them.  Many restaurants are cashless.  Employees are told to turn people away if they can’t pay digitally.  Visa just gave 50 small businesses $10,000 each for winning its “cashless challenge.”  Killing cash makes billions for credit-card companies. “Card swipe” fees earned Visa and Mastercard $43 billion last year.  Pushing business to “frictionless” card-only pay models is an enormous moneymaking strategy for them.  We’re the patsies.

Making a card a requirement for consumption is like making an ID card a requirement for voting.  It disempowers communities of color.  17% of black and 14% of Hispanic households had no bank account in 2017.  Some have poor credit; some work jobs that pay cash.  Cashless isn’t an option for them.  Cashless stores create public spaces that essentially ban low-income people from entry.  So, they either join a digital economy via banking institutions or they are banned from these spaces.[62]  That’s unfair.

Banks have a revolving door to government finance positions, no matter which party is in power,[63]  where they create benefits for banking and financial institutions in law and government practices.

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. – Napoleon Bonaparte

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.  – Thomas Jefferson, U.S. Founding Father and President

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. – James Madison

Whoever controls the volume of money in any country is absolute master of all industry and commerce. And when you realize that the entire system is very easily controlled, one way or another by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate. – President James Garfield, assassinated weeks after making this statement.[64]

Who controls the money, controls the world. – Henry Kissinger, Council on Foreign Relations

None are more enslaved than those who falsely believe they are free. — Goethe

Permit me to issue and control the money of a nation, and I care not who makes its laws. – Mayer Amshel Rothschild, Global Banker

The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.… The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, and more selfish than bureaucracy… I have two great enemies, the Southern Army ahead of me and the bankers in the rear.  Of the two, the one in the rear is my greatest foe. –  Abraham Lincoln, U.S. President

Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal — that there is no human relation between master and slave. — Leo Tolstoy

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. — Woodrow Wilson, President when U.S. Federal Reserve Bank was created

All of the perplexities, confusion, and distress in America arises, not from the defects of the Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.  — John Adams, Founding Father and President[65]

The U.S. economy, banking and financial systems are profoundly and fundamentally corrupt and broken, providing systemic advantages to existing wealth and power.  They don’t make sense for common folks, who they mostly take advantage of.  It feels bad when we understand it, because we can see real harms to real people and environments, we inherently value fairness, want all to flourish, don’t like our lives and societies undermined, don’t like being cheated, and don’t want to be part of a sham.  Our economic, banking and money systems aren’t sustainable and will change, change affecting all.  Let’s change now!

Help raise awareness of these issues and reduce how we participate in and give power to this system!  Don’t do business with any bank that is too big to fail!  Insist on living wages and living wage increases!  Think analytically and critically about the spin!  Learn how financial, money and banking systems work, and how to partake in them with minimal harm!  Resist big-box businesses!  Buy from mom and pops!

Q:  If you go browse in a store, see a $100 item for 50% off, and buy it, how much money did you save? 

A:  Nothing.  You spent $50.  And if you did it on credit and roll it over it could be far more. 

Become financially literate!  Stop spending so much money, especially money you don’t have, on credit!  Pay off cards first, then other debt!  Support local businesses creating local economic multiplier effects!  Recognize and cultivate real wealth, rather than phantom financial wealth and money!  Acquire and work with real property, goods and services, with like-minded real people in real communities! 

Value and insist on fairness!  Be interested and learn!  Acquire experiences and skills, rather than things! (That doesn’t have to be expensive.)  Don’t patronize businesses that don’t take cash and tell them why!  Ask merchants for cash discounts!  Write letters about this to government representatives and news organizations, even if you do not believe it will make a difference!  Stop being a rube!  We can change!

Chapter Input


Contribute information, articles, comments, suggestions, ideas and discussion on this Economy, Banking and Finance chapter.  

How do you feel after reading this information?  Why do you feel that?  What values are impacted?  How can we change?  What can we do?  Where can we get more information?  (Please submit any discussion on the entire We Can Change Wicked Problems! section here.)

Please provide only constructively intended interactions addressing ideas and content, not persons. All mean-spirited interactions will be deleted, especially anything disrespectful directed toward persons interacting with this site and their qualities, rather than ideas and content.  Thanks!



[1] "Here's why economists keep getting it wrong”, Jared Bernstein, CNBC, June 21, 2016, https://www.cnbc.com/2016/06/21/heres-why-the-fed-keeps-getting-it-wrong-commentary.html

[2] “Current US Inflation Rates: 2008-2018”, U.S. Inflation Calculator, https://www.usinflationcalculator.com/inflation/current-inflation-rates/

[3] “Consumer Price Index, San Francisco Area — December 2018”, U.S. Department of Labor, Bureau of Labor Statistics, https://www.bls.gov/regions/west/news-release/consumerpriceindex_sanfrancisco.htm

[4] “A Better Way To Think About December’s Jobs Numbers:  The context you need to understand job growth and unemployment in the U.S., updated every month.”, Julia Wolfe, FiveThirtyEight, January 4, 2019, https://projects.fivethirtyeight.com/jobs-report-growth-unemployment/

[5] “Mass Incarceration: The Whole Pie 2017”, Peter Wagner and Bernadette Rabuy, March 14, 2017, Prison Policy Initiative, https://www.prisonpolicy.org/reports/pie2017.html

[6] “The Wages of Poverty in America:  In the United States of inequality”, Rajan Menon, Common Dreams, July 16, 2018, https://www.commondreams.org/views/2018/07/16/wages-poverty-america

[7] “Measuring economies:  The trouble with GDP:  Gross domestic product (GDP) is increasingly a poor measure of prosperity. It is not even a reliable gauge of production”, The Economist, April 30, 2016, https://www.economist.com/briefing/2016/04/30/the-trouble-with-gdp

[8] “11 Charts That Show Income Inequality Isn’t Getting Better Anytime Soon:  It’s no secret: More and more wealth is trickling up”, Dave Gilson, Edwin Rios, December 22, 2016, Mother Jones, http://www.motherjones.com/politics/2016/12/america-income-inequality-wealth-net-worth-charts/

[9] “11 Charts That Show Income Inequality Isn’t Getting Better Anytime Soon:  It’s no secret: More and more wealth is trickling up”, Dave Gilson, Edwin Rios, December 22, 2016, Mother Jones, http://www.motherjones.com/politics/2016/12/america-income-inequality-wealth-net-worth-charts/

[10] “Wealth distribution in the United States in 2016”, Statista, https://www.statista.com/statistics/203961/wealth-distribution-for-the-us/

[11] “Study proves it: Walmart super-stores kill off local small businesses”, Steven Barrison,

May 4, 2011, New York Daily News, http://www.nydailynews.com/new-york/brooklyn/study-proves-walmart-super-stores-kill-local-small-businesses-article-1.140129

[12] “Bernie Sanders says Walmart heirs own more wealth than bottom 40 percent of Americans”, Molly Moorhead, July 31st, 2012, Politifact, http://www.politifact.com/truth-o-meter/statements/2012/jul/31/bernie-s/sanders-says-walmart-heirs-own-more-wealth-bottom-/

[13] “The Forces Driving Middle-Aged White People's 'Deaths Of Despair'”, Jessica Boddy, March 23, 2017, NPR, https://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair

[14] “White and Dying in America:  The mortality rate among under-educated whites in America is rising, which explains why so many voted for Trump”, Jeff Nesbit, March 27, 2017, U.S. News and World Report, https://www.usnews.com/news/at-the-edge/articles/2017-03-27/whites-without-a-college-degree-are-dying-in-america-thats-why-they-voted-for-donald-trump

[15] “The Forces Driving Middle-Aged White People's 'Deaths Of Despair'”, Jessica Boddy, March 23, 2017, NPR, https://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair

[16] “America Has to Close the Workforce Skills Gap”, Rob Kaplan, April 12, 2017, Bloomberg, https://www.bloomberg.com/view/articles/2017-04-12/america-has-to-close-the-workforce-skills-gap

[17] “CD Rate Strategies for the New Interest Rates”, Ruth Sarreal, March 08, 2017, The Huffington Post, https://www.huffingtonpost.com/gobankingrates/cd-rate-strategies-for-th_b_9401438.html

[18] “CDs Vs. Inflation: Are They Keeping Up?”, Richard Best, December 22, 2015, Investopedia, http://www.investopedia.com/articles/investing/122215/cds-vs-inflation-are-they-keeping.asp

[19] “The Year in Housing:  The Middle Class Can’t Afford to Live in Cities Anymore”, Emily Dreyfuss, December 31, 2016, Wired, https://www.wired.com/2016/12/year-housing-middle-class-cant-afford-live-cities-anymore/

[20] “The Illusion of Money”, David Korten, January 18, 2011, Yes Magazine, http://www.yesmagazine.org/blogs/david-korten/the-illusion-of-money

[21] “The Illusion of Money”, David Korten, January 18, 2011, Yes Magazine, http://www.yesmagazine.org/blogs/david-korten/the-illusion-of-money

[22] “Who Prints Money in the United States?:  Does the Federal Reserve or U.S. Treasury Print Money?”, Kimberly Amadeo, The Balance, Updated January 07, 2019, https://www.thebalance.com/is-the-federal-reserve-printing-money-3305842

[23] “The truth is out: money is just an IOU, and the banks are rolling in it”, David Graeber, The Guardian, March 18, 2014, https://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity

[24] “The Structure and Functions of the Federal Reserve System”, Federal Reserve Education.org, Accessed January 25, 2019, https://www.federalreserveeducation.org/about-the-fed/structure-and-functions

[25] “Nobel Prize-Winning Economist: Federal Reserve System is Corrupt and Undermines Democracy”,  WashingtonsBlog, March 4, 2010, https://washingtonsblog.com/2010/03/nobel-prize-winning-economist-federal-reserve-system-is-corrupt-and-undermines-democracy.html

[26] “Money Multiplier and Reserve Ratio“, Tejvan Pettinger, Economics Help, June 19, 2017, https://www.economicshelp.org/blog/67/money/money-multiplier-and-reserve-ratio-in-us/

[27] “US Loan Loss Reserve / Total Loans for all Banks:1.22% for Q3 2018”, Y Charts, https://ycharts.com/indicators/us_loan_loss_reserve__total_loans_for_all_banks

[28] 100*(1/0.0122)

[29] “Why Banks Don't Need Your Money to Make Loans”, Matthew Johnston, Investopedia, Updated Oct 10, 2018, https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp

[30] “Effective Federal Funds Rate:2.40% for Jan 24 2019”, Y Charts, https://ycharts.com/indicators/effective_federal_funds_rate

[31] “Best Online Savings Accounts for January 2019”, As of Friday, January 25, 2019, BankRate, https://www.bankrate.com/banking/savings/rates/

[32] “U.S. Inflation Rate, $100 in 1913 to 2018”, CPE Inflation Calculator, http://www.in2013dollars.com/1913-dollars-in-2018

[33] “M2 Money Stock (M2)”, St. Louis Fed, https://fred.stlouisfed.org/series/M2

[34] “Money as Debt”, 2009, http://www.moneyasdebt.net/

[35] “Exchange Rates and What Affects Them:  How Exchange Rates Work”, Kimberly Amadeo, The Balance, Updated November 05, 2018, https://www.thebalance.com/how-do-exchange-rates-work-3306084

[36] “The New York Fed is understating the impact of a $500 trillion market”, Wolf Richter, Business Insider, May 15, 2017, https://www.businessinsider.com/new-york-fed-derivatives-500-trillion-market-2017-5

[37] “The Great American Bubble Machine”, Matt Taibbi, Rolling Stone, April 5, 2010, https://www.rollingstone.com/politics/politics-news/the-great-american-bubble-machine-195229/

[38] “How Much Did the Financial Crisis Cost?”, Sarah Childress, PBS Frontline, MAY 31, 2012, https://www.pbs.org/wgbh/frontline/article/how-much-did-the-financial-crisis-cost/

[39] “Why Only One Top Banker Went to Jail for the Financial Crisis”, Jesse Eisinger, The New York Times, April 30, 2014, https://www.nytimes.com/2014/05/04/magazine/only-one-top-banker-jail-financial-crisis.html

[40] See the chapter on Prisons and Incarceration

[41] “Is Your Bank Too Big to Fail? Probably! Check Out This Handy List”, Ethan Wolff-Mann, January 5, 2016, Money, http://time.com/money/4167843/is-your-bank-too-big-to-fail-probably-check-out-this-handy-list/

[42] “Top 10 Unforgivable Crimes Banks Have Committed”, Jonathan H. Kantor, Listverse, May 10, 2017, https://listverse.com/2017/05/10/top-10-unforgivable-crimes-banks-have-committed/

[43] “10 Bizarre Schemes Corporations Have Tried To Get Away With”, Gordon Gora, Listverse, September 14, 2016, https://listverse.com/2016/09/14/10-bizarre-schemes-corporations-have-tried-to-get-away-with/

[44] “5,300 Wells Fargo employees fired over 2 million phony accounts”, Matt Egan, CNN, September 9, 2016, https://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html

[45] “Bankers Hate Peace: All Wars Are Bankers’ Wars”, Washington's Blog, Global Research, March 26, 2015, https://www.globalresearch.ca/bankers-hate-peace-all-wars-are-bankers-wars/5438849


[47] “Using IRA Money to Buy Real Estate:  Weighing the Pros and Cons”, Dana Anspach, Updated December 03, 2018, https://www.thebalance.com/rules-of-buying-real-estate-in-an-ira-2388761

[48] “Total Household Debt Increases, Driven by Mortgage, Auto and Credit Card Debt”, August 15, 2017, Federal Reserve Bank of New York, https://www.newyorkfed.org/newsevents/news/research/2017/rp170815

[49] “How Credit Card Issuers Calculate Minimum Payments:  Your minimum is usually based on a percentage of your balance — a small percentage. If you want to get out of debt, pay more than the minimum.”, Claire Tsosie, NerdWallet, October 31, 2018, https://www.nerdwallet.com/blog/credit-cards/credit-card-issuer-minimum-payment/

[50] “Credit Card Minimum Payment Calculator:  How long will it take to pay off credit cards?”, BankRate, https://www.bankrate.com/calculators/credit-cards/credit-card-minimum-payment.aspx

[51] “The Average American Is in Credit Card Debt, No Matter the Economy”, Ethan Wolff-Mann, February 9, 2016, Money, http://time.com/money/4213757/average-american-credit-card-debt/

[52] “Report on the Economic Well-Being of U.S. Households in 2016”, May 2017, Board of Governors of the Federal Reserve System, Page 1, https://www.federalreserve.gov/publications/files/2016-report-economic-well-being-us-households-201705.pdf

[53] “Consumers paying $104 billion in credit card interest and fees:  As balances rise and interest rates climb, the collective cost of carrying debt on plastic is on track to reach $110 billion by next March, new research shows.”, Sarah O'Brien, CNBC, July 20, 2018, https://www.cnbc.com/2018/07/19/consumers-paying-104-billion-in-credit-card-interest-and-fees.html

[54] “The Average American Is in Credit Card Debt, No Matter the Economy”, Ethan Wolff-Mann, February 9, 2016, Money, http://time.com/money/4213757/average-american-credit-card-debt/

[55] “Only 1 in 3 Adults are Financially Literate”, Ricky Biel, Haydel Biel and Associates, August 21, 2018, http://www.hbawealth.com/blog/only-1-in-3-adults-are-financially-literate

[56] “4 Stats That Reveal How Badly America Is Failing At Financial Literacy”, Dani Pascarella, Forbes, Apr 3, 2018, https://www.forbes.com/sites/danipascarella/2018/04/03/4-stats-that-reveal-how-badly-america-is-failing-at-financial-literacy/#2ca170042bb7

[57] “The Financial Literacy Problem”, Visual Capitalist, Accessed January 25, 2019, https://www.visualcapitalist.com/americas-growing-financial-literacy-problem/

[58] “Credit Card Processing Fees and Costs”, ValuePenguin, https://www.valuepenguin.com/what-credit-card-processing-fees-costs

[59] “If Europe can rein in credit card fees, why not us?”, Mallory Duncan, December 7, 2015, The Hill, http://thehill.com/blogs/congress-blog/economy-budget/262142-if-europe-can-rein-in-credit-card-fees-why-not-us

[60] See the chapter on Government Corruption

[61] “If Europe can rein in credit card fees, why not us?”, Mallory Duncan, December 7, 2015, The Hill, http://thehill.com/blogs/congress-blog/economy-budget/262142-if-europe-can-rein-in-credit-card-fees-why-not-us

[62] “Who Wins When Cash Is No Longer King?:  It won’t be the poor.”, Sidney Fussell, The Atlantic, December 21, 2018, https://www.theatlantic.com/technology/archive/2018/12/cashless-amazon-walmart-workers/578377/

[63] “The People From ‘Government Sachs’”, Dealbook, The New York Times, March 16, 2017, https://www.nytimes.com/2017/03/16/business/dealbook/goldman-sachs-goverment-jobs.html

[64] “Part II: Banking And War Profiteering”, Editors, Veterans Today, October 20, 2017, https://www.veteranstoday.com/2017/10/20/part-ii-banking-and-war-profiteering-2/

[65] “Money as Debt”, 2009, http://www.moneyasdebt.net/

© 2019 and 2020