So Why Aren’t We Taught About Money Like This In Schools, and Why Has It Not Been

Discussed Like This in the Public Forum Over The Years?

“The difficulty of having people understand monetary theory is very

simple: The central banks are good at press relations, the central banks employ a
large fraction of economists. So there is a bias to tell the story in a way favorable
to the central banks.”
-Milton Friedman, 2006, Economist and winner of the 1976 “Nobel Prize” in
Economics.

“In the US, the importance of financial sector campaign donations for
members of Congress is well known, and in the UK those in the financial sector
are major donors….It was this power and influence that led to the deregulation
that allowed the global financial crisis, but nothing has been done to check it…
…It should therefore not be surprising that [the public] have moved away from
established leaders towards those…who are willing to talk more openly about
the power of the financial sector and inequality. Why were politicians and the
media so surprised by this success? I think it tells us how insular the
Westminster and Washington bubbles really are. Political commentators talk
to politicians who talk to political commentators. It tells us how embedded the
influence of the City [financial district of London] and Wall Street is. The media
relies on economists from the financial sector, and so tends to see the economy
from their perspective.
-Simon Wren-Lewis, 2016, Professor of Economic Policy at Oxford University

Let’s face it: Every society has specific constructs. This society we live in has

concentrated much of the money into the hands of the banking/financial class, as well as

large multi-national corporations that rely on the status quo of the banking system being

preserved at all costs. This is not a recent development, either. It’s been like this for a very

long time.

It makes sense, then, that private financial institutions were the first ones to fund

the profession of economics, and academia naturally grew up around its ability to get paid

by those who needed their services. Any economist proposing theories that would

negatively affect the banking system’s profits, or risk changing the status quo in a major

way, would risk losing their ability to make a living in the private sector.
 When central banking was developed, many economists also got paid by conducting

research for them and their stockholders (the private banks), and they still do to a large

degree. Thus, the monetary economists became quite intertwined with both the big private

banks as well as the central banks.

In addition, central bankers themselves are currently extremely limited in

what they can do to positively help human civilization. We need to be looking

beyond them. The point of their job is to try to use indicators to judge a path forward on

interest rates and money supply in order to influence lending, which they hope will, in turn,

influence economic activity. However, interest rates are an extremely blunt tool with

which to conduct monetary policy, and blunt tools tend to have unintended consequences

worse than their initial purpose. At times, it can be like trying to “hammer” a nail into a

piece of wood using a brick.

It has sure seemed this way since 2008 when the central bankers adjusted interest

rates down to near zero and have kept them there since. It hasn’t done much to benefit the

working class, as wages remain stagnant and the labor force continues to shrink. In fact,

the artificially low interest rates have had the unintended consequence of

accelerating the problem of growing income and wealth inequality, as the low rates

have disproportionately benefitted the banks, large corporations, and those who

already own lots of stocks (equity).

The bottom line is that our monetary system’s promotion of inequality is no

longer “a phase.” As mentioned in Chapter 1, it now happens in both our periods of

economic expansion and economic contraction. It has become the reality all times.
Any other reality would require a moment of reckoning in financial markets that the

system is simply too fragile to bear at all times.

We are, therefore, trapped into this systematic promotion of inequality.

Furthermore, the central banks’ tinkering in the post 2008 world has shown that

their “toolbox” of actions just isn’t enough to adequately benefit the broader society that’s

more than one or two degrees of separation from them. The central bankers are

therefore rather powerless to help the majority of society. Hopefully this book is

convincing you that it’s the underlying monetary system itself that really needs to be

re-evaluated in order to get to the root causes of today’s problems, and that goes

beyond the central bankers to Congress, and the voters who elect Congress.

Even Federal Reserve officials will sometimes admit that we should really be

looking beyond the Fed and instead to Congress for ways to improve the system, but they

only usually say it when backed in a corner during interviews and Congressional testimony.

Now, naturally, we’d also want to see what the community of professional

economists says about reform of the monetary system. Herein lies a problem.

In 2015 I came across a lecture on YouTube given by Bernard Lietaer. A native

Belgian, Lietaer received an MBA from MIT in the late 1960s and became a Professor of

International Finance at the well-known University of Louvain in Belgium in the 70s and

80s. From 1978-83, he was the Head of Organization and Electric Data Processing at

Belgium’s Central Bank. In more recent years, Lietaer has been involved in the study of

alternative monetary systems.

I mention Mr. Lietaer because of an anecdote he gave of a conversation he’d had

with famed economist Paul Krugman, also a product of MIT. Krugman was a recipient of
the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,” which is

technically different from the other Nobel Prizes, even though today it is commonly referred to

as the Nobel Prize of Economics. It is actually not one of the prizes that Alfred Nobel

established in his will in 1895, but instead was created 73 years later by a donation to the

foundation from Sweden's central bank, on the bank's 300th anniversary. Regardless, Paul

Krugman is very much thought of as the “establishment” of American “liberal” economic

thought today. He carries mainstream prestige, complete with his own column in the New York

Times.

Lietaer described his conversation with Krugman like this:

“Paul Krugman told me personally that it was totally crazy to talk

about ‘the money issue.’ We were both from MIT…we had the same
professors, and what he told me [was]: “Didn’t they tell you? Never touch the
money system.” You can touch everything else, but you never touch the
money system. The reason? You will not be invited to the right places and
you could kiss goodbye the Nobel or anything else that is worthwhile getting.
You’re killing yourself academically if you touch the money system.” i

Michael Hudson, Research Professor of Economics at University of Missouri, is one

of the few professional economists out there who openly advocates for reform to move

away from a Government-guaranteed monetary system that is based on private, un-backed

debts. He was once asked why he doesn’t receive many challenges from other professional

economists regarding this. He replied, “They know I am right, and they concede it, but then

go back to business as usual ‘because it’s a job’.” ii

Again, you will read about some of the more interesting modern alternative views that

credible people have proposed later in the book.

 Milton Friedman, who also won the “Nobel Prize of Economics, “ saw all this

firsthand over his long and illustrious life as an economist, which spanned from the 1930s

into the 2000s. By 2006, Friedman was able to make the big-picture conclusion quoted at

the beginning of this section that the private banking system, along with its apex the

“central bank,” has used its influence to hinder the cause of monetary thought among

professional economists.

Friedman, who would certainly know about these sorts of things, estimated to

Reuters in 1993 that the Federal Reserve employed half of the monetary economists in the

United States, and created visiting appointments for two-thirds of the rest. He observed:

“The Fed’s relatively enhanced standing among the public has been aided by the fact that Fed

has always paid a great deal of attention to soothing the people in the media and buying up

its most likely critics.”

Friedman also wrote in 1993:

“[The Federal Reserve employing so many monetary economists] is

extremely unhealthy…it is not conducive to independent, objective
research…I know there has been censorship of the material published.
Equally important…the Federal Reserve has had a significant influence on the
kind of research they do, biasing that research towards noncontroversial
technical papers on method as opposed to substantive papers on policy and
results.”

Economist Robert D. Auerbach, who today is a Professor of Public Affairs at the

University of Texas, worked for the Congressional committee in the 1980s and 90s that

oversaw the banking industry and the Federal Reserve. (Back then it was known as the

Banking and Currency Committee, today it’s called the Financial Services Committee.) In

2008, Auerbach wrote of the work he did for the Committee in the early 90s investigating

the Federal Reserve’s near monopoly on the employment of monetary economists. He also
wrote about his conversations on the topic with Milton Friedman, who had mentored him

during his University days in the 1960s:

“I assisted in congressional investigations of the Federal

Reserve…during the 1990s…The investigations examined the number and
contracts of outside economists from academic institutions who signed
contracts and were paid by one of more of the 12 district Federal Reserve
Banks. These economists were in addition to over 500 economists employed
at the Federal Reserve. Some outside economists were contracted and paid
by more than one, even up to 5 of the 12 Federal Reserve district banks…
During another call from Friedman, he informed me that
someone had asked for his help in stopping me in the congressional
investigations of the Federal Reserve. Milton wanted me to know that he
strongly objected to this call and that I should continue my efforts.”

So, instead of acknowledging the problem, it seems the Fed’s response was to try to

cover it up.

Things have unfortunately not changed much into the early 21st century. Danielle

DiMartino Booth, a former Senior Financial Analyst/Policy Advisor at the Federal Reserve

Bank of Dallas, wrote in a January 2017 Bloomberg op-ed:

“[Milton Friedman’s] prescience was remarkable. Today the

institution of the Fed is as intellectually entrenched as it has ever been. It has
become the largest employer of people with doctorates in economics. It has
hired or contracted with more than 1,000 of these economists, who actively
endeavor to validate, rather than question, orthodox theories and policies.
The pipeline of talent filling new positions at the Fed is sourced from the
same stagnant academic pool that produced the current leadership. Is it any
wonder criticism within the Fed has been quashed?”

To give you some context about Ms. Booth’s number of 1,000 economists being

employed by the Fed, in 2013 the American Economic Association only had 1,041 member

economists who specialized in areas with relevance to monetary theory and policy. iii

It’s time to be mature about this.

 It’s time the world recognized the profession of monetary economics as one

populated by very smart people, but perhaps naturally limited due to the audience it

must cater to in order to sustain itself.

Overcoming this fact might be humanity’s toughest challenge of the 21st century.

i “The New Paradigm of Money: Monetary blind spots and structural solutions,” Bernard A.
Lietaer, Research Fellow, University of California. Covering the Crisis Conference, Brussels, 9-10
November 2009
ii http://www.victoryfortheworld.net/articles1.html
iii https://www.huffingtonpost.com/2009/09/07/priceless-how-the-

federal_n_278805.html?ncid=engmodushpmg00000004