Source: Guardian
 

Arundhati Roy. Photograph: Sarah Lee

This is not an ideal beginning. I bump into Arundhati Roy as we are both heading for the loo in the foyer of the large building that houses her publisher Penguin’s offices. There are some authors, V S Naipaul say, with whom this could be awkward. But not Roy, who makes me feel instantly at ease. A few minutes later, her publicist settles us in a small, bare room. As we take our positions on either side of a narrow desk I liken it to an interrogation suite. But she says that in India, interrogation rooms are a good deal less salubrious than this.

Roy, who is 50 this year, is best known for her 1997 Booker prize-winning novel The God of Small Things, but for the past decade has been an increasingly vocal critic of the Indian state, attacking its policy towards Kashmir, the environmental destruction wrought by rapid development, the country’s nuclear weapons programme and corruption. As a prominent opponent of everything connected with globalisation, she is seeking to construct a “new modernity” based on sustainability and a defence of traditional ways of life.

Her new book, Broken Republic, brings together three essays about the Maoist guerrilla movement in the forests of central India that is resisting the government’s attempts to develop and mine land on which tribal people live. The central essay, Walking with the Comrades, is a brilliant piece of reportage, recounting three weeks she spent with the guerrillas in the forest. She must, I suggest, have been in great personal danger. “Everybody’s in great danger there, so you can’t go round feeling you are specially in danger,” she says in her pleasant, high-pitched voice. In any case, she says, the violence of bullets and torture are no greater than the violence of hunger and malnutrition, of vulnerable people feeling they’re under siege.

Her time with the guerrillas made a profound impression. She describes spending nights sleeping on the forest floor in a “thousand-star hotel”, applauds “the ferocity and grandeur of these poor people fighting back”, and says “being in the forest made me feel like there was enough space in my body for all my organs”. She detests glitzy, corporate, growth-obsessed modern Indian, and there in the forest she found a brief peace.

There is intense anger in the book, I say, implying that if she toned it down she might find a readier audience. “The anger is calibrated,” she insists. “It’s less than I actually feel.” But even so, her critics call her shrill. “That word ‘shrill’ is reserved for any expression of feeling. It’s all right for the establishment to be as shrill as it likes about annihilating people.”

Is her political engagement derived from her mother, Mary Roy, who set up a school for girls in Kerala and has a reputation as a women’s rights activist? “She’s not an activist,” says Roy. “I don’t know why people keep saying that. My mother is like a character who escaped from the set of a Fellini film.” She laughs at her own description. “She’s a whole performing universe of her own. Activists would run a mile from her because they could not deal with what she is.”

I want to talk more about Mary Roy – and eventually we do – but there’s one important point to clear up first. Guerrillas use violence, generally directed against the police and army, but sometimes causing injury and death to civilians caught in the crossfire. Does she condemn that violence? “I don’t condemn it any more,” she says. “If you’re an adivasi [tribal Indian] living in a forest village and 800 CRP [Central Reserve Police] come and surround your village and start burning it, what are you supposed to do? Are you supposed to go on hunger strike? Can the hungry go on a hunger strike? Non-violence is a piece of theatre. You need an audience. What can you do when you have no audience? People have the right to resist annihilation.”

Her critics label her a Maoist sympathiser. Is she? “I am a Maoist sympathiser,” she says. “I’m not a Maoist ideologue, because the communist movements in history have been just as destructive as capitalism. But right now, when the assault is on, I feel they are very much part of the resistance that I support.”

Roy talks about the resistance as an “insurrection” she makes India sound as if it’s ripe for a Chinese or Russian-style revolution. So how come we in the west don’t hear about these mini-wars? “I have been told quite openly by several correspondents of international newspapers,” she says, “that they have instructions – ‘No negative news from India’ – because it’s an investment destination. So you don’t hear about it. But there is an insurrection, and it’s not just a Maoist insurrection. Everywhere in the country, people are fighting.” I find the suggestion that such an injunction exists – or that self-respecting journalists would accept it – ridiculous. Foreign reporting of India might well be lazy or myopic, but I don’t believe it’s corrupt.

She sounds like a member of a religious sect, I say, as if she has seen the light. “It’s a way of life, a way of thinking,” she replies without taking offence. “I know people in India, even the modern young people, understand that here is something that’s alive.” So why not give up the plush home in Delhi and the media appearances, and return to the forest? “I’d be more than happy to if I had to, but I would be a liability to them in the forest. The battles have to be fought in different ways. The military side is just one part of it. What I do is another part of the battle.”

I question her absolutism, her Manichaean view of the world, but I admire her courage. Her home has been pelted with stones; the Indian launch of Broken Republic was interrupted by pro-government demonstrators who stormed the stage; she may be charged with sedition for saying that Kashmiris should be given the right of self-determination. “They are trying to keep me destabilised,” she says. Does she feel threatened? “Anybody who says anything is in danger. Hundreds of people are in jail.”

Roy has likened writing fiction and polemic to the difference between dancing and walking. Does she not want to dance again? “Of course I do.” Is she working on a new novel? “I have been,” she says with a laugh, “but I don’t get much time to do it.” Does it bother her that the followup to The God of Small Things has been so long in coming? “I’m a highly unambitious person,” she says. “What does it matter if there is or isn’t a novel? I really don’t look at it that way. For me, nothing would have been worth not going into that forest.”

It’s hard to judge whether there will be a second novel. The God of Small Things drew so much on her own life – her charismatic but overbearing mother; a drunken tea-planter father whom her mother left when Roy was very young; her own departure from home in her late teens – that it may be a one-off, a book as much lived as written. She gives ambiguous answers about whether she expects a second novel to appear. On the one hand, she says she is engaged with the resistance movement and that it dominates her thoughts. But almost in the same breath she says others have “picked up the baton” and she would like to return to fiction, to dance again.

What is certain is that little of the second novel has so far been written. She prefers not to tell me what it is about; indeed, she says it would not be possible to pinpoint the theme. “I don’t have subjects. It’s not like I’m trying to write an anti-dam novel. Fiction is too beautiful to be about just one thing. It should be about everything.” Has she been blocked by the pressure of having to follow up a Booker winner? “No,” she says. “We’re not children all wanting to come first in class and win prizes. It’s the pleasure of doing it. I don’t know whether it will be a good book, but I’m curious about how and what I will write after these journeys.”

Are her agent and publisher disappointed still to be waiting for the second novel? “They always knew there wasn’t going to be some novel-producing factory,” she says. “I was very clear about that. I don’t see the point. I did something. I enjoyed doing it. I’m doing something now. I’m living to the edges of my fingernails, using everything I have. It’s impossible for me to look at things politically or in any way as a project, to further my career. You’re injected directly into the blood of the places in which you’re living and what’s going on there.”

She has no financial need to write another novel. The God of Small Things, which sold more than 6m copies around the world, set her up for life, even though she has given much of the money away. She even spurned offers for the film rights, because she didn’t want anyone interpreting her book for the screen. “Every reader has a vision of it in their head,” she says, “and I didn’t want it to be one film.” She is strong-willed. Back in 1996, when The God of Small Things was being prepared for publication, she insisted on having control of the cover image because she didn’t want “a jacket with tigers and ladies in saris”. She is her indomitable mother’s daughter.

I insist she tell me more about her Fellini-esque mother. She is, says Roy, like an empress. She has a number of buttons beside her bed which, when you press them, emit different bird calls. Each call signals to one of her retinue what she requires. Has she been the centre of her daughter’s life? “No, she has been the centre of a lot of conflict in my life. She’s an extraordinary women, and when we are together I feel like we are two nuclear-armed states.” She laughs loudly. “We have to be a bit careful.”

To defuse the family tensions, Roy left home when she was 16 to study architecture in Delhi – even then she wanted to build a new world. She married a fellow student at the age of 17. “He was a very nice guy, but I didn’t take it seriously,” she says. In 1984 she met and married film-maker Pradip Krishen, and helped him bring up his two daughters by an earlier marriage. They now live separately, though she still refers to him as her “sweetheart”. So why separate? “My life is so crazy. There’s so much pressure and idiosyncrasy. I don’t have any establishment. I don’t have anyone to mediate between me and the world. It’s just based on instinct.” I think what she’s saying is that freedom matters more to her than anything else.

She chose not to have children because it would have impinged on that freedom. “For a long time I didn’t have the means to support them,” she says, “and once I did I thought I was too unreliable. So many of the women in India who are fighting these battles don’t have children, because anything can happen. You have to be light on your feet and light in your head. I like to be a mobile republic.”

Roy has in the past described herself as “a natural-born feminist”. What did she mean by that? “Because of my mother and the way I grew up without a father to look after me, you learned early on that rule number one was look out for yourself. Much of what I can do and say now comes from being independent at an early age.” Her mother was born into a wealthy, conservative Christian community in Kerala, but put herself outside the pale by marrying Ranjit Roy, a Hindu from West Bengal. When she returned to her home state after her divorce she had little money and was thus doubly marginalised. The mother eventually triumphed over all these obstacles and made a success of the school she founded, but growing up an outsider has left its mark on her daughter.

Roy says she has always been polemical, and points to her run-in with director Shekhar Kapur in the mid-1990s over his film Bandit Queen – she questioned whether he had the right to portray the rape of a living person on screen without that woman’s consent. It may be that the novel is the exception in a life of agitation, rather than the agitation an odd outcrop in a life of fiction-writing. But has she sacrificed too much for the struggle – the chance to dance, children, perhaps even her second marriage? “I don’t see any of these things as sacrifices,” she says. “They are positive choices. I feel surrounded by love, by excitement. They are not being done in some martyr-like way. When I was walking through the forest with the comrades, we were laughing all the time.”

HOW WE GOT IN IT AND HOW TO GET OUTBy Ellen Hodgson Brown, J.D.
 

 
Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008.  Public services are being slashed and public assets are being sold off, in a futile attempt to balance budgets that can’t be balanced because the money supply itself has shrunk.  Governments usually get the blame for excessive spending, but governments did not initiate the crisis.  The collapse was in the banking system, and in the credit that it is responsible for creating and sustaining.
Contrary to popular belief, most of our money today is not created by governments.  It is created by private banks as loans.  The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally.  But the system contains the seeds of its own destruction.  The source of its power is also a fatal design flaw.
The flaw is that banks advance “bank credit” that must be paid back with interest, while having no obligation to spend the interest they collect so that borrowers can earn it again and again, as they must in order to retire the debt.  Instead, this money is invested in various casinos beyond the borrowers’ reach. This leads to a continual systemic need for more new bank credit money, more debt with more interest attached, to prevent widespread defaults and deflationary collapse.
Today this problem is particularly evident in the EU.  The Euro is a fixed currency system that does not allow for expansion to meet the demands of the private lending casino.  The result is that EU member nations collectively are being crippled by debt.
There are more sustainable ways to run a banking and credit system, as will be shown.
How Banks Create Money
The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called “Modern Money Mechanics.”  It states:
“The actual process of money creation takes place primarily in banks.” [p3]
“[Banks] do not really pay out loans from the money they receive as deposits.  If they did this, no additional money would be created.  What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.  Loans (assets) and deposits (liabilities) both rise [by the same amount].” [p6]
“With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts.”  [p49]
A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan, etc.
That’s the conventional model, but banks actually create the loans FIRST.  (Picture how a credit card works.)  Banks need deposits to clear their outgoing checks, but they find the deposits later.  Banks create money as loans, which become checks, which go into other banks.  Then, if needed to clear the checks, they borrow the money back from the other banks.  In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit.  The rate at which banks can borrow from each other in the U.S. today (the Fed funds rate) is an extremely low 0.2%.
How the System Evolved
The current system of privately-issued money is traced in “Modern Money Mechanics” to the 17^thcentury goldsmiths.  People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called “banknotes.”  Other people who wanted to borrow money were also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around.  The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10% of the time.  That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold.  Ninety percent of the notes were basically counterfeited.
This system was called “fractional reserve”banking and was institutionalized when the Bank of England was founded in 1694.  The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.
That is still true today. The U.S. federal debt is never paid off but just continues to grow, forming the basis of the U.S. money supply.
The Public Banking Alternative
There are other ways to create a banking system, ways that would eliminate its ponzi-scheme elements and make the system sustainable.  One solution is to make the loans interest-free; but for Western economies today, that transition could be difficult.
Another alternative is for banks to be publicly-owned.  If the people collectively own the bank, the interest and profits go back to the government and the people, who benefit from decreased taxes, increased public services, and cheaper public infrastructure.  Cutting out interest has been shown to reduce the cost of public projects by 30-50%.
In the United States, this system of publicly-owned banks goes back to the American colonists.  The best of the colonial models was in Benjamin Franklin’s colony of Pennsylvania, where the government operated a “land bank.”  Money was printed and lent into the community.  It recycled back to the government and could be lent and relent.  The system was mathematically sound because the interest and profits were returned to the government, which then spent the money back into the economy in place of taxes.  Private banks, by contrast, generally lend their profits back into the economy, or invest in private money-making ventures in which more is always expected back than was originally invested.
During the period that the Pennsylvania system was in place, the colonists paid no taxes except excise taxes, prices did not inflate, and there was no government debt.
How Private Banknotes Became the National U.S. Currency
The Pennsylvania system was sustainable, but some early American colonial governments just printed and spent, inflating the money supply and devaluing the currency.  The British merchants complained, prompting King George II to forbid the colonists to issue their own money.  Taxes had to be paid to England in gold.  That meant going into debt to the English bankers.  The result was a massive depression.  The colonists finally rebelled and went back to issuing their own money, precipitating the American Revolution.
In an international first, the colonists funded a war against a major power with mere paper receipts, and won.  But the British counterattacked by waging a currency war.  They massively counterfeited the colonists’ paper money, at a time when this was easy to do.  By the end of the war, the paper scrip was virtually worthless.  After it lost its value, the colonists were so disillusioned with paper money that they left the power to issue it out of the U.S. Constitution.
Meanwhile, Alexander Hamilton, the first U.S. Treasury Secretary, was faced with huge war debts, and he had no money to pay them.  He therefore resorted to the ruse used in England known as fractional reserve banking.  In 1791, Hamilton set up the First U.S. Bank, a largely private bank that would print banknotes “backed” by gold and lend them to the government.
The ruse worked: the paper banknotes expanded the money supply, the debts were paid, and the economy thrived.  But it was the beginning of a system of government funded by debt to private bankers, who lent banknotes only nominally backed by gold.
During the American Civil War, President Lincoln avoided a crippling war debt by returning to the system of government-issued money of the American colonists.  He issued U.S. Notes from the Treasury called “Greenbacks” rather than borrowing at usurious interest rates.  But Lincoln was assassinated, and Greenback issuance was halted.
In 1913, the privately-owned Federal Reserve was authorized to issue its own Federal Reserve Notes as the national currency. These notes were then lent to the government, eliminating the government’s own power to issue money (except for coins).  The Federal Reserve was set up to prevent bank runs, but twenty years later we had the Great Depression, the greatest bank run in history.  Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, wrote in 1934:
“We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit.  If the Banks create ample synthetic money we are prosperous; if not, we starve.”
For the bankers, however, it was a good system.  It put them in control.
Setting the Global Debt Trap
Prof. Carroll Quigley was an insider groomed by the international bankers.  He wrote in Tragedy and Hope in 1966:
“The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.
“The apex of the system was to be the Bank for International Settlements [BIS] in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.  Each central bank… sought to dominate its government by its ability to control Treasury loans….”
The debt trap was set in stages.  In 1971, the dollar went off the gold standard internationally. Currencies were unpegged from gold and allowed to “float” in currency markets, competing with other currencies, making them vulnerable to speculation and manipulation.
In 1973, a secret agreement was entered into in which the OPEC countries would sell oil only in dollars, and the price of oil would be dramatically increased.  By 1974, oil prices had increased by 400% from 1971 levels.  Countries lacking oil had to borrow dollars from U.S. banks.
In 1981, the Fed funds rate was raised to 20%.  At 20% compound interest, debt doubles in under four years.  As a result, most of the world became crippled by debt.  By 2001, developing nations had repaid the principal originally owed on their debts six times over; but their total debt had quadrupled because of interest payments.
When debtor nations could not pay the banks, the International Monetary Fundstepped in with loans — with strings attached.  The debtors had to agree to “austerity measures,” including:

• cutting social services
• privatizing banks and public utilities
• opening markets to foreign investors
• letting currencies “float.”

Today, austerity measures are being imposed not just in developing countries but in the European Union and on U.S. States.
The BIS: Apex of the Private Central Banking Pyramid
What Professor Quigley foretold about the Bank for International Settlements (BIS) has also come to pass.  The BIS now has 55 member nations and heads the global financial pyramid.
The power of the BIS was seen in 1988, when it raised the capital requirement of its member banks from 6% to 8% in an accord called Basel I.  The result was to cripple the Japanese banks, which until then were the world’s largest creditors. Japan entered a recession from which it has not yet recovered.
U.S. banks managed to escape by dodging the capital requirement.  They did this by moving loans off their books, bundling them up as “securities,” and selling them to investors.
To persuade the investors to buy them, these mortgage-backed securities were protected against default with “derivatives,” which were basically just bets.  The “protection seller” collected a premium for agreeing to pay in the event of default.  The “protection buyer” bought the premium. Owning the asset was not required.  Like gamblers at a horse race, derivative players could bet without owning a horse.
Derivatives became a very popular form of gambling.  The result was the mother of all bubbles, exceeding $500 trillion by the end of 2007.
Because of securitization and derivatives, credit mushroomed.  Virtually anyone who walked in the door could get a loan.
The tipping point came in August 2007, with the collapse of two hedge funds.  When the derivatives scheme was exposed, the market for derivative-protected securities suddenly dried up.  But the U.S. stock market did not collapse until November 2007, when new accounting rules were imposed.  The rules grew out of the Basel II Accords initiated by the BIS in 2004.  “Mark to market” accounting required banks to value their assets according to market demand that day.  Many U.S. banks, like those in Japan in the 1990s, suddenly had insufficient capital to make new loans. The result was a credit crisis from which the U.S. has not yet recovered.
The BIS has now become global regulator, just as Quigley foresaw.  In April 2009, the G20 nations agreed to be regulated by a Financial Stability Board based in the BIS, and to comply with “standards and codes” set by the Board.  The codes are only guidelines, but countries that fail to comply risk downgrades in their credit ratings, something so costly that the guidelines have effectively become laws.
An article on the BIS website states that central banks in the Central Bank Governance Network should have as their single or primary objective “to preserve price stability.”  That means governments should not devalue the national currency by inflating the money supply; and that means not “printing money” or borrowing credit created by their own central banks.  Like the American colonies after King George took away their power to issue their own money, governments must fund their deficits by borrowing from private banks.  The bankers’ global control over currency issuance has become virtually complete.
The effects of this policy are particularly evident in the European Union, where EU rules allow deficits of only 3% of government budgets and prevent member countries from either issuing their own money or borrowing credit advanced by their own central banks.  Member nations must borrow instead from the European Central Bank, private international banks, or the IMF.  The result has been forced austerity measures, as seen in Greece and Ireland.  The system is so unsustainable that commentators are predicting that the EU may break up.
The Way Out: Return the Money Power to Public Control
To escape the debt trap of the global bankers, the power to create the national money supply needs to be restored to national governments.  Alternatives include:

• Legal tender issued directly by national treasuries and spent on national budgets.
• Publicly-owned central banks empowered to advance the nation’s credit and lend it to the government interest-free.
• Nationalization of bankrupt banks considered “too big to fail” (after expunging or writing down bad debts on inflated bubble assets).  These banks could then issue credit to the public and serve the public’s banking needs, with the profits recycling back to the government, defraying the tax burden on the people.
• Publicly-owned local banks (state, provincial, or municipal).

Publicly-owned banks have been successfully established and operated in many countries, including Australia, New Zealand, Canada, Germany, Switzerland, India, China, Japan, Korea, and Malaysia.
In the United States there is currently only one state-owned bank, the Bank of North Dakota.  The model, however, has proven to be highly successful.  North Dakota is the only U.S. state to have escaped the credit crisis unscathed.  In 2009, while other states floundered, North Dakota had its largest budget surplus ever.  In 2008, the Bank of North Dakota (BND) had a return on equityof 25%.  North Dakota has the lowest unemployment rate in the country and the lowest default rate on loans.  It also has the most local banks per capita.
North Dakota has had its own bank since 1919, when  farmers were losing their farms to the Wall Street bankers.  They organized, won an election, and passed legislation.  The state is required by law to deposit all its revenues in the BND.  Like with the sustainable model of the bank of colonial Pennsylvania, interest and profits are returned to the government and to the local economy.
A growing movement is afoot in the United States to copy this public banking model in other states.  Fourteen U.S. state legislatures have now initiated bills for state-owned banks.
The model could also be replicated in other countries.  In Ireland, for example, where the major banks are insolvent and are already nationalized or soon will be, the government could deposit its revenues in its own publicly-owned banks, add sufficient capital to meet capital requirements, and leverage these funds to create interest-free credit for its own local needs.  That is exactly what Alexander Hamilton did when faced with government debts that were impossible to repay: he put the government’s existing funds in a bank, then borrowed the money back several times over, employing the accepted “fractional reserve” model.
Japan’s solution is also a variant of what Alexander Hamilton proposed two centuries earlier.  Japan retains its status as the third largest economy in the world although it has a debt to GDP ratio of 226%.  Japan has “monetized” the national debt, turning it into the national money supply.  The government-owned Bank of Japan holds Japanese government debt equal to 100% of the nation’s GDP; and because the government owns the bank, this loan is interest-free and can be rolled over indefinitely.  An interest-free loan rolled over indefinitely is the equivalent of issuing money.