“We Love Fiat Money.” Cheerleaders for Hitler’s Economics

From Michael McKay:

I have been waiting for years for the essay below.  Dr Gary North systematically devastates all the arguments of those who promote the idea that:  a. We should abolish the Federal Reserve – and then – b. We should give control of the Money DIRECTLY to the US Treasury/Government.

Their central idea is that Paper Money is Good / Fiat Money is Good. They see the only problem as being ‘Who Controls The Paper Money Creation‘.

by Gary North
by Gary North
Recently by Gary North:
Why Gold Is Rising

Ellen Brown is a lawyer by profession, a Greenbacker by confession, and a fan of Adolf Hitler’s economics by consistency.

She is quite open about her support for National Socialism’s economics, as I shall demonstrate. What is depressing is this: she is getting a respectful hearing in Tea Party circles. Her book, The Web of Debt (2006), is widely cited on the World Wide Web. As of early October, 2010, a Google search for "Ellen Brown" and "Web of Debt" generated close to 600,000 hits. This is huge.

Here is a tactical problem. For two generations, conservatives have been shouted down by the Left with this accusation: "Fascist!" Ellen Brown is now making this accusation plausible. Yet the great irony is this: Ellen Brown is a Leftist. There is nothing even remotely free market or conservative about The Web of Debt. It is a call for a Federally funded welfare state. She praises the New Deal. She praises John Maynard Keynes. She has only one objection to their recommended programs: governments borrowed money to fund them. She wants a welfare state that is funded entirely by paper money printed by Congress. She is about as conservative as Nancy Pelosi.

How could her ideas be getting a hearing in Tea Party circles? It’s a long story. Let me summarize it.


Brown is a Greenbacker. She is open about this. Most people have never heard of Greenbackism. It has been a fringe movement in American political life ever since the 1860s. The Greenback Party in the 1870s was the first American political party to come out in favor of a pure fiat money economy, a paper money system controlled by Congress with currency irredeemable in gold coins or silver coins.

The Greenbackers are committed to paper money. They are opposed to any form of gold standard. They are opposed to fractional reserve banking. They are opposed to central banking, unless the central bank is 100% owned and controlled by Congress.

They were part of the non-Marxist Left during the late 19th century. In the 1930s, they divided. Some of them attempted to enter the anti-Roosevelt Right. An example was Gertrude Coogan. She was not well known. I have written a minibook on her economics, published by the Mises Institute: Gertrude Coogan’s Bluff. (You can download it for free here.) Others joined the anti-Roosevelt Left. The most famous example was the radio preacher, Father Charles Coughlin, who later broke with the New Deal because he thought it was not sufficiently committed to the welfare state. He called the New Deal "the Jew Deal." He favored the economic policies of Hitler.

In a strange amalgam, Leftist-Populist Congressman Jerry Voorhis in 1943 persuaded Devin-Adair Books to publish his Greenbacker book, Out of Debt, Out of Danger. In the post-War period, this tiny publishing house became one of the three conservative publishers, along with Caxton and Regnery.

In the early 1950s, the Greenbackers gravitated to the Right. A Greenback publisher gained editorial control of The American Mercury, by then a far-Right magazine that had originally been founded by H. L. Mencken. One of its writers was George Lincoln Rockwell, who later founded the American Nazi Party.

A series of tiny publishing houses began issuing reprints of 1930s-era books, plus new ones. (For a short bibliography, click here.) They made little headway into the conventional Right. But within certain fringe groups, especially anti-Semitic groups opposed to "the International Jewish Bankers’ Conspiracy," they gained a foothold.

This obscurity has all changed. Their market has grown exponent
ially since 2008. Two reasons are Ellen Brown and Ron Paul, both of whom are opposed to the Federal Reserve. Their opposition gave negative publicity to the FED. This rallied the Tea Party troops. A third reason was the economic crisis in the fall of 2008 and the Federal bailouts of the banks. The Greenbackers are riding the growing wave of opposition to the Federal Reserve System.

The strategic problem is this: the Tea Party movement is filled with people who have no economic understanding. They cannot distinguish Ron Paul’s opposition to the FED, based on the gold coin standard, from Ellen Brown’s opposition, based on a fiat money standard. They are intellectually defenseless.


In 2006, Brown’s 500-page book appeared. By 2008, it was in its 4th printing. It is an attack on fractional reserve banking and the Federal Reserve System. It began getting a hearing on the World Wide Web.

The book does not initially appear what it really is: a call to set up a government-funded welfare state. But there are brief statements to this effect in the early pages. Only on page 234, halfway through the book, does she get to the point: the Nazi economy.

The German people were in such desperate straits that they relinquished control of the country to a dictator, and in this they obviously deviated from the "American system," which presupposed a democratically-governed Commonwealth. But autocratic authority did give Adolf Hitler something the American Greenbackers could only dream about – total control of the economy. He was able to test their theories, and he proved that they worked.

At this point, anyone with an IQ above 90 should begin to smell a rat.

The Greenbackers are big advocates of Abraham Lincoln. Why? Because he allowed the banks to suspend payments in gold in 1861. Then in 1862 and 1863, he signed into law a system of unbacked fiat money called Greenbacks. They see him as the creator – a would-be national savior who was thwarted by the bankers, who had him assassinated.

They never discuss the fact that Lincoln was an advocate of fractional reserve banking. They never mention that in January of 1863, he signed the bill authorizing a second issue of Greenbacks, but sent Congress a letter deploring the law. He called for a national bank act. Congress gave it to him a month later.

With this as background, I return to Brown’s discussion of National Socialism.

Like for Lincoln, Hitler’s choices were to either submit to total debt slavery or create his own fiat money; and like Lincoln, he chose the fiat solution. He implemented a plan of public works along the lines proposed by Jacob Coxey and the Greenbackers in the 1890s. Projects earmarked for funding included flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at 1 billion units of the national currency. One billion non-inflationary bills of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. The workers then spent the certificates on goods and services, creating more jobs for more people. . . .

Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. [Web of Debt, p. 234.]

The German economic system was run by the central government. It preserved the illusion of private property, but it was a socialist system. The government controlled the means of production. The government issued fiat money, and it established price and wage controls. It set up a system of 1,600 cartels in 1933–36. Beginning in 1934, government officials set the prices of commodities, and this resulted in shortages of most domestic commodities. The government also expanded the power of the government over the affairs of everybody in the society.

There have been only two major studies in English of the German economy since 1939. One was called The Vampire Economy, and it described the details of this centralized economic system. It was published in 1939. You can download a copy of it free of charge here. The other is Adam Tooze’s massive study, The Wages of Destruction (2006). They both tell the same story. (Oddly enough, both were published by Viking.)

Dr. David Gordon reviewed Tooze’s book. Here are selections from his review.

As Adam Tooze has noted, Hitler in 1932 indicated his interest in job-creation programs, and this of course required government spending. But once in power, his interest shifted from job creation to rearmament. This required even more government spending; and armaments rapidly increased.

The Nazi party did not adopt work creation as a key part of its programme until the late spring of 1932, and it retained that status for only eighteen months, until December 1933, when civilian work creation spending was formally removed from the priority list of Hitler’s government … [Work creation] was in sharp contrast to the three issues that truly united the nationalist right . . . the triple priority of rearmament, repudiating Germany’s foreign debts and saving German agriculture … It was Hitler’s action on these three issues not work creation that truly marked the dividing line between the Weimar Republic and the Third Reich. (Adam Tooze, The Wages of Destruction, Viking, 2006, pp. 24-5). . . .

In effect, Germany had embarked on a Keynesian policy: government spending became increasingly important in guiding the economy into the military channels that Hitler wanted. . . .

Keynes himself viewed the Nazi efforts with favor. In his preface to the German edition of The General Theory, dated September 7, 1936, Keynes indicated that the ideas of his book could more readily be carried out under an authoritarian regime:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output under conditions of free competition and a large measure of laissez-faire.

Hitler was the head of a political party. In English, it was called the National Socialist German Workers Party, or "Nazi Party" for short. It was not called socialist for nothing. To imagine that this system was anything other than socialism is to parrot the Party Line of the Left ever since 1923. "No, no, no: the Nazis were not really socialists." Well, if they weren’t, their policies surely resembled socialism. They believed in centralized control over the economy, and when they got into power in 1933, they established that control. This control grew even tighter after 1939, because of World War II.


The secret of the Nazi economy was spending on war. In a study of Nazi fiscal and monetary policy, economist Albrecht Ritschl concluded in 2000,

A critical reassessment of deficit spending during the Nazi recovery reveals a surprisingly small role for macroeconomic policy. Both the descriptive evidence and the results from multivariate time series forecasts suggest that recovery from the Great Depression was mainly driven by a rebound effect that was visible in the data already by late 1932. Up to around 1936, the German recovery was no more advanced than that of Britain or the United States, where far less expansionary fiscal policies were followed. However, even in Germany the fiscal impulse generated by the budget deficit was too small to be consistent with Keynesian demand stimulation under an income/expenditure mechanism. In order to explain the very high, at times two-digit growth rates of GNP during the recovery, deficits would have had to be two to five times higher than they actually were. Apparently, recovery was due to forces other than fiscal and monetary policy, just as in the cases of Britain and the United States. . . .

Nazi recovery appears less spectacular than was hitherto believed. Our results also indicate that government spending was dominated by war preparation already in a very early phase of the Nazi recovery. I find little justification for the popular interpretation that recovery was sparked off by non-military work-creation and the construction of the autobahn network. Investment in the autobahn reached sizable magnitudes only in 1936. All these projects pale in comparison with the rapid build-up of military expenditure, except for the year of 1933 when rearmament had not yet really begun. To secure the desired high speed of war preparation, the Nazi administration took early, often draconian steps to crowd out private demand. The growth in consumer spending fell short of the increase in national product, and the contribution of private investment to the recovery remained unimpressive.

Strict control of private expenditure was partly achieved by maintaining taxation at the high levels reached during the depression years. [Deficit Spending in the Nazi Recovery, 1933–1938: A Critical Reassessment, Institute for Empirical Research in Economics, University of Zurich, pp. 1617.]

In short, the government created jobs in factories preparing for war. Then it taxed workers so that they could not spend their income on consumer goods.

Hitler was no advocate of economic growth. He was an advocate of military expansion. Professor Tooze summarizes.

This backdrop is essential if we are to understand Hitler’s refusal to accept the liberal gospel of economic progress. Economic growth could not be taken for granted and Hitler was by no means the only person to say so. As we have seen, the doctrine of economic life as a field of struggle was already fully formed in Mein Kampf and Hitler’s ‘Second book’. And this Darwinian outlook was only encouraged by the subsequent Depression. Given the density of Germany’s population and Hitler’s insistence on the inevitability of conflict arising for ex
port-led growth, the conquest of new Lebensraum was certainly one means of raising Germany’s per capita income level. Hitler could hardly have been more emphatic or consistent in his advocacy of this position. As we have seen, he made a point of reiterating this belief in the very first days of his new government in 1933. An aggressive foreign policy based on military strength was the only real foundation of economic prosperity (Wages of Destruction, pp. 145-46).

Hitler was a mercantilist who believed in expansion by military conquest.


Ellen Brown adds this:

While Hitler clearly deserved the opprobrium heaped on him for his later military and racial aggressions, he was enormously popular with the German people, at least for a time. [Web of Debt, p. 235.]

Her message: Hitler was a man of the people! She wants the United States to follow his lead . . . but only in economic policy, of course. Not the concentration camps. Not the war.

She does not draw the obvious conclusion, namely, that the centralized power of the government over money, business, and labor was basic to the power which that government imposed over the Jews and other minorities. It is almost as if his racial tyranny and military aggression were completely divorced from his economic views and the government’s economic policies. It should be obvious that these policies were a package deal. Without the centralization of power over the economy, the German government could not have exercised the tyranny that it did exercise in all other areas of life. This was the argument of F. A. Hayek in The Road to Serfdom (1944). It is unfortunate that Ellen Brown does not believe in the arguments presented in that book. She dismisses all such free market arguments as "the British System" of Adam Smith.

Her happy-face and utterly mythical welfare economy of Nazi Germany, with its high employment, is the economy that Ellen Brown wants to see established in the United States. She is very clear about her intentions. Anyone who thinks that she is anything but a National Socialist in her economic outlook does not take her words seriously.

Her ignorance of National Socialist economic practice and its results – war and concentration camps – is monumental. It matches her ignorance of monetary theory. Her ignorance is a package deal.


To get some sense of what Greenback economics is all about, let me survey a few of her economic errors. I list them in the order in which they appear in Web of Debt. I do not refute them here. I have devoted one article per error. Click any link to see the direct quotation from Web of Debt and my refutation.

  1. Governments should get out of debt by printing paper money.
  2. There is not enough gold to facilitate trade.
  3. Economic scarcity is the result of greedy bankers.
  4. Mercantilism’s state-run economy is harmonious; the free market isn’t.
  5. Keynes was correct about money.
  6. The New Deal made Americans richer through public works.
  7. The New Deal’s price controls on food were good for America.
  8. Keynes was a great economist because he promoted budget deficits.
  9. Rothbard’s monetary theory is wrong (when you misquote it).
  10. The New Deal allocated capital better than the free market did.
  11. A monetary system is a national contractual agreement.
  12. Falling prices and increasing productivity cause recessions under a gold standard.
  13. The government can pay off its debt with paper money with no price inflation.
  14. The government can pay off Social Security with paper money with no price inflation.
  15. Americans should trust Congress to regulate the monetary system.
  16. The government should build a larger welfare state with fiat money.
  17. The banking system should be run like the Post Office.
  18. Banking should be run on a non-profit basis.
  19. If Congress prints money, there will be no need for an income tax.
  20. Gold’s price fluctuates too wildly for it to serve as money.
  21. It is possible to have civil government without taxes, debt, and inflation.


As implausible and garbled as Greenback economics is, it is Nobel-Prize material when compared to the Greenbackers’ version of American history.

I have been reading their books, off and on, for over 45 years. I have found the same false stories over and over. Greenback authors rarely verify them. They simply repeat them.

In terms of the number of utterly bogus stories, Ellen Brown’s Web of Debt surpasses anything I have ever read. It is filled with bogus quotes from famous people. It also has its share of bloopers. Let me begin with my favorite. She argues that the president of the Federal Reserve Bank of New York, Benjamin Strong, met secretly in February of 1929 with the head of the Bank of England, Montagu Norman. Together, they concluded that a collapse of the stock market was inevitable. They decided to take no action to prevent this. She cites no evidence for this meeting, but she assures us that "the evidence suggests" it (p. 143). I can think of a crucial piece of evidence that calls the story into question. Strong died in 1928.

With this as background to Ellen Brown, historian, I now offer 30 other examples.

  1. A bogus quote from Sir Josiah Stamp on the Bank of England
  2. Jefferson was a promoter of unbacked paper money.
  3. Lincoln promoted debt-free paper money.
  4. Colonial Pennsylvania avoided taxes by issuing paper money.
  5. A bogus quote from Franklin on colonial paper money
  6. Ignoring a negative statement by Franklin on the "Continentals"
  7. A bogus quote from John Adams on debt as a means of conquest
  8. The "Christian Bible" Prohibits Interest, but no
    t the "Jewish Bible."
  9. China’s medieval unbacked paper money had centuries of success.
  10. England’s medieval wooden "tallies" were interest-free money.
  11. A bogus quote from Nathan Rothschild
  12. A bogus quote from Jefferson on banks
  13. Jefferson and Jackson fought the 1st Bank of the U.S.
  14. The Civil War’s paper money made survivors richer.
  15. A bogus Lincoln quote on men and wages
  16. Lincoln favored the Greenbacks over Union debt to banks.
  17. The Greenbacks were pure fiat money unrelated to gold backing.
  18. Two bogus quotes from Bismarck on European bankers
  19. International bankers defeated Lincoln in 1863 with the National Bank Act.
  20. A bogus quote from Garfield on the control over money
  21. The island of Guernsey had fiat money without inflation.
  22. Populism defended the interests of the common man.
  23. A bogus document: "Bankers’ Manifesto of 1892"
  24. "Robber Barron" Capitalists raised prices and lowered quality.
  25. Benjamin Strong (d. 1928) plotted with Montagu Norman in 1929.
  26. Milton Friedman said that the Federal Reserve caused the Depression.
  27. Hitler’s National Socialism ended the Great Depression in Germany.
  28. Germany’s hyperinflation (1921-23) happened only after the central bank was privatized.
  29. Foreign currency speculators caused Zimbabwe’s inflation.
  30. Gold’s price rose in the 19th century
  31. Shays’ Rebellion (1786) took place after the Constitution was ratified (1788).


Ellen Brown has achieved what no other Greenbacker has achieved ever since Father Coughlin: a large national audience – though nowhere near the size of his audience at its peak. Her book, Web of Debt, is universally regarded as authoritative by Greenbackers. She does not share his anti-Semitism, but she shares his economic views.

Those of her disciples who read this article and who click through to see my evidence of her errors will have a problem. They can verify for themselves that she does not know what she is talking about in two areas: economic theory and Ameri
can history. She has used bogus quotes to bolster her weak economic case. She cannot be trusted. Will they back away from her and her book? Will they search for some other book that proves the Greenback case? Or will they simply drop Greenbackism?

As for Ellen Brown, she now has four courses of action.

  1. Pretend that she never read this article, on the assumption that her followers will not see it. (Intellectually dishonest.)
  2. Burn all copies of her book and write a revised one that corrects her oversights. (Hard work, and then I will get to reply.)
  3. Burn all copies of the book and stop promoting Greenbackism. (Do authors ever do this?)
  4. Reply to me, point by point, on her Website, showing that I am 100% wrong. (Impossible, and then I will get to reply.)

Lawyer Brown now has an opposing "counsellor": me. From now on, I will be her lifelong tar baby. If she replies and sends me a link, I will reply in my department: Ellen Brown: Greenbacker.

I have spent 45 years dealing with monetary cranks. She is by far the most vulnerable of them all. It is not just that she understands neither economics nor the basics of historical research. None of them does. What makes her so vulnerable is that she is so visible . . . and so consistent. She finally did what was implied by them all after 1935, but which only Father Coughlin had the courage to do. She came to the defense of Adof Hitler’s economy. I have waited for a target like her for 45 years.

This is going to be fun. For me.

Additional Comments by Michael McKay

This idea has been promoted by Ellen Brown (author of ‘Web of Debt’), who Dr North takes on POINT FOR POINT.

These ‘Greenbackers’ have created terrible confusion within the ranks of Ron Paul Supporters as well as all those (mostly young) people who are newer to libertarianism in general and the study of Sound Money in specific.

I would say that the hardest hit – where the worst confusion exists – are with those who are actively trying to END THE FED and bring an end to Central Banking.

We clearly see these Greenbackers confusing the situation by their attempt to merely changing WHO the ‘Central Banker’ is.

I have seen this confusion close at hand in my home town of Fairfield, Iowa.

A while ago there was a well intentioned meeting at the Fairfield Public Library where the terribly confused video ‘The Money Masters‘ was shown.  Unfortunately, for the 100’s of people that came to watch it they were all poisoned by this false notion that Fiat/Paper Money can be made to work.  The unfortunate result is that we now have scores of folks who were (and still are) very new to the Principles of Free Markets & Sound Money in Fairfield, Iowa that have to UNLEARN this hogwash.

I attended a dinner with Ron Paul in 2009 and I had the opportunity to speak directly to Dr Paul about this problem. He viewed it as a "terrible problem that was confusing the young people who are new to Liberty."

This problem is not just contained to the US either.  Sean Gabb, the head of the Libertarian Alliance in London, England, recently told me that this same idea has created terrible divides in the Libertarian Movement in England, as well.

We owe Dr North a tremendous debt of gratitude for his scholarship and commitment to teaching the Principles of Sound Money.

You will want to Read and Share his excellent article with all those who still are under the spell of this horrible doctrine that – somehow – Fiat Money can be made to work.

The link that you can forward to your friend which also contains Dr North’s archives is here at http://www.lewrockwell.com/north/north891.html

Michael McKay

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