Promoted to Headline (H3) on 4/29/12: Permalink
A Cure-all for the Financial Ills of our time?
By Josh Mitteldorf (about the author)
"Actually," says the
Earthling, "there are building materials stockpiled just out of
town."
" So, there are no workers to do
the job?"
"Actually, there are hordes of
unemployed workers who would love to have the work."
" So -- what's the problem?"
" Well, the way things work
here, we need these pieces of green paper before we can get
started..."
" Beam me up! There's no
intelligent life on this planet!"
Philadelphia -- There were two visions
expressed at this weekend's first (annual?) convention of the
Public Banking Institute. The first is the very practical idea that
states and cities around America could be rescued from insolvency if
they had their own banks, instead of relying on commercial banks to
borrow money through bonds. Tax-exempt bond issues supply money to
states and municipal governments typically at 5 or 6% interest, while
banks these days are able to borrow from the Fed at 1/4% per year.
The second vision is hinted in the joke
(above) that Board President Ellen Brown told as she opened her
address to the group. It is the radically-subversive idea that the
system we have for introducing money into the economy is a boon for
the banks, but perhaps a major drag on our economy. Perhaps a
simple, direct system of money creation by the Treasury Dept instead
of the Fed would put an end to cycles of recession, and create a
foundation for long-term prosperity.
Banking is a huge leech on our
economy. 40% of every dollar we spend on goods and services -- 40%
of all that we create and all we consume -- is siphoned off the top
as bank interest in one form or another. (Calculations of Margrit
Kennedy) The US
Government is in the absurd position of paying interest to a private
bank for every dollar that is put into circulation. The Federal
Reserve system has privatized the power to create money, which,
according to the Constitution, ought to belong to Congress alone.
Presently, interest on the national debt costs the Federal government
$500 billion in 2011, and (because of structural deficit spending) it
is the fastest-growing portion of the Federal budget.
The problem is that an expanding
economy needs an expanding money supply. But since 1913, the Federal
Reserve (a private consortium of banks) creates the money, backed by
new Treasury Notes (bonds) which the Federal Government issues. In
essence, every dollar in the money supply represents a dollar of
Federal debt. Interest on this debt grows exponentially -- which
means it's not much of a problem until suddenly it is. It's a
ticking time bomb.
We need another system.
It has not always been thus.
Colonial America had paper money created separately by each colony --
a system promoted by young Benjamin Franklin in the 1730s. British
King George put an end to the colonies' power, one of the
inflammatory actions leading up to the Revolutionary War.
Fourscore and seven years later,
President Lincoln financed the Civil War by printing "greenbacks"
-- direct money creation by the Federal Government, a sound and
simple and publicly-accountable system for regulating the money
supply. The greenback system died with Lincoln.
Some say it's not an accident that
the present monetary system is so dysfunctional that it is stifling
economic activity, and so complicated that "only economists can
understand it". The system has many victims, but there are a few
who benefit. Carroll Quigley
was a professor of history and Washington insider who wrote, in 1966:
[T]he 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. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations . (from Tragedy and Hope: A History of the World in Our Time (cited by Brown)
A venerable voice at the conference
was Bill Still, who has been educating the public on this issue for
over 20 years. His video from the 1980s is available now on Youtube .
12-year-old
Victoria Grant attended the conference with her Dad, and talked about
the Canadian national bank that worked in the public interest for 30
years after its creation in 1939. Since 1974, however, Canada, like
the US, has depended on private banks for its own currency, and the
result has been an exponential spiral of debt. You can hear Victoria
telling the emperor that he has no clothes on here.
How to restore sanity to our monetary
system? A direct assault on the Fed and the Wall St banks that own
it pits us against a wall of opposition from some of the richest and
most powerful organizations in the world. Let's start at a smaller
scale, in the states and cities where American democracy still has
some life and some room to move. States (with the exception of North
Dakota) are all in trouble, slashing services and increasing taxes in
response to the financial crisis of 2008, as the recession cuts into
tax revenues just as more people are in need of public services.
There are bills introduced in
legislatures of 17 states to create state-owned banks. Many of these
are modeled on the example of North Dakota, the only state at present
that has a state bank. North Dakota was insulated from the bank
crisis of 2008, and the state is prospering recently, with the lowest
unemployment rate, the lowest default rate on credit card debt, and
lowest foreclosure rate in the 50 states. Economic historian
Rozanne Ederson told us that North Dakotans love their bank now, but
in 1919, its original implementation required a farm foreclosure
crisis and a hotly-charged legislative battle.
The farmers who pushed through North
Dakota's bank in 1919 were the radicals of their day. In
Philadelphia this weekend are the people who aspire to carry their
torch in a new century. They're up against The Bankers -- a rich
and powerful force in opposition to change. But states are so
desperate for cash these days, and the State Banks could potentially
relieve so many ills that who knows -- it just might work!
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