- Some of the best ideas are often the simplest. When applied
to the global economic crisis, the solution is easier than imagined. What's
hard, in fact a Gordian Knot, is the political will to embrace it. But
even matters that great can be solved by a bold stoke, and according to
legend, Alexander the Great's "Alexandrian solution" was achieved
with one stroke of his sword, cutting the Knot in half. Applied to the
global economic crisis, it means addressing it with effective policies,
not ones wrecking America and other troubled nations worldwide.
-
- Economist Michael Hudson explains that "debt leveraging
is what caused our economic collapse," so piling on more ("The
Recovery Plan from Hell" he calls it) makes things worse, especially
the way it's done:
-
- -- in America, by a private banking cartel Federal Reserve
bailing out its members to enrich them - the key giant ones referred to
as Wall Street; and
-
- -- the US Treasury doing the same thing; it let the federal
debt skyrocket to stratospheric levels and affirmed Adam Smith's dictum
in The Wealth of Nations that no country ever repaid its debts, surely
not huge ones in a private banking cartel run state, and therein lies the
problem - easily solved with a bold stroke, thus far not taken nor will
it without mass public action demanding it.
-
- Which is why this article is written, inspired by the
work of others. Economist Michael Hudson for one. Global Research.ca editor
Michel Chossudovsky another, and noted author and writer Ellen Brown for
her extraordinary book titled "Web of Debt" and her explanation
of how "Cash-Starved States Need to Play the Banking Game" the
same way as North Dakota.
-
- If done at state and federal levels, it can save the
economy from Wall Street's predation - by removing the debt overhang through
debt write-downs as well as funding sustainable, inflation-free prosperity.
It's not a pipe dream. It's real. It happened before and can again. Short
of that, according to Hudson:
-
- "debt service will (keep) crowd(ing) out spending
on goods and services and there will be no recovery. Debt deflation will
drag the economy down while assets are transferred further into the hands
of the wealthiest 10% of the population (mainly the top 1%), operating
via the financial sector."
-
- Eventually the economy will collapse, but Wall Street
will profit hugely - aided and abetted by corrupted public officials allied
with the private parasitic Federal Reserve turning America into what Hudson
calls a "zombie economy" and banana republic.
-
- What Works for North Dakota Can Work for the Other States,
America, and Everywhere
-
- On March 2, Brown explained North Dakota's "Banking
Game" and asked:
-
- "What does the State of North Dakota have that other
states don't....its own bank" - and therein lies its uniqueness and
strength. When only four of the 50 states are solvent, North Dakota runs
surpluses, and according to the Center on Budget and Policy Priorities,
it's expected to have them in FY 2009 and 2010.
-
- In his January 2009 State of the State address, governor
John Hoeven explained:
-
- "Since 2000, the State of North Dakota has gained
jobs, and now we are gaining population, as well.
-
- Personal income has grown by 43 percent - nearly 15 percent
faster than the national average. In fact, our per capita income has moved
up 12 places, from 38th to 26th among all the states (despite a tiny 641,481
population, according to 2008 US Census Bureau figures).
-
- Wages have grown 34 percent, compared to just 26 percent
for the rest of the country.
-
- Our gross state product since 2000 has grown by nearly
$10 billion, from $17.7 billion to more than $27 billion last year - a
56 percent increase - again, faster than the nation.
-
- And our foreign exports have grown by 225 percent since
2000, breaking the $2 billion mark for the first time in North Dakota history.
-
- Furthermore, our economic growth and diversification,
along with the good financial stewardship, has enabled us to build a surplus
and a solid financial reserve for the future....the state of our state
is strong (at a time) our nation's economy is in a down-cycle...."
-
- On May 23, The Bismark Tribune and other state papers
reported that North Dakota has the nation's lowest unemployment rate at
4%. Clearly, it has a leg up on the other states, something all their governors
and legislators should note along with federal officials in Washington.
What works for North Dakota can work everywhere.
-
- The Bank of North Dakota is the only state-owned bank
in the nation - established in 1919 by its legislature "to free farmers
and small businessmen from the clutches of out-of-state bankers and railroad
men," according to Brown quoting management consultant Charles Fleetham
in a February 2009 article published in his home state, Michigan. Brown
continues:
-
- "Three elected officials oversee the bank: the governor,
the attorney general, and the commissioner of agriculture. The bank's mission
is to deliver sound financial services that promote agriculture, commerce
and industry (and operate) as a bankers' bank, partnering with private
banks to loan money to farmers, real estate developers, schools and small
businesses." Also to students and private individuals in the state
at low affordable rates.
-
- Key though is how it operates and stays solvent when
so many of the nation's banks are financially strapped and face bankruptcy.
As Brown explains:
-
- "Certified, card-carrying bankers are allowed to
do something nobody else can do....create 'credit' with accounting entries
on their books." It turns money into credit by what's called "fractional
reserve banking" that multiplies each dollar deposited magically into
about 10 in the form of loans or computer-generated funds. It's literally
money created out of thin air so that banks can re-lend it many times over,
and the more deposits, the greater the amount of lending.
-
- At issue is whether credit should be private or public,
and as Brown wrote in a December 29 article titled "Borrowing from
Peter to Pay Paul: The Wall Street Ponzi Scheme called Fractional Reserve
Banking:"
-
- "Readily available credit has made America 'the
land of opportunity' ever since the days of the American colonists,"
with more on that below. "What has transformed this credit system
into a Ponzi scheme that must continually be propped up with bailout money
is that the credit power has been turned over to private bankers who always
require more money back than they create" because they charge high
interest rates to make a profit. When governments lend their own money,
profit isn't at issue so rates can be low and affordable to businesses,
farmers, and private individuals, and for their own and municipality needs,
it's interest-free.
-
- Brown and others have explained that "fractional
reserve banking" dates from the 17th century, done then mainly in
gold and silver coins. Early bankers soon realized it was simpler to use
deposit receipts (called notes) as a means of payment. They then began
creating money by making loans through promises to pay, and more could
be issued than the amount of coins on hand as only enough were needed to
service redemptions - today's idea of a reserve requirement.
-
- What began earlier as notes, today are accounting entries
that literally create money out of thin air. And it works the same for
government as for privately-owned banks, except for the following.
-
- As publicly-run institutions, their mandate is entirely
different:
-
- -- they don't have to earn profits;
-
- -- they're not beholden to Wall Street or shareholders;
and
-
- -- only the state's creditworthiness matters, and so
far, in over 230 years, no state ever went out of business and virtually
none ever default on their debt, even when poorly governed.
-
- Further, they can lend to themselves and municipalities
interest-free, and to businesses, farmers, and individuals at low affordable
rates to create internal growth and sustainable prosperity. And the more
often loans are rolled over, the more debt-free money is created - without
fear of inflation.
-
- As long as new money produces goods and services, inflation
can't occur. Only imbalances cause problems - "when 'demand' (money)
exceeds 'supply' (goods and services)." Price stability is assured
when both increase proportionally, and that's exactly how it worked in
colonial America and under Lincoln during the Civil War as Brown explained
in "Web of Debt."
-
- In 1691, Massachusetts became "the first local government
to issue its own paper money...." called scrip. Other colonies followed,
Pennsylvania most effectively by issuing new money without inflation or
need for taxes. For over 25 years, it collected none, and at the same time,
its population grew and commerce prospered. The "secret was in not
issuing too much (credit), and in recycling the money back to the government
in the form of principal and interest on government-issued loans."
-
- In other words, keeping everything proportionally in
balance and not having to pay interest to predatory private lenders - the
very system wrecking America today and other economies run by private central
banks.
-
- Lincoln did the same thing in spite of assassination
threats before his inauguration as well as "treason, insurrection,
and national bankruptcy" during his first year in office. Considering
what he faced, his accomplishments were remarkable, including:
-
- -- building the world's largest army;
-
- -- defeating the South;
-
- -- turning the country into the world's "greatest
industrial giant;"
-
- -- launching the steel industry, a continental railroad
system, and a new era of farm machinery and cheap tools;
-
- -- establishing free higher education;
-
- -- giving settler ownership rights and encouraging land
development through the Homestead Act;
-
- -- having government support all branches of science;
-
- -- standardizing methods of mass production;
-
- -- increasing labor productivity by 50 - 75%; and
-
- -- still more "with a Treasury that was completely
broke and a Congress that hadn't been paid."
-
- He did it by nationalizing control over banking so government
could print its own money - interest free without paying usurious rates
that private bankers demanded, from 24 - 36%. As a result, "the economy
was jump-started with a 600 percent increase in government spending and
cheap credit directed at production" - done with government-issued
Greenbacks. They financed the war, paid the troops, and spurred the nation's
growth - free from the system wrecking the country today to let parasitic
private banks prosper.
-
- In "Web of Debt," Brown explained that early
20th century Australia operated under a publicly-run bank as well - its
Commonwealth Bank that created money, made loans, and collected interest
at a fraction of what private bankers charge. It worked well enough for
the country to have one of the highest living standards in the world at
the time. Once private bankers took over, Australia became heavily indebted,
and its living standard fell to a 23rd place ranking - clearly showing
the destructive power of private bank-created money and overwhelming benefits
possible when governments print their own.
-
- America today can have the same advantages instituted
by:
-
- -- its colonists;
-
- -- Lincoln;
-
- -- early 20th century Australia;
-
- -- the Middle Ages, falsely portrayed as a backward and
impoverishing era only saved by industrial capitalism; in fact, under its
banker-free tally system, it prospered for hundreds of years; and
-
- -- China for thousands of years before the era of private
banking, and today because Beijing directs The People's Bank of China (its
semi-independent central bank) to grow the nation's economy and create
millions of jobs for its burgeoning population.
-
- America and world economies can be just as prosperous
but only with determined effort enough to replace their corrupted systems
with one that's fairest and works best .
-
- A publicly-run banking system benefits everyone by using
deposits for sustainable internal growth and government needs - at the
state and local levels. And for the federal government, by printing its
own money interest-free for the same purpose.
-
- This writer and Brown believe that credit should be a
public utility under a nationalized banking system, creating its own money
at the federal level and with deposits into state-run banks - to serve
people, not predator bankers. It would be the most equitable, sustainable,
efficient and democratic system, free from parasitic lenders, and it would
work equally well at the federal, state and community levels with local
branches of government banks serving municipalities, their businesses,
and residents at affordable costs.
-
- Under the privately-run Federal Reserve and parasitic
giant banking system, corporate monopolies run America and use "their
affiliated banking trusts to generate unlimited funds to buy up competitors,
the media, and the government itself, forcing truly independent private
enterprise out" - the very system classical economists abhorred.
-
- Private banks hold nations hostage by making them pay
interest on their own money as well as "advanc(ing) massive loans
to their affiliated cartels and hedge funds, which use the money to raid
competitors and manipulate markets."
-
- In America, it's an extreme form of Darwinism with the
federal government and 46 of the 50 states insolvent - and small businesses
and ordinary people faring worst. Another way is essential to keep the
nation, individual states, local communities, and most people from becoming
"zombies" and America transformed into Guatemala.
-
- With federal, state, and community banks made a public
utility under a nationalized banking system, consider the benefits:
-
- -- personal and payroll taxes could be eliminated;
-
- -- stable, sustainable economic growth could be generated;
-
- -- America's manufacturing base could be rebuilt;
-
- -- vital infrastructure projects could be undertaken
on a scale never before imagined, including cleaning up the environment
and developing alternate, sustainable, clean, safe, and affordable energy
sources;
-
- -- many millions of new good-paying jobs could be created,
putting an end to unemployment for everyone willing and able work; and
for those willing but unable, aid could be provided;
-
- -- home foreclosures would end, and the dream of home
ownership would be in reach for everyone because mortgages would be plentiful,
cheap, and not designed to scam the unwary;
-
- -- inflation could be ended;
-
- -- booms and busts would be a thing of the past;
-
- -- destructive currency devaluations and economic warfare
for private gain would no longer be a threat;
-
- -- private pensions, savings, and investments would be
secure; and
-
- -- federal, state, and local debt could be eliminated.
-
- Imagine the following:
-
- Weeks back, Bloomberg and others reported that from $12
- 14 trillion in bailouts and stimulus have been allocated or spent, while
the Fed can't account for $9 trillion in off-balance sheet transactions.
Why? Because of unprecedented willful fraud given a wink and nod by the
highest officials in Washington partnered with criminal bankers to loot
the Treasury and fleece the public.
-
- Now imagine if $1 trillion of the total looted went to
publicly-run banks for productive purposes. "Fractional reserve"
magic would create $10 trillion. If around half of it went there (remember
already allocated or spent), an astonishing $70 trillion could be used
productively, not wasted, used to buy damaged assets cheap for greater
consolidation, or for speculation at the risk of a severe future inflation.
Then envision a new future:
-
- -- the federal debt could be eliminated;
-
- -- all unfunded liabilities, including Social Security,
Medicare, and Medicaid would be secure in perpetuity;
-
- -- the nation and all 50 states would become solvent
and on their way to comfortable surpluses; and
-
- -- a sustainable, inflation-free, prosperous future would
result with essential social benefits for everyone, including affordable
or perhaps free health care, education, and the end of poverty because
a guaranteed minimum income could be assured.
-
- Overall, it would be nothing short of a revolutionary
new America, only rhetorically addressed up to now, with all winners and
no losers - except the private predator banks and their corrupted public
sector partners.
-
- And remember, newly created money isn't inflationary
as long as imbalances are avoided and it's productively used for new goods
and services.
-
- That's the kind of America to work for and not quit until
achieved. If not now, when? If we don't do it, who will? If not done soon
enough, it may be too late. If that's not incentive enough, what is?
-
- Stephen Lendman is a Research Associate of the Centre
for Research on Globalization. He lives in Chicago and can be reached at
lendmanstephen@sbcglobal.net.
-
- Also visit his blog site at sjlendman.blogspot.com and
listen to The Global Research News Hour on RepublicBroadcasting.org Monday
- Friday at 10AM US Central time for cutting-edge discussions with distinguished
guests on world and national issues. All programs are archived for easy
listening.
|