"There were two visions expressed . . . . 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 . . . 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.
"Five hundred billion dollars could be saved annually just by refinancing the federal debt through our own central bank, interest-free. This is not an off-the-wall idea but has actually been done, very successfully. Among other instances, it was done in Canada from 1939 to 1974, as was detailed by the youngest and oldest speakers at the conference, 12-year-old Victoria Grant and former defense minister Paul Hellyer, founder of the Canadian Action Party. Another Canadian at the conference, Toronto Councillor Kristyn Wong-Tam, has proposed that the Toronto city council could improve its finances by forming its own bank."
The direct solution to the economic crisis, urged by veteran money reformer Bill Still, would be for the federal government to simply create the money it needs, as the American colonists did by printing paper scrip and Abraham Lincoln did by printing greenbacks.
But cities and states
don't need to wait for a deadlocked federal Congress to act. As Wong-Tam has proposed for Toronto, they
can divest their public revenues from the too-big-to-fail banks and put them in
their own publicly-owned banks. These
banks could then do what all banks do : leverage capital, backed
by deposits, into money in the form of bank credit.
This newly-created bank money
would then be available for the use of the local government interest-free
(since the government would own the bank and would get the interest back as dividends). Among other possibilities, the money could be
used to restore the schools. This would
not be an expenditure but an investment, as illustrated
by the G.I. Bill , which
provided education and low-interest loans for returning servicemen after World
War II. Economists have determined that
for every 1944 dollar invested in the G.I. Bill, the country received
approximately $7 in return, through increased economic productivity, consumer
spending, and tax revenues.
Legislation for public
banks has now been introduced in 18 U.S. states, on the model of the highly
successful Bank of North Dakota (BND). Elaborated
on at the Public Banking conference by Ed Sather and Rozanne Junker, the BND is
currently the country's only state-owned bank and has been a major factor in
allowing the state to escape the recent credit crisis. North Dakota is the only state to boast a
significant budget surplus every year since the economic downturn of 2008.
Ellen Brown noted that
40% of banks globally are also publicly-owned.
These are largely in the BRIC countries (Brazil, Russia, India, and China),
which also escaped the credit crisis, largely because their public banks did
not rely on derivatives and, unlike private banks, lent counter-cyclically to
cushion their economies from the downturn.
Samuel Giles proposed that even public universities could set up their own
banks, which could then leverage university monies for the university's own use,
rather than giving those assets away to Wall Street to be speculated with and
lent back at much higher interest rates.
Innovative Solutions for Pennsylvania
Speakers Michael Sauvante and Mike Krauss noted that efforts are underway in several Pennsylvania and Ohio municipalities to create public banks. One possibility is for public banks to take an aggressive role in ending the foreclosure crisis by acquiring abandoned and foreclosed homes by eminent domain. These homes could be added to the asset base of the bank, which could extend credit to restore them and then sell or rent them at reasonable rates.
Krauss noted that Philadelphia
already has a strong effort underway to create a "land bank"--a bank to
acquire, rehabilitate and create productive uses for the city's more
than 40,000 vacant properties--and legislation (HB 1682) has been
introduced in the state legislature to enable this effort. But the land bank proposed is not designed to
function as a depository bank that leverages funds into credit. Rather, it would simply work with
appropriated funds or bond revenue. This is a positive step toward addressing a
real need, but it could be enhanced by turning the land bank into a public
bank--a chartered bank having the power to create money as credit on its
The efforts for
developing public banks in Pennsylvania are being led by the Pennsylvania
Project, which was a co-sponsor of the Philadelphia conference and is supported
in its work by the Public Banking Institute and the Center for State Innovation. The Pennsylvania Project is creating
partnerships with other Pennsylvania public policy organizations to introduce
legislation for a state Bank of Pennsylvania in 2013, after elections are held and
a strong foundation of support has been laid.
Revolution Without Bloodshed
We live under a tyranny today that is just as intolerable and unjust as that in 1776, but violent revolution is no longer an option. Our oppressors own the military and the media, and their FEMA camps are waiting for us.