From the article, “California Budget Dilemma: Turning Crises into Opportunity” by Ellen Brown — modified for Ohio by the LV Editors.
Many states such as California, Pennsylvania and Illinois are in the midst of financial chaos. Ohio is among them. With a proposed budget that is already more than $3 billion out of balance, Governor Strickland seeks to fix Ohio’s woes by using over $5 billion in one-time “bailout” dollars, increasing fees (taxes) by $1.3 billion and burning through the entire rainy day fund. The creation of dozens of new government programs sets Ohio up for even greater deficits in the future when the bailout dollars end but the costly programs remain.
What to do? Perhaps Ohio could take a lesson from the island state of Guernsey, located in the English Channel off the French Coast, which faced similar funding problems in the 19th century. Toby Birch, an asset manager who hails from there, tells the story in Gold News:
“As weary troops returned from a protracted foreign war [the Napoleonic Wars ending in 1815], they encountered a land racked with debt, high prices and a crumbling infrastructure. . . There was economic gridlock as labor and materials were abundant, but much-needed projects could not be funded for want of cash. This led to a period of so-called ‘poverty amongst plenty’ … existing borrowing costs were consuming 80% of the island’s revenues. This was when a committee of States members was formed . . . The committee realized that if the Guernsey States issued their own notes to fund the project, rather than borrowing from an English bank, there would be no interest to pay. To prevent an inflation of the money supply, the Guernsey States issued the notes with a date due, and on that date the bearer was paid in gold. The money came from rents on the finished infrastructure, supplemented with a tax on liquor.
“The end result of the Guernsey Experiment was spectacular – new roads, sea defenses and public buildings were established, fostering widespread trade and prosperity. Full employment was achieved, no deficits resulted and prices were stable, all without a penny paid in interest. Money was used in its purest form: as a convenient mechanism for oiling the wheels of commerce.”