States’ Budget Woes: Transforming Crises into Opportunity

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.”

Read more.

July 6th, 2009 | Posted in Print Edition | Read More »

The [Non] Federal [No] Reserve Bank

“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JP Morgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JP Morgan, sits on the board of the New York Fed and participated in the secret weekend negotiations. In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency.

October 17th, 2008 | Posted in Print Edition | Read More »