How Cash Starved States can Create their Own Credit
by Ellen Brown
Hat tip:Global Research, March 3, 2009
“He that will not apply new remedies must expect new evils; for time is the greatest innovator.” Francis Bacon
On February 19, 2009, California narrowly escaped bankruptcy, when Governor Arnold Schwarzenneger put on his Terminator hat and held the state senate in lockdown mode until they signed a very controversial budget.1 If the vote had failed, the state was going to be reduced to paying its employees in I.O.U.s. California avoided bankruptcy for the time being, but 46 of 50 states are insolvent and could be filing Chapter 9 bankruptcy proceedings in the next two years.
One of the four states that is not insolvent is an unlikely candidate for the distinction – North Dakota. As Michigan management consultant Charles Fleetham observed last month in an article distributed to his local media:
“North Dakota is a sparsely populated state of less than 700,000, known for cold weather, isolated farmers and a hit movie – Fargo. Yet, for some reason it defies the real estate cliché of location, location, location. Since 2000, the state’s GNP has grown 56%, personal income has grown 43%, and wages have grown 34%. This year the state has a budget surplus of $1.2 billion!”
What does the State of North Dakota have that other states don’t? The answer seems to be: its own bank. In fact, North Dakota has the only state-owned bank in the nation. The state legislature established the Bank of North Dakota in 1919. Fleetham writes that the bank was set up to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the state must deposit all its funds in the bank, and the state guarantees its deposits. Three elected officials oversee the bank: the governor, the attorney general, and the commissioner of agriculture. The bank’s stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota. The bank operates as a bankers’ bank, partnering with private banks to loan money to farmers, real estate developers, schools and small businesses. It loans money to students (over 184,000 outstanding loans), and it purchases municipal bonds from public institutions.
Still, you may ask, how does that solve the solvency problem? Isn’t the state still limited to spending only the money it has? The answer is no. Certified, card-carrying bankers are allowed to do something nobody else can do: they can create “credit” with accounting entries on their books.
Friday, February 6, 2009
Here is an excellent response to socialist luminary Naomi Klein’s latest article in which she again blames “free market ideology” as being responsible for the economic crisis, when in fact any cursorary study reveals that the anti-free market policies of the Federal Reserve, along with corporate fascism, not free-market capitalism, are the culprit.
RE: Naomi Klein: Public Revolt Builds Against Rip-off Rescue Plans for the Economy
“The pattern is clear: governments that respond to a crisis created by free-market ideology with an acceleration of that same discredited agenda will not survive to tell the tale. As Italy’s students have taken to shouting in the streets: “We won’t pay for your crisis!”
Klein’s “Pattern” = NONSENSE –> “Free-Markets” DO NOT EXIST under FASCISM
In fact the only solution Naomi Klein and her ilk offer is “nationalizing” money power under a corrupted Washington circus already run by Organized Corporate Crime (FASCISM) anyway. In other words more concentration of power in fewer hands. Exactly the sordid hands that now bankroll all play-actors at the Washington-MSM madhouse that rigged the financial crash to begin with.
By Naomi Klein, The Nation. Posted February 6, 2009.
Governments that respond to a crisis created by free-market ideology with the same bad ideas will not survive to tell the tale.
Watching the crowds in Iceland banging pots and pans until their government fell reminded me of a chant popular in anti-capitalist circles in 2002: “You are Enron. We are Argentina.”
Its message was simple enough. You–politicians and CEOs huddled at some trade summit–are like the reckless scamming execs at Enron (of course, we didn’t know the half of it). We–the rabble outside–are like the people of Argentina, who, in the midst of an economic crisis eerily similar to our own, took to the street banging pots and pans. They shouted, “¡Que se vayan todos!” (“All of them must go!”) and forced out a procession of four presidents in less than three weeks. What made Argentina’s 2001-02 uprising unique was that it wasn’t directed at a particular political party or even at corruption in the abstract. The target was the dominant economic model–this was the first national revolt against contemporary deregulated capitalism.
It’s taken a while, but from Iceland to Latvia, South Korea to Greece, the rest of the world is finally having its ¡Que se vayan todos! moment.