Ending Today's Economic Crisis
Simply and Easily, in America and Globally
by Stephen Lendman
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
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
"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
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
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
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
-- 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
-- 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
-- its colonists;
-- 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
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
-- personal and payroll taxes could be
-- stable, sustainable economic growth
could be generated;
-- America's manufacturing base could
-- 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
-- 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
-- inflation could be ended;
-- booms and busts would be a thing of
-- 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
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
-- 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
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 firstname.lastname@example.org.
Also visit his blog site at sjlendman.blogspot.com
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