[R-G] [BillTottenWeblog] Ending Today's Economic Crisis Simply and Easily

[Bill Totten]

in America and Globally

by Stephen Lendman

sjlendman.blogspot.com (May 27 2009)


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 (1776) 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 (2007) and her explanation of how
"Cash-Starved States Need to Play the Banking Game" the same way as
North Dakota.

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 to Hudson:

"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
ten percent of the population (mainly the top one percent), 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 fifty states are solvent, North Dakota runs surpluses, and
according to the Center on Budget and Policy Priorities, it's expected
to have them in Fiscal Year 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 fifteen percent faster
than the national average. In fact, our per capita income has moved up
twelve 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 the nation.

"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 four percent.
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 ten 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 governed.

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 Debt.

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 remarkable, including:

- 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 of science;

- standardizing methods of mass production;

- increasing labor productivity by fifty to 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 to 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 instituted by:

- its colonists;

- Lincoln;

- 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 burgeoning population.

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 fifty 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 the benefits:

- personal and payroll taxes could be eliminated;

- stable, sustainable economic growth could be generated;

- America's manufacturing base could be rebuilt;

- 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 be provided;

- 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 the unwary;

- inflation could be ended;

- booms and busts would be a thing of the past;

- 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 be eliminated.

Imagine the following:

Weeks back, Bloomberg and others reported that from $12 to 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 future:

- the federal debt could be eliminated;

- all unfunded liabilities, including Social Security, Medicare, and
Medicaid would be secure in perpetuity;

- the nation and all fifty 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 assured.

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
lendmanstephen at sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The
Global Research News Hour on RepublicBroadcasting.org Monday - Friday at
10 am US Central time for cutting-edge discussions with distinguished
guests on world and national issues. All programs are archived for easy
listening.

http://www.globalresearch.ca/index.php?context=va&aid=13720

http://sjlendman.blogspot.com/2009/05/ending-todays-economic-crisis-simply.html


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