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Take the Power to Create Credit Away from the Giant Banks and Give It Back to the People
- Text size
Washington’s Blog
November 4, 2009
Many people – including former analyst for the U.S. Treasury Richard Cook – argue that credit is too important a function to be left to the private banks.
Indeed, even after taxpayers have given trillions in bailouts, backstops, guarantees, and other gifts, the giant banks are still not lending out much credit to individuals or small businesses.
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| When currency speculation is removed from the equation, money simply acts as a yardstick to measure the exchange of goods and services so that barter is not necessary. | |
The talking heads say that real reform of this nature is not “politically feasible”. But not politically feasible doesn’t actually mean anything except that the powers-that-be don’t want it.
We have been throwing ourselves against a brick wall trying to force the giant banks into doing the right thing, but as Buckminster Fuller said:
You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.
A Better Model
So what is a better model?
Gold advocates argue for a return to a gold-backed standard. This would, in fact, be a vast improvement over the fiat currency system we have now, as it would help to stabilize the currency, add discipline and consistency, and reign in the funding of unnecessary wars and other imperial mischief which are funded by the unlimited printing of new fiat dollars.
But Ellen Brown argues that a gold standard restricts credit for the little guy, not just Uncle Sam. If Brown is right – and given that the too big to fails are refusing to lend to most little guys – public banking might be the only way to restore a healthy economy and ease the pain for the average American. (Brown also argues that it was actually the bankers – and not the populists – who forced the adoption of a gold standard in the 1890s, and that the true meaning of the “Cross of Gold” speech has been forgotten).
But as discussed below, it may not be necessary to choose between a gold standard and other options.
National Public Bank
AFL-CIO president Richard Trumka told Congress last week:
If the Federal Reserve were made a fully public body, it would be an acceptable alternative.
The American Monetary Institute proposes the following alternative:
Incorporate the Federal Reserve System into the U.S. Treasury where all new money would be created by government as money, not interest-bearing debt; and be spent into circulation to promote the general welfare. The monetary system would be monitored to be neither inflationary nor deflationary.
Second, halt the bank’s privilege to create money by ending the fractional reserve system in a gentle and elegant way.
All the past monetized private credit would be converted into U.S. government money. Banks would then act as intermediaries accepting savings deposits and loaning them out to borrowers. They would do what people think they do now. This Act nationalizes the money system, not the banking system.
Bloomberg News columnist Matthew Lynn writes:
The U.K. government needs to start thinking about what it will do with all the banks it now owns. The answer is simple: Hand them to the people…
Instead of selling the stakes it acquired in the financial system to other banks, or listing the shares on the stock market, it could create mutually owned societies. Royal Bank of Scotland Group Plc could be a people’s bank, owned by everyone.That would ensure more diversity, competition and stability, all goals just as worthy as getting back the money Prime Minister Gordon Brown’s government spent on bank rescues…
Sovereign nations such as the U.S. and England have the power to create credit and money (and see this, this and this). Taking the credit-creation power away from the banks and giving it back to the nation would ensure that credit is freed up for people’s use, and the stranglehold over the economy is taken away from the too big to fails.
State Public Banks
Many people argue that – given its actions – people don’t trust the federal government to create money.
Fair enough. Why not let the states do it?
Michael Moore recommends that the American people demand:
Each of the 50 states must create a state-owned public bank like they have in North Dakota. Then congress MUST reinstate all the strict pre-Reagan regulations on all commercial banks, investment firms, insurance companies — and all the other industries that have been savaged by deregulation: Airlines, the food industry, pharmaceutical companies — you name it. If a company’s primary motive to exist is to make a profit, then it needs a set of stringent rules to live by — and the first rule is “Do no harm.” The second rule: The question must always be asked — “Is this for the common good?” (Click here for some info about the state-owned Bank of North Dakota.)
As Moore notes, the state of North Dakota already has such a bank, and – because of that – North Dakota is just about the only state which is not running a huge deficit.
PhD economist and candidate for Florida governor Farid Khavari wants to create a Bank of the State of Florida, to create credit without burdening the state and its citizens with high interest charges by private banks.
See this for details.
Local Public Banks
An alternative to federal or state public banking is local public banks, as proposed by Edward Kellogg and others.
As summarized by Adrian Kuzminski:
During this time of financial and economic crisis, it is worth recalling that credible alternatives to our current financial system exist, if largely unrecognized, and deserve serious consideration…
The now-neglected 19th-century American proto-populist, Edward Kellogg … was a kind of godfather to the later populist movement on monetary issues. Perhaps the most profound of American writers on monetary issues, Kellogg advocated a decentralized but nationally regulated monetary system based on non-usurious, low-interest public loans to individuals. His vision inspired 19th-century century mutualists, greenbackers, populists, and others who sought to restructure the monetary system to redistribute wealth.
In our own day, when usurious credit in the form of private finance capital remains the dominant force in economic life, and is largely taken for granted even by educated people, the alternative Kellogg offers is more important than ever. Indeed, I suggest that Kellogg’s theory of money is the best monetary alternative we have to the baleful system under which we suffer…
Edward Kellogg (1790-1858) was a New York City businessman whose losses in the crash of 1837 led him to examine the business cycle, monetary policy, and debt. In a series of writings, Kellogg developed the idea of … having the government provide very-low-interest loans to the general public. These loans would have a uniform, fixed interest rate, established by law. They would be issued locally through a system of public credit banks he called the Safety Fund. Once issued, these low-interest loan notes would circulate as currency, replacing the privately issued banking notes of his day (which today take the form of Federal Reserve Notes)…
In his day Kellogg seems to have influenced even Abraham Lincoln who, according to historian Mark A. Lause, ” . . . had his own copy of Kellogg’s book, Labor and Capital [sic] advocating the government issuance of paper currency as a just means of redistributing wealth, and he corresponded with the author’s son-in-law.” Kellogg’s public currency was intended to end the monopoly over the discretionary issuance of money at interest, which was held then (and now) by the private banking and investment system…
Kellogg proposed to establish local public credit banks, and we might imagine one in each community. These local public credit banks would be part of the Safety Fund. Instead of money being issued (as it is now) through a privatized and centralized money-management system on a top-down basis, primarily as loans at increasing rates of interest from a central bank to major commercial banks, and then to regional and local banks, and then to the public, money in his system would be issued by local federal banks as loans directly to citizens at nominal interest on the basis of their economic prospects. Once lent out, Kellogg’s public credit notes would flow into circulation, providing the basis for a new currency backed by the assets of individual borrowers…
A centralized national currency would be replaced, in Kellogg’s system, by a locally issued currency. But that currency would everywhere be subject to common national standards, ensuring that each local public credit bank reliably issued equivalent units of currency. A dollar issued by one local public credit bank of the Safety Fund, Kellogg intended, would be worth the same as, and be freely interchangeable with, one issued by any other. The independence of local branches would be guaranteed by the discretionary power reserved to them as a local monopoly actually to loan money; the compatibility of their monies would be ensured under federal law by fixing the value of the dollar by law at 1.1 percent/year – that is, by lending money everywhere to citizens at that rate…
The goal is to establish and preserve economic decentralization. Amounts of money lent in Kellogg’s system would vary considerably from place to place, with some areas needing and creating more currency than others. The solvency of local federal public credit banks would be guaranteed by collateral put up by borrowers, and the money supply would be stabilized by repayment of loans as they came due. The interchangeability of public credit bank notes would ensure a wide circulation for the new money…
To achieve a stable currency, Kellogg insisted that this rate be fixed by law; perhaps today it would take a constitutional amendment.
What’s the Best Option?
People of good faith debate whether the gold standard, or national, state or local public banking is the best solution.
But they agree that the current fiat currency system where the creation of credit is controlled by the private banks has pushed us into an economic crisis and a credit crunch, with little hope of stability for the future.
Changing to a public banking system and/or reimplementing the gold standard would clearly be a large change. But remember – as Buckminster Fuller pointed out – building a new model is often easier than fighting the existing one.
The time is right for a new model.
Afterword: Is a Gold Standard Incompatible with Public Banking?
Many people assume that a gold standard is incompatible with public banking. But that might not necessarily be true.
An analysis of ways in which a gold standard might possibly complement public banking is beyond the scope of this essay, and I have not yet even thought it through myself. But before ruling out the possibility, I invite financial experts to brainstorm on this issue to see if we can have the best of both worlds.
After all, when currency speculation is removed from the equation, money simply acts as a yardstick to measure the exchange of goods and services so that barter is not necessary. People may be able to create a money system which has the stability and discipline created by a gold backed system. with the credit availability of a public banking system.
Admittedly, the gold standard may at first blush be seen as more conservative than public banking, as the former limits money expansion while the latter encourages it. But as with all liberal-conservative dichotomies, it is important to get beyond labels and to determine what is actually best. Indeed, public banking – especially if it is on the state or local level – would not create easy credit for the government to launch new imperial adventures.
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November 4th, 2009 at 10:37 am
ok here du go!
But for you who revere my Name, the sun of righteousness will rise with healing in its wings. And you will go out and leap like calves released from the stall
those who hope in the LORD will renew their strength. They will soar on wings like eagles; they will run and not grow weary, they will walk and not be faint
SPIRITBLADE Reply:
November 4th, 2009 at 10:51 am
SELAH
November 4th, 2009 at 10:43 am
pppffffftttt!!!!!(American)
For as churning the milk produces butter, and as twisting the nose produces blood, so stirring up anger produces strife.”
SPIRITBLADE Reply:
November 4th, 2009 at 10:52 am
“I will not strive with man forever.”
November 4th, 2009 at 10:50 am
See to it that you do not refuse him who speaks. If they did not escape when they refused him who warned them on earth, how much less will we, if we turn away from him who warns us from heaven?
November 4th, 2009 at 10:51 am
A lil’ off-topic, but OKAY!!
GOOGLE IMAGE: Noah’s Ark/ Turkey/ Wyatt
[AND]
Red Sea/ Pharaoh’s chariots
Pages, and pages- of pictures and pictures of why you (quite probably) will die [ST00PID].
Rick Reply:
November 4th, 2009 at 11:37 am
Spiritblade while i disagree with James posting on every topic i also disagree with you and have posted a link to a christian news website on another topic that stated there is no evidence for Noahs Ark. Why did you ignore that? Are you too egotistical to accept that you are wrong? Man up and shut the fuck up.
SPIRITBLADE Reply:
November 4th, 2009 at 11:44 am
i’ve STUDIED what i post, you do not.
Whereas i’ve used a variety of adjectives, i’ve never stooped as low as you.
You’re not bad-enough to shut me up punk.
No [m00k] can be.
SPIRITBLADE Reply:
November 4th, 2009 at 11:45 am
Man up:
Howard Brittain
Ward Colorado
You want a shot a the Title?
(better bring a big-assed army)
November 4th, 2009 at 10:58 am
VISIT MY BLOG-SITE, SOON PROFESSIONAL WEB-SITE. We’re in this together, we need TO STICK TOGETHER!
http://www.domenk.wordpress.com
November 4th, 2009 at 10:59 am
HERE: Stream and Download ALL the best interviews and rants from the Alex Jones Show Archives:
http://alex-jones-archives.politicsfiles.info/
TODAY:
- Mike Rivero:Al Gore Set To Become First “Carbon Billionaire”
- Author Bill Sardi:What’s In Your Vaccine?
- Taking It To A New Level
- Another Adventure with Rob Dew & Aaron Dykes
Backup your favorite episodes, don’t miss any!
November 4th, 2009 at 11:22 am
NWO don`t want you to know this: http://www.freedomguide.weebly.com
WTF!!! Reply:
November 4th, 2009 at 12:45 pm
I just interviewed for a Janitor job, but they gave it to the damn MBA holder. Maybe if I get my PHD I can flip burgers.
whitemale08 Reply:
November 4th, 2009 at 5:46 pm
It would be nice to see a ‘SOVEREIGN CREDIT’ system return to this country and for each nation to do the same;
for each country to trade based on a return to the original Bretton Woods of fixed-exchange-rates not Wall Street/City of London speculation;
for each government to ‘protect’ their industries and manufacturing base.
Would there be paper billionaires like Buffet? …doubt it but we would have a world wide middle-class.
www.creditambassador.com Reply:
November 4th, 2009 at 10:59 pm
I think Ron Paul is a good man period for talking about “1913″ when the PRIVATE FED was created!!! a system that total controls all of our banks threw our own MONEY!! NOBODY IMPORTANT was ever woken so many people up to something so IMPORATANT!
You want to know another thing ?? in “1899″ the first FOR PROFIT credit bureaus where created , long before the FED, it was created to collect our personal info and illegally spy on us for the BANKs, and then the credit bureaus went unregulated doing whatever they wanted with all our personal info, and selling it! until our corrupt government came and made all there illegal tactics totally LEGAL, under the false flag “Equal Credit Opportunity Act” of 1974 which made us believe we had credit rights, but really the only people in 1974 who knew anything about how the credit industry, and how it should work where the people working at the credit bureaus and there lobbyist!!! So for 70 year they had free range over our father fathers, now it part of our everyday, it truly does ruin lives!!! But the fact remain we still have rights, and we still can beat the credit bureaus at there own game! we still can fight these corporations, it should be obvious based on Rons action against the FED.FOR MORE INFO AND HELP ON BEATING THE CREDIT BUREAUS CHECK OUT OUR SITE FREE WEEKLY NEWSLETTERS AND FREE VIDOES, (also be sure to pay attention to the new credit card reform bill Obama pushed thru, it targeting people with good credit!
in 2007 Experian the credit bureau bought the largest set of servers and debt reporting software in the world, now known as metro2 and eoscar, with an overall goal of owing 60% off EU, USA, and CA debt, so in simple terms the credit bureaus them self have now bought the largest collection company and debt reporter!!
What this mean to you??? well for starters this new platform has been inputted into Equifax and Transunion online dispute department, so now the 3-4 billion disputes the 3 bureaus gets each month currently now doesn’t even go to the actually credit bureaus for dispute department at ALL, and if you are thinking about disputing online your actually contacting the original creditor now, the are re routed directly to the companies from which the originally appeared, and being that 97% of people with bad credit have inaccurate, incorrect, or plain illegal information on there report they now will not even get 1 look at any doc sent to bureau until the creditors or collection companies see them first which TOTALLY illegal, but of course the credit bureaus who make BILLION of dollar each year collecting and re selling all of our personal information so the banks can keep us in this BS rat race arent even touchable, just like having bookie who cooks the bets you make, you now have a for profit credit bureau who isnt liable for any infor correct or incorrect that on your report, and not to mention the fact when you really do get past the eoscar system and metro2 it not like your in court hearing, your doc and personal info is sent to India for TU, Philippines for EQX and same for EXP, so ALL your most sensitive data now is being looked at and “eye balled” for $0.30 cent on per page, which is not even in the US…now I know what your thinking (F credit and the bureaus,) but this totally fake recession is based on the fact 85% American cant even get approved for basic loans to afford to live even if they had good job, so in short if your looking to beat the credit bureaus and banks at there own game, and make the system work for you instead of against you, do yourself favor check out our website for our insider info on how to beat the bureaus and make difference in your financial life, you shouldn’t have to fight these billion dollar companies on your own, not when we can provide a 4-6 year learning curve with our team!!! Fighting them doesn’t COST a dime and our videos and appointments are totally free!
http://www.creditambassador.com/
November 4th, 2009 at 11:30 am
So far not one of these comments has anything to do with this article. The discussion regarding alternatives to the Federal Reserve system is timely and important to our nation. I’m not too familiar with how “public banking” or the “gold standard” would actually affect our economy. I get the notion that they would in some form hinder credit bubbles, reduce inflation and deflation, eliminate fiat currency, reduce poverty, and bring back real wealth building. I suppose some say that cycle leads back to where we are now, but I don’t think so. Where we are now is due to the federal reserve fiat currency cycle!
BanksterCrook Reply:
November 4th, 2009 at 12:00 pm
This is a good article. This is finally getting to the heart of the matter. These people who are writing off topic are trying to prevent a real discussion –which is that bankster crooks have cuased these problems and they need to be stopped. The only way is to get rid of the central bank.
November 4th, 2009 at 11:34 am
Your funny puke-face.
i’m gonna kill you last.
See how good ur asses are, at takin’-out an Israelite.
welp Reply:
November 4th, 2009 at 2:53 pm
see-Is62.2,65.15,Rom2.28,7,Gal4.21-30,Rev2.9,3.9-12
November 4th, 2009 at 11:38 am
Great article like many on this site. Alex has the best team of researchers in the Patriot community.
I hate making a passionate post and it gets deleted before anyone ever sees it. If you have this problem come check out our new website and forum. We welcome all idea’s and opinions. Read the news here and post your comments with us. Free movies, live chat, ton of information. A way to kill the swine flu. Ya thats what I said. Called the Pandemic Zapper. Plans on our E-Book Page. AND ITS FREE. Could save your Life, and much much more.
Check us out.
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November 4th, 2009 at 11:40 am
Yeah id like to start a business manufactoring guns (maybe Aks and 9mms) and ammunition, because of all the boom in sales going on right now. I wonder if I can get a bailout loan to get started? I can prove the scarcity in ammunition right now, who would I contact for a loan? It would defenitely help the economy, because if every American had a gun to protect themselves from tyrants there would be no crimes the revenue generated and also the decline of arrests, because if we all have a gun to protect ourselves there would be no crime. All the money spent in court fines would be spent in the economy, preferably on organic food and a family vacation:)
BanksterCrook Reply:
November 4th, 2009 at 12:02 pm
You can probably get such a grant from Homeland Security, but only if you agree to use said weapons against the little guys.
November 4th, 2009 at 11:41 am
Mel Watt (D-NC), Chairman of the Monetary Policy Subcommittee, has sided with Fed and is working to gut substantial audit provisions from HR 1207. The bill Congressman Watt has sent to the full Financial Services Committee contains no audit of the Fed’s monetary policy-making authority or transparency of the Fed’s secret agreements with foreign central banks.
1. Rep. John Adler, NJ (202) 225-4765
2. Rep. Travis Childers, MS (202) 225-4306
3. Rep. Steve Driehaus, OH (202) 225-2216
4. Rep. Alan Grayson, FL (202) 225-2176
5. Rep. Rubén Hinojosa, TX (202) 225-2531
6. Rep. Suzanne Kosmas, FL Toll Free: 1-877-956-7627
7. Rep. Dan Maffei, NY (202) 225-3701
8. Rep. Brad Miller, NC (202) 225-3032
9. Rep. Walt Minnick, ID (202) 225-6611
10. Rep. Ed Perlmutter, CO (202)-225-2645
11. Rep. David Scott, GA (202) 225-2939
12. Rep. Brad Sherman, CA (202) 225-5911
13. Rep. Jackie Speier, CA (202) 225-3531
When contacting these members, remember that up to this point, these members have been allies on this issue. A civil yet firm tone should be kept during these calls. They should be thanked for their cosponsorship, told that Mel Watt’s changes to the bill are unacceptable, and urged to hold the line and honor their promise to support transparency at the Fed by voting “Yes” for the Paul amendment.
It is also important that we contact Financial Services Chairman Barney Frank and House Speaker Nancy Pelosi and urge them to schedule a standalone, up or down vote on the real Audit the Fed bill.
Rep. Barney Frank: (202) 225-5931
Speaker Nancy Pelosi: (202) 225-0100
November 4th, 2009 at 11:51 am
If we do nothing wright now then all is lost! The New CC Laws go in effect in June 2010
after that all bets are off.Banks and the big boys are off shore China UAE Russia etc. Turkey just told America to F off they will support Islam and Iraq and Afghanistan is a Book end to the real Attack”IRAN AND GOG MAGOG RUSSIA WILL STRIKE WWIII WILL BEGINS. Fokker SAID IN THE HOUSEING MARKET RESSESION OF THE CARTER YERAS 80 TO 82 UNTIL REGANOMICS KICKED IN.
REMEBER UP TO 24% RATE OUCH THAT KILLED CONSTRUCTION FOR 2.5 YEARS THE CREDIT CRUNCH THEN AND NOW “WE HAVE LIVED BEYOND OUR MEANS”( NO SAVINGS STRUCTURE ) GREED AND SELFISHNESS NOW, I WANT IT NOW! AND WELFARE HAS TRUMPED THIS COUNTRY WE WANT IT NOW AND YOU WILL GET. (POVERTY)!, THE PEOPLE NEED A NEW INDEPENDENT PARTY OF REPUBLIC CONSERVITIVES NOW OR ALL IS LOST! REPENT NOW OR FACE THE TRIBULATION OF THE ANTICHRIST! THE IMF AND CHASE JP DO NOT GIVE A RATS ASS ABOUT AMERICA AND THE WAR WILL RUN FOREVER UNTIL IRAN IS CONTROLED!
FOR THOSE WHO WERE WISE OWLS AND SAVED AND STUDIED THE MARKETS WILL HAVE TO HIRE GUNS TO DEFEND THERE PROPERTY AGAINST THE HORDS, THE CHRISTIANS WHO WILL BE WELL OFF WILL HELP,BUT WILL IF HAVE TO ,KILL IN SELF DEFENSE.BE PREPARED NOW LIKE THE ANT STORES UP HER NEST FOR THE WINTER TO FIGHT ANOTHER DAY!
November 4th, 2009 at 11:59 am
Rothschild says when pigs fly…??? http://www.youtube.com/watch?v=cHZXEc4y6R0
November 4th, 2009 at 12:59 pm
Try this instead of all this ignorant dribble as above: the First Continental Congress voted unanimously to establish our political economy on the basis of one of Hamilton’s 3 reports, the Report on a National Bank.
That’s the answer.
Most of this dribble on here is idiotic.
You don’t have to invent a new system. What Henry Clay later called the “AMERICAN SYSTEM” – that is what has produced every period of prosperity in America.
Go learn how the First and Second National Banks worked. In our CONSTITUTIONAL system, credit is issued as Credit to the Real Economy for the promotion of public works projects in the Public Interest [as John Perkins spoke about].
Too many of you people know what you hate the Federal Reserve, but fail to grasp the American System.
November 4th, 2009 at 2:19 pm
How about both? Public banking transitioning into a SILVER standard, to be augmented if need be by gold, platinum, and rhodium. And oh yeah, almost forgot, restore all mining rights so that we can actually produce our own supply of these metals.
November 4th, 2009 at 3:17 pm
It’s elementary
http://www.youtube.com/watch?v=u03TfQN1pXo
November 4th, 2009 at 4:16 pm
Nano Silver Hydrosol for those Europeans left out. See Bionaid at http://www.bionaid.eu, tri-oxysilver solution, covalant bond, superior to colloidal silver products. Thx
November 5th, 2009 at 3:53 am
The best solution is to pass the Minnesota Transportation Act. Ellen Brown endorses it, Byron Dale authored it. Byron Dale is the only person in America with a real workable solution. Read his new book Modern Money Secrets to understand this better than any other author.
November 5th, 2009 at 6:08 am
LIGHT. CHANGING THE MONETERY STRUCTURE WILL HAVE TO BE DONE BY CONGRESS. JFK DID NOT HAVE MUCH LUCK AT IT. SO EVERY APPOINTED PRESIDENT AFTER HIM JUST WENT ALONG WITH THE GAME BECAUSE THEY WERE ALL IN THE CLUB, LIKE NOW. STATES COULD ISSUE THEIR OWN CURRENCY AND BY PASS THE FEDERAL CRIMINAL SYSTEM.(FED) LOOK WE CAN DO ANYTHING WE SET OUR MINDS TO. THE TIPPING POINT IS NOT YET HERE. GET DEPROGRAMED AND GET OUT OF THE MIND CONTROL OF WALL STREET AND BLOOMBURG BUSSINESS INFOTAINMENT CONTROL. BY THE WAY, GOOD ARTICLE. I AM GOING TO CUT UP MY CHASE VISA. ITS A START. Obama can be directed to listen to the people! 307,000,000+ SPEAK UP!
November 5th, 2009 at 10:11 am
Absolutely!