December 31, 2013
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Money, as Karl Marx lamented, plays the largest part in determining
the course of history. Once speculators are able to concentrate wealth
into their hands they have, throughout history, emasculated government,
turned the press into lap dogs and courtiers, corrupted the courts and
hollowed out public institutions, including universities, to justify
their looting and greed. Today’s speculators have created grotesque
financial mechanisms, from usurious interest rates on loans to legalized
accounting fraud, to plunge the masses into crippling forms of debt
peonage. They steal staggering sums of public funds, such as the $85
billion of mortgage-backed securities and bonds, many of them toxic,
that they unload each month on the Federal Reserve in return for cash.
And when the public attempts to finance public-works projects they
extract billions of dollars through wildly inflated interest rates.
Speculators
at megabanks or investment firms such as Goldman Sachs are not, in a
strict sense, capitalists. They do not make money from the means of
production. Rather, they ignore or rewrite the law—ostensibly put in
place to protect the vulnerable from the powerful—to steal from
everyone, including their shareholders. They are parasites. They feed
off the carcass of industrial capitalism. They produce nothing. They
make nothing. They just manipulate money. Speculation in the 17th
century was a crime. Speculators were hanged.
We can wrest back
control of our economy, and finally our political system, from corporate
speculators only by building local movements that decentralize economic
power through the creation of hundreds of publicly owned state, county
and city banks.
The establishment of city, regional and state banks, such as the
state public bank in North Dakota,
permits localities to invest money in community projects rather than
hand it to speculators. It keeps property and sales taxes, along with
payrolls for public employees and pension funds, from lining the pockets
of speculators such as
Jamie Dimon and
Lloyd Blankfein.
Money, instead of engorging the bank accounts of the few, is leveraged
to fund schools, restore infrastructure, sustain systems of mass transit
and develop energy self-reliance.
The
Public Banking Institute, founded by
Ellen Brown, the author of “Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free,”
Marc Armstrong and
other grass-roots activists are attempting to build a system of public
banks. States such as Vermont and Washington and cities such as
Philadelphia, Washington, D.C., San Francisco and Reading, Pa., have
begun public banking initiatives. Public banks return economic power,
and by extension political power, to the citizens. And because they are
local they are possible. These and other grass-roots revolts, including
sustainable agriculture, will be the brush fires that will, if they
succeed, ignite the overthrow of the corporate state.
“The debate
about public or private control of the monetary system has been going on
for hundreds of years,” Armstrong, the executive director of the Public
Banking Institute, said when I reached him by phone. “The American
Revolution had everything to do with who controlled our economic
destiny. The money supply is central to that control. North Dakota has
proven that a state can use a public bank to further the economic
interests of its people. North Dakota funds its own infrastructure and
capital investment projects. It provides funding for commercial lending
throughout the state. It develops the areas of its economy it wants to
prioritize, areas that are often not funded by private banks.”
“When
a public bank such as the bank in North Dakota funds infrastructure
projects the interest costs, which [otherwise] are often 50 percent or
more of a project, in essence fall to zero because the interest is
returned to same people who own the bank and paid the interest in the
first place,” said Armstrong, who previously worked for IBM Finance.
“[Americans typically] hold labor costs under a microscope, but ...
don’t hold interest costs under a microscope. North Dakota can offer
commercial loans as low as 1 percent. Compare this with Wall Street
banks that charge 14 or 15 percent. We can use bank credit, the tool
Wall Street banks use to amass wealth and power, to empower ourselves.”
And because credit, Armstrong notes, is the source for 97 percent of the
nation’s money supply, this power would be huge.
The Bank of
North Dakota, the vision of socialists from a century ago, has been in
operation for 90 years. It offers the state’s farmers and businesses low
interest rates on loans. After
floods destroyed much
of Grand Forks in 1997 the bank provided a six-month moratorium on
mortgage payments and gave low-interest loans to the community to
rebuild, a sharp contrast with the raw exploitation that marked the
arrival of Wall Street bankers and speculators in Gulf Coast areas hit
by Hurricane Katrina. Public banks in the United States, like the public
banks in Germany, fund things such as solar power because it is good
for communities rather than the portfolios of speculators.
Public
banks also protect us from the worst forms of predatory capitalism.
Reporters Trey Bundy and Shane Shifflett last January
wrote in the San Francisco Chronicle on
how one of Wall Street’s numerous scams works. When the Napa Valley
Unified School District in California needed funds in 2009 to build a
high school in American Canyon it took out a $22 million loan with no
payments due for 21 years. “By 2049, when the debt is paid,” the paper
noted, “the $22 million loan will have cost taxpayers $154 million—seven
times the amount borrowed.” And Napa, the paper reported, is one of at
least 1,350 school districts and government agencies across the nation
that have engaged in this form of borrowing, called capital appreciation
bonds, to finance major projects. Capital appreciation bonds mean
billions in debt for the public and hundreds of millions of dollars for
the speculators, the reporters pointed out. And this kind of scam is
writ large across the entire society.
“California public schools
received $9 billion in loans over the last seven years,” said Armstrong,
who is from California. “In 25 to 30 years the interest due on that $9
billion will be $27 billion. This is just one example of the massive
societal crisis being caused by big banks. Wall Street investment banks
should not be permitted to handle public financing, which has become
simply another way for Wall Street to monetize and extract our nation’s
wealth.”
The potential windfall for communities through the establishment of public banks is huge.
In a study prepared
in Vermont in support of establishing a public bank it was estimated
that a public bank could make loans equal to 66 percent of state funds
on deposits, or $236.2 million in credit for economic development in the
state. This would expand the total credit supply available for state
lending agencies by $236.2 million. Furthermore, the credit would be at a
low cost to the state because public banks do not have to borrow money
by selling bonds. Public banks make loans based on deposits. Interest
returns to the state on loans and deposits. In essence, the state lends
money to itself. The availability of $236.2 million in new lending, the
study estimates, would create 2,535 new jobs, $192 million in value
added (gross state product) and a $342 million increase in state output.
“If used to finance state capital expenditures, funding through a
public bank could save close to $100 million in interest costs on
[fiscal year] 2012-13 capital spending, due to most interest payments no
longer leaving the state,” the report says.
U.S. Sen. Bernie Sanders of Vermont and U.S. Rep. Peter DeFazio of Oregon
have called for a
national infrastructure bank. The U.S. Postal Service would fund the
proposed bank. The Postal Service—which from 1911 until 1967 provided
basic checking and savings services to the public—with its offices in
nearly every community has the physical infrastructure to jump-start a
national public bank. Deposits would be invested in government
securities. These securities would be used to finance infrastructure
projects. And the proposal would not require raising taxes. The plan,
which I doubt the banking lobbyists and their lackeys in Congress will
ever permit, would in addition to saving the Postal Service itself
provide access to banking for the one in four households that cannot get
such services.
We won’t be saved by anyone in Washington. We will
have to save ourselves. We will have to transform our communities,
cities and states into places where the consent of the governed is no
longer a joke. We will have to take back power, which in a corporate
state is financial power, from the venal class of speculators who hold
us hostage. In open defiance we will have to build our own independent
institutions. Of course the speculators will fight back. And they will
fight dirty—they know the consequences of this revolt. Public banks are
not just about the economy. They are about liberty.
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