Econintersect: Ellen Hodgson Brown made a short presentation in 2010 explaining how state economies are damaged by relying on private banking to fund public business. She indicates that, when there are idle resources not being used only because the cost of using private sector banking to create funding is greater than the current cash flow of the state, the need for public banking is especially evident. Brown has chosen the state capital of Michigan, an especially depressed state, to make her case for rescuing such states by implementing public state banks to finance public processes and to interface local private banking activities using state resources.
Ellen Brown speaking in Lansing Michigan.
In the short (ten minute) video below Brown explains the rationale behind state owned banks. From a statement accompanying the video:
Due to the collapsing credit bubble which in turned popped the housing bubble, leading to recession, and perhaps, economic depression, there is not enough money and credit to keep the economy running. Three possible solutions are that the federal government issue debt-free money directly, that communities create alternate or community complementary currencies, or that a state create its own state owned bank, similar to the Bank of North Dakota. For example, a state owned bank in Michigan could provide credit to the state itself for infrastructure projects, help provide the capital for local banks, so they could in turn provide low interest loans to home owners, small and medium sized businesses, and students. In addition, a state owned bank could be used to help fund state expenses during tough times by providing loans.
A major advantage of a state owned bank is that the state could borrow money from the bank at zero interest, for projects, saving up to 50% of the cost of the project, since there would be no interest burden when repaying the loan. For Michigan, California, Florida, and other states looking to solve their economic problems, the state owned bank model, and the Bank of North Dakota in particular, should be studied in depth, as such a bank could provide the credit needed within that state economy during depressions and other tough economic times.
The video was produced by Local Future.
Updated 2:31 ET 30 October 2014.
- Fixing the Economy with State Owned Banks (Ellen Brown, Web of Debt)