How The Big Banks Run The World -- At Your Expense
Continued from previous page
The banks, of course, make a nice profit on this as "middlemen" between the Fed and the government.
If you have been watching closely, you will now begin to see why the Public Banking conference's message is pretty dramatic: What is the big deal about deficits when the economy is stagnating? Why doesn't the Federal Reserve Board simply "create money" (as it does all the time anyway) and lend it to the government via the banks and then have the government put people to work by investing the money (building bridges and roads and schools, for instance)? Two things then happen: the economy gets going and more tax receipts come in to help pay off the debt (of newly created money). Yes, of course, if this went too far, inflation could become a concern. So, it is important not to go too far.
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Even more interesting - much more interesting! - if the law were changed - or we acted as we did in part during World War II and, for instance, Canada acted between 1938 and 1974; - it would be possible for the Fed to lend directly to the government, bypassing the bank "middlemen" who make their profit by selling bonds to the Fed and investing the money in the government.
Moreover - watch this very, very closely - since by law the Federal Reserve Board turns over almost all its profits (i.e. all interest) to the government even now, the loans would cost the government literally nothing if things were done in the simple, straightforward way (or if a "public bank" were set up that operates just the way private banks are run today, including making profits for the owners - who in this case would obviously be the public - i.e. the government).
(One rough estimate offered by the Public Banking people is that had the United States done what they are talking about over the last 24 years, the amount saved on interest payments on the national debt would have been roughly eight trillion dollars - and the economy might also have been moved out of recession. Whatever the number might be in a careful statistical analysis, it is very, very large indeed.)
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There is a rough parallel in all this with the way student loans used to be handled and are handled now. For a substantial period, the banks provided some loans to students that were guaranteed by the government, adding a mark-up for their profit. In 2010, Congress decided to eliminate the middleman and the government now simply makes the loans directly at lower cost.
But, of course, we don't allow ourselves to follow the straightforward path outlined above or suggested by the student loan program changes. Indeed, to even suggest the Public Banking strategy is to suggest a horror of horrors, since one of the biggest money makers for the banking industry would be on the chopping block.
And the banking industry - especially its Wall Street branch - plays a very powerful and rough political game opposing anything or anyone who tries to "uncorral" the thinking of the public.
Nonetheless, that is the direction that was opened up for serious discussion at the Public Banking conference. First steps first, of course. We currently have one "public bank" in the United States, the 93-year-old Bank of North Dakota. Since 2010, seventeen states have considered legislation to create banks based in one or another way on this model. Ellen Brown, the leading theorist behind the movement - along with many participants - urges the value of such banks on their own terms in that they help small businesses, farmers, home-owners, students and others.