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Public Banking: Why?

November 8, 2011

Ellen Brown has been kind enough to allow repost of one of her blog articles.  MMT and Public Banking are kissin’ cousins, much like we’re close to circuitists such as Steve Keen.

The idea behind Public Banking is simple:  Have the State have it’s own bank that can make loans.  This would help to smooth out the loan cycle of private banks.

But more importantly, it would capture some of the economic rent of interest.  Let’s face it – banks only exist because the government backs them.

Here are some of the things a Public Bank could do:

“There are many inviting possibilities for applying the CIT’s $133 billion in credit power, but here is one easy alternative that illustrates the cost-effectiveness of the approach. Assume the bank invested $133 billion in municipal bonds at 5% interest. This would give the state close to $7 billion annually in interest income – nearly enough to pay the interest tab on the state’s debt.”

Ellen says 14 states have now introduced bills on Public Banks.

Here is her blog:  Web of Debt.  Take a visit – if you haven’t already.

 

 

 

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  1. beowulf
    November 8, 2011 at 10:28 am

    Its an interesting idea and one (as Ellen has pointed out) that’s worked very well in North Dakota for nearly a century. Politically, the biggest difference between MMT and public banking is that MMT reforms must be handled in Washington, there’s no state version of MMT possible. By contrast, public banking is a battle that can be won state by state.

    I can imagine a federal version of public banking (say, a revival of the old Postal savings bank), but the course Ellen is on is probably the better strategy– focus on creating state banks wherever possible. Once those states have a track record, she can mop up the rest of the country by lobbying for the Postal savings bank. :o)
    http://american-business.org/2663-postal-savings-banks.html

  2. Dan Kervick
    November 8, 2011 at 11:00 am

    I love the idea, but the lobbying resistance will be fierce, just as it was in the case of the public option for health insurance.

  3. Clonal Antibody
    November 11, 2011 at 8:53 pm

    Ellen Brown’s embrace of MMT – Now Is the Time for an Economic Bill of Rights

    After President Roosevelt died in 1945, his vision for an Economic Bill of Rights was kept alive by Martin Luther King. “True compassion,” King declared, “is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring.”

    King, too, has now passed away, but his vision has been carried on by a variety of money reform groups. The government as “employer of last resort,” guaranteeing a living wage to anyone who wants to work, is a basic platform of Modern Monetary Theory (MMT). An MMT web site declares that by “[e]nding the enormous unearned profits acquired by the means of the privatization of our sovereign currency … [i]t is possible to have truly full employment without causing inflation.”

  4. Paul Mineiro
    November 12, 2011 at 9:58 am

    Serious question. Absent the profit motive, how do we avoid a public bank becoming politicized, making loans that are not due to credit-worthiness, and then needing a bail-out from the state?

    Of course, something similar happened with private banks recently (not politics per se: but bad loans and subsequent bail-out).

    • November 12, 2011 at 10:53 am

      Another serious question. Even with the profit motive how do we avoid a private bank becoming politicized, making loans that are not due to credit-worthiness, and then needing a bail-out from the state?

      Cos that’s what happened.

    • Clonal Antibody
      November 12, 2011 at 11:02 am

      Paul,

      What prevents shareholders of a private bank from getting preferential loans? The same regulations that prevent that prevent politicization. However, the direction as to the type of loans banks makes is always open to politicization, whether the banks are public or private.

      However, look at the Bank of North Dakota, explore their website and history. That should give you a very clear idea of how things can work with state (province) owned banks.

      Look also at the history of the nationalization of banks in India. India has had nationalized banks for over forty years. There has been no politicization of the banks, other than what I said earlier.

      BTW, TC, one of my comments is stuck in moderation!

  5. Clonal Antibody
    November 27, 2011 at 4:03 pm

    On the “Public Banking” issue there is The Great Debate©: Public Banking

    Editor’s note: This debate started with an article by Ellen Brown (first article below) which elicited a response from Michael Rozeff (second article below) and then a rebuttal from Brown. If Prof. Rozeff has further points to make we will post them at a later time. He has not replied to our query in that regard as yet.

    Also a very good comment there as well

    There are so many errors in Rozeff’s critique that basically his entire argument is one long journey through monetary confusion. I will start by identifying his theoretical errors and then proceed to show where he specifically applies these errors in his critique of Ellen.

    Rozeff doesn’t understand, and therefore fails to engage, Ellen’s basic argument

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