The first annual Public Banking Institute meeting was held in Philadelphia (PBI) last weekend, April 26-28, 2012.
The pre-meeting get-together of about 22 State coordinators (like me - NY), was a chance to see how far we've come -- 17, soon to be 18, States now have some form of public banking bills in active status, all introduced since 2010. This is testament not only to the depths of the economic crisis, but also to the broad realization that the old solutions -- taxing, borrowing, and even Keynesian stimulus, simply don't work anymore. It was clear from both the Coordinators' meeting and from the larger conference that followed, that:
A. The debt-based money system is fundamentally unsound and unsustainable, and
B. That some form of Public Bank, state-wide, or even nationally, needs to be established to return money to, as guest speaker and Libertarian presidential candidate Bill Still put it, "We the People."
The first annual Public Banking Institute meeting was held in Philadelphia (http://www.publicbankinginamerica.org/...) last weekend, April 26-28, 2012.
The pre-meeting get-together of about 22 State coordinators (like me - NY), was a chance to see how far we’ve come – 17, soon to be 18, States now have some form of public banking bills in active status, all introduced since 2010. This is testament not only to the depths of the economic crisis, but also to the broad realization that the old solutions – taxing, borrowing, and even Keynesian stimulus, simply don’t work anymore. It was clear from both the Coordinators’ meeting and from the larger conference that followed, that:
A. The debt-based money system is fundamentally unsound and unsustainable, and
B. That some form of Public Bank, state-wide, or even nationally, needs to be established to return money to, as guest speaker and Libertarian presidential candidate Bill Still put it, “We the People.”
Ellen Brown, president and founder of the sponsoring Public Banking Institute, and present throughout, included in her opening remarks the following joke to the sold-out crowd of 150 or so attendees:
An alien lands in post-Katrina New Orleans and asks an Earthling about the devastation. "So -- is there no building material for repairing the damage?"
"Actually," says the Earthling, "there are building materials stockpiled just out of town."
" So, there are no workers to do the job?"
"Actually, there are hordes of unemployed workers who would love to have the work."
" So -- what's the problem?"
" Well, the way things work here, we need these pieces of green paper before we can get started..."
(to the mother ship) "Beam me up! There's no intelligent life on this planet!"
Or, to put it less humorously: there are millions of jobs to be done, and millions of people who want to do them, and the only thing standing in the way is money.
Gar Alporovitz (http://www.garalperovitz.com/...), activist, author, and political economist at the University of Maryland gave the Keynote Address.
He told us we were witnessing a transformative time, that he, and we, must take seriously, difficult, yet open with possibilities, and that we should not be afraid to try and fail, and try again. He said the mid 20th Century was an aberration, not normal, with a push from a post-WWII bailing out of the economy, and the convenient self-destruction of international competitors. The strong labor movement also helped the growing middle class. Alporovitz said that period is now over and that we are now in a period of stagnation, with ripples but no long-term growth. Public Banking is just one of the movements gaining traction in such a time, he said. Like other analysts, he pointed to the impossibility of supporting 400 Americans who are richer than the bottom 160 million.
However, Alporovitz expects no Great Depression II, because the government is now 34% of the economy - triple the amount it was in the last Great Depression - though perhaps many in the audience believed that would not be enough of a guarantee, with services and the safety net being cut so much.
We are beginning to realize the need to rebuild society from the bottom-up instead of relying on elected officials and then urging them to deliver the necessary changes for us. Our elected bodies are stuffed with mis-representatives. For example, there are over 5,000 neighborhood-owned corporations, Alporovitz tells us, many under conservative ownership. (The historic Right-Left dichotomy is itself breaking down, as I was to discover throughout the weekend). Alporovitz gave the example of steel workers who lost their jobs in Youngstown, Ohio, and attempted to set up a cooperative community, but that Big Labor – as distinct from the rank and file – let it fail, unsupportive of the idea of worker-owned companies.
That was then.
Now, 30 years later, there are more worker-owned coops on the ground in Ohio than anywhere else in the country, and Big Labor has come out in favor of that which they used to oppose. This flattening restructuring is being done, Alporovitz says, in green energy, small businesses and so on, all over the country. Over time, knowledge will build up through experimentation, allowing for democratizing ownership. We are actors in history, he says, impelled to act because every system we’ve grown up with is no longer tenable. No financial experts he’s talked to, believes there will not be another financial crisis (we will examine solutions later in this article). Yes, break up the Big Guys, he says, but they will reassemble and we’ll be back where we started. Instead, we have to re-examine the entire basis for the financial system – a theme that would be repeated throughout the conference. Alporovitz referred favorably to Schumacher’s “Small is Beautiful” thesis, but cautioned that the attendees could not have come by plane, train, or automobile, without large-scale factories and businesses to create those. He, like Schumacher, is favor of appropriate technology.
Questions Alporovitz leaves us with are: How do we know what is the appropriate size of an institution? How do we break them up when they get too big? What do we mean by “changing things?” Are we part of a growing movement, or do we mean to just “tend to our own garden?”
Rozanne Junker, Ph.D. (http://www.publicbankinginamerica.org/...) gave a thorough and inspiring talk about the history of the Bank of North Dakota, making it clear how close the bank came to not being at all. First, it was created by socialists in a deep farming state in 1919, then taken over by its enemies after they routed the socialists in the following elections, then, through a series of reforms, it slowly became the powerful institution it is today. Without such dedication 100 years ago, and a good bit of luck, there would probably be no public banking movement in America today. Junker has a half hour video (http://www.prairiepublic.org/...) out on the history of the BND, well worth purchasing by any serious student of public banking. It’s not only a history lesson, but also a set of warnings and advice for anyone contemplating a new public bank.
Some of the conference participants have been working for monetary reform for decades, and there was a heavy demographic tilt towards the grey-head set. It can take many years to really understand what is going on. On the other hand, some, like 12-year old Victoria Grant, there with her father, have only just started, and are our future. She gave a well-rehearsed speech that brought a standing ovation, also available on Youtube here: http://www.youtube.com/... (~111,000 views so far, but soon to be released in high-def from the PBI’s own taping of the entire event, for a whole new set of viewers) on how Canada prospered under a Public Bank from 1935 to 1974. Victoria shyly told me later that yes, she had to memorize a lot to make the video. She showed us how the right spokesperson can reach multitudes.
She shined.
But it was left to some of the elders like Paul Hellyer, former Canadian Minister, to document more specifics of the late, great Canadian Public banking system – and veteran reformer Will Abram, not present at the conference, but whose booklet: “Money: The Canadian Experience” is also a must read for any serious student of Public Banking. He too, has a video, http://www.youtube.com/... though it falls far short of the viral viewership of Victoria’s video. Abram documents the vast public works, post WWII G.I. bill that graduated 54,000 college students in record time, and other projects that the Bank of Canada funded in those years, while ringing up debt of only $18 billion. Since privatization in 1974, the debt has exploded to nearly $500 billion, and now the Austerians are engaged in cutting everything, from public education to Canada’s world-renowned Health Care System. None of this would be necessary without such a debt burden, imposed by the completely unnecessary private Central banking system. Our own experience with exploding debt is, of course, similar since the Federal Reserve Act of 1913. We should pay as much attention to the negative examples as we do to the positive ones.
Byron Dale, who gave perhaps the second most impassioned speech over the 2 days of the conference, recalling his 30 years of monetary study, and even his times in jail for challenging the authorities, traced the development of money based on wealth, to money based on debt.
I slightly challenged him during the Q&A by holding up the $5 U.S. Note I carry around in my wallet to show what debt-free money looks like, but he was having none of that. Dale claims that any Note, including one issued directly by Treasury, like a U.S. Note, is not debt-free money because it is eventually returned as taxes to the government. I countered that under a true Greenback system – in which Government simply produces what it needs, or even what the economy needs, through direct issuance – there would be no need for Federal taxes at all. He agreed with that, and admitted that the United States Note was better, but still not the best solution of wealth-based money he is looking for.
This is interesting, since award-winning filmmaker (http://www.youtube.com/...) and Presidential candidate (http://still2012.com/) Bill Still (http://www.publicbankinginamerica.org/...), among others, has also specifically called for a debt-ending solution based upon U.S. Notes issued by government. However, Still disagrees with recent attempts, such as Kucinich’s HR2990 (http://www.govtrack.us/...) bill, based on Stephen Zarlenga’s American Monetary Reform Act, to allow an unelected federal Monetary Authority to decide issuance of the currency. He says this is “way, way, WAY” too much power in an unelected body, whose head would be appointed by the president, and prefers instead some sort of de-centralized or multi-state decision over this, parceled out on a per capita basis, perhaps, but this, he said, he has not fully worked out. This may prove an obstacle, as politicians are notoriously reluctant to develop groundbreaking bills on their own.
During his presentation, Still recalled the obscure history of, and former inattention to, the monetary reform system, pre-9/11. He says the 9/11 truth movement has brought unwanted attention to movement. Suddenly there was TV coverage from Telemundo and the Venezuelan news service! This made the movement into a fringe movement, just when it finally starting to get the attention it, and we, so desperately needed.
The most important power remains, Still says, is the sovereign power to create money.
We The People have to take back control of the money system or we are never going to get anywhere…it matters not what backs the money, all that matters is the quantity and who is in control.
According to Still, Ron Paul is one of the main problems with monetary reform – Paul is “desperately” misquoting the constitution (article 1, Section 10), when he says only gold and silver can be legal tender, and attributing a power of the States to the larger Federal Government – a power which it has never used for repayment anyway. Sure enough, the constitution says:
No State shall …emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”
It’s worth noting, as Still did, that this is the only place gold or silver is mentioned at all in the constitution.
The case structure in section 10, and section 8, is important. Still cited noted scholar Robert G. Natelson of Harvard that the final and frustratingly oblique phrase to “coin Money” (Article 1, Section 8) meant to “forge” anything, like in the common saying “to coin a phrase.”
During Still’s talk, he expressed support for the lawsuit against Treasury initiated by one of the writers on Op Ed news, Cliff Johnson, http://www.opednews.com/... and the related lawsuit, found here: http://tompainetoo.com, to correct statements of misinformation by Treasury and the GAO as to the equivalence of United States Notes and Federal Reserve Notes, to address the lost seigniorage issue properly, and my related petition (exhibit B) to reissue U.S. Notes here: http://www.change.org/....
From Johnson’s article, Still also cited Madison’s fear of the Money Masters of his day, and how the Founders had to compromise on the paper money issue, by nearing delisting it from the constitution. However, after much debate, Madison did manage to keep the option for “Public Notes.” This was later taken up by Lincoln to issue the nation’s first Legal Tender Law, and the first 3 installments of U.S. Notes (http://en.wikipedia.org/...), with which to pay the northern troops during the Civil War.
Still also supports the end of fractional reserve banking…yet it is fractional reserve banking that would allow a State Bank to leverage its tax-based deposits for public needs and projects…or, maybe not?
Ed Sather, former SVP of the Bank of North Dakota (http://banknd.nd.gov/), America’s only State Bank (founded 1919), was adamant, even under repeated audience questioning, that the BND does not practice fractional reserve banking – something that did not sit well with most of the anti-fractional reserve crowd. Sather maintains that the appearance of the BND loaning out the same amount, or less, as it has on deposit, is, in fact, the result of it actually loaning out deposits, and that the bank has to borrow back money if it runs short when deposits are called upon. Sather, who unlike most of the guest speakers, has actually worked in a bank, nevertheless disagrees with a great deal of scholarly work on the money multiplier effect (http://en.wikipedia.org/...) and on how loans precede deposits and are therefore new money (http://www.nakedcapitalism.com/...), including statements from central bankers , to the effect that banks create money when they make loans. The frustration with this “bankers’ point-of-view” was evident both at the general meeting and at the State coordinators’ meeting earlier.
John Fullerton, another banker turned monetary activist, speaking on day 2, went completely against the Greenback thesis of Bill Still and others at the conference, and claimed it didn’t matter who produced the money, so long as a long list of regulations aimed at moving banking away from making money on transactions, and back towards financing, was implemented. Well, I couldn’t let that stand and in the Q&A I asked him why we couldn’t have a Land Value Tax (LVT) to dampen the land cycle instead of after-the-fact remedies. To his credit, Fullerton knew what LVT was, and even identified me as a Georgist (well, a Georgian, but close enough). But then he backed off “imposing yet another tax” even while seeming to understand this was a Single Tax to end all other taxes. Of course, he may have forgotten that it was a “mortgage crisis” that originally led to the meltdown, and that this is fundamentally yet another “Land crisis” within the too-predictable 18-year cycle, going back hundreds of years in capitalist history. The failure to understand the role of Land in economics, is by far the greatest failing of neo-classical economics (what Economist Dr. Michael Hudson calls “Junk Economics”).
After Sather’s talk, and again at the end of the 2-day conference, Ellen Brown had to put an end to discussion about fractional reserves to preserve order and to move things along. (In an article she wrote some time ago, she pointed out that the idea of fractional reserves is obsolete, in that the Fed allows for essentially zero reserves (http://www.huffingtonpost.com/...) now, loaning to banks through its open discount window, when needed. This appears to agree with Steve Keen and other more recent economic thought). It was, she said, not something we were going to be able to agree upon at the conference. Well, if something as basic as whether banks create money when they make loans, or simply loan out deposits, cannot be agreed upon, what else is controversial?
Gold.
There were a good number of gold-bugs in the audience, and at least one commodity-basket-based money presenter (a more complicated and arguably more manipulable form of commodity-backed currency than simple gold-backed currency). Brown, along with Still and other Greenbackers, agrees that basing a currency on a nearly finite commodity like gold, would only result in deflation of the money supply, i.e. a depression. Of course, it would also make a very small handful of speculators extremely wealthy; interestingly, the arguments for a gold-backed currency come from this sector too! Bill Still further argues, with new evidence only available in the last 2 weeks, that the remaining supply of gold in Fort Knox has been mixed with 40% tungsten ore (which has similar density to gold), making a mockery of the claim that gold is a stable base for money.
Rethinking Finance
An interesting display of the economic pyramid was put forward by a Skype-based presentation by Hazel Henderson, founder of Ethical Markets and a PBI board member, at the top of day 2. She postulates that there is unaccounted for in neo-classical economics, fully half the economic wealth of the country – given by Nature (what Georgists call Land), plus something she calls the “Love Economy” – what is provided, mostly by women, free of charge, through nurturing and support. The Love economy, Henderson says, is worth $16 trillion alone, more than the annual American GDP that is currently counted. It is not monitizable, (and perhaps therefore ignored by the largely male, white economists). As an example of how the “Love economy” could be influenced, Henderson suggested that over-population could be dealt with by giving the world’s third world women solar panels, so they could learn, so they would then choose to stop having so many children. She also seeks practical reinvestment of some $120 trillion of institutional money into the green economy: http://transformingfinance.net/ by factoring in externalities, and use of natural resources fully, and treating finance itself as a global commons. From the transforming finance site:
The TRANSFORMING FINANCE group outlined necessary principles and conditions to operate the shared global financial architecture consistent with 21st century realities. Their Statement cites many agreements and institutions, global norms and rules that have evolved since Bretton Woods. It shows how markets for public goods can be expanded by pricing carbon and other emissions and external costs and accounting for un-priced assets, including: ecological productivity, biodiversity and other global commons, as well as social and human capital.
Henderson made the now-familiar observation that the sun’s energy dwarfs anything produced from fossil fuels.
However, it is this writer’s opinion, as well as many Georgists, that in addition to a pollution tax, natural resources have to be charged for at the raw level – below the wellhead in the case of oil, or “in situ” in the case of coal etc. This will remove the speculative element that makes trading in these commodities so profitable, by taxing away the profit from it, not-so-incidentally putting that money back into the public domain, whose demand created the value in the first place. Without that, the appeal of playing these markets to deep-pocketed speculators, including those in the resource companies themselves, would disappear. (Just today, a piece on CNBC cited the SEC’s questioning of Chesapeake Energy’s CEO’s for his actions in acquiring personal shares in each of his company’s wells. Investors, who thought they were investing in a Natural Gas development company, sold off the stock on the news that Chesapeake was operating like a hedge fund. This would have been impossible under a system that rewards production, not speculation on raw commodity price).
Henderson also came out in favor of having the Treasury issue our currency instead of (only?) the private banking sector. Henderson spoke favorably of a tongue-in-cheek Sheila Bear plan to have Bernanke issue $10 million to everyone as a 10-year loan instead of further bailouts to Wall Street, and promoted the idea of making Ellen Brown Treasury Secretary – which drew wide applause.
On the other hand, some of the presenters almost seemed like they thought the current system just needed some tweaking and to be extended so that the States, and in one case (Samuel Giles), universities, could form their own banks to get a piece of the action. This last proposal, at a time when student debt has just topped a trillion dollars, set off alarm bells for both me and my fellow traveler and Public Banking advocate, Rita Rowan (treasurer of Common Ground-NYC too, where I am president). The last thing students or universities need, it seems to us, is more debt.
Continuing the Green theme later in the day, Frank Nussle from the University of Pennsylvania presented his view of economics as a kind of biological analogy, urging us to think of both efficiency and resiliency in any new economic paradigm we devise. The current system is resilient for the TBTF banks, he says, but he is advocating resiliency for the economy as a whole, and the “casino economy” does not have that. He advocates for us to go beyond the fiat money monoculture, stressing more social technology as a way of properly allocating resources, something he says is already happening with various local economies.
Two rousing speeches (one in a tavern (http://www.youtube.com/...) the night before the official conference, the other at the conference) by Ethan Allen impersonator Jim Hogue excited the crowd, running off every invective against the robbing of the “commons” (broken down by root ‘com’ into 2 dozen related words: Community, Communication, etc.) by the elite “tyrants, smirking chimps, backstabbing, worthless, treacherous, treasonous, cowardly, unctuous whores, leeches, arrogant, destructive and panderers…What they can’t pillage, pillage, pillage some more, they destroy!” Their accomplices are “maggots, enemies of planet Earth, tyrants…and we take it, and grovel and call ourselves free...and they are violating the rights of all Men!” says “Ethan Allen.”
This drew hearty applause from the crowd, which was equally frustrated and patriotic.
Off Session Conversations
There were some interesting audience members – including Green gubernatorial candidates for both California (Laura Wells) and New York (Howie Hawkins). Wells gave a short speech, in which she cited her past support of State Banking as a major platform in her run for Governor – which was received very favorably when she was running as an otherwise too-easily-ignored third party candidate - as well as fair taxes. These were the only two planks she felt she had time to emphasize as a minority candidate with little media coverage. Off session I asked her why we couldn’t just “tax bads, not goods.” She said because the bads (pollution, resource use/abuse) are easier to tax. Wells, I hope you will not succumb to the Money Power.
Hawkins and I had met before, at a Pace University Left Forum conference in 2011, and we got to talking again between sessions. He told me the Democrats had given the Green party, and him, a silver or lead type choice, wherein they would promise to support his party’s candidates for some role in local government, if they didn’t oppose them in the elections…or else “smash you if you (the Green Party) ran against us” including character assassination. We talked about the difference in countries where there are parliamentary systems where minor party candidates get proportional representation, like Canada, (http://www.huffingtonpost.com/...) or France. There, Hawkins says, parties are forced to “form coalitions” and to work with minor parties. Here, in the winner-take-all system, it is “like the Mafia” says Hawkins, when dealing with the Democrats.
He is less worried about the recent changes to the voting process with the new electronic machines, and says there are paper ballots to count and there are spot checks with samples. He has watched them count ballots himself.
However, he said the Working families party and Charles Barron took some of his votes, during several recounts, when he ran for Governor, in the Bronx, when he should have done better, according to previous polls, though he doesn’t know how this was done.
It is hard to imagine a more frustrating endeavor than to be a third-party candidate for office, except maybe, for some, being a monetary reformer. Our collective understanding has never been greater. Our collective will never stronger. But the elite opposition has never been more determined to hold on to the means of making and raking in, the money.
There are some great pictures of the attendees here (http://www.flickr.com/...). There is indeed a lot of positive energy at conferences like this. Are these the people who will return the Money Power to We The People? Time will tell…