The Secret Of Oz Page #12

Lending out extra money that the bank didn't have would be considered a form of counterfeiting.

They would be prohibited from creating new money at all, and they would be competing, absolutely competing without subsidy as they have now, competing with other banks to provide a better deal. And what this would do, it would make the banks truly competitive which they are certainly not at the moment - they're about the only huge industry that is subsidized to the level that they are - and also a competitive market for borrowing and lending would encourage new entrants to come in, you know much more than they can get in now when the existing license bags are so easily subsidized by the permission that they are given to create new money.

In other words banks could only lend money they actually have.

Absolutely! And I think that's the situation that the central money authority should be in: it should create the money debt-free and it should give it to the government to spend into circulation.

In Ellen Brown's solution the government would create all the money debt-free, some of it would be simply spent into the economy but most of it would be lent into the economy at low interest or no interest, to local governments or individuals.

In her model money lent into the economy minimized the inflationary effect of new money.

The solution to others is to return to the government-issued money of the american colonists, and particularly the colony of Pennsylvania which had its own bank and issued government credit. Congress feels that the they have to bail out of the banking system and the real reason is that we think that we're dependent on this banking system for the credit, but we're not.

Like Dorothy and all the characters in "The Wizard of Oz" we have the power to create our own money and our own credit, the government's mentality in general seems to be "we'll do what we have to do and we'll worry about paying for it later", but what you could do is "pay for it now!", in other words you don't have to pay for it, you don't have to pay for it later, you don't have to pay for it with that, you can just pay for it with money.

In the money masters' solution the government creates all the money in the form of debt-free US notes or their electronic equivalents and then spends that money into existence through normal budgetary process.

Existing money is of course replaced one for one with the new debt-free money. The national debt is paid off with this new money as well, but to prevent inflation reserve requirements are gradually raised on the commercial banks requiring them to maintain 100% reserves; in other words bank could then only loan out money they actually have.

Solutions at the state level would be easier to achieve initially before reform at the federal level is politically possible. An interesting fact is you don't have to have a federal charter to create a bank.

States can charter banks as well!

All it takes is a bill passed by the state legislator. Many states already allow state charted banks.

The state then deposits all their funds into their new bank and can then utilize the fractional reserve principle to their advantage by making loans to themselves for roads, bridges etc. at no interest.

When the loans are repaid the money is extinguished from the system. The beauty of this system is you create wealth without creating a permanent increase in the money supply and the consequent inflation.

During the civil war Virginia authorized counties to issue their own debt-free money. Since there was no gold there would have been no money in circulation to maintain commerce. These surviving bills are tissue paper thin.

Minnesota monetary reform expert Byron Dale has proposed legislation for Minnesota to charter a state bank which would be empowered to give the state government all the money necessary to provide infrastructure funding such as road building and repair without debt or interest:

My concept of money reform is just a little bit different but it's only based upon the fact that for me personally it's easier to work on my state legislator than it is on my federal legislators, and of course the solution to our problem is clearly money put into circulation without debt.

Now it really doesn't make any difference how you do it just as long the money comes into circulation without debt to anybody and has a payment.

Now you have that quality replaced and, what got me into the state solution was: a friend called me and told me i should watch tv because minnesota senate of transportation here was being heard on television and during that hearing at least 50% of the senators said on that committee that they had defined a new and innovative way to fund the transportation because they just couldn't do it the way they'd been currently doing it.

And that made me start thinking and I said, now i know how we could do it on the federal level, how could we work it out so we could do the same thing at the state level some way.

And knowing that banks can create money, my theory was: well if you can create money and loan it you can surely create money and spend it!

So I contacted the FDIC and asked them if banks could create money for investments the same way they could create money for loans, and they said "absolutely!".

And so then I started working up a concept of a bill how that could be done. The very concept to the bill is to simply have the banks create the money and spend it into circulation to build infrastructures for the state.

This proposal is currently working its way through the Minnesota legislator with several bankers as sponsors.

Actually the state-owned bank idea is nothing new. The Bank of North Dakota is the only state-owned bank in america, it was created in 1919 as a populists movement swept to the debt-ridden farmers of the northern plains.

Even in the these worst times the Bank of North Dakota is earning record profits and helping fund their state.

It's been doing this for the last 90 years, hardly a radical start-up idea. According to the bank's president Eric Hardmeyer:

"We are the depository for all state tax collections and fees. We plow those deposits back into the state in the form of [low-interest] loans. Over the last 10-12 years, we've turned back a third of a billion dollars just to the general fund to offset taxes or to aid in funding public sector needs. Not bad for a state with a population of 600,000. [In 2009] the State of North Dakota does not have any funding issues at all. We, in fact, are dealing with the largest surplus we've ever had."

Another interesting idea is a University bank. Although it's never been done before it can be modeled on the State Bank of North Dakota.

A university needs to only apply for deposit insurance from the FDIC, alternatively the state could self-insure the deposits of the university bank just as north dakota does for the bank of north dakota. All that's needed for University to get started would be a state charter from your state legislator.

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