Public Banking - A Good Bridge But, creating money as debt is still a problem
by Virginia Hammon | published
614 3 minute read
Comments on Ellen Brown’s excellent talk on Why Banking Needs to be Run as a Public Utility for the Center for Global Justice
Public banking is a good bridge within our existing money system. However, it’s important to recognize that our existing system, which demands continuous and exponential growth, and a dedication to profits for private interests over the general welfare, is simply NOT SUSTAINABLE. Public banking as defined by Ellen Brown and the Public Banking institute is an improvement within our existing money-creation system. Establishing public banks that use the same power that private banks have today to create the money supply as debt – will shift some power back to states or local communities. That would be a very good thing! But, even shifting a significant portion of the total banking-money-creation power to public banks, will only slow what is an inevitable system failure. (Read the very short story here to understand why)
In this video Ellen Brown also gives an excellent explanation of why the US government could give out $1,250/month to every adult and it would not be inflationary. We can research, deliberate, and discuss the optimum amount, but we’re on the same page about making the payments. Given the dire straits we’re in, I’d lobby for the higher amount of $2,000 – at least for the next year or two while we struggle to get through this pandemic.
Ellen Brown is very sharp. She has an excellent memory for detail and she is extremely knowledgeable about the US and global financial system. The first 50 minutes of this video when she makes her formal presentation about how the existing system works is well worth your time. She has been explaining for more than a decade and the practice shows. We are with her 100% until the very last moments of her presentation, when she explains that one reason to give the money creation power to public banks is that these public banks will have the power of “leverage” and can make far more loans into a community than a development fund bank that does not have the power of money creation. In this context, leverage means the power of creating new money as debt. While that is true, again, it leaves in place a SYSTEM that is exploiting and degrading our people and planet, and that is not sustainable. So, it’s a short-term fix.
When we switch the entire system to Just Money, the decision about how much money can be created should be done at the United States level by a Steady Money Agency that collects and aggregates information about our local, state, and national needs for additional money each year. New money can be distributed by Congress with percentages going to individuals (as in a universal basic income), to states and municipalities (to replenish development funds), and can be spent by the federal government on national infrastructure (as in water, air, roads, etc.). (Read more on a Just Money system here or more on the benefits of a Just Money system here.)
The issues that are worth discussing are:
- When we the people create new money for a coming year, what proportion of that money should be allocated to go directly to individual citizens? – to states? -to municipalities? (or should states then choose how to distribute it within the state?), and what proportion should be set aside for federal spending on the general welfare?
- How should the amount allocated to States be calculated? – by population? – by need (poverty level? -infrastructure quality level? -?)
- What role should the private banking sector play in the distribution of new monies?