Ellen Brown calls for Parallel Public Banking System

This new banking system is the key to the success of the modern Jubilee. Basically, the government will simply create a new banking system from scratch. The new banking system will be done in a regulated fashion, for the public good, rather than from profit motive. Sounds like heresy, but consider this: profit motive is fine in the real economy, which involves real wealth production, but highly destructive in the banking industry, which is parasitical to the real wealth-producing economy.

In her words:


To understand the real cause of the credit crisis and how it can be reversed, we first need to understand credit itself – what it is, where it comes from, and what the real tourniquet is that has limited its flow. Banks actually create credit; and if private banks can do it, so could public banks or public treasuries. The crisis is not one of “liquidity” but of “solvency.” It has been caused, not by the banks’ inability to get credit (something they can create with accounting entries), but by their inability to meet the capital requirement imposed by the Bank for International Settlements, the private foreign head of the international banking system. That inability, in turn, has been caused by the derivatives virus; and only a few big banks are seriously infected with it. By bailing out these big banks, the government is actually spreading the virus by furnishing the funds for them to take over smaller regional banks.

A more effective alternative than trying to patch up the hopelessly imperiled derivatives positions of these few Wall Street banks would be to simply create another credit system with a pristine set of books. We don’t need to fix the Wall Street disease; we can bypass the whole problem and create a new, healthy, parallel system. A network of public banks (federal and state) could create “credit” just as private banks do now. This credit could be extended at low interest rates to consumers and at very low interest to local governments, drastically reducing the cost of public projects by reducing the cost of funding them.

We the people and our representatives in Congress have allowed Wall Street to call the shots because we think we are dependent on their credit system, but we aren’t. There are other ways to get credit -- ways that are fair, efficient, transparent, and don’t encourage greed. Public credit could be generated by a system of public banks. Precedent for this solution is to be found in the state-owned Bank of North Dakota, which has been generating credit for North Dakota since 1919, keeping the state fiscally sound when other states are floundering. (See Ellen Brown, “Sustainable Government: Banking for a ‘New’ New Deal,” webofdebt.com/articles, December 8, 2008.)

The credit crunch could be avoided by “going local” not just in the United States but around the world. Countries that have been seduced or coerced into funneling their productive assets into serving foreign markets and foreign investors could become self-sustaining, using their own credit and their own resources to feed and serve their own people. There is much more to be said on this subject, but it will be saved for future articles. Stay tuned.

http://www.webofdebt.com/articles/creditcrunch.php