GUEST COMMENTARY: We need ways to keep local government funded

Wednesday, June 8, 2011 | 12:01 a.m. CDT; updated 9:28 a.m. CDT, Thursday, June 9, 2011

"Economics is the method: the object is to change the soul."
— Margaret Thatcher

". . . deficit hawks do not give a damn about reducing deficits and balancing the budget. They want to cut the programs that the poor and middle class depend upon — programs like Social Security, Medicare, and Medicaid — so that the rich can have more money in their pockets."
— Dean Baker, co-director of the Center for Economic and Policy Research

Can we as Americans focus on the threat facing us as the rest of the world’s economies continue to be clobbered nation-by-nation by the IMF and the central banks? The latter include our Federal Reserve (the Fed) and the European Central bank.

The people of Iceland, Ireland, Latvia, the U.K., Portugal and now Greece are being ordered to tighten their belts to satisfy the bondholders and bankers responsible for the crises in their economies. Can we afford to wait until every public asset that isn’t nailed down gets privatized? The results of privatization world-wide have been uniformly dismaying.

Following is a description of three paths I think might be taken to keep our state and local governments adequately funded. In ascending order of time to take effect these are:

1. Change the Fed’s charter so that it can directly come to the aid of the states. Fed Chair Ben Bernanke claims correctly that according to the Fed’s charter, his "hands are tied" in this regard. It turns out that the only obstacle is one paragraph in the Fed’s charter that could be amended appropriately. This would only require a bill to be introduced and cosponsored, say, by House member Dennis Kucinich, D-Ohio, and Sen. Claire McCaskill, D-Mo.

2. The Fed could "buy" our $180 billion fiscal shortfall and have Treasury print up paper wealth in this amount, which could then be sent directly to those who need it most, like the umpteen millions of us without jobs or homes. Disbursement would be through government agencies. The Fed’s injections of liquidity thus far have been sent to the banks, not Main Street, to build up their reserves. As the only entity in the world allowed to print money, the Fed’s balance sheet shouldn’t be affected. Nor would this add to the national debt, since no government spending would be involved. Finally, the amount of $180 billion is only 1.4 percent of the $13.2 trillion already thrown at or committed to the banks and would amount to little more than a drop in the bucket as far as the Fed is concerned.

3. We should form our own state/public bank along the lines of the Bank of North Dakota. As the only state consistently in the black throughout this financial crisis, North Dakota can also claim the nation’s lowest unemployment rate (3.3 percent vs 8.9 percent for Missouri). A state bank would enable other banks to avoid the current credit freeze, serving as Missouri’s “Mini Fed,” providing liquidity and clearing checks for most of the private banks around the state. Missouri's 1875 constitution, however, explicitly banned the establishment of a state bank (Article XI Section 13).

John McFarland is a member GRO-Grassroots Organizing.

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Jimmy Bearfield June 8, 2011 | 12:11 p.m.

"As the only entity in the world allowed to print money, the Fed’s balance sheet shouldn’t be affected. Nor would this add to the national debt, since no government spending would be involved."

So why stop at $180B? Why not print a few trillion? Heck, print tens of trillions and use that to close the deficit and pay off the debt.

(Report Comment)
Mark Foecking June 8, 2011 | 1:01 p.m.

The problem here is the Mint(s) only print a small portion of the money in circulation. Very much more is created by banks out of thin air by the act of loaning money they don't physically have. Printing money to cover what has been loaned into existence only dilutes its value.

The results of forced wealth redistribution by governments have been typically negative - Zimbabwe being the worst of many that have not observed history. Taking money or land away from people that know how to get and use it, and giving it to people that don't, generally means that everyone has less money eventually.


(Report Comment)
Richard Saunders June 8, 2011 | 2:54 p.m.

The "Federal Reserve System" is neither federal, nor a reserve. It is instead a private banking cartel given monopoly privilege to create "Federal Reserve Notes" from "thin air" then lend these notes into circulation either to the Treasury or by individuals taking out a loan.

Here's a question, why would the federal government create such a system when the Constitution already specified that the Treasury could create its own notes (US Notes) backed by its reserves?

Because without first destroying sound (commodity backed) money, politicians had no ability to spend without restriction. But if you made an IOU legal tender, then there is nothing to stop them from turning WWI into "the war to end all wars," for instance. (Before that time, the era of "total war" was simply unaffordable, as eventually the gold to fund it ran out, and the aggressors had to rely on negotiation. But once the doctrine of total war came about, it brought about the disastrous Treaty of Versailles, which brought about the Nazi regime and WWII.)

The Federal Reserve needs to be ended (for the third time now!), as it is the mechanism of society's destruction. Before 1913, the value of a dollar was relatively stable over the long-term. Since then, the value has constantly been eroded, with today's dollar having about the same purchasing power as a nickel back then. Where did the other $0.95 go? It was either wasted by federal government boondoggles, or siphoned off by the Wall St. (and European) banks that own The Fed.

Like every other holder and user of dollars, local governments cannot survive without relief. Relief which can only come by ending the Fed. To increase the scope of the Fed's activities on the local level is to invite a vampire into your house for a sleep-over.

(Report Comment)
Mark Foecking June 8, 2011 | 7:52 p.m.

Richard Saunders wrote:

"Because without first destroying sound (commodity backed) money, politicians had no ability to spend without restriction."

It's not just politicians, it's everybody. Having today what you should save for tomorrow is a natural human trait, and one of its greatest faults.

"But if you made an IOU legal tender, then there is nothing to stop them from turning WWI into "the war to end all wars," for instance."

No, fossil fuels did that. As as long as the supply of some essential commodity like that keeps expanding, the money supply can expand. When supply increases falter, so does growth of the money supply.

All banks loan money far in excess of their deposits - it's not just central banks. Abolishing the Fed won't solve the greater problem of what our money is based on.


(Report Comment)
frank christian June 9, 2011 | 7:04 a.m.

Another installment of the voluminous "The World According to Mark F." Man oh man!

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