"California Dreamin" *: As the state's budget can get rid of worries

"California Dreamin" *: As the state's budget can get rid of worries

Ellen Brown

How it works in California, it's running all over the country, "says the proverb. All eyes are therefore on the "Golden State", which tries to the budget deficit of 26 billion U.S. dollars to cover. The eighth-largest economy in the world is not like all Third World countries and toneless singing in the swamp of debt and devastation sink. The voters in the state have a veto on further tax increases brought the leadership of the Democrats further savings from services and the sale of public property clearly rejected. In the terminal between tax limits and other debt limit, the state hardly any room for maneuver.

"Expect only the best and you are not satisfied with less," describes an otherwise well-known proverb, the attitude to the famous "California Dreaming" (California Dream) is typical. It creates its own reality, instead of trying again after an ancient, long model failed to proceed, it is a new dream. If ever someone has a unique solution to the problem can be found, then the Californians. But what happened? Governor Schwarzenegger is waiting on what might happen and paid in the meantime, the bills of the State bonds (in America we speak of "IOU" for "I OweYou," the technical expression is "registered voucher").

Hmm ... bills with bonds paid. Not a bad idea! That was exactly the idea with which the American settlers in the 18th Century from its financial terminal liberated, as they have neither silver nor gold had, with the Old World in the trades were settled. Money was just a medium of exchange, a kind of value received for goods or services or an amount owed. The idea that a government could pay for paper documents placed first 1691, the Governor of the Province of Massachusetts in reality, when he urgently money for a local war needed. An anonymous British written document from 1650 had to use a paper currency first thrown into the debate, the proposed model, however, the receipts, the London gold and silver for precious metals exhibited, which they kept in their vaults. For the colonies, the problem is that it is not enough silver and gold had. The popular representation of Massachusetts (Massachusetts Assembly) has therefore proposed a new form of paper money, a "letter of credit," the so-called bonds, or IOUs the government represented. The only cover for the paper money of Massachusetts was the "full appreciation and recognition" ( "full faith and credit") of the Government.

Other colonies followed the example and put their own paper money in circulation. Some were as promissory notes of the government, who later in "hard" currency (silver or gold) could be redeemed. Others were even "legal tender". In trading, they were "as good as gold", without liability or obligation to these papers later in a different form of money to redeem them. The new paper money, the colonies were not only independent of the British bankers and their gold, but they were their own provincial government funding, without taxing the citizens to have. The Assemblies of the settlers discovered that the credit agencies in each province is a constant flow of interest income arose because they instead of the banks lent money.

Other countries, too, turned to this solution later. As an example, the public sector employees in Argentina by massive layoffs were threatened, their unions persuaded the governments of six states which, but it was better to do it, instead of bonds or state bonds to pay for. The promissory notes were then state benefits or taxes are paid, they were by the merchants generally accepted on the spot.

There is only one problem ...
Why can not California do likewise? Well, the problem lies: Explains Today debentures to "legal tender", so, this small list of the Constitution of the United States. In Article I, Section 10 states: "No individual state can ... Coins [or] letters of credit (bills of credit) to spend. "The constitutional commentary from Cornell University Law School defines this phrase as follows:

"In the spirit of the Constitution mean> letters of credit <a paper medium of exchange for payments between individuals or between the government and individuals, and to normal social purposes."

The commentary cited cases since the 1830s, years before the Supreme Court of the United States were negotiated in which »zinsträchtige certificates with a nominal value not exceeding ten dollars, the credit of the state office in Missouri and spent for the payment of taxes and the other State funds owed and to pay the fees and salaries of public servants were authorized, as letters of credit were taken pursuant to this section is not allowed to be circulated. " That everything seems to be quite clear before you continue reading. Indeed, in Article I, Section 10 of the Constitution also stipulates that no individual state should "something other than gold or silver coins become legal tender explain." But recently when a federal bills only with his gold and silver coins paid? The state could argue that the Constitution must also be adapted to modern conditions. You could have other compelling arguments lead to the field. The states have agreed on the right to issue its own currency to renounce it and transmit to the Congress. According to Article I, Section 8 of the Constitution, Congress possesses the sole right, "coins mark [and] ... its value to be determined." The scholars are still arguing about what to do with "coins mark" actually meant, but the Constitution explicitly gives Congress alone the right to draw money and its value. Obviously, the Congress with this power is not carefully handled. He coins, but allowed in privately owned banks to issue "bank notes", which will soon bear the lion's share of the money supply in the country represented. Thus it was, bankers and not the Congress "the value [of currency] to define" who followed the law of supply and demand: The more notes they drew, the lower was the value of each note. 1913 Congress had it even, that the Federal Reserve Bank said its own privately owned Federal Reserve notes in circulation and bring them to the country's sole currency could explain. These scores were then, with interest to the U.S. Government awarded.

Today, Federal Reserve notes, however, only about three percent of the money supply (M3) from. The other 97 percent are from private banks in the form of credit in circulation. "Bank Credit" is simply an entry in the accounts of borrowers geschöpft as many reputable sources confirmed. Graham has the clearest Towers, the Governor of the Bank of Canada from 1935 to 1955 described this process:

"Banks create money. They are as Technically ... there is money in a generation ... The booking process is all ... Every time a banker, a credit ... awards, will be the new bank credit geschöpft - brand new money. "

The Congress has not only broken the agreement, the national money supply to create, but has also refused to grant the money to California, with its comparatively low budget hole of 26 billion U.S. dollars from the bail to help. The citizens of California are also justifiably outraged, because Congress has not the same even with the eyelash gezuckt when he was about 700 billion U.S. dollars granted by which the private banking system helped the Federal Reserve is highly dubious for the same purpose even trillions provided. For the bailout of the private insurance company AIG has been ten times as much money is granted, such as California needs today. Half the amount that California desperately needs today, went to pay the gambling debts of AIG to Goldman Sachs - a single bank - on top.

California stands for a significant share of the federal budget and tax revenues for every dollar that goes to Washington, only 80 cents goes to the state back. Nevertheless, the federal government in Washington, even the request of the State of California on a loan guarantee is rejected, the state several hundred million dollars would have been spared interest. The clear message is: "Look at how you cope alone."

Creative Problem Solving
The situation seems pretty desperate, but perhaps it is only once beyond the narrow boundaries of thinking. The law allows states not to "letters of credit" to bring into circulation, however, it can be another form of money called "check book" money to create. The relevant state must only establish its own bank. To further comment from the Constitution of Cornell University Law School to quote:

»From banks in the states of notes in circulation are no letters of credit, it is immaterial whether the State is the sole shareholder of the bank is whether the representative of the bank by the council were elected, or whether the bank's capital through the sale of A federal bonds has been raised. "

If private credit in their books can draw, it can probably also the eighth largest economy in the world. There are also long been an example of how this can go. The state of North Dakota has nearly 100 years, a separate bank. North Dakota is one of only two U.S. states (the other is Montana), currently not covered by a budget terminal threatened. North Dakota has the credit lock through the Wall Street opposes it, that the state has spent its own loans. By law since 1919 are all revenue of the state in their own bank, the Bank of North Dakota (BND), is created. Using the "minimum", a tool that is open to all banks, these deposits then as "reserves" ready to loans in multiples of the minimum value to be assigned. For the other banks in the state of the BND is not a rival but partners who are backing them. It acts as a sort of central bank for North Dakota. The loans are not the BND by the (U.S. federal deposit insurance) FDIC but by the state covered.

California would follow this model, then you do not have the capital to meet requirements of the FDIC, but could state ownership (such as parks, buildings, etc.) to explain capital base. If the "multiplier effect" applies to the capital again and again to be given, then you could with this base, several hundred billion dollars in "loans" scoop. The state could extend its revenue in the State Bank to create and pay his employees about what the deposit base for further loans would increase again. Thus, sufficient credit geschöpft, so the state is not only its short-term budget gaps should be filled, but also the outstanding debt (or debt) to buy back could. Interest on bonds and replacement costs for the General Fund of California for the current financial year, to nearly five billion dollars - about 20 percent of the budget hole. All this money could be saved in interest payments because the state interest so to itself would pay.

The state could do more than the wolf in front of his door to drive away. He could draw enough credit to the economy to "stimulate" as the U.S. federal government currently does. It could be used for the 11.5 percent currently unemployed citizens of the state to create jobs, tax base and increase the income of the distressed housing market badly needs. Loans for projects that create income (transport, energy, housing) could, with the profits from the funded projects be paid. Would some of the new loans are not repaid, then they could easily be extended. Since 1835 extended the U.S. federal government constantly their loans. 1835 (under President Andrew Jackson) was the last time the federal debt actually paid off.

In times of boom, such a Plan would also not lead to inflation. Today, however, the economy much more of a serious shortage of money, because virtually all of our money comes from bank loans, and the river is that bank loans dried up. Since neither the federal government nor the Federal Reserve jumped into the breach, in order to fill the vacuum, the states must also do. As the governments of the colonialists in the 18th Century, they can hire the function of the banks take over.

The taxpayers and legislators from California to make it right if they are hacking and entrench itself further cuts and savings resist. What happens in California, one observes not only throughout the country, but throughout the world. Not "We the people" have brought about this crisis, but the banks. We should, therefore, no additional taxes or poorer services or the closure of our public park and expensive parking fees for the damage must. Like American settlers, we can also use the old model, replaced by something better. If the legislature of California to act quickly, then we can be a bank owned by the state that is prior to the expiry of the 45-day maturity of the bonds issued now fully operational. With the new possibilities of the online banking needs of the state not even a "permanent" building investing. The whole transaction could be completed via computer. Lackluster legislators should no longer try to agree on a budget, they could shake hands and go home without having to abandon their current stance. You might just win, just like "we the people".

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* California Dreamin 'refers to a song of the American musical group The Mamas and the Papas in the 1960s.