This is Chapter Nineteen of my book, How to Dismantle an Empire. It begins Section SIX on The Community Cash Cow. This final section lays out the framework for the solution. It explains why bankers are the ones who control the world, no matter who governs. The exception is the public Bank of North Dakota. I detail its policies of mortgages and student loans, fiduciary responsibility, protection of private and public assets, and disaster relief. I show how we could do even better with Commonwealth Reserve Banks as the first step in the solution.
The video starts with a story on how I ‘accidentally’ joined a march on my way to get a chocolate martini, and ended up with a fine Fuck Israel bracelet to match my daughter’s phone sticker. And that’s appropriate because this chapter is how we DO fuck Israel and the Rothschilds who own it … and, through banking, all the rest of us.
The chapter starts with a David Graeber quote that began my one and only conversation with Russell Brand.
On a zoom call with hundreds of participants, he gave notice that he’d be calling on me after the next participant. Meanwhile, he was trying to remember a David Graeber quote. By my turn, I’d found this one in my book and read it. It wasn’t the one he was thinking of, but was a great segue into my book, which he wanted to read and asked me to put directions on how to buy it in the chat.
I said that was my dilemma—even though it’s everything I’m against, do I put it on Amazon and dance with the devil? He replied, ‘Dance with the devil but don’t go home with him.’ And so I did.
Normally, when you challenge the conventional wisdom—that the current economic and political system is the only possible one— the first reaction you are likely to get is a demand for a detailed architectural blueprint of how an alternative system would work, down to the nature of its financial instruments, energy supplies, and policies of sewer maintenance. Next, you are likely to be asked for a detailed program of how this system will be brought into existence. Historically, this is ridiculous. When has social change ever happened according to someone's blueprint? —DAVID GRAEBER Anyone with money has a right to lend it, of course, and any group with money can pool it and lend it; but the ability to create money-as-credit ex nihilo (out of nothing), backed by the “full faith and credit” of the government and the people, is properly a public function, and the proceeds should properly return to the public. —ELLEN BROWN, THE PUBLIC BANKING SOLUTION Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile. —WILLIAM LYON MACKENZIE KING 1935 PRIME MINISTER OF CANADA
banking is governance
The blueprints for social change are as varied as the architectures of all the world’s cultures, but the mechanics of building are everywhere the same. First you need a stable base and a way to level the foundation. Then you need materials with which to erect and connect your structure. Finally you need tools. Whether it’s a shoddy dump, a showy McMansion, or an elegant yurt depends on the skills and intent of the architect and builders. But no one, no matter how skilled, can conjure a home from thin air.
Our city councils and county supervisors are being asked to conjure thriving and functional economies out of thin air without the tools and materials. Our communities don’t own their labor. Privately owned banks, instead of governments, issue the credit that enables the exchange of real estate. Therefore residents, no matter what they do, work for the bankers while local governments subsist on the tax scraps that fall from the corporate table.
In these final chapters we outline three steps for gaining back control of our own labor: issuing the debt backed by mortgages or student loans, localizing tax collection where social services are provided, and generating the credit to pay for the things we're providing to ourselves. As architects of social change, these are the tools and materials to design a new world from the grassroots up. We'll start with the debt.
the dakota reserve bank
The first step in reclaiming labor is to establish Commonweath Reserve Banks to replace the so-called Federal Reserve, which is no more government-owned than Federal Express, as Ellen Brown puts it. The public bank movement has taken off across the country, thanks in large part to the successful example of the Bank of North Dakota (BND), the only state-owned reserve bank in the US, which was founded nearly a century ago in 1919. Moving our mortgages and savings to public banks backed by Commonwealth Reserve Banks is critically important to protect our collective retirements, city funds, and properties. Banking at home is the way to put our money where our heart is.
Credit unions and local banks are a way to do less harm, but they still work within the system created by, for, and of private bankers. They aren't big enough to hold and protect public funds, their loans are subject to the fluctuating interest rate of the Fed, and they take the returned interest out of circulation as retained earnings to generate capital to issue more loans. Not owned by any government, they have no mandate to serve the public interest. Their authorization comes from the same cartel of private bankers—the Fed—that they're competing against. They're a step in the right direction, but can't go nearly far enough.
The BND replaces the Fed as the authorizing agency for North Dakota credit unions and local banks, of which they have more per capita than any other state. The first priority of a public reserve bank is to safeguard the public funds, public pensions, and public assets that make up its capital. It protects the solvency and liquidity of its network of community banks, who then protect the private assets of their members, such as deposits, savings, and mortgages. This requires the reserve bank to have fiscally sound business practices and promote lending policies that prioritize the health and future viability of their member banks. The building of long-term trust and confidence takes precedence over distributing funds or making low-interest loans.
Yet since 1945 the BND has indeed distributed $555 million to the North Dakota general fund, in addition to their mission of promoting agricultural development and helping residents through natural disasters with low-rate loans. As North Dakota’s Reserve Bank, they have no retail branches. Instead they partner with and support community banks rather than competing with them. Deposits in these community banks are not federally insured but backed by "the full faith and credit of the State of North Dakota."
Federal deposit insurance (FDIC) lulls consumers into an unwarranted complacency with bank speculation, aka gambling, even though taxpayers and depositors will still make up their losses. For North Dakota community banks, fiduciary responsibility is a requirement.
rightsizing a reserve bank
Although it would be legally allowed, by practice the BND doesn't loan to individuals or corporations outside their state unless it serves their mission "to deliver quality, sound financial services that promote industry, commerce and agriculture in North Dakota." The bank is overseen by an Industrial Commission that includes the governor, the attorney general, and the commissioner of agriculture in addition to an advisory board appointed by the governor.
The BND doesn’t give money away. By using the interest rate strategically, the BND is able to use its reserves to do the most good for the greatest number of residents without depleting its principal. When the BND does have profits above their reserve and lending requirements, they disburse them to the General Fund so the state can then apply the surplus according to its own priorities without the BND becoming a grant-making organization.
What's the right size for a reserve bank? The BND serves 700,000 people, which includes a diversity of livelihoods but shares one bioregion and several dominant industries. This size holds the bank accountable to a population where people are aware of what's going on within their government. Within the state, the individual community banks serve counties with as few as 1000 people. At this level, people feel ownership and believe that they can make a difference. This is a human-sized economy.
beginners and rebuilders
Let’s look at some of the BND’s loan programs. One of their key goals is to get community banks started in underserved areas. They initiate this process by loaning money for bank shares to help a community acquire or refinance a bank within their county. They loan a minimum of 51% in order to have an ownership stake as collateral, up to a maximum of 85% of the shares. This allows community banks to act autonomously but protects the BND’s investment. It gives the BND oversight while not interfering with local decisions.
All mortgage loans are initiated by member banks and can only be for primary owner-occupied homes at no more than 80% of the value, not to exceed $300,000, although the member bank can, at its own risk, issue a second mortgage up to 95% of the value.
The BND assists state residents through lowering the interest rate on certain loans, although they still seek high equity ratios. With the exception of Beginning Entrepreneur and Student Loans, all other loans are covered by collateral valued 15-25% higher than the borrowed amount. The community banks carry a higher risk because the BND holds the first lien or mortgage, so the initiating banks have a personal stake in verifying the creditability of the deal.
When North Dakota flooded in 2011, the BND issued a program called Rebuilders’ Loans offering up to $30,000 at 1% interest for 20 years, which could be used for damage repairs or to purchase FEMA housing. No payments were required for the first two years, although interest accrued. As the grace period for the program expired, they added a supplemental program of $20,000 under the same terms.
lending to the heart
Farms and ranches are the heart of North Dakota. The BND has programs that allow first-time and beginning smallholder farmers with less than 15 years of experience to acquire land and equipment at lower interest rates. Family farms can borrow up to $500,000 at below-market rates while established farmers can borrow up to $2 million. The variable interest rate for the BND's portion floats at 1% below their base rate and is capped at 11%.
The Dakota Alternative Educational Loan (DEAL) supplements Federal student aid. Unlike Stafford loans, DEAL loans accrue interest at all times. The BND encourages students to pay this down so it's not added to the principal when they graduate. For ND students going elsewhere in the country or a nonresident going to a ND college, the fixed interest rate is 5.7% and the variable rate has been 1.5% over LIBOR, which is the average interest charged by banks to one another.
Students from the surrounding five states attending non-ND colleges pay a 6.7% fixed rate or 2.5% over LIBOR with a one-time 3% fee, which provides loan forgiveness to all students if they die or become permanently disabled (not the case for private student loans.) After graduation the student can consolidate all DEAL loans, federal PLUS loans (Parent Loans for Undergraduate Studies) and private loans, choosing a fixed or variable repayment term up to 25 years. The variable rate is capped at 10%.
These detailed examples show that a public bank can do some good in lending practices but its primary role is to protect community investments and generate the funds that the city, county, or state can use for public benefit. Let’s look, however, at whether we could do better for individuals and still stay solvent.
the fed funds trap
Although the BND offers better mortgages and student loans than private banks, these fixed vs. variable rates put public and private borrowers in a bind. On a maximum $50,000 loan in 2014, ND students had to choose between a variable rate at 1.78% or a fixed rate almost 4 points higher at 5.7%. That's a huge difference. The lending rate couldn't logically go any lower, so it would have made sense for the student to lock the rate in, but that meant a starting rate of $2850 a year in interest. However if interest rates rose, it could go to 10%, or $5000 a year in interest. And once student loans had been consolidated they couldn’t be refinanced.
Likewise, in the Family Farm program, the BND interest rate floats at 1% below the base rate, which may put it as low as 1.6%. But if rates rise, it can float up to "no more" than 11%. 11%! On a $500,000 loan, that starts at $55,000 per year in interest alone. At 1.6%, however, it's only $8000 per year in interest. Rather than this being a boon, it enables buyers to qualify for bigger loans, bidding up the price of farmland and setting them up to lose it all once the rate adjusts. This turns our students and family farmers into gamblers in a rigged game.
It’s not just students and farmers who have been forced into risky variable rates, but hundreds and perhaps thousands of school districts, utility districts, cities, counties, and states. Prudently, each bought interest-swap "insurance" to cover their bets—a collective 300 billion dollars’ worth. In “It Takes a Pillage” we looked at how that turned out for Detroit, which paid a full year of city revenues to get out of the deal after they went bankrupt. The FDIC has now sued sixteen of the world’s largest banks for damages for LIBOR manipulation, and Ellen Brown has suggested that California should follow suit. But why should there be a variable rate at all, allowing banks to put our security as communities and homeowners at risk?
oiling the skids
In The Public Bank Solution, Brown demonstrates that interest rates are fully under the control of government when they own their own banks. In 1938 the Bank of Canada was nationalized, which enabled low-rate loans for businesses, provided funding for social programs and education, disbursed farmland to WWII veterans, and set budgets for infrastructure projects like the Trans-Canada Highway. In 1957 the federal healthcare system was born, which began as a modest plan to cover half of hospital costs that progressively grew into comprehensive health benefits.
Then, in 1974, Canada joined the newly formed Bank for International Settlements in Basel, Switzerland. Under the guise of fighting “stagflation,” countries were encouraged to borrow from private lenders rather than their own central banks. This would use existing money, the BIS said, rather than creating new money and causing inflation. They conveniently ignored the fact that private banks also create money but extract the interest rather than disbursing it, and therefore are the real cause of inflation.
That same year OPEC, which had agreed to sell their oil exclusively in dollars in return for military support, launched an embargo that quadrupled the price. The dollar, which had taken a nosedive when Nixon took it off the gold standard in 1971, resurged—along with the fortunes of Middle East dictators, the profits of London bankers, and the debts of third-world nations. With their new wealth the oil sheiks forced countries like Liberia to accept loans they didn’t want, with the threat of US military invasion if they didn’t comply. These same debts, incurred fifty years ago, are borne by the grandchildren of those people today.
By 1981 interest rates peaked at 20% in the US and 22% in Canada. As Brown points out, at 20% interest compounded annually, debt doubles every four years. As the interest was siphoned off to foreign bankers, more money had to be created to replace it. Meanwhile prices rose alongside interest rates, contrary to prediction, because tighter credit led to higher unemployment, lower production, and higher costs.
In 1993 Canada’s net debt was $423 billion, 91% of which represented accumulated interest. By 2012 the debt was $581 billion or 84% of GDP, causing the House of Commons to cut 19,200 jobs and raise the retirement age to 67. As usual: heads, the bankers win; tails, the people lose.
keeping pace
This same pattern can be seen in the US by looking at the Bank of North Dakota’s base rate history from 1980 through 2008, set by the Fed funds rate. In less than the life of a mortgage, it went from a high of 19% in 1981 into a vacillating decline that resulted in 3.25% by the end of 2008. Each rate drop has set off a flurry of refinancing and an increase in loan amounts, creating the false impression that housing prices rise as a natural phenomenon and debt is a smart investment. But now that Fed funds are zero to .25% interest, it can’t go any lower.
A low Fed funds rate prevents banks and credit unions from being able to give a decent return on long-term deposits. This drives retirement savings into the fickle arms of the stock market. Most people aren’t trying to get rich but just keep pace with inflation. As housing prices rise, so do the costs of essential services. Unlike producers of goods, service providers have to live in the same economy.
The BND has been able to shield their cities and counties from fluctuating interest rates through two programs. First they created revolving loan funds: dedicated amounts that rotate to new communities as other recipients pay them back. One fund is dedicated to water facilities, including reservoirs and dams, and another helps healthcare entities improve their information technology. Because they own these funds through retained earnings, the BND can control the rate of interest, which can be as little as one-percent. The loans also don’t create inflation because it’s existing money that had been collected as interest.
The second program is called Partnership in Assisting Community Expansion (PACE), which writes down the interest on loans for new job development, biofuel production, and affordable housing. In each of these, the local community is required to chip in from their tax base at a percentage that varies according to their ability to pay. This requires them to do their own risk assessment and keep their end of the bargain or be ineligible for future loans.
By virtue of holding the loan contract, the BND becomes a stakeholder that has the authority to scrutinize agreements and progress. Having this oversight prevents corruption at the local level, such as theft, crony credit, project delays, abusive pricing, and other problems in public works. Because projects are in phases, loan funds are also released in phases after a transparent process where public bank officials examine them. This strategy of shared risk and well-collateralized debt makes the BND a responsible guardian of state funds, pension funds, private deposits, and real estate mortgages.
In the rest of the US and the world, we are in desperate need of just such a responsible guardian over our property and savings, both public and private. North Dakota has its own vulnerabilities to the corruption built into our economic model, which we'll look at a little later. But first, let’s look at some of the ways that the private banking system has hurt communities, nationally and globally, and how public banks like the BND could protect against this in the future.
forget the fdic
After the housing bubble burst in 2009, the FDIC went $8.2 billion in the red, requiring them to extract special assessment premiums from the banks to recoup their losses. This had a heavy impact on credit unions and small savings and loans, neither of which benefited from the bail-out money. But the next time could be worse, since trillions in derivatives have now been mixed with depositor accounts and given super-priority to lay first claim to assets in case of bankruptcy.
Even if accounts under $250,000 were to remain safely FDIC-insured, a banking crisis would wipe out pension funds, state or municipal budgets, stock brokerage accounts, and insurance reserves. The economy is therefore subject to blackmail: if any of the major banks were allowed to go bankrupt, we would lose our savings as a society, as well as individuals. Now that the Dodd-Frank Act forbids any future bank bailouts in case of insolvency, this leaves the only option as the bail-in where depositor accounts may be seized by up to fifty percent to make up the banks’ speculative losses.
This same bail-in scheme robbed depositors of their savings in Cyprus. The interest-rate swap robbed Detroit public employees of their pensions. And across the US, fraudulent mortgages have scammed 10 million people out of 4.5 million homes. However, none of these could happen in North Dakota. Let’s take a detailed look at why:
Unlike the tax haven of Cyprus, only North Dakota residents can open demand deposit accounts at the BND, not foreign speculators. Because they’re not FDIC-insured, FDIC losses wouldn’t affect the BND, nor would their community banks be subject to a bail-in. Since there is no FDIC insurance to fall back on, any loss would be borne by the BND and the state: a strong deterrent to gambling and speculative investments.
Unlike Detroit, a North Dakota city could have utilized the Community Water Revolving Loan Fund to get a 40-year loan at a 3% fixed rate with the interest and payments deferred for three years until it was self-supporting. Other community projects could be funded through PACE or other programs, so that cities and counties would never be forced into derivative bets like interest-rate swaps from private banks.
Unlike subprime mortgage companies, the BND doesn’t resell mortgages to foreign investors and sovereign wealth funds. Instead the BND assists community banks by purchasing their mortgages, freeing them up to make more loans. This protects the BND and the community bank while the homeowners know that their mortgage papers and payments won't leave the state.
sam i am
Even North Dakota, however, may be caught in the pending meltdown of mortgage insurance. In Guaranteed to Fail: Fannie, Freddie and the Debacle of Mortgage Finance, the authors—four NYU professors—make the following analogy:
Suppose that we offered you the following opportunity: We will invest $1, you lend us $39. With this $40, we will buy bank-originated pools of mortgages that are not easy to sell and face significant long-term risks. Although we’ll attempt to limit that risk by using sophisticated financial hedging instruments, our models have large error and uncertainty. We’ll invest 15% of the funds in low-quality mortgages that households will be unable to pay in a recession or a severe housing downturn. And to make it even more interesting, we’ll become the largest financial institution in terms of assets that are related to mortgages and together buy around $1.7 trillion worth, making us truly too-big-to-fail.
But it doesn’t stop here. We’re going to offer insurance on a whole lot more mortgages taken out in America, say $3.5 trillion (together), and guarantee them against default. We don’t want much for offering this insurance—maybe around 20 cents per $100 of mortgage—but that will provide us with $7 billion in profits per year (assuming absolutely zero foreclosures). As a lender to us, you might be worried about how much capital we’ll hold as a buffer against all future defaults: for every $100 that we guarantee, we’ll hold only 45 cents.
And because we want as big a market share as possible, we’re going to backstop some dicey mortgages. For this type of risky investment, we know that you are expecting a big return. However, we are only going to pay you the yield on government bonds plus a little extra. You would think our investment pitch was crazy and reject the deal outright. But if we came along and whispered to you that we have a wealthy uncle—his name is Sam—that will make you whole on the money that you lent us no matter what happens, do you care about the risk? If you believe that Sam will be there, you’ll give us your money freely.
fannie and freddie in flames
After the housing crisis, Fannie Mae and Freddie Mac sat on 150,000 foreclosed homes at a taxpayer cost of $150 billion. But this was a shadow of the $3.5 trillion in mortgage guarantees, the $1.7 trillion mortgage portfolio, and the $2.2 trillion position in derivatives. Now that they’re no longer profitable, they have been taken off the Stock Exchange and nationalized. But in a presentation to the St. Louis Federal Reserve, the authors make the case that nationalizing Fannie and Freddie isn’t the solution.
In their view, “government entities of the scale of Fannie and Freddie should simply not exist. That is, their job should be performed by private markets or not at all.” Mortgage insurance should be a public-private partnership with the public entity covering no more than 75% of a “plain vanilla” mortgage; all additional risk should be only insured by well-capitalized private entities at their own expense. In any case, as the authors point out, housing subsidies and guarantees have not fulfilled their mission to increase home ownership but have distorted the price of housing, resulting in over-investment and fewer consumer dollars in circulation.
Yet, despite their perceptive view of the problem, the authors leave the lucrative privilege of creating mortgage credit in the hands of the private bankers to whom they’re presenting. In the BND model, 80% of a plain vanilla mortgage is bought by the public bank, which holds the title and returns the interest on this safe investment to the community while freeing up member banks to take on more exposure at their own risk. This truly ends the housing cycle of prices spiraling up and money siphoning out.
in land we trust
Mortgages have been used to create currency since 1720 when Benjamin Franklin instigated Pennsylvania’s scrip system. According to Franklin, what backs money is labor but the greatest security for preserving the value of money is land. The land has the unique quality, Franklin ascertains, of not being able to be exported. But our modern system does export the land by bundling mortgages by the thousands into collateralized debt obligations (CDOs) and selling them off to pension funds, insurance reserves, or foreign investors in the secondary market. This exports ownership of homes and turns them into a commodity, like gold or silver, that no longer belongs to our communities.
The holders of the CDOs include public funds on which retirees depend and the hedge funds of market speculators. What this means in practice is that, in order to protect the retirement funds of state employees, tax money also needs to bail out predatory lenders and foreign investors. But in order to truly protect pensions, state funds, and personal savings without robbing Peter to pay Paul, they first need to be separated from speculative investments and derivatives, the way that they were under Glass-Steagall.
Mortgages and student loans represent the transfer of wealth from one generation to another, both the built infrastructure and the repository of knowledge and skills. If high-equity local mortgages backed public funds, the 27% of income in housing costs—that now goes primarily to multinational banks—would repay the previous generation and fund an increase in this wealth to pass on to the next. State and county governments could borrow from revolving loan funds and pay the interest to themselves. Profits in excess of reserves could be disbursed equally to local governments or the state, as does the BND.
the fed: fickle like a fox
However, the public banks would still be in competition with private banks and their lending rates would be subject to the fickle fluctuations of the Fed funds rate. When banks issue a loan, they create the credit on one side of the ledger and the asset of the debt on the other through double-entry bookkeeping. But when the credit is transferred from the buyer to the seller’s account in another bank, the lending bank needs to rebalance its books by the end of each day.
They do this by borrowing overnight from other banks or at the Fed funds window, whose rate therefore sets the ceiling on the interbank lending rate. While the variable rate captures the low Fed funds rate, the possibility that the rate will rise makes banks unable to issue fixed mortgages at a lower rate. Banks profit from this uncertainty but it puts homeowner and student borrowers at risk. Variable rates keep the cost of housing high and the interest on personal savings low.
The Federal Reserve operates through a network of regional Feds; public reserve banks could operate the same way. Commercial banks don't profit from the interest on the Fed rate, which is returned to the Federal government. Their profits are made on the 3-points above prime at which they lend/create up to ten times their capital. As seen, a lower prime allows them to issue more money for the same properties.
If there were ten Regional Reserve Banks across the US, each would cover a population about the size of California. Regional Reserve Banks could distribute the capital—which isn't money but rather a license to issue money—to EcoState Reserve Banks, each covering millions of people. The EcoStates could divide the capital among Commonwealth Reserve Banks serving hundreds of thousands of people, each the size of North Dakota or Iceland or Santa Cruz County. At this size there is oversight, stability, and accountability to the members.
The Commonwealth Reserve Banks could pay their EcoState Funds .25% annually, which is the current Fed funds rate, for each dollar they create. The EcoState is the shared function of the commonwealths to protect their natural resources and the environment, including the promotion of regenerative agriculture and the reversal of climate change.
If mortgages averaged a conservative $40,000 per person, it would generate $100 per person per year, or tens of millions annually for each commonwealth and hundreds of millions a year for the collective EcoState. The commonwealths would be devoting this budget to eco-logos, the reason and purpose behind the eco-nomos.
With a stable bank funds rate, Commonwealth Reserve Banks could offer, for a limited time, variable mortgages that compete with for-profit bank rates but cap the interest at 3.3% for a 15-year loan or 5.3% for a 30-year loan. The latter would put the maximum repayment at twice the borrowed rate, which is the most allowed under Islamic banking before it’s considered usury. Any homeowner with a fixed or variable rate would be eager to refinance during this window.
Variable rate loans would be gradually phased out as the prime was slowly raised in a predictable and public trajectory. The built-in volatility of the housing market, which leads to a gambler’s mentality in buying or selling, would be replaced by one responsive to what home buyers can afford at that time. In some places, the price of housing may go up with more money in circulation. In others, it may go down as speculative buyers leave the houses for those who actually live there.
With a stable bank rate, local depositors could be given a return on retirement savings that would increase with time, perhaps 1% annually for the first five years, 2% for the next five, and 3% thereafter with the ability to borrow your own funds at 4%. The current rate of return from commercial banks is .01%. [This was 2018] The Commonwealth Reserve Banks could even give the government and pension funds that make up their capital a whopping 7% return. Because banks can lend/ create $10 for each $1 of capital, a 1% retail interest rate generates a 10% return on the underlying capital so that a 7% return on capital only costs .7%.
what goes up must come 'round
However, the exposure risk of Fannie and Freddie still threatens to capsize our ship of state. Fannie and Freddie Mae’s mortgage insurance allows houses to be bought with only 5% down, which raises the overall price of a house since bidding is competitive. This needs to be phased out so that the market adjusts.
Currently, a couple with good credit can finance up to 95% of a $250,000 home at a variable interest rate of 3% with a $1000 monthly mortgage. But they will also have to pay mortgage insurance and be vulnerable to losing their home when interest rates rise. However, if mortgagers required a 20% downpayment, the same $1000 monthly payment without insurance could finance 80% of the same home selling at $235,000 with a 5% fixed rate. The delayed gratification of buying would be exchanged for a lifetime of greater security.
The beauty of small economies is that each community can tailor their policies to fit their own issues, without one size fitting all. We can pay forward our inheritance from a past generation by making our cities more sustainable, friendly, and nurturing for generations to follow. The specific goals of each community may differ. In some cases, housing costs may be too high. In others, incomes may be too low. There may be too few houses, or a surplus that needs fixing up. There may be gentrification pushing people out, or the need for gentrification to bring people in. Some places may be losing their youth for lack of opportunities while others are losing young families who can't afford homes.
Overall, the cost of housing and the money in circulation need to meet in the middle. For the community to issue the debt is the first step to bringing this under their control.
fracking the farm
North Dakota, however, has not resulted in a sustainable, friendly, and nurturing model. If North Dakota was merely providing for their own well-being, they should be sitting on top of the world. They're a leading producer of beef and dairy cattle, hogs, and honeybees. They grow enough durum wheat to supply the entire country with pasta, plus soybeans, flaxseeds, sunflower seeds, sugar beets, beans, canola, barley, and rye. And, most attractive to the Federal government, they have oil. Due to the Bakkan Shale, ND has become the second-leading oil-producing state behind Texas.
During the Great Depression, the Bank of ND worked hard to keep farmers on their land. But in return, the state retained half of their mineral rights, so that farmers have little choice about allowing fracking. It enabled the ND economy to be the fastest-growing in the nation at 13.4% for three years in a row. Fifty thousand new workers have migrated to ND and state unemployment is down to 3%. Overflowing movie theaters seat viewers in the aisles while grocery stores can’t keep their shelves stocked. In the sudden housing boom, real estate costs rival New York City in some areas. But all of this has driven the cost of living up, making them more dependent on bringing new money in.
And the oil accessed by fracking has a very dark side. Vast amounts of water, laden with chemicals and salt, are used to break it out of the shale bed. To dispose of the wastewater there are deep, reinforced wells where it presumably can't reach the groundwater. The oil companies self-monitor spills, of which they reported 1000 in 2011, but many more have been alleged. Trucks, tired of waiting in line for the wells, have been known to dump the brine, laden with heavy metals and carcinogens, on the side of the road where it has sterilized farmland and wiped out aquatic life in streams and wetlands. Landowners must either settle or spend hundreds of thousands of dollars on lawyers to prove the damages.
In the severe drought of 2012, ND ranchers were the only ones left with pastureland when South Dakota and Wisconsin ranches dried up in the hot sun. While climate change and extreme weather has ravaged their neighbors, ND is upping the fossil fuel ante. Yet health problems and lifestyle changes are coming back to haunt them. They have the highest suicide rate for young people in the country. When the fast money is gone and the mostly-male transient workers leave, will the BND's new farmer programs keep young people on the farms? Will there still be farms to keep them on? If groundwater ends up contaminated, as some predict, ND's farming and ranching days could be over.
oil not soil
Standing Rock has brought worldwide attention to the Dakota Access Pipeline and the state's brutal repression of indigenous-led protests. Yet the governor credits oil concessions with paying for 80% of ND’s public education costs, which has lowered their property and state taxes. Is this true? The oil industry isn't teaching in the public school classrooms; North Dakota teachers are. The houses the teachers live in weren't built by the oil industry; they were built by North Dakotan construction workers. The food the teachers eat isn't grown by the oil industry; it's grown by North Dakotan farmers and ranchers. The money brought in by the oil business doesn't make any of these things happen. North Dakotans make them happen.
North Dakota doesn't need Federal money to galvanize their own residents to accomplish their common goals. If their own money were kept in ND, instead of going to the Federal government, they could hire one person out of three to be a teacher, caregiver, doctor, firefighter, public defender, sanitation worker, ecologist, state militia, or librarian. Whatever their priorities were, they could fund them with the exact same amount of money, and it would continue to circulate after it was spent.
To restore our soil, water, climate, food production, and industry will require fundamental changes in how we think about who we are, what our purpose is, and most importantly, what our relationship is to one another. We the people have a right to use ALL of the land, ALL of the properties, and ALL of our time and energy for our common well-being. Next we'll examine the second major leak in the money boat that keeps us bailing instead of sailing.
CHAPTER 19 EXERCISES
Using examples from the book, or from your own research, logic, and experience, comment on the following and what it means today:
Paradigm Shift #19
The Fed has stolen the name of the Federal Government along with its most important function, the power to issue currency.
The Fed is not owned by government but by private bankers who issue the licenses to private bankers to issue the money.
Banks are the default landlords of everyone with a mortgage.
LEXICON
Explain how the following definitions change the dialogue around social problems. Is this concept used in discussion of the examples to which it applies? If not, how does this affect the potential solutions?
public reserve bank: A repository of community funds, assets, and pensions with the responsibility to protect and increase them, and the authority to lend to community banks as a multiple of this capital.
Fed funds rate and window: the interest charged by the privately-owned Federal Reserve for banks to meet their overnight requirements to balance their assets and liabilities.
Fannie Mae and Freddie Mac: government entities that have ended up underwriting bank losses for high-risk, low-equity housing loans, thereby driving prices up, and selling off the resulting foreclosures at fire-sale rates to private investors.
collateralized debt obligations (CDOs): loans such as mortgages that are backed by real property or revenue streams, which can therefore be insured, or bundled and sold as assets.
QUESTIONS FOR REFLECTION AND DISCUSSION
Explore the good and bad of North Dakota and why it's become the crux of the two extremes between sovereignty and extractive capitalism. Was there another way to design it so that it wouldn't have left farmers and communities vulnerable? How does the relationship between North Dakota's government and their indigenous population figure in? Could you design an economy that would nurture a relationship of mutual respect, enhance cultural identity on all sides, protect the rights of people and the environment, and encourage the fluid exchange of goods and ideas? Does the racial "segregation" of the reservation hurt native tribes or protect their sovereignty by giving them ownership of their land and laws? Would this same model be a good or a bad thing for other racial groups?
In your Commonwealth, how would you structure your Public Reserve Bank to protect your funds, assets, and pensions? Would you use rotating public loans? Could they be applied even at a neighborhood level? Would you authorize loans to privately owned banks, or only allow them to lend the money they had? In your community, would you want to bring the cost of housing down or the flow of productive income up? Could current homeowners be buffered in a controlled decline of housing prices? Explain how.
The purpose of money is to steal our time. The bankers usurp ownership of the properties and issue debt against them, for which we pay with our lives. It's not interest that's usury, it's usurping the right to issue the money. Banks and corporations are seen as heroes because they give us money, government as parasites because they take it—but it's actually the exact opposite. We're subject to a geistheist, the stealing of our spirit, our soul, our purpose. That's what we have to change.
Explains why inflation is really dilution and your house is not worth more, your money is worth less. Gives examples from my book, How to Dismantle an Empire, on how the interest rate affects the price of a house and how they fluctuate it for the bankers' benefit. Cites Ellen Brown and Matt Ehret on bail-ins and reads passages from my book on how the bond rating sunk Cyprus. Begins with dramatic and personal illustrations of inflation—the hospital bill when I was born and my college scholarship.
I have incorporated your changes into my copy; not so many this time.
Great exploration Tereza!
There has to be some answers in here in State Banks as a way to move forward for our communities. Well done.
And I like your conclusion:
"To restore our soil, water, climate, food production, and industry will require fundamental changes in how we think about who we are, what our purpose is, and most importantly, what our relationship is to one another. We the people have a right to use ALL of the land, ALL of the properties, and ALL of our time and energy for our common well-being."