Monday, October 17, 2011

Bankers vs banksters

Whenever someone points out the massive criminal behavior of the banksters, inevitably someone else starts reciting a list of all the wonderful services provided by your local friendly bank—a safe place to park your money, a convenient way to make payments, a sound institution where capital for the community's innovation is financed, etc.  And the services that show up on such a list are indeed socially valuable.  If banking did not exist, something very similar would spring up because the need for such services is thunderingly obvious.

So why do I mostly bitch about the evil banksters in this blog?  Because those socially useful functions of banking represent only a TINY fraction of what passes for banking these days.  By volume, over 98% of the monetary transactions have nothing, NOTHING, to do with the functioning of the real economy and are merely the operations of the bankster ├╝ber-casino.  So the whole idea of any reasonable society is to ensure that we encourage the formation of socially useful banks while severely restricting the destruction of the real economy, the obscene concentrations of wealth, and the other manifestations of casino banking.

And the problems of striking such a balance have been addressed before.  Many times.  And often quite successfully.  So for the young people who are waking up to the serious nature of the problems caused by Wall Street and its imitators, rest assured that while there is very little need to invent anything new, it is a good idea to read up on the history of the struggle to control the banksters.

Reassessing the Greenback and Other Alternative Monetary Systems
Anthony Migchels   Thursday, October 13, 2011
The Greenback was the Dollar, or United States Note, printed by Abraham Lincoln's Treasury to finance the Civil War. 
It was a paper dollar, debt free and, therefore, also interest free. It was spent into circulation by the U.S. Treasury department beginning in 1862. Although modified many times through legislation, U.S. Notes were printed until 1971. Even today a minute number of Greenbacks are still in circulation. 
Debt-free paper money was the basic design for most early government currencies as usury was heavily frowned upon. The Continental was similar, as was the paper printed by the Chinese Emperors. In this essay we will use the term Greenback to describe this basic model. 
The Greenback is both much maligned and much admired. 
The Libertarians and Austrian Economists are concerned with the inflation that the Greenback brings. They rightly point out that every debt-free government currency has inflated itself into extinction. This is their primary motivation for demanding a gold standard to hedge inflation.

Populists and others praise the fact that it's debt free (interest free), which clearly is a great boon to society, as it stops the interest drain to the plutocracy. more
And while banking and monetary questions were especially interesting in the settlement of North America by the largely European immigrants, alternatives to banksterism have been tried in many places.  This is an account of public banking in post WW II Germany brought by those New Deal economists who were part of the occupation governments.
The Public Option in Banking: Another Look at the German Model
Thursday 13 October 2011
by: Ellen Brown, Truthout | News Analysis

Publicly owned banks were instrumental in funding Germany's "economic miracle" after the devastation of World War II. Although the German public banks have been targeted in the last decade for takedown by their private competitors, the model remains a viable alternative to the private profiteering being protested on Wall Street today. 
One of the demands voiced by protesters in the Occupy Wall Street movement is for a "public option" in banking. What that means was explained by Dr. Michael Hudson, professor of economics at the University of Missouri in Kansas City, in an interview by Paul Jay of the Real News Network on October 6:

[T]he demand isn't simply to make a public bank, but is to treat the banks generally as a public utility, just as you treat electric companies as a public utility.... Just as there was pressure for a public option in health care, there should be a public option in banking. There should be a government bank that offers credit card rates without punitive 30% interest rates, without penalties, without raising the rate if you don't pay your electric bill. This is how America got strong in the 19th and early 20th century, by essentially having public infrastructure, just like you'd have roads and bridges.... The idea of public infrastructure was to lower the cost of living and to lower the cost of doing business. 
We don't hear much about a public banking option in the United States, but a number of countries already have a resilient public banking sector. A May 2010 article in The Economist noted that the strong and stable publicly owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the world in the last few years. 
In the US, North Dakota is the only state to own its own bank. It is also the only state that has sported a budget surplus every year since the 2008 credit crisis. It has the lowest unemployment rate in the country and the lowest default rate on loans. It also has oil, but so do other states that are not doing so well. Still, the media tend to attribute North Dakota's success to its oil fields. 
However, there are other Western public banking models that are successful without oil booms. Europe has a strong public banking sector; and leading it is Germany, with 11 regional public banks and thousands of municipally owned savings banks. Germany emerged from World War II with a collapsed economy that had degenerated into barter. Today, it is the largest and most robust economy in the eurozone. Manufacturing in Germany contributes 25 percent of gross domestic product, more than twice that in the UK. Despite the recession, Germany's unemployment rate, at 6.8 percent, is the lowest in 20 years. 
Underlying the economy's strength is its Mittelstand - small to medium sized enterprises - supported by a strong regional banking system that is willing to lend to fund research and development. 
In 1999, public banks dominated German domestic lending, with private banks accounting for less than 20 percent of the market, compared to more than 40 percent in France, Spain, the Nordic countries and Benelux. Since then, Germany's public banks have come under fire; but local observers say that is due to rivalry from private competitors rather than a sign of real weakness in the sector. more

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