Banks have a great privilege. They create debt/money with a few strokes on a computer keyboard. Then they charge interest on this newly created “money.” It’s called Fractional Reserve Banking. All banks, but one, are privately owned. By law, these private banks have one objective, making profits for their shareholders. It is all about profits for the private banks.
It is a failed system. Booms and busts are created by the improper use of this newly created money. We could change the Federal Reserve Banking system. However, Washington D.C. has lost its way and we are foolish believing things are ever going to improve at the federal level. The cabal of private Wall Street banks run the show and must make profit for the few.
Mother Jones quoted Sen. Elizabeth Warren, D-Mass., as saying, "Today, the four biggest banks are 30 percent larger than they were five years ago." She added, "And the five largest banks now hold more than half of the total banking assets in the country."
On a world stage these private banks and others have expanded the derivatives market. The Bank of International Settlement (BIS) states that their statistics on over-the-counter derivative markets "show that notional amounts outstanding totalled $693 trillion at the end-June 2013.” That’s right, "T" as in trillion.
We can continue to talk about the dysfunction in D.C. or we could actually do something. Alaska could step up and out from Wall Street. No secession, no revolution. Just change our banking system here. In 1919 the people of North Dakota wanted to step up and out from Wall Street. They created the only state-owned bank in the nation, Bank of North Dakota (BND). Their public bank weathered the last economic bust very well. North Dakota has the lowest unemployment in the nation at 3 percent. I understand their public bank has added almost as much to their state coffers as oil and gas has.
Perhaps the people of Alaska should take part or all of our Permanent Fund and create credit for the advancement of a productive economy instead of a speculative economy, rejecting Ponzi schemes of the derivatives market, and instead using our assets in a public bank to create credit here in Alaska. The principle investment would never be touched. But through the marvels of modern banking, credit creation could occur. Private banks do not lend assets. They create credit/debt from the assets held. They are allowed to create 10 times what they have in assets (10:1 ratio). Now, I don’t think it prudent to take all $40 billion from our Permanent Fund and create 10 times that amount of credit. BND only creates an equal amount of credit as assets held (a 1:1 ratio)
Consider taking our invested money from foreign nations and “banks too big to fail/jail” and start our own public Bank of Alaska. Then create credit for infrastructure projects. The most successful nations in history have built an economic system using this type of public credit. Alaska can and should step up and out from Wall Street with our own banking system for success. Economics is the lynchpin of Freedom and Liberty.
Ray Southwell is a retired Registered Nurse who lives with his wife and mother in Nikiski. He has studied the founders' original intent of codifying the Second Amendment and was co-founder of the Michigan Militia and the Alaska Citizens Militia.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch, which welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.