Six years after the 2008 collapse of Wall Street, the story line in the US media is that the Great Recession is past and a recovery is underway. It is a totally false narrative.
The reality is that the slow moving social catastrophe that began in 2008 rolls on. The American people have endured almost six years of bankster-induced austerity - savage budget cuts, reduced services, unemployment, home foreclosures, bankruptcies, failing schools, crushing student debt, higher taxes and more public debt.
This false narrative dominates the media because less than one percent of our nation controls not only our government and economy, but also the debate about the future of our country.
However, many Americans sense that our fundamental economic problems have not been fixed, and that the same kind of crisis could happen again at any time. As Ellen Brown writes:
Shock waves from one Wall Street scandal after another have completely disillusioned us with our banking system; yet we cannot do without banks. Nearly all money today is simply bank credit. Economies run on it, and it is created when banks make loans. The main flaw in the current model is that private profiteers have acquired control of the credit spigots. They can cut off the flow, direct it to their cronies, and manipulate it for personal gain at the expense of the producing economy.
Wall Street's ability to control both the creation and distribution of money and credit are key reasons why the finance industry has become so powerful - and why the rich are getting richer while so many are treading water or getting poorer. To create a sustainable economy where wealth is enjoyed broadly, not only by the 1%, we must address and transform our system of money creation and distribution.
Ellen Brown continues:
The benefits of bank credit can be maintained while eliminating these flaws, through a system of banks operated as public utilities, serving the public interest and returning their profits to the public... Examples from around the world and through history show that it works admirably well, providing the key to sustained high performance for the economy and well-being for the people.
What Wall Street doesn't want you to know is:
- that it alone controls the creation and distribution of money and credit,
- that this is the basis of Wall Street's stranglehold on our economy (and our government),
- and that there is an alternative to this system, one that actually creates enduring prosperity for the many, rather than bubble cycles of wealth for the few.
The secret Wall Street would rather you not know about is that publicly owned banks are a powerful and historically proven way to create long term, broadly shared wealth and prosperity, in contrast to our current private banking system which is largely focused on speculation, short term profit - and preys on, rather than serves, the real economy.
In the aftermath of The Great Recession, the big banks that caused the crash were, as we all know, bailed out. However, the Federal Reserve declared that it would not extend a hand to regional governments devastated by economic events stemming from Wall Street's greed and corruption. Cities and states had to slash budgets and services, faced for years with terrible austerity choices.
However, over this difficult last four years, nearly half the U.S. state legislatures explored over the last four years the possibility of creating public banks to responsibly leverage state assets and establish public credit for sustainable economic development, just as the Bank of North Dakota has been doing for almost a century. Predictably, the big banks and other entrenched and powerful economic interests opposed these initiatives vehemently - and none of the initiatives made it into law.
Wall Street fought these initiatives so hard because publicly owned banks threaten their entire business model as public banks enable governments to:
- save up to 50% of the lifetime cost of public works projects (for example, California could have saved $6 billion in long term interest on its recently completed Bay Bridge, which cost $6 billion to build);
- save hundreds of billions on management fees for public funds (a study released earlier this year showed that the City of Los Angeles loses over $200 million per year on fees and other unnecessary expenses by banking with the big banks);
- create strategic, reasonable interest loans to key segments of the economy such as students, homeowners, and small businesses;
- enjoy another key benefit of public banks - backstopping smaller banks, enabling them to take on larger deals - leading to a more diverse and vibrant financial sector not dominated by the biggest banks (North Dakota enjoys the most diverse banking sector per capita in the U.S.).
It's clear why Wall Street would not want you to know about public banks, and why they have fought so hard to prevent them from being established in the 21st century. The question is - as the consolidation and power of the big banks increases, and Wall Street prepares for another crash funded by bail-ins (your deposits), will the American people demand an honest, transparent banking system dedicated to serving the real economy?
Public creation of money and credit has a powerful long term effect on society that is so profound it cannot be adequately explained in a short article. Imagine a network of public banks at the state, county, and city levels, vastly reducing the waste of tax dollars while increasing revenues, enabling long term economic planning, and supporting a proliferation of regional and community-oriented banks dedicated to the real economy. Exploring the many benefits of public banking, public money creation, and public credit is one of the reasons we have created the New Economy Academy.
Each state and its citizens would benefit from such a network of public interest banking. Increasing knowledge and informed action is the agenda of the Public Banking Institute, and we welcome your support as we expand the current debate to educate citizens, legislators, bankers, academicians, and activists about the power of public banking to transform our economy.