Fed seal

Photo by Kurtis Garbutt, courtesy SheerPost.

PBI Chair Ellen Brown writes in her latest article on SheerPost of the dilemma the Fed is facing as it attempts to shore up the severe economic crisis taking place on Main Street following a year of lockdowns.

Ellen quotes US Treasury Secretary Steven Mnuchin himself summing up the problem: “The people that really need support right now are not the rich corporations, it is the small businesses, it’s the people who are unemployed.” So why aren’t they getting the support?

Ellen explains:

“The reason the Fed is not well suited to the task is that it is not allowed to make loans directly to Main Street businesses. It must rely on banks to do it, and private banks are currently unable or unwilling to make those loans as needed. But publicly-owned banks would. …

“The only monies the central bank can create and spend are ‘bank reserves,’ and these circulate only between banks. The deposits circulating in the producer/consumer economy are created, not by the Fed, but by banks when they make loans. …

“In countries with strong government-owned banking systems, public banks have historically increased their lending when private banks pulled back. … [T]hey do not have to focus on short-term profits to please their shareholders. They can pour their resources into improving the long-term prospects of the economy and its infrastructure, stimulating local productivity and strengthening the tax base.  …

“Three promising new bills are before Congress that would facilitate the establishment of a public banking system in the US.”

[Read the full article]