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Forum Post: Banking on the Public: Going Postal, North Dakota and Other Finance Alternatives

Posted 6 years ago on July 4, 2013, 7:38 p.m. EST by LeoYo (5909)
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Banking on the Public: Going Postal, North Dakota and Other Finance Alternatives

Thursday, 04 July 2013 12:10 By Abby Scher, Dollars & Sense | Report


Hundreds of people seeking a roadmap for remaking the banking system gathered north of San Francisco in early June at Public Banking 2013: Funding the New Economy, a conference held at Dominican University, whose Green MBA program was a cosponsor. It was the second annual gathering sponsored by the Public Banking Institute (PBI)—the California-based nonprofit that is popularizing the idea of a North Dakota-style public bank.

A handful of fans of rightwing populist Ron Paul mingled with Occupy Finance folks, grizzled leftists, and middle-class suburbanites whose eyes were opened to the dysfunction of the financial system as they or their neighbors were foreclosed upon. According to PBI, 20 states currently have legislative advocates for state banks, a reform also backed by the think tank Demos, the Center for State Innovation in Madison, the Institute for Local Self-Reliance, and Gar Alperovitz, the author of America Beyond Capitalism who was a keynoter at the conference. The North Dakota bank, formed in 1919 after the farmer-backed Nonpartisan League took over the state legislature, holds the deposits of municipalities and the state government, and collaborates with small banks in the state on loans for small businesses and farmers. During a period when too-big-to-fail banks dismiss smaller loans as being unprofitable, this partnership gives community banks important backing, and indeed, North Dakota has more community banks than any other state. The public bank also generates a surplus that supports the state treasury.

Researchers from PBI, Demos, Institute for Local Self-Reliance and CSI all point out that North Dakota weathered the last bust better than most states not only because it is in the midst of an energy boom but because its public bank provides countercyclical support. The public bank operates on a longer time horizon, and ensures that public deposits are invested close to home, unlike public monies placed in Wells Fargo or JP Morgan Chase. Many governments use these larger banks because smaller community banks don't have the capacity to handle their relatively large deposits. The state bank solves that problem.

Postal banks got a big boost at the conference when James Sauber, the chief of staff of the National Association of Letter Carriers announced that both his union and the American Postal Workers Union will partner with PBI in a campaign to reinstate simple checking and savings accounts in post offices. The U.S. Postal Service offered simple affordable banking services used by many working class people from 1911 to 1967 when the system was dismantled. “In the 1940s, 4.2 million American had accounts at the post office,” Sauber said. In other countries, postal banks remain important institutions, most notably in Germany, Britain, New Zealand (launched in 2002), Brazil (launched in 2000) and Italy, although Japan is beginning to privatize its postal bank, the largest in the world. The U.S. postal workers are intrigued not only by postal banks' potential to offer social inclusion—28% of Americans don't have full access to banking services—but also by the revenue generated that supports the postal system as a whole. “Don't dismantle this institution—reinvent it,” he said.

The conference boasted another major announcement: The city of Reading, Pennsylvania is redirecting its deposits from big corporate banks and channeling them to local banks that will invest locally by working with a financial intermediary that will handle the relationship. This strategy was promoted by public banking activists in the state and Tom Sgouros, a progressive policy consultant and journalist based in Rhode Island, following PBI's conference in Philadelphia last year.

The state bank idea faced a setback when the Boston Federal Reserve issued a report dismissing the idea after the Massachusetts legislature agreed to explore it. But with successful public banks operating around the globe, activists in California, Oregon and Vermont in particular are not letting naysayers slow them down. The conference organizers apparently made it their aim to build left-right alliances. PBI President Ellen Brown's 2008 book The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free—won an audience among Tea Partiers with her analysis even while defending a government-run bank. The eclecticism—and at times wrong-headedness—was on display at the podium. After a Green Party leader opened the conference, Bill Still, who ran for the Libertarian Party nomination for U.S. president, told the crowd, “We need to get rid of the government's ability to borrow...You need to reissue sovereign money.” His film, The Money Masters: How International Bankers Gained Control of America, was praised by W. Cleon Skouson, the John Birch Society-aligned writer championed by Glenn Beck.

Some activists also appear to believe that the public banks will push corporate banks out of operation. Occupy Finance member Julia Willebrand, the Green Party candidate for NYC comptroller, was sporting a “Break Up Big Banks” button, and was challenged by a PBI staffer who said the government wouldn't have to do that because the state banks would remake the system. Of course, Germany has a whole system of public and cooperative banks that live quite happily without threatening Deutsche Bank and big finance. Indeed, after the recent crisis, Germany's Left Party proposed a scheme for reducing the power of the corporate banks in favor of public and cooperative banks, acknowledging that it will be a long struggle.

In his plenary, Gar Alperovitz warned against “projectism,” falling into the trap that one initiative—for a public bank, say—can transform the system. “Can we get our heads around the notion that people like us...can transform and build an entirely new economy?” Those championing banking as a public utility cheered their answer.

Sources: Axel Troost and Philipp Hersel, How a Socialization of the German Banking System Might Look Like, (New York: Rosa Luxemburg Stiftung, October 2012); Ellen Brown, The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free (Third Millenium Publishers, 2008); Amy Rapoport, The People's Bank, American Prospect, April 1, 2013; Doug Henwood, Web of Nonsense, Left Business Observer, July 2009; Arthur MacEwan, “Should We Blame ‘Fractional Reserve' Banking?” Dollars & Sense, May/June 2013.

This piece was reprinted by Truthout with permission or license.



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[-] 2 points by shadz66 (19985) 6 years ago

At the Public Banking Institute Conference last month, Landon Carter, gave an excellent explanation of why money is scarce [ http://itsoureconomy.us/2013/06/why-is-there-a-scarcity-of-money/ ]and he also explained that because we have given bankers the monopoly on money creation and they do so by the loaning of money, that puts everyone in debt. It creates an “impossible contract” - that requires us all to keep taking money out of circulation ... thereby creating money competition and money scarcity. But it doesn’t have to be this way. We could manage money through public institutions such as public banks and a Public Federal Reserve.

In addition to privatized debt-based finance, the tax laws create unfairness and inequality. A report by The US Congressional Budget Office [ http://itsoureconomy.us/2013/05/the-distribution-of-major-tax-expenditures-in-the-individual-income-tax-system/ ] found that Washington spends more on tax breaks then on Medicare, the military or Social Security & the group that benefits most from tax breaks is the wealthiest 0.1% !!

From last link : 'It's now high time to end the era of Big Finance capitalism and an economy based on the extraction of resources, especially for energy. This statement is not an ideological proposal, but a practical one. We simply cannot continue on the present path, and as systems fail and resources become scarce, we will be forced to change what we do.

''Capitalism is once again at a crossroads. We can determine the path. We can create a system that is neither corporate capitalism nor state socialism but that is defined by the limits of resources and by the desires of the people. This new system will have some features of both capitalism and socialism, but will be rooted in participatory democracy, fair sharing of economic wealth and ownership, and values such as cooperation and sustainability. --- The future is in our hands. A lot is already happening. Let's dig in, work together and create not just a new world, but a better place for all of us.'' And also see :

per aspera ad astra ...

[-] 3 points by LeoYo (5909) 6 years ago

Have you come across this?

The Crime of Fighting Poverty: Local Currency's Success in Kenya Ends in Forgery Charges

Monday, 01 July 2013 10:06 By Ellen Brown, Web of Debt Blog | News Analysis


Former Peace Corps volunteer Will Ruddick and several residents of Bangladesh, Kenya, face a potential seven years in prison after developing a cost-effective way to alleviate poverty in Africa’s poorest slums. Their solution: a complementary currency issued and backed by the local community. The Central Bank of Kenya has now initiated charges of forgery.

Complementary currencies can help eradicate poverty.

Proving that may be difficult in complex economies, due to the high number of factors influencing outcomes. But in an African slum with little of the national currency available, supplying residents with an alternative currency has a positive effect that is obvious, immediate and incontrovertible.

This was demonstrated when Will Ruddick, an American physicist, economist and former Peace Corps volunteer, introduced a complementary currency into a Kenyan slum called Bangladesh, near the coastal city of Mombasa. Will’s local development organization, Koru-Kenya, worked with over one hundred small business owners in Bangladesh, who agreed to give each other the equivalent of 400 shillings (about €3.5 or $4.60) in mutual credit in the form of business vouchers called Bangla-Pesa. Half of the vouchers would be available for spending on each others’ products and services, and half would be spent into the community on public projects such as waste collection and health services. Allocation decisions were democratic and transparent, and the new currency was backed entirely by the community’s own resources and insured by a system of group guarantors, not by the Kenyan government or a development agency.

The project was launched on May 11, 2013. The immediate effect was an increase in sales of 22%. That meant increasing incomes and purchasing power by 22%. These exchanges were of goods and services that without the additional currency would have been thrown away or gone to waste, not because they were unmarketable but because potential customers did not have the money to buy them. Introducing Bangla-Pesa worked to move the economy forward at full capacity, connecting the community to its own resources when the only things lacking were those slips of paper called “money.” A compelling video on the project is here.

The successful Kenyan experiment quickly earned endorsements from the United Nations, The Hague and the International Reciprocal Trade Association. Indeed, no other poverty alleviation or local governance program can compete with the cost-effectiveness of this approach, which is easily replicable in poor communities across Africa. The plan was to expand it to other villages in a democratic grassroots fashion so that it could provide a local medium of exchange for people throughout the continent. This would be done via mobile phones with a system provided by Community Forge, an organization based in Geneva that supports the development of community currencies worldwide.

But that plan was unexpectedly interrupted on May 29th, when Will and five other project participants were arrested by Kenyan police and thrown in jail. Besides Will, who is married to a Kenyan aid worker and is a new father, the others include local community business owners who are parents and grandparents, a youth activist, a volunteer mother, and the caretaker of seven orphan children. The police at first accused the group of plotting a terrorist overthrow of the government, claiming that Bangla-Pesa was linked to the MRC, a terrorist secessionist group. When that link was easily disproven, the Central Bank of Kenya was called in and charges of forgery were formally placed. Will and his fellow suspects have been released for now on a bail of EUR 5,000 and await trial on July 17th. If convicted, they face seven years in a Kenyan prison.

Despite these perilous circumstances, Will remains optimistic. “The exciting thing,” he says, “is that these systems really do show a means of poverty reduction – and my hope is that after this case we’ll be allowed to spread them to slums across Kenya. There have been years of precedent for Complementary Currencies as a solution to poverty, and today there is no doubting it.”

Successful Precedents from Switzerland to Brazil

Complementary currencies are endorsed by many governments worldwide. The oldest and largest is the WIR system in Switzerland, an exchange system among 60,000 businesses – a full 20% of all Swiss businesses. This currency has been demonstrated to have a counter-cyclical effect, helping to stabilize the Swiss economy by providing additional liquidity and lending capacity when conventional credit for small businesses is scarce.

Brazil is a global leader in using the complementary currency approach for poverty alleviation. Interestingly, its experience began in much the same way as Kenya’s: Brazil’s most successful community currency, called “Palmas”, was nearly strangled at birth by the Brazilian Central Bank. How it went from criminal suspect to official state policy is told by Margrit Kennedy and co-authors in People Money:

After issuing the first Palmas currency in 2003, local organiser Joaquim Melo was arrested on suspicion of running a money laundering operation in an unregistered bank. The Central Bank started proceedings against him, saying that the bank was issuing false money. The defendants called on expert witnesses, including the Dutch development organisation Stro, to support their case. Finally, the judge agreed that it was a constitutional right of people to have access to finance and that the Central Bank was doing nothing for the poor areas benefiting from the local currencies. He ruled in favour of Banco Palmas.

What happens next shows the power of dialogue. The Central Bank created a reflection group and invited Joaquim to join in a conversation about how to help poor people. Banco Palmas started the Palmas Institute to share its methodology with other communities and, in 2005, the government’s secretary for “solidarity economy” created a partnership with the Institute to finance dissemination. Support for community development banks issuing new currency is now state policy.

[-] 3 points by LeoYo (5909) 6 years ago

The Legal Debate: Mutual Credit or Counterfeiting?

If the Kenyan court follows the example of Brazil, this could be the beginning of a promising new approach to poverty reduction in Africa. The Bangla-Pesa is backed by local resources, and the villagers were very happy to have it in order to move their products and buy the surplus of others within their community.

Viewed as a case of counterfeiting, however, there is historical precedent for harsh punishment. In the mid-eighteenth century, when the Bank of England was privately owned and had the exclusive right to issue the national currency, counterfeiting Bank of England Notes was made a crime punishable by death. That was the era of Charles Dickens’ Tale of Two Cities and Bleak House, when supplementing the national currency might have helped relieve mass poverty; but it was in the interest of the Bank to control the market for currency and keep it scarce, in order to ensure a steady demand for loans. When there is insufficient money in the system to cover the needs of exchange, people must borrow from banks at interest, ensuring the banks a handsome profit.

The converse is also true: when sufficient money is supplied to cover the needs of exchange, debt levels and poverty are dramatically reduced.

In this case, the physical Bangla-Pesa voucher looks nothing like the national currency, as it would need to in order to sustain a charge of forgery. The intent of complementary currencies, as their name implies, is not to imitate or compete with the national currency but to complement it, allowing for increased sales within the local community of existing goods and services that would otherwise go unsold. Today, the Bank of England itself acknowledges this role of complementary currencies.

The Bangla-Pesa experience demonstrates what policymakers often overlook: gross domestic product is measured in goods and services sold, not goods and services produced; and for goods to be sold, purchasers must have the money to buy them. Provide consumers with excess money to spend, and GDP will go up. (In Kenya, where nearly half the population lives in poverty and mass unemployment, increases in GDP reflect extractive practices rather than local conditions.)

The common perception is that increasing the medium of exchange will merely devalue the currency and increase prices, but the data show that this does not happen so long as merchandise and services remain unsold or workers remain unemployed. Adding liquidity in those circumstances drives up sales, productivity and employment rather than prices.

This was demonstrated in a larger experiment in Argentina, when the country suffered a major banking crisis in 1995. Lack of confidence in the peso and capital flight ended in a full-scale run on the banks, which closed their doors. When the national currency became unavailable, people responded by creating their own. Community currencies at the local level evolved into the Global Exchange Network (Red Global de Trueque or RGT), which went on to become the largest national community currency network in the world. The model spread throughout Central and South America, growing to seven million members and a circulation valued at millions of U.S. dollars per year. At the local government level, provinces short of the national currency also resorted to issuing their own money, paying their employees with paper receipts called “Debt-Cancelling Bonds” that were in currency units equivalent to the Argentine Peso. Although these various measures increased the currency in circulation, prices did not inflate. To the contrary, studies found that in provinces in which the national money supply was supplemented with local currencies, prices actually declined compared to other Argentine provinces. Local exchange systems allowed goods and services to be traded that would not otherwise have found a market. This salutary effect was also observed in Bangladesh. “With Bangla-Pesa,” says Ruddick, “we’ve seen that a circulating community-backed interest-free credit is a low-cost, effective way to increase local liquidity and decrease poverty.”

The defendants just need to prove that in court. A crowd-funding campaign is being used to raise the money urgently needed for their defense. The link for contributions is here. To sign a petition begun by a delegation at The Hague supporting the Bangla-Pesa, click here. Jamie Brown contributed to this article.

This piece was reprinted by Truthout with permission or license.

[-] 2 points by shadz66 (19985) 6 years ago
[-] 0 points by ImNotMe (1488) 4 months ago

''The Public Banking Movement Is Coming for You: Wall Street Beware!'' by Robert R. Raymond:

fiat justitia ruat caelum ...

[-] 1 points by turbocharger (1756) 5 years ago

North Dakotas public banking is a great model, one that the people should be pushing all over if they understood how the money works.

Asking the Post Office to jump into the banking industry, while UPS and FedEx continue to push money through to Obama and Congress and legislate via ALEC.... I don't see how this makes sense.

The Post Office started allowing people to use the physical address in case something has to be signed, so that was a good move. Text message updates on po mail is cool. But to think that then piling on a banking service platform into the business is somehow going to allow them to become more innovative with the shipping is beyond me.

Yes, they get a cash flow increase, but at what cost? Need more overhead, and then there is the liability aspect of it all. What are the numbers?

[-] 0 points by 99nproud (2697) 5 years ago

"somehow going to allow them to become more innovative with the shipping is beyond me. "

What the f#$@ are u talkin about.?

So you are against using Post Office banking to compete with the criminal private banksters who crashed the world economy?

[-] 1 points by turbocharger (1756) 5 years ago

Right, the post office is going to give you a loan on your house and open a savings account for you.

The link you posted already shows why this doesnt work and banks have to come in and become partners.

Its your hype, not mine. If you feel better cashing your check at the post office instead Jims then knock yourself out.

[-] -1 points by 99nproud (2697) 5 years ago

Not really loans, maybe small xmas club type accts,

And NO mother#@$&in private banks.

Are you dense.

The whole idea is to compete with them & the overpriced checkcashing places.

And what "hype" are you talkin about.? Make some sense, and remember you are pushing the criminal private bankster line, so don't expect any quarter.

Wall st Bankster loving piece of @#$%

[-] 3 points by turbocharger (1756) 5 years ago

Wow, here comes the real emotions underneath the username...

If you dont like the idea of private banks being involved, then perhaps you should not use- as your own examples of why its great- lots of examples of private banks helping the post office in other nations.

And they are going to compete by cashing checks for how much?

Oh right, we havent gotten that far yet. The core aspect of why its good isnt even researched yet.

Gotcha. Dont worry, there will be another meme on facebook anytime now.

[-] -1 points by 99nproud (2697) 5 years ago

You would know. 'Meme watch' on facebook goes right along with your empty bashing to avoid substance.

Predictable yet still.

facebook? LOL

[-] 0 points by turbocharger (1756) 5 years ago

How do you think this insane idea went viral? People posting in chat forums?

So there is no official payday interest chart, but you did find an article that says they want to charge 25% interest and a $25 upfront fee.

When the post office comes out with a coherent plan that doesnt require the help of an actual banking agency, I'll pay attention.

Until then here is some bread, enjoy the circus.

[-] 0 points by 99nproud (2697) 5 years ago

You'll pay attention long enough to lie, distract from any substantive progress at the behest of your bankster paymaster.

That I believe.

"the proposed Postal Card would cost users less than half what they pay for prepaid cards now, and Postal Loans would cost them less than one-tenth the cost of a payday loan, a substantial savings for the poor."

[-] 0 points by turbocharger (1756) 5 years ago

your article is openly suggesting partners there boy wonder:

" It sounds good, but where will the post office get the money for the loans if it cannot branch into taking deposits? And where will it get the capital to back the loans when it is insolvent? The white paper states: Electronic payment products like Postal Cards might be a wise entry point, and would expand upon existing services like paper money orders. . . . The right partners could bring much needed startup cash to the table as part of the deal, overcoming the Postal Service's current funding limitations."

So far your first article openly shows that the other nations who do this partner with central banks.

The second article states that a 25% interest with a $25 fee is whats on the table, and then openly states that partners would be a good thing.

Nice job. Got any other great articles to not prove your point?

You see, simply cutting something doesnt mean its still not criminal.

From the official report:

"Consider Partnerships with the Private Sector The Postal Service could create a “win-win” situation by partnering with banks and other organizations to provide financial products and services to new customers."

Please read the rest of this section and you will see what I am saying.

[-] -1 points by 99nproud (2697) 5 years ago

Already read it & much more.

The article lays out good info. You are willfully taking things out of context for your same old distraction, deflection, forte sole purpose of protecting your bankster paymasters?

Break up the banks & vote out all pro bankster pols!!

[-] 2 points by turbocharger (1756) 5 years ago

I'm simply stating that your article states that post offices in other countries partner with banks to do what they do, and the postmaster who wrote this piece that started this insanity openly states its a win-win.

Its not taking anything out of context, theres an entire section on it in that report.

Is there a slight chance you didnt realize this before our discussion?

[-] 0 points by 99nproud (2697) 5 years ago

You're repeating yourself. I've answered those dishonest, out of context, distractions already.

We disagree.

I support relief (with cost saving P.O. banking, & other alternative banking) for decent working class Americans who have been victimized by criminal banksters.

You appear to agree with those banksters who say P.O. banking won't work.

No big deal I'm used to it

[-] 1 points by turbocharger (1756) 5 years ago

Sometimes if it looks like a duck and quacks like a duck, its a duck.

Anything that E Warren is endorsing has some ties to the banks.