By Ken Walden
OPINION How would you like to increase your spending power by 10 times (or more), relieve student debt by more than 90 percent, increase Social Security benefits, lower taxes, increase pay for teachers, and lower loan amounts for homes and small business to 1-2 percent?
I'll bet I have your attention. I'm sure you think this is crazy talk, but this is based on a movement that is already happening. It's the public banking movement.
In 1950s, the buying power of the dollar was over 10 times what it is today. That means you were able to buy 10 times the amount of goods and services with a dollar compared to what you can now.
What happened? Why is it so hard for most people to just barely get by these days? And why are so many are not getting by at all?
First, let's review how money is created. Did you know the money we have in circulation today is created out of thin air? Most of it is just an entry in a computer system. A small percent is printed dollar bills like you have in your wallet or purse, and a very small percentage is metal coins.
Money is simply trusted as being worth what it says on the bill, coin, or computer screen. Did you also know that money for loans is created this way as well?
When you take out a loan from a bank (for a home loan, a student loan, a business loan, a car loan, etc.), the money that the bank loans you (with interest charges) is not taken from other people's deposits. It is made (mostly) out of thin air. It is simply an entry in their computer system ... that's it.
Most people think they are borrowing money that is deposited into the bank by other people, but this is not true.
Here is quote from Robert Anderson, the secretary of the US Treasury in 1959, on this topic: "When a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposits: it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower."
Why is this a problem? Let's look at how much interest we're paying on a variety of loans. If you buy a house for $500,000 in 30 years at an average interest rate, you will pay an additional $580,000 in interest on money the bank made from thin air. With a public bank you, would pay less than half this amount.
On public projects like bridges, roads and schools, 30-50 percent of the cost is interest. The new span of the Bay Bridge that was just opened at a cost of $7 billion, the interest on this project is estimated to be an additional $7 billion. It's estimated that the cost of almost everything you buy is increased by 35-40 percent because of interest.
This is just the tip of the iceberg.
The solution to the problem is a public bank. With public banks, these billions of dollars of profit (via interest) are recycled back into the public treasury instead of funneled off to private banks.
If you think this is some theoretical fantasy you should know that San Francisco is currently looking at creating a public bank, 20 states are also considering them, and North Dakota has had a public bank for over 90 years. This is not a new idea.
It's impossible to give you an in-depth overview in a short article so please go to our website (www.whattheworldcouldbe.com) and on the 'Solutions' page click on the box titled 'Creating Jobs, Student Debt Relief, & the New Green Economy'.
Public banks have the possibility to dramatically change our lives for the better and you can help.
Ken Walden is director of What the World Could Be.