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here we are in Lansing Michigan in front of the State Capitol a particularly appropriate place for a discussion of state banking we're actually in a depression here in Michigan a depression is when the money supply has collapsed that means there is simply not enough money to fund businesses and to conduct trade so the solution is to put more money into the system in any depression what's wrong is that the money supply has collapsed and you have to pump it back up in some way there are only three ways you can do this one would be for the federal government itself to issue the money directly and in fact that's what the American colonists did for a hundred years before the Revolution it's what Abraham Lincoln did in order to avoid being caught by the Wall Street bankers in a debt trap as they were actually trying to do they were going to charge Lincoln highly you serious interest rates 24 to 36 percent in order to fund the Civil War so that same technique could be used the government the federal government could print the money to fund many projects to put people back to work and to get the money back into the economy but they're not doing it and we the people have very little control over Congress at this point so your other two options are at the local level directly at the local level you could issue community currencies in many communities are doing that and in this way you can people can exchange products and get the get the local economy going again the problem with the community currency is that you can't really fund major projects with it you can't fund a government project say railroads and highways and infrastructure and things that will put large numbers of people back to work so that your third alternative is to create a bank because banks actually create money on their books that is where our money supply comes from 97% of the money supply is actually created by banks when they make so if you have your own Bank you can create this former credit on your books fund major projects and the money from the thing you built will repay the loan hopefully with a profit to the to the state or the thing maybe let's say it's low-cost housing the rents could repay the loan or if it's some form of energy the fees generated by the energy would repay the loan so so there are many ways in which you could create projects that are funded through credit to get the economy going again which is what Michigan and many other states desperately need at this time because they aren't able to do what they really need to do they need to do more than that to get things flowing again in the economy there's only one state at the moment that actually owns its own bank that's North Dakota the Bank of North Dakota returns a 25 percent dividend to the state so that's it's actually a huge moneymaker for the state plus because the state owns the bank it can fund government projects interest rate so that can cut the project's the cost of product government projects in half that's another great money saver for the state plus at the moment public banks just simply are not funding local businesses and small homeowners etc because it's too risky and the the business model of a private bank is that it has to make profits for its shareholders so it has to do the thing that will make the most money for its shareholders and if they can make more money by speculating let's say or by doing something very safe like buying government bonds at banks can get money at 0.2 percent at the Fed Funds rate and then they can buy government bonds that pay two or three percent so they get a clear two percent or so profit without taking any risk at all if they can do that why should they lend to small businesses or to homeowners where they might lose their shirts and they're losing their shirts more than ever these days because they aren't able to turn loans and sell them off to investors like they used to so so there's a different business model for a publicly owned bank in a privately owned Bank a publicly owned bank is there to serve the community and that's in North Dakota for example that's actually in their mission statement that they are there to serve North Dakota in so they they have particular goals like agriculture education energy those are all things that they they develop and they're they can take the long view because they're not focused on their quarterly profits for their shareholders they're focused on what is best for the state overall so they can do a ten-year project where a bank just a private bank simply simply can't do that they could actually get in trouble with their shareholders if they took that sort of risk but it's not really a risk for the state because the state unlike a private bank has a huge capital base and a huge deposit base so they're actually a much more stable entity than important they don't say a small local bank would be a state-owned bank would would obviously help the state for its projects but it could also help consumers directly in North Dakota they're they're mostly a banker's Bank and they service the other banks and allow that and then that the local banks are the ones that actually make the loans in the community but what the state-owned Bank does is it partners with the local banks and it helps with the capital the reason that local banks are unable to make loans right now is that they lack the capital and this is because the collateral has shrunk so what a state bank can do what it does in North Dakota is it participates in these loans so it adds the capital in allowing the local bank to to make these loans and the same goes for loans to local businesses it can help with the capital base in North Dakota had a very good student loan program where they actually followed the students and that they had the lowest default rate in the country because they actually kept these loans on their books in North Dakota because they keep not just student loans but any form of loans they keep it on their books they don't package them up and sell them off to investors they have actually the lowest default rate generally on all their loans of any state in the country they also are the only state that currently has a budget surplus and they have the lowest unemployment rate in the country the state bank concept is currently supported by a number of people running for various offices that are Republicans Democrats greens independents it's all across the spectrum what they all have in common is that they all want to get the power back for the state or go local get our own money back to our state for our people rather than giving it away to Wall Street to speculate with so in Michigan I think there's something like two billion dollars going to Wall Street in interest and that money could be and should be retained in the state for the state's own purposes a state bank could serve not and could not only make loans to the community and make loans for infrastructure but it could actually be used to pay the budget of the state now I mean it can't be used permanently but in North Dakota when the state had budget problems they borrowed from their own state bank so a state which has budget problems could borrow from a state bank to fund to tide it over for that period and then because they would retain their employees that means people would be getting paid and then they would be engaging in commerce buying products so that would increase the sales taxes that would go back to the state and it wouldn't increase the income taxes that go back to the state if if you keep those things going you're going to generate more money for the state and then that can pay back the loan there is that concern that this would be inflationary but so long as you have a collapse in the money supply as we have right now and if you have people out of work and materials that could be put to work you won't create inflation inflation results when demand or money exceeds supply that so when you have too much money competing for too few goods the price will go up but if you have if you add extra money to the system in order to create goods and services the prices will remain stable so for all these reasons Michigan should consider having its own state-owned bank Michigan has many resources it's green here there's agriculture their products and there's labor eager to work the only thing they're lacking is the credit to keep the wheels of industry moving and that credit could be provided with its own state-owned bank