Why we need State and Federal Public Banks?

1. Public Banks operate for the benefit of the people not for private profit.
2. Public Banks will loan to ordinary citizens currently not able to purchase houses. This means that your children will be able to buy a house instead of renting from someone that owns more than one house.
3. Public Banks are not prone to the boom and bust cycle of private banks. When depositors panic, banks scramble to recall loans and lending becomes scarce. A recession is created.
4. With Public Banks there is no national or state debt. State and National-Debt arrived when private banks arrived. State and National-Debt cannot exist when States and Nations are funded by Public Banks. International debt arrived when International Banks arrived.
5. Public Banks tend to even the spread of wealth. Private banks tend to concentrate wealth.
6. Public Banks invest money in local area businesses creating jobs and infrastructure and stronger communities. Private banks tend to concentrate on making money from money and encourage Ponzi style investment and bubbles and placement of money in offshore tax havens.
7. Cash should be issued by the Treasury. This will remove the burden of paying for the cash at full face value using taxpayers money. It will also remove the burden of the mounting compound interest payable on the bonds (iou’s) used to pay for the cash.
8. Fewer bankruptcies and foreclosures. Foreclosures can claim no more than the asset in question.
9. Private banks use Fractional Reserve banking which creates debts that cannot be repaid. The result is that debts keep mounting and debts become bigger than the available money to repay them.
10. Public state and federal banks create money as credit by spending into society. The government collects tax and spends it back into society. If it needs extra work done it creates new money. But this is not inflationary as it is spent into society without creating debt. No money is owed. The money is earnt into society and provided it is taxed back out at a sensible rate, all is well. If people are earning more, then more tax will be collected. So it tends to be fairly self balancing. Unlike private banks where money is created when loans are issued. The magnitude of the debt and interest at each stage of production, means that something like 30% of all purchases are interest payments to banks. This is equivalent to three time the GST rate. And the GST itself is effectively used to cover government interest repayment.***
11. Public banks have previously been used to develop cities, regions, states or nations. They are usually instrumental in developing a region. A public bank will invest in the areas that need developing. This is done by extending credit to develop infrastructure and business important to the region. This would include: farmers, families, small and medium business, infrastructure.
12. Public banks would not form cartels.
13. Private banks have to be government backed in the event of a crisis. Thus we have public money guaranteeing private profit. The banks have a protected situation and get government support to prevent failure whilst they act as risk-taking entrepreneurial firms, paying exorbitant executive salaries and biasing their operations to the interests of their shareholders. Thus the risk is public but the profit is private and thus encourages excessive risk taking. In 2008 the large banks were publicly guaranteed. This has given them a massive competitive advantage over the smaller institutions and has enabled them to gain a much larger market share. With this reduced competition, the large banks have been gouging their customers and increasing their profits.
14. All loans have to be shown and kept on the banks balance sheets. This is to stop all on-selling of loans and financial assets.
15. The creation of money is the responsibility of government. Paper money and coin should come from the Treasury. Money that is lent (virtual money) should come from the federal government or state bank. Private and other banks, credit societies then on-lend the money. Banks should serve as underwriters and performers of credit analysis.
16. The logic is that if the government has the right to collect our taxes and spend those taxes, it needs a medium to do that. This is called currency or money. It is thus necessary that they issue the money that is used to pay the taxes that they require us to pay. If the money is created by any other organisation then all sorts of drama and skimming can occur. Other money can be issued by other entities but cannot be used to pay taxes. He who taxes creates the means to pay the taxes. The government needs to spend into society at about the same rate as it taxes.
17. The public bank may operate as a high street bank, but it does not need to. It can operate as a bank for banks. Community banks, cooperative banks and credit societies can then flourish.

Australia

Arguments Against Public Banks

• A government bank is susceptible to politically-motivated lending policies and cronyism.
  Solution. All lending must be posted on a website. There mustbe an independent review of operations.
• This is communism.
  Answer. We accept public ownership of the police, schools, hospitals, roads, airports, ports, government departments. We dont call this communism. The creation of money is so profitable and inter-twined with the viability of the state and the livelihood of the people that it should not be left to private profiteers who have more interest in their personal income and their share holders than the public good.
• Anything the media and big money can throw against it including financing politicians.
• The profit from making money is so huge that within a few years, corporations will get round the legislation and usurp the ability to create money.

Bill Mitchell writes:

	An Australian government tried to nationalise the banking system in 1948 but the legislation was challenged by the Bank of New South Wales. The challenge — Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 — which was also known as the Bank Nationalisation Case was decided upon by the High Court in Australia. The court ruled that the Government’s plans were unconstitutional. The High Court ruled that the nationalisation of private banking would violate an individual right to engage in particular types of trading and commercial activity. Under section 92 of the Constitution, there is deemed to be constitutional freedom of interstate trade and commerce. The Court ruled that the banks had a right to engage in interstate banking which would be lost if there was nationalisation. Interestingly, this interpretation of section 92 of the Constitution has now been overturned in the Cole v Whitfield case in 1988. So the old grounds for opposing bank nationalisation are now no longer available. The High Court also ruled that there was a failure in the proposed legislation to provide “just terms” for compensation to the private owners. This was deemed to be in violation of section 51(xxxi) of the Constitution which says that government would provide adequate compensation for compulsory property acquisitions. So this finding did not find that nationalisation violating any principle — it was just a case that the specific legislation was not generous enough. [Bill Mitchell on Billy Blog] The full version is here: