On June 25, California Governor Arnold Schwarzenegger rejected a plan that would save the state $3 billion by cutting school spending, saying he would rather see the state issue IOUs than delay the funding problem with a piecemeal approach. The state’s total budget deficit is $24.3 billion. Meanwhile, other funding doors are slamming closed. The Obama administration has said it will not use federal stimulus money to prop up California; and Fitch Ratings, a bond rating agency, announced that it was downgrading the credit rating of the state, which already has the lowest in the nation. What to do? Perhaps California could take a lesson from the island state of Guernsey . . . .

Read more here –

11 Responses

  1. I like the phrase “poverty amidst plenty”. That says it all. The United States has an in-place superstructure, plenty of natural resources, plenty of labor, know-how, etc. etc. Nothing is lacking for us to have a robust economy. The only problem is that too many people owe the FIRE sector too much money. Too much of the average man’s paycheck and the average small business’ revenues goes to pay interest, insurance and other payments to non productive sectors of our economy.

    • I completely agree with Mr. Bullock, in this country we have all the resources necessary for a prosperous economy; the big problem is debt, most people believe in instant gratification and spend way more than they actually possess.

  2. That’s the truth, Randy Bullock. The economy is held in thrall to private finance that has monopoly control over society’s most essential public utility: credit.

    Ellen never loses her focus and stays on message with one simple truth: money is the creation of sovereign power. Money becomes a society’s medium of exchange because the sovereign state declares by law a legal tender for all debts public and private. It couldn’t be simpler. It is so simple,” the mind is repelled”. Was the JM Keynes’ phrase?

    Then why isn’t anyone listening? Why do we suffer poverty in the midst of plenty when it is unnecessary to do so? That’s the question that is not asked and therefore never answered because it seems self-evident that it should be this way. It’s just the way it is. It’s the “business cycle”.

    The lack of money and the means to remedy this lack are easily understood. Ellen explains it again and again. Why the people at large accept the “recession”, believe in the “business cycle” and willingly endure the deprivation is not actually an economic or financial issue at all. It is purely psychological.

    We are taught that money is NOT a public utility, like electricity, water supplies, highways, bridges, libraries, etc. In spite of the fact that money is as essential to the survival and functioning of a society as any other utility.

    We are taught that money is private property and that some people have more than others because some people are actually worth more than others in terms of their “virtue” or intelligence, work ethic, prudence, probity, etc etc. Those that have it deserve to have it, while those who don’t do not on account of moral failings.

    No matter how educated we are or what station in life we occupy, we believe this because this is what we have been taught from day one. It is difficult to disentangle money from the concept of self-worth we all share. In other words, our self-esteem has been monetized and it becomes difficult to impossible for most people to understand that money has absolutely nothing to do with the inherent worth of any person.

    The wealthiest people who occupy the most privileged positions in society are more often than we care to think, worse than most criminals in terms of the harm they do to society. Consider Bernie Madoff. It is not often that people are given the chance to see the lies that wealth and privilege conceal. This is such a time. Check it out!

    But this is not to say that Ben Franklin was naive when he wrote Poor Richard’s Almanac and that success does not have a moral dimension. Uncle Ben gave wise counsel, but he lived in a time when control over the monetary system itself was not so divorced from public control as it is today, a time when wealth and power were not so concentrated in the hands of a small group and the private monopoly that exercises financial control in secret, as today. It was also possible to live without money, or with very little, in a purely subsistence way that is not possible in our monetized world.

    In any case, our private, secret, excessively complicated monetary system is owned and operated by a privileged group that is by and large amoral, whereas the greatest number of the American people remain moral and tend to monetize their self-worth. The private system is fraudulent at its core, yet the people persist in the naive moral equivalencies established by Uncle Ben and submit to the “business cycle” ruthless financiers have always been able to manipulate for their own benefit.

    The people cannot hear Ellen’s message chiefly because they suffer from a type of “battered wife syndrome”. They accept money as a measure of their own value, but fail to realize that this money is not created by the Wizard behind the curtain, but is a utility they provide for themselves, or could. They submit to the abuse of a system they themselves permit to exist.

    Excuse me for a rambling unfocused argument. That doesn’t make it less true.

    California always leads the nation. Have Californians raised a critical mass of self-esteem that will allow them to hear Ellen’s proposal? Will they rise ;up and create a truly New Deal for themselves as the humble 19th Century farmers did for North Dakota?

    I hope so! I Really, really hope so!

  3. A few of my favorites:

    Our planes are flying, but we cannot take you because we are short of tickets

    All of our money except coins is created by banks when they make loans.

    At a reserve requirement of 10%, if California deposited all $128 billion in its own state-owned bank, it could issue $1.28 trillion in loans, far more than it would need to cover its $23 billion budget shortfall.

    My comments:

    Who will be the first Governor to step up and lead his fellow Governors out ot the swamp? Ellen Brown will hold your hand and you will have many new friends.

  4. The proposal of your article astonished me, my immediate question to you is ;
    why has no one done this to date. I would think that even without a financial crisis, every state of the union would have immediately established their own state bank. Now that there is a crisis, why has this issue not surfaced in California, or other troubled states.
    It seems to me that every state in the union could easily make themselves financially independent, or even a sovereign nation( California 8th largest econamy world wide, bigger than Russia ?) and consequently ceceed from the union, and bad together to form a new UNITED STATES OF AMERICA. This would ” Clear the table ” of all the nonsense foisted upon the american people to date, and avoid a very dark and uncertain future.
    Please someone answer this question for me. Thank you
    Hansadutta das

    • I think it hasn’t been done (except in North Dakota) because most people don’t understand how banking works. Once you do understand, it’s obvious. ND hasn’t been too vocal about it, perhaps, because they want to stay under the radar, lest someone starts changing the rules. That’s also true of countries that issue their own money, such as Jersey and Guernsey.

      • Dear Ellen Brown, thank you for your reply, I very much apriciate it, and am impressed that you would take the time.
        your response implies that not one of
        the numerous governors of the combined united states of America since the beginning of the last century ( Almost 100 years ) to date have not been able to understand this GOLD MINE POTENTIAL of state banking. That is a sad and disappointing fact.
        I think you or someone who understands these issues as you do should go to the steppes of The governors office and declare a sit down strike till he agrees to see you and hear your presentation, informing the press as you are kept waiting. You must create a contraversy that will attract media attention and make the rank and file public aware of this unique solution. you can do it, you are extremely intelligent, and articulate. Please think on this, it can and must be done.
        I know this sounds extreme, but this is how things in America happen, the individual who dare to speak and act contrary to the herd.
        Thank you again,
        with regards and good will,
        Hansadutta das
        Again thank you for your speedy response

    • Thanks for your encouragement. Would you be in India as your name suggests? I’m just now researching whether issuing IOUs, as the Governor is proposing to do, constitutes an impermissible issuing of “bills of credit” under the Constitution. In the course of that, I’ve come across some cases saying that for a state to own a bank that issues banknotes is NOT an impermissible issuing of bills of credit under the Constitution — interesting!

  5. “The process by which banks create money is so simple that the mind is repelled.” –John Kenneth Galbraith, in “Money: Whence It Came, Where It Went” 1975.

    The next sentence in the paragraph goes like this:

    “Where something so important is involved, a deeper mystery seems only decent.”

    • I don’t really expect prices to drop, just not to rise. The stock market is propped up by manipulation, and gold and silver are held down, so it’s very hard to say what a good investment is right now. I’ve grown fond of my little investments and can’t part with them, but I can’t say they’re doing very well! They’re mostly gold, silver, copper and alternative energy stocks.

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