On May 22, 2009 Governor Arnold Schwarzenegger quoted in Time
"I understand that these cuts are very painful and they affect real lives. This is the harsh reality and the reality that we face. Sacramento is not Washington -- we cannot print our own money. We can only spend what we have."
Why not? Private banks do it all the time and its legal. According to the Federal Reserve Bank of Dallas
Banks actually create money when they lend it.
According to Huffington Post there is a State owned bank that has been doing this since 1919.
Only three of 50 states are now solvent, meaning they have the revenues to meet their state budgets; and one of them is North Dakota. It is an unlikely candidate for the distinction. It is a sparsely populated state of fewer than 700,000 people, largely located in isolated farming communities afflicted with cold weather. Yet since 2000, the state's GNP has grown 56%, personal income has grown 43%, and wages have grown 34%. The state not only has no funding issues, but this year it actually has a budget surplus of $1.2 billion, the largest it has ever had.
North Dakota boasts the only state-owned bank in the nation. The Bank of North Dakota (BND) was established by the state legislature in 1919 specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. The bank's stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota. By law, the state must deposit all its funds in the bank, which pays a competitive interest rate to the state treasurer. The state rather than the FDIC guarantees the bank's deposits, which are plowed back into the state in the form of loans. The bank's return on equity is about 25%, and it pays a hefty dividend to the state, which is expected to exceed $60 million this year. In the last decade, the BND has turned back a third of a trillion dollars to the state's general fund, offsetting taxes. The former president of the BND is now the state's governor.
The BND avoids rivalry with private banks by partnering with them. Most lending is originated by a local bank. The BND then comes in to participate in the loan, share risk, and buy down the interest rate. The BND provides a secondary market for real estate loans, which it buys from local banks. Its residential loan portfolio is now $500 billion to $600 billion. Guarantees are also provided for entrepreneurial startups, and the BND has ample money to lend to students (over 184,000 outstanding loans). It purchases municipal bonds from public institutions, and it backs loans made to new farmers at 1% interest. The BND also has a well-funded disaster loan program, which helps explain how Fargo, when struck by a disastrous flood recently, managed to avoid the devastation suffered by New Orleans in similar circumstances.
I would like to hear if anyone has experience with this and any drawbacks there might be.
Constitution, Article I, Section 10
I'm for amending this personally- I think it would be a great thing if we left coining money and emitting bills of credit to the states. Then states could vote for an *in-state currency* instead of taxes- all state business could be paid for by printing expiring currency that is only good for in-state transactions.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
Having said this
I had to go and look up the Bank of North Dakota. Amazingly, I can find *NO* Supreme Court challenge on the topic- AT ALL. But it does explain why North Dakota had no usury law unlike other states in the 1970s- they didn't need one. With bank loans being available to all citizens at a mere 1% interest rate (as long as the use the money was put to was in the interest of agricultural or community development- INCLUDING STUDENT LOANS!), the competition kept more expensive loans out of the market.
EVERY state should do this- and the end result would be no more "foreign" control of the mortgage market.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
that state
refuses to deal with the costs of illegal immigration, which is about $10.5 billion annually.
They won't clean out their social services rolls or pretty much do anything that makes economic/common sense.
Same is true with a host of states...rather than deal with economic realities they kowtow to special interest groups and it's just out of hand.
Then, the state is a massive waste machine. They have political gridlock, all sorts of gerrymandered districts, the entire bay area is run by corporations and they have their own personal representatives in Congress...
They are a combo of overwhelmed free emergency rooms with private health insurance companies that make the entire concept of insurance a joke....raking in their profits at all costs...
I mean pick a topic, pick an area and you will not find something that is just beyond the boundaries of what is economically feasible.
ya know, I don't think they should be allowed to generate more debt.
I think they should plain go down. They wanted their illegal immigrant land and their corporations running certain sections and all of the rest of it, so let 'em suffer the consequences.
It will be a good example to other states that one cannot defy the laws of economics forever without ruining your state economy.