Monday, September 5, 2011
North Dakota's Economic Miracle
Ellen chips in again with another article on how well
North Dakota has weathered the economic storm
that has hugely crippled the
economy. The same holds true for the
Canadian economy though I suspect that US
in particular needs to actually set up their own bank to assist in fully capitalizing
their economy. Ontario
The common tread in all this is the deliberate decision to localize the role of the central bank in one form pr the other. In
, five large banks have an
effective monopoly on credit and it is carefully regulated. As well Canada Alberta
has a provincial bank like that of . North
My point form the onset of the crisis is that banking authority as well as the bulk of central banking authority needs to be regionalized and perhaps distributed far deeper into the economy. I would go so far as to test it all out at a village agro - COOP level where community input is easily intensified.
In short, the monopoly to create credit must not be centralized for exactly the reasons just demonstrated. That much money and power will always find a way to subvert the regulators when the concentration is too high. Yet the same actions pulled off in
North Dakota would damage no one outside of and trhe
perpetrators would quickly find themselves in jail. North Dakota
Solution to the Economic Crisis?
’s Economic “Miracle”—It’s Not
Oil North Dakota
By Ellen Brown
URL of this article: www.globalresearch.ca/index.php?context=va&aid=26344
What's its secret?
In an article in The New York Times on August 19th titled “The
North Dakota Miracle,” Catherine Rampell writes:
Miracle. Let’s instead take a look at Texas , which has the lowest unemployment rate and
the fastest job growth rate in the country. North
According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July—that’s just over a third of the national rate (9.1 percent), and about a quarter of the rate of the state with the highest joblessness (Nevada, at 12.9 percent).
Its healthy job market is also reflected in its payroll growth numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent.
came in second, with an increase of
2.6 percent. Texas
doing so well? For one of the same reasons that North Dakota has been doing well: oil. Texas
Oil is certainly a factor, but it is not what has put
over the top. Alaska has
roughly the same population as North Dakota and produces nearly twice as much
oil, yet unemployment in North Dakota
is running at 7.7 percent. Montana, South Dakota, and Wyoming have all
benefited from a boom in energy prices, with Alaska Montana
and Wyoming extracting much more gas than has. The
Bakken oil field stretches across North Dakota Montana as
well as North Dakota, with the greatest Bakken
oil production coming from Elm Coulee Oil Field in . Yet Montana Montana’s
unemployment rate, like ’s,
is 7.7% percent. Alaska
A number of other mineral-rich states were initially not affected by the economic downturn, but they lost revenues with the later decline in oil prices.
is the only state to be in continuous budget surplus since the banking crisis
of 2008. Its balance sheet is so strong that it recently reduced individual
income taxes and property taxes by a combined $400 million, and is debating
further cuts. It also has the lowest foreclosure rate and lowest credit card
default rate in the country, and it has had NO bank failures in at least the
last decade. North Dakota
If its secret isn’t oil, what is so unique about the state?
has one thing
that no other state has: its own state-owned bank. North Dakota
Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in
. The Bank of North Dakota (BND) does not compete with
local banks but partners with them, helping with capital and liquidity requirements.
It participates in loans, provides guarantees, and acts as a sort of mini-Fed
for the state. In 2010, according to the BND’s annual report: North Dakota
The Bank provided Secured and Unsecured Federal Fund Lines to 95 financial institutions with combined lines of over $318 million for 2010. Federal Fund sales averaged over $13 million per day, peaking at $36 million in June.
The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services. In 2010, according to the BND annual report:
The need for Flex PACE funding was substantial, growing by 62 percent to help finance essential community services as energy development spiked in western
Commercial bank participation loans grew to 64 percent of the entire $1.022
billion portfolio. North Dakota
The BND’s revenues have also been a major boost to the state budget. It has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of
. According to a
study by the Center for State Innovation, from 2007 to 2009 the BND added
nearly as much money to the state’s general fund as oil and gas tax revenues
did (oil and gas revenues added $71 million while the Bank of North Dakota
returned $60 million). Over a 15-year period, according to other data, the BND
has contributed more to the state budget than oil taxes have. Los Angeles
According to the annual BND report:
Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.
A 19 percent return on equity! How many states are getting that sort of return on their Wall Street investments?
Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange,
In a June 2011 paper called “The Public Option: The Case for Parallel Public
Banking Institutions,” he compares California North Dakota’s
financial situation to ’s.
He writes of California
and its state-owned bank: North Dakota
The state deposits its tax revenues in the Bank, which in turn ensures that a high portion of state funds are invested in the state economy. In addition, the Bank is able to remit a portion of its earnings back to the state treasury .... Thanks in part to these institutional arrangements, North Dakota is the only state that has been in continuous budget surplus since before the financial crisis and it has the lowest unemployment rate in the country.
He then compares the dire situation in
is the largest state economy in the nation, yet without a state-owned bank, is
unable to steer hundreds of billions of dollars in state revenues into
productive investment within the state. Instead, California deposits its many
billions in tax revenues in large private banks which often lend the funds
out-of-state, invest them in speculative trading strategies (including
derivative bets against the state’s own bonds), and do not remit any of their
earnings back to the state treasury. Meanwhile, California suffers from constrained private
credit conditions, high unemployment levels well above the national average,
and the stagnation of state and local tax receipts. The state’s only response
has been to stumble from one budget crisis to another for the past three years,
with each round of spending cuts further weakening its economy, tax base, and
credit rating. California
Not all states have oil, of course (and it’s hardly a sustainable economic basis), but all could learn from the state-owned bank that allows
capitalize on its resources to full advantage. States that deposit their
revenues and invest their capital in large Wall Street banks are giving this
economic opportunity away. North Dakota
This article was written for YES! Magazine. Ellen Brown is an attorney, president of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are http://WebofDebt.com and http://PublicBankingInstitute.org.