North Dakota's Monetary Magic
The Automatic Earth
Amid of all of the chaos and confusion in the global economy, there exists a humble bastion of relative economic peace and prosperity, and it exists in the developed world no less. It's known as the state of "North Dakota". Typically flying well under the radar of any mainstream analysis or even casual reference, it was first the subject of a recent piece in the New York Times entitled
The North Dakota Miracle and then another piece critiquing the NYT article, written by Ellen Brown in
Yes Magazine. The NYT piece superficially credited "oil" with North Dakota's 3.3% unemployment rate, consistent budget surplus and stable financial system.
That prompted Ellen Brown to pen her critically perceptive piece entitled,
North Dakota's Economic 'Miracle' - It's Not Oil
Ellen Brown: "Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7 percent.
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. North Dakota 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."
The availability of energy and material resources is always a fundamental factor contributing to economic stability and growth, but focusing only on that conveniently allows us to skate around the stark financial discrepancy between North Dakota and every other struggling American state. Which is, of course, the existence of a state-owned central bank in ND that clears checks, guarantees student loans and business development loans, and issues credit money within the state and
independently of the privately-owned Federal Reserve System.
Yep, you heard right! While the powerful institutions of Europe, the Middle East, Latin America and Southeast Asia have so far been inextricably locked into the devastating effects of corrupt Fed monetary policy, such as trade imbalances and high inflation, and entire multi-trillion dollar economies are descending into insolvency through incurable deficits, one single agricultural state within the U.S. has escaped the Squid's blood funnel in a magical sleight of finance that can only be described as Houdini on steroids. As described by Ellen Brown below, North Dakota has certainly reaped the benefits of its monetary courage.
North Dakota's Economic 'Miracle' - It's Not Oil
"Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. 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.
...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."
...According to the 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.'
It's understandably a common reaction these days to hear the word "debt" or "credit" and cringe with disgust. The last thing our world system needs to regain health and stability is more credit (debt) when there is already tens of trillions of dollars worth of outstanding liabilities that cannot come close to being paid off with current and future revenues. Well, that sentiment is very true for the global system as a whole, but not necessarily for localized components of the system which are attempting to distance themselves from the broader debt machine and weather the ongoing financial storm.
At the state and local level, a transparent, state-owned and well-manged central banking institution could help local farmers and entrepreneurs with maintaining their productive operations, and expanding when it's deemed prudent to do so. Almost none of the credit money generated would finance operations outside of the state or be funneled through the TBTF national banks, which are best described as the insatiable tape worms living in the digestive tract of a developed capitalist society. North Dakota's monetary officials know that, once those guys get involved, all productive capital flows will simply become parasitic, i.e. wasted in graft and mis-allocated towards unnecessary and speculative projects.
Protester at October 6 2011 Occupy Wall Street Gathering
It is certainly true that North Dakota's cozy unemployment and public debt situation will become less comfortable after the next huge leg down in the ongoing global financial crisis. It must still live according to some fiscal rules of the broader union, and it will be forced to pay for the mistakes of a misguided nation through oppressive tax policy and decreased commercial activity with other states. However, it is unlikely that its economic situation will deteriorate as quickly and as severely as many other states, such as California or New York. A comparison to the former, written by Law Professor Timothy Canova in his paper
The Public Option, is presented by Ellen Brown:
North Dakota's Economic 'Miracle' - It's Not Oil
"In contrast, California 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."
The major medium to long-term obstacles for ND are, of course, energy and environmental issues such as peak oil, climate change, water contamination, topsoil degradation, etc. That is also another reason why its state-owned and managed monetary circuits will be invaluable during and after a collapse of the global financial system. ND will be one of the few states to have both the proper incentives (collapsing demand for energy) and some of the critical institutions necessary to efficiently re-allocate resources towards alternative energy systems, sustainable farming and environmental preservation.
In addition, once the U.S. dollar is eventually poised to devalue into near worthless pieces of paper, North Dakota will have a state-issued currency and banking model that facilitates local production and exchange and one that is the envy of all of its neighbors. It is always a possibility that such envy will attract more danger than respect, but the opposite could also be true. Communities and states will be desperately searching for models to placate their residents and stabilize their economies once it is clear that the federal government and reserve banking system is only capable of producing counter-productive policies. Many of them will not have to look much farther than North Dakota.
North Dakota's Monetary Magic
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