A few weeks ago I mentioned I was going to make a thread on this. I recently heard a pod cast about this topic- Private banks v. public banks. What is money? and wanted to look more into it before posting.

Specifically I was worried about any link to this an Modern Monetary Theory. It appears to be similar on its face, but looking deeper at MMT, it seems to be half-baked and could be improved if they checked out what the Public Banking Institute has come up with.

To make this as simple as possible consider the difference between a public bank and a private bank.

WHAT IS PUBLIC BANKING?

Public banking is banking operated in the public interest, through institutions owned by the people through their representative governments. Public banks can exist at all levels, from local to state to national or even international. Any governmental body which can meet local banking requirements may, theoretically, create such a financial institution.


Public banking is distinguished from private banking in that its mandate begins with the public’s interest. Privately-owned banks, by contrast, have shareholders who generally seek short-term profits as their highest priority. Public banks are able to reduce taxes within their jurisdictions, because their profits are returned to the general fund of the public entity. The costs of public projects undertaken by governmental bodies are also greatly reduced, because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects, on average, by 50%.
Then look at how money is created by either a public or private bank.

WHY PUBLIC BANKS?

Today, cities and states put their money in Wall Street banks, allowing those banks to leverage our public funds in order to dominate the financialized speculative economy rather than reinvesting them in our communities. At the same time, cities and states borrow money from Wall Street institutions and bondholders at high interest rates and pay large fees to keep money in their banks. This is not a cost-effective way to do business. Cities and states could be keeping their public dollars and leveraging them for their own community needs.


With city and state-owned banks, we cut out Wall Street middlemen. Our community’s cash stays home to benefit us! Bank fees are eliminated, interest costs drop, and public bank profits are reinvested into our communities.




Public banks can help us create the communities we want. We want parks, good roads, safe bridges, clean energy, and housing we can afford. We want lower interest rates for local small business loans, local control of our tax dollars, investment in our local communities, and ethical and transparent financial institutions managing our public funds. Public banks can be the financial engine that makes this happen for our communities.
In short private banks create money by issuing loans as debt. Public banks do not. They issue money directly debt free.

Here is detail on WHAT IS MONEY?


The US has one public bank. It is the Bank of North Dakota.

The Bank of North Dakota

By law, all money held by North Dakota is deposited in the Bank of North Dakota. Among other advantages, the Bank of North Dakota can partner with private community banks to increase their power to lend.


The Bank of North Dakota pays the profits generated by lending to its only shareholder — the people of North Dakota, as represented by their state government. Despite its small population and modest volume of economic activity, the Bank of North Dakota returned more than$600 million to the state’s general fund in recent years. The Bank of North Dakota helps the state achieve budget surpluses and eliminate the need for drastic tax increases or spending cuts for vital public services.


The BND story is here.
Notably North Dakota faired well in the Great Recession of 08-09 even turning a profit.

Anyway, food for thought.