Ellen Brown, author of a recent Huffington Post article about the deficit (“Cheney Was Right About One Thing: Deficits Don’t Matter“), also wrote the book called “Web of Debt.” In her article, she says that it doesn’t matter how big the deficit is. What matters is what that deficit costs (the interest we incur on the bonds we issue to cover the deficit).
If, on the other hand, rather than issuing bonds to cover the deficit, we borrow money interest-free from our own government-owned banks (as North Dakota has done for years and as eight other states are now considering doing) we can maintain debt til the end of time, and it has no negative impact on the economy.
The key is to look at the large-scale banks as public utilities for managing debt, not as for-profit private enterprises. We should, she says, convert the US banks that are “too big to fail” into such public utilities. She agrees with Thomas Hoenig, President of the Kansas City Federal Reserve, who said that such banks “should be restricted to commercial banking and barred from investment banking.”
By the way, North Dakota has a $1 billion budget surplus, the lowest unemployment rate in the nation (3.7%), and probably more small-scale private banks than any other state (proving that large-scale public utility banking poses no threat to private banks).
Here’s Ellen Brown’s article: “Cheney Was Right About One Thing: Deficits Don’t Matter.”