Tuesday, February 18, 2014

OMG Ellen Brown is Running for California State Treasurer

Ellen Brown is running on a platform that California should have its own state bank. From her campaign web site:
California cannot solve its budget problems by slashing services that have already been cut to the bone or raising sales taxes that hurt the poor far more than the rich. We are fighting over a pie that remains too small. The pie itself needs to be expanded – and it can be.

How? By reclaiming that portion that is now siphoned off in interest and bank fees.  When tallied up at every stage of production, interest has been calculated to claim one-third of everything we buy.

How can that money be recaptured?  By owning the bank.

The approach was pioneered in North Dakota, the only state to escape the 2008 banking crisis. North Dakota has the lowest unemployment rate in the country, the lowest foreclosure rate, the lowest default rate on credit card debt, and no state debt at all. It is also the only state to own its own bank.
Her understanding of the situation in North Dakota is near zero as I discuss here:  Mish Takes on Money Printing Advocate Ellen Brown (Again).

Further, she completely distorts the financial situation in California. She writes:
 Consider the awesome potential for California, with its massive capital and deposit bases. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account currently earning a meager 0.264% annually. It also has over $400 billion in its pension funds (CalPERS and CalSTRS).
Awesome potential? Here's what the 2012 Comprehensive Annual Financial Report really says:
The primary government’s net assets as of June 30, 2012 were a negative $15.5 billion. After the total net assets are reduced by $82.3 billion for investment in capital assets (net of related debt) and by $29.4 billion for restricted net assets, the resulting unrestricted net assets totaled a negative $127.2 billion. 
In other words, she is counting on money that is not even going to be around for the long term. What about the CalPers and CalSTS money?  Here's AP:
 California's public pensions remain underfunded. CalPERS has an estimated unfunded liability of $100 billion, while CalSTRS reports a funding gap of $70 billion.
Brown wants to take this money and put it into a "state bank" and spend it, which would make the current financial situation worse by hundreds of billions of dollars.

She also thinks she will be able to borrow $154 billion interest rate free. I am not making this up. From her web site:
California’s population of 37 million is more than 50 times that of North Dakota. In 2010, the BND had about $4,500 in deposits and $4,200 in loans per capita.  Multiplying 37 million by $4,200, a State Bank of California could, in theory, generate $155.4 billion in credit for the state; and this credit would effectively be interest-free free, since the state would own the bank.
Got that? By applying the "North Dakota formula," which has no relevance to California, she thinks a California state bank can "generate $155.4 billion in credit" interest free. She does not explain anywhere who is going to  provide $155.4 billion in credit interest free.

Gary North has done a full take down of Ellen Brown that starts here: Gary North on Ellen Brown: Cheerleader for Hitler's Economics


  1. I for one think it would be quite fitting to give the California prison system's retirement money to an Ellen Brown run state bank.

  2. The best part: Californians are stupid enough to support her.

  3. The "freelunch" crowd never cease to amaze me with their eternal search for the proverbial freelunch. This woman will probably get elected. She's nutty enough for your average Cali left winger in the street to support, but you can bet that the left wing elite, especially in academia, whose money she'll be borrowing for free will never let her idea become reality -- at least not with their money. Her entire argument is one of form over substance. Good luck California. If you're a California government worker nearing retirement, you may want to consider taking a pension buyout and running, far, far away. LOL