Already, California has cut its services past the bone, and

into the marrow; schools will close, the state's 235,000 employees may have to

take a third unpaid day off (during which many actually work, essentially for

free), effectively amounting to a 14% pay cut As deficit grows, Calif. prepares to issue IOUs.  If anyone

still considers California to be a spendy state, compare the budgets of New

York State, a smaller state with similar large cities, populations and

obligations.  New York, with a

population of 19,306,103 people (as of 2006), has a current state budget of

$121 billion (and is in deep deficit as well, and also has a stalled Senate with Republicans and Democrats unable to

do anything until leadership issues are resolved), while California, with a

population of 36,756,666 (as of 2008), nearly twice as much, has a budget of

only $100 billion, some 20% less.  California is already lean and, increasingly, mean. 

California also has one of the highest foreclosure rates in

the nation, an unemployment rate over 10%, and the absolute lowest bond

ratings, meaning that whenever it does

borrow money, it must do so at exorbitant rates. 

While replacing the dollar with California IOUs sounds

tempting, as a way to stick it to the irresponsible legislature (Cash that, why don't you!), the state's banks

may not be willing to accept them in exchange for cash.  Bank of America says they will –

through July 10 anyway.

None of this sounds

particularly promising if you're the Governator, trying to balance the budget,

which Schwarzenegger must do under

the state constitution.  But, there

is another option.  There is a way

to balance the budget, create a surplus, and tell the high interest charging

banks 'Hasta La Vista, Baby.'

California should follow

the model of North Dakota and Charter its own state bank. 

North Dakota has had a

state bank, which by charter, must contain all the state's funds, and which,

Ellen Brown tells us, "was established by the legislature in 1919 to free farmers and

small businessmen from the clutches of out-of-state bankers and railroad men."  The

bank has met its purpose fabulously.  Today, North Dakota is running its biggest surplus in history. 

As Brown reminds us,

today's capital reserve requirements are only 8% for banks, thanks to the

myriad ways they have found to skirt the rules, except for the final rule set

by Switzerland's Bank for International Settlements (I suppose if they could,

they'd find a way to flout that too, and leverage until their reserves were 1%,

or nothing at all).  If we use that

8% as a baseline, then California could deposit its expected $128 billion in

revenues this year into the state bank, and have over 1.28 Trillion to loan!  The

state's banks would howl.  Let

them.  They set the rules, now they

have to play by them.  Besides, who

do you trust more to fund a bank: the depositors and borrowers of the Wells

Fargos of California, or the citizens of the state who must pay taxes every year?  California has never defaulted on its obligations; Wells Fargo needed

bailout money from the Federal Reserve (which itself, is neither Federal, nor a

Reserve).

Now, if this new state

bank – which could operate as a non-profit, with no shareholders to please –

were to distribute its fund to the state's private banks, in order to issue new

loans to strapped homeowners at, say 1% rates (like North Dakota's bank does),

or even a more inflation-realistic rate of 3%, still far below current bank

rates of 5% and higher on 30-year mortgages, they could refinance defaulting

homeowners, fund startups, and even fund general government expenditures, all

without paying a dime in interest to private bankers!

Whenever I tell people

about the miracle of North Dakota's banking system, they say something like, "Well,

that's a tiny state (about 640,000 people), full of farmers.  It's not representative of the country."  Well, this may be so, but the banking

model could work in California, and if it did, most states would quickly follow

suit.  As goes California, so goes the nation.  Then, we would nationalize most banking functions for

essentials like mortgages – while leaving the Monetized Derivative Exchanges (which

have as much to do with regular banking as a regular bank has to do with a

piggy bank) like Citibank and J.P. Morgan free to place their speculative bets

– but with far less money, certainly not enough to bankrupt the country.  Other countries would follow the

American example. 

This is how the Terminator

could Save the World.

Author's Bio: Scott Baker is the author of Neitherworld – a two-volume novel blending Native American myth, archaeological detail, government conspiracy, with a sci-fi flair. He is a frequent contributor and editor for Op-Ed News and has a blog: http://newthinking.blogspot.com/ Scott has two progressive petitions on Change.org: http://www.change.org/actions/view/a_new_form_of_capitalism_geonomics and http://globalwarming.change.org/actions/view/close_the_gap_2 Scott was an I.T. Manager for New York University for over two decades where he initiated computing, developed databases, established networks for two major departments and earned a Certificate for Frontline Leadership. He had a video game published in Compute! Magazine. Scott now chooses to use his computer for the greater good. He is a recent graduate of the Henry George School of Social Science in New York City. Scott is a modern-day Renaissance Man with interests in astronomy, history, natural sciences, psychology, philosophy, Native American culture, and all future-forward topics; he has been called an adept syncretist by Kirkus Discoveries for NeitherWorld. He grew up in New York City and Pennsylvania. He graduated with a Bachelor's degree in Psychology from Pennsylvania State University and was a member of the Psychology honor society PSI CHI. Today he is an avid bicyclist and is active in several Green organizations and Progressive organizations such as ObamaNYC and Transportation Alternatives, and has a presence on Facebook, MySpace, Change.Gov, OpEdNews, and PickensPlan. Scott is a strong proponent of the Georgist Single Tax: "Tax the use of natural resources, not wages or capital," which would dramatically reduce resource use and increase productivity.

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