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On our return trip from France, the United flight was delayed by a full day for inexcusable reasons, but upon boarding the same aircraft, one of the first announcements by the crew was, “Who left a book yesterday entitled ‘America is Not Broke!’ by Scott Baker?” On the 11-hour return flight I had time to read some of the best parts twice.

I’m beginning to sense a ground swell of interest in restructuring our banking system, tax system, and now our accounting system as it applies to all government financial statements. Scott Baker, in this new book, offers a simple explanation of the advantages of having banks owned by the public for two reasons. First, they would loan money directly to end users (unlike the too-big-to-fail banks that have been hoarding what they received from the Federal Reserve) and second, they would create a profit center for the public that would reduce what would otherwise be required in the way of tax revenue. We look no further than the 1930’s Resolution Trust Corporation and North Dakota’s 100-year-old state bank for an example of how these entities strengthen local regional banks and credit unions while generating income for the governments that create them --- all at the expense of Wall Street.

Another section of the book suggests that we can just issue money that goes directly, for example, to the rebuilding of infrastructure --- essentially debt-free government money produced in the same way that we can issue currency or stamps. So-called “quantitative easing” on the part of the Treasury Department funneling money through the Federal Reserve and on into the major banks was only one step removed from the concept of friction-free Sovereign Money --- the latter having been in existence with great success off and on since this country was founded.

What intrigued me the most was the chapter outlining the degree which governments hoard money. We know there are reports depicting government cash flows and shortfalls, which equate to an income statement in corporate accounting. What apparently doesn’t come into play for most governments is a balance statement that shows at a given moment what they owe and what they own.

Apparently all government agencies from local fire departments to the state pension funds are compelled to issue standardized Comprehensive Annual Financial Reports (CAFR’s) that report their assets and liabilities. Of the 215,000 reports filed in this country, the liquid investment assets amount to $95 Trillion plus another $45 Trillion outside the US. Focusing on one county, for example, Los Angeles was sitting on $324 billion and the local government agencies within the county added another $1.3 trillion. Much of this is liquid cash. The rest would be buildings, land and other hard assets.

In supposedly bankrupt Detroit, there is $5.1 billion in their pension fund, $1.2 Billion in cash equivalents and investments, and another billion dollars in a collection of various agency investments. All the figures outlining the city pension unfunded liability ignores the $450 million annual contribution. That’s equivalent to saying you’re broke today because your home mortgage is $500,000 while ignoring the fact that you’re planning to make monthly payments for the next twenty years.

Governments clear their balance sheets at the end of every year. Therefore, in years in which they collect more in tax revenue than they have to spend, they sweep the excess under the rug into a “liabilities” account. I know. It sounds goofy, but this explains how our governments wind up with so much money. Once money has been swept into a liabilities account, it is apparently untouchable and contributes to the $95 Trillion of excess assets sloshing around on our governments’ bank accounts. Meanwhile, starting from zero each year, we are borrowing from Wall Street to pay for the next annual shortfall.

It’s fashionable in some circles to describe America as having “gone to hell in a hand basket,” but Scott Baker refers to this as “disaster pornography.” It’s an effort, in general, to paint all governments as being fiscally irresponsible and dysfunctional. Like Wagner’s music, which Mark Twain said “was better than it sounds,” governments are apparently in better shape than they look.

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