COVID Cash: Emergency Proposal for People and Local Economies

How local community banks can turn into temporary “public” banks, for the benefit of everyone. U.S. people and local economies are going to be in need of a lot of emergency cash in the next few months.  The 2020 growing season is just getting started for U.S. farmers in the Upper Midwest. We need to make sure that our 2020-21 food supply is planted and planned for. Local and regional institutions are already in place to provide cash to local and regional economies—i.e., local and regional community banks. Moreover, they have the resources and mechanism—fractional reserve lending—to get new $$ out into local economies ASAP.

UPDATE April 6, 2020
After I drafted this proposal, I sent it to some monetary policy and food & farm colleagues for comment. They encouraged me to send this out to the universe.

Yesterday, April 5, 2020, I sent the proposal to 50+ residents and business owners in my hometown, along with this cover letter. COVID CASH Part 2:  “Evanston, IL Helicopter Money” — pilot project cover letter . Let’s see what happens.

How local community banks can turn into temporary “public” banks
Case study: Evanston, Illinois
A working draft

NOTE on the word “PUBLIC”
There are many meanings to the word “public” and probably even more misconceptions of the word. In this proposal, I am using the word “public” bank to describe a simple banking transaction that benefits the common good because it applies to all residents of a given area or jurisdiction.

There are, of course, real “public banks”—e.g., the 101-year old Bank of North Dakota. And I am a big supporter of the folks at the Public Banking Institute who have been promoting public banking in the U.S. in a variety of forms and jurisdictions.  But we don’t have time or resources (including legislative votes) to charter public banks at any level—national, state, county, etc. We have to use the tools that we have right now.

Legalized counterfeiting—AKA fractional reserve lending—is one such tool that private interests have been using against the public for at least 117 years. Here’s a chance to use it for ALL of us, in an emergency. Once we get through this COVID crisis, we can put our efforts towards reclaiming the sovereign power to create new U.S. Money as a public utility, owned and operated by ALL the people of the United States for our universal common public good.

THREATS
1.  U.S. people and local economies are going to be in need of a lot of emergency cash in the next few months. Although individual members of Congress are trying to be creative (e.g., Rep. Rashida Tlaib’s #MintTheCoin) I’m not sure that Congress (both GOP & Democrats) are up to the task. Nor is the bureaucracy really capable of getting enough $$ fast enough to enough people. 

We’ll probably know in the next few days.  Everyone is focusing on April 1, when people’s bills are due (rent, utilities, etc.) and greater numbers of people are losing their income. I suspect the real fallout won’t be apparent until mid-April, when people start getting eviction notices, start getting sick without $$ or insurance, are unable to buy food, start getting super-stressed (beyond their current anxiety).

2.  The 2020 growing season is just getting going for U.S. farmers in the Upper Midwest. We need to make sure that our 2020-21 food supply is planted and planned for ASAP.

OPPORTUNITY
Local and regional institutions are already in place to provide cash to local and regional economies—i.e., local and regional community banks. Moreover, they have the resources and mechanism—fractional reserve lending—to get new $$ out into local economies ASAP.

PILOT PROJECT
Local Economy:  City of Evanston, IL
population 75,000
30,000 households

1. Find one community or local bank who’s willing to talk this through and try it out.

2. Proposed mechanism: Two alternatives (numbers are only an example)

COVID Cash for all Evanston RESIDENTS
— Community bank agrees to lend $375,000,000 at no interest to a local business, local non-profit, or local unit of government.
— Borrower agrees to use that money to stimulate the local economy, by giving $5,000 to every resident of Evanston = $375,000,000.
— Borrower disburses $5,000 to every resident immediately.

COVID Cash for all Evanston HOUSEHOLDS
— Community bank agrees to lend $150,000,000 at no interest to a local business, local non-profit, or local unit of government.
— Borrower agrees to use that money to stimulate the local economy, by giving $5,000 to every Evanston household = $150,000,000.
— Borrower disburses $5,000 to every household immediately.

PAYING BACK THE LOAN: Three options
1. Borrower pays back the loan in the usual way.

2. Borrower defaults.

3. Borrower and bank declare a debt jubilee:  Why does loan need to be paid back? It was all created out of thin air in the first place. Bank should be happy that the community as a whole is a little more solvent.

REPEAT and REPLICATE
Maybe we can do pilot projects around the country, simultaneously.

POSSIBLE VARIATIONS OF PILOT PROJECT

1. Alternative Lender
Can credit unions legally lend beyond their reserves?
Other local financial institutions?

2. Alternative Local Economy: Evanston, IL foodshed
People to be included in cash infusion
a. $5,000 each to all Evanston eaters ( = all Evanston residents)

b. $2,000 each to non-Evanston residents
—Farmers who sell at Evanston farmers markets, CSAs (signed up for 2020 ?)
—Evanston food business owners: grocery stores, restaurants, cafes, bakeries, convenience stores
—All employees at Evanston food businesses
—Other people in Evanston’s food chain who are non-residents?