Tale of two bridges

Submitted by OhioBank on Thu, 02/03/2011 - 12:39.

 This short story is to illustrate the difference between monetizing the debt and monetizing an asset. 

A tale of two bridges


Two bridges are needed to be built in Ohio.  One in Richland County and the other in Huron County.  Each bridge costs 10 million dollars.  


Ohio legislators are in charge of the Richland bridge. To built the bridge in Richland County, they decide to start a new bond program.   The bridge will be built by the Ohio Department of Transportation. The bonds are rated for a large fee, by a highly reputable bond rating firm outside of Ohio.  The bonds are sold to investors for the principal of 10 million dollars, plus interest.  


The State Bank of Ohio has control of the Huron bridge. The bridge in Huron County will be financed by money given to the Ohio Department of Transportation by the State Bank of Ohio.  The amount is 10 million dollars.


The Ohio legislation and the State Bank of Ohio, expect the Ohio Department of Transportation to repay the money used.  The Ohio legislation and the State Bank of Ohio are both concerned.  ODOT is considered a very shady and unreliable group.  After all, they are citizens of Ohio. And it is assumed that Ohio resources will be used to built the bridges.  The Ohio legislation and the State Bank of Ohio feel that Ohio resources are inferior to any other resources.  


Both bridges are built, but the Ohio Department of Transportation refuses to pay back the money used.  They claim that the funds are not available.  It is rumored that the funds were taken by other Ohio legislators for another Ohio State programs.  The bond holders are angry and demand payment of principal and interest.  They want Ohio to sell Ohio assets in lure of payment.  They claim Ohio is shady and unreliable, and may go into default. 


The Ohio legislation is in a panic.  They try to issue new bonds to pay the old bonds, but higher rates of interest are demanded, because of Ohio's shady reputation to bond holders.  The Ohio legislation manages to sell some higher interest bonds, but to make up the difference, they must also raise gas taxes, increase license plate fees and cut back on several state services.  To generate more revenue, the Ohio legislation takes possession of the Richland bridge and leases it to a private company that charges tolls to cross the bridge. 


The State Bank of Ohio is also in a panic.  If the money for the Huron bridge is not repaid, The State Bank of Ohio threatens to place liens on ODOT equipment and garnish the wages of ODOT employees.  The State Bank of Ohio even considers a repayment of the principal only, and forgive all interest charges.  The Ohio Department of Transportation still refuses to make payment, claiming the funds are not available.  


After intense negotiations, the Ohio Department of Transportation offers to GIVE the Huron county bridge to the State Bank of Ohio in lure of payment.  Since the bridge is:  brand new, Ohio craftsmen were used, Ohio revenue was generated through wages, Ohio sales taxes were generated from the purchase of resources from Ohioans, Ohio income tax increased through higher income, Ohio resources were used and are not inferior,  The State Bank of Ohio is owned by the citizens of Ohio, and the bridge is exactly where the citizens of Ohio wanted and needed the bridge to be, the State Bank of Ohio ACCEPTS the ODOT offer. 


The Ohio legislators have monetized the debt.  The State Bank of Ohio have monetized the asset. 


The sad end of this tale is that the State Bank of Ohio does not exist.  The citizens of Ohio do not own a State Bank.  Bonds will continue to be used to build both bridges.  And, the Ohio legislation could create a State Bank of Ohio immediately. 


If a State Bank of Ohio financing method makes more sense to you, for bridges, road maintenance or any other state infrastructure improvement, please contact your Ohio Representative.  Ask them why they are against a State Bank system that has provide the State of North Dakota a surplus for the last 90 years. And ask them to contact me or return my emails.  Thank you. 

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Ohio Bank - more info please

I take it the difference with a State Bank would be that the money which presently goes to private bond holders would instead be paid to the State Bank - and that would allow the State Bank - which doesn't need a profit like private investors - to charge a lower rate of interest.   Is this the advantage you are driving towards?  

Please link up a description of the North Dakota Bank system so we can read more about this concept.  Thanks, & welcome to Realneo.  Best, Jeffb

Welcome to RealNeo, Ohio Bank: Dave Pich...

Thanks for bringing this information to REALNEO. Please do expand on your information and add links with detailed info that supports your mission! We are interested in learning more! Thanks and we hope to read lots more of your input on such matters of significance for our citizens! 

Always Appreciative, "ANGELnWard14"

Ohio Bank Concept

Thank You Dave Pich! Welcome to REALNEO--Cuyahoga County Executive candidate David Ellison suggested a similar framework for Cuyahoga County. 

It has been said that Ohio is the most corrupt state in the Union (hey, we're actually ranked #32!).  I would agree. 

I believe your assessment of this bridge story is 100% correct.  As Jeff B notes:

I take it the difference with a State Bank would be that the money which presently goes to private bond holders would instead be paid to the State Bank - and that would allow the State Bank - which doesn't need a profit like private investors - to charge a lower rate of interest.   Is this the advantage you are driving towards?  

If so, I would also support the establishment of an Ohio Bank.  But can we trust any bank?

A few short comments

Committee for the State Bank of Ohio

The State Bank of North Dakota, lends money for infrastructure building and repairs at low or 0% interest.  Which of course, reduces the cost to tax payers.  ( that could be us )

My proposal, is similar to pending legislation in Minnesota.  But before I add links, several illustrations are required.  I don't want to insult anyone, but several of my examples will cause discussion, questions and disagreements.  

First of all, all money in this country is created by debt.  All the numbers that represent money in all your accounts were created by debt.  The cash you hold, was borrowed from the Federal Reserve.  The only exception is the coinage you have in your pocket.  The U.S. Treasury ( that's us ) produced that money.

Pretend there is no money in the world.  You go to the bank, and borrow one thousand dollars to purchase a car.  The bank deposits the money into your checking account, and you sign a promise to pay back all the money plus interest.  When you go to purchase the car, you notice a major defect, and decide not to buy it.  You return to the bank to pay back the money borrowed.  You cannot pay them back.  Because, even though you gave them back all the money in the world, you still owe them interest on that money. Consequently, the only possible way to repay your loan completely, would be to...... you guessed it..... borrow more money.

Pretend there are only two people in the world, you and me.  We each go to the bank and borrow $100,000 plus interest, to purchase our homes.  There is now 200,000 dollars, circulating in our economy.  In order for one of us to: make all of his principal and interest payments: extinguish the promissory note from the bank: and receive clear title to their property: one of us must FAIL.  [ I finally got through to one Ohio legislator with this example.  After this story he realized failure is built into the system. ] 

If you agree with me so far, that all money is borrowed into existence, you're ready for the next illustration.  In the above Tale of Two Bridges, the Ohio Legislation borrowed the money into existence.  The State Bank of Ohio, SPENT the money into existence.  (  read the story again )  This is a very difficult concept.  If your head is still not spinning, you can take the State Bank concept one step further.  Since the State Bank of Ohio monetizing the asset,  the money does NOT have to be repaid.  So..... the State of Ohio could reduce or eliminate the State gasoline tax.  [ The Ohio Constitution states all road maintenance and construction will be payed for with gas taxes, and license plate fees. ]  [ Think of the economic benefit to Ohio and it's citizens,  if we had the cheapest gas in the country. ] 

One more tale to illustrate how this works.  An individual needs one million dollars to build a home.  At the bank he puts up a down payment and signs a promissory note for the balance. The bank creates the money and credits his checking account for that amount.  He buys the property, hires the contractors, architects, engineers, and purchases all the materials.  The home is completed and EVERYONE agrees, that house on that property is worth one million dollars.  Everyone has been paid, all materials have been purchased, and all taxes and permits completed.  He dies.  Or he looses his job, or whatever reason, the note cannot be repaid.  As per the promissory note, foreclosure, etc.  the bank takes possession of the property.  At this point, the commercial bank has monetized the asset.  I am not an accountant, but it appears to me, both sides of the ledger are correct.  The bank created the million dollars on one side, and they have the million dollar property on the other.  Is everyone happy ????  This is an important concept of our economy.  Real people did real labor.  Real resources and materials were used.  Real people transported, designed, created, real things.  Is the bank happy ?  No.  Banks make money by lending it and receiving interest payments.   Interest is the profit and motivation of the commercial bank.  Monetizing an asset for a commercial bank is a wash.    

If the State Bank of Ohio is owned by the citizens of Ohio, wouldn't be OK if the new bridge, the road maintenance and infrastructure improvements ended up as a wash ? 

P.S. Do any of you know Mike Foley (D) district 14 Ohio legislator ?   He is a member of the Financial Institutions Committee.  I sure would like to talk to him.  

Ok, here's some links.  

Recommended viewing, "The Secret of OZ"  by Bill Still.  If you have internet TV you can see it sometimes on JustinTV on the Truth Alliance channel.  Or you can purchase it on ebay or Amazon.  [ or get enough of you together and we can have a viewing party  ] 

Byron Dale, the Man behind the Minnesota Bill : http://www.wealthmoney.org/about/ByronDale.html

Ellen Brown is an advocate of state banks and sometimes writes for the huffington post : http://www.huffingtonpost.com/ellen-brown/washington-state-joins-mo_b_813019.html

Any Questions ? 

Can we trust any bank ?

Committee for the State Bank of Ohio


I wanted to address this question separately for different reasons. 


In my opinion, the United States Congress is serving the people that have the power.  Unfortunately it is no longer the voters that have the power.  I believe the banks have the power.  I don't think, I'll be around long enough to see real change in the federal government.


Let there be no question as to the amount of power that will be given to the Ohio legislation with a State Bank of Ohio weapon.  This is a totally new conception of money, and how we can take control of debt on a local state government level.   I have never been involved with politics before.  Right or wrong, I am off the couch and trying to take back control of the situation. 


Now explain that entire concept in a 2 sentence paragraph...

for some of us less edumucated, ignorant hillbillies....(Smiles) (ME!) 

Because most readers spend less than 2 minutes on a post...it'd take most of us elongated amounts of time to process & understand such a concept-even though I am extraordinarily intrigued by your concept...I recognize that it "Blows folks' minds" in long form... Keep it even more simple...Smiles...

(I am really guilty of trying to write WRITE TOO MUCH to drive home ideas.... but I am working on that issue! Smiles...) 

Keep sharing! 

Always Appreciative, "ANGELnWard14"

2 sentences

Committee for the State Bank of Ohio

If you understand that the money is created from debt, that money is created when you make a long term loan, house , car, etc. then you understand that money is created when you borrow it.  

You spend the borrowed money, others get it, they spend it, they save it, other loans are made on it, and it multiplies and accelerates through the system, benefiting all.  The State Bank of Ohio just skips the first part, and spends it into creation. 

Ohio Bank...monetizing asset...

Your example about a "BANK REO" through 'foreclosure' is understandable.... as 'monetizing the asset'... (Somewhat)...

Yet, as most banks have "PMI" insurance on those loans and promissory notes-don't they get to "Break Even" if the borrower defaults and they go through a full foreclosure? (not positive how that all works..but curious with regard to the "relativeness" of this Ohio Bank Concept.)

Always Appreciative, "ANGELnWard14"

Break even

Committee for the State Bank of Ohio

The foreclosure story is for illustration purposes.  Yes, PMI insurance, loss of down payment, loss of previous mortgage payments, offsets the bank's paperwork, having a home in their inventory and not having the money to lend out, to receive MORE interest. 

the highest form

Byron Dale is my counter part in the State of Minnesota.  He liked the tale of two bridges so much, he changed it around a little, and is sending it to the Minnesota Senate.  This is in a effort to help pass Senate File 65, which is now in committee.  Maybe his illustration is easier to understand than mine.  Enjoy.


Two bridges need to be replaced, one in Wisconsin and one in Minnesota.  Each bridge 

needs to be 40,000 sq. ft. and will cost $5 million.   


Wisconsin uses the standard process to fund the building of the new bridge.  The 

legislature passes a new General Obligation interest bearing bonding bill to obtain the 

funds.  These bonds are generally for a term of 20 years.  They pay a bond dealer a very 

large fee to market the bridge bond.  The bond dealer breaks down the bond and sells 

portions of the bond to many different investors.  Some portions of the bond go to pension 

funds but the majority goes to a consortium of banks.  These banks create new money that 

never existed before to buy their share of the bond. 


After the bridge is built Wisconsin realizes they are not taxing enough to collect the funds 

needed to repay the bond plus interest, normally around 4%.  The interest on the bond 

has driven the cost of the bridge up to $9 million not including the large fee paid to the 

bond dealer.  Wisconsin finds that it has to raise taxes on gas and other things.   Interest on 

money always drives up the cost of doing business.  It also drives up taxes to pay the 

interest on funds that government borrows.  This in turn drives up the cost of living for all 

the people living in Wisconsin.   


Minnesota funds the building of their new bridge using the process established through the 

passage of Senate File 65.  Minnesota goes to state-chartered banks that already create 

new money that never existed before and mandates that they create some money debt free 

money and grant (spend) it to the people of Minnesota as an act of good will and natural 

equity to raise the standard of living for the people of Minnesota.  Minnesotans uses this 

new debt free, interest free money to pay for the building of the bridge.  This money will 

all go into circulation as earned income by people who work to build the bridge.  

This keeps the total cost of the bridge at $5 million not the $9 million plus the large bond 

dealers fees that the bridge cost Wisconsin. 


Minnesota didn’t have to raise taxes; they don’t have to drive up the cost of living of 

Minnesotans.  In fact, it will raise the people’s standard of living because they no longer 

need to be taxed to pay for the building of the new bridge. When Minnesotan uses this new 

process to fund, maintain and upgrade their transportation system the state gas tax would 

be eliminated and the price a gas would go down by 26 cents a gallon.   


State-chartered banks will benefit from this goodwill grant because when this new debt 

free money goes into circulation create more jobs and will enable more Minnesotans to 

make their loan payments.  This will reduce loan losses the banks are suffering from now. 

Much easier to understand, Ohio Bank! Thanks!

Thanks for sharing this information & helping us to understand the concept a little more... Look forward to more updates on your efforts! 


Always Appreciative, "ANGELnWard14"