(One has to consider the possibility that Strauss-Kahn was set up as it would be impossible to imagine a similar arrest of a US banker, like Jamie Dimon, the CEO of Chase, or Ben Bernanke, the Federal Reserve Chairman, but it’s too early in this news cycle for a conspiracy theory to emerge despite the fact that Strauss-Kahn was setting himself up for a presidential run in France against Nicolas Sarkozy who is running the war against Libya, etc. etc.)

Strauss-Kahn was traveling back to Europe to attend a yet another critical meeting with German leader Angela Merkel on Greece.  Last year, Greece accepted IMF supervision of its financial matters in return for a $150 billion bailout package and Strauss-Kahn was the Big Man in the deal.

As you may have heard, the IMF forced Greece to make drastic budget cuts in return for the loan, which has created a recession, but the recession has not reduced the deficit. (I wonder why.)  Now, the IMF wants Greece to fully privatize its utilities:

EU and IMF inspectors are pushing Greece to fully privatize public utilities in exchange for the release of its next tranche of aid and a possible extra loan, Greek newspapers wrote on Saturday without naming sources … According to the daily Eleftherotypia newspaper, inspectors currently in Athens have said the government should fully privatize the Public Power Corporation and two water companies, Thessaloniki Water EYATH and Athens Water company EYDAP.

Back on the home front, cities across our state are struggling financially, especially Detroit, which is trying to get rid of a $200 million deficit.   Recently, Governor Snyder spearheaded the passage of a new legislation which empowers emergency financial managers (EFM) to right the sinking ships of our cities.

Would-be EFMs are flocking to training sessions and are licking their lips for a chance to trim pension plans, modify union contracts, sideline elected officials, and more than likely, to sell public infrastructure on the cheap to private corporations.  Is it merely coincidence that in 2010  the Michigan Citizens Research Council published a report on Detroit’s financial condition and concluded that Detroit  has only one asset that could be “monetized”at a rate sufficient to make a major contribution to resolving the accumulated deficit: the Water and Sewerage Department, which wholesales services to suburban communities?

Now it appears the idea of a state bank in Michigan has been buried with the Republican landslide, as  our new leaders roll out their formulas for creating prosperity. But a state bank could give Michigan citizens a backstop to privatization.  For one thing, it’s getting tougher and tougher for Michigan cities to get credit as they face downgrades from rating agencies and interest rate hikes. For example, in April, Romulus was downgraded by Fitch and given a negative credit outlook.

The core idea of a state bank is that citizens empower the government to create money. States have that power but they don’t use it because private corporations and their political accomplices have convinced us that money creation is too dangerous to put in the hands of the citizens. Only the smartest and wisest people should have that power and needless to say, these are business people (and don’t be confused, the Federal Reserve is federal in name only).  Never mind the conflict between civic duty and maximizing shareholder value. Our regulations will solve this problem. Yep. It’s worked pretty good so far, but tell this to the half a million Michiganders whose homes are worth less than their mortgage.

It’s time for the people to take back their power given to them by the Founding Fathers and the Constitution. It is helpful to recall that Thomas Jefferson opposed the creation of the First Bank of the United States (which was privately funded by the way) as unconstitutional. Here is what he had to say about  allowing private corporations to control the power of making public money:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Both the Free Press and the News believe that Bing is not going far enough fix the budget.  In an editorial entitled “No Time to Tinker,” the Freep suggests that Bing “take a cue” from Gov. Rick Snyder and “build radical change into Detroit’s budget plan.” And the News says that “the real savings will come by privatizing many of the services now provided by the city.”

I couldn’t agree more with our local rags.  Radical change is needed, but not the phony radical change they are promoting.  Since when is cutting benefits, laying off workers and privatizing municipal services a radical idea?  The Indiana Turnpike was leased for $3.8 Billion by an Australian/Spanish partnership. Now, that’s radical!

Seriously, read the articles and look for the word “debt.”  The article are seasoned with the ugliest of words, “deficit,” but I don’t think you will find any talk about “debt.”  I wonder why?

Ignoring the debt is certainly not related to the amount of debt.  According to Detroit’s 2010 Finanical Audit, citizens of Detroit are currently responsible for $9.3 Billion dollars of long term debt. (This amount includes the school system’s $1.5 Billion debt.)  If you divide  $9.3 Billion by 730,000 souls you get a per capita debt of almost $13,000. According to the audit, the per capita income for Detroit is only $15,042!  And, the city’s debt has increased three-fold from 2001, adding over six billion dollars in debt, while the population was falling by 200,000.

For contrast, the city of Farmington Hills, a middle class suburb located about 10 miles northwest of Detroit, has $24 Million in long term debt. With a population of 78,000, the per capita debt is $305.

Do you see the problem?  $305 versus $15,042.  How can Detroit cut its way to positive cash flow, with a such a debt burden?  But it is not surprising that the major mass media in this region doesn’t want to address this challenge, because the solutions would be TRULY radical: either restructure the debt or open a state bank to relieve the debt.

Governor Rick Snyder campaigned on "reinventing" Michigan. (photo Bill Rice)

The plot of the program was Governor Snyder’s tax cutting strategy—will it work?  Graham asked two local experts for their opinion—Lou Glazer of  Michigan Future think tank fame and Don Grimes, an economist at the University of Michigan.  Both men are mostly positive on Snyder’s program, though Glazer questions the wisdom of Snyder’s tax cuts.  He claims there is no correlation between economic prosperity and tax rates.  I will leave that debate to smarter folks like Glazer and Grimes, but I doubt that Glazer would be so sanguine if his business experienced a 400% tax increase like mine did when Granholm got rid of the old Single Business Tax. It’s always easier to say things don’t matter when they don’t happen to you.

But I digress… some years ago I actually met Mr. Glazer at a meeting in Detroit when he was just starting to wind up Michigan Future. After hearing Glazer’s pitch, I had other ideas for Michigan’s future and actually tried to start a foundation—Michigan 22nd Century—to drive them. But being a man of no great prominence, the Michigan 22nd Century never took off.

I had three core ideas for reinventing Michigan:

1. we need to build the world’s first water based economy (a word that isn’t mentioned in Graham’s program),
2. we need to build a post peak oil infrastructure, and
3. we need to create a state bank to get us out of debt.

I find it curious that so many smart people never mention our state’s debt load when they talk about reinvention.  Here’s an example: last year the Detroit Water and Sewerage Department earned $285 million from its water sales to about four million Michiganders, but it paid $145 million in principal and interest on its debt. 

Think about it!  50% of your water bill to Detroit goes to debt and interest … and people wonder why their water rates are going up! Memo to our thought leaders and politicians—if you don’t do anything about the debt, it will not matter how many taxes you cut (which is why Engler’s tax cutting program didn’t work in a era of ever rising leverage throughout our state).

I also find it curious that politicians and economists have been talking about replacing the auto industry for 50 years and they ignore the state’s only unique resource—its water.  We have it. The world is going to want it. It’s time we make a sustainable Blue Economy out of it.

And finally, any plan to reinvent Michigan is doomed to a repeat-a-vention, unless it confronts the challenge of Peak Oil.  Maybe I missed the email, but how is Michigan supposed to reinvent itself with $4 gas. Make no mistake about it—Libya is not a one off.

It is the beginning of mammoth and monstrous change for us and we better start the real reinvention. Now.

We can use this argument against the formation of any bank or against the bailing out of large banks, i.e. Citibank, Bank or America, Chase—you know, the ones the fund the campaigns of George’s masters in Washington.

Needless to say, George misses the major advantage offered by a state bank—recycling interest payments back to the state instead of off loading them Wall Street to fund the coffers of the Democratic and Republican elites. Currently, the public institutions in our state are paying billions of dollars in interest each year and most of this money leaves Michigan. Wouldn’t it be nice to have this money for our roads, bridges and schools?