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The Difference Between Wealth and Profit











By Marilyn M. Barnewall
June 27, 2010

Because my career was banking, I have written much about the attack on America’s independent banks by a federal regime that apparently seeks global governance.

Attacks? How else do you explain that as of June 30, 2009, the Federal Reserve Bank of St. Louis said there were 6,898 commercial banks in the United States – but as of June 30, 1984, there were 14,369 commercial banks? In 1994, that number was pared down to 10,623. Now we have less than 6,898.

How do we stop the ever-growing power of the Federal Reserve System? Why are financial experts talking about a world run by central banks? There are answers but they must be implemented before the power to make changes at the State level is removed.

The capacity to control monetary policy at the State rather than federal level and a State currency distribution system are powerful tools.

When people hear the words “State Bank,” they may think it means “State-chartered bank.” A State Bank is quite different from a State-chartered bank. The 90-year old Bank of North Dakota is the only State-owned bank in America.

Think of a State Bank as a mini-Federal Reserve – only it’s State-owned rather than a Federal Reserve Bank. The Federal Reserve System, a privately-owned corporation that is not part of the federal government, has Member Banks – nationally-chartered (they usually have the word “national” in their name). The Bank of North Dakota has “Member Banks” – State-chartered banks. The Bank of North Dakota, for example, provides its own State deposit insurance coverage – like a mini-FDIC (call it NDDIC).

Nationally-chartered banks (those licensed by the federal rather than State government) can do business in states that have a State Banking system, but cannot be members because of their national Charters. The authority that Charters a bank determines whether it will be a Member of the Federal Reserve System or of a State Bank.

The Federal Reserve System clears checks and performs other monetary functions for its members. It establishes monetary policy for the nation. Why? Because the Fed is the only alternative available in the 50 states to perform these functions – except in North Dakota. State Banks can, if they choose, replace Federal Reserve System functions and clear checks and set monetary policy for Member Banks.

A State Bank (exemplified by Bank of North Dakota) is the official depository institution for all State collections and fees. It’s very beneficial to local economies. Such a controlled source of funds is called a ‘captive deposit base’. The State Bank pays the State Treasurer a competitive rate of deposit interest that can be used to reduce local tax burdens. In states that are part of the federal system, funds collected by the State leave the State. When a State owns a State Bank, loan policies are determined by the State, not the federal government or the banking cartel known as the Federal Reserve System.

State Banks determine loan policies that can support State assets. In North Dakota, loan policy supports agriculture and energy. In Alaska, Texas and Oklahoma, it can support oil. In Colorado, loan policy can support uranium, natural gas, or oil shale production; in Utah, it can support coal. States rich in other things can create loan policies supportive of them.

Another thing State Banks make possible is getting away from a fiat currency system (paper money with nothing backing it) dependent upon consumer and business indebtedness to survive. That system has bankrupted our nation. A Sovereign State needs its own currency. The currency must be backed by something other than a Governor’s signature. And, without something (like gold, silver, oil, uranium, etc.) backing a State currency, the citizens have the same problem that caused the federal system to fail: a worthless fiat currency.

When a State legislatively declares the right to create its own currency, it needs a State banking system or there is no way to exercise power – a required element of “sovereignty.” A State may print as much of its own money as it chooses, but without a distribution system and without a State-owned asset of value backing it, it’s worthless. You thought your State could declare its sovereignty and still trade in the U.S. dollar? You might want to re-think that. Federal governments whose power bases are threatened by State governments declaring sovereignty usually don’t view the State fondly. They usually don’t offer the use of their currency.

A State that declares itself sovereign must function independently of the federal government – or it is not sovereign. States that have declared (or will declare) State Sovereignty need to fulfill international standards of sovereignty. A State Bank helps achieve that objective. In other words, legislation declaring a State to be “Sovereign” doesn’t make sovereignty a reality.


There is the issue of de jure versus de facto sovereignty. The experts say neither declaring nor being proclaimed sovereign or exercising sovereignty is sufficient. To be sovereign requires both de jure (proclaiming) and de facto (being proclaimed). Proclaiming sovereignty (“I’m sovereign”) doesn’t get the job done. Being proclaimed sovereign (by a legislature or by citizen vote or by another State) doesn’t either. It is generally accepted that both de jure and de facto are required. The ability to exercise sovereign power is also required. That’s a major part of how international law defines “sovereignty.”

State sovereignty, then, must be based on de jure and de facto proclamations. It must exhibit evidence of exercised power. The most recognized exercise of power in the world is monetary. As long as states are tied to the Federal Reserve System, monetary power is vested in the federal, not the State, government.

To be recognized as sovereign, international law says the State, as a person, must have:

1- A permanent population;
2- A defined territory;
3- Government; and,
4- The capacity to enter into relations with other states.

It is also held that sovereignty requires not only the legal standing to exercise power, but also an actual exercise of that power. International law says sovereignty exists only when the State declaring sovereignty is recognized as sovereign by other states (and/or nations).

Why is it important to comply with international laws when declaring State sovereignty? If citizens take a prescription drug for a serious disease made by a German pharmaceutical company, access to international trade must exist. If citizens drive a foreign-made car, they need parts available. If the State wants to provide access to coffee and bananas for citizens, it will have to comply with the international trade laws of Brazil. When a State declares sovereignty, international (as well as interstate) commerce laws become important. Many questions arise. How will highway systems be maintained? Who pays for public schools and police protection – and which currency is used to pay for State government?

The solutions to State Sovereignty: Currency, monetary policy (coordinated with other states) and a State Bank that provides a distribution system for both.

A State structure supporting America’s Constitutional Rule of Law and the Bill of Rights must be in place. State Constitutions generally fulfill that requirement, but may need to be more legislatively clear. Why? After the Federal Reserve System and Wall Street cause economic collapse, the states will be able to reorganize around the Constitution and the Bill of Rights, as written by our founders, and do so quickly to once again become the United States of America.

Can a State declare itself sovereign if it does not have sufficient power to determine its own currency and monetary policy? That is the key question to the core problem.

State Banks give credible stability to State Governments and their business sectors. They provide a distribution source to those states with the lawful authority to create their own currency. This one concept makes possible a logical alternative to the failing federal monetary distribution system – the failed fiat currency and the failed fractional-reserve means of creating currency that results in perpetual debt.

Numerous projects must (and can) be quickly coordinated among sovereign states if interstate commerce is to continue. States must plan ahead and work together to create a workable system. Compatible computer systems able to exchange information so proper check clearing can occur are needed. How does a company in a Sovereign State pay for goods purchased in another State that has not declared sovereignty and still uses the U.S. dollar? State Banks must be able to pay and accept the federal government’s currency via the same settlement process used all over the world.

There is one flashing red light regarding State Banks. It can be solved by how the State Bank Charter is written.

Unless constraints are firmly in place, there is little doubt power abuse will occur. Money draws crooks like honey draws bees. While the above information focuses on the positive aspects of implementing a State Bank, legislators need to be aware that unless prohibited from doing so, a State Bank can become a tool used to redistribute wealth – just as the current system is used nationally. Each State Bank Charter must contain prohibitions against the politicization of State Bank funds and investments, or all that will result is a State Bank that does the same economic harm currently done by the Federal Reserve System.

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How does your State fund a State-owned bank? Have your State legislators check the amount of U.S. dollars available in existing State Comprehensive Annual Financial Reports (CAFRs). Most states have billions of CAFR dollars that cannot, by law, be used to pay down State debt but can be used to invest in a State Bank on behalf of citizens.

This is a great (and critically needed) project for State Tea Party groups. You really could save your State from an economic apocalypse if you get this job done in time.

� 2010 Marilyn M. Barnewall - All Rights Reserved

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Marilyn MacGruder Barnewall began her career in 1956 as a journalist with the Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and bank consultant, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, and other major industry publications. The American Bankers Association published Barnewall’s Profitable Private Banking, the first book written about private banks, in 1987. She taught private banking at Colorado University for the American Bankers Association and trained private bankers in Singapore in 1991. She has authored seven banking books, one dog book, and one work of fiction (about banking, of course). She has served on numerous Boards in her community.

Barnewall received her degree in Banking from the University of Colorado Graduate School of Business in 1978 and was named one of America's top 100 businesswomen. She was a founding member of the Committee of 200, the official organization of America's top businesswomen. She can be found in Who's:Who in America (2005-08), Who's Who of American Women (2006-08), Who's Who in Finance and Business (2006-08), and Who's Who in the World (2008).

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The capacity to control monetary policy at the State rather than federal level and a State currency distribution system are powerful tools.