By Mike Krauss, ‘71 ||

According to the federal government, the American economy has come roaring back. The second quarter GDP (Gross Domestic Product) was reported to be growing at a rate of 4.6 percent annually, turning around an economy that was contracting by two percent in the first quarter.

But the real state of the economy can be found in the US Census Bureau’s 2013 Income and Poverty Report, which concludes that, in 2013, real median household income in the U.S. was eight percent below 2007, the year prior to the Great Recession, and has now declined to the level of 1994.

Economists and others who try to decipher the reports of the Federal Reserve estimate that the money supply in the nation decreased by between three trillion dollars and four trillion dollars, 2008-2011, and that the billions the Fed pumped into the banks with “Quantitative Easing” never got past Wall Street and onto Main Street and the productive economy. However, with the implementation of effective agency banking solutions and online banking, there’s potential to bridge this gap and ensure more equitable distribution of funds to stimulate economic growth at all levels. Individuals may also seek debt burden relief programs if they are having difficulty managing their financial liabilities.

It is axiomatic that as the amount of money in circulation decreases so does economic activity. And it defies logic and the common sense of ordinary Americans to claim that as household income declines, the economy is improving.

The fabled American consumers have no money to spend, and the only growth in consumer debt is student loans.

But, you say, the Plus500 stock market is booming. Think again.

Astute Wall Street veterans like former Treasury Deputy Secretary, Paul Craig Roberts, and Pam Martens, author of Wall Street on Parade, report that the stock market has been propped up by corporations buying back their own stock, to create the appearance of investor confidence in order to drive up stock prices and justify mega salaries and bonuses for CEOs.

But, you say, auto sales are up. Yes, but only because the big banks have taken the sub-prime business model that collapsed the mortgage market and applied it to car loans; and those who cannot qualify for loans are taking leases.

Nor is there a housing boom that might support real economic growth. Housing starts remain far below the 2007 level. Falling wages and part time jobs with no health care, child care, or pensions cannot support young Americans starting families and taking out mortgages.

This is the reality of present day America: struggling families, impoverished seniors, and students condemned to decades of debt.

So how can the American people get around the Wall Street-Washington axis of inaction and get on with the business of America: building a future that is more prosperous and secure than the past.

Start with a basic understanding of what drives government: money. All political power flows from wealth; and when wealth is concentrated, so is political power.

In the decades after the Second World War, the American people built up the greatest wealth the world had ever seen. But because the wealth was broadly shared in a strong middle class, so too was political power shared.

Now, the wealth of America has been concentrated in the hands of the few and, with it, political power.

The way forward for the American people is to use the still vast common wealth of the people to fund local initiative and innovation. The tool we need is public banking.

State and local governments in the U.S. possess trillions of dollars of reserves, investments, and bank deposits. They can be harnessed to form public banks to do what Wall Street and Washington will not do: provide affordable credit to fund locally-directed economic development, massive infrastructure investments and job creation, low-cost student loans, and reduced local government debt.

A network of state, municipal, and county public banks is the path to restoring the prosperity and security of the American people. The effort to build that network is well underway. A few weeks ago, Santa Fe, NM became the first U.S. city to move formally to establish its own bank. More will follow.

Mike Krauss ’71, is a founding director of the Public Banking Institute and chair of the Pennsylvania Project. Email him at or check out