There are only two States in the United States that are not operating in a deficit, if not technically bankrupt. Montana because of their rich oil resources, and North Dakota, because of their implementation of a State Bank, the Bank of North Dakota.

Because most people are not economists and may well just fall asleep trying to read up on it, you can learn in this post and in one podcast all you need to know to understand why and how part of Dr. Farid A. Khavari’s platform as Governor of the State of Florida, the Bank of the State of Florida (BSF), will work.

How Floridians can have 2% fixed rate 15 year mortgages and how the State of Florida can make billions by providing them

A cornerstone of the economic plan is to create a Bank of the State of Florida. We will put the power of modern banking to work for the people of Florida, not for Wall Street.

Over the years, interest has been the biggest cost most families had. When you pay interest to the bank, that means less money for your family. Reducing interest costs can save a family hundreds of thousands of dollars.

Let’s take a $100,000 mortgage, for example. With a 30-year fixed rate 5.5% mortgage, your monthly payment is $567.79 and you will pay $104,404.40 in interest on that loan.

With a 2% fixed rate 15-year mortgage, your payment would be $643.51, the total interest would be only $15,831.80 – and the mortgage would be paid 15 years sooner! You save 88,572.60 in interest. If you then make 15 years of payments to yourself with 5% interest from the Bank of the State of Florida, you will have more than $160,000 after taxes in your account—just by having your mortgage from the Bank of the State of Florida.

How can we do this? It’s called “fractional reserve banking” and this is how all the banks do it. If you have $100 in reserves, you can loan out $900 or more. That means you collect interest on $900 but you pay interest on only $100 at most. If the bank pays you 2% for your CD and lends it at 5% on 9 times as much money, you can see this is a really good deal – for the bank.

Now our Bank of the State of Florida does not need to be greedy. It is not going to get involved in shenanigans like bundling and selling mortgages, taking out weird insurance policies and general practices that have caused the mess we are in today. When we make a mortgage, that asset remains right on our books and the paperwork is right there on file. We are going to pay good dividends and the highest rates in the market for long term deposits. We are going to loan out 9 times our reserves. And we are going to make billions of dollars for the State Treasury while we save Floridians a trillion dollars—and that trillion dollars becomes many trillions in Florida’s economy.

Let’s say we pay 5% for our $100 and loan out our $900 at 2%. We pay out $5 in interest, and we take in $18 in interest. Can we make money at that? You bet we can.

We could make the $3.6 billion we are short this year on just a couple of million 2% mortgages. We can do even better on 3 – 4% commercial financing and vehicle loans.

And all the money the bank earns goes directly into the State Treasury, to work for Floridians, not to Wall Street.

Where do we get the reserves? The State of Florida has billions invested with Wall Street. 5 or 6% guaranteed looks pretty good these days compared to a 50% decline in the stock market. Look at what long-term bonds are paying, look at CD’s—we will have no problem attracting all the long-term deposits we need to get started, simply by paying good rates.

Now look what happens. With a 2% fixed rate 15-year loan, the buyer has paid off over 11% of the principal within 2 years. That means we have more than enough reserves to make a new mortgage for someone else, without having to pay interest for the reserves! (In comparison, a 5.5% 30-year loan takes 7 years to pay 11% of the principal).

Now some people might think that low interest rates will just raise the price of homes. That would be true if the 2% loan was for 30 years. But the payment on the 2% loan for 15 years is a little bit higher than the payment for 5.5% 30 years, so this tends to hold prices down. It also tends to eliminate speculation that messes up the market every time. As long as prices are stable, we can offer mortgages with low down payments, so home ownership can be as easy as paying rent.

What the Bank of the State of Florida does is transfer hundreds of billions of dollars away from Wall Street directly into the pockets of Floridians by reducing interest costs… and it puts hundreds of billions into the State Treasury, too. We will have stable, fair prices for homes and take 15 years of slavery out of the process of owning a home.

Consumer financing is another area where Wall Street and the big banks are costing us way too much. Banks charge huge interest on credit cards, for example, where the cost of money to the bank is really zero. If a family has $10,000 in credit card debt at 25% interest, that’s over $200 per month in interest alone. At 6%, the monthly interest is only $50. This family could reduce monthly payments by $50 and pay off the debt years sooner. The State earns billions of dollars per year while saving Floridians billions and billions more.

The Bank of the State of Florida will earn billions of dollars per year for the taxpayers of Florida, not Wall Street fat cats. At the same time it will reduce interest costs and save Florida families hundreds of thousands of dollars per family. Who needs that money more? You or Citibank?

The Bank of the State of Florida can handle checking accounts and ATM’s too. The other banks will have to become competitive, and there is no reason why they cannot.

Couldn’t the federal government do the same thing? Actually, the federal government could do even better and they could do it immediately at huge benefit to the U.S. Treasury. Do you think we should wait around for them to do it? We can have this program in effect in Florida within a year, at no cost to the State.

Then there is this podcast hosted by Kim Greenhouse of It’s Rainmaking Time. It is an hour and fifteen minutes of a discussion entitled State Chartered Banks: A Solution for the US Economy featuring Ellen Brown and a panel of experts in the field. Dr. Khavari is one of those guests.

For the audio of Kim Greenhouse’s interview with Ellen Brown about State Chartered Banks, click HERE.

For Florida, and the rest of the country for that matter, this represents the light at the end of the deficit tunnel. Not an oncoming train.

related links:

• Khavari For Governor
• How the Nation’s Only State-Owned Bank Became the Envy of Wall Street
• State Chartered Banks: A Solution for the US Economy

In a continuing effort to inform Florida voters about the only person running for Governor of the State of Florida who has an economic recovery plan, one that does not include more borrowing and taxing, meet Dr. Farid Khavari.  The beauty of his plan is that it represents a blueprint for long term economic prosperity instead of a pothole patch.

And, it is a plan that other states can also benefit from. Economic security is not exclusive to Florida. Expect other states to catch on to this Bank of the State of Florida concept too! More information about his platform is on his website and in his latest book, Toward a Zero-Cost Economy, available in stores or for free download at his website, www.khavariforgovernor.com.

Please share this press release from the Khavari campaign.

Khavari: The era of commercial banks is over; state banks are the future.

Miami, FL  Nov. 23 — Noted economist Farid Khavari, a  Democratic candidate for Florida governor, has gained national and international attention for his plan to create a state-owned bank in Florida.

“Not since the Great Depression has it been so clear,” said Khavari. “We need banks that work for the benefit of the people, not people working for the benefit of the banks. There is no mystery why we are facing another depression: the banks got greedy and stupid, and now they are making us pay for it.

“The economy is collapsing due to lack of demand. The economy needs money, but the banks are cutting credit, and then sucking all the cash out of the economy by raising interest rates to make sure no one has any cash left at the end of the month. The cost of interest is built into the cost of everything. People already work ten years of their lives just to pay interest in one form or another. The Bank of the State of Florida will end that for Floridians. And this model will work for every state.

“We can start the BSF at no cost to taxpayers. We can pay 6% interest on savings. Using the same fractional reserve rules as all banks, we can create $900 of new money through loans for every $100 in deposits. We can loan that $900 in the form of 2% fixed rate 15-year mortgages, for example, and the state can earn $12 every year for every $100 in deposits. That means Floridians can save tens of billions of dollars per year while the state earns billions making it possible for them.

“2% fixed-rate mortgages will create a thousand times more jobs than any so-called stimulus can.  By reducing the total interest cost on a home by over 85%, the average family will save hundreds of thousands of dollars, and that money stays in Florida,” Khavari said.

“State and local government budgets will balance without higher taxes when the BSF cuts interest costs,” Khavari said. “6% BSF credit cards will save people billions per month, money that stays in Florida instead of going to the big banks—and the state will make huge profits on that, too.  Saving billions in interest costs will create millions of jobs without subsidies just by keeping those billions circulating in Florida. Eventually the state will earn enough to reduce and eliminate state and local taxes while every Floridian has economic security in a recession-proof Florida.”

Asked whether a state-owned bank is socialism, Khavari smiled. “Are public schools socialism? Public roads, police and fire protection, municipal water? Socialism is where everyone works for the state. In these cases, and with our Bank of the State of Florida, the state is working for everyone. I call that general capitalism.”

Farid A. Khavari, Ph.D. is an economist and author of nine books, including Environomics. His latest book, Toward a Zero-Cost Economy, is available in stores or for free download at his website, www.khavariforgovernor.com.

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