A Public Bank Option for Scotland

Guest post by Ellen Brown.

Scottish voters will go to the polls on September 18th to decide whether Scotland should become an independent country. As video blogger Ian R. Crane colorfully puts the issues and possibilities:

[T]he People of Scotland have an opportunity to extricate themselves from the socio-psychopathic global corporatists and the temple of outrageous and excessive abject materialism. However, it is not going to be an easy ride . . . .

If Alex Salmond and the SNP [Scottish National Party] are serious about keeping the Pound Stirling as the Currency of Scotland, there will be no independence. Likewise if Scotland embraces the Euro, Scotland will rapidly become a vassel state of the Euro-Federalists, who will asset strip the nation in the same way that, Greece, Ireland, Portugal and Spain have been stripped of their entire national wealth and much of their national identity.


To achieve true independence, Crane suggests the following, among other mandates:

  • Establish an independent Central Bank of Scotland.
  • Issue a new Scottish (Debt Free) Currency.
  • Settle any outstanding debt with new Scottish Currency.
  • Take Scotland out of the EU.
  • Take Scotland out of NATO.
  • Establish strict currency controls for the first 3 years of independence.
  • Nationalize the Scottish oil & gas industry.
  • Re-take control of the National Health Service.
  • Establish a State Employment Agency to provide work/training for all able-bodied residents.

Arguments against independence include that Scotland’s levels of public spending, which are higher than in the rest of the UK, would be difficult to sustain without raising taxes.  But that assumes the existing UK/EU investment regime.  If Scotland were to say, “We’re starting a new round based on our own assets, via our own new bank,” exciting things might be achieved. A publicly-owned bank with a mandate to serve the interests of the Scottish people could help give the newly independent country true economic sovereignty.

I wrote on that possibility in December 2012, after doing a PowerPoint on it at the Royal Society of Arts in Edinburgh. That presentation was followed by one by public sector consultant Ralph Leishman, who made the proposal concrete with facts and figures.  He suggested that the Scottish Investment Bank (SIB) be licensed as a depository bank on the model of the state-owned Bank of North Dakota. I’m reposting the bulk of that article here, in hopes of adding to the current debate.

From Revolving Fund to Credit Machine: What Scotland Could Do with Its Own Bank

The SIB is a division of Scottish Enterprise (SE), a government body that encourages economic development, enterprise, innovation and investment in business.  The SIB provides public sector funding through the Scottish Loan Fund. As noted in a September 2011 government report titled “Government Economic Strategy”:

[S]ecuring affordable finance remains a considerable challenge and further action is needed to ensure that viable businesses have access to the funding they require to grow and support jobs. The recovery is being held back by limited private sector investment – indeed, overall investment in the UK remains some 15% below pre-recession levels. Evidence shows that while many large companies have significant cash holdings or can access capital markets directly, for most Small and Medium-sized companies bank lending remains the key source of finance. Unblocking this is key to helping the recovery gain traction.

The limitation of a public loan fund is that the money can be lent only to one borrower at a time.  Invested as capital in a bank, on the other hand, public funds can be leveraged into nearly ten times that sum in loans.  Liquidity to cover the loans comes from deposits, which remain in the bank, available for the use of the depositors.  As observed by Kurt Von Mettenheim, et al., in a 2008 report titled Government Banking: New Perspectives on Sustainable Development and Social Inclusion from Europe and South America (Konrad Adenauer Foundation), at page 196:

[I]n terms of public policy, government banks can do more for less: Almost ten times more if one compares cash used as capital reserves by banks to other policies that require budgetary outflows.

In 2012, according to Leishman, the SIB had investment funds of £23.2 million from the Scottish government. Rounding this to £25 million, a public depository bank could have sufficient capital to back £250 million in loans. For deposits to cover the loans, the Scottish Government then had £125 million on deposit with private banks, earning very little or no interest.  Adding the revenues of just 14% of Scotland’s local governments would provide another £125 million, reaching the needed deposit total of £250 million.

The Model of the Bank of North Dakota

What the government could do with its own bank, following the model of the Bank of North Dakota (BND), was summarized by Alf Young in a followup article in the Scotsman. He noted that North Dakota is currently the only U.S. state to own its own depository bank.  The BND was founded in 1919 by Norwegian and other immigrants, who were determined, through their Non-Partisan League, to stop rapacious Wall Street money men foreclosing on their farms.

Young observed that all state revenues must be deposited with the BND by law.  The bank pays no bonuses, fees or commissions; does no advertising; and maintains no branches beyond the main office in Bismarck. The bank offers cheap credit lines to state and local government agencies. There are low-interest loans for designated project finance. The BND underwrites municipal bonds, funds disaster relief and supports student loans. It partners with local commercial banks to increase lending across the state and pays competitive interest rates on state deposits. For the past ten years, it has been paying a dividend to the state, with a quite small population of about 680,000, of some $30 million (£18.7 million) a year.

Young wrote:

Intriguingly, North Dakota has not suffered the way much of the rest of the US – indeed much of the western industrialised world – has, from the banking crash and credit crunch of 2008; the subsequent economic slump; and the sovereign debt crisis that has afflicted so many. With an economy based on farming and oil, it has one of the lowest unemployment rates in the US, a rising population and a state budget surplus that is expected to hit $1.6bn by next July. By then North Dakota’s legacy fund is forecast to have swollen to around $1.2bn.

With that kind of resilience, it’s little wonder that twenty American states, some of them close to bankruptcy, are at various stages of legislating to form their own state-owned banks on the North Dakota model. There’s a long-standing tradition of such institutions elsewhere too. Australia had a publicly-owned bank offering credit for infrastructure as early as 1912. New Zealand had one operating in the housing field in the 1930s. Up until 1974, the federal government in Canada borrowed from the Bank of Canada, effectively interest-free.

. . . From our western perspective, we tend to forget that, globally, around 40 per cent of banks are already publicly owned, many of them concentrated in the BRIC economies, Brazil, Russia, India and China.

Banking is not just a market good or service.  It is a vital part of societal infrastructure, which properly belongs in the public sector.  By taking banking back, local governments could regain control of that very large slice (up to 40 per cent) of every public budget that currently goes to interest charged to finance investment programs through the private sector.

Recent academic studies by von Mettenheim et al. and Andrianova et al. show that countries with high degrees of government ownership of banking have grown much faster in the last decade than countries where banking is historically concentrated in the private sector.  Government banks are also LESS corrupt and, surprisingly, have been MORE profitable in recent years than private banks.

Young wrote:

Given the massive price we have all paid for our debt-fuelled crash, surely there is scope for a more fundamental re-think about what we really want from our banks and what structures of ownership are best suited to deliver on those aspirations? . . .

As we left Thursday’s seminar, I asked another member of the audience, someone with more than thirty years’ experience as a corporate financier, whether the concept of a publicly-owned bank has any chance of getting off the ground here. “I’ve no doubt it will happen,” came the surprise response. “When I look at the way our collective addiction to debt has ballooned in my lifetime, I’d even say it’s inevitable”.

The Scots are full of surprises, and independence is in their blood.  Recall the heroic battles of William Wallace and Robert the Bruce memorialized by Hollywood in the Academy Award winning movie Braveheart.  Perhaps the Scots will blaze a trail for economic sovereignty in Europe, just as North Dakotans did in the U.S.  A publicly-owned bank could help Scotland take control of its own economic destiny, by avoiding unnecessary debt to a private banking system that has become a burden to the economy rather than a pillar in its support.


Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com.

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  • jo6pac

    I would love a Yes win here and if they did the above and stay away from the eu Scotland could be the winner. If they do win I also would love it if they tell England to remover all military from Scotland then lease all bases to Russia. That’s just so I can watch nato cry;)

    • Highlander

      Well, you know? At one time, back in the days of the Tsars, they did have a rather good rapport. And yes: It would be a rather humorous outcome for them to invite the Russians. NATO would have fits of squirming, hand-wringing, and night sweats!!!

  • colinjames71
    • Highlander

      Yes, a most excellent analysis of the matter!

      I’ll side with Corbett on a number of issues, most specifically in monetary matters, and dumping the royalty altogether.

  • Highlander

    What Scotland really needs is to breakaway from the current paradigm of government, and adopt A New Paradigm Of Government (ANPOG).

    Only then can they be truly free from oppressive politics, greedy politicians, and control freaks.

  • clarioncaller

    Becoming independent of the Crown would yield enormous benefits to the Scots. They could transform ‘Balmoral’ into a Bed ‘n Breakfast reaping a windfall for their Treasury.

  • Bev

    The NEED Act proposes a historic money reform, containing all the monetary provisions of the American Monetary Act including ending “fractional reserve” banking.

    Why Promoting States to do Banking is a Distraction and Diversion, and Reforms Nothing

    Historical experience has taught us what we need to do:

    1. Put the Federal Reserve System into the U.S. Treasury.
    2. Stop the banking system creating any part of the money supply.
    3. Create new money as needed by spending it on public infrastructure, including human infrastructure, e.g. education and health care.

    See full list of Monetary Conference speakers such as Michael Hudson, Joseph Huber & Steve Keen at http://www.monetary.org/2014schedule.html

    The American Monetary Institute announces its 10th Annual AMI Monetary Reform Conference
    October 2 – 5, 2014 at University Center in downtown Chicago


    A review of The Web of Debt by Ellen Hodgson Brown, J.D.
    The Shocking Truth About Our Money System And How We Can Break Free
    Second edition revised and updated (Third Millennium Press)
    Analysis by Jamie Walton, American Monetary Institute (AMI) researcher
    * All page references [in square brackets] relate to the Second edition (revised and updated 2008)

    Ellen Brown spins a captivating tale about our present money system, particularly for
    readers who were unaware that most of our money is created and controlled by the banking system, as a ‘debt’. Indeed, the book’s main value has been as an introduction to some of the problems with the debt-based money system, and some of the potential of monetary reform.
    Brown certainly deserves credit for this. However, through twists and turns, the book ends up promoting what could be an even stickier web of debt, as we’ll see below.

    Brown’s incredible U-turn

    Finally, after hundreds of pages telling us how bad the debt-money system is, Brown turns around and starts ‘justifying’ the present unsustainable (and unjust) debt-based money system, telling us fractional reserve banking:

    “… would be sorely missed if banks could no longer engage in it.” [p. 403]

    Brown completes her remarkable U-turn by rejecting what she’d just said is “the cheapest and most honest way” to create money in favor of keeping the system she earlier said had “reached the end of the line” and jumps to the ‘conclusion’ that we could somehow fix the problem by
    ‘nationalizing’ the banking business:

    “What is wrong with the current system is not that money is advanced as credit against the borrower’s promise to repay but that the interest on this advance accrues to private banks that gave up nothing of their own to earn it. This problem could be rectified by turning the extension of credit over to a system of truly national banks … authorized both to deal with deposits and to create credit-money with accounting entries, … as an agent of Congress.” [p. 404]

    Notice Brown has shifted her definition of the problem from the “fraud” itself to the interest on the “fraud”. She then asserts that taking interest on ‘loans’ of “nothing” would be okay if only “national” banks took it. In one paragraph, Brown redefines the problem and turns the “fraud” into her ‘solution’.

    But her flawed argument misses the point entirely: it turns our government into a banker, the ‘owner’ of our indebtedness, but does nothing to change the ill effects caused by a debt-based money system.

    Brown ends up keeping the problem in place


    The Lyndon LaRouche Influence on Brown

    The citations from the following writers in outlets (in order of first appearance in the book) known to be associated with the Lyndon LaRouche ‘network’ appear on the following pages:

    Anton Chaitkin; American Almanac (1977, 1997); pp. 8, 87, 224-25.

    John Ascher; Schiller Institute (website) (2001); pp. 19, 112.

    Marcia Merry-Baker, et al. (et al. uncredited); American Almanac (1995); pp. 19, 112.

    Lyndon LaRouche; Economics: The End of a Delusion (2002); pp. 50 (x2), 151, 415.

    Anton Chaitkin; Fidelio Magazine (spring 1998); p. 54.

    Anton Chaitkin; Executive Intelligence Review (1986); p. 84.

    Marcia Baker; Executive Intelligence Review (2007); p. 152.

    Christine Craig; Executive Intelligence Review (2007); p. 152.

    Lonnie Wolfe; American Almanac (1999); p. 160.

    Richard Freeman; Executive Intelligence Review (2007, 2002); pp. 192, 290-91, 295-98, 322-23.

    Christopher White; American Almanac (1993); pp. 192 (x2), 301.

    John Hoefle; EIR Talks (1998); pp. 193, 302.

    Christopher White; The New Federalist (1994); pp. 195, 196.

    John Hoefle; Executive Intelligence Review (2005, 2002); pp. 197, 325-26, 422-23.

    William Engdahl; Current Concerns (2003); p. 206. †

    William Engdahl; A Century of War (1993); pp. 207-08, 209-10, 215-16, 217, 240, 241, 242, 251, 252, 266, 414. ‡

    William Engdahl; Energy Bulletin (2006); p. 213. †

    Rachel Douglas, et al. (et al. uncredited); Executive Intelligence Review (1992); pp. 224, 225-26.

    Dennis Small; Executive Intelligence Review (2002, 2003); pp. 244, 246.

    Cynthia Rush; Executive Intelligence Review (2005); p. 246.

    Kathy Wolfe; Executive Intelligence Review (1992); pp. 249, 250.

    Michael Billington; Executive Intelligence Review (1992); pp. 257-58.

    Jeffrey Steinberg; EIR White Paper (Seminar in Berlin) (2006); p. 281.

    Lothar Komp; Executive Intelligence Review (2005); pp. 304-05, 305, 371-72.

    uncredited; Executive Intelligence Review (2004); p. 325.

    Lyndon LaRouche; Lyndon LaRouche Political Action Committee (website) (2005); p. 446.

    Lyndon LaRouche; Schiller Institute (website) (2000); p. 446 (x2).

    There may be more citations from other writers/outlets not identified as associated with this network.

    † Engdahl wrote these articles some years after withdrawing from the LaRouche network.

    ‡ Engdahl was a leading figure in the LaRouche network for many years and this book was first published within 12 months of his withdrawal from the network.

    This review was edited-down from an analysis three times this size, which will eventually be made available to serious researchers. Many thanks toTadit Anderson and Thomas Gregory for their help with this process.

    • ClubToTheHead

      The common wisdom, supported by among others Modern Monetary Theory (MMT), is that money is, and must be created with debt. MMT fans are passionate that this is a law of economics as infallible as any law of physics.

      When the little acknowledged collapse of capitalism became apparent in 2008, tens of trillions of dollars were created from nothing by a keyboard electronic addition to the criminal financial institutions’ accounting ledgers. There was no mention anywhere of the national debt instantly increasing by that amount. Nor was there any interest payment made to any Fed or government office that could account for the twenty to thirty TRILLION DOLLARS typed into existence.

      MMT claims that the Federal Reserve is not a private institution, so why was scale of the total amount of money supplied to the crashed financial sector revealed only by a Bloomberg investigation rather than by a GAO report? The pre-crash US ten trillion dollar debt did not increase by multiples on issuance of this grant to the collapsed financial institutions during their trash-for-cash sales to the FED.

      • Bev

        Indeed. Money should not be debt as Ellen Brown and MMT Modern Monetary Theory suggest along with the Federal Reserve Bank.


        AMI Evaluation of “Modern Monetary Theory”

        The AMI evaluation of Modern Monetary Theory (MMT) addresses the issues that arise over MMT’s misguided views on monetary facts, and its gross error in assuming that all money must be debt. That alone is all that’s necessary to wreck a monetary system and turn it into a wealth concentrating engine – into the “wrong” hands!


        MMT misuses terms

        MMT stretches and twists the meaning of words beyond normal usage; for example, Wray says:

        “We say that fiat money is a government liability. For what is the government liable? To accept its money in payment of taxes.”6

        Normally people think of a liability as being something owed and due. Money need not be something owed and due, it’s what we use to pay something owed and due. To call money a liability ignores the nature and properties of money.
        It removes the concept of money and substitutes a concept of debt in its place.

        MMT mis-defines money as debt

        Poor methodology and misuse of terms leads MMT to mis-define money as debt; e.g., Wray says: “Fiat money will be defined as … nothing more than a debt.”7

        But money and debt are two different things, that’s why we have different words for them. We pay our debts with money.

        If money is defined as a debt, it artificially places an unnecessary burden of debt on the whole of society. It turns the positive real net worth of all we produce into a financial negative instead of positive. In effect, it artificially places financial claims on all of our achievements and progress, thus denying us full benefit and enjoyment of all we create.

        While most money in the U.S. mis-designed system is really debt, put into circulation by banks when they make loans, it is a huge error to then define the “nature” of money as debt. That mistake would render it impossible to redesign the system in a just and sustainable way.

        The AMI considers the concept and definition of money as the most critical factor in determining whether a society’s money system functions in a just and sustainable way.

        How money is defined determines who controls the money system, and whoever controls the money system will dominate the whole society. For instance:

        • If money is defined as wealth (e.g., commodities like gold and silver by weight), as Adam Smith did, then the wealthy will control not only their own wealth, but the money system and thus the whole society as well.

        • If money is defined as credit or debt, as MMT and most economists now do, those who dominate credit (the banks) will control society’s monetary mechanism – and we know from experience they will misuse it to create bubbles, until the whole system crashes.

        • If money is defined as an abstract legal power of society, as the Constitution does, then the money system is placed under our constitutional system of checks and balances to work justly and sustainably for the whole society, not for only a privileged part of it.

        The AMI uses the following concept of money:

        Money’s essence (apart from whatever is used to signify it) is an abstract social power, embodied in law, as an unconditional means of payment.

      • ax123man

        “collapse of capitalism”? Don’t you mean the “collapse of crapitalism”? (crony capitalism). There is no room in capitalism for gun controlled monopolies. I’m growing tired of the “FED is private/public” debate. Both sides need to wake up and see the FED for what it is: a collusion between elitists both PUBLIC and PRIVATE. Ellen brown is both ignorant and naive if she thinks simply making banks publicly controlled will solve this. The problem is that banking and money is a MONOPOLY, not that it’s private or public.

        • ClubToTheHead

          John Kenneth Galbraith makes your point on the fiction of public and private sectors very plainly in his “Economics of Innocent Fraud”.

          Capitalism, and money itself, has never existed without the support of a credible threat of, and actual use of, State violence. The US dollar is now backed by its dominant military. All nations of the world are required to accept US intervention in their economies or be targeted for regime change.

          • ax123man

            Why would capitalism need state violence? There is absolutely nothing about it that requires it.

            “Capitalism, and money itself, has never existed without the support of a credible threat of, and actual use of, State violence”

            If the above is true, which I dispute, it’s because capitalism provides excess wealth and some members of society would rather leach off that wealth than produce something other want. But then to answer this question, one needs to define capitalism, which many seem to struggle with. I define it simply as an addendum to the free market, whereby some individuals save enough in order to acquire capital formation which can increase the production of goods and services beyond what could be done without that capital. How does this require violence?

            As far as your “never existed” comment, take a look at Ireland, which existed in a state of near anarchy from 650 to 1650, with it’s first coins minted in 997. Were Irish coins not money? Or will you argue kings were a form of state? Irish tuath’s were essentially voluntary, which singles out the most important quality representing a state, that is it is a MONOPOLY of violence. It is non-voluntary.

            It’s interesting you’d reference a book by Galbraith written when he was clearly showing signs of aging, with some of the text being completely incoherent. Anyway, I think Galbraith would agree that the blurring of lines between private and public sector is a problem. But how does one go from that to seeing a need to INCREASE the power of the state? Did we solve the problem of the blurring of the lines between church and state by increasing the power of the state?

          • ClubToTheHead

            That you would question whether a monarchy is a form of State makes further discussion of this topic pointless.

            We must first have a common language.

          • ax123man


            “The most commonly used definition is Max Weber’s, which describes the state as a compulsory political organization with a centralized government that maintains a monopoly of the legitimate use of force within a certain territory”

            The most striking quality of a state is that it is a monopoly. It is not voluntary. The Irish Tuath (and other such agencies in Iceland and elsewhere) were voluntary.

            So what exactly is the point you were trying to make in your last comment? That you don’t understand history? Or accept the above definitions? No, you just magically waved your hands claiming “your crazy for believing….”

          • ClubToTheHead

            “use of force”

          • ax123man

            Huh? You’re starting to become incoherent yourself. Maybe reading too much Galbraith. I read about a gang of thugs in Detroit who used force on some other people. Does that make them a government/state? How about the mafia in that same city? Are you trying to say that the “monopoly in a given territory” part is not really that relevant?

            Give me a relevant argument (more than 3 words) why an Irish tuath was the equivalent of a state.

          • ClubToTheHead


          • ax123man

            your argument is the single word “amusing”? It would appear that your rebuttals have degraded to typical progressive nonsense. “Watch me as I refute factual arguments with such emotional charged words as …. amusing”.

          • ClubToTheHead

            Write on.

          • ax123man

            Since it’s clear your positions are completely unrelated to facts, I thought you might want to understand what they are based on. Here are some hints:

            From Helmet Schoeck, Envy: A theory of Social Behavior

            “One begrudges others their personal assets, being as a rule almost more intent on their destruction than on their acquisition”

            From Michael Huemer – The Irrationality of Politics (2012 Ted talk)

            “If you think the community of experts on this subject are wrong while at the same time being unable to state their positions, you might hold an irrational position”

            “Rationality is costly. That is if your rational, you don’t get to believe whatever you want to believe”

            And there you have it: the basis of progressivism.

          • ClubToTheHead

            Ah, Ted talks, the unthinking basis of progressivism.

            Reason’s support of irrationalism.

  • jadan

    Ian R. Crane recommendations for a new monetary regime in an independent Scotland seem reasonable enough. What seems unreasonable is Ellen Brown’s suggestion that the Bank of North Dakota could be a model of public banking for them.. First of all, no one knows anything about this weird little bank in North Dakota, and if they know anything about ND, it’s because of the fracking. It’s become the 2nd largest producer of oil & gas within the last 10 years. There is a frenzy of exploitation going on that is despoiling the environment of that agricultural state. And guess where lots of the money the BND is earning comes from? From the “participation” in the loans of the many private banks in ND that are funding fracking. The BND is a banker’s bank. It helps establish private banks and guarantees their loans, with public funds. There are more private banks per capita in ND than any other state becauae the “public” bank underwrites them. The BND is a banker’s bank capitalized by public wealth, which is used to help private bankers get richer. So why would anyone call a banker’s bank a “public bank”? One hopes any public bank in a newly independent bank in Scotland would bear little or no resemblance to the Bank of North Dakota. There are no public banks in the US. We have no model to offer the world. We have a corrupt privatized monetary system called “the Fed”. Ellen Brown is a supporter of that corrupt private system, even though she knows better than most what a public bank really is. Go figure!

  • ahuxley

    If Scotland were to succeed in implementing most or all of Ms. Brown’s suggestions, it wouldn’t be too long before it was branded a “terrorist state”, invaded by NATO for “humanitarian” reasons, under the pretext that bagpipes are WMDs…
    And unfortunately, the majority of the western, brain-dead population would swallow the swill, hook, line and sinker…

    Good luck, Scotland…