I am not an economist - but I understand what this proposal is and what it isn't.

Firstly - in general terms, its a good idea - but is kind of doomed to fail due to practical constraints.

What is the practical constraint?

Well - the state bank is going to suffer all the same problems any other bank is suffering.

This means if they lend into a deflationary environment, then loans are likely to default. The taxpayer then picks up the tab.

All banks borrow money from the Federal Reserve - if they use US dollars - and the Federal Reserve arbitrarily sets the so called 'discount window' (This is the interest rate it charges to banks).

So if the bank started with low interest rates - it still has to at least match the Fed rates or lose money. So unless there is some special provision for a state bank, then it is at the mercy of the Fed in terms of interest rates.

The article is quite correct in stating there is a decoupling between investment and the real economy.

Basically investment is a lie - because you can make a bet something is going to fall - so regardless of if the economy is going up or down - investment banks can make money. Thats not investing - its gambling.

Real banks can only make money if the economy is growing. Therefore the rules set up by the controller scum make it in their interests to make things go up and down as much as possible - and big rallies, then crashes make them the most.

While short selling is legal - then we are all at the mercy of the roulette players who benefit even when everyone else loses.

The free money that has been injected into the investment banks will never go into the real economy for obvious reasons - it is a sure way to lose.

Under normal conditions a state bank would be ok - at the moment it would be an extra expense, and not that likely to succeed.

The only way to really succeed would be if it offered debt free money - such as a state currency that was spent into the economy to create infrstructure - or as silver and gold backed currency that could be used everywhere.

While each state is tied to the overall US economy, and its money is issued as debt by the Fed - then no system is going to work.

The govt should print and issue every state a few hundred billion to build infrastructure. That would end the deflation, re-ignite the economy and get things moving - it would also devalue the dollar which is actually a good thing at this time.

The problem is that all that money is printd as debt to the Fed - so it doesn't really help. Govts should just print money without having to borrow it from some crappy private bankers.

The best thing the US could do is just shut down the Fed - and print debt free money. It could just pay off all its foreign debt with paper at no cost - it would of course devalue the dollar - but it wouldn't hurt the US much, and most people in the US don't have savings they have debt - so devaluing the dollar is good for just about everyone in the US.

Once all debt is paid, back the debt free currency with gold or something equivalent, and spend masses of it into the economy for infrastructure and other things good for the people.

You could turn this whole thing around overnight if you wanted to.