How You Can Cash In on the New Trend Toward Private Lending

As public finances continue to collapse throughout the United States, some states are considering drastic action to protect their citizens from our parasitical central banking system and their horrid inflation.
Utah, for example, has moved toward accepting gold and silver as legal tender.
Meanwhile, another fourteen states are looking at a unique strategy to help them pay public employees, meet pension obligations, keep schools open, and put them in a stronger financial position into the future – without selling off state assets, drastically cutting services, or severely raising taxes.
This strategy has been in use for nearly a century in one particular U.S. state that’s far removed from major population centers, financial hubs, and Washington, DC.
I want to share this state’s very smart strategy with you, because you may be able to adapt this creative solution for yourself – on a much smaller scale – to add additional income to your wallet or start a new in-demand business when our economy continues to collapse.
North Dakota:
How It has Safely Enjoyed a Seven-Year Budget Surplus…
These 14 states – California, Hawaii, Arizona, New Mexico, Illinois, Louisiana, Maine, Maryland, Montana, Oregon, New York, Oklahoma, Virginia, and Washington – are looking to model North Dakota’s state-owned bank – the Bank of North Dakota (BND). It is the only state-owned bank in the U.S. and was founded in 1919 because North Dakota wanted independence from out-of-state moneylenders. BND is actually a major reason for North Dakota’s remarkable financial strength.
Field of  Grain
Today, North Dakota has the lowest unemployment rate (3.3% in April 2011) in the nation. In 2009, the state enjoyed its largest budget surplus on record, during the height of the economic crisis. This year it launched the Children FIRST program which provides a $100 contribution for families who opt into the state’s college savings plan, and there have been NO bank failures in the state for over 11 years.
Consider these highlights of the state’s financial independence, as documented by Ellen Brown, J.D., author of Web of Debt (stay with me because I’m going to show you how to replicate this performance on a personal level):
  • Helps keep taxes low for its 600,000 residents. The Bank of North Dakota is self-funding and self-sustaining and does not rely on state funds or tax money. In fact, the opposite is true; BND has a return on equity of 26% and has contributed over $300 million to the state general fund over the last decade.
  • Keeps money and jobs in the state. BND accomplishes this by leveraging state funds into credit for local businesses.
  • Enriches the state long term. Studies show interest payments are responsible for 30-50% of public project costs nationwide. But not in North Dakota! State and local infrastructure projects are funded through BND at substantially less cost, because the state owns the bank and essentially pays the interest to itself.
  • Claims financial independence. The BND is insured directly by the state, not the FDIC, which enables it to save on costs and exercise its autonomy.
  • Strengthens community banks, it does not compete against them. BND acts as a mini-Fed that helps local banks make loans and provides correspondent banking services. North Dakota has the highest number of local banks per capita and the lowest default rate of any state.
In short, North Dakota and its state-owned bank are successful because it maintains its independence and keeps the spread, interest, fees, capital, and money at home rather than “export” it to out of state moneylenders.
Keep the Money in the Family and Build YOUR Wealth, Too
Using North Dakota as an example, protecting your financial independence may soon mean having the capacity and skill to bankroll your family and friend’s businesses so they become self-reliant like you and help perpetuate your own safety, health, and success.
Peer-Peer Lending
What’s good for North Dakota may become a necessity for you and your loved ones. Lending money to friends and family is often considered ill advised. In these economic times, it is already difficult to receive loans from a bank and it may become harder in the future. “Keeping the money in the family” by lending to them may be a necessity very soon.
So, it may be a good idea to get some personal lending experience, even on a small scale, and earn additional revenue while you build your skill. The problems sometimes associated with lending to friends and family often occur because expectations are not fully explained or written down properly. LendingKarma.com allows you to create customized personal loan documents such as promissory notes and UCC documents to use with friends and family. You can even set up automatic email notifications when payments are made or payments are due.
It doesn’t manage your collections but it gives you peace of mind, walks all parties through the steps, and formalizes the arrangement between you and your family, friend, or business associate.
Becoming a Wise Lender Is a Valuable Skill
In many emerging economies, when you want to start a business or buy real estate you ask friends and family for a loan – or to join you. Banks in these countries exist to serve corporations, not the middle class. Even today, in many rural parts of Turkey (even after a decade of financial stability and avoiding the global crisis plaguing most European nations) the local goldsmith, not the banker in the three-piece suit, is still the center of the finance world.
In fact, these direct lending (and borrowing) situations already exist here in the U.S. It’s known as person-to-person lending, peer-to-peer lending, or social lending. The Internet has made it simple to connect borrower and lender, sidestepping traditional banks. Companies such as Prosper.com and LendingClub.com are major players in this arena, each of them helping fund over $200 million in loans since 2006.
“He Who Owns the Gold (and Silver) Makes the Rules”
When inflation returns with a vengeance and traditional banks go back to 1970’s interest rates, or worse, and require stricter lending hurdles… and you’re the only one in your neighborhood smart enough to own a stash of precious metals, you’ll find yourself in an envious position to act as the alternate bank and call the shots. Or, be the spark that rebuilds your community (or a small chunk of it) and earn a healthy profit in the process.
Although, this may be an extreme idea and hopefully we never reach this point in America, it’s not too far fetched. Drive through any community in the U.S. with a high immigrant population and you will see many small businesses. In fact, there are even more, even smaller businesses you won’t see from your car.
The point is, many of the owners immigrated with just the shirt on their back, so a bank didn’t lend them the money to start their enterprise. The capital came from hard labor, savings, and probably friends and family. So, it doesn’t hurt to learn (or at least familiarize yourself with) the skill of banking and lending at a direct level.
One Last Pointer – This One’s for Everyone…
FCU
Don’t have the resources or the inclination to become the bank for your family and friends? You can get many of the same benefits by joining a member-owned federal credit union (FCU). FCU’s are chartered to act in the best interests of their members/account holders. Interest rates charged to borrowers are generally lower because there’s no need to make a profit for shareholders, only enough to pay interest to depositors.
Keep these options in mind. America is in the worst monetary crisis since the Civil War. Once this crisis peaks (probably in the form of a profound dollar crisis), unregulated person-to-person lending may be one of the few remaining rungs of the ladder for entrepreneurial Americans to pull themselves back up.
Remember this: 20 years ago, the number of home-schooled children represented a tiny number of families who wanted their kids to escape failed public education. Today, there are at least a million home-schooled children, most of who test head and shoulders above kids who are trapped in the government-run school system.
Is the rise of a privatized, unregulated banking system really that far-fetched? I don’t think so.