Forging America: My Campaign Manager is Roosevelt

Chapter 299 - 149: Surpassing Keynes, Part 2

"So, you can’t expect the Federation to create a nationwide RFC for you like in the old days. Sanders doesn’t have that kind of power."

"You have to create a miniature RFC yourself, right here in Pittsburgh."

"Force the blood to circulate between Erie, Scranton, and Pittsburgh. Create prosperity in this localized area until you attract outside capital."

Leo understood what Roosevelt meant.

"You want me to start a bank?"

Leo shook his head.

"That’s impossible, Mr. President."

"The laws in Pennsylvania are very strict. Local governments are prohibited from engaging in commercial banking. We can’t accept deposits, and we can’t issue loans freely like commercial banks."

"That’s a red line."

"The guys at the State Banking Regulatory Bureau are just itching for an excuse to come after me. If I dared to open a bank, they’d be at my office tomorrow with seizure notices and handcuffs."

"Then don’t call it a bank," Roosevelt corrected him.

"A name is just a label. The function is what’s core."

"You could call it the ’Regional Industrial Working Capital Fund,’ or the ’Supply Chain Settlement Center.’"

"As long as you don’t put up a sign that says ’bank’ and don’t accept deposits from the public, the regulatory bureau can’t touch you."

"We’re going to establish a bookkeeping system internal to the Rust Belt—a closed-loop regional credit system."

Leo paused. "A closed-loop credit system?"

"Yes."

Roosevelt began to lay out his audacious plan.

"You have five hundred million US dollars in cash on hand."

"To a traditional bureaucrat, that’s just money to be spent."

"But in the eyes of a financier, it’s the perfect reserve."

"Listen, Leo."

"Starting tomorrow, when you pay the Erie steel mills, don’t pay the full amount in cash."

"Pay thirty percent in cash."

"For the remaining seventy percent, you’ll pay with something new."

"We’ll call them ’Alliance Credit Notes.’"

Leo’s mind raced, trying to keep up with Roosevelt’s thinking.

"Notes? Those are just IOUs."

"Exactly, they’re IOUs. But these are IOUs backed by the Pittsburgh City Government and guaranteed by five hundred million US dollars in cash."

Roosevelt continued.

"The Erie steel mill gets one of these notes. What can they do with it?"

"They can take that note to Scranton to buy cement, or to Johnstown to buy glass."

"Because Scranton and Johnstown are also members of the Alliance, they will recognize the value of these notes."

"The Scranton cement plant gets the note, and they can use it to pay their shipping fees to the Pittsburgh logistics hub."

"The Pittsburgh logistics hub gets the note and can use it to pay taxes to the city government or to pay its land lease."

"See?"

Roosevelt painted a picture of constant circulation.

"The note has completed a full circle between Erie, Scranton, Johnstown, and Pittsburgh."

"It has facilitated four transactions and spurred production four times."

"And throughout this entire process, not a single cent of cash in the Pittsburgh City Government’s accounts has been touched."

"Cash only actually leaves the account when a note finally needs to be redeemed for US dollars, or when it leaves the Alliance to pay an outside supplier."

"This is the multiplier effect."

"Within this circle, the note *is* money."

"This way, your five hundred million dollars can be used like it’s two billion."

"You’re not just building projects, Leo."

"You’re creating liquidity."

"On this barren plain, you are issuing a currency of our own."

Leo sat in his chair, a tingling sensation crawling up his scalp.

It was an insane idea.

It was tantamount to establishing an independent "special monetary zone" in western Pennsylvania, right under the nose of the existing US dollar system.

Using the five hundred million dollars as a reserve, he would use administrative power and a tightly bound supply chain to create an internal settlement instrument.

This was a transgression against the established financial order.

"Is... is this legal?"

Leo asked instinctively.

"If you don’t call it currency, then it’s legal."

Roosevelt’s reply was blunt.

"We’ll call it a supply chain financing service. It’s a transfer of debt between corporations—a perfectly legal business practice."

"As long as the other mayors and the factory owners agree, even if the bureaucrats in Harrisburg figure out what we’re doing, they won’t find any law on the books to stop us."

"Because we aren’t printing money. We’re just keeping a ledger."

Leo stood up and walked over to the huge map.

He looked at the circle he had drawn with his own hands: the "Pennsylvania Industrial Revival Alliance."

Before, this circle was just a loose coalition bound by mutual interest.

It was sustained only by a one-way blood transfusion from Pittsburgh.

But with the addition of this "closed-loop credit system"...

The circle would come alive.

It would become an organism with an independent circulatory system.

Erie’s steel, Scranton’s cement, Pittsburgh’s logistics, Johnstown’s energy.

This invisible network of notes would lock them all tightly together.

It didn’t just solve the funding shortage; it was a form of deep political entanglement.

Once these cities grew accustomed to using the notes, once their economies became dependent on this system...

...they would never be able to break away from Pittsburgh.

They would have to uphold Leo’s authority and ensure Pittsburgh’s financial security, because that was the anchor for the value of the notes they held.

It was a bond stronger than any treaty.

But Leo didn’t let the grand vision go to his head.

He was silent for a moment, his brow furrowing even tighter.

’But this is still just drinking poison to quench thirst, isn’t it?’

’No matter how we redefine it or design the closed loop, we’re essentially just borrowing from the future.’

’We’re using five hundred million dollars of leverage to create two billion in false prosperity. But if no new hard currency flows in from the outside, if Erie’s steel ultimately can’t be sold outside of Pennsylvania, this closed loop is bound to collapse under the weight of accumulating debt.’

’When that happens, it won’t just be Pittsburgh that collapses, but the entire Alliance. It’ll be a catastrophe ten times worse than what we’re facing now.’

Leo paused, waiting.

He expected Roosevelt to chuckle, as he always did, and point out a blind spot in his reasoning, telling him there was some perfect economic principle to avert this outcome.

But what he got instead was Roosevelt’s frank admission.

"You’re right."

Roosevelt’s voice was calm.

"It *is* drinking poison to quench thirst. When that five-hundred-million-dollar reserve is depleted, the game is over if no new capital has been injected. Everyone dies."

Leo felt a chill run down his back.

"Then what are we doing? We’re leading everyone to ruin!"

"We’re buying time," Roosevelt said. "As long as we can inflate the balloon big enough, we’ll have a chance before it pops."

"What chance? How do we break this deadlock?"

"There are only two ways."

Roosevelt held up one finger.

"First, pray for another world war to break out."

Leo was stunned.

"My New Deal never actually ended the Great Depression. It was the guns of Pearl Harbor, the battlefields of Europe, the endless orders for munitions that finally absorbed the United States’ excess production capacity and allowed the country to truly recover."

"If a third world war broke out tomorrow, Pittsburgh’s steel would instantly become a critical strategic resource. All your problems would be solved in an instant."

"That’s impossible," Leo said through gritted teeth. "I can’t count on the destruction of the world to save my city. What’s the second option?"

Roosevelt’s gaze seemed to pierce through the void and land on Leo, filled with undisguised ambition.

"Then move faster. Even faster."

"Before the money you’re holding burns up, before that balloon pops."

"Climb."

"Climb to the highest seat of power."

"When you’re the President of the United States of America, when you’re the one holding the keys to the Federal Reserve’s printing press and deciding the flow of trillions of dollars..."

"...a little debt crisis like this will naturally solve itself."

Roosevelt’s voice was filled with a seductive power.

"For a mayor, five hundred million dollars in bad debt is enough to land you in prison for life."

"But for the President of the United States of America..."

"Five hundred million dollars?"

"That’s nothing more than a trivial statistical error. A simple monetary policy adjustment. With a single stroke of a pen, it could even become a national strategic investment."

"As long as you climb high enough, no debt can ever catch you."

Roosevelt’s laughter echoed in the depths of Leo’s consciousness.

"Go on, my boy."

"Turn this crisis, one that’s doomed to fail, into the cannon salute that announces your coronation."