Transcript: David Korten: Agenda For A New Economy: From Phantom Wealth To Real Wealth, 29 May 2009
[Thom Hartmann]: I'm very pleased to have in the studio with me an old friend and brilliant, advisor's not even a strong enough word. I've learnt so much from David Korten over the years. David Korten, former Harvard Business School professor, the Asia regional advisor for development for USAID, Ph.D. from the Stanford Business School. He's the author of the international best sellers "When Corporations Rule the World", and "The Great Turning: From Empire To Earth Community". Co-founder and board chair of Yes! Magazine, and board member of the Business Alliance for Local Living Economies.
David, tomorrow night here in Portland, the reason why he's here rather than up in Seattle way where he normally lives, Bainbridge Island, is tomorrow night 7 o'clock he will be at the First Baptist Church at SW 12th and Taylor for all of you Portlanders, and that's a $20 donation although no one will be turned away for lack of funds. David, welcome to the show.
[David Korten]: Thom, it's always a delight to be here with you in Portland, particularly in the studio.
[Thom Hartmann]: Yeah, it is great to have you. David, as an economist or an economics guru, a business guru, somebody who really understands this stuff, and the author of these books that just have analyzed our, brilliantly analyzed our economic situation, your thoughts on how George Bush setting up TARP and his initial response, and now Barack Obama in many ways following through on the Bush policies. Where's our economy at right now? Where's it going to go? And what are the consequences going to be of the types of intervention that we are seeing right now?
[David Korten]: Well, so far as I can see, the interventions are, I mean, we've actually become quite distracted in terms of the focus on how do we recover the economy, get it moving again. And of course, my most recent book, "Agenda For A New Economy: From Phantom Wealth To Real Wealth", I wrote it specifically because of the focus on restoring the economy essentially to its former shape.
... the tag line is, "Why Wall Street can't be fixed, and how to replace it".
[Thom Hartmann]: OK, so let's get into that.
[David Korten]: Yeah, I wrote it because the focus of the Bush response to the financial collapse was based on recovery rather than recognizing that we have a fundamentally defective economic system. The design is wrong from the beginning. We've created a society in which most everything we do depends on money, and then we've given over the control of creation and allocation of money to these Wall Street institutions that are basically organized as a crime syndicate engaged in a counterfeiting, usury, fraud and extortion rackets.
[Thom Hartmann]: And they literally do create money. I think a lot of people think that the Fed creates money or that the Treasury creates money. And the Treasury can mint coins, but that is about it. The Fed prints our dollars but with a fractional reserve banking system, the way that money is created is by debt. Every time a loan is written, literally money is created out of thin air.
[David Korten]: Yes, this is a key to understanding the existing system and it's one of the reasons for the incredible instability and the incredible power that we give to private banks to essentially control the economy. Now, one of the things that I became very conscious of as we look into this is that most of Wall Street's activities is focused on creating what I call phantom wealth. It is about creating money out of nothing and not channeling it into the productive activities of Main Street, where we're producing real goods and services for people, but rather channeling it into all kinds of very complicated systems of financial speculation, [cross talk]
, financial bubbles, derivatives and one of the things I realized in this book is rather than trying to unravel how do all of those scams work, the bottom line is that it is a system that is devoted to creating as much money as possible, which is phantom wealth, it is simply numbers that have no reality, to give more and more power not even to the shareholders in Wall Street so much as to the managers; the CEOs, the heads of the banks, and the top money managers.
And this is the starting point of recognizing the need to essentially shut down Wall Street as we know it, create a whole new financial system that is designed to meet the needs of Main Street businesses and Main Street people.
[Thom Hartmann]: And one where money actually represents wealth. That is, it represents actual goods and services rather than just kind of magic stuff that Wall Street creates.
[David Korten]: Yeah.
[Thom Hartmann]: What's, in the last hour I had a caller about the Fed, and my point was that the Fed, Ellen Brown very eloquently has been arguing for some time that the Treasury Department should simply buy the Fed from, or acquire the Fed, seize the Fed, from the twelve Federal Reserve banks, let them become simply private banks, and we should start minting our own money, as North Dakota does. We have one state that does this, and they have been doing that for a century and providing 3% loans to farmers, which is why they were institutionalized in the first place, with no problem ever. Your thoughts on the Fed and their role in all this.
[David Korten]: Well, the basic idea that we need to move from a system in which most of our money is created by private banks lending it into existence to a system where banks serve the function that I learned, that was taught when I was in Business School, was that banks are intermediaries; that they take in deposits from their, from people that have savings, and then they lend those out to people in the community.
[Thom Hartmann]: That's the theory.
[David Korten]: That's the theory, yeah, and that's the way it should work.
[Thom Hartmann]: For the last couple of thousand years, actually.
[David Korten]: Yeah. When we need money into circulation, it should be issued by government, and I think preferably spent into existence to fund infrastructure, fund education, fund things that are actually building the social and real physical capital of the society, which are really foundations of continued real wealth creation.
[Thom Hartmann]: Right.
[David Korten]: Certainly rather than banks lending it into existence for purely private gain of the banks.
[Thom Hartmann]: What do you think? We're talking with David Korten ... , and David, the title of your most recent book?
[David Korten]: "Agenda For A New Economy: From Phantom Wealth To Real Wealth".
[Thom Hartmann]: And it seems to me, you know, that Ellen Brown's suggestion, for example, that we federalize the Fed, your suggestions that we change the way that we're dealing with money.
[David Korten]: Yeah, it's essentially the same thing, it's just a question of how you do it, and I'm less concerned about specifically how we do it than the fact we need to do it.
[Thom Hartmann]: Right, my question is how do you do it, I mean, all of a sudden just snapping your fingers and say we're, that ain't going to happen. I'm hearing, I mean, we've got an administration right now that is basically continuing Bush economic policies rather than going back to FDR economic policies, much less Teddy Roosevelt or Abraham Lincoln economic policies. He actually issued currency, Federal currency, the Greenback, and seized some of those Federal Bank functions and it worked quite well for a while, and then he was assassinated and so, how do we do this?
[David Korten]: Well, the first thing is we have to start the conversation. I mean, it's clear that, you know, I have no idea what Obama's intentions were as he came in. I have no idea to what extent he understands the problem, but he is obviously under enormous political pressure from Wall Street. You know, I think of it, he's got so many issues on his plate it's sort of like the old saying, when you're up to your neck in alligators, it's hard to remember that you came to drain the swamp.
[Thom Hartmann]: Yeah.
[David Korten]: And...
[Thom Hartmann]: But he's embraced some of those alligators. I mean, he's got Larry Summers and Tim Geithner.
[David Korten]: He absolutely has, and I find that extremely disappointing and as you say, his policies, particularly in relation to Wall Street, are almost identical to the Bush administration. Now...
[Thom Hartmann]: What's that going to lead us to?
[David Korten]: Well, it's going to lead us to, if they pump in enough money to revive the banking system temporarily, it will simply get back into its old mold and it will collapse again.
[Thom Hartmann]: Right. It's where they're just reinflating the bubble.
[David Korten]: They're reinflating the bubble and they're creating enormous wealth.
[Thom Hartmann]: And when it collapses again we could see something that really does look like the Great Depression.
[David Korten]: Yes.
[Thom Hartmann]: I mean, it's hell on wheels out there right now but it could get a whole lot worse.
[David Korten]: But, the thing that is so important is the kind of thing that you're doing on your show; the kind of deep change that we need starts with a conversation. And as long as most people think that government prints money, have no understanding of this issue, then it becomes almost impossible for president Obama to take the kinds of initiatives that are necessary, because nobody's going to understand it.
[Thom Hartmann]: Right.
[David Korten]: We've got to have the conversation.
[Thom Hartmann]: We have a big job educating the American people and you're doing some of the greatest work in that regard. Yes! Magazine is a great resource ...
[David Korten]: And our current issue is on the new economy. It just came out, and I hope everybody will check it out on the news stand.
[Thom Hartmann]: The New Economy Starts Here, in fact, right there on the cover.
[David Korten]: Exactly.
[David Korten]: "Agenda For A New Economy: From Phantom Wealth To Real Wealth". "Why Wall Street can't be fixed, and how to replace it".
[Thom Hartmann]: There you go, and once again, for our friends here in the Portland area, David will be speaking tomorrow night at 7 pm at the First Baptist Church at 12th and Taylor in downtown Portland. $20 donation, $5 to $20, no one's going to be turned away for lack of funds. So show up if you want to hear some, if you want to learn something and learn it in a fun and entertaining way, David Korten's your man. And he's here and he's going to have a great time, so thank you so much David for stopping by.
[David Korten]: Thank you Thom.
[Thom Hartmann]: Great seeing you.
Transcribed by Sue Nethercott.