Debt-based economic system collapsing

James Naughtie interviewing Dennis Kucinich, congressman from Ohio, on the 'Today' programme 17/12/08 (extract)

JN Congressman, the truth about the regulatory system now admitted by the head of the NEC is that it has not worked at all.

OK That's absolutely correct. As chairman of the domestic policy sub-committee my sub­committee has been looking at this failure of regulatory systems and you have to go back to this bill that was passed, the financial modernisation act which overrode the protections that were trying to stop insurance companies, banks and financial security interests from inter-dealing without transparency. The whole thing has come down and what it comes to is a debt-based economic system collapsing, economies of nations are collapsing. The private sector has failed. The public sector is expected to rescue them. It will and therefore the public sector ought to be in control of the money system to benefit the country and one of the things I am going to be doing in the States is taking steps to make that happen.

J N Well I know you are very critical of the bailout, the $700 billion plus bailout and the way that was organised what was the alternative, because at that stage there was an absolute sense of panic. We know that the president was quoted and it has never been denied as saying to the treasury secretary, "This sucker could go down" meaning the whole American financial system. What was the alternative?

OK The president's manner of expression really didn't reveal any deeper thought structure about what could be done. The fact of the matter is rather than borrowing the $700 billion and ending up paying about three times the amount after interest charges, the Government could have issued the money the same way the banks do instead of borrowing it from them.

You know there was an opportunity which I argued for in the Democratic caucus to buy the pools of mortgage-backed securities so you could go to the root of the problem which is people losing their homes because they can't pay the principle and interest and enable a rescheduling the principle and interest so that you keep people in their homes but there was no interest in that. In effect what we have done is to bailout Wall Street. We have got to change the game and it is about creativity. I think it is time to incorporate the Federal Reserve into the US Treasury where money will be created by the Government as money not as private interest-bearing debt. I think we have to remove the banks' privilege to create money through fractional reserve and we have to spend newly created money into circulation on infrastructure including education and health care. These are the kind of things that will make a difference.

JN The president elect was saying yesterday that the Fed was running out of weapons, of instruments to use.

OK President Obama, is going to be faced with some dramatic action. We are going to have to rebuild America's infrastructure and the Government ought to be spending the money into circulation rather than borrowing it from the banks. We need to make sure that we have control over our monetary policy. The only way to do that is to incorporate the Federal Reserve Banks into the US Treasury so the money will be created by the Government as money. President Obama is going to have to move dramatically to get control over this economy.

(Items supplied by Colin Whitmill)

Guardian Political Review, Issue 56, 2009

Dennis Kucinich

US Congressman Dennis Kucinich