Path to a Peace Economy

Yes! Magazine - Our economic institutions have been designed by Wall Street interests to secure personal economic and political power in the hands of members of a small ruling elite. They do it well. Unfortunately, it is the wrong purpose. We need a top to bottom redesign to put in place the institutions of a new economic system, a New Peace Economy, designed to share power and resources in a world that works for all.

The Wall Street financial collapse has stripped tens of millions of previously middle class Americans of their jobs, homes, and retirement assets and plunged them into poverty and despair. The federal government and the Federal Reserve have responded by pouring trillions of dollars into the Wall Street financial institutions that created the crisis with minimal conditions and oversight, all in the hope that some of this money would trickle down as loans to the productive economy. The recipient financial institutions used the money instead to fund acquisitions that make "too big to fail" banks even bigger, pay dividends to shareholders who by market rules should have been wiped out in bankruptcy proceedings, award obscene bonuses to criminally culpable executives, and launch new predatory financial scams that create new systemic risks.

Wall Street says we have now weathered the crisis, which basically means the profits and bonuses of its most rapacious financial institutions have been restored. The jobs, homes, and retirement assets of ordinary Americans have not. To the contrary, job losses, bankruptcies, and housing foreclosures continue.

This is money as a system of power, a tyranny all the more complete because it is largely invisible to those it enslaves. To liberate ourselves from the tyranny, we must demystify money and recognize that it is a mere number created from nothing with a simple accounting entry when a bank issues a loan. As economist John Kenneth Galbraith once famously observed, the process by which money is created is “so simple it repels the mind.”

When you take out a loan from a bank, the bank opens an account in your name and enters the amount of the loan in its ledger. That becomes a liability on the bank’s accounts, offset by the corresponding asset of your promise to repay with interest. Two simple accounting entries, and money magically appears from nowhere. This simple fact makes banking a very profitable business and is the key to the ability of the institutions of Wall Street and its global counterparts to rule the world.

Mayer Amschel Rothschild, founder of the Rothschild banking dynasty, once famously said, "Permit me to issue and control the money of a nation and I care not who makes its laws."

That pretty well sums it up. In our current system, this control is centralized in and monopolized by Wall Street institutions that value only money and seek only private accumulation. From a societal perspective it is a devastatingly unwise and destructive arrangement.

So what is real wealth? We might say it is anything that has a real intrinsic value: land, labor, knowledge, food, education.

Most valuable of all are those forms of wealth that are beyond price: Love, a healthy, happy child, a job that provides a sense of self-worth and contribution, membership in a strong caring community, a healthy vibrant natural environment, peace—none of which find any place on Wall Street balance sheets or in our calculations of GDP.

Pull back the curtain, as the financial crash has done, and the truth is revealed that Wall Street acquires its power by destroying real living wealth to create phantom financial wealth. Wall Street is more than immoral, it is an institutional manifestation of evil.

So what will the New Economy look like, and how will we achieve it? Read more.