MS. JEN GOLBECKFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world, I'm Jen Golbeck from the University of Maryland, sitting in for Kojo.

MS. JEN GOLBECKLater in the broadcast, a vegetarian feast with Mediterranean food writer and journalist Aglaia Kremezi, but first, understanding our money a little bit better by snacking on short documentary films. For a lot of us the American economy is something of a black box, the business pages are written in a language we don't often understand, our savings and investments go into banks that only go on to do alien things with them.

MS. JEN GOLBECKBut a new documentary series attempts to demystify the forces that shape our economy, using everything from cavemen to animation to explain things like, what the federal reserve actually does and why our tax system is so complicated. "We The Economy," is a series launched by a Microsoft founder Paul Allen and documentarian Morgan Spurlock. It features two pieces by the guest joining us today, about one very basic question, what is money anyway? Joining us from studio's in New York City is James Schamus, filmmaker and screenwriter. James, it's good to have you.

MR. JAMES SCHAMUSThanks for having me.

GOLBECKYou also can join the conversation, do you think it's fair to say that most Americans are economically illiterate? And how comfortable do you feel about your basic knowledge of pocketbook issues? Give us a call at 1-800-433-8850 or send us an email to kojo@wamu.org. James, your fingerprints are on a few big films that took on very big matter, films like "Brokeback Mountain," but Paul Allen and Morgan Spurlock put together this series, essentially out of concern for whether or not we're becoming economically illiterate. Why did you sign on to the project and what did you feel you could bring to it?

SCHAMUSWell, it was a lot of fun being asked by Morgan and his team to contribute a little documentary, this summer, about the economy. They had a whole series, there's 20 filmmakers who've made these short films and they range from Academy Award winners to people who make gigantic big spectacle Hollywood movies like "G.I. Joe: Retaliation," and then there was me, I'm a producer and screenwriter. I work a lot with Ang Lee and have made things like, as you've mentioned, "Brokeback Mountain," "Crouching Tiger," so this was a fun chance to flex some other muscles.

SCHAMUSAnd actually, I hope contribute a little bit to the economic literacy of my fellow citizens, of which I think, it's fair to say, there's very little. The idea was to make short films that approach topics that we all think we know something about but in fact are vast and underlie alien mysterious to most of us. Things like, you know, what is it all about? What is money after all? And my goal was to, and what turned out to be two short films, make those questions seem very strange to you, so that, for the rest of your life, if you click on my movies, you will never look at a dollar bill the same way again, that's for sure.

GOLBECKSo what do you attribute the basic gaps and understanding that we might have about the economy too? Where do you think this knowledge deficit comes from?

SCHAMUSWell, I think there are two reasons for this knowledge deficit. Number one is, there are profound and powerful forces in our society who don't want you to know. They would prefer it if you remained in ignorance bliss about the way in which the economy works. And then there's the second part which is, it takes some effort actually, these days. The system is that complicated and it's that difficult to get through the weeds to figure out what fundamentally are the issues that face us as citizens, when we stare down dollar bills in banks.

SCHAMUSSo those two things combined, I think, are very powerful reasons for the fact that most of us actually have no idea what's going on beneath the surface of this little headlines that shout out from you, from, you know, the mad money guy on TV.

GOLBECKSome people's eyes glaze over when they try to read the business section of the newspaper and their eyes might glaze over when they sit down to watch documentaries too. So how did that shape the approach you all took to this project?

SCHAMUSYou know, I think, there's a danger when you try these things, which is to take essentially, you know, on the one hand, complicated ideas, for example, my second movie is really about banks and banks turn out to be, on the one hand, profoundly simple entities, they're basically gigantic machines for ripping the rest of us off, but they do that in incredibly complicated ways.

SCHAMUSSo you run a danger, which is, like everything else in America these days, we have this idea that, you know, hey, I'm really interested in quantum mechanics and physics, maybe I'll watch an 18 minute Ted Talk and somebody will explain it to me and I won't have to actually think anymore about it, right? It turns out, that, you know, quantum mechanics is actually really complicated.

SCHAMUSSo what you want from that Ted Talk or what you want from that short little movie, like we made, is not somebody to sit around and explain it to you in terms that a two-year-old would understand because if they can explain it to you in terms that a two-year-old would understand, A, they're talking down to you and, B, they're actually not telling you anything. So what I want to do and I think with a lot of the filmmakers try to do is just get your interest, get your interest enough to say, I'm curious enough now and I've got enough tools to start thinking about this stuff in productive ways.

SCHAMUSSo, you know, that's the first step, please don't explain to me a very complicated thing in stupid ways and, B, give me enough information that I'm going to actually want to learn more.

GOLBECKWe have a call from Richard in Arlington, Va. Richard, you're on the air, go ahead.

RICHARDHello, James, I'm actually your cousin, Richard, found through your dad, Julian, so I wanted to let you know that I understand, very well, about the way that banks do what they do. I and my wife, personally, take on the position of Dave Ramsey and making sure that we know what our money does and how it does it and not give it to banks and not take loans and make sure that our money is working for us and not for any other entity.

GOLBECKIs that something, James, that you found was common or uncommon in the work that you did, prepping for this film?

SCHAMUSWell, first off, you know, on a certain level, we're all cousins but hello family. And here's the deal, I would love to say that we had the ability to control the flow of our money through the system by making wise and judicious and limited investments and placements of our cash. And certainly, I'm very proactive myself and I think if people learned more there are tools out there to be more proactive and assertive with where your money goes.

SCHAMUSBut the fact is, for example, we often have this fantasy that rather than put our money into Citibank or, you know, Wells Fargo or one of these, you know, megaliths, these dark starship things, juggernauts out there soaking up the rest of the world for their cash, we're gonna put our money into a small local bank, right, and therefore, the money will serve a local community.

SCHAMUSThe problem with that fantasy is that the vast majority of deposits that are made into these small local banks, which do serve those functions from time to time, ends up, by the end of the day, literally, getting traded and deposited with their correspondent banks, like Citibank or Chase or any of the other large ones because the banks themselves always looking around to figure out how much reserve cash they need, according to the federal government, to keep in the vaults and how much they can move around.

SCHAMUSThey're trying to move as much as possible. So even when you put your dollars into a small, local institution, the bottom line is, they don't have enough pizza joints and local businesses to make loans to, with that money, they actually make what profits they make, primarily, by loaning on margin to bigger banks every single day and adjusting those numbers at the end of the day. So even when you try to put money into one place, money moves at velocities and speeds that are unimaginable to these days, to us.

SCHAMUSIt's such an interconnected system and in fact one of my interviewees, in "That Film About Money," which is the name of the film that I made, Barbara Garson wrote an entire book on what happened when she took the advance money for her book and deposited it in a small local bank. And she followed that money all the way to Thailand and all over the world. It moved within minutes, actually, of her depositing it.

GOLBECKCousin Richard, thanks very much for your call. If you'd like to call us, please do. Are you any less nervous about the American banking system today then you might've been in the immediate aftermath of the financial crisis? Give us a call at 1-800-433-8850 or send us an email to kojo@wamu.org. James, why did you take on your specific part of the project? You've set out to explore, in very short form, deep answers to a simple a question, what's money?

SCHAMUSI think, if you start with the fundamentals and you can freak people out, just at the level of the fundamentals, you've started the process of thinking for people. So to think about money, you also have to think about banks, right? You think that money is a thing, it's a thing you have in your wallet and sometimes you deposit it in a bank and the bank saves it, you know, and they safeguard it and they keep it in these vaults down below, right?

SCHAMUSAnd immediately, when you actually put a little pressure on that wonderful imagine and idea of what money is and what banks are, the whole thing explodes in your face and you find out, for example, that banks, in order to be banks and be profitable at being a bank, actually have the exact opposite purpose, they're main goal, no matter how vault-like they look, is to make sure they have as little cash as possible in the bank at the end of the day. They need to get rid of it as fast as possible.

GOLBECKSo before we get into the serious subject matter of what you covered here, you said in an interview at the Huffington Post, that if the project weren't funny, it would be suicidally depressing. Is that a view you would've taken before you studied up, to put together your piece?

SCHAMUSYeah, I would probably amend that opinion at this point. It is both funny and suicidally depressing, by the time you get to the end of it.

GOLBECKYour two part contribution to the project is based on the premise that money, in so many ways, is an idea. You long for the days when part of that idea was that banks were like temples, sacred places that guarded what it's -- what we've earned. Why do you long for that idea and how do you see that its changed?

GOLBECKYou know, my longing, such as it is, is somewhat of a rhetorical faint, that is to say, yeah, it's -- on the one hand, the good old days when we marched up the temple mount and sacrificed our animals in front of an empty, holy of holies at the center of the temple, those were the gold old days, of course. But it was simply to note, for example, that the, kind of, semiotics, the ideology, the imagery that banks have always had of these, you know, Greek temples, right? You see them all over the place, the remnants of those.

SCHAMUSAnd really was a powerful sign to the perspective, you know, customers and society at large, there was something trustworthy about the system. And to a certain extent, that trust was earned, back in the days when banks actually had to hold a lot of their equity. They actually had -- the people who owned the bank actually had to lend out their own money as well as your deposits, when they made loans.

SCHAMUSThat is no longer the case, right? Just this past week, The New York Times reported that the banks have once again, found a way to end run the regulations that were meant to make sure that they had, as they call it, some skin in the game when they made mortgages, we made loans to homeowners, right? That since 2008, there was a lot of noise from Washington that said, we've gotta hold these banks accountable for making these crazy loans, which they then repackaged and sell to other investors, according to various tranches of risk, right?

SCHAMUSSo they past all these regulations and laws and it turns out, of course, there are so many loop holes that voila, as of this past week, we've discovered that, yet again, banks essentially take no risk themselves when they make these lunatic loans.

GOLBECKSo Barbara Garson, the author of "Up The Down Escalator," had a particular metaphor that she used when she explained why money's not necessarily a tangible thing, let's listen to that clip.

MS. BARBARA GARSONMoney is like a hot potato, whoever holds it has to pass it on to somebody very quickly. You -- I mean, a bank can't keep its money in the bank, they can't pay you interest, however low, without getting some.

GOLBECKWhy is it instructive to you to think about money like a hot potato of debt that we're all passing amongst each other? Our money just doesn't sit there in the temple anymore.

SCHAMUSNo. I mean, just think about it this way, if you take a dollar bill and you walk down to your corner bank and you proudly present it to the teller, and you say, I'd like to deposit this dollar bill and start a savings account. And they gladly accept your dollar bill and a year later you come back and magically the dollar has increased by one cent because of the interest that the bank is paying to you. It's now worth a dollar and one cent, that's magical. Of course, you hope for higher interest and you hope you have more money to deposit in the bank but you've, you know, you've earned a penny that year and you've done nothing except just let that dollar sit there.

SCHAMUSBut it hasn't sat there. In fact, the only reason that the bank can give you a penny is because they've taken that dollar and as fast as humanly possible they've moved it out the door and lent it, they hope, to somebody else who's going to pay them a much higher rate of interest, right. And they're going to keep the difference between the penny they're paying you and the interest that they're getting paid by the person that they've lent that money to.

SCHAMUSSay on a charge card they can get 22 percent, or again, it was in the news this week, many of the big banks own all these payday lenders and magically somehow again they've gotten through all the regulations and they're charging upwards of 35, 36 percent per year. That's a pretty healthy spread. I don't know what you get, Jen, on your CDs or your money market account...

GOLBECKNot that.

SCHAMUSNo, you don't get 36 percent but Citibank who owns one of the biggest payday lenders, that's what they're pulling down on some of these crazy loans they're making, and forcing, obviously, people at the lower end of the income spectrum into these terrible deals. They often don't know what they're signing up for when they get these payday loans, right.

SCHAMUSSo that's the classic model of the bank. The bank takes your dollar and then mediates or intermediates, they make loans and that helps the economy. And through that the economy's supposed to grow. The fact is that what's really happening is that this massive turn of debt, that is to say, the first dollar you put in the bank is a form of debt because weirdly it's not the bank's money. You're actually lending them the money. You're actually a creditor. People don't realize this. When you put money in the bank you're actually lending to the bank, except for one thing. You don't sign any real contract. They get to do whatever they want with it.

SCHAMUSThe bank is supposed to lend it to people who are buying homes, they're starting businesses but more often than not what they're doing is going to Las Vegas and gambling with it and then selling the gambling chips to other perspective losers out there so they can cover their losses and take their winnings. It' sort of a kind of win-win for the banks.

GOLBECKLet's take a call now from Eric in Fairfax, Va. Eric, you're on the air. Go ahead,

ERICYes. I -- this gentleman you have on, I -- he characterizes banks as machines to rip us off, but that's not true. They're critical parts of a modern society. They fulfill a crucial role and to characterize them that way, I believe, it's doing a disservice and...

GOLBECKI think we lost Eric in the middle there, but thanks for call, Eric. And I think his point came through that he's saying that banks are a critical part of our society to have it function the way it is.

SCHAMUSAbsolutely. And by the way, there are other, you know, essentially critical pieces of infrastructure out there that have also turned into serially criminal enterprises too. So it's not as if the individuals who are at the bank working, they are criminals or that there's, you know, anything morally wrong with banking per say. So don't get me wrong.

SCHAMUSBut when you have virtually every single major bank in existence in America and internationally annually paying out billions and billions and billions and billions and billions of dollars in criminal settlements, right, without anybody actually going to jail, it just keeps -- you know, the Libor scandal, the home loan scandals, all these things, these are basically costs of doing business that are incorporated into the planning of these large enterprises, these banks. And they've incorporated the cost of their own criminal behavior as just simply another line item on the budget.

SCHAMUSAnd I think we, as citizens, when we understand the way in which the inflation of, well, there's essentially a very good idea, that kind of intermediation like, let's get money into a system, let's get people who are judicious and thoughtful about supporting businesses and individuals when they need to bridge the gap between, you know, what they want to do and what their immediate resources are. This is all, I think, a genuinely good thing. So in essence I agree with your caller. He's probably a cousin of mine, so we're all family here.

SCHAMUSBut I would say that, you know, since in particular the passage during the Clinton years of the Financial Services Modernization Act that was the repeal of Glass-Steagall and the creation in its wake and a bunch of other regulatory rules of the derivatives market in particular. You have found an entirely different business model that has taken over this old school notion of what banks are, what they can do for us. And that business model essentially has to do with more or less gambling on a cosmic scale.

SCHAMUSWe're talking in derivatives, trillions of dollars, right. And derivatives is another fancy word for gambling with algorithms that no one really understands. We don't even know how to put this stuff on the balance sheets of these banks. It's very difficult for regulators and for citizens to understand, you know, what kinds of risks we're at right now.

GOLBECKJames Schamus, this is a fascinating conversation. We're running out of time but one last question for you. We got an email from Anthony asking, "Where can we watch these movies?"

SCHAMUSYou can watch them on virtually any platform known to digital mankind and humankind at this point. The good folks who financed and produced these have managed to put them on everything from YouTube to Hulu to Netflix, as well as there's a site for We the Economy. so I'd just say, you know, just Google search away or duck duck, go go, if you don't want to be tracked, and they should be pretty easy to find.

SCHAMUSAnd they do represent, by the way, a wide variety of opinions. My opinions, as you can tell, tilts slightly more progressive and left-leaning than many of my fellow filmmakers. And that's one of the nice things about the series is that they've generously provided for a broad range of political viewpoints about our subjects.

GOLBECKAnd we'll have a link to the We The Economy website on our website kojoshow.org. James Schamus is a filmmaker and screenwriter and he's the director of a film featured in the We The Economy series, a series of explanatory short films about economic issues. James, thank very much for joining us.

SCHAMUSThank you for having me.

GOLBECKWe'll be back after this short break. You're listening to "The Kojo Nnamdi Show" and I'm Jen Golbeck sitting in for Kojo.