Webinar with Michael Hudson: A 4000-Year Perspective on Economy, Money and Debt

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Yves here. Michael Hudson gives a very long sweep of history and his own work in this webinar on Positiva Pengar on how the various debt and monetary regimes from 2400 BC onward have influenced economic development and the distribution of wealth and power.

Even though this is a lengthy talk (the Q&A section will be posted tomorrow), it’s less formal than Hudson’s papers and so lends itself to being consumed in more bites. This format also allows Hudson to discuss related issues like the corruption of economics and macroeconomic data, and the dustup between Paul Krugman and Steve Keen.

By Positiva Pengar. Originally published on YouTube

Jussi: Welcome Michael. I just give a brief overview of the agenda and then I get back to you with a few questions.

I just show you this picture, what we want to do today is this: Today we will get a long-term view on money debt and the economy, including the different power struggles over the ages. We start from 2400 B.C. until today. It goes through Babylonia and Sumerian time to biblical times, Roman and medieval banking, to today. That’s a quite big thing to cover but we have the right man with us: Michael. I just say a few words first.

Michael has been an advisor to governments, he is an expert on financial and real estate markets and actually history too of debt and money and the economy, which is the reason why he is here today. He predicted the Latin American debt crash in the 1980s and the crisis of 2008.

Today’s topic: 40 years of research into the origins of money, debt and how the economy was organized way, way back. This kind of research is not like reading a book, because those were written in clay tablets, so Michael’s research has been a very big thing.

Michael, could you please introduce yourself, let’s take three of your defining moments that you like to share in your career. If we start with the first one with the Chase?

Michael: Well, my first major job on Wall Street was becoming the balance of payments economist for Chase Manhattan, and the very first task they gave me, in late 1964, was to look at the balance of payments of their three major Latin American creditors: Argentina, Brazil and Chile, to see how much they can afford to borrow. My job was to say: here is how much of an export surplus they can raise for and exchange for.

The idea of the New York banks, was that all of the economic surplus would be paid for debt service, so that everything that they could export to create a trade surplus, an investment surplus, a tourism surplus, etc., if you put this all together, they’re generating say two billion dollars a year, all of that can be paid as interest. You calculate: how much will two billion dollars pay in interest, how much of a loan can that support, and say: that’ll be maybe a 20-billion-dollar loan.

I did my forecasts: here is the trade balance, the tourism balance, the investment balance and they weren’t generating any surplus. So, I said: wait a minute, how are they going to repay more interest if they’re not generating an economic surplus to pay in the first place.

You can imagine that this did not make me popular with the international division within the bank, because bank officers get paid according to how many loans they can make because that’s what the bank’s business is: making loans. If I said: wait a minute, they can’t afford to repay, I was called doctor doom, already in the 1960s.

We had one meeting with the federal reserve at a later point and they said: Mr. Hudson, according to your analysis, Britain can’t pay any additional loans? And I said: that’s pretty obvious, I think that the pound is going to be devalued. They said: but we’re always going to lend Britain the money to pay, aren’t we? And I said: that’s right, if the federal reserve and the US government lends Britain the money to pay the interest to keep itself, then they can do it. And the fed guy said: then we can lend the Latin American governments if they’re friendly governments.

In other words: we will lend the dictators and the client oligarchies money to pay, but if they were to vote for somebody we don’t like, then we’ll call in all the loans, strangle the economy, block them from importing, devalue the currency, create a crisis, to say: that’s what you get for not voting for our guys.

You want to try democracy? This is the free market where we get to bankrupt you if you don’t like it.

They said: it’s not a bad thing that the government makes loans, because we can control them, we can make sure that if they elect anyone we don’t like, anyone who wants land reform, anyone who wants independence, anyone who won’t privatize their oil and their natural resources, you can just absolutely destroy them.

I said: Okay, I get it, if you lend them the money, then they can pay. This is like a Ponzi scheme: you lend the investors enough to pay the interest and keep current. That was my introduction to how the balance of payments worked between the United States and the third world and how political the whole credit problem was.

David Rockefeller had taken over the bank from George Champion, who had said around 1963-64 that the Vietnam war was fiscally irresponsible because it was ultimately going to force us off goal.

My boss at Chase, John Deaver, said: “That’s the merchants of death argument in reverse, you’re saying we can only vote for a war that we can afford. That’s wrong: we have to do what’s right; we have to fight communism everywhere! What is communism? Communism is nationalism, the opposite of democracy, communism is voting for somebody we don’t like. Even if we can’t afford it, we’ve got to do it!”

So, now the rest of us at the economic research department dealt with what the war meant. Every Thursday evening the Federal Reserve came out with a balance sheet of currency money, currency and gold. Under the gold exchange standard, Every dollar of paper currency, every green bill in your pocket had to be backed 25% for gold.

We were watching the balance of payments deficit was draining, and draining, and draining foreign exchange that was cashed in for gold by general de Gaulle in France, by Germany etc. At a certain point the dollar was going to have to stop gold convertibility.

That was the other thing that we were watching: monetary theory is supposed to be all about money being spent on goods and services. But the entire balance of payments deficit of the United states since 1950, was to pay for the war in southeast Asia and for the 800 military bases that America had around the world.

The key to the balance of payments was the military. It didn’t have anything to do with America’s prices and wages and all the things that academics talked about. It was what the academic theorists leave out: we are the gun votes. That was my first experience.

Jussi: What you’re saying is that the US had to get out of the gold standard because it made itself to be a Latin American country with US dollar loans?

Michael: That was what their worry was. But my book Super Imperialismshowed just the opposite: The gold actually became a key to American dominance. But at the time they were very worried about going off gold.

There was a Columbia university group at that time of three people: my mentor Terence McCarthy, Seymour Melman, critic of the pentagon, and myself. We were the three warning that the balance of payments of the war was going to force the government off gold.

I had to leave the bank to finish my dissertation, because they kept giving me more and more work, which is what economists would have. And I got my PhD as a union card.

Then I developed a whole balance of payments accounting format at Chase. I went to Arthur Andersen, the accounting firm. Before they were closed down for fraud, they were a major accounting firm. I said I want to do my analysis for the whole US of its balance of payments. I worked for a whole year putting the US balance of payments together. That’s when I found the entire deficit was all military.

So, they had their art department drop all the charts. One day my boss came into my office and said: we just got a phone call from Robert McNamara, and they had the defense department, the leader of the Vietnam war, the hawk. He was an idiot savant, very brilliant but didn’t know what to be brilliant about, and there was a tunnel vision, the power mad Irishman who went on to lead the world bank and corrupt it. Anyway, he said that Arthur Andersen would never get another government contract if they didn’t fire me and prevent this criticism of the analysis of the balance of payments from coming out.

So, I took it to New York University, where I got my PhD. I took it to the business school, and they immediately published it as a triple issue of the bullet and then that became a major to do at that point. That was in 1968-69 and it was obvious at that time that America was soon going to go off gold, which it did.

After that I became fairly well known because I had forecast it and I did explain how once countries go off gold, America went off gold.

Other foreign central banks said: what are we going to call our reserves in? The American government doesn’t want us to buy gold, the only thing we can buy is other government securities and the only government securities around are American treasury securities, because nobody else is running as big a deficit to push all of these IOUs into the world market.

I went up every month to Canada, in Montréal to Molson Rousseau to give stock market reports and bond market reports. That led to the Canadian government appointing me to have a study of how Canada should conduct itself (and this was 1978) in this new monetary order where it couldn’t get gold anymore.

The problem in Canada was: in the late 1960s and especially the 1970s, interest rates were going up very rapidly in the United States and Canada and the whole western world. They were going up because of the shortage of credit because of war financing.

In the past, the Bank of Canada had been a wonderful monetary model, in World War II and the 50s. But the commercial banks have been increasing their political power over Canada.

When the Canadian provinces wanted to borrow, instead of paying like maybe 5,5-6 % when they needed to fund their own provincial development, roads and the kind of thing that provinces or states spend their money on, the banks went to them and said: “You can save a quarter, maybe half a percentage point, in interest. Instead of borrowing from Canadian banks, you can borrow from Swiss banks and German banks. You can borrow in Swiss Francs or German Marks and you’ll get a much cheaper loan!”

My argument was that it’s completely unnecessary, let’s look at what happens when a government like Canada borrows foreign exchange from Germany or France. The province will have the banks issue a bond to be paid in Switzerland or Germany to be subscribed in Swiss francs or German marks. Then the province will take these Swiss francs and German Marks and turn them over to the Central bank, the Bank of Canada, in exchange for domestic Canadian currency. That’s because provinces don’t spend foreign exchange on building bridges, hiring labor and building hospitals. They use domestic currency.

I said: if the Canadian government is going to be creating this money in any case, why doesn’t it just print all the money to begin with? It can simply print a billion Canadian dollars and charge whatever interest it wants. They could charge zero interest. Why do you have to go through the charade of borrowing Swiss francs and German marks and foreign currency if you’re just going to turn into domestic currency?

Meanwhile, the provinces were borrowing so much money, that the Canadian dollar went up from about 90 cents to 1.06 US dollars. It was all increasing the currency, all this foreign currency borrowing inflow.

We had a stormy meeting with the banks, they said: we’re honest brokers. The bank that was saying this was certainly the crookedest money laundering bank in Canada, the Scotia bank. They said: you need us as an honest broker, you can’t trust the government, governments are bad. They brought in a catholic priest who said: “What Mr. Hudson is proposing is the way to the gas chambers. Any government decision is the way to Nazi Germany. It’s the gas chambers!  He is supporting the government, don’t let the government make any decision at all. Only the swiss banks and the German banks can make a decision because only the bankers are honest and smart.”

I thought: Oh my god! Here are the banks in Canada, they are involved in money laundering and pretty crooked, what can I do? The government published my report from the Institute of Research and Public Policy: Canada in the New Monetary Order.

I got landed immigrant status for all that. They actually wanted me to put together a report on what the government could do to change the personality of Canadians. They said: “I can see that we have a problem here.”

My main client at one of the Toronto banks, who’d been in charge of investment, became head of the personnel department. He said: “There’s a problem, when I hire economists, they have tunnel vision, they don’t have a sense of reality.”

The government said: we’re going to hire you by the department of state, which in Canada funds, not foreign affairs, but domestic education, the film industry. My idea was: what can you do to create some kind of a group in Canada that is reality based, and doesn’t just believe what economic models say, and doesn’t simply rely on the United States (that was a byproduct of that).

Right after that, I got involved with UNITAR, the United Nations Institute of Training and Research, that was under Irvin Laszlo, a systems analyst. I was doing a study of north-south relations. I wrote three major articles and presentations for them saying that (this was in 1969-70), there is no way that Latin American countries and the other southern hemisphere countries can pay their foreign debts, they’re about to default.

This was the analysis that I began at Chase Manhattan and I said: are they going to default? You have to begin talking about how you’re going to cancel the debts. Because if you don’t cancel the debts and you don’t write them down, then you’re going to have the IMF come in, you’re going to impose austerity, their economic growth is going to stop and their economies are going to shrink.

UNITAR had a big meeting in Mexico City. Mexico’s president wanted to be head of the united nations, so he put up the money for a big UNITAR meeting, and we went down there and I gave my usual presentation saying now there’s going to be a debt crisis. You’ve got to begin talking about writing down debts to the ability to pay. If the banks make a loan that can’t be paid, you have to treat this as a bad loan, it’s not a bad debt, it’s a bad loan. The banks knew that the countries can’t pay.

I thought that a basic principle of international law should be that if creditors make loans to countries that cannot be paid, the assumption should be that they know it won’t be paid, it’s intentional and they want the consequences, they want to drive the country bankrupt, they want to grab its oil and its raw materials. They want to use debt is a lever to essentially strip the assets of the country and transfer them into the creditor countries. Especially the United States, which could create all the credit it wanted simply on the printing press.

There was a riot there and that led me to realize that this is really an important topic and that other people didn’t want to understand it, which was obvious for me just from drawing my graphs. I’d spent maybe 10 years, by that time 20 years since 1960 to about 1980, most of my time was drawing statistics, making graphs of them, being a quantitative empirical chart drawer. I could see that that is important, but then I thought I’ve got to decide to write a history of how countries have coped with paying debts in the past.

The fact is that in the end, almost nobody has been able to pay the debt. That’s because simply of the mathematics of compound interest. Exponential interest accumulates and accumulates, and any rate of interest has a doubling time. The debts, if you leave them, they double, they redouble and they keep on growing.

I began to do historical studies at that point. I realized it doesn’t help my drawing charts, people just get angry at it. And most people who are not economists and are not in the financial sector, are not all that interested in looking at charts, they need it sort of wrapped in a big picture. So, I’ve got to begin framing my points in the big picture.

In 1982, Mexico announced that it couldn’t pay the debt, it was a default. The result was that after 1982 you had the Latin American debt bomb. Countries defaulted, because they couldn’t pay. Everything that I’d forecast pretty much came true, but it wasn’t politically correct for me to say it.

People told me that I was like a premature anti-fascist. I was warning about the problem before it occurred. I’d worked at the Hudson institute with Herman Khan for many years. We went around the world and he’d usually introduced me as Doctor Doom. There were a few other doctor dooms, they were all financial. Al Woljinower, Henry Kaufman and we were all warning that the debts couldn’t be paid.


People thought that we must have a psychological desire for them not to be paid. People would ask us: isn’t it that you don’t want the debts to be paid? Why do you want to believe that there’s going to be a crisis? They couldn’t believe that we were actually making charts showing where the money was. And to follow the money in this case, means we followed the debt.

Debt led me into my historical studies.

Jussi: It seems like you have a quite extensive experience from the politics of external debt. Thank you for that introduction and background. It’s quite clear what you’re saying: If a country has external debts, it’s a problem for them. If people have debt to someone, it’s a problem for them.

What you actually said: it should be a business risk, then it would be a bad loan rather than a bad debt. If you give a loan, and know it’s a bad loan, you should take the business risk.

Could you share anything about the history, if you go back to the Babylonian or Sumerian time and what happened. If you start with the origin of credit and money and how that structured the society at that time?

Michael: I spent the year 1980-81 going back in history. It was easy to go back through medieval European times, the Templars, go back to Greece and Rome who were just at constant revolts of trying to cancel the debts.

In the Bible you had the Jubilee year. At that time almost all the commentators around 1981 said that the Jubilee year was all utopian, couldn’t have really happened. There were references I found to Babylonian antecedents, but nobody had written an economic history of the ancient. There were years and years of journal articles, if you look through what had been written you wouldn’t find debt anywhere in the index of any of these.

We knew that there were proclamations, so I began to read literally everything that had been printed in any economic journal in any language about the ancient Near East. I found that in order to understand the origins of debt, you had to understand the whole context.

I found that there had been debt cancellations, and these were not only attested by legal records, but by every ruler in the Near East. When they come to power, from Sumerian times: Enmetena, Urukagina, down through the Hammurabi dynasty. The first ruler, upon taking the throne, would proclaim a clean slate, to cancel the debts, to return land from creditor to debtors who forfeited them, and you’d free the bond service. The same thing, literally word for word, is what you get in the biblical Jubilee year.

In 1984 this began a process that I spent the next 35 years on. In 1984 I was brought up to Harvard and I joined the faculty as a research associate of the Peabody museum, which was their archaeology anthropology department. We decided, because there wasn’t any history, that I was going to organize a theory a series of colloquia and invite the leading experts in Egyptology, Assyriology, Sumer, Babylonia, and other Near Eastern countries each to say: In their period, how did these societies handle debt, how did the rate of interest come to be developed and what did they use for money. It was pretty much only towards the end of this long research, we published five major colloquia of my Harvard group that I’ve co-edited.

In order to explain what money is, we had to say: how did civilization develop its economics? It probably began in the late Neolithic. In the late Neolithic, how do you organize society when you have the individual economy and every people worked on their land, they’d grown their own crops, they had cattle, etc.

But they also needed: Who’s going to build the temples? Who’s going to build the pyramids? Who’s going to build the city walls to protect them? Who’s going to do the major irrigation works? Who’s going to work on what today is called infrastructure, and who’s going to serve in the army because they were fighting all the time?

How are you going to organize a society both to build infrastructure and fight? The answer was: you would assign land to everybody in a standardized plot, and you’ll get as much land as is necessary to pay a given tax, the tax is originally in labor. If we’re going to give you a family size plot you have to have people serving as labor during the non-harvesting season to build the walls, to carry the dirt, to dig irrigation canals, to build pyramids etc. It was the need to pay taxes to support infrastructure and employ labor, that led to property being assigned to the land tenure.

The rulers had to keep accounts for all of us: how are we going to supply beer and meat to the people who are working? How are we going to get stone and metal? Mesopotamia was very rich agricultural land as was the Nile valley,but it was all deposited by water over the millions of years. Where are they going to get stone and metal?

They had to have foreign trade. So, they had accountants that organized their society. And they organized it through balance sheets: we have silver and metals coming in from abroad, we have grain and barley and wool domestically.

They created money as part of an accounting-system, a means of payment. They set one unit of grain (a bushel of grain was equal to one shekel of silver), so that you could keep foreign trade and domestic agriculture all in one set of unified accounts. Money thus was a by-product of accounting.

You had 100 years of misinformation about money, essentially written by pro-bankers, Austrians and academics that said: Money must have developed when people wanted to barter. But that’s not how money was created! It had nothing to do with barter.

We found that the origins of enterprise were coordinated by the chieftains or by the rulers or whatever you would call the chieftains and/or rulers in a given society. The chieftains in every society, African tribal societies, Asian societies, were in charge of foreign trade.

They were mixed economies: they had private entrepreneurs traveling abroad, they would either borrow money from each other, or from the palace, they’d have to pay taxes to the palace, tariffs, and you’d have the people on the land. You’d have basically an integrated economy being coordinated.

Money wasn’t used at all for barter! You can understand why: the major domestic money was grain. Just imagine you’re during the crop year, you have the whole year in between harvests. Nobody’s going to carry around a little grain in their pocket and weigh it out (the scales weren’t all that good anyway). During the crop year, what we found, and all of this was from documents that were engraved on clay, we found them from garbage piles of people, you dig them all up and you’d get the whole public records, the archives of a particular family.

During the year, you’d go to the ale house and you run ale and you do what workers do in the west between paydays. They’d run up a tab on the bar. The whole idea was: on payday you would have to settle your bill, pay the tab. In Mesopotamia and Egypt, the only time that you would actually pay for all of these things that you consume during the year: rent of animals, plows, shoes, whatever, we have the contracts for the IOUs that the people would sign.

Every contract would say: in exchange for what you bought; the debt will be paid on the threshing floor at harvest time. The Sumerians and the Babylonians and the Egyptians would bring in their grain or their crops to be weighed out. The first thing that would happen those days was to say: this much goes to the ale lady, this much goes to the palace in exchange for what it’s advanced, this much goes to the palace who rented out land to me as a shared property, and they pay all the debts.

In sum, money was used once a year or once a harvest season to settle the debts. Ancient societies operated on credit, not money!

So, the whole Austrian idea was wrong. The reason was not only dishonesty, but a vicious hatred of democracy by the Austrian school and by academic economics. Their hatred of democracy was the fear that a democracy might take control of a government and apply pro-labor policies that interfered with the profits of banks and the profits of the rich people. The Austrian school developed a whole theory of economics. Today it is the Chicago school junk economics, the monetarism.

How do we create an economic theory where government doesn’t exist? If we can say that the whole economy works without government existing, except to interfere, then we can we can block democracy, we can prevent any government from actually doing anything. That’s the ideal of the Republican party and the Democratic party of the United States today, it’s the neoliberal idea today.

It is essentially to circumscribe governments so that instead of the governments creating money, or instead of the governments regulating debt, the bankers, the financial sector will be in control, which is the honest sector.

This idea said: this must have been how civilization began back in Mesopotamia in Egypt in the third millennium B.C. second millennium B.C. But we know that didn’t exist, because I just said what was the norm: you pay the debts out of your crops and you had the idea of a more or less stable society.

But as you all know: crops fail sometimes. Sometimes, when there’s bad weather, what do you do when the crops fail? What do you do if there’s a disease and people get sick? What do you do with families that somebody’s injured somehow or they can’t pay the debts? Or if there’s military hostility, there’s war your opponent’s come in, they burn the land, they destroy the crops, what do you do in that case?

The ruler could do one of two things: If he did not cancel the debts he could say: Oh, I’m sorry, there was a crop surplus, and you’ve pledged your land to the creditor, now you’re going to lose the land. And you’ve pledged your slave to the creditor as a collateral. And your wife and daughter you’ve also pledged as collateral for the debt.

If the ruler didn’t cancel the debts, then half the population would lose its land, the families would be broken up, and the creditors would end up pretty quickly without all the land and all of the population. The creditors tend to get powerful enough that they don’t pay their debts, they can resist the government. Then they can in fact become a rival to the palace.

The last thing the palace wanted in Babylonia, all the way down to the Byzantine empire, was to have an independent creditor class that would end up hiring its own army, overthrowing the government and establishing a Chicago school essentially Pinochet type revolution taking over. So, the rulers cancelled the debts.

Everybody knew back in the 1980s about Hammurabi’s laws and they thought: here’s a law code. But it wasn’t a real law code, because we have the actual court documents of many cases, and the judges didn’t follow Hammurabi’s laws, they were guidelines, it wasn’t a literary thing. The only proclamations of Hammurabi that actually had legal legally binding force were the debt cancellations, the underarm laws.

The idea was: you’re going to have a disruption in activity, how do we get back to normal, how do we restore resilience. That is like today when we’re in a pandemic right now. Economic activity is disrupted, there are a lot of arrears that are mounting rent arrears, data arrears, how are we going to handle that?

Babylonia and Sumer are examples. They said, okay, the debts don’t have to be paid, we’re going to start all over, an economy in balance.

We looked at the training manuals for the scribes. The mathematical models used by Babylonian scribes are more sophisticated than any mathematical model used anywhere in the world today, because they saw something very simple: They calculated how fast the debts grow: compound interest.

How fast do crops and cattle grow when the economy grows? Just like today, it grows in an S-curve. If the economy grows in an S-curve, due to compound interest the volume of debt is going to grow faster than the ability to pay. Either you’re going to have the whole society end up owned by the creditors, or you’re going to have the rulers restore balance. The economy is not self-regulating.

Every economic student today has said: there’s a business cycle and the business cycle is self-regulating. If unemployment goes down or there’s a crash, it’ll all automatically go back to normal without the government doing anything. That’s not what they believed in the Bronze Age. They knew that the government had to intervene and restore order.

The Sumerian word for this “amar-gi”, was restoring the mother condition, in other words: restoring normalcy. There was a theory of time that underlay the Bronze Age, before classical antiquity, a circular time. You had to go back to normal, everything had to be put back in order just to free economies from the disruption that you’d have when there’s a crop failure.

Even if there was no crop failure, even if there was no military invasion, when a new ruler took power, you were pretty sure that during that period of the former king’s rule, debts were going to mount up.

What we found very quickly, was that the Babylonian andurarum laws were taken over, word for word, in the Bible and the Jubilee year. The Hebrew word that they used was “deror” which was cognate to the Babylonian word “andurarum”.

Judea had lost the war with Babylonia, the wealthiest families and some of the rest of the population were taken to Babylonia and they became acclimatized over a period of a century or so and became part of Babylonian society. But when Iran, Persia, conquered Babylonia, King Cyrus let Nehemiah resettle. A lot of the exiles wanted to go back to their homeland.

The people wanted to go back most of all, were the wealthiest families, they wanted to go back to Judea. And they said: now we want our ancient land, that was all redistributed to the poor, to the rest of the people. They brought with them this concept of the Jubilee year, of restoring historic order, and historic order was: to restore to them their land.

When the Bible was edited and composed in the sixth and fifth century B.C., you had this Jubilee year written into the whole narrative of the Bible, put at the very center of Mosaic law, in Leviticus book 25, woven into the history of the kings, woven into the prophets, you had all of the Jewish Bible written to weave in this concept of andurarum, derorof Jubilee of restoring order.

There was a major sect based on Melkizedek, one of the high priests. From the sixth century to the first century B.C. there weren’t many records, because the Judeans didn’t keep their records on clay tablets, they kept them on parchment, and we don’t have any of them, all we have is what has survived in the caves of the Dead Sea scrolls. We know from the Dead Sea scrolls that there were midrashes, that is quotations of all of the things from the Bible that was putting all the debt cancellations all together.

Jesus was part of this movement, and in his very first sermon, when he went to the synagogue on his home city, he unrolled the scroll of Isaiah and said: I’ve come to proclaim the year of the lord, the Jubilee year, to cancel the debts.

In the five centuries that followed the initial compilation of the Bible, there were more and more wealthy people becoming rich in Judea, just as they were in Greece, Rome and every other country. Every country in those centuries was polarizing between creditors at the top, exploiting debtors at the bottom, enslaving much of the population.

The issue was: what about this Jubilee year in the Bible? You’re supposed to liberate the slaves, and you’re not liberating them! You’re supposed to return the lands, and you’re gobbling up the land!

Jesus said that he’d come to represent the conservative biblical reform, against the wealthy people who Luke, one of the four authors of the new testament of the Bible, said: they were the pharisees. They were the rabbinical group led by Rabbi Hillel, who had developed a clause that also had been used in Babylonia. When borrowers should borrow, they’d say: we waive our rights under the Jubilee year.

Already in Babylonia, creditors have got borrowers to say: we waive our rights in case the ruler should cancel the debts. The ruler and the court said: all these clauses are illegal! The debts are cancelled. But that is not what happened in Israel, the rabbis got the waiver to be signed.

You had, in Judea, the same kind of a class fight, that you were having much more in Greece and Rome.

Am I moving too fast for you?

Jussi: No, not at all, you’re doing fine. What I see is that you’re talking about the same power struggle between creditors and debtors all the time? Between government and financial elites? It seems like it’s a pattern all over the place.

If you take your experience from there from the Latin American things you experience from Canada, from your balance and payments analysis that you made, and we go back all the way to Sumer and Babylonia, and back to Judea with Jesus, it seems like it’s the same thing all over again all the time?

Michael: It is a common thread throughout history. The question is how did the west come to be so different from all this? Why don’t we today don’t we cancel the debts? Well, the answers found in Greece and Rome.

I’ve been lecturing at the Institute of Fine Arts, a part of NYU in New York, teaching a course in Greek archaeology from the 10th to 8th century BC. There was a meeting in 1990 about this period. Almost all the lectures on archaeology at that were all about pottery, or designs or ships. There was nothing about social practices, because there are no social records about social practices. That’s why it was the dark age, literally dark.

I’d worked with the Bronze Age in Greece. The second millennium B.C. we have all the linear B records of the Palaces, Knossos in Crete, no records anywhere of interest being charged. Just how much is owed from each different section, but no idea of interest!

My theory, and it has now become the accepted theory, is that interest was brought to Greece and Rome, by Phoenician (Syrian) traders around 750 B.C. They were trading, they brought the whole practice of charging interest. They would trade with presumably the chieftains or the wealthy families, and the Aegean in the Greek city states, in Italy, Rome and the other city-states.

How are you going to calculate the rate at which interest builds up? I figured out that the rate of interest in Babylonia was 1/60 per month, because the Babylonian system was based on 60, because you could divide it very easily into fractions. Sixty months is five years, so the doubling time of a loan in Babylonia, and the whole Near East, was five years.

The Cretans and Egyptians, used a decimal system, so their rate of interest was one tenth. But Rome used the duo-decimal system, twelfths. It divided, just as you have the Troy Pound divided into twelve Troy Ounces, you had twelfths. In Greece, Rome, Babylonia, in every country, the rate of interest was the local fractional system. We realized, what was born was the whole argument that Aristotle later developed: how can interest be charged in monies of baron metal?

You have again the Austrian school, the anti-socialist far right-wing extremists say: The creditors must have always been the good guys, because if you say the creditors are the bad guys, then you have an argument against today’s bankers, so the creditors must have lent out cattle and they must have lent out grain and took part of their return in the form of grain and cattle.

No anthropologist has found any society, anywhere in the world, at any time, where people lend out cattle. Creditors foreclose on cattle, but they won’t lend them out. They take them, not lend them.

I realized that what was born, was not cattle, it wasn’t crops growing, it was time. If you have 1/12 interest, that means you pay 8,3 % a month. You had every rate of interest based on the time, and the debts in Greece were always owed on the new moon. When you have the moon, a new period, the debts are due. You had the whole timing of paying debt.

You had the rate of interest being charged, but you didn’t have any kings in Greece and Rome. Rome overthrew the kings, that were reported by Livy and other historians, who have kept a pretty good balance and kept the creditors in check. Same thing in Greece, in most country areas you didn’t have the kings, they were sort of more like the mafia.

In Greece coming out of the Dark Ages in the eighth and seventh centuries BC, they were overthrown by leaders called tyrants, who actually laid the seeds for democracy. In Corinth and other countries, the first thing they would do was to redistribute the land that had been monopolized by the local mafiosi, the kings and they did cancel the debts. In Athens, 507 B.C. Solon cancelled the debts, he didn’t redistribute the land, but subsequent tyrants Peisistratus, became the great catalysts for democracy in these countries.

But you had an oligarchy developing throughout the whole ancient world, in Greece and especially in Rome. Aristotle wrote that the constitutions of many cities seem to be democratic but actually were oligarchic. Both he and Plato described how, if you do have a democracy, you’re going to have wealthy people developing, they’re going to take over, and the democracy is going to turn into an oligarchy, and the oligarchy is going to make itself hereditary, into an aristocracy, and it’s going to essentially stifle economic growth, grab all the wealth and all the land for itself, until someone among the ruling families is going to fight against the other ruling families. They’re going to take the people into their camp (that was Aristotle’s phrase) and have a revolution and have democracy all over again.

So, it was like an eternal triangle: democracy, oligarchy, aristocracy, overthrowing it with a new democracy and the whole cycle begins all over again. And that’s pretty much how Greek history seemed to be developing.

In Rome, you had an oligarchy ruling from the very beginning. The kings were overthrown and the oligarchies were pretty much in control from the 5th century, end of the 6th century and onward. What you had was five centuries of repeated revolts, walkouts, secessions of the plans and civil wars. The common demand of all of the rebels was: cancel the debts, redistribute the land.

They were all killed, the Romans believed in the kind of free market that the University of Chicago believed in. “We can’t have a free market, if you don’t assassinate everybody who wants to challenge our power.”

The oligarch’s “free market” is, “Liberty for us is the liberty to enslave our debtors. Liberty for us is the ability to do what we want to other people.” That was a free market as the Romans defined, and of course that’s Milton Friedman’s free market, and what libertarian economics is all about: Freedom for the wealthy.

What they call the free market is a market dominated by the creditors, dominated by the monopolists and by the rentiers. Rome was a rentiersociety, so they killed one popular leader after another, ending with the stabbing of Julius Caesar, when they were worried that he was going to cancel the debts to resolve the debt crisis that had already occurred a generation before in the Catiline conspiracy, when Catiline tried to fight to cancel the debts, as his predecessors had tried to.

Rome became really the first society not to cancel the debts. We all know what happened to that: we had the dark age, and the dark age is what happens when you let creditors take control.

The Dark Age is what happens when you let the free marketers gain control and essentially use debt as a lever to grabbing all of the land, all the property, to create monopolies and to take power away from the government.

When you hear the libertarians say: we want to get rid of government power, government planning is awful, look at what Stalin did! The fact is that every economy plans ahead, since the Neolithic you have to plan ahead, every company plans ahead to research and development. If the government doesn’t take the lead in doing the planning and indicative planning and regulation, then planning and regulation and research allocation shifts to the creditors, to the banks, and that’s what we’re seeing today. We’re seeing the takeover of the banks and the creditors, and you can see this happening again and again in medieval Europe.

What survived from the Dark Age, after the Roman economy collapsed, and survived mainly in Byzantium empire, which did have more or less regular debt cancellations, being fairly Near Eastern at that time. Western Europe was a kind of barbarian backwater, much as it’s becoming today once again. What put it in motion was the looting of Constantinople, funded by the nations and the Crusades.

The Pope mounted a Crusade to the Holy Land, but Venice put up money to fund an army to loot Constantinople, in exchange for one quarter of all of the loot that they could grab. Constantinople had been the one protecting Europe from the hordes from the east, from the Huns from the Turks and all sorts of invading crabs. You had all of this money, pouring into the Christian societies, from Italy, all the way to England.

With money, you had commerce. The problem was, how were you going to develop commerce without credit? The Church’s Schoolmen, the theologians, sought some way to permit interest, which Christianity had banned when things got so bad in the Roman Empire that the Christians went to the extreme of banning interest outright.

They saw interest as the problem that is causing everybody to lose their land and fall into bondage. But the theologian said: you need interest for credit, so we’re not going to permit interest on debts, but we will permit bankers to do foreign exchange trading so that they can send money from England to the kings and the nobility that are on the Crusades. If they put money in London or they need money while they’re on the Crusades to outfit themselves, to buy food or whatever, they can lend against the land.

So, all of a sudden you had the main borrowers were not the poor peasants losing the land, they were the rich nobles. And the people they were borrowing from weren’t civilian creditors, they were the Church, the main Church orders themselves, the Knight Templars and also the Hospitallers.

We have the loan agreements that they’ve all grown up with, and they’re just as difficult as if you go to a bank today and you sign an IOU for a credit card as a bank loan, you had all the different clauses for what you’d have to repay. You had debt coming back into Europe, essentially at the top of the pyramid. The main borrowing was from Italian bankers, and the borrowing is by the kings. It wasn’t so much by the poor, the poor could only borrow from the Jews, they couldn’t borrow from the Christians. Only the rich people could borrow from the Christian bankers.

Kings inspiring to go to war had to borrow, because all wars are fought with foreign exchange. You want to fight the war on foreign soil and destroy their country, not on your own soil where your country is hurt.

Silver, and to a lesser extent gold, was the form of money. Just as silver was money in antiquity, which is why the Spanish word for money “arjun” is the word for silver. Argentina is where the silver came from.

So, you had the developing again, not only of credit, but also of bankruptcy. Who’s going to go bankrupt? It was the kings who would go bankrupt in the realms.

By the 13th century, Matthew Paris was an annalist who was writing about how London and England were being treated pretty much like the third world countries are treated today by the International Monetary Fund. They were just looted by the Italian bankers that say: give us your mines, give us your forests, give us your land, give us your money.

The kings outside of Italy became client oligarchies, client royalties (not even an oligarchy) to the papal groups that were funding them. Finally, the French king decided to arrest all the Templars, kill them, accuse them of devil worship and grabbed all the money back.

Most of the kings in Europe, from Paris to London, had kept the royal treasury in the temples. Just as in antiquity all the cities would keep their savings in the temples. In Babylonia the savings were always kept in the temples, that was done in antiquity. Finally, the Templars were overthrown and that opened the path for the only creditors being Italians and the Dutch and others.

You had the whole unfolding of European countries going to war, again and again and again, going bankrupt. As they would run up into debts that couldn’t be paid again and again, more and more of the commons, the royal domain, the forest, the subsoil resources, the land, were all forfeited to creditors.

When governments couldn’t pay, they would create a monopoly to give to creditors, and most of the monopolies in infrastructure were all created in order to pay the debts. The easiest thing for governments to do was to pay debts by saying: we’re going to create an East and West Indies trading company, we’re going to give a trading monopoly and we’ll sell it off, and then we’ll take the proceeds, and you have to pay for the debts and bonds, so we’re going to retire our bonds. Give us a given amount of bonds and we’ll create a monopoly. That’s how the Russia company was created in England. The South Sea company was created to pay debts.

The bank of England was created for 1.2 million pounds sterling paid for in British bonds. All of the monopolies that were created, the privatization of Europe, was largely a debt settlement for debts that couldn’t be paid.

Well as you can imagine, as you fast forward today, the last thing that bankers want is for governments to create their own money. Because if governments can create their own money, like I wanted Canada to do instead of borrowing from Germany, then people won’t have to borrow from the banks. And the banks want the governments to balance their budget, not to create their own money.

Instead of Modern Monetary Theory, instead of just running a deficit by printing the money, they borrow the money at interest from the banks and the financial class. The claim is that if a government prints money, that’s inflationary, but if you borrow the money from rich people, it’s not inflationary.

This is the same argument that I’ve come across in Canada and It’s wrong. If the government spends more money, it’s equally inflationary (or non-inflationary) whether it is rich people lending it to you, or bankers creating it on a balance sheet and lending it to you, or if the government just prints the money. It’s all the same, it doesn’t matter where the money comes from, but the pretense by the monetarists is that the governments cannot create their own money, government debt is bad, only private debt is good.

And private debt is good because if you have a private corporation or a government going into debt to a private sector or an individual, the creditor ends up foreclosing on the collateral, and the creditors get rich. You have a whole financial dynamic that has defined money as what rich people have and are able to foreclose on. If governments can create their own money, they could also create the creditor rules.

They could say: if you’ve made a bad loan that can’t be paid like it happened after 2008 when the banks in America made trillions of dollars of fraudulent loans, which were called junk mortgage loans, everybody knew it to ninja, no income, no jobs, no assets.

Of course, you’re going to have forfeitures, of course you’re going to have a foreclosure, but you’re not going to want the government to come in and say: wait a minute. We’re going to write down the debts to the real value. The banks only deserve the real value of the property, they don’t deserve the fictitious values that they put on this property.

This was criminal, as my colleague at University of Missouri at Kansas City, Bill Black, has written extensively (he was the prosecutor for the savings and loan frauds in the United States in the 1980s). He found the frauds under the Obama administration, and the bailout, the worst frauds in modern financial history.

Obama was the protector of the fraud. He said: we’re going to reward the criminals. We’re going to let the banks foreclose on debtors that can’t pay the fictitious loan values. We’re going to let private Wall Street firms buy up all their property.

Obama’s policy reduced home ownership rates in the country. He slashed it by ten percent, mainly among black people and Hispanics, the low-income people, who had been redlined and who’d had themselves victimized by the most fraudulent loans.

Obama said: I believe in the free market; I’m not going to interfere with the banks (meaning I’m not going to interfere with the bank fraud). No banker will go to jail, but if the debtor can’t pay, then let him be thrown out in the street. You have the same situation today.

Jussi: it seems like what you’re describing is private debt is like a weapon of mass destruction for society or for ordinary people?

Michael: That’s right, because of the compound interest. If people leave their savings in the market or in the bond market or the banks, they grow exponentially. But the economy is not growing, wages have not grown at all since 1980, but the volume of debt has gone up. In every economy, you have the ratio of debt to income rising, you have the ratio of debt to the value of assets rising.

If you look at American real estate, as a whole, most of the real estate is not held by the nominal homeowner or a commercial owner. The debt is the largest chunk of the real estate value.

The whole economy is being absorbed by this expansion of debt. And that’s vastly increased today with the coronavirus. That’s where Babylonian example comes in. If you do not say: we’re going to treat the whole year, or two years of the virus, as an interruption, nobody’s going to have to pay the debts, no one will have to pay the rent, the landlords won’t have to pay their mortgage debt to the bank, we’re just going to take a breather, so that when it’s all over, we can start afresh as things were before. If you don’t have a debt write down, you won’t have resilience.

Jussi: you just take a holiday; I think you’re talking to the right audience when you say that. Because if you want the holiday, you need it to be backed by the state. You need state money in that case. Because it doesn’t matter for them if they get the money or not. Because they can just spend it into existence anyway, right?

If we have a system where we shortcut the private banks or the private financiers, there is no need to pay. In a crisis you could just have a holiday on any payment without a problem actually.

Michael: It’s easy to say that as an ideal, and I think it’s even stronger if you say: what if you don’t do that? What if you make people pay? Between 5 and 10 million families are going to be evicted, right now in America there is a moratorium on rents, renters do not have to pay the landlords. But at a certain point, this moratorium is going to end.

Now, one of two things can happen: either you say okay: At the end of the moratorium, runners don’t have to pay, the landlord doesn’t have to pay, and you don’t have to pay. We’re just starting off where we were when we were interrupted.

But, if you make everybody pay, then you’re going to throw 10 million families out in the street, just like Obama threw 10 million families out, but this is going to be even worse. In New York City there will be huge evictions, presumably they’re all going to be sleeping on the subways, the homeless shelters are already full in New York city. You’re going to have mass evictions, corporations bankrupt, families losing the money, landlords insolvent.

The stock market is soaring because this is the best thing that’s happened in half a century: we’re going to get rich! It’s easier to make money in a crisis than it is in growth. There are large numbers of private capital funds that have been created. The private capital funds are saying: We’re raising money we’re raising billions of dollars so that when the evictions come, we can all pick up commercial buildings, residential buildings, homes at a discount, at a cheap price, and then we can turn them into rental properties. What used to be an owner-occupied housing, will now be rental housing and we can act to raise the rents.

We can recover what was overthrown in the 19th century. We can restore what happened in the medieval times. We can have a neo feudal society. We can be money-large, and we’ll have the power that the landlords had over Europe for hundreds of years before democratic reform. All we have to do is stop democracy, and of course that’s where American diplomacy comes in.

Jussi: wow, this is a strong picture you’re painting. My question is this: can it be a coincidence that we have all the economic theories that we have? That we have beliefs that say: the state needs to have a surplus all the time, we have to borrow from private banks all the time.

I don’t see that many who talk about the problem with private debt. It’s you and Steve Keens actually, and a few more, but not that many. I don’t see any big-name economists, I don’t see that in any papers, is there any reason for it, what do you think?

Michael: the economic discipline has been turned into a propaganda discipline. There’s been an enormous amount of money to subsidize business schools, think tanks, right-wing organizations. The Koch brothers who have over 50 billion dollars have funded all sorts of right-wing institutes and lobbying organizations. They call them think tanks, but they’re propaganda tanks.

When I went to school 60 years ago, they still taught the history of economic thought. We still learned classical economics about economic rent being unearned income as opposed to profits. But you’ve had the lobbyists essentially strip away, you no longer have, in America, the history of economic thought as a core curriculum topic. You don’t have economic history, it’s a core curriculum topic.

It’s as if economics should be taught in the humanities department, as literature, science fiction, a parallel universe. So how are you going to get students who study economics and enter this parallel universe? It helps to be autistic. It helps not to have a reality sense. It helps to be someone like Paul Krugman who lives in a kind of “if you assume this then this will happen”. And these are the people who get the Nobel prizes.

The Nobel prize is essentially a public relations organization for the bankers to fight against democracy, against classical economics, to say: that it’s quite right that all economic power should be centralized in a small class. The Nobel prize judge say: if you don’t say that the rich people should take over society instead of governments, then that’s not science, what we say is science because we’re giving the Nobel prize for it, and we get the judge.

They’ve corrupted the judgment process, the academia has been corrupted, and even the statistics have been corrupted. They have redefined gross national product, again and again, to instead of treating interest and fees as a transfer payment, as a cost, they treat it as output.

In the United States, interest rates on credit cards are maybe 11%, but the penalty fees are 29%. The penalty fees are not treated as interest in the accounts, they’re treated as a financial service. So, the banks are providing you a service that is worth the margin between 29% and 11%, and it’s actually a contribution to GDP.

Another reason GDP is going up so much in America is there’s so many foreclosures, there’s so many debt foreclosures. If you’re in a home and the home price is being bid up, because of the monopolization of land, the increase in the home owner’s value of what the homeowner would have to pay himself or herself if they rented their home to themselves, that’s 7% of GDP right there.

You have a concept of economic output; the picture of economies has been redesigned by the bankers to make themselves look as if the parasite is creating all of the nourishment for the host. It’s as if the parasite is actually doing all of the productive work by charging penalty fees, by charging interest, by making monopoly profits. You have the world turned inside out, and I don’t think you can reform a discipline that has been sort of taken over as public relations for the banking sector.

You really have to create a new discipline. I call it archaeology, I mean it could be anthropology, you could call it reality economics. I worked with Herman Khan and Alvin Toffler in the 70s, we decided to call it futurology or futurism. Because you have to create a clean sweep, a new beginning.

What would the correct curriculum be? We teach classical economics. We take Adam Smith, John Stuart Mill, value theory, the difference between value and prices, economic rent, unearned income. You’ve got to restore the concept that not all income is earned, some income is a transfer payment, it’s parasitic, you’ve got to restore that concept.

You’ve got to make a realistic economic model that looks at: here’s how much the debts are growing, here’s the ability to pay, you’re going to have to write down the debts or else you’re going to end up looking like Greece looked a few years ago, where Argentina is looking today. And that’s going to be our future if you don’t have a reality economics, replacing this junk economics that’s paid for by the right-wing lobbyists.

Jussi: We are sitting in the epicenter of what you talked about now, because we are in Sweden in Stockholm, Riksbanken, the Nobel prize is from here, so maybe we should invite someone to have a discussion with you later on. It would be quite fun to see what it is that makes them avoid a Nobel prize in economics, you know based on what criteria, that would be quite fun actually.

Michael: the last thing they would ever agree to is a discussion. A few years ago, Paul Krugman, one of the Nobel prize winners thought: I’ve got to talk to somebody who doesn’t agree with me, and he found a guy from Australia, nobody’s heard of him, Steve Keen. And so, he had a debate, you can find it on google, with Steve Keen, and it was like Bambi meets Goliath.

Krugman is the lobbyist for the banks, ultra-right winger, saying that banks cannot create money, all banks do is act like savings banks, they relend the loans from savers to borrowers, but they don’t create credit at all. Steve Keen showed that when you go into a bank, the banker doesn’t say: well let me see how much money we have to lend you. The banker says: okay we’ll just write out an IOU, and you’ll sign the IOU, and we will create a deposit. It’s the loan that creates the deposit, not the deposit that creates the loans!

Steve Keen made Krugman look like the idiot savant that he is. There is no way you are going to talk to any realistic person, because the fact is:They’re basically the neo-fascists. They want to get rid of democratic government, to centralize control in the hands of the banks. They can only do this by making a fictitious view of an economy that doesn’t exist.

Anyone who brings in the reality, here are the statistics, the reality of economic history, they say: that’s not economics, that’s exogenous. They actually have a vocabulary. “Exogenous” means “external to our models”.That means: that’s politics, we don’t discuss politics.

And once they talked to Steve Keens they said: oh, for that reality, that’s not what we’re talking about. Economics is not about reality. Economics is a story about how the world would work if the rich people controlled the government and ran markets in a way that worked.

Of course, that’s utterly fiction, how would banks be if they weren’t crooks? There might be some planet where it’s ruled that way, but let’s talk about the real world, well reality is not part of our models.

They have a problem with the empirical things actually, because the results if you look at the number shows quite clearly what’s happening everywhere. Even if you look at Steve Keens numbers, when he modelled Minsky and we look at history, he can see what happens with private debt when it goes over certain numbers, and then you have a crash. Then you have fire sales, and then somebody buys this stuff cheap and then it starts all over again. It’s quite clear, the numbers are very clear, there’s no doubt about it.

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  1. GramSci

    Thanks for this, Yves. This is the best concise introduction to Hudson that I have read. I’ll circulate this one widely to my “democratic” friends.

  2. Carolinian

    Thanks as always for the Hudson big picture. It sounds to me at least that he is making a case for there being such a thing as “human nature” and that it has been remarkably constant over the millennia. Behavioral economics over Krugman economics? It could be we are driven by tendencies that have little to do with all our rationalizations.

    1. Jonathan Holland Becnel

      *Channels Garth from Wayne’s World*


  3. 2014

    There are quite a few problems I noticed with the transcript when listening, unfortunately. For example, right out of the gate,

    Communism is nationalism, the opposite of democracy, communism is voting for somebody we don’t like.

    Should instead read,

    Communism is nationalism, communism is democracy, communism is voting for somebody we don’t like.

    His points get distorted quite a bit due to this… Fantastic interview, nevertheless!

  4. Ignacio

    When somebody says ‘debt doesn’t matter in our models because debt, the liability, is matched by an asset elsewhere in the economy’ you can start with hooo hooo! And that is what Krugman’s models say and he has repeated some or several times.

  5. Durans

    From the Article

    It’s as if economics should be taught in the humanities department, as literature, science fiction, a parallel universe. So how are you going to get students who study economics and enter this parallel universe? It helps to be autistic. It helps not to have a reality sense. It helps to be someone like Paul Krugman who lives in a kind of “if you assume this then this will happen”. And these are the people who get the Nobel prizes.

    I was fine with this article until I got to this point. This really threw me off. What the does being autistic have to do with this? The next sentence seems to indicate that they don’t have a sense of reality. This is nothing but ableist stereotypes that has to nothing to do with actual autistic people. The other possibility is the supposed idea that autistic people don’t care able people much, which in itself is another ableist stereotype.

    I know this is just a small part of the article, but it ruins the whole article for me. I feel this is far more easily overlooked than if it was some racist, sexist, homophobic, or transphobic comment. This is why I feel I have to point it out.

    1. Yves Smith Post author

      Please try using a search engine. You may find the usage offensive but it refers to an established political movement.

      The post-autistic economics movement (French: autisme-économie)[1] or movement of students for the reform of economics teaching (French: mouvement des étudiants pour une réforme de l’enseignement de l’économie)[2] is a political movement which criticises neoclassical economics and advocates for pluralism in economics. The movement gained attention after an open letter signed by almost a thousand economics students at French universities and Grandes Écoles was published in Le Monde in 2000.

      The French term autisme has an older meaning and signifies “abnormal subjectivity, acceptance of fantasy rather than reality”. However, post-autistic economists also “assert that neoclassical economics has the characteristics of an autistic child”.


      Your reaction is also an example of the cognitive bias called “halo effect,” which is wanting to see things and people as all good or all bad. You might consider reading up on that too.

      1. Durans

        I was well aware of the french economics movement and I already thought their use of that name was offensive. Going into that is a whole other thing, so I’ll just leave that here.

        If Mr.Hudson didn’t mean to refer to actual autistic people then he should have thought of a better word or a completely different way to get the idea he was going for across. I actually agree with him on many things he said, but I think he needs to be aware of the connotations of using the word autistic as he did.

        1. Jonathan Holland Becnel

          Doc Hudson isn’t plugged in at all to the Digital Culture Wars being pushed on Reddit eat al.

          He is blissfully ignorant. He mentions he this when asked a question about Central Bank Digital Currencies at the end.

          Not quite sure why ud assume Doc meant any I’ll will toward ordinary workers who are Autistic?

  6. chuck roast

    Nice to hear a view of national accounting over the millennia. The orthodoxies have buried Ricardo and Marx. But, I’m curious why the heterodox political economists have not developed a system of national accounting whereby rent and interest payments are treated as drains on economic growth. If the velocity of money has diminished substantially as was discussed the other day, then the dollar I spend at Walmart goes directly to China measured as (X-M), and this has serious local implications that are not measured. Similarly, debt and interest payments are drags on the economy that need to be better understood and accounted for differently.

    I loved the part where the King of France extinguished his debts to the Templars by declaring them devil worshipers and physically extinguishing the sect. Harry, Megan and the kid should take note.

    1. jsn

      Pope Leo X legalized usury in order to get Jacob Fugger, the first banker to ever have a consolidated balance sheet across a continental branch office opperation, to finance one of his wars.

      This functionally ended the Catholic Chuch prohibition on usury, opening the door to neo-Roman debt surfdom!

    2. jsn

      Also, what you’re looking for seems to be what Kalecki and Keynes came up with a century ago.

      Applied Keynesianism would have “euthanized the rentier” but Kaleck foresaw that Capitalists would rather be less rich than lose their social prestige / control and would be willing to forgo massive income to preserve their power.

      Which they have done.

  7. Jerome Skyrud

    Thank you, Michael, over the years you are slowly educating us to reality. When you talk about the paucity of political parties in the world that support progressive values, you didn’t mention DIEM 25. Wouldn’t that party fill this void?

  8. The Rev Kev

    Perhaps it is just me but does anybody else get the feeling that with the economy that we should really go back to square one and redesign it from scratch? In earlier times Doc Hudson points out that debts had to canceled on a cyclical basis in order for those societies to work. In other words, that model did not work. In modern times the debt is allowed to grow exponentially and is one tree now that grows to the sky now – and is unsustainable. So the present model does not work either.

    Perhaps I am butchering the concept but for me an economy is just a way to distribute resources and I mean real resources – not symbols. If the present economy is, as a byproduct, literally destroying the planet and depleting resources to extinction, then I would say that a redesign from scratch is warranted. There is after all no contract that says that a society must be run in a way that ensures the destruction of itself and its people. If an economy and the associated debt are sustainable, then it is obviously not fit for purpose.

    1. Jonathan Holland Becnel

      I think with the Internet and workers talking with each other around the globe this is the way to go. Involve everyone as a stakeholder, hash it out in real time, and vote. The first global democratic vote. We keep our borders and nationalities and share our cultures while keeping our corporations from crossing the borders.

  9. Eudora Welty

    I deeply admire and respect Dr. Hudson, and I loved this talk. I was crying throughout the lecture. Thank you.

    1. Jonathan Holland Becnel

      Same. And I feel so much love and hope for our future because of what he’s saying!

  10. Joe Costello

    “5th century, end of the 6th century and onward. What you had was five centuries of repeated revolts, walkouts, secessions of the plans and civil wars. The common demand of all of the rebels was: cancel the debts, redistribute the land.”

    This is a very simplistic and not accurate view of Rome. If you want to look at the democratic history of Rome, look to Livy and Machiavelli. Debt and land resdistribution didn’t become big issues in the republic until the last of its five centuries. The successful fight of the plebs for more political power began at the founding, Machiavelli considered it the key to Rome’s political dynamism.

    As far as “democracy”, in recorded history there has never been a level power structure, including Athens. Aristotle in fact points to five different types of democracy, all with some sort hierarchy along with various distributed power structures. That’s what we know, completely distributed power never existed, so to use “democracy” as a critique to what did exist, is simply not helpful.

    That’s not to say we don’t have a lot to learn from history on much more distributed systems of power, certainly much more distributed than what exists today and evolve them to an even greater extent. We even have a lot to learn from closer on with the old agrarian republic of the US, lost to us and it seems to history.

    Money is a medium, it is dependent on the structures of power. Democracy is not centralized, if you have some sort of centralized money creation system, it isn’t democratic.

  11. Selwyn

    There were so many interesting historical tidbits tucked in this that completely altered my understanding of, not just economics, but of the roots of so much taken for granted that made no sense to me because it had no context.


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