Michael Hudson: On Debt Parasites

Yves here. This is a rush transcript of a recent interview on one of Michael Hudson’s favorite topics: the role of debt in ancient societies and how that has changed over time. The transitions from speaker to speaker have not yet been added to this write-up, but it’s easy to infer where the breaks occur.

If and when Hudson posts a spruced-up version, I’ll put it up in place of this one.

Originally published at Michael Hudson’s website

We’re told that debt forgiveness is impossible, because all debts must be paid, and to do the opposite is to invite anarchy and chaos. But what if none of it was true? Renowned economist Michael Hudson tells Branko Marcetic on New Zealand’s 1/200 podcast about the debt jubilees of the ancient world, how Jesus preached debt forgiveness, and how the finance sector has become a parasite feeding off the productive parts of the economy.


Okay, welcome everyone to another episode of 1 of 200, the New Zealand and international politics podcast. I am very excited about today’s episode, we have a brilliant guest. His name is Michael Hudson. He is an economist. He is a professor of economics at the University of Missouri Kansas City, and a research associate at the Levy Economics Institute at Bard College, as well as being a former Wall Street analyst. He’s written many, many brilliant books, including the one that I’m going to talk to him today about largely, it’s called …and Forgive Them their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to Jubilee Year. Michael, how are you going?

Pretty good.

Great, great to have you. Well, you know, look, let’s get straight into it. I think it’s such a fascinating book, because of what it tells us about our own history as a species and about how our society is structured. You really make the case here that our modern relationship with and understanding of debt is really kind of upside down, very alien, when you look at the full scope of human history, and the question of how we deal with debt, it’s this fundamental, maybe the fundamental issue of civilization and political economy. So let’s just start with you giving us a bit of an overview of what ancient societies relationship to debt was, how they kept debt in check, how they viewed it.

Almost all debt, in really ancient society, was interpersonal. The typical kind of debt was what the Europeans called weregild-type debt. If you injured somebody, what are you going to do, if you break an arm, or if you kill them. There are two choices ancient society had: either you had a feud, and your family would fight his family, or he’d make restitution. And the idea of a restitution payment, that was called a debt like schuld, or devoir, in German and French, you would owe restitution, and that meant that you would settle the conflict and there wouldn’t be fighting. So gradually, the payment of the weregild, whether it was in money — or if it was really serious, it would be in slave girls or cattle — came to be the word for debt, meant the word for compensation payment, and at the same time, for the injury or for the offense, or the word for ‘sin.’ So the original meaning of the Lord’s Prayer in Hebrew and Greek was, “Forgive us our debts,” because their whole fight in the time that Jesus wrote all over the Roman world was a fight to cancel the debts that were enslaving everybody.

It was St. Augustine that changed all of this. He said, forget the idea of monetary debt. The church in the fourth century had been banning usury, banning the charging of interest. And St. Augustine said, “Wait a minute. Now that Constantine has made Christianity the state religion, we’ve got to support the state.” And he ended up fighting against the original Christians who wanted to protect the poor from the rich, who were forcing them all into debt — especially in North Africa, which was the first part of the Roman Empire to really go feudal, huge land of Fundy law states with serfs called coloni who were tied to the land, just like serfs in the Middle Ages. And so Augustine said, “If we’re going to be a universal church, then universal means you can’t have any disagreement.” So the great authority on this period, Brown, wrote that Augustine was really the founder of the spirit of the Inquisition. He appealed to the Romans, to support him against the people who actually wanted believe that the church should do what it had done for the last four centuries: support the poor against the rich. And they basically ended up killing them or exiling them, and grabbing the church property and giving it all to Augustine. And he said, you know, forget about — from stoicism to early Christianity, the whole idea was, what’s sinful is for the wealthy people to use debt to oppress other people, to take debt out of the interpersonal affairs and just personal injury and keeping the peace, to making debt monetary, and getting people in debt and then saying, well, just like there was a legacy from archaic times, that people couldn’t pay the debt, they were exiled. And the Bible has cities of exile, cities of refuge. And if you had people who couldn’t pay the debts, and society didn’t want them to start a big feud, then you’d exile them. Until basically a new ruler would come in, who would declare a clean slate. He would say, “Okay, everything’s over, all you people can come back, we’re going to have a new beginning. Nope, no debts.”

To get back to your question — how did all this begin? — in Mesopotamia, you’d have basically, most debts began to be owed to the palace or the temples, in an agrarian economy. Obligations were paid throughout the year. If you were in the third millennium Sumer, or second millennium Babylonia. What do you do during the crop year, when you want to go out to a bar? They actually want to alehouses, and the alehouse lady would do just what a bartender would do today: they’d put it on the tab, and you’d run up a tab to the alehouse, you’d run up a tab to the palace for advances of animals, or water, or agricultural inputs, and everything was done by credit, and the debts would all be paid on the threshing floor, in grain. And a unit of grain was equal to a unit of silver. So the palaces could keep the economy records with a dual monetary standard and have a single standard that would include domestic agricultural economy, the weaving of textiles, feeding people, and also foreign trade.

So you’d have these debts, but sometimes, you would have a crop failure. And at that time, you would have, like in the laws of Hammurabi, you say, “If the storm god comes, Hadad, and ruins the crops, then the debts don’t have to be paid.” Because obviously, what would happen if you had all these cultivators who’d run up debts to the ale lady who was sort of a public official — they call them pubs in England, because they’re public houses. What would you do if the members of your family got married, and you had to pay a temple priest to perform the ceremony. All these things would be mounted up during the year. And if there was a crop failure, or if there was a war, or if there was a drought, and you couldn’t pay, what would happen if you hadn’t wiped out the debts? All of a sudden all these people that owed debts would become the servants of the person who they owed them to, a wealthy person.

This was all a carryover from the original interpersonal weregild: that if you’d break somebody’s arm, or if you’d kill a family member, and you couldn’t pay, then okay, you become their servant, and you have to work off the debt until there’s a new ruler taking the throne, or a new chieftain, or until there’s a debt cancellation. And this is how society worked, basically, in the third, second, and even into the first millennium. That was what the first sermon of Jesus was all about. When he went to the synagogue, and Luke explains that he unrolled the scroll of Isaiah the prophet and said, “I’ve come to proclaim the year of the Lord,” which was the debt cancellation — the Jubilee year — that was brought in from Babylonia into Judaism, as it was done all through the Near East. Assyria had it when it conquered Judea. Babylonia had it when it conquered Judea and took the exiles to Babylonia, and the exiles, picked up, literally the same word used in Babylonian for a clean slate (debt cancellation), brought it back to Israel, and word for word had the same conditions of a clean slate: when a new ruler took the throne, or when there was other reasons — a war was over, or there was any reason for a debt cancellation — you’d cancel the debts, you’d liberate the debt servants to go back to their families, you’d give them back the pledges that they’d made. If they pledged a slave girl, they’d get the slave girl back. If they pledged their land, they’d redistribute the land.

People who translated the Bible, from the fourth century, down to about the twentieth century, didn’t really know what these words meant. What does it mean, “year of the Lord?” What does it mean, “deror,” which was the debt cancellation? And it was only after Assyriologists began to find out how all of Near Eastern society had debt cancellation, just like anthropologists were finding that all the way from the Native American Indians to European realms, you’d have this practice of restoring balance. The idea was, how do we prevent society from destabilizing and polarizing? You cancel the debts.

Well, all this changed when, in around the eighth century BC, when you have Near Easterners begin to sail westward into the Mediterranean, into Greece, the Aegean and Italy, and they brought the idea of trade, weights and measures, and commercial contracts. And also the idea of interest-bearing debt appeared for the first time in the societies. There was no concept of interest in in the West, in all of the Linear B documents of Greece, from about 1,600 to 1,200 BC, you had a palatial economy, but there was no concept of interest anywhere. All of a sudden this was brought and you had basically local chieftains, who all of a sudden became what a number of historians now mafia families. Local cities were like mafia groups, and they found a way of just monopolizing the land, until about the seventh and sixth centuries. There were revolutions all over by reformers, all over Greece, and Italy, and reformers, later were called “Tyrants.” But they called themselves reformers, and they were the people who introduced what became democracy. They introduced public building, they ended up incorporating the population, and preventing debt bondage.

The whole fight of early society, every society, was how do you prevent the population from falling into bondage? And the palaces had a reason for doing all of this. If you would have the taxpaying smallholders, the small cultivators, owing their crop to the creditor and owing their liberty, having to go to work on the creditor’s land, instead of working as a corvee, building palace walls and digging ditches for irrigation, if you would have these people fall in debt to the creditors, they wouldn’t be able to pay this crop surplus and labor surplus to the palace anymore. The creditors would take over. And the whole idea of rulers throughout the Near East, all the way into probably the early kings of Rome, who said, “The one thing we’ve got to do is prevent the creditor class from becoming an independent oligarchy. Because if it becomes independent of us, and it gets the economic surplus, they’re going to use this labor to hire an army. They’re going to overthrow us and they’re going to become the state.”

So you always had a struggle between the state protecting society from the creditor class — the oligarchy — and the oligarchy wanting to be independent, wanting not to have a debt cancellation. And this was a fight that went on for four centuries before Jesus’s time. The fourth century BC and the Dead Sea Scrolls have shown there was a long political fight. And Jesus represented the people who were trying to fight all of this. And so the early Christians were basically advocates of the Jubilee year, trying to trying to cancel it.

Well, in Rome, the wrong kings were overthrown in about 509 BC by an oligarchy, who essentially wanted to reduce the rest of the Roman population to serfdom. And they were so oppressive, that there was a walkout, the secessio plebis in about 494 BC. They walked out, they came back. There was just five centuries of early Roman history into the Republic — the whole Republic was a long set of one revolt after another after another, wanting a debt cancellation and redistribution of land. All of this was called a democracy. A democracy to the oligarchy means all the creditors are equal, and therefore liberty is the liberty to enslave the rest of the population, and make them dependent on reducing to serfdom.

Democracy throughout antiquity meant serfdom for most of the population. Aristotle was very clear on this. He said, “Many cities have constitutions that appear to be democracies, but they’re really oligarchies.” And in fact, every democracy, Aristotle wrote, tends to turn into an oligarchy, as wealthy people get rich, and then the oligarchy makes itself into a hereditary aristocracy, and lords it over the rest of society, and the only way that you can prevent a total breakdown is when some members of the ruling, wealthy families get together and one family breaks and says, “Look, we don’t want this kind of poverty, we’re going to try to go and take the people into our camp.” Those are the words that Aristotle used: we’re going to take them into our camp and throw out the oligarchs, just as the Tyrants did in the seventh and sixth centuries, in the wealthiest Greek cities, from Sparta to the area north of Athens. Athens was about the last of these cities to have a democracy.

You had this whole background that led to the modern world, which was a world that stopped the tradition of debt cancellation that had liberated populations from debt servitude, from debt bondage, and what became serfdom, and on the idea that, well, the law is inexorable, you’re not going to have any debt cancellation. And there was the fight within the Christian church against Rome, especially again in North Africa, which had been Carthage that was destroyed by the Romans in 146 BC. They took over the very rich agricultural land, and that became the agricultural breadbasket of the Roman Empire from Egypt, all the way to Numidia, which was Carthage but then it went all the way to what is now Algeria, basically, providing all of the grain for Rome.

The historians now say, “Well, boy, the Roman Empire wasn’t all that bad —look at how rich it got.” But the richness was all concentrated in the 1 percent of the population and the 99 percent ended up being tied down to the land. If you read the late books of the New Testament, all the way through to the book of Revelation, it’s all about, “We’re living in the end times, it’s terrible, Rome is the beast, there’s no hope here. We can’t reform land. We can’t cancel the debts ever because of the greed of the rich. There’s nothing to do but become martyrs and die and hope that in the next world, things are going to be better, and maybe Jesus is going to come back.” The whole idea was anti-Roman. But then so many Romans, themselves of wealthy families, said, “You know, the poor people who are the Christians, what they’re saying, what our philosophers say in stoic philosophy, is you shouldn’t be greedy. You shouldn’t have wealth addiction. Money is addictive. And, you know, we really want to restore human decency and egalitarianism.” So they converted to Christianity, and finally, Constantine converted and made it the state religion.

But in making it the state religion around the 411-413 AD, the first thing is okay, we’re not going to have oppression against the Christians. Let’s give them back the property. Well, immediately, there was a fight among the Christians: Who’s going to get the property? There are all these different churches. There’s some churches that cooperated with the Romans, and there’s some churches that fought the Romans. Well, hardly by surprise, all these groups said, “Well, Rome has the army. Let’s appeal to the Emperor. Now that you’ve made us Christians the world religion, who are you going to give the property to? Who are you wanting to say are real Christians? Are the real Christians the ones who supported Rome, and the wealthy classes, and they’re keeping all of us in feudalism? Are you going to support — in North Africa it was the Donatists — are you going to support the poor, which is what Jesus and early Christians talked about?” Rome said, “Well, now there’s a state religion, the state is the army supporting the wealthy landowners. We’re just going to kill you, unless you join our church.” And that was Augustine’s universal church. He said, “Forget what Jesus in the Lord’s Prayer said about, ‘Forgive us our debts.’ What he meant was, the debt of Adam having sex with Eve. That’s original sin, we’re born into sin, that sin is all about sex. It has nothing to do with the sin of offense and egotism and hurting others and getting other people in debt. Forget that because, the Roman Empire, debt is us.” In other words, Augustine said, “I’m pro Wall Street.” He was just like President Obama or the other pretend Democrats supporting the status quo. Basically, Augustine came in and said, like President Biden, nothing’s really going to change. And the armed force of the Romans supported them. As I said, they fought the other people.

Even before Augustine, you had a fight between Cyril of Alexandria, the gang leader who killed Hypatia. He was sort of the Donald Trump of Alexandria, anti-semitic. He said, “How are we going to get the Jews out of Christianity? We know that Jesus was Jewish, and that’s very embarrassing. How do we sort of keep them out of the church? Well, number one, we’re going to kill them all. And number two, anyone who can read books, we’re going to get rid of them. We’re going to kill Hypatia, we’re going to kill the intellectuals, and we’re going to kill all the priests that don’t agree, like the Nestorians. And we’re going to introduce the Nicene Creed, of saying ‘Who is Jesus? Was Jesus really a Jewish rabbi who was saying cancel the debts, or was he something else? Was he really a person or not? Well, no, he wasn’t a person. He was really God. He was part of God’s body.” And that’s the Nicene Creed. “Forget Jesus as a person, forget his biography, forget the fact that he was Jewish. He was really part of God and God is eternal and eternal is us right now, us and the Romans.” Cyril basically imposed this. People were dying for these seemingly obscure theological issues. It was the whole basis of theology, the whole fighting at that time was over how you’re going to cope with the debt problem and the adverse land redistribution? I’m only saying that as a background for today, because the same fight that you’re having today is the same fight that you had in Judea, in Jesus’s time, and in the Christian church, when Augustine took over.

Every economy is going to be planned by someone. The question is, is it going to be planned by the creditors, as happened today? Or are you going to have a government, a ruler, that is going to say, “My job is to keep society stable, and to prevent it from polarizing so that we can survive and be resilient and go forward”? The creditors don’t care about resilience. Their timeframe is rather short. So there’s sort of an irony here. It turns out that if you look at history, the only kind of society that has protected populations from debt bondage and feudalism are societies with a strong central ruler. Well, in the modern Western world, they define free just like the Romans, as the oligarchs said: “Our liberty is the liberty to do whatever we want to those below us. Our liberty is our privilege of being able to enslave the 99 percent.” Right now, you have, thanks to the Chicago School, where I understand that you’re talking from, a free market is a market where Wall Street and the creditors have control of planning society’s allocation of resources. The idea of Western freedom is the freedom to oppress. The idea is the 1 percent shouldn’t have any public authority guiding them to protect the 99 percent and to prevent society from running into the kind of debt corner that the United States and Western Europe have painted themselves into today.

I’m glad you brought up Wall Street because I wanted to get to this issue of, you talk about the difference between financial capitalism and productive capitalism. You talk about the real economy and the finance economy. In line with everything you’ve told us now about the history of debt, and how its functioned to destabilize societies, what is the role of the finance sector in modern economies, and how does it differ from the real economy as you define it?

Well, Aristotle talked all about this. He said there were two kinds of economics: there was the real economy, oikonomos, the household economy, and there was chrematistike, the economy of wealth. And he said, the economy of wealth is antithetical to the real economy, because the purpose of the creditor, of Wall Street, is to get the 99 percent in debt to the 1 percent, so that the 1 percent says, “Everything that you produce, all of the economic surplus that you have over subsistence rates, you have to turn over to us.” The tendency of any economy that has debt, and an interest-bearing debt ,is that the debt grows faster than the economy as a whole. So you have exponential debt doubling every so many years — any rate of interest is a doubling over time — and economies have never been able to keep up with it. The economies taper off. And the more that compound interest builds up, the more income is diverted away from the real economy of production and consumption — eating, and making things, and commerce — into the financial economy, where it’s just lent out, and more and more of this money is lent out, or used to buy land and property and real estate and corporations, corporate raiding, and all of that.

So every modern society has a tension between the growth of debt, of finance, and the real economy. That’s why the Chicago school, all of their economic models, they don’t have debt. They don’t have money, because all money is debt. They say, “Wait a minute. Economics is really about, given how much money people have, what are they going to spend it on?” There’s no question about, why do some people have money and not others? What’s the distribution of this money? And when people spend money is it really only on what are they going to eat and buy? Or is it about the debts they’re going to pay? How about the privatized medical care they have to pay? How about the taxes they have to pay — where the taxes are in turn paid to the wealthiest 1 percent, as they were back in Rome.

All of this is excluded from economics. Nominally, academic economics is all supposed to be just about the production and consumption. But the world we live in is run by the financial sector that’s taken over the industrial capitalist economy, and turned what appeared to be industrial capitalism of the 19th century, that Adam Smith and John Stuart Mill and Marx and Veblen talked about, all of it’s turned it into financial capitalism. There’s no room in the curriculum to talk about it. That’s why I stopped teaching economics at the New School already in the 1970s. There was no way that I could fit debt into the curriculum is. There’s this kind of schizophrenia of the image of the world that we have, as if the world didn’t have debt that was growing faster than the economy, as if everybody could pay the debts. The tendency of debt for any family, any corporation, any economy, is to grow faster than the ability to pay, until there’s a crash. And when you can’t pay, either you lose the property, or you become in one way or another, a servant to your creditor, in terms of having to pay labor, having to pay whatever you produce. You have a concentration of property ownership in the hands of the creditors, if you don’t write off the debts, which ancient society did, and which used to be the core of ancient religion: from Babylonian religion — Hammurabi, receiving the laws, and the god saying, you have to promote social justice, write down the debts — to Christianity.

Let me ask you a little bit about what implications this has for the post-pandemic economic recovery, because the theory in both the United States as well as New Zealand, to some extent, is, you give money to people, you give them enough money to spend, they’ll go out and spend that money, and that’ll stimulate the economy and get things going again. But we saw in the United States, for instance, that with some of those initial stimulus checks, I think the majority of people spent that on paying down bills, paying off debts, and not the consumer spending that it was meant for. So what implications, as the world comes out of this pandemic-driven economic cataclysm that we’ve all been through, what implications is there that we continue to have these highly indebted societies at the same time?

The implication of an indented society is that more and more of your income is going to pay debts in one form or another, because the debts mount up. You have, on the one hand, the banks have found out that you can get for yourself as bankers what landlords used to get in the 19th century all the way from feudalism: you can get all the land rent, by lending more and more money to people to buy a house so that if anybody wants to buy a house, they have to go to a bank, they go to loan, and the banks will lend larger and larger amounts that absorb the entire rental value of property, up to the point where in the United States, almost all the bank mortgages that are lent out the families are guaranteed by the government up to the point where they absorb 43 percent of the borrower’s income. Well imagine that 43 percent of your income goes to pay rent. This was never the case in any society before. When Ricardo talked about the economy and rent in the early 19th century, he thought food was the main element of people’s diets. They had to eat. And at that time, landlords owned almost all the land and everybody had to rent, and renters only had so much to pay. And so rent wasn’t as important as food and the basic things that people needed. You could sleep in the streets. You could sleep in sort of group houses if you didn’t have money. People could get by without owning their own house.

All of that basically changed in the 19th century fight of the classical economists against landlords. Adam Smith, John Stuart Mill, the socialists, they finally got rid of the landlord domination of the House of Lords in England and the upper houses in Europe, and they began to privatize housing. “Democratize it,” they called it, as if they were the same thing. And so by “democratizing,” letting everybody buy their house, all of a sudden, the cost of housing has gone way, way up to today at 43 percent, and all of these mortgage payments go to the financial sector. When you owe so much for the house, you begin to run behind in other bills. You have to borrow from the banks. You need to buy a car to get to work, you have automobile debt. In order to get a job, you need to go to university, have an educational degree university degree, so you have student debt. Almost everybody in order to survive, has to survive like they did in the third millennium BC: by going into debt and owing the money to the banks in interest, and this interest continues to grow without any reference to the ability to pay.

Prior to Western civilization, every society had to survive by keeping debts within the ability to pay. If you look at the medieval weregild laws of the Germanic societies in Europe, if you injured somebody, you had to pay, but it was always within the ability to pay. There was no intention of having debts grow so large that they were beyond the ability to pay. Now, the whole idea is to monopolize property and to get it behind the inability to pay, and not only the personal inability to pay and the corporate inability to pay — in order to take control of the production process and the labor process — but entire governments. So what do creditors do? The largest value of wealth in the world is what the governments owned — the land that the governments owned, the property, the government infrastructure. Since 1980, in the West — it’s like discovering the New World, it’s like Europe, discovering the Western Hemisphere in the 15th and 16th centuries — you had the financial sector discovering that there was all this wealth of governments, not only the land that governments had, the mineral rights, the oil rights, the mining rights, the roads, but also the electric utilities, the school system, the medical system, all of this could be privatized. And so they would make loans to the government, or they’d raid the currency and the government would have problems paying.

The financial sector, one of the first things they did was endowed business tools, by control of the educational system that shaped how people thought about the world, and in countries like — you mentioned New Zealand, I think you have a connection in New Zealand — they said, “Well, you know, the government’s really wasting a lot of money. Bureaucracy isn’t as efficient as public enterprise. Let’s sell off the electric utility.” So they sold off the New Zealand electricity utility, and they said, “How are we going to price it? Well, it’s not charging very much right now, it’s not making much money. We’ll discount it by the rate of interest — let’s say a 10 percent rate of interest — and we’ll sell it at the capitalized value — what it’s earning.” So they privatized it, sold it largely to financial investors, especially foreign investors. And the foreign investors said, “Okay, thanks, now we own the utility. First thing we’re going to do, we’re going to double the electricity rates. The next year, we’re going to double them again. And then we’re going to stop providing electricity to you people in the countryside. It costs too much money to do with it.” They cut service, they raised the price, and they made a huge killing. And of course, they sent the profits to England and the United States.

They did that not only with electricity, but with the transportation. “Let’s privatize the transportation. Oh, the government didn’t charge very much because they wanted transportation as a public utility.” Well, they bought up the transportation and essentially Thatcherites in New Zealand doubled the rates of transportation, they cut the services to places, and they began laying off the labor force. They said, “We don’t need the labor.” And the Labour government said, “This is wonderful! This is efficiency! You’re cutting the labor force! Look at labor productivity! When you fire half the people and make the other half do the work, productivity goes up. New Zealand’s really, really winging it!”

That’s basically the story of what happened in New Zealand since the 1980s. And it was led by the Labour Party, just as in England, it was Tony Blair and the Labour Party that led the privatization of transportation and did things that even Margaret Thatcher and the conservatives never could have done, because the conservative thought was essentially that, well, you ought to conserve society by making it resilient. Well, in New Zealand, it was the conservative parties in the 1950s and 60s that had actually been the socially minded policies — how are we going to make New Zealand work instead of how can we carve it up and make it into something other than a calm, quiet, middle-class society? How do we polarize it and grab all the money for ourselves and make most of New Zealand poor, so that life is hell in New Zealand if you want to buy a house, as it is in Australia. We’ll just financialize the housing market and raise prices to a point where it absorbs almost all the income of people who work in New Zealand, who then have to pay the rest of what they’re able to keep on privatized electricity, privatized transportation, and all this money’s sent abroad.

So you have New Zealand falling into the position of other Third World countries: a chronic balance of payments deficit paid to the financial centers, and enough pressure on its currency so that if it would elect a government that wanted to somehow rein in the financial sector, the foreigners, the financial groups, would have a run on the currency. They’d sell the New Zealand currency short, currency would go down, there’s a crisis. “Look, there’s no more confidence in New Zealand, you’ve got to let us run the economy and restore confidence by taking it over and making you poor.” That’s New Zealand’s philosophy. They call that democracy. Democracy is basically oligarchy. Democracy is the freedom of the financial sector from the government or state authorities to restrain the oligarchy from impoverishing society.

A long and bitter history in New Zealand that you just laid out that listeners I think, some of which will be familiar to them, of course, famously “out-Thatchered Thatcher” is what the Economist said about New Zealand in the 80s. But you bring up the Labour Party. The Labour Party is back in power in New Zealand. And it may not be doing the same stuff it did in the 80s, but what we have seen is it’s embarked for the first time in New Zealand’s history on this quantitative easing program, money printing in colloquial terms, which we’ve seen in the United States as well as a response to the crisis. And the way that it’s taken form in these two countries is, in New Zealand, it’s been used to stimulate lending in the finance sector, which led to this enormous housing boom, that’s made life a lot harder for people. And in the United States. It’s been used to pay down corporate debt. Right. And I think the way that people when they see these policies get done, the cause of very complicated and esoteric I think people say to themselves, well, I guess there’s no alternative that there was this was the only way that could have happened. You know, unfortunately, these governments don’t want to spend on social services on you know, helping people get over their debts, canceling their debts, but they have to this is the only thing they can do with these money printing programs is bail out the big guys. My question to you, is that the case? Could these money printing programs that we’ve seen around the world actually have been used to bailout ordinary people, or stimulate the economy at the very least, instead of just stimulating a speculative boom or or bailing out big, big corporations?

No, there is no way of bailing out ordinary people because of compound interest. You just pointed out that the money that Trump gave, the Cares Act, was paid into their bank account, to their credit card accounts and used to pay down debt. If you have debt growing exponentially, there’s no way to create enough money to finance this exponential growth in debt without flooding the economy with — literally, it’s moving towards infinity. The only way of solving this, really is to, to cancel the debts, write them down. The debts cannot be paid. And if you try to pay them by creating money, then you’re going to end up creating an infinite amount of money. Yes, it would help pay the all of the debt arrears by the American population to the banks. They’d say, “Okay, we’ll give you, you know, $5 trillion.” All this money would immediately be re-lent out and doubled again. The government would have to give $10 trillion the next year. It would become an infinite function. Wall Street, indeed, is telling the government to do just this. Wall Street is saying, “We don’t want to lose money, that would be a disaster. If we would lose money when the American public could not pay, we don’t want to kick people out of their houses. We want them to pay more and more and more money on the debts they owe. We don’t want to have to prevent student debtors from having enough money to pay.

Give credit card debtors enough so they can afford to pay us, so that we get even more money, and then we’ll use this money to invest in China, invest in countries that aren’t going bankrupt like the United States, and are not being reduced to debt peonage.

So it’s one thing for the government to create money to finance infrastructure, but to create money to pay the banking sector is a bailout to the financial sector — it’s a dead end. And of course, that’s exactly what Donald Trump did in discovering the wonders of Modern Monetary Theory. He said, “Well, you know, Dick Cheney was right. Debts don’t really matter. We can just create all the money and spend it, we can create the money to finance the military industrial complex as Dick Cheney wanted. We can create the money and cut taxes on the rich and just create the money to give to them to give away. Create all the money for the balance of payments that we want to finance our military spenders abroad. The one thing we don’t want to spend money for is what MMTers wanted to do. We don’t want to spend it on infrastructure or on people. We want to spend it on my campaign financers on Wall Street. That’s how I got elected — by being a Republican and getting campaign contributions. So we want the government to do MMT to give to my gang, not for the 99 percent.” There’s MMT for the 1 percent, and there’s MMT for the 99 percent which is, you know, who are you going to do?

So in other words, the you could have done called quantitative easing to to actually invest in the in the real economy. But to deal with these issues of indebtedness, you really have to restructure basically, every way that we do things right now, the way that the economy operates.

Yes, every economy that has interest-bearing debt has to restructure at some point, or else, all of the economy is meant to be owned by just a teeny group of people at the top, like you had in Rome. And that’s what how the Roman Republic ended up in the Roman Empire. It becomes centralized. The tendency of any financialized economy is to centralize. Not only wealth, but by centralizing wealth, you centralize political power, and decision-making, and ultimately, military force in the hands of the financial class. And somehow, this is not in the economics curriculum. This is how economies work! I mean, it’s like you’re teaching biology without death. You’re teaching biology without people getting older. And old age as if this can go on forever and ever, and you can have people growing up — it’s as if you could say, kids are born and you can grow up to be 50 feet tall or 500 feet tall, you know, it doesn’t matter. It’s going to go on forever.

Well, I think that’s a great place to end it. bleak, but I think the important thing is to know you know, the underlying factors that have created the societies that we have, and that’s how we fix them. Of course, that’s a that’s a tall order. Before we go, can you give us quickly a sense you know, what projects do you have coming up? I know you’re writing a new book, or maybe even several books and then where people can, I guess, find your work if they want to read more, hear more?

Well, I just published the third edition of Super Imperialism, which I wrote in 1972, to explain how America has other countries financing its military spending abroad by the dollar standard. That’s available on Amazon. In January, I’ll be publishing The Destiny of Civilization, which is a series of lectures that I’ve given in China, on finance capitalism versus industrial capitalism, and socialism — how socialism in a way restores the third millennium, the old idea of the primacy of the state over the oligarchy. And then late next year, I’m coming out with my book on the collapse of antiquity, as to how Greece and Rome ended up in feudalism as a result of the debt dynamics. I’m dealing with the final chapter. The ending of Rome was not simply to bequeath feudalism to the West, but to transform Christianity, and to turn Christianity from a religion of resilience for the poor, to oppression by the rich, and just say, “You can you can have as much usury as you want. It’s okay. You can oppress the people as long as you give charity to the church for us to spend it on your deathbed. It’s okay.”
The oldest con in the book. I think it’s really vital to have that history, because I think a lot of people have a conception of the world that the way it is, is the way it’s always been. And I think one of the great things about your book, …and Forgive Them Their Debts, is that shows, in fact, that’s not how the world was and it doesn’t have to be that way. It’s a deliberate choice by people in power. So I want to really thank you again for taking the time to speak with me and tell our listeners everything you’ve just told us.

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  1. Sound of the Suburbs

    The economics of globalisation has always had an Achilles’ heel.
    The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
    Not considering private debt is the Achilles’ heel of neoclassical economics.

    What could possibly go wrong?
    The inevitable.

    Private debt rises until you get a financial crisis.
    At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
    1929 – US
    1991 – Japan
    2008 – US, UK and Euro-zone
    The PBoC saw the financial crisis coming by looking at the private debt-to-GDP ratio and you can too by looking at the chart above.
    The Chinese were lucky; it was very late in the day. The Chinese had done the same thing as everyone else, but worked out what the problem was before the financial crisis.
    They are still on the edge of the precipice, and might fall in like everyone else.

    The Chinese have been making all the classic mistakes of neoclassical economics.
    Then they have been doing something we haven’t seen before.
    Working out where they went wrong.

    Davos 2018 – The Chinese know financial crises come from the private debt-to-GDP ratio and inflated asset prices
    The black swan flies in under our policymakers’ radar.
    They are looking at public debt and consumer price inflation, while the problems are developing in private debt and asset price inflation.
    The PBoC knew how to spot a Minsky Moment coming, unlike the FED, BoE, ECB and BoJ.

    A year later, and they had made further progress.
    Davos 2019 – The Chinese know bank lending needs to be directed into areas that grow the economy and that their earlier stimulus went into the wrong places.
    They had pumped bank credit into areas that don’t grow GDP, and the private debt-to-GDP had risen to a level they were on the verge of a financial crisis.
    Everyone does that with neoclassical economics, but they don’t usually see the financial crisis coming, like the US in 1929, Japan 1991 and US, UK and Euro-zone in 2008.

    1. George Edward Hamilton

      Debt Is a Gravitational Manifestation

      The fundamental axiom of modern economics is, roughly stated, the theory of the marginal utility of production, which states that a return accrues to a producer. The theory ignores the fact that the world only rewards power.

      It appears that production brings a return—in pedestrian circumstances—as other things have remained equal, and the production does often add to the power of the producer to demand payment. But it’s not the production that brought the reward; otherwise, the pyramid builders, the cotton pickers and all the slaves of the ancient world would have been prosperous—as would the essential workers of today. They were not and are not because no one is paid according to productivity, but instead according to the power dynamic at play.

      Debt is just the manifestation, the enumeration of power dynamics.

      There are two aspects of power that more or less define it, or at least are the essential features of its creation. The one is pretty well known, and pretty well understood. That is it’s gravitational force. It concentrates around the weight of its own prerogatives. But the other is virtually unknown. That is its primacy, it’s ontological priority. This ignorance is a fundamental flaw in our philosophy.

      Power lies in the void. Power is the void. An absence of regulation to fill the void allows the vacuum pressure of Original Duality (yes, Emptiness, the mother of Being, is dual, Aristotle) to structure transactions as functions increasing toward Duality. This manifests as debt, as master/slave, leader/follower dynamics.

      Understanding duality as fundamental gives us the key to an ongoing solution. It is not in some sort of mathematical parity. It is in a well-oiled series of easy transitions. That is why debt forgiveness makes sense. It’s like firing the retro rockets to keep the spacecraft in a stable orbit. It’s necessary from time to time. The power dynamics aren’t nullified. Capitalism can’t be eliminated. But we can dance like a ballerina if we understand the ground we’re standing on.

  2. Michael Hudson

    Thanks, Yves.
    I didn’t send this transcript out beyond my own webmaster because when I got it, I realized that I was wandering all over the place. I’m just beginning to collect my anthropological articles on the Bronze Age Near East into a new book, Temples of Enterprise, and worried that my interview was a stream of consciousness as I was thinking about how to organize the introduction and even the table of contents.
    Maybe some NCrs can comment on what aspects they would like to see emphasized, or what seems either unclear or needs elaboration.

    1. Tomfoolery

      Thanks, Michael. Very interesting regardless.

      I’d be interested in how these older societies understood “usury”. From what I know, it was discouraged by Aristotle, and banned by at least the monotheistic religions until ~1500’s when it started eroding. Clearly debts still existed, but did they not have interest at all? Or did usury just mean what it does today, and just not “overly high” interest?

      My personal hypothesis is that the erosion of the usury prohibition is the source of a lot of our current misery, but I’m not sure how consistent that is with the historical record.

      1. Michael Hudson

        Ancient languages did not distinguish between interest and usury. Bronze Age rulers left commercial debts intact (at 20%), but regularly cancelled personal grain debts (33 1/3%). Only Christianity and Islam banned usury — not distinguishing between commercial and personal debts (productive and unproductive credit) until the Schoolmen in the 12th and 13th century AD.
        Remember, Shylock’s pound of flesh was on a zero-interest debt.

        1. JEHR

          Michael, I very much liked the way you carried your analogy to present-day events because sometimes we cannot imagine that we have much in common with the Ancients. I was glad to see Trump, Biden, Thatcher, Blair, etc. put right into the places where they belong. You are doing a wonderful service for humankind with your precise and readable research. Thank you.

    2. clarky90

      Hillel the Elder precedes St Augustine, by 500 years or so……. “We are, both, Pro-Wall-Street”!

      The Prozbul (Hebrew: פרוזבול)


      “The Prozbul (Hebrew: פרוזבול of Greek origin; i.e. προσβολή, prosbolḗ = “delivery”) was established in the waning years of the Second Temple of Jerusalem by Hillel the Elder. The writ, issued historically by rabbis, technically changed the status of individual private loans into the public administration, allowing the poor to receive interest-free loans before the Sabbatical year while protecting the investments of the lenders……….

      The Torah (The Immutable, Word of God) mandates a Sabbatical year, every seventh year (not to be confused with the Jubilee, which is the year following seven cycles of Shmita). Among other things, the departure of the year cancels all debts. This is one of the many laws in the Torah meant to protect the poor and disadvantaged, affording them a chance to escape from eternal debt……”

      However a bit of innovative thinking, ahem, can easily “fix”……”The Immutable……”.

    3. kirk seidenbecker

      Was there not a specific question that was asked of Jesus by the authorities that led to him being stitched up.. something about paying taxes to Caesar?

    4. korual

      Your first response certainly covered a huge range of material, which would be hard for a beginner to grasp a hold of, though later on the train of thought was clear.

      The privatization of the New Zealand electric utility was a strange carve up. The electric grid is state owned still, but the power stations were shared out to 5 companies which are 51% state owned and the electricity retailers are mostly private. The 5 power generators make huge profits, matched only by the local banks, far more than the dairy or tourism sectors that NZ is famous for. So you are correct that a large proportion of NZ production is financially extracted to Wall St banks, who are affectionately called “foreign investors”.

      The silly thing is that these companies pay 51% of their dividends to the government, which as any good MMTer knows, is a complete waste of money. So the profits kept in the country don’t even get invested in more green technology.

    5. Skip Intro

      If you’re taking requests, it would be interesting to learn more about Aristotle’s Economics of Wealth, and how that and the early understanding of the unsustainable nature of exponential debt might be reflected in Minsky, or substantiated by Piketty. That’s a bit off topic probably.

  3. TimD

    When a person or company takes on debt, they shift consumption or investment to the present and then use future income to pay down their debt. A company borrows money for new equipment, they make more money and pay down their debt. Someone makes a student loan, they have higher qualifications, make more money and then can pay down their debt – well in theory anyway. If one doesn’t make more money then they reduce future consumption to pay down the debt. We can see that in the US, where people have taken on debt through student loans, not made enough extra and this has caused people to postpone buying a home and starting a family.

    When a society gets into this condition, then effective demand drops, production is reduced and then incomes are lowered – which makes the situation worse. A debt jubilee or a even a series of bankruptcies can get the economy restarted again by letting people and businesses take on more debt and shift consumption to the present.

    Another way to maintain economic activity is what governments are currently doing – the are printing money and spending it. Like Michael says above – MMT – Trump increased the national debt by $8 trillion in 4 years, Obama by 10 trillion in 8 years, GWB added about $4 trillion. This money wasn’t pumped in because governments are irresponsible, it happened to make the economy look like it is growing. In other words, to legitimize the system.

    I don’t think debt jubilees or MMT fix the economic problem, they just accommodate it.

    1. Michael Hudson

      That’s oversimplified.
      From the Bronze Age down through classical, when people ran into debt, they lost their land — and their personal liberty. Today, when Third World countries run up dollar debt, they let the IMF privatize their public domain.
      The mathematics of compound interest lead to debts far exceeding the ability to be paid over time. The Babylonians recognized this, as I describe in “… forgive them their debts.” we have the textbooks to train their scribes in contrasting compound interest to the “real” economy’s S-shaped growth.
      So the creditors can’t be bailed out in the end, except by turning all of society’s assets over to them.

      1. James Simpson

        Today, when Third World countries run up dollar debt, they let the IMF privatize their public domain

        should read: “Today, when governments of the Global South are forced by the unfair rules of international trade dominated by the USA and EU to run up dollar and euro debts, the IMF forces them to privatize their public domain in the interests of the US and EU corporations.”

      2. clarky90

        Michael, you may find this interesting?

        Did Rabbinic Judaism emerge out of Christianity? (Prof. Israel Jacob Yuval)


        Israel Jacob Yuval (born October 1, 1949 in Beit She’an) is an Israeli academic who is Professor of Jewish History at the Hebrew University of Jerusalem

        1. clarky90

          Karaite Judaism


          Hebrew: יהדות קראית‎‎, also spelt Qaraite Judaism, is a Jewish religious movement characterized by the recognition of the written Torah alone as its supreme authority in halakha (Jewish religious law) and theology. Karaites maintain that all of the divine commandments handed down to Moses by God were recorded in the written Torah without additional Oral Law or explanation. Karaite Judaism is distinct from mainstream Rabbinic Judaism, which considers the Oral Torah, codified in the Talmud and subsequent works, to be authoritative interpretations of the Torah. Consequently, Karaite Jews do not consider the written collections of the oral tradition in the Midrash or Talmud as binding……

          …According to Mordecai ben Nissan, the ancestors of the Karaites were a group called Benei Ṣedeq during the Second Temple period. Historians have argued over whether Karaism has a direct connection to the Sadducees dating back to the end of the Second Temple period (70 CE) or whether Karaism represents a novel emergence of similar views. Karaites have always maintained that while there are some similarities to the Sadducees due to the rejection of rabbinical authority and the Oral Law, there are major differences…..

      3. TimD

        Yes, when the third world runs up dollar debt they are pressed to cut public services and privatize. This helps drive down costs and leads to greater profits. When the US runs up debts it either prints money, sells bonds or sells assets. However all of that printing does not make the economy bloom.

        My only issue with a debt jubilee is that it doesn’t fix the structures that leads to the debt, it similar to being bulimic – over eating leads to weigh gain which leads to bulimic behavior. Economies are structured so that an increasing share of economic activity goes to the wealthy few, over time it leads to higher debt and then either a reduction in consumption or, like in the case of the third world – neoliberal restructuring. Neither are good outcomes.

        The next trick is to get the creditors to agree to the jubilee. They spend so much time and resources in grabbing a larger share of the pie, they won’t look too kindly on writing off their debts.

      4. jim truti

        In a context of a “debt jubilee” it will be interesting to know who are the creditors and who are the debtors.
        Our situation cant be compared with earlier times where all debt was mainly owned to the king.
        One can see the king forgiving some debt as he will still be super rich but I wonder what the repercussions would be when its pension funds and 401k that get to foot the bill?

        1. TimD

          Yes interesting, from https://www.ici.org/faqs/faq/401k/faqs_401k 401ks are worth $7.3 trillion of the $37 trillion retirement market and https://siblisresearch.com/data/us-stock-market-value/ has the value of the stock market on Dec 31, 2021 at $53 trillion. At the same time I have been told that, 80% of the stock market’s value is owned by 10% of the population. To me, anything I have invested is for retirement, but then again I am not one of those 10%, so I am not sure how they carve the retirement market value out of the total stock market.

          US Debt Clock.org has numbers for debt. Consumer debt is $63,855 per person in America, student debt is $39,257 per student and credit cards are $6,300 per holder. On top of that is Federal debt of $89,000 per citizen. If you go over to the website they explain where the numbers come from.

          If it were up to me, the jubilee would just come out of that 10% and I think it would take more than just asking politely or delivering sound reasoning.

          1. jim truti

            I wish Hudson took the “debt jubilee” idea further and came up with roadmap showing how would that practically be applied to our current situation.
            Clearly that would have to show all debt outstanding and debt holders out there as well as all creditors who will take a cut and by how much.
            I dont know who the “saints” in the “debt jubilee” committee making those decisions will be but that will have the merit to create a platform for a political party to run on which in turn will have to define the process better and convince the majority of the people to vote for it.

            1. KiWeTO

              So if we run the ability of debt to claim more and more if each productive human output, could we then not reach a debt singularity moment where all debt is held by one entity, and then eliminate that entity from the game and restarting everyone else at a new game?

              Basically, a global game of Monopoly(TM) where the winner is removed from the next game? (Might take a while and much continued human suffering to get to that singularity point, though.)

              So if that is the endgame ad absudem, then, why do we need to wait an infinite more generations of society to reach singularity? Too much “me-me-me” focus where we cannot work together in our greater continued-society interest?

              Can we instead have a Thanos-style snap in chrematistike sooner rather than later? Would such a halving of debt bring asset prices into freefall, and would that be a better or worse thing for all societies? Or has infinite debt become the acceptable skin for slavery today?

              Greater human society needs a Thanos moment to catch it’s breath, so that we can continue the endless marathon of species life. Unfortunately it is likelier to be through death and destruction than good sense.

    2. James Simpson

      It is no longer possible to make ‘maintaining economic activity’ a public good per se. The oncoming climate crisis means we must seriously examine which activities are compatible with human survival. As the crisis worsens, it will become increasingly obvious which are not.

      1. TimD

        I agree James, however when people who have stagnant incomes and increasing debts are told that the problem is government regulations, too many taxes on the wealthy and illegal immigrants – it is hard to talk about climate change as the BIG problem. To be stewards of the planet we need to rethink consumption and that means rethinking production and distribution as well.

    3. michael hudson

      Tom, I wasn’t criticizing you. This was to Mr. Simpson.
      Here’s what I wrote to you:

      Ancient languages did not distinguish between interest and usury. Bronze Age rulers left commercial debts intact (at 20%), but regularly cancelled personal grain debts (33 1/3%). Only Christianity and Islam banned usury — not distinguishing between commercial and personal debts (productive and unproductive credit) until the Schoolmen in the 12th and 13th century AD.
      Remember, Shylock’s pound of flesh was on a zero-interest debt.

      From the Bronze Age down through classical, when people ran into debt, they lost their land — and their personal liberty. Today, when Third World countries run up dollar debt, they let the IMF privatize their public domain.
      The mathematics of compound interest lead to debts far exceeding the ability to be paid over time. The Babylonians recognized this, as I describe in “… forgive them their debts.” we have the textbooks to train their scribes in contrasting compound interest to the “real” economy’s S-shaped growth.
      So the creditors can’t be bailed out in the end, except by turning all of society’s assets over to them.

      1. JeffK

        Shylock’s interest was revenge, and not his usual practice according to the theatrical production, he chose to forego the usury fee because Antonio was a christian merchant, and the Christian’s disparaged the Jewish lenders for their usury practice (hence Antonio’s spat upon Shylock in a previous encounter). Perhaps more relevant is why Shakespeare chose to explore this topic in the late1590s. I don’t think it was just to challenge cultural discriminatory norms. Antisemitism and usury may have been his premise for addressing the economic hardships of his audience, which would be unimaginable to speak of implicitly or explicitly as attributable to the ruling class of England, the funders of his theater.

        Equally impossible to imagine for me is debt forgiveness in the 21st century. The case for it makes sense in theory as you present it, but practically it seems that any redistribution would get challenged in the courts. Take student debt as an example. How do you equitably forgive the debt of the population in arrears and ignore the people who just paid their last payment, or ignore the high school graduate who is about to sign up for a new student loan? As beneficial to society as state-supported educated cohort may sound, in practice, the resulting social discontent from an unequal distribution may cancel out the benefit.

        If the greatest amount of debt today is attributable to mortgage and real estate then how does forgiveness of debt (i.e. cancellation of assets) not destroy fiat money? It seems to me that the selection of winners and losers, the resetting of the economy in a brief period of time, would result in greater social discontent than relief to the debt-burdened.

        1. Dick Swenson

          I haven’t worked my way through this entire and interesting thread, but aren’t the somewhat generous bankruptcy laws examples of “forgiveness” at least those applicable to corporations?

    4. JEHR

      TimD, a better way to make sure that young people are able to get the education they want is to make sure education is free from Grade one to the Ph.D. That way, debt does not get in the way of, for instance, buying a home. Education should be free for all citizens and to do that it has to be financed publicly by the (democratic) government. That means that education is paid for by the hard labour of all citizens of a country so all citizens should be able to enjoy free education. Of course, the whole society then benefits from the knowledge that citizens learn through their (free) education.

      1. TimD

        I am all for that JEHR, the reasons behind the student debts include the move to cut taxes to the wealthy and corporations, slower economic growth leading to less funding, and schools adopting a profit model over a service one. My first degree cost $600 per year in tuition now the same piece of paper is over 10 times that.

        The trick is repealing the neoliberal model, which means higher taxes and more regulation. I am good with that.

        1. JEHR

          Yes, the neoliberal model means that every enterprise (including education) must make a profit. That’s Capitalism writ large!

      2. Adam Eran

        Even worse: When the teachers realize failing students means less revenue for the institutions that pay them, then they have an incentive to at least do “grade inflation,” if not passing grades for incompetents. The financialization of education might explain some of what we have now.

        A related topic: “The point of economics as a discipline, is to create a language and methodology for governing that hides political assumptions from the public” – Matt Stoller writes in his anti-monopoly newsletter Big

        Can you say “Agnotology”?

  4. Tom Pfotzer

    I am delighted to see this passage in Dr. Hudson’s delivery:

    Donald Trump did in discovering the wonders of Modern Monetary Theory. He said, “Well, you know, Dick Cheney was right. Debts don’t really matter. We can just create all the money and spend it, we can create the money to finance the military industrial complex as Dick Cheney wanted. We can create the money and cut taxes on the rich and just create the money to give to them to give away. Create all the money for the balance of payments that we want to finance our military spenders abroad. The one thing we don’t want to spend money for is what MMTers wanted to do. We don’t want to spend it on infrastructure or on people. We want to spend it on my campaign financers on Wall Street. That’s how I got elected — by being a Republican and getting campaign contributions. So we want the government to do MMT to give to my gang, not for the 99 percent.” There’s MMT for the 1 percent, and there’s MMT for the 99 percent which is, you know, who are you going to do?

    This is the problem I have with MMT. We create a lot of money, but it doesn’t get invested in us and the things we really need. More money, but ultimately less wealth, so we get inflation (more money chasing relatively fewer goods). And Dr. Hudson clearly points out that MMT has been around for decades, as the Cheney quote indicates.

    Debt cancellation doesn’t seem to work long-term. The disparity in (some forms of) competence between the 1% and the 99% regularly delivers the 99% right back where they were before the most recent cancellation.

    What is the reason for the competence disparity? What is the actual problem? Is it genetics? Culture? Personality? Which is the dominant factor?

    I say it’s culture, and you can see the effect of culture here in the U.S. over the past 50 years. We’ve let ourselves go soft; we’ve delegated creativity to someone else, and we’ve become dependent. A learned helplessness has taken hold.

    Avoiding debt, learning how to learn (teach oneself), learning how to innovate…these are things a culture can inculcate and reward. Yes, certainly there’s a role for the state, and we must demand that the state perform that role, and leveling the playing field between powerful and weak is surely front and center. That’s what the constitution was supposed to do for us. That’s its main value-add.

    But the character and function of the state is a summation of the character and function of the individuals. The households. That “real economy” that Dr. Hudson mentioned above.

    Let’s focus on equipping people to build and operate their own little “micro economy” (household) in such a way that they capture the benefits of their own productivity, and don’t get on the slippery slope of debt to do it. Learn the predators’ moves, and learn to negate those moves.

    Culture could do that job.

    1. Dick Swenson

      Creating money and using it are different actions. Using it is a policy decision by government agents assuming that it available for use. Using it wisely is a decision based on moral grounds. Agent Orange (my name for DT) has a morality about with one can argue

      MMT is an economic consequence of an interpretation of the right of self financing governmensts.

  5. McWatt

    Michael Hudson is a God That Walks the Planet.

    Thanks for this Yves. There is a lot of new information in this interview.

  6. Eclair

    Michael Hudson, I really appreciate your ability and willingness to tell a story, shorn of all the garble usually surrounding academic economics. I am chuckling over your description of the origins of the Nicene Creed; having been raised Catholic and attended parochial school and having recited the Creed thousands of times, in unison, I am now appalled at how, with every recitation, we were affirming the erasure of Jesus as a raggedy Jewish radical, advocating debt cancellation. Alternative narratives are so important!

    1. Thistlebreath

      Eclair–to expand your mention of the art of the story teller: why in the world do we (used to at this point) all like to go to live concerts to hear accomplished musicians perform their hits? Improvisation. In the sort of alpha state that an accomplished creator can enter, we get to read Mr. Hudson’s associations and connections that might be harder to parse in a more formal, written account.

      This interview is wonderful. Dense, lyrical, insightful. It really is an “inter-view” where the give and take between questioner and guest gives rise to unexpected revelations.

  7. flora

    Thanks so much for this post. Absolutely terrific!

    This bit stands out to me like a bright light:

    Since 1980, in the West — it’s like discovering the New World, it’s like Europe, discovering the Western Hemisphere in the 15th and 16th centuries — you had the financial sector discovering that there was all this wealth of governments, not only the land that governments had, the mineral rights, the oil rights, the mining rights, the roads, but also the electric utilities, the school system, the medical system, all of this could be privatized. And so they would make loans to the government, or they’d raid the currency and the government would have problems paying. …

    So now western govts go to public-private partnerships. Those work to the advantage of the private entities and to the detriment of the public. Public-private deals are a case of Financial raiding parties “helping” governments, imo.

    To rephrase the old joke:
    “Hi, I’m from Big Finance. I’m here to help you.”

  8. Hayek's Heelbiter

    As always, thank you, Dr. Hudson.
    A side issue that intrigues me and which I haven’t seen examined is the transition from citizen soldier to essentially a mercenary army without the sense of civitas that universal military service should cultivate.
    Once again, in ancient Rome, debt reared its ugly head.
    “As the Republic grew, many land owning farmer citizens lost their land to rich land owners. After a while, fewer and fewer men held land so men stopped qualifying to join the legions.” Opening up to anyone to enlist.
    I notice this unremarked transition in America also. My father was raised in “the holler” but he served in World War II with people of every religion and social class (not race unfortunately ), a shared experience that engendered in him and his peers an enduring sense of solidarity.
    But when America abolished the draft, most of the recruits came from the poor and dispossessed (debt once again).
    And as corollary, ever since George Bush Sr., the American ruling class has been composed of oligarch wannabes who have absolutely no idea about hot combat and are quite willing to blithely sacrifice other people’s children for their media/video game ideas of what warfare is about.
    Hope that you can take a look at this issue in your forthcoming “Destiny of Civilization.”
    Ps. You mentioned Greece in your precis, but the conscription of the hoplites seems to be very ambiguous. I hope your book will clarify this also.

  9. Susan the other

    Interesting about St. Augustine. He has been idolized as the womanizer who came into the fold of the church by repenting his sins and forgiving everyone else who did all those same naughty things. Funny how sex became the scapegoat for the sin of money. Never a mention of money. I wonder if this deception, omitting anything about money and thus debt, started when money was first used, that is, became fungible. Not tally sticks, and interpersonal obligations, but some physical token of exchange that was sanctioned by the church, etc. So I’d just carry that thought further, money is still the same scam today but worse – it’s a privatized nothing burger but we can’t live without it. We can’t live without something that is nothing. Lovely. What will always be “something” is human cooperation. But human cooperation has been eliminated by corrupt politicians; democracy is nonsense; and money is still the thing that runs the system. I think David Grabber is right, we need some schizmogenesis. On a grand scale. Maybe starting now by rejecting the 800bn$ military budget. Give them choices that don’t involve war or money.


    This article describes two choices for societies, resources are either allocated by the government or the banks. Banks are a terrible choice because they are concerned only with their profits and have no concern for the health of society in general. Government, as we have today, is corrupted by money and if the politicians allocate resources you can be sure it will be funneled to their cronies.

    Are the possibilities really limited to government or banks when it comes to allocation of resources? It seems to me there are any number of ways to allocate resources in a society and that this article is wrong to assume there are only two.

    1. flora

      I must respectfully disagree. Whether governments or banks, the question is between short-term thinking for instant profits which will by their nature peter out over a short time, or in long-term thinking for sustainable recurring profits generation after generation. The word “cultivation” comes from the agrarian world and has many non-agrarian meanings. “Eating the seed corn” is a saying from the agrarian world which also has a non-agrarian meaning. Both govts and banks can be economically aligned in either short-term or in long-term outlooks and actions. My 2 cents.

      1. flora

        adding: govts and creditors can also be in opposition instead of in alignment. Yin and Yang, as it were. See the New Deal for an example of govt and creditors being in opposition. Whereas, the Gilded Age showed govt and creditors in alignment with the creditors point of view. My 2 cents.

  11. dk

    Wonderful piece. Thank you Michael and Yves.

    It turns out that if you look at history, the only kind of society that has protected populations from debt bondage and feudalism are societies with a strong central ruler.

    This is the thing about the pro-Democracy hand-waving going around the Establishment Media these days. If a democracy can’t elect a strong executive, it can’t muster the will and exert authority power to deal with aggressive and empowered feudal corporations and bank-spawn.

  12. rob

    It may be that I am biased , but Mr Hudson’s take on history and his ability to stress the inter-relatedness of the lessons history SHOULD teach with the current day; is truly impressive.
    If only , the general population could be exposed to greater knowledge, to try and remind them where we all fit in these stories.
    It seems that one way “forgive a debt” in the US, would be to reform our monetary system as was proposed in the NEED act in 2011/2012 by dennis kucinich .
    In the Bill as, was proposed to congress, and is written, for all to see it; the proposed method of ending money creation by banks , while adopting the treasuries ability to “create” all US dollars from that point forward, which will “pay the debts of the securities , as they come due. ALL without accruing any more debt. All to be done as to not cause a shock in the system, but would effectively begin a cycle of “ending debts”.

    And If those inclined to MMT wanted to get on board after the Law was changed, and could then see about writing down student debt , while simultaneously paying for a single payer health care system for everyone. Again, since the newly endowed treasury would be creating “debt free” dollars.. Wouldn’t this be a rational course for the public to demand for our own good?

    Then after wall street doesn’t have the goose that lays the golden eggs anymore, we can address the funding of political campaigns.. But monetary reform, is really the key, it seems. If we want to save our society.

  13. Noone from Nowheresville

    @ Professor Hudson,

    Is there any chance that some of your works will be translated into something like a children’s chapter book? Or a graphic novel for teenagers? Or perhaps something like Chris Hedges did with Joe Sacco in Days of Destruction, Days of Revolt? Or even little video shorts like Molly Crabapple did with her artwork & prisoners?

    Definitely not an assignment. Just hoping there was something you’d done which could be directed at the younger generations to get them more interested in your meatier works. It’s the young who need to understand this game more than anyone else. I think the younger the better. Perhaps Sunday School type environments even.

    Thank you for all you do.

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