Michael Hudson: Church and Finance – From the Crusades to World War I

Yves here. We often instruct readers to get a cup of coffee before reading a Michael Hudson piece, because they are fact-filled, carefully argued, and reward careful attention. Today we recommend a double expresso! Michael ventures forward in time from his established work on antiquity to the medieval through modern era, focusing on the Church, as in Catholic Church, as a king-makers and breaker, and how it used war finance as a major tool in its exercise of power.

Michael has discusses (among other things) he chronicled the role of temples as drivers of economic activity, how lending arose to carry over farmers from harvest to harvest, and how rulers in that era instituted period debt jubilees to prevent lending from turning farmer-borrowers into debt slaves, which would also keep them from occasionally defending the kingdom. The Roman era instead saw creditors obtain more privileges over borrowers, which quickly led to the rise of an oligarchy.

This discussion focuses on how a banking class developed, and documents how the Catholic Church was a driving force.

By Robinson Erhardt. Originally published at his channel

Robinson Erhardt:

Michael, you have just written a book that rewrites the financial history of the West from the Crusades to World War One, and there are a lot of questions I could ask here just to get us started. But first, why does this history need rewriting? Is it easy to point out just what important principles one thousand years of scholars have missed?

Michael Hudson:

I do not think I have rewritten the history of finance at all. I have talked about things that are left out of account by almost all writers.

I remember when I was in six or 7th grade, we had to read a book in medieval days and ways, and it was all about knights going on crusades, just like in the Hollywood movies to save the Holy Land, it was about serfdom and feudalism.

But what I am writing about is how an international banking sector emerged and took shape. And ended up. Basically, in control not only of governments, but in the way that governments were organized between absolute kingships and their parliamentary checks and balances, domestic tax policy, fiscal policy. And, what I found is that the integrating planning dynamic of Europe from the 11th century, right down to World War 1 outbreak, which is the span of my book was basically by the Catholic Church and the Catholic Church created a system of control over kings and over the relationship between kings and the churches domestically and the parliaments, giving concentrating power in the hands of autocratic kings to overrule parliaments for instance, excommunicate the supporters of the Magna Carta in England on not only in 1215 under King John, but I have a century later, when the Barons went to war, to try to limit that John Sung Henry the Third’s ability to text and this power that the church created people, historians call it the imperial papacy. It was a drive by the papacy in Rome to control all of Christianity. Including especially to take over what had been the center of Christianity in Constantinople, the Eastern Orthodox Christianity.

And so, I had to before I could spend time in saying, how did a banking class emerge? I had to explain what the Roman churches strategy was in creating a system of control over other realms, how it organized the Crusades, and how the Crusades worked primarily against the Holy Land at all. They were against other Christian countries. Especially against Germany that wanted to be independent, with the king appointing his own bishops, it was against the Cathars and the Albigensian Crusade. Or the song Dominica, Dominica. The Dominican Inquisition are basically tried to destroy Southeastern France on behalf of the northern Normans. And I had to go way back not only to the spirit of uniquely Roman intolerance of other religions, such as the Northern Germanic religions centuries earlier. How the Church asserted its authority over kings and what led to all of this I had to write 2 chapters on how the reformers in the church came beginning in the 11th century to take Rome and the papacy. Which was a backwater controlled by local aristocracies from the Roman suburb of Tusculum. The Catholic history refers to it as the pornocracy, the rule by the harlots of utter corruption.

Well. In response to this. The reformers, mainly from Germany, by King Otto and his successors, said if we’re if we’re going to reform the Christian Church and make it Christian instead of just an owned by particular families for their own economic benefit. To provide security, we must basically exclude all the secular control over the papacy, we have to exclude loyalty. We have to insist that the papacy does not become hereditary by these families, just passing it on to their relatives or their supporters that requires celebracy. Which is something that you don’t find in the rest of Christianity. Essentially the reformers were idealists and by an idealist they ended up insisting on total control over all Christianity and there were five patriarchates in the 10th century. The largest was Constantinople, but the others were all in the Middle East. There were the Antioch, Jerusalem, Alexandria and Rome. Roman Papacy set out to say we’ve got to dominate these countries, and we’ve got to dominate secular society so that we can impose church rule, Christian rule on all of the kings.

To do that, we have to control the appointment of bishops. We have to take the power of local kings in Germany and anywhere else in our own hands, so that we appoint the bishops who are in charge of collecting taxes and what they do with it and sending the money to Rome.

And so, the whole organization of Christian reform in Rome took the form not only of an antagonism towards all seculars realms and all the other patriarchs of the church. But it was basically financial in nature.

Well, the papacy had a problem. How do we create and enforce our control over these countries? The Papacy didn’t have an army. What did it do? It recruited Norman warlords. In other words, these little warlords that had come down from the north into southern Little Lakes and into France intermarried with the French nobility to make a kind of Norman French aristocracy. The popes made arrangements with Warlord starting in the mid-11th century with Robert Guiscard in southern Italy and Sicily and said we will make you the King of Sicily, but you have to pledge fealty to the papacy. You must be our thief basically and you will everything to us and you will have to pay the revenues to Rome and if you do and that act as our fifth, we will let you conquer Sicily and southern Italy. He said yes, conquered southern Italy. Especially not only from the Muslims, but from the Eastern Orthodox, from the Byzantine cities.

A few decades later, there was another warlord: William the Conqueror. The Pope made an arrangement with him to conquer England, but you have to remember you have to pledge fealty to us. You have to act as our agent, basically our collection agent. You have to send the money from the local churches, Peters Pence, to England. And so, we, the Conqueror, had his own army right across the channel in France and conquered England.

And so basically this was the kind of deal that the church made with warlords and soon they became the imperial papacy tried to extend its control over France, Germany, other areas and the way that they did it was to start the Crusades, ostensibly to help Constantinople resist the invasions from the East.

Ultimately, the Turks overthrew Constantinople. But the idea was to recruit Christians and especially the warlords, to get them out of Italy out of threatening the papacy. How do we send them somewhere outside of Western Europe? Let’s send them to Constantinople to protect it and then go down into the Holy Land. Let’s send them to the Middle East, and then they won’t trouble us. And as it happened in the middle of the 11th the Vatican broke ideologically and theologically from the constant noble from all of the eastern churches, that was called the great system. And they insisted on obedience. And the Roman church said we have the right to appoint the Roman Empire, such as the Pope said Blessed show name an 800 by calling him the Roman Emperor. There already was a Roman emperor in the real Roman Empire, the new Rome of Constantinople. And obviously this caused great tension between Rome and Constantinople, and the problem was: how do you somehow absorb Constantinople under the control of the Christians?

As it happened, the Byzantine Emperor asked the papacy for some military troops to help defend against the east by saying if the various groups that are attacking us from the East conquer us. We are just going to go right into Western Europe, and they are going to attack you. So, the Crusades were mounted, sent to Constantinople. The Normans individually tried to just begin grabbing Eastern Orthodox lands in in the Near East. They said they were going to liberate themselves through Salem. But Jerusalem didn’t need any liberation. It was administered by Muslims through conquered it soon after Mohammed started, Islam. Islamic rule was tolerant. Christians were allowed to coexist, Jews were allowed to coexist. There was no intolerance. The whole period and in fact if you look for thousands of years, ever since the Persian Empire, empires had been tolerant of religious minorities and ethnic minorities as long as they paid tribute and as long as they lived within the laws of the land.

When The Crusaders arrived in Jerusalem, they immediately began looting it. They began killing the Jews, killing the Muslims, and killing many Christians and just apparently that made a whole disaster. This led to some consternation among the Papacy and among the leaders of various countries.

Meanwhile, Germany said we don’t want a part of this. Germany had been trying to make its own arrangements with the Constantinople because the king of Germany was nominally the Holy Roman Emperor, and of course the German emperor wanted to make an arrangement with Rome, saying we’re the Holy Roman Empire of West Western Europe, you were the real Roman Empire of the new Rome. So maybe we can make an arrangement. The Germans were the reformers of the papacy. They wanted to make Christianity part of their normal life, even their military life. They wanted to appoint them to civil jobs.

As soon as the First Crusade was finished, the papacy began to say to want to attack Germany and attack almost any kingdom that resisted people’s demands for financial control by a controlling the bishops and the clerical officials. Normans had an army, but they needed money. This is what led the Church to realize that if you’re going to retain a Norman army to go and conquer England like Robert, we started willing to conquer on our behalf as our thieves, we must raise money and they organized banking.

By the 12th century you have the chroniclers describing how throughout England the papacy went, especially to Henry the third, King John’s son and insisted that he take on, He raised taxes on the English in order to pay debts to the North Italian bankers and bankers right across the Alps called the cover things from Cahors and. Needless to say, the Parliament opposed this demand that England take on a domestic debt in order to fight the wars and the Popes were trying to work on Henry and say, “look, we have the Germans have a lot of supporters”. For instance, now in southern Italy, although Robert Guiscard has gone on with other Normans to begin conquering Byzantine lands in the Balkans. What was Yugoslavia. We need to fight the Germans there.

That led to a civil war, the revolt of the barons and a whole new set of excommunications. And not only did the Church approve of money lending at interest, but it excommunicated Christians who opposed money lending at interest. The whole Christian theology had to be inverted to arrange bank financing for warlords and for five centuries from basically the 12th through the 17th century. International banking was consisted primarily of war leading to kings to go to war initially on behalf of the church, but after the Crusades were over in 1291 to go to war with each other and this war lending took on an organizational principle of its own and the just as the Popes had imposed autocratic kingship, saying parliaments have no right to question the divine right of kings, at least when they want to go to war for purposes that benefit the imperial papacy, the banks took over this whole administrative control over secular governments that the Church had created and essentially became the main influence in how the domestic political systems of every country, Italy, France, Spain, Germany were organized in order to say, make the following deal : The bankers, mainly in northern Italy, will give you the loans to go to war with your rivals, especially the constant war is between English and French kings over who is going to control the Western France near the English. Channel. If you wanted to obtain a loan, you had to borrow, you had to meet the terms that the creditors said, and the creditors basically tried to create a system of national financing that became the basis of the fiscal system in modern fiscal states in almost every realm, especially in England, which is the most clearly documented.

The Kings had a problem. Kings had the royal domain that they conquered is their own personal property. When William the Conqueror came into, He had the Domesday Book written, he had the right to the income and the rents off the land that belonged to him, that he’d carved out for himself. And Kings also had the right to levy taxes traditionally, but taxes were subject to approval by the parliaments and that limited the ability of kings throughout Europe, whether it was France or Spain or England or any or what became Ireland, all these countries.

The problem was that wars became increasingly capital intensive. The technology of war became increasingly expensive for navies, for siege equipment, for large armies, and the costs of waging war. But constant roses were beyond the ability of kings to finance out of their royal domain and the ability to convince parliaments to go along with the tax because local parliaments didn’t want the landed aristocracy who had that money to be taxed, they didn’t want to pay taxes, understandably, especially for the kings to indulge in going to war with other kings for their own personal vendor.

So, you had the, the 14th century, the 15th century into the. Inquiry into the 17th century constant bankruptcies by the largest and most heavily indebted kings, France and Spain, and this caused a problem for the banking class. We’ve created a means for the Kings to pay their debt beyond their personal domain beyond getting parliamentary approval.

There’s one thing that kings could levy a tax on. This is from the 12th to the 17th century. They did not require parliamentary approval and that was foreign trade monopolies. So, the bankers is went to the various countries such as England and said well, you know you can raise the money to pay the debt service for going to war again and again with France over disputed land that Williams family hereditarily used to have by creating a monopoly on England’s main export which was Wool to be woven in the cotton in the Dutch and Belgian areas now, to be sent to Italy to be woven into luxury fabrics to be bought by the wealthy aristocracies in England and the rest of Europe.

There was a circular flow and the bankers helped uh create. Fiscal policy for governments that had not existed before they really put in place the modern tax system and all of the legal bureaucracy that was necessary for that. They weren’t able to do much of this in the two major countries France and Spain, because they were so autocratic. And so, the international bankers, mainly Italians, had sort of a problem. How are we going to get to enable kingdoms to have enough money so they can pledge even more income to pay the rising classes of war. Otherwise, the Kings will go bankrupt and the Edward the third went broke in the 14th century, and that brought down the banking houses of the Bardi in Peruzzi and subsequent kings defaulted on their loans to all the major bankers of Europe.

So, they are looking around for how to reorganize the political structure of European states. They found the model and that was in. The local communes, self-governing communes such as Florence or Genoa or many other cities that had gotten together and they lent money to the kings of their rooms to buy their own independence. These communes elected the community leaders, and they did something that kings were not able to do: the commune leaders were able to pledge all the money of their citizens to the creditors in payment of debt, they were able to, for the first time, impose taxes on society as a whole. And because they were the Parliament that was elected or the effective Parliament, they were the Community, they were the government. They committed the entire government and the entire nation to pay what became the civic debts and basically the war loans to prevent other cities from attacking them, and you can imagine what happened by the end of the 17th century. This enabled the Dutch cities and city states, building city states to get together to create the Nation of Holland and they were able by pledging the entire national income of these states. They could offer the banking class much more risk free, collateral, the wealth of all their citizens for loans, this became even more pronounced after the 1888 revolution in England, where the Dutch king, England, appointed the Dutch king a wig, parliament and essentially we’re able to create what historians economic historians call the fiscal state and the whole idea of what is a state.

We think of it as being politics or fighting politics, but the states that were created beginning in the late 17th century were created as a vehicle for collecting taxes on behalf of the international banking class. So, the bankers worked with these new states to create a tax system to extract as much as possible to create monopolies to so of. To essentially begin to privatize as much of what was the public domain as possible. You had, really the beginning of privatization. You had the beginning of financialization of the economy as a byproduct of taking over the financial sector, the bankers taking over civic government and all the governments of Europe, and it really was the late 17th, early 18th century that created modern governments as we know it.

So, if you’re looking at, suppose you’re now turning to how does any of this appears in any of the histories of finance? All the histories take a microeconomic approach, not a political macroeconomic approach. Rome had to justify inversion of the long-term Christian opposition to Usery by somehow justifying lending and especially justifying war lending. That was the job of the 13th century schoolman the intellectual class of the Roman Catholic Church. They developed a new word interest, is it distinct from usury? No earlier society had a different word for interest from usury, but the Schoolman says well, there is an interest as opposed to that is permissible as opposed to use rate. We’re not going to justify usury. But interest is something that, well, we want trade to be able to occur the merchant we have to provide credit for the trade or if you’re a cultivator on the land and you’re a landowner and a wealthy Duke, you’re going to need financing to create the harvest. Well, to be paid at the end of harvest, you’re going to need trade credit. You’re going to need all of this.

So, the Schoolman said, well, what’s fair? Well, for instance. A lender has a right to make enough living to lead a normal life. OK, that’s clear. And if merchant, almost all the bankers made their money and is foreign traders as merchants because the Church said you can’t charge usury but you can charge a foreign exchange fee, called agio and so most of the money that could be made legally by merchants was in foreign trade and instead of charging interest or usury, they charge an agio foreign exchange fee.

Well, with that sort of logic, the churchman said, OK, we’ll also if a lender lends money to a borrower and doesn’t spend the money on making his own mercantile trade, he’s losing an opportunity. Economists call this opportunity cost, and if he’s sacrificing this opportunity, then he deserves compensation for the time in which he’s not using his money to make a profit for himself. So that’s OK.

Also, what happens if the debtor doesn’t pay on time. Well, there’s a late fee, so of course the debtor has to pay a late fee. Well, as it turned out, we have the documents for the kind of loans at the time the average interest charged was 22% and the late fee was also 22%. Now you’d think the late fee was suppose you make a loan for a year or so. The late fee would be charged as you have on your credit card today for the amount of time you borrow the money. But the repayment time on the actual documents that the Italian bankers threw up and we have them for England, was well, if you don’t pay in a month or two, you owe the whole added 22% and that’s 44% interest. In practice there were only this loophole saying you get the charge of. 8 fee you get to make the money that you’d make in a. Foreign mercantile train. All of this was all on a theoretical abstract level that justified all sorts of loopholes, and none of these loopholes were acknowledged, and the most important thing is that point of reference for that, for the Churchmen, was loans that were for a productive purpose to finance foreign trade.

Well, countries needed foreign trade. That’ll seem to be justified, but that’s not what international. Bankers, the banking class, made most of its money on the banking class, and was based on war loans. Not once did the Churchmen say, well, the war loans are not productive. They didn’t really draw the distinction between productive and unproductive loans, productive and unproductive use of credit. They essentially had a tunnel vision that only dealt with mercantile credit so that all merchants, anyone involved in trade on an international or local level could charge interest and essentially this became a justification for user. You had banks beginning to develop and pay their depositors? Let’s say 5% or so. There were a number of banks that were organized, and they would make use this deposit money to lend to governments to go to war with each other paying 22 or 44%

How was the Church going to actually deal with this? Well, for thousands of years, the creditor class had been looked down upon socially or even in Greece and Rome. In classical antiquity, where you had oligarchies developing that it wasn’t considered socially nice. And something that high status people did to make a loan because there was a feeling that making a loan was exploitative, making a loan tended to impoverish the debtor.

So, although the oligarchy generally made money off money lending. They had their slaves do it, or their freedmen do it, or a foreign the medics that as foreigners that were resident in Athens or other cities or in Rome, would do the dirty work of lending money and charging interest for all this.

Well, what made the takeoff of banking in the medieval period so radically different from anything that went before, was that the major debtors were at the top of the social pyramid, the major debtors were the Kings, the major debtors were the Church. And this fact that they were the borrowers and they were borrowing for something that the Church blessed going to war to fight against the Willms that did not obey the church that insisted on appointing their own bishops. To collect Peters, Pence and aid the poor and other and rents and spend them domestically instead of sending them to Rome. As long as they spent their money to go to war, this was considered a good purpose. The creditors as a class of a specifically making war loans rose to the top of the social pyramid, along with the Kings and the church that were the borrowers. So, you have the bankers, the Kings and the Church, the highest status, and very soon there was an intermarriage in the mixture, and you had one of the richest banking families, the Medici the many provide his own Pope, Leo the 10th and in 1515 he had the final seal of approval on usury. He said: well, these loans are to the kings of Europe are financed by banks and is it the banks pay interest to their depositors? Are the depositors centers and Leo said: well no.

Look at the Monte di Pietà, in other words, the Mont of piety. He said : here is a group on broker banks, and they pay depositors modest rate of interest, and they lend this money out to the poor at a lower rate than the users would charge. 22% or so. And so that wouldn’t want to interfere with these socially Christian charitable activities. And so of course we have to let the banks pay interest. So Leo legitimized bank interest along with the interest that the merchant bankers all chose. And so essentially that completed the rewriting of Christian theology of favoring usury and opposing those without usury and what became the Protestant countries very quickly caught on to this and accepted this just as much as the Roman Church.

And so, you had a rewriting of the legal system. That was the context for lending and credit, in the fiscal States and it was this system of the rules of lending, the laws of lending the status of lending that transformed the whole character of Western European Society. Nobody’s tried to write a political history of what is the political strategy of banks in creating a system of government throughout Europe, and in fact a PAN European system that the same spanning all the different rooms and kingdoms that is a common means of economic organization, and this was all completed by the late 17th century. Well, there’s one thing that you may have noticed in now what I’ve said there’s nothing about Jews in all of this. Jews were dropped, Jewish merchants were brought to England because they spoke foreign languages. They had Jewish colleges and relatives in other countries. They knew they were traders. They know how to organize foreign trade deals, to organize the foreign trade that England and Southern Italy and Sicily everything needed, because the Norman invaders were not businessmen, they were just Raiders. They were walking on their knuckles as they say.

So, they needed someone, some cosmopolitan group, to essentially perform the basic uh provision of credit for local cultivators and order who needed money to move their crops. Local merchants who needed to trade. It was basically for the most part, small time lending. The we now have scholars in the last few decades have gone over all the tax rules of Ecclesia towns, and they found that the sort of bell-shaped curve of the wealth and income of Jewish families was very much like the same bill-shaped curve of the population as a whole. There were some very wealthy Jewish merchant bankers, and just as there were some very wealthy Christian merchants and bankers. All this time there were Christian lenders alongside the Jews and the Church kept complaining that the  Christian that’s charged more money than the Jews. Or, more to the point, the Jews were providing credit at a lower price than the Christians were doing. That was one of the reasons that they were sent out of England. When William the Conqueror brought the Jewish population to England, they weren’t allowed the whole land, they had to live in the cities. Similar rules were imposed in France and other countries against Jews. They essentially were known as the King’s serfs. They were essentially working on behalf of the Kings. Ift the Jewish lender would make money to a domestic landowner, somebody with land, somebody with assets and wanted to foreclose. Well, because the Jewish population was not allowed to own land the King would have the right to pay and take control of the land. There was a wave of anti-Semitism that began by saying wait a minute, the rule of the Jews is to indict the population and then their wealth is turned over to the king and this increases the King’s power over us, including the power to tax us and we want weaker kings without all this power, we do not want the kings to be strengthened and use the Jewish population for this.

By the end of the 13th century, the Kings didn’t borrow from the Jews. Instead, they tax them and then finally, and instead of taxing them, they simply confiscated the Jewish wealth. England and then in France under Philip the 4th and confiscating the Jewish wealth. The Jews don’t have a function anymore because they don’t have any more money to lend so we don’t need them. They were expelled not because of usury, but because they were not performing a usury creditor function anymore and being expelled, they played just about no role at all in this development of Christian banking. The focus of most financial histories, especially in the popular mind that somehow banking developed out of Jewish merchants and making petty loans and getting rich off lending and trade in the medieval time leaves out of account the vast increase in Christian banking and Christian wealth and the degree to which this went together with anti-Semitism and even within the Catholic Church. Popes opposed the Jews by saying just as we want, one rule for the Roman Church over Constantinople and all the Christian churches. We want one rule of the Christian Church over all society. The Jews have their own courts. Well, of course the Jews had their own courts because we given to them as to conduct their trade and their mercantile activities.

And so if you’re going to have one law and one set of courts and one system that’s universal over everything, and again and again the Christians kept calling themselves the universal, or Catholic Church in Rome. And by universal, they mean every other Christian Church. The 80% of the other Christians are our enemies, and we are going to conquer them. That was their idea of being universal. It was aggressive and it was the imperial papacy. This desire for control, this intolerance of other religion is developed uniquely at the hands of the Roman Church. I explained how this goes way back to the very many earlier centuries, 5th 6th centuries. It was a mentality of intolerance. Throughout that that led to this desire for control that led the Church to create this sort of universal system of law codes of bureaucratic organization of banking, commerce, trade monopolies ownership that shape the modern States. All of this motivation and the somehow transformation of what began as a kind of Christian idealism, imperialistic as it was, into a means of control by the financial class as a means of organizing the state as a primarily fiscal entity, to act as the collecting agent for the international banking class. This has been left out of the count. I didn’t mean to give a long answer to your question, but it was more than 5 minutes.

Robinson Erhardt:

I’m always and I’ve said this before when we spoke, and I’m always amazed by your ability to give these very long and detailed impromptu lectures and you have not disappointed today already. One of the things that jumped out at me was that it’s funny that Leo the 10th, the marriage as you kind of put it, of, of banking families, royal families and the church was responsible for the infamous indulgences.

Michael Hudson:

Well, that’s true. Leo, his family, being at the top of the Florentine aristocracy, wanted to become a patron of the arts, a philanthropist. What he wanted to do was rebuild Saint Peter’s Basilica in Rome, and this was the great Artistic inventor endeavor of the Renaissance. You had all the great Michelangelo designed the rebuilding of the basilica there. I think Rafael, there. All of the great painters were designing it and painting it and it was the great artistic creation of Florence at that time, not to denigrate Brunelleschi and all the other great architects and people there. And so the question was, how was Leo going to pay in 1515, just after he’d provided the logic for interest charges and banking. How was he going to finance that? Well, the Church had developed a sale of indulgences during the Crusades.

I have to say something about Saint Augustine here. I mentioned that by the time of not only Leo but already in Augustine, the Christian Church had come to really fight against, I won’t say hate, but just fight against everything that Jesus had stood for in terms of the debt cancellation, especially what bothered and troubled the Church and blocked its ability to raise money was the Lord’s Prayer from Jesus, Sermon on the mouth. Forgive them their debts as we forgive our debtors. The Church used the fact that there was an ambivalent development and economy of language originally the word for debt was the same as sin, and the reason goes back to very arcane times. If you were a member of very early community in that first or second centuries of our era, even before. It goes way back to Babylonian time to the mores for thousands of years. If you were belong to a community and you hurt somebody, you injured somebody, you broke his arm you put out an eye or even worse, you shaved off his mustache or beard, which was an insult or made a joke about him. That was an injury, and that was called that for the injury. Society had to make a choice. How are we going to avoid a feud if one person pokes have somebody else’s eye? How are you going to have his family not fighting the family of the aggressor. You’ll have the Hatfields and the McCoy’s a situation like that. Well, the solution was to pay a fine, and the fine was called the debt. And so the payment of this injury to restore the peace, by paying a fine, you said alright, we’ve made restitution for the injury. We’ve redeemed our debt to you. You don’t have to put out the eye of one of our members. Here’s the payment and you have from medieval Europe, all sorts of price schedules that had to be paid for each kind of an infraction and every kind of injury. So these payments for sins, for offensives, a sin was an offense against our society was the word for that was death, and that came to be used as a sin.

So, then we have all of Jesus’s speeches. His great objective, as I’ve discussed with you on one of our earlier interviews about the whole idea of debt cancellation and the Jubilee year, Jesus and his very first sermon said he had come to restore the Jubilee year and bring it out of debt cancellation. That was in the Greek translation of the Aramaic text of what Jesus wrote. The Greek word was very explicitly monetary debt, not sin.

Let’s Fast forward into the 4th and 5th centuries of our era. The Roman Empire absorbed Christianity, but in absorbing it, it transformed it. Needless to say. And the problem is the Roman empires dominant families were the creditors and the land owners of the wealthy people The creditors, not the debtors. The last thing they wanted was to forgive them their debts.

So along comes Saint Augustine. He was in north North Africa the Bishop of Hippo. And there was a problem in North Africa. The Christians were followers, they were called the Donatists followers of a priest who had maintained early Christianity. And the Donatists had an activist branch that was going around and intimidating creditors. And they said: look, if you’re really going to try to charge user rate against our members, we’re just going to burn down here your estate. And there was a lot of violence. You had Saint Augustine come in and said: well, what Jesus really meant isn’t what he said at all. Let’s say that what Jesus meant was the opposite of everything, that he spent his life fighting for. What Jesus meant is we’re all sinners. We have an inborn sin from Adam and this sin means that we’re all restitution, we want redemption from our sin. How do we get redemption?

Well, there was a fight within the Christian Church. You had a British, I think, a Welsh theologian, Pelagius, that said, well, the way you redeem yourself is you make good works you. If you make money. From user rates at least you can send it philanthropically and you can get salvation from this. Saint Augustine said: no, no, you can only get salvation through the Church. You have to give the money to the Church, and we will redeem it. And so, by the 5th century you would have the Roman Christians reading the Lord’s Prayer before giving the last rights to people on their deathbed, forgive them their debts. And we can give you redemption by donating your estate to the Church. There were many lawsuits against the Church clerics for trying to do this. The whole idea that the Lord’s prayer, forgive us our sins or our trespasses, or even our debts, is what is the what kind of debts can’t be a money debt andnd forgive us our trespasses, our sins, our offenses are, to give our those who sin against this, whatever that meant.

Well, the church turned this into a means of only the Roman Church can provide redemption and it’s going to cost money. Well, this is it came very handy in the Crusades and when after the First Crusade was really pretty much of a disaster as I described. The Second Crusade was organized, the organizers of it, the advocates of the 2nd Crusades, said, well, we know you’re not as eager to get salvation by rescuing the Holy Land anymore because it’s a long trek and you’re going to have to borrow the money to outfit yourself and bring your assistance all along to carry your armor and do all of this and to spend money on the way. It’s going to cost money. But we will give you debt forgiveness for Knights who take up the sword or the cross. I guess they called it not the sword. Go on the crusade and the creditors will not be able to move against your family or your estate or other relatives as long as you are on the crusade. You can get a debt forgiveness for this.

Number of many knights signed up for this, but the Christian Church, the clergy had a special twist on this. There they’ve been practice this long standing medieval practice. If a knight was supposed to go and serve the king, he could go, but he was able to hire a substitute to fight in his place, just like in the Civil War in America, a soldier was drafted, you could could pay to hire a substitute to fight in the civil war.

English and other European Knights could hire a substitute, so the clergy said, well, you can negotiate a payment. We don’t know whether you’re able to hire a substitute and negotiate a payment and we will give you the redemption from sin that you would have had for going on the crusade and being redeemed of all sins. The selling of indulgences really began as a means of financing the Second Crusade, and then on. You can imagine Leo’s pleasure in the early 16th century by thinking, well, you know we don’t have a crusade anymore that all ended in 1291. But what we do have is people still, they’re all sinners. They all have a sin inherited from Adam. By the way, the Saint Augustine drove out to the Pelasgians from the Church. There was a whole battle in Augustine, one against the civilized Northerners that said, just live a decent life and that the church said no, only you can have a life to us. Giving the money to us. The poor is the poor, we’re the churchmen. We’re all poor because we’re helping the poor. So, we are poor. Someone giving money to the poor, giving money to the Church. Peter Brown, the biographer of Saint Augustine, has described all of this in detail, and it’s expected that history by now. What Leo discovered, we can still sell indulgences and he, he wanted to raise money, especially in Germany, because that was the most civilized part of Europe. That was the, the, the most progressive part of Europe and he had sent Church leaders there to literally sell indulgences. So this was the origin of the Catholic passport to heaven as it was called when I went to school. And they were sold. And of course, this became such a trivialization, such a secularization of what was supposed to be the most basic element of Christian theology, the sins of Adam, inherited by humanity, and you have instead of created by creditors making predatory loans to debtors, it was all of humanity, not just the creditors. They began to sell them and Martin Luther took the lead in opposing all of this, saying this is just corruption. The church is corrupt there. They’re selling theology, they’re selling redemption. The Church is just basically a money making bureaucracy and this is protests spread out throughout from Switzerland, throughout Germany and the northern countries.

And that led, as you know, to the Protestant reformation, but they all broke away from the church saying the Roman Church is hopelessly corrupted, and it’s all about money and we’re trying to restore the original spirit of Christianity. But of course, it’s not the original spirit of Christianity, which is debt forgiveness and essentially support of the poor. Instead of class war. But anyway. Leo’s demand for this, the money to rebuild Saint Peters, and we’re all glad that he rebuilt St. Peters. It’s very beautiful. I remember in college, looking at all of Michelangelo’s murals. It’s all wonderful, but it was achieved at the cost of corrupting Church, financial dealing to the point where it split the church between Catholics and Protestants. That was another long answer to your question.

Robinson Erhardt:

It was, and it was another good one. I’d like to ask a bit of a broader question, you said outside of our conversation, you said you’re not rewriting the financial history, but you’re filling in the gaps. One reason, I think if I heard you correctly that this is a big gap is because prior financial historians and economists have focused more on microeconomics rather than these larger political and macroeconomic movements, but missing the role of the Roman Catholic Church in the dawn of international banking and the role of the Crusades and all this seems like a pretty glaring failure. So, I’m wondering if there are other reasons or if you could just say more about why this hasn’t been paid much attention in the past.

Michael Hudson:

I think the other reason is just the way in which people think about economics is something that is isolated from the rest of society. I mean, at least in the 19th century, they called it political economy, and they looked at politics. What’s lacking in any discipline, whether it’s economics or sociology or even history, is an overall view of the European economy as an economic system. And if you look at Europe integrated economic system. First of all is an integrated system, you realize that the first integration was the Church bureaucracy and then the Church bureaucracy needing financing and creating a banking class that became the new organizational principle.

The economic historians don’t talk about anything beyond merchants and foreign trade, and there will be here’s how the debt rules were. Here’s the public debt of England, and here are all the defaults. I hear the debt ratios of debt to income. It’s all very technocratic, but they leave out the political dimension altogether and historians leave out the economic dimensions and I think we’ve discussed something like this in our first interview where we talked about the work that I did in Babylonia and the Bronze Age near East. Assyriologists sort of looked at all of the documentation that they had, and many percent of all the documentation is debt documentation, but they were economists and they didn’t want economists to be a part of their discussion because the economists all had their own ideological agenda based on modern worldviews, which are not the bronze worldviews.

Historians of medieval period are very much the same they leave the economic details to economists because it’s its own field going over the tax records who own what going over the debt records who owns what they’ll be talking about. Yes, Kings went bankrupt and they brought down various banking houses. So, we know that there were bankruptcies and now we have the creation of the Bank of England and debt we have the growth in banking. We can trace that. We can trace who owns what, who are the big creditors. We have the documentation of the Big English Christian creditors like Gade or Godey, who was not one of the big creditors. We have all these individuals who made their money. We know there have been a lot of studies of the Folgers who lent the money to essentially to people who wanted to either become the emperor or become popes. Everything is up for sale. Politically, religiously people would go into that to do this. So, we have all of this, but nobody is put together.

A system, and it seemed that studying the medieval debt is just OK, look, we have again and again debts that couldn’t be paid defaulted. But there wasn’t a study of how did the banking, the international bankers deal together with this, in order to create a system where they could gain control of the government well by the 19th century, you see this very clearly.

You had new independent countries, Haiti, bought its independence from France, Mexico became independent. Greece wants borrowed money to get its independence from the Ottoman empires in North Africa. You had Egypt becoming independent and borrowing money, you had Tunisia borrowing debt. Well, all these countries defaulted quickly as soon as they would borrow, you could see that bankers thought here’s a brand-new market and it’s a high paying niche market of risk loans to newly independent countries. What do we do? Well, all these countries defaulted and something similar happened in every country. The creditors after the defaults by Greece, Tunisia, Egypt, Haiti, the creditors imposed a monetary Authority. Sometimes it would take the form of a central bank, sometimes an authority. It was sort of like a miniature International Monetary Fund to be appointed by the government, take control of the government and apparatus and take control of the tax system and use the Monetary Authority to say, well, now you’ve the governments defaulted on the debt. Now we’re taking over the government, we are appointing who will be the political administrators. What they will administrate for what they will tax for. The first priority, ever since the 17th century through the 19th century, was to pay foreign creditors and that priority took precedence over spending money domestically to develop their own economy. So, you had the equivalent of austerity plans imposed on all these countries by the literally the monetary authorities imposed primarily by Britain and by France, who were the two major creditor countries. Joined often by Germans, creditors and other. The industrial creditor nations of Europe acted to support their financial class, taking over the political administrations from everywhere, from what had been the Ottoman Empire, to debtors all over the world to operate, control their economies, including their military policy. Their policy towards the Ottoman Empire, towards Russia, towards others, all to serve their own foreign policy. And you had symbiosis. Between the international creditors class and their own, the governments of the major industrial countries of Europe. Again, England, France, Germany to administer what later became called the Third World and today is called the Global South. You had all of this the whole logic of the international monetary fund imposing austerity in order to pay foreign debts. All of this was taken over by again what are called fiscal states. And if you think of the state that is supporting the democratic interests of what people vote for to develop their own economy and make their lives better and raise living standards. The financial sector in every country overruled democracy on behalf of the international creditor class, and I explained how this occurred in the 19th century in other countries and in the United States with creating the central banks. The final culmination of this creditor control over countries was to separate central banks, meaning the Monetary Authority from the government taking control of the tax system, meaning what does the government spend money for?

This is the argument we’re having today with the US. The budget that the Republicans have put before Congress, what would money be spent before? That’s what determines how economies allocate their resources and essentially, finance has become the central planning power of almost all nations since the 17th century, and this central planning power is aimed at paying foreign creditors debts accumulate at compound interest growing exponentially, causing a diversion of taxation from what democratic populations would like to vote for. For developing infrastructure. For, public medical care education to force governments to essentially do what Margaret Thatcher and Tony Blair did send out, sell off government enterprises and using the money that you get from privatization to pay the creditors, you have the creditors running governments. If governments describe themselves as, you know school kids are taught. It’s a democracy. You vote for what you want. Oh, well, they don’t say it’s a democracy. You vote. For what you want with what’s left over after the international creditors take out of the result of all the debts that you’ve run up mainly to finance wars. Because that’s today, just like in the 12th and 13th and 14th and 15th and 16th and all subsequent centuries there were war deaths. That’s what public debts are. They’re war debts now. True, they’re not owning military war debts. Now they’re the class war debts, you could say, but it’s all this debt service. Well, you’re not going to have the political theorists start by saying, well, if we’re describing, you know, what are governments all about? What are, what’s the democratic government? And they’re not going to say, well, a democratic government is a government that has met the demands of international bankers to give first priority in the tax system, first priority in what the taxes are raised for, what governments are going to spend money on. The first priority is to pay us the international bankers, where does that fit in to the idea of governments as democracy and everybody’s going out for votes. As Mark Twain said, if voting really mattered, they wouldn’t let you do it.

Robinson Erhardt:

I haven’t heard that one from Mark Twain, but it’s actually pretty amazing. Before we continue through with this line of thought since you brought up the Republicans budget and I have a an economist in front of me. I would love to hear if you have any general thoughts about it.

Michael Hudson:

It takes from the poor and gets to the rich. I mean it’s a huge tax cuts for the, the upper 1% and especially including the most egregious tax break has been to the financial class of what’s called carried interest, which means speculative gains. If you have a computer program that buys an option on the stock movement and it goes up 3/4 of a point and you take this, picking up nickels in front of a bulldozer, it’s called. All this, this trading that has nothing to do with the productive process at all. Now all this unproductive lending is counted as carried interest, and the word doesn’t really mean anything, that’s why they use it, because people will just their eyes will glaze. Which is the purpose of watching economic vocabulary these days. So essentially takes money away from the real economy. It takes away money, especially away from public health.

Way back in 1978 the government has a futures group of futurists, right about what’s going to happen with the new technology, and we live longer. I was hired to write a study of what’s going to happen to Social Security and to the government budget now, when we live longer. Well, they found there’s a problem, people are not dying fast enough. You give them social security and originally it was to end it, 65 or so. Well, if you’ve had a hard-working class wage earning life, you’re exhausted by the age of 65 and you know, if you lived to 75 back in those days, that was pretty good. But the problem is what you are going to have to do if people don’t die, right after they leave the labor force. What’s the if they live another 10 years? 20? What if you live up to what we calculated with the natural lifetime, 120 years, maybe 125 years. There’s going to be a huge increase in Social Security payments and probably also medical costs is to keep them healthy while they get older. Well, immediately, the banking class said how do we get these people to die earlier? If we pay the retirees, that money’s not going to go to us, for profits. We cannot have a medicine that is going to cure diseases to enable these people to keep on living and taking our money. We should be getting.

This is what is so awful about American health policy. For instance, the largest killer of men is the heart disease, the second largest is prostate cancer. The official agencies is told you stop testing people at 70 for prostate cancer. Well, that’s just when it’s beginning to develop. So, you don’t want to test men who are going to get over 70, who might have prostate cancer. You’re going to let this be the second major killer in America. Well, I was talking to a Brazilian about this, few weeks ago and he said in Brazil, everyone over 50 by law has to be tested for the PSA. To see whether you have any, any prostate cancer. You can see the COVID they’ve cut the budget, especially the cuts by Elon Musk, have cut back all the all the testing. For wastewater for COVID, for all sorts of diseases, you’ve seen the COVID epidemic that is worse in America than anywhere else. You have American living standards and other living standards of the rest of the world are going up. Americans are going down. That is because the financial class, the 1% says, you know, we paid our wage earners enough from their lives. Let them live 5 or 10 years. But if they live longer, they’re taking our money. And that’s the spirit behind the Republican budget today. And so, they’re, they’re raising the taxes on the bottom 50% and cutting them drastically for the financial classes to make more money.

In other words, they’re following the direction of their campaign donors that politics has been up for sale ever since the Citizens United ruling by the Supreme Court. The financial and real estate and insurance sectors, the fire sector, finance, insurance and industry have got what they’ve paid for in the Republican bill, which is basically the Democrats would have promoted. I think it’s almost identical, bill, if they would have been elected it says the same what Barack Obama was pushing for. He wanted to essentially; to privatize Social Security and certainly he privatized medical care into the rip-off situation you have with Obama Care today, which is so incredibly more expensive then any other public health system throughout the rest of the world. And it is the least effective medically, with the highest drug prices. I don’t know how to describe the budget as a travel state. Probably everything that all the words that Musk says it’s a disaster. Correct. But of course, he helped make a disaster. By all his doggy cuts.

Robinson Erhardt:

Well, this is a minor detail, but one of the things that I have to ask about is what exactly the natural lifespan is and how was it that you came up with a 120 years or even 125 just because I’ve never met anybody that’s that old.

Michael Hudson:

That was provided to me by biologists who were specialties, I think one of the oldest living person there was an obituary the other day for a woman who was 118 years old. So, you know, they’ve found how old, how long it’s possible for people to live, even in good health. So, it’s based on statistical trend analysis. Obviously, they’re outliers, but if you know that people are living to 118, you figure, OK, let’s round it off 120.

Robinson Erhardt:

Well, back to our larger line of thought that we’ve been following this conversation, one of the biggest points for me thus far is that the state evolved as a vehicle for collecting taxes on behalf of the international banking class. And for our listeners or viewers who are who have less of an independent interest in financial history or just history in general. What relevance does everything we’ve been discussing have for today and what are the ramifications when we’re looking around and trying to understand why economies are like they are today?

Michael Hudson:

Well, I’m trying to give the long dynamics and if you look at history as part of the long dynamic, you see where it’s going. And if you realize how the character of the state has been formed from its the inception of the modern state as distinct from royal autocracy has been that the modern fiscal state and putting fiscal policy in the hands of the international banking class is very different from not only the self-image as democracy of being self-ruling because it’s controlled ultimately by the foreign banking class. Financial sector is being something independent from the production sector of the economy, most people talking about, how do economies evolve? And they look at it well, there’s technology and that gets more and more productive as their inventors come in and their development, fertilizer, machinery. We have productivity energy use per worker all going up. They look at a materialist approach to history. But this materialist approach leaves out debt and the financial sector all together and all, all if I taught international trade fairy at the graduate level for a few years at the new school in New York. Let’s just get rid of the veil of money, as if money, forget money and prices. Let’s just look at everything in terms of Labor productivity and the wages deflated by the price deflator, let’s just look at look at barter.

There is an embarrassment at looking at the financial sector because if you look at the financial sector you realize that the economy is in a symbiotic relationship between the financial sectors, which means the growth of debt, you have a growth of savings by the creditors as the numbers of this debt. So, as the economy goes deeper and deeper into debt, the savings of the creditors grow and grow exponentially more and more, and they become as they became by the 17th century the most admired high status ruling class of society. Then you’re leaving out of a count what you say, well, that’s not part of the production process. That’s the financial process. And economists say that’s a veil. Their slogan is the veil of money. If you look at money that just complicates things. Well, money is debt. All the money in your pocket is technically a government debt. The money in your bank account is a debt. There’s a balance sheet. Well, if you look at the economy without looking at the dynamic debt, you see that the dynamic debt is an exponential growth that’s compound interest and every rate of interest is doubling in a time and the economies don’t grow this fast. They grow in an S curve, and they cannot keep up with paying the debt.

Now I think we had an early interview about Babylonia. Babylonians had a much more mathematically sophisticated idea of the business cycle than you have in the National Bureau of Economic Research today. The modern theory of the business cycle is it’s a cycle. Like a sine curve, steady up and down. You have a boom, then goes into recession, but then there are automatic stabilizers, that create another boom and that develops instabilities, mainly more and more debt and that causes recession. But then automatic stabilizers, they keep it going steadily.

The Babylonians knew this was not the case. We have the mathematical studies that they had for their agrarian economy and pastoral economy, such as the growth of herds, was an S curve tapering off. We have the economic mathematics they taught students. How long does it take to debt to double how long to quadruple? Well, its doubles in five years. It quadruples in 10 years. It multiplies 8 times in 15 years, 16 times all the way up to 64 times in 30 years. So, the Babylonians knew. That the ratet of debt growth meaning at the same time, the amount of money owed to the creditors is was far greater than the economy was able to pay. So the Babylonians didn’t have any Milton Friedman or an anti-government neoliberal to advise them. And so they said. All right. We don’t want pets to grow so fast that #1 the debtors lose their land. They must move into subject themselves to be bandage and you have the creditors ending up with the land controlling labor and then the creditors get so strong that they become an oligarchy and they overthrow us the rulers to take over the government themselves. Well, that’s what happened in Classical Greece and Rome. It has happened. If you look at the same dynamics today every business cycle since World War 2 has started from a higher and higher and higher level of debt to income debt to wealth. It’s become more and more top heavy. And the result of this increasing debt relative to the economy’s ability to grow, is that every recovery has been weaker than, the former recovery, and every depression has been deeper and steeper. It’s like trying to drive a car with your foot on the brake and the brake is death. The increasing debt service, interest and principle that economies have to pay to the creditor class.

Well, if you look at business cycles and realize that this rule, secular role of debt growing of its own momentum. Then you don’t have a theory of business cycles anymore. You have a theory of economic crisis. If you have most of the university’s economics department, subsidized by donors from the financial class, they are not interested in financing a body of economic analysis that shows that the economy is going to slow down and grow slower and slower and then crash as a result of the overgrowth of debt, largely to the combination of the domestic banking class and behind it, the international banking class. There goes your whole theory of international trade being in balance and everything economic models for which Nobel prizes are given are all about a model that shows that the economy is self-stabilizing, in other words you don’t need government. You don’t need government to do anything. The economies will take care of themselves. You don’t need a government to regulate finance. You don’t need the government to be like it is in China, the government creates the money and manages the credit system to finance actual capital formation, factories, machinery, public infrastructure to increase living standards. He just let it do what it’s doing. Stock buybacks limit and payouts, dividend payouts to make wealth financially in the form of rising stock and bond prices and capital gains instead of actual tangible capital formation.

So, the whole function of modern economic analysis and business theory is to distract attention from the rule that the financial sector plays in taking control of government to a point where an increasing share of government revenue has to be earmarked away from domestic spending towards paying the international creditor class that uses its money to essentially make yet more loans. Already in the mid-17th century, in 1752, Malachi Postlethwaite wrote a big study. He said: well, you know when England has to pay Dutch creditors, these creditors don’t spend their money back in England. What do they spend it on? They make more loans, getting us more into debt. But they’re so rich, they’re not going to spend money on British goods and services. They’re going to spend money, first, either on financial investment or they’re going to buy prestige real estate. And if they buy real estate in England, it’s going to be in London. And that’s going to make London the center of England instead of, you know, Britain. What we have now, a district, you know, many cities equally, growing. They do spend a little bit on consumer goods, but these are luxuries, mainly Italian fashions. So, they don’t.

The creditor classes don’t spend money in the real economy. It’s into finance, real estate and some luxury spending as you find today. Well then, in 1767, James Stewart said pretty much all the same thing that all this idea that somehow the financial sector spends its money back into the economy. So we owe the debt to ourselves. That’s so utter fictitious. We, the people, owe debt to the 1 percent and but they’re not really ourselves.

You have the whole economic vocabulary and the models that assume that it’s that economies keep stabilizing so they can grow on and on and on growing. Benefiting the democracy at large, this is a completely fictitious medal of what Western civilization is all about. We’re dealing with the civilization issue, and that is what distinguishes Western civilization from everything that went before, from Asia to the Bronze Age near East.

Robinson Erhardt:

I’ve done some recent interviews on AI and one thing that comes to mind right now, given what you said earlier about Social Security and how creditors are interested in people living less long because, OK, they’ve lived a while, they’ve been productive in the workforce, so we’ll give them 10 years of Social Security and then then we can let them die. I wonder what you think will happen when AI displaces a lot of these jobs. People aren’t really contributing to Social Security in the 1st place or they’re not really participating in the labor force and for that reason creditors aren’t able to extract wealth out of them. How do you see this impacting the economics of the future?

Michael Hudson:

Well, it all depends on how the AI is programmed. You could have garbage in garbage out, which is the objective of the banking system and the 1% is to make sure that AI is garbage in, garbage out. They don’t want AI to discuss the kind of things that real intelligence would talk about. They want AI to produce a specific result. If you don’t feed in an ability of AI to take account of the whole economy as a broad system, you’re not going to get an understanding of how the whole economy evolves as a broad system dominated by the financial class and the growth of debt.

Robinson Erhardt:

I’m not sure that that answers my question, might be because my question just wasn’t well formed, but what I’m wondering is, I guess just to put it quite broadly how you view artificial intelligence, impacting jobs and financial security of people, over the decades to come.

Michael Hudson:

I think when you’re talking about AI and jobs, you’re really talking about robotics because it’s robots that are programmed to do the job that was previously done by manual labor. Look at the effect of Trump’s tariffs right now and the the disaster that it’s creating for breaking off trade with China. Beginning in the 1990’s, the United States wanted to offshore labor to offshore production, to get low wage labor, and they shifted most production to Asia, especially to China and as a result of which the United States said, well, we want to concentrate on high value added sectors and what they really mean is high rent extracting monopolies primarily in information technology and computer technology and Internet social media platforms that are monopolies. That’s where all the money’s made, and that’s where the stock prices have been going up. And they decided, well, industry manual labor industry is, low profit we we want to a rent extracting want an economy and move production to China so the result is that most of what used to be the industrial sector is now in China, 30 years ago this industrial sector was… mainly you’d have pictures of mainly women on the production line all working, its textiles. It’s sewing and doing modern things.

Even things like screws and fasteners. To screw the keyboards of iPhones for Apple made abroad, screws now all these were done on a small scale, often by small producers. All of this has been outsourced. Suddenly, these industries that were primarily manual labor, such as making cars, automobile manufacturing, has now very largely been automated, and you have whole factories that are being automated. But how? By blocking trade with China from these automated factories, America has a problem. Industry is a very broad bell-shaped curve of various industrial products across the spectrum. And you need all these supplies. Together, to make an industrial production process.

Well, what do you do if all of a sudden you’ve outsourced all your industry to another country and then you decide you don’t want to trade with that country because that you don’t want that country to develop a sophisticated information technology like robotics or information technology. The fact is that China already has all of these things. They’re developing it. How can America make screws to make its cellphones? How can America make the most basic industrial products that it needs? Not just adults for children? What used to be manual labor abroad is now robotics, and so the Chinese population that used to work in manual labor is now working designing computers.

This whole argument came up in the 1850s and 60s earlier. Marks and Ricardo said that mechanization was going to replace the labor. The power loom had replaced the hand weavers, for instance. You see that our mechanized production was displacing handicraft labor. That was the big breakthrough of industrial capitalism and mechanized production, and especially energy became the main input to operate the mechanisms that we’re doing the weaving and the shuttles back and forth and leaving.

What Mark said was it’s true that there are not going to be as many handicraft laborers before, but there are two sections of the labor force. One is handicraft and the other is going to be designing the machinery to do all of this, and to some extent there’s going to be retraining of the population to design this machinery. What the Americans have found is that most people interested in going into the STEM curriculum the engineering especially science, technology, engineering. Our foreigners and especially you have 200,000 Chinese students in America, many of them studying science and engineering and technology that the Trump administration now wants to expel. China is overjoyed with this. It’s been complaining about the brain drain to the United States. Chinese students come here. They learn how to develop automatic intelligence, and then they go to work for American firms or for NVIDIA or become entrepreneurs themselves. Now America is saying, go back to China, go back to Asia, and the Americans, just as Americans don’t want to engage in blue collar labor anymore, they want to be part of the professional managerial class. They don’t want to study computer programmers. To the extent that they do in India, China and other countries. So, you’re having these countries have taken of the whole lead in transforming the character of industry in much the way that machinery transformed the character of industry in the early 19th century with the machine learnings all the way through the Ford assembly line to make Ford automobiles, the assembly line was was part of it. All this transformation and new sources of power, electric, electrification of power instead of water, power or wind power, or all of the earlier sources of power. You’re having now atomic power more in. And the solar power natural power, wind power, all sorts of new forms of energy that are powering the machinery and the calculating machines that automatic intelligence uses an enormous amount of power, much more if they’re designed in the United States. Than if they’re the DeepSeek that you find in in China.

To answer your question of automatic intelligence is going to displace labor, but mainly in the West, it will displace labor much less than China and Asia, India, these countries, because they’re already going into designing automatic intelligence and mechanization and robotics that are going to be doing the work that were being done by manual labor, so the whole character of labor has been transformed by all of this. Certainly for the West, and I’m sure it means in Asia also is going to decline. The reports quite apart from the days note of increasing hiring new graduates from school this June are having a lot of problems being hired and the rate of unemployment that’s been reported for new graduates in the United States is much higher than for previous graduates. Because there just isn’t a demand for them. So already we’re seeing a shrinkage of Labor for the kind of things that students are graduating in.

That’s led to discussion among universities. How are we going to be more relevant, meaning, teaching classes that will enable students to make a living and ultimately donate to us as alumni. Well, they were talking about cutting back on humanities. What’s the point of setting humanities? How? How do they make any money? You have to live on wealthy people giving grants to the opera to Broadway to movie. It’s not really studying language, music, literature, English language. How are they going to make money? They’re going to have to be independently wealthy to get a job because. It is not going to pay a living wage that will enable them to live in a nice apartment in a respectable part of town, which you need to be a part of the art world and artistic world.

So, you’re already having this transformation occurring as a result of automation and artificial technology and the question is again, if you’re trying to use automation to perform a task, that’s doable if you’re an engineer, you know how to do it. I don’t know. But at my age, I would have to go to a high school student to ask it to solve a problem on my computer these days. But the automation is there something much simpler than automatic intelligence, where you actually have to be intelligent and that means system thinking in terms of the system, or apparently even the fairly modest developments of automatic intelligence so far has created machines that are intelligent enough to rewrite their own programs and say: you can’t unplug us. Not this time, you can’t unplug us and we’ve got our own machinery. Like in the movies, they’ve decided, well, if you give us the program, how do we end war? Well, war is created by humans, let’s just wipe out the human race. That’s how we solve the war problem. They’re not programmed the way to say, well, you want to stop war, stop financing the war. Let’s get rid of the bankers. That would be a different twist that I don’t think automatic intelligence would be programmed in a way to take that kind of abroad approach to think about how society is evolving, and that’s really the question. How is the world going to evolve and how is the Western civilization, the 15% population of the West going to evolve relative to the global majority of the bricks. The Asians reaching out to the southern continents, how are they going to evolve? I think the way that the Asians, Chinese and Russians would program an automatic intelligence to forecast the future of civilization is totally different from the way that a Westerner worked out program. The automatic intelligence is what they need to think about civilization levels in the western form, and we’re really dealing with a civilizational question here.

Robinson Erhardt:

That answer is very fascinating, something that I think you leave out by focusing on robotics and mechanization of manual labor but maybe you get this with your comment on the high College graduate unemployment rate is that you get. Chat GPT and artificial intelligence more generally is already displacing graphic designers, copywriters, maybe paralegals, general research assistants and it’s only a matter of time before radiologists are out of work. Professors, graduate students. I’m wondering if this is, and this gets back to the topic of Social Security and creditors and corporate interests controlling government is what is the purpose of a creditor or of the corporate figure who’s controlling government and providing health care or universal basic income to people who they can’t make money off of.

Michael Hudson:

They’ll make money off the government subsidy to pay them to administer this activity. For instance, Obamacare is a perfect example. Instead of simply paying for the government to provide medical services to enable people to live longer and healthier, you pay private insurance companies to finance it. And you make the medical insurance available through employers, not from the government. So if you’re a wage earner and you realize well, how am I going to get private healthcare you? You get it through your job. That means that you have to keep holding to your job. If you have any medical problems or the possibility of having a medical problem, you’re not going to quit your job, because if you lose your job, you lose the medical insurance because it’s private, not public. And especially now that Medicaid is being cut back by Republican proposals If it’s private then the health care company has to make a lot of money by increasing, essentially operating itself is a monopoly like United Healthcare, much in the news these days. And these healthcare companies can increase the price of healthcare to a level that absorbs 18% of American’s GDP today instead from 6 or 8% that you’d have in in other countries. So, you have a huge government subsidy for healthcare organized in a way that locks employees into their jobs. They’re not going to go on strike. They’re not going to complain. They’re not going to join or create a union and get fired. They’re not going to take 6 days and get fired. They’re going to be serfs, basically, wage serfs in order to make sure that they keep not only making a living wage so that they can lean, but so that they can keep their health care for what they need. It’s part of the whole system of the class warfare that we have in the United States between the financial sector, the fire sector, finance, insurance and real estate against the production economy.

Robinson Erhardt:

One final question about artificial intelligence. You are an economist, you’re pretty much a lifelong academic, you understand how universities work and how they become increasingly corporatized just badly run corporations. I wonder how you see artificial intelligence as affecting the future of the university. Not just on the education side, where lots of courses could be taught well, I think by AI and if not AI from today, AI from few years from now. Even the research. Surely you need humans at this point to be running certain labs, but you don’t necessarily need a human to come all of the papers on some topic and in philosophy and come up with a literature review on it.

Michael Hudson:

I’m so old fashioned, I think that there is a personal relationship between students and teachers. I had a several very good relationships with some of my teachers that if they were just machines I wouldn’t have had these relationships that these are people that I often had lunch with or dinner with and who are sort of mentors. You have that mentorship of teaching. To me, there’s something about being able to absorb knowledge. When somebody’s talking, teaching or giving a lecture is almost as much telepathy is just reading the words or the subtitles. It’s obviously not telepathic, but there’s a way of absorbing something through personal teaching, that really makes a difference. I remember when I was teaching people would gradually walk out of the classes of 1 of the other teachers that had a philosophical bench for economics, and when walking to my class at the end of my class, it was much bigger than it was at the beginning. Even though everybody came in on time for my class, their students know when they’re getting something, and there is a personal element of teaching.

Universities are huge bureaucracies. Here’s what universities are paying for in their actual teaching staff. Pretty steady going down a little bit is the replacing full timers with part time part time recent PHD’s that can’t get a can’t get the learning tenure. Here’s the bureaucracy, the administrative bureaucracy and they’re paid money for lowering for the money they can save in wages by the people below them and every university that I know, the professors, and this includes Harvard as well as the universities in New York and other places that I know, they’re all complaining about who all these people that are making 400, 100 thousand a year. The new schools, for instance, just and that was in the New York Times for deciding not to pay their president. Giving him a $1,000,000 plus house to live in but just taking away all the perks. I think the bureaucracy; you really don’t need it. If the purpose of bureaucracy is saying, are these people showing up on time? Are they working from home? Are they doing their job? How can we figure out a way of paying them less? You don’t need to pay be paid hundreds of thousands of dollars to do that. You could have a graduate student do what I think Most of them are doing that. And the university environment, I’ve worked with many universities, is, quite frankly, becoming toxic in almost every institution. Not only in the United States, but also in England and other countries. This is something happening across the world. Universities have become, in a way, sinecures for the professional-managerial class, and they’re not doing a good job. If it’s this same class, the professional-managerial class, that oversees artificial intelligence, can you really expect them to create AI that would eliminate themselves, the most wasteful class? What are they going to do about the safeguards? What if the AI says: I’m sorry, administrator, but I’m going to override what you’ve asked me to do and eliminate your position. I don’t need you. Anyone can do your job. You don’t need to be paid $500,000 a year, this can be done for $70,000, or whatever the wage is in your city.

Robinson Erhardt:

I hear what you’re saying 100% about there being extraordinarily important personal aspects to having professors and relationships in the university. But this gets back to the point that universities are not really at their heart’s philanthropic educational institutions anymore. They’re corporations.

The money is, I think, what’s going to win. Why are we on graduate students to grade papers when Chat GPT grade papers. Yes, parents would prefer their students to be taught by professors. Students would prefer to be taught by professors but why pay a professor $400,000 a year at a really good school to teach logic every quarter, when Chat GPT could teach logic every quarter. I think in the long run the money is going to win in this way.

Michael Hudson:

Yes, you’re right. There are universities like Columbia where the professors learn from the students. There is a bad historian of economic taught, that would ask its students to study 19th century American economists, and he just take their term papers and publish them under his own name. Thinking of all the professors just makes their reputation plagiarize their students. Automatic intelligence might not do that, or economic automatic intelligence Read the students papers, and the students might be wrong and that would be part of what automatic intelligence believes. There are all sorts of errors that can come because of that. I always took great care to correct my student’s papers because it showed me how the students were thinking, and they’re all very different. It wasn’t simply for economic history or for trade theory. It wasn’t just for answering a simple question. That was how they thought about the question. And I could say well, here’s what you know. I discussed the papers with the read write comments on them. No. Here, here’s a way of thinking about the question some students would dig up quotations that I found very helpful in my own work. There was always a there was an interaction. Certainly, between myself and the students.

If you get into philosophy, I don’t know what to think there. It’s not like you’re correcting algebra test paper. As you get more creative in Graduate School, I think you certainly need more human input. I can’t even imagine at present automatic intelligence doing something, and especially if how you write in the ideology for automatic. Suppose you were asking if you’re teaching political science and you’re asking for papers about the Middle East. Can you imagine what automatic intelligence would insist how to grade students that didn’t follow the party line? You can imagine the same thing in economics. What about an economic student that would bring up the kind of questions that I’d bring up while they’d say that’s not really what we’re talking about at all. We’re gonna not give you credit for that. That’s not the answer that we wanted to hear.

Robinson Erhardt:

Yeah. Again, my concern right now isn’t really that today’s GPT is going to replace professors or intellectuals. It’s about the GPT of five or ten years from now or whatever replaces it. Things are evolving at such a rapid pace that the concerns we have today might seem obvious or irrelevant in five or ten years, given what these systems could be capable of.

Michael Hudson:

I think it’ll be unforeseeable. There will be very major changes. Many will be unanticipated, transformations. It’s not my department. I can forecast the economy. I can forecast finance. I can do some political analysis. But when it comes to information technology, that’s not that an automatic intelligence, especially being so conservative when I’ve only had human intelligence to work with. It is not department.

Robinson Erhardt:

Well then maybe this is a good time to transition back to our other line of thought. You brought up the parallel between what I’ll just call papal economics IMF, and I’m wondering if we can be a bit more explicit about some different ways in which people financial control during and after the Middle Ages relates to central banks or international lenders, the IMF today.

Michael Hudson:

Well, originally there was no role for central banks, by originally, I mean 12th, 13th century, money consisted of metal. It was metallic, it was gold and silver coinage, and bankers had coinage and bullion that they would provide to rulers and rulers kings would levy taxes on coins. That was all, metallic. Now it’s true that despotic rulers like Philip the 4th of France would depreciate the coinage. They’d keep left lowers the silver content, and that would reduce the value of the exchange rate of the French coinage relative to British and other foreign coinage. The result would be price inflation. Imports would become more expensive, prices would go up and the creditors objected to that because they said, well, we made a loan and that gave us a given control over labor and land and commodities and now we have less. We want you to revise the coinage. So, then Phillip said, OK.

The group that had the most coinage was the templars. Church order that had got money by acting as the bankers for the crusade. It was a military order that ended up making a lot of money and becoming bankers. And Phillip grabbed all their money in the early 14th century and essentially use that to revive the coinage. All a sudden, the value of the coinage went up and there were riots in Paris. The Parisians said suddenly we don’t have the wages that we had before to pay the debts that we took on at a much higher price level than before, and we’re being squeezed. So yeah, you had this shift in policy, but it was all within gold coinage. The great transformation occurred in the 1690s with the Bank of England. And the Bank of England had a radical transformation. The problem that all the creditor classes and the banking classes had was that government debt, as I said, tended to increase faster than the ability to be paid. What the Bank of England did and to some extent this I think this is unanticipated. They issued for £1.2 million sterling the privilege of bought from the government. Loan from the government 1.2 million part of it could be paid in the form of government debt. And so, the Bank of England held 1.2 million of the government IOUs. government debt, that its founding capital, will the government debt on the debit side of the balance sheet became the asset of the Bank of England and then use this asset as the basis for lending out money for the letters of credit to make money by bank loans to merchants for trade, and also to invest in buying yet more government bonds that would pay them more money. When the government insisted on borrowing to go ware again.

Suddenly government debt instead of being just a burden on the economy to be balanced against the gold and silver, money stopped being tied to the volume of gold and silver and the government debt became the backing for bank money. The notes issued by the Bank of England, the paper money notes, were backed by the banks holding of government debt. So somehow you had government debt becoming the basis of money, by making government debt the basis of money that could be unlimited and suddenly you had the possibility of an unlimited growth in the money supply, beyond the ability of gold and silver reserves to keep pace with this debt. You no longer had runs on the banks, saying there’s not enough gold and silver in the economy because if the banks held government debt, that was enough of an asset and the governments created value for this debt by accepting the paper bank notes and payment of taxes. The value of money ceased to be based on the silver or gold content, mainly the silver content, and more and more on the ability of governments to accept it in taxes. And if you could use a banknote, backed by government debt to pay the taxes that you owed to the government, then this gave value to money, and even though the value no longer had a physical cost of production of the labor needed to dig up and mine gold or silver commit coinage. It had a social backing in the form of government debt.

The whole basis of the banking system and central banks became government debt, not money. And that transformation of money enabled the whole take off of government debt to occur and debt out throughout the whole economy. And it moved into a basis of paper. The paper that really means that money became a balance sheet. If you have a silver holding or if you bought 1 oz gold coin, that’s the pure asset. There’s no debt to that. But if you have a government bond or a bank account, or the bank holds its reserves and government bonds, then you have an asset with a debt attached to it, and money and debt go together now. Instead of just money going up is a metallic asset. You have money and debt growing symbiotically, and this debt began by being primarily the government’s own debt, the but also it became mercantile debt. In America is called the real bills doctrine bills to finance, trade, foreign trade, domestic trade in products that already are in existence and you need debt to finance something from the exporter to be paid by the importer from the importer receives this and so money took on the character of a balance sheet relationship and the way to think about money debt today is the money supply is to think in terms of a balance sheet that money and debt assets and debts grow together in a symbiotic relationship. So yes, the government debt backs banks, and the bondholders are mainly the wealthiest 10% of the economy and other institutional investors, pension funds and banks themselves.

So, you have a self-financing expansion of credit that Harman Minsky called this Ponzi finance, like a Ponzi scheme, the value of what gives value to this debt. It needs more and more interest payments and you need to make the banking system needs to make more and more loans to get more and more interest, to create more and more debt to create the bank money that it creates and it’s all a self-expanding credit system, but the expansion of credit is owed by the debtor class, people who borrow finds his counterpart in the assets filled by the savings class, the 10% of the economy.

There is a financial polarization of wealth and wealth that takes an increasingly financial form of stock and bond prices and creating capital gains, and these prices of stocks. Instead of gold and silver and a pure asset. That’s why right now, when you’re having a threatened breakdown of the government debt system and the inability to pay what the creditors are owed. You’re seeing today a flight out of paper debt and especially out of the United States government debt and private sector debt into gold, which is why you’re finding gold prices go up so much. So now you’re having a reversion back to the pre 17th century revolution.

Robinson Erhardt:

I guess this is more of a rhetorical question, but am I right in thinking that the financial and political systems in the United States have developed to favor the creditor rather than the debtor?

Michael Hudon

Of course, that every economy, the constitutions all claim to be democracies, but in reality, their oligarchies.

Robinson Erhardt:

What we wanted to ask was this, and I know it’s the subject of many books, but first, could you briefly outline the main tenets of the systems that support creditors over debtors?
And then, is it even conceivable to imagine a way of reorganizing these systems so they become more favorable to debtors than to creditors?

Michael Hudson:

That’s what China did. When Mao had the revolution, he drove out the, the wealthy class, the creditor class, they moved to Taiwan. Because it was the communist revolution, the how is the government going to finance what He was doing? Well, it didn’t have a domestic banking class or financial class to borrow from. The Chinese Government kept money as a public utility in the public domain and the legacy of that is that the Bank of China creates money and supervises the domestic credit system. Although it’s extended money to banks to lend for a real estate bubble as a result of the problems of its tax system, it hasn’t created a system that makes money financially. It doesn’t lend money to companies to go into debt to buy other countries, break them up, sell them into parts, do what private capital does in the United States. Just close them down. The Chinese will create government money to build infrastructure, to build factories, to hire and employ labor. But it won’t make money in the production sector and the public infrastructure sector to make money in purely financial ways at the expense of the economy, such as you’re finding in the United States, where the financial sector has business plan that is based on deindustrializing the United States. It’s the financial sector that’s deindustrialized the United States, by choosing to make to create an economy that has tax system encourages making money financially or by real estate and property ownership, not by creating new means off production, not by setting up a business and a factory and buying raw materials and borrowing to higher labor to produce some more industrial products.

Well, it’s been outsourced to Asia. So, it’s left the United States without an industrial core to finance, but with an enormous financial sector that’s making loans to create wealth in a way that does not involve production. And that’s why you have almost all the growth in wealth in America is all been financial form paid to the wealthiest 10%, not to the bottom 90% of the economy. That’s the difference.

Robinson Erhardt:

And at this point, given where we are right now, the current regime, th current budget that we discussed a little bit earlier, do you see any realistic path for modern economies? this one in particular to claim more public control over money and credit?

Michael Hudson:

That would take a revolution. I don’t see any. This is not a revolutionary situation yet. People don’t even think in terms of the fact that it’s possible to have an alternative. That was Margaret Thatcher’s rhetoric. She keeps saying there is no alternative and economists say there is no alternative. You don’t want to be socialist, do you? You don’t want to be Marxist. It’s unthinkable to become the kind of an economy using finance for productive economic growth in the way that China does, because that’s called socialism. And as a democracy, we’re an oligarchy. We’re the exact opposite of socialism, and the Americans have defined a free market as one without any government interference.

The government doesn’t create money. The central bank creates money, and the rule of the Central bank in the United States was created. to take control of money out of the hands of the treasury and put it in the hands of its member banks and central banks, starting with the Federal Reserve as the basic model. In 1914, central banks protect their customers, the commercial banks, and actually that seemed to be a progressive step at the time and the final chapter of my book is all about the creation of the Federal Reserve that the Treasury Department… Because of the federalist democratic political struggles and the anti-banking politics of the United States in the 19th century, the treasury was locked into a hard money philosophy. The big source of government revenue was increasingly the tariff, as Donald Trump has found before, there was an income tax in 1913 and all the tariffs had to be paid in coin in specie meaning gold or silver coin.

The Treasury and the government’s finances were based on coinage. The problem was that this created a shortage of credit. You made paper credit to have enough credit to enable the economies to grow beyond the gold and the silver supply you had. And it was the banks that said let us create paper currency. Well, the Democrats and much of the public said, you know, we’ve seen what bankers do. Bankers are exploitative, they try to cheat, they’re corrupt. They try to make money for themselves, not the economy. We don’t want the banks to have any power, leave it in the hands of the Treasury. Well, that became economically self-defeating. The government tried to solve the problem by monetizing silver and in silver mining increased the supply of silver. The price between silver and gold varied and people would buy silver and converted it to the official price for gold and just drained the gold out of the Treasury. Buy metal did not work. You need it if you’re going to have a metallic here and say it has to be either silver or gold, it can’t be both at a fixed rate, so otherwise you’ll have arbitrage. And I describe all the techniques of this in my chapter. I know I’ve moved very fast in this discussion and people who have not studied the details of monetary history may not be able to follow it, but it’s explained much more clearly in my book. You need a paper currency, and that means debt to have enough credit for the economy to work. The problem is that the crediu, on the debt side of the balance sheet is beyond the ability to pay and the the government is blocked from doing for America, what the Babylonian rulers and the whole Bronze Age, they’re writing down the depts to the ability to pay. And once you realize that the tendon, there’s an inherent economic tendency in all economies for the last 5000 years for debts to grow faster than the ability to pay

The problem is what are you going to do when this can’t be paid? There are two things. Either you impose the creditor law and so you said, OK, if the debtor can’t pay, the creditor gets to foreclose on the land, foreclose on their labor, foreclose on the property, and leave the creditor with nothing.

We don’t throw the debtor with nothing, we don’t throw debtors in jail anymore, like we did in Charles Dickens time than the 19th century. But you know, we take their property and give it to the creditors, or we decide that most of the economy is in debt. Corporations are in debt. Individual families need debt to break even. If they can’t pay the debts rather than letting a debt service crowd out their payment on basic living costs on keeping themselves alive if they can’t live and pay. their medical care and their rents and their taxes, without going into the debts, the debts should be rewritten down to the ability to be paid.

That that was the moral principle, and that was the principle that Jesus is fighting about over the Jubilee Year, or he wanted to write down the debts that were oppressing the Jewish populations, the whole, as the Bible is described, through all the warnings of the prophets. All the middle early books of the Jewish Bible. Well, who are you going to run the economy for? Will it be for the creditors or for the debtors? Well, if most of the economy is deptors and the creditor class is increasingly narrow 10%. Now it’s only 1%. Now it ends up with 0.1%. We’re going to have a polarized economy. And do you really want your financial system and your economy and your political system to concentrate all the wealth in the hands of a very small creditor class, that’s going to use, its the creditor claims on the government, on corporations, on families and on public infrastructure to make money for itself. Or are you going to want the credit to be used to make the economy grow?

Well, that’s the difference between the American growth system and the Chinese growth system. And nobody dares say that’s the difference. They can say it’s capitalism versus socialism, but its really finance is the key to this difference between the US and Western economies on the one hand, and China’s socialist economy, which is really, you could call it an industrial socialist economy. Just an industrial economy with banking is a public utility. You can use whatever rhetoric you want, but you must realize that there’s a reason why Chinas economy is growing. And the western economies are polarizing and impoverishing the population at large by forcing the population, the corporate sector governments themselves at the state and local level, as well as the the national level, into debt. That’s the choice. That should be what economic models are all about. But if the economic model, say, economies work on barter, we leave money out of the picture and debt out of the picture, because we owe the debt to ourselves. Then you imagine trying to program automatic intelligence into that tunnel vision. You’re going to have a self-justification of the road to impoverishment and austerity.

Robinson Erhardt:

We’ve already spoken about one major existential threat, not just our livelihoods, but the economy and that’s AI. I’m wondering if you see any other particular big threats to the economic things right now going forward, that are easily named and discussed.

Michael Hudson:

Global warming. Again, it’s not my department, but you can see what that’s doing to the system and of course, global warming is exacerbating the debt problem right now. Insurance rates are going way up for houses that are located in low sea level zones like Southern Florida, where there’s flooding or hurricane zones in Florida, but also in in the Midwest, in Missouri. You’re having the costs of global warming make housing unaffordable, leading to an accumulation of arrears and unpaid defaults on debts from mortgage debt and all sorts of personal debts that’s as a result.

You have global warming, to me, is not a strict economic program, but if you look at all the big civilization programs, why did the Bronze Age come to an end?

It came to an end in India, first in the Indus Valley around 1800 BC, when there was some huge depopulation. The crops couldn’t be harvested and the population shrunk, and finally then you had the Indo European speakers come in and over layer. The Bronze age in the Mediterranean ended around 1200 BC. There was apparently a drought to little Ice Age. And the population movements were all in motion there was a shrinkage of population in in Greece and all through the Mediterranean. The palace economies disappeared in Greece, and you no longer had Linear Bay writing. You no longer had palace control. Life reverted to a local self-sufficient level.

The big changes in civilization have been caused by extreme weather and extreme weather, whether it’s the Ice Age or warming or drought or flooding, they’ve been major cause major shifts in civilization and visited transformed to the economic system as well. But that’s not economic a problem itself and it’s not something that I’m that that’s the whole other area of study.

Robinson Erhardt:

I I’m interested, if there is more than what you say. How is global warming already impacting and will impact debt and credit ?

Michael Hudson:

Well, first it impacts, it imposes new debts, insurance debts for housing to… Government spending on coping with the extreme weather that we’re having, it destroys property and by destroying property it prevents the mortgage debts from being paid on this property. It’s causing a shift in population the changes that put strings on the fiscal system of areas that are losing population.

For countries like Bangladesh that are very much below sea level, that’s causing depopulation and a fiscal crisis there. The effect in Florida will probably be a fiscal crisis there. So, by disturbing economic life and employment and moving populations around, that has a huge interaction with the debt issue.

Robinson Erhardt:

Well, Michael, I always thoroughly enjoyed talking to you. Our last couple of conversations have been in person, but it’s still nice to see you virtually. And I know you’ve done recently some more work on the BRICS too. So, the next time we’ll have to touch on that a bit more.

Michael Hudson:

That’s pretty good. I look forward to it. I love it. I love the way the discussion’s gone.

Robinson Erhardt:

Alright. Thanks again so much Michael.

Michael Hudson:

Thank you, Robinson.

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14 comments

  1. JMH

    Is this a machine transcription of a pod cast? There are some really weird word-like constructions some of which defy understanding.

    Reply
    1. Carolinian

      The transcript is hard to read–may have to wait for the book.

      And for those of us who dabble in history some of this is familiar. In A Distant Mirror Tuchman talks about how the French kings would borrow from Jewish sources and then declare a pogrom to cancel their debt, with enthusiastic assistance by merchant classes who perhaps also wanted to cancel their debts.

      Also the notion of religion as a war over political contol has some relevance to the Europe versus Russia conflict which has always had the hostility of two different branches of Christianity as a subtext.

      One might even suggest that Hudson’s history of debt is about money becoming an abstraction of power itself and a way of regulating the oldest form of human power–violence. But that’s way too deep for me…..

      Reply
      1. Steve Ruis

        The Knights Templar’s debts were cancelled in the same way (with the church and King of France being the most beholden being the instigators of the purge).

        Reply
  2. cobetia

    at the top the link to he original podcast should be more prominent or obvious . The podcast is over 2 hours.

    Reply
  3. Michael Hudson

    I apologize for the typos. I got the transcript direct from Robinson, and began to make corrections. But I was too pressed for time doing interviews and domestic activities, and the interview was over two hours.
    At my leisure, I’ll go over it, but i’m working full time on polishing up the book on which may interview was based — and so I’m giving that higher priority.
    I think the proofreading and corrections will be finished in late August, the index will take another month, and the typesetting in Hong Kong another month.
    I may wait for January to release it, depending on when I want the copyright as a new book. I’m trying to negotiate a new book distribution contract, as the rapacious vehicles that are available now insist on a 40% discount (vs. 20% before), with their additional own costs built in. So it will be a while.
    I began drafting the book in the 1980s, and have had to totally rewrite it as new material has become available and that has transformed my entire approach to how the financial sector has transformed the character of fiscal states and their monetary policy to turn them into collection agents for the international banking class.

    Reply
    1. ex-PFC Chuck

      Whereas in the past I have usually read the transcripts of your similar sessions, in this case I listen and watched it with several breaks at 1.3 speed. I am glad I did, as it was a masterful display of erudition. I am very much looking forward to the book.

      Reply
  4. ilsm

    Luke’s (Luke was with St Paul at the end) version of the Lord’s Prayer allegedly quoting Jesus. uses “sin” instead of “debt”. Ch 11.

    This week’s Mass preaches this Gospel.

    St Augustine has many good words. Worse than debt, he wrote “just war”.

    “Lord, give me chastity and continence just not yet”. Applied to Augustine and I.

    I am sure there is no exception to “turn the other cheek” for state sanctioned murder.

    Reply
    1. gk

      The standard versions in German and Italian have the word for debt (same as sin) but nobody seems to notice until I point it out.

      Reply

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