We’re told that debt forgiveness is impossible, because all debts must be paid, and to do the opposite is to invite anarchy and chaos. But what if none of it was true? Renowned economist Michael Hudson tells Branko Marcetic on New Zealand’s 1/200 podcast about the debt jubilees of the ancient world, how Jesus preached debt forgiveness, and how the finance sector has become a parasite feeding off the productive parts of the economy.
Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics. He can be reached at email@example.com
Cross-posted from Michael’s Blog It is a transcript of an interview that was poorly done. We have tried to correct the worst passages.
Photo by Pragyan Bezbaruah from Pexels
Okay, welcome everyone to another episode of 1 of 200, the New Zealand and international politics podcast. I am very excited about today’s episode, we have a brilliant guest. His name is Michael Hudson. He is an economist. He is a professor of economics at the University of Missouri Kansas City, and a research associate at the Levy Economics Institute at Bard College, as well as being a former Wall Street analyst. He’s written many, many brilliant books, including the one that I’m going to talk to him today about largely, it’s called “…and Forgive Them their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to Jubilee Year”. Michael, how are you going?
Great, great to have you. Well, you know, look, let’s get straight into it. I think it’s such a fascinating book, because of what it tells us about our own history as a species and about how our society is structured. You really make the case here that our modern relationship with and understanding of debt is really kind of upside down, very alien, when you look at the full scope of human history, and the question of how we deal with debt, it’s this fundamental, maybe the fundamental issue of civilization and political economy. So let’s just start with you giving us a bit of an overview of what ancient societies relationship to debt was, how they kept debt in check, how they viewed it.
Almost all debt, in really ancient society, was interpersonal. The typical kind of debt was what the Europeans called weregild-type debt. If you injured somebody, what are you going to do, if you break an arm, or if you kill them? There are two choices ancient society had: either you had a feud, and your family would fight his family, or he’d make restitution. And the idea of a restitution payment, that was called a debt like schuld, or devoir, in German and French, you would owe restitution, and that meant that you would settle the conflict and there wouldn’t be fighting. So gradually, the payment of the weregild, whether it was in money — or if it was really serious, it would be in slave girls or cattle — came to be the word for debt, meant the word for compensation payment, and at the same time, for the injury or for the offence, or the word for ‘sin.’ So the original meaning of the Lord’s Prayer in Hebrew and Greek was, “Forgive us our debts,” because their whole fight in the time that Jesus wrote all over the Roman world was a fight to cancel the debts that were enslaving everybody.
It was St. Augustine that changed all of this. He said, forget the idea of monetary debt. The church in the fourth century had been banning usury, banning the charging of interest. And St. Augustine said, “Wait a minute. Now that Constantine has made Christianity the state religion, we’ve got to support the state.” And he ended up fighting against the original Christians who wanted to protect the poor from the rich, who were forcing them all into debt — especially in North Africa, which was the first part of the Roman Empire to really go feudal, huge land of feudal law states with serfs called coloni who were tied to the land, just like serfs in the Middle Ages. And so Augustine said, “If we’re going to be a universal church, then universal means you can’t have any disagreement.” So the great authority on this period, Brown, wrote that Augustine was really the founder of the spirit of the Inquisition. He appealed to the Romans, to support him against the people who actually believed that the church should do what it had done for the last four centuries: support the poor against the rich. And they basically ended up killing them or exiling them, and grabbing the church property and giving it all to Augustine. And he said, you know, forget about debt — from stoicism to early Christianity, the whole idea was, what’s sinful is for the wealthy people to use debt to oppress other people, to take debt out of the interpersonal affairs and just personal injury and keeping the peace, to making debt monetary, and getting people in debt and then saying, well, just like there was a legacy from archaic times, that people couldn’t pay the debt, they were exiled. And the Bible has cities of exile, cities of refuge. And if you had people who couldn’t pay the debts, and society didn’t want them to start a big feud, then you’d exile them. Until basically a new ruler would come in, who would declare a clean slate. He would say, “Okay, everything’s over, all you people can come back, we’re going to have a new beginning. Nope, no debts.”
To get back to your question — how did all this begin? — in Mesopotamia basically most debts began to be owed to the palace or the temples, in an agrarian economy. Obligations were paid throughout the year. If you were in the third millennium Sumer, or second millennium Babylonia, what do you do during the crop year, when you want to go out to a bar? They actually want to alehouses, and the alehouse lady would do just what a bartender would do today: they’d put it on the tab, and you’d run up a tab to the alehouse, you’d run up a tab to the palace for advances of animals, or water, or agricultural inputs, and everything was done by credit, and the debts would all be paid on the threshing floor, in grain. And a unit of grain was equal to a unit of silver. So the palaces could keep the economy records with a dual monetary standard and have a single standard that would include domestic agricultural economy, the weaving of textiles, feeding people, and also foreign trade.
So you’d have these debts, but sometimes, you would have a crop failure. And at that time, you would have, like in the laws of Hammurabi, you say, “If the storm god comes, Hadad, and ruins the crops, then the debts don’t have to be paid.” Because obviously, what would happen if you had all these cultivators who’d run up debts to the ale lady who was sort of a public official — they call them pubs in England, because they’re public houses. What would you do if the members of your family got married, and you had to pay a temple priest to perform the ceremony. All these things would be mounted up during the year. And if there was a crop failure, or if there was a war, or if there was a drought, and you couldn’t pay, what would happen if you hadn’t wiped out the debts? All of a sudden all these people that owed debts would become the servants of the person who they owed them to, a wealthy person.
This was all a carry over from the original interpersonal weregild: that if you’d break somebody’s arm, or if you’d killed a family member, and you couldn’t pay, then okay, you become their servant, and you have to work off the debt until there’s a new ruler taking the throne, or a new chieftain, or until there’s a debt cancellation. And this is how society worked, basically, in the third, second, and even into the first millennium. That was what the first sermon of Jesus was all about. When he went to the synagogue, and Luke explains that he unrolled the scroll of Isaiah the prophet and said, “I’ve come to proclaim the year of the Lord,” which was the debt cancellation — the Jubilee year — that was brought in from Babylonia into Judaism, as it was done all through the Near East. Assyria had it when it conquered Judea. Babylonia had it when it conquered Judea and took the exiles to Babylonia, and the exiles, picked up, literally the same word used in Babylonian for a clean slate (debt cancellation), brought it back to Israel, and word for word had the same conditions of a clean slate: when a new ruler took the throne, or when there was other reasons — a war was over, or there was any reason for a debt cancellation — you’d cancel the debts, you’d liberate the debt servants to go back to their families, you’d give them back the pledges that they’d made. If they pledged a slave girl, they’d get the slave girl back. If they pledged their land, they’d redistribute the land.
People who translated the Bible, from the fourth century, down to about the twentieth century, didn’t really know what these words meant. What does it mean, “year of the Lord?” What does it mean, “deror,” which was the debt cancellation? And it was only after Assyriologists began to find out how all of Near Eastern society had debt cancellation, just like anthropologists were finding that all the way from the Native American Indians to European realms, you’d have this practice of restoring balance. The idea was, how do we prevent society from destabilizing and polarizing? You cancel the debts.
Well, all this changed when, in around the eighth century BC, when you have Near Easterners begin to sail westward into the Mediterranean, into Greece, the Aegean and Italy, and they brought the idea of trade, weights and measures, and commercial contracts. And also the idea of interest-bearing debt appeared for the first time in the societies. There was no concept of interest in in the West, in all of the Linear B documents of Greece, from about 1,600 to 1,200 BC, you had a palatial economy, but there was no concept of interest anywhere. All of a sudden this was brought and you had basically local chieftains, who all of a sudden became what a number of historians now call mafia families. Local cities were like mafia groups, and they found a way of just monopolizing the land, until about the seventh and sixth centuries. There were revolutions all over by reformers, all over Greece, and Italy, and reformers, later were called “Tyrants.” But they called themselves reformers, and they were the people who introduced what became democracy. They introduced public building, they ended up incorporating the population, and preventing debt bondage.
The whole fight of early society, every society, was how do you prevent the population from falling into bondage? And the palaces had a reason for doing all of this. If you would have the taxpaying smallholders, the small cultivators, owing their crop to the creditor and owing their liberty, having to go to work on the creditor’s land, instead of working as a corvee, building palace walls and digging ditches for irrigation, if you would have these people fall in debt to the creditors, they wouldn’t be able to pay this crop surplus and labour surplus to the palace any more. The creditors would take over. And the whole idea of rulers throughout the Near East, all the way into probably the early kings of Rome, who said, “The one thing we’ve got to do is prevent the creditor class from becoming an independent oligarchy. Because if it becomes independent of us, and it gets the economic surplus, they’re going to use this labour to hire an army. They’re going to overthrow us and they’re going to become the state.”
So you always had a struggle between the state protecting society from the creditor class — the oligarchy — and the oligarchy wanting to be independent, wanting not to have a debt cancellation. And this was a fight that went on for four centuries before Jesus’s time. The fourth century BC and the Dead Sea Scrolls have shown there was a long political fight. And Jesus represented the people who were trying to fight all of this. And so the early Christians were basically advocates of the Jubilee year, trying to cancel debt.
Well, in Rome, the wrong kings were overthrown in about 509 BC by an oligarchy, who essentially wanted to reduce the rest of the Roman population to serfdom. And they were so oppressive, that there was a walkout, the secessio plebis in about 494 BC. They walked out, they came back. There was just five centuries of early Roman history into the Republic — the whole Republic was a long set of one revolt after another after another, wanting a debt cancellation and redistribution of land. All of this was called a democracy. A democracy to the oligarchy means all the creditors are equal, and therefore liberty is the liberty to enslave the rest of the population, and make them dependent on reducing to serfdom.
Democracy throughout antiquity meant serfdom for most of the population. Aristotle was very clear on this. He said, “Many cities have constitutions that appear to be democracies, but they’re really oligarchies.” And in fact, every democracy, Aristotle wrote, tends to turn into an oligarchy, as wealthy people get rich, and then the oligarchy makes itself into a hereditary aristocracy, and lords it over the rest of society, and the only way that you can prevent a total breakdown is when some members of the ruling, wealthy families get together and one family breaks and says, “Look, we don’t want this kind of poverty, we’re going to try to go and take the people into our camp.” Those are the words that Aristotle used: we’re going to take them into our camp and throw out the oligarchs, just as the Tyrants did in the seventh and sixth centuries, in the wealthiest Greek cities, from Sparta to the area north of Athens. Athens was about the last of these cities to have a democracy.
You had this whole background that led to the modern world, which was a world that stopped the tradition of debt cancellation that had liberated populations from debt servitude, from debt bondage, and what became serfdom, and on the idea that, well, the law is inexorable, you’re not going to have any debt cancellation. And there was the fight within the Christian church against Rome, especially again in North Africa, which had been Carthage that was destroyed by the Romans in 146 BC. They took over the very rich agricultural land, and that became the agricultural breadbasket of the Roman Empire from Egypt, all the way to Numidia, which was Carthage but then it went all the way to what is now Algeria, basically, providing all of the grain for Rome.
The historians now say, “Well, boy, the Roman Empire wasn’t all that bad —look at how rich it got.” But the richness was all concentrated in the 1 percent of the population and the 99 percent ended up being tied down to the land. If you read the late books of the New Testament, all the way through to the book of Revelation, it’s all about, “We’re living in the end times, it’s terrible, Rome is the beast, there’s no hope here. We can’t reform land. We can’t cancel the debts ever because of the greed of the rich. There’s nothing to do but become martyrs and die and hope that in the next world, things are going to be better, and maybe Jesus is going to come back.” The whole idea was anti-Roman. But then so many Romans, themselves of wealthy families, said, “You know, the poor people who are the Christians, what they’re saying, what our philosophers say in stoic philosophy, is you shouldn’t be greedy. You shouldn’t have wealth addiction. Money is addictive. And, you know, we really want to restore human decency and egalitarianism.” So they converted to Christianity, and finally, Constantine converted and made it the state religion.
But in making it the state religion around the 411-413 AD, the first thing is okay, we’re not going to have oppression against the Christians. Let’s give them back the property. Well, immediately, there was a fight among the Christians: Who’s going to get the property? There are all these different churches. There’s some churches that cooperated with the Romans, and there’s some churches that fought the Romans. Well, hardly by surprise, all these groups said, “Well, Rome has the army. Let’s appeal to the Emperor. Now that you’ve made us Christians the world religion, who are you going to give the property to? Who are you wanting to say are real Christians? Are the real Christians the ones who supported Rome, and the wealthy classes, and they’re keeping all of us in feudalism? Are you going to support — in North Africa it was the Donatists — are you going to support the poor, which is what Jesus and early Christians talked about?” Rome said, “Well, now there’s a state religion, the state is the army supporting the wealthy landowners. We’re just going to kill you, unless you join our church.” And that was Augustine’s universal church. He said, “Forget what Jesus in the Lord’s Prayer said about, ‘Forgive us our debts.’ What he meant was, the debt of Adam having sex with Eve. That’s original sin, we’re born into sin, that sin is all about sex. It has nothing to do with the sin of offence and egotism and hurting others and getting other people in debt. Forget that because, the Roman Empire, debt is us.” In other words, Augustine said, “I’m pro Wall Street.” He was just like President Obama or the other pretend Democrats supporting the status quo. Basically, Augustine came in and said, like President Biden, nothing’s really going to change. And the armed force of the Romans supported them. As I said, they fought the other people.
Even before Augustine, you had a fight between Cyril of Alexandria, the gang leader who killed Hypatia. He was sort of the Donald Trump of Alexandria, anti-semitic. He said, “How are we going to get the Jews out of Christianity? We know that Jesus was Jewish, and that’s very embarrassing. How do we sort of keep them out of the church? Well, number one, we’re going to kill them all. And number two, anyone who can read books, we’re going to get rid of them. We’re going to kill Hypatia, we’re going to kill the intellectuals, and we’re going to kill all the priests that don’t agree, like the Nestorians. And we’re going to introduce the Nicene Creed, of saying ‘Who is Jesus? Was Jesus really a Jewish rabbi who was saying cancel the debts, or was he something else? Was he really a person or not? Well, no, he wasn’t a person. He was really God. He was part of God’s body.” And that’s the Nicene Creed. “Forget Jesus as a person, forget his biography, forget the fact that he was Jewish. He was really part of God and God is eternal and eternal is us right now, us and the Romans.” Cyril basically imposed this. People were dying for these seemingly obscure theological issues. It was the whole basis of theology, the whole fighting at that time was over how you’re going to cope with the debt problem and the adverse land redistribution? I’m only saying that as a background for today, because the same fight that you’re having today is the same fight that you had in Judea, in Jesus’s time, and in the Christian church, when Augustine took over.
Every economy is going to be planned by someone. The question is, is it going to be planned by the creditors, as happened today? Or are you going to have a government, a ruler, that is going to say, “My job is to keep society stable, and to prevent it from polarizing so that we can survive and be resilient and go forward”? The creditors don’t care about resilience. Their time frame is rather short. So there’s sort of an irony here. It turns out that if you look at history, the only kind of society that has protected populations from debt bondage and feudalism are societies with a strong central ruler. Well, in the modern Western world, they define free just like the Romans, as the oligarchs said: “Our liberty is the liberty to do whatever we want to those below us. Our liberty is our privilege of being able to enslave the 99 percent.” Right now, you have, thanks to the Chicago School, where I understand that you’re talking from, a free market is a market where Wall Street and the creditors have control of planning society’s allocation of resources. The idea of Western freedom is the freedom to oppress. The idea is the 1 percent shouldn’t have any public authority guiding them to protect the 99 percent and to prevent society from running into the kind of debt corner that the United States and Western Europe have painted themselves into today.
I’m glad you brought up Wall Street because I wanted to get to this issue. You talk about the difference between financial capitalism and productive capitalism. You talk about the real economy and the finance economy. In line with everything you’ve told us now about the history of debt, and how its functioned to destabilize societies, what is the role of the finance sector in modern economies, and how does it differ from the real economy as you define it?
Well, Aristotle talked all about this. He said there were two kinds of economics: there was the real economy, oikonomos, the household economy, and there was chrematistike, the economy of wealth. And he said, the economy of wealth is antithetical to the real economy, because the purpose of the creditor, of Wall Street, is to get the 99 percent in debt to the 1 percent, so that the 1 percent says, “Everything that you produce, all of the economic surplus that you have over subsistence rates, you have to turn over to us.” The tendency of any economy that has debt, and an interest-bearing debt ,is that the debt grows faster than the economy as a whole. So you have exponential debt doubling every so many years — any rate of interest is a doubling over time — and economies have never been able to keep up with it. The economies taper off. And the more that compound interest builds up, the more income is diverted away from the real economy of production and consumption — eating, and making things, and commerce — into the financial economy, where it’s just lent out, and more and more of this money is lent out, or used to buy land and property and real estate and corporations, corporate raiding, and all of that.
So every modern society has a tension between the growth of debt, of finance, and the real economy. That’s why the Chicago school, all of their economic models, they don’t have debt. They don’t have money, because all money is debt. They say, “Wait a minute. Economics is really about, given how much money people have, what are they going to spend it on?” There’s no question about, why do some people have money and not others? What’s the distribution of this money? And when people spend money is it really only on what are they going to eat and buy? Or is it about the debts they’re going to pay? How about the privatized medical care they have to pay? How about the taxes they have to pay — where the taxes are in turn paid to the wealthiest 1 percent, as they were back in Rome.
All of this is excluded from economics. Nominally, academic economics is all supposed to be just about the production and consumption. But the world we live in is run by the financial sector that’s taken over the industrial capitalist economy, and turned what appeared to be industrial capitalism of the 19th century, that Adam Smith and John Stuart Mill and Marx and Veblen talked about, all of it’s turned it into financial capitalism. There’s no room in the curriculum to talk about it. That’s why I stopped teaching economics at the New School already in the 1970s. There was no way that I could fit debt into the curriculum. There’s this kind of schizophrenia of the image of the world that we have, as if the world didn’t have debt that was growing faster than the economy, as if everybody could pay the debts. The tendency of debt for any family, any corporation, any economy, is to grow faster than the ability to pay, until there’s a crash. And when you can’t pay, either you lose the property, or you become in one way or another, a servant to your creditor, in terms of having to pay with labour, having to pay whatever you produce. You have a concentration of property ownership in the hands of the creditors, if you don’t write off the debts, which ancient society did, and which used to be the core of ancient religion: from Babylonian religion — Hammurabi, receiving the laws, and the god saying, you have to promote social justice, write down the debts — to Christianity.
Let me ask you a little bit about what implications this has for the post-pandemic economic recovery, because the theory in both the United States as well as New Zealand, to some extent, is, you give money to people, you give them enough money to spend, they’ll go out and spend that money, and that’ll stimulate the economy and get things going again. But we saw in the United States, for instance, that with some of those initial stimulus checks, I think the majority of people spent that on paying down bills, paying off debts, and not the consumer spending that it was meant for. So what implications, as the world comes out of this pandemic-driven economic cataclysm that we’ve all been through, what implications is there that we continue to have these highly indebted societies at the same time?
The implication of an indented society is that more and more of your income is going to pay debts in one form or another, because the debts mount up. You have, on the one hand, the banks have found out that you can get for yourself as bankers what landlords used to get in the 19th century all the way from feudalism: you can get all the land rent, by lending more and more money to people to buy a house so that if anybody wants to buy a house, they have to go to a bank, they go to loan, and the banks will lend larger and larger amounts that absorb the entire rental value of property, up to the point where in the United States, almost all the bank mortgages that are lent out the families are guaranteed by the government up to the point where they absorb 43 percent of the borrower’s income. Well imagine that 43 percent of your income goes to pay rent. This was never the case in any society before. When Ricardo talked about the economy and rent in the early 19th century, he thought food was the main element of people’s diets. They had to eat. And at that time, landlords owned almost all the land and everybody had to rent, and renters only had so much to pay. And so rent wasn’t as important as food and the basic things that people needed. You could sleep in the streets. You could sleep in sort of group houses if you didn’t have money. People could get by without owning their own house.
All of that basically changed in the 19th century fight of the classical economists against landlords. Adam Smith, John Stuart Mill, the socialists, they finally got rid of the landlord domination of the House of Lords in England and the upper houses in Europe, and they began to privatize housing. “Democratize it,” they called it, as if they were the same thing. And so by “democratizing,” letting everybody buy their house, all of a sudden, the cost of housing has gone way, way up to today at 43 percent, and all of these mortgage payments go to the financial sector. When you owe so much for the house, you begin to run behind in other bills. You have to borrow from the banks. You need to buy a car to get to work, you have automobile debt. In order to get a job, you need to go to university, have a university degree, so you have student debt. Almost everybody in order to survive, has to survive like they did in the third millennium BC: by going into debt and owing the money to the banks in interest, and this interest continues to grow without any reference to the ability to pay.
Prior to Western civilization, every society had to survive by keeping debts within the ability to pay. If you look at the medieval weregild laws of the Germanic societies in Europe, if you injured somebody, you had to pay, but it was always within the ability to pay. There was no intention of having debts grow so large that they were beyond the ability to pay. Now, the whole idea is to monopolize property and to get it behind the inability to pay, and not only the personal inability to pay and the corporate inability to pay — in order to take control of the production process and the labour process — but entire governments. So what do creditors do? The largest value of wealth in the world is what the governments owned — the land that the governments owned, the property, the government infrastructure. Since 1980, in the West — it’s like discovering the New World, it’s like Europe, discovering the Western Hemisphere in the 15th and 16th centuries — you had the financial sector discovering that there was all this wealth of governments, not only the land that governments had, the mineral rights, the oil rights, the mining rights, the roads, but also the electric utilities, the school system, the medical system, all of this could be privatized. And so they would make loans to the government, or they’d raid the currency and the government would have problems paying.
The financial sector, one of the first things they did was endowed business tools, by control of the educational system that shaped how people thought about the world, and in countries like — you mentioned New Zealand, I think you have a connection in New Zealand — they said, “Well, you know, the government’s really wasting a lot of money. Bureaucracy isn’t as efficient as public enterprise. Let’s sell off the electric utility.” So they sold off the New Zealand electricity utility, and they said, “How are we going to price it? Well, it’s not charging very much right now, it’s not making much money. We’ll discount it by the rate of interest — let’s say a 10 percent rate of interest — and we’ll sell it at the capitalized value — what it’s earning.” So they privatized it, sold it largely to financial investors, especially foreign investors. And the foreign investors said, “Okay, thanks, now we own the utility. First thing we’re going to do, we’re going to double the electricity rates. The next year, we’re going to double them again. And then we’re going to stop providing electricity to you people in the countryside. It costs too much money to do with it.” They cut service, they raised the price, and they made a huge killing. And of course, they sent the profits to England and the United States.
They did that not only with electricity, but with the transportation. “Let’s privatize the transportation. Oh, the government didn’t charge very much because they wanted transportation as a public utility.” Well, they bought up the transportation and essentially Thatcherites in New Zealand doubled the rates of transportation, they cut the services to places, and they began laying off the labour force. They said, “We don’t need the labour.” And the Labour government said, “This is wonderful! This is efficiency! You’re cutting the labour force! Look at labour productivity! When you fire half the people and make the other half do the work, productivity goes up. New Zealand’s really, really winging it!”
That’s basically the story of what happened in New Zealand since the 1980s. And it was led by the Labour Party, just as in England, it was Tony Blair and the Labour Party that led the privatization of transportation and did things that even Margaret Thatcher and the conservatives never could have done, because the conservative thought was essentially that, well, you ought to conserve society by making it resilient. Well, in New Zealand, it was the conservative parties in the 1950s and 60s that had actually been the socially minded policies — how are we going to make New Zealand work instead of how can we carve it up and make it into something other than a calm, quiet, middle-class society? How do we polarize it and grab all the money for ourselves and make most of New Zealand poor, so that life is hell in New Zealand if you want to buy a house, as it is in Australia. We’ll just financialise the housing market and raise prices to a point where it absorbs almost all the income of people who work in New Zealand, who then have to pay the rest of what they’re able to keep on privatized electricity, privatized transportation, and all this money’s sent abroad.
So you have New Zealand falling into the position of other Third World countries: a chronic balance of payments deficit paid to the financial centres, and enough pressure on its currency so that if it would elect a government that wanted to somehow rein in the financial sector, the foreigners, the financial groups, would have a run on the currency. They’d sell the New Zealand currency short, currency would go down, there’s a crisis. “Look, there’s no more confidence in New Zealand, you’ve got to let us run the economy and restore confidence by taking it over and making you poor.” That’s New Zealand’s philosophy. They call that democracy. Democracy is basically oligarchy. Democracy is the freedom of the financial sector from the government or state authorities to restrain the oligarchy from impoverishing society.
A long and bitter history in New Zealand that you just laid out that listeners I think, some of which will be familiar to them, of course, famously “out-Thatchered Thatcher” is what the Economist said about New Zealand in the 80s. But you bring up the Labour Party. The Labour Party is back in power in New Zealand. And it may not be doing the same stuff it did in the 80s, but what we have seen is it’s embarked for the first time in New Zealand’s history on this quantitative easing program, money printing in colloquial terms, which we’ve seen in the United States as well as a response to the crisis. And the way that it’s taken form in these two countries is, in New Zealand, it’s been used to stimulate lending in the finance sector, which led to this enormous housing boom, that’s made life a lot harder for people. And in the United States. It’s been used to pay down corporate debt. Right. And I think the way that people when they see these policies get done, the cause of very complicated and esoteric I think people say to themselves, well, I guess there’s no alternative that there was this was the only way that could have happened. You know, unfortunately, these governments don’t want to spend on social services on you know, helping people get over their debts, changeling their debts, but they have to this is the only thing they can do with these money printing programs is bail out the big guys. My question to you, is that the case? Could these money printing programs that we’ve seen around the world actually have been used to bailout ordinary people, or stimulate the economy at the very least, instead of just stimulating a speculative boom or or bailing out big, big corporations?
No, there is no way of bailing out ordinary people because of compound interest. You just pointed out that the money that Trump gave, the Cares Act, was paid into their bank account, to their credit card accounts and used to pay down debt. If you have debt growing exponentially, there’s no way to create enough money to finance this exponential growth in debt without flooding the economy with — literally, it’s moving towards infinity. The only way of solving this, really is to, to cancel the debts, write them down. The debts cannot be paid. And if you try to pay them by creating money, then you’re going to end up creating an infinite amount of money. Yes, it would help pay all of the debt arrears by the American population to the banks. They’d say, “Okay, we’ll give you, you know, $5 trillion.” All this money would immediately be re-lent out and doubled again. The government would have to give $10 trillion the next year. It would become an infinite function. Wall Street, indeed, is telling the government to do just this. Wall Street is saying, “We don’t want to lose money, that would be a disaster. If we would lose money when the American public could not pay, we don’t want to kick people out of their houses. We want them to pay more and more and more money on the debts they owe. We don’t want to have to prevent student debtors from having enough money to pay.
Give credit card debtors enough so they can afford to pay us, so that we get even more money, and then we’ll use this money to invest in China, invest in countries that aren’t going bankrupt like the United States, and are not being reduced to debt peonage.
So it’s one thing for the government to create money to finance infrastructure, but to create money to pay the banking sector is a bailout to the financial sector — it’s a dead end. And of course, that’s exactly what Donald Trump did in discovering the wonders of Modern Monetary Theory. He said, “Well, you know, Dick Cheney was right. Debts don’t really matter. We can just create all the money and spend it, we can create the money to finance the military industrial complex as Dick Cheney wanted. We can create the money and cut taxes on the rich and just create the money to give to them to give away. Create all the money for the balance of payments that we want to finance our military spenders abroad. The one thing we don’t want to spend money for is what MMTers wanted to do. We don’t want to spend it on infrastructure or on people. We want to spend it on my campaign financers on Wall Street. That’s how I got elected — by being a Republican and getting campaign contributions. So we want the government to do MMT to give to my gang, not for the 99 percent.” There’s MMT for the 1 percent, and there’s MMT for the 99 percent which is, you know, who are you going to do?
So in other words, you could have done quantitative easing to actually invest in the real economy. But to deal with these issues of indebtedness, you really have to restructure basically, every way that we do things right now, the way that the economy operates.
Yes, every economy that has interest-bearing debt has to restructure at some point, or else, all of the economy is meant to be owned by just a teeny group of people at the top, like you had in Rome. And that’s how the Roman Republic ended in the Roman Empire. It becomes centralized. The tendency of any financialised economy is to centralize. Not only wealth, but by centralizing wealth, you centralize political power, and decision-making, and ultimately, military force in the hands of the financial class. And somehow, this is not in the economics curriculum. This is how economies work! I mean, it’s like you’re teaching biology without death. You’re teaching biology without people getting older. And old age as if this can go on forever and ever, and you can have people growing up — it’s as if you could say, kids are born and you can grow up to be 50 feet tall or 500 feet tall, you know, it doesn’t matter. It’s going to go on forever.
Well, I think that’s a great place to end it. bleak, but I think the important thing is to know you know, the underlying factors that have created the societies that we have, and that’s how we fix them. Of course, that’s a tall order. Before we go, can you give us quickly a sense you know, what projects do you have coming up? I know you’re writing a new book, or maybe even several books and then where people can, I guess, find your work if they want to read more, hear more?
Well, I just published the third edition of Super Imperialism, which I wrote in 1972, to explain how America has other countries financing its military spending abroad by the dollar standard. That’s available on Amazon. In January, I’ll be publishing The Destiny of Civilization, which is a series of lectures that I’ve given in China, on finance capitalism versus industrial capitalism, and socialism — how socialism in a way restores the third millennium, the old idea of the primacy of the state over the oligarchy. And then late next year, I’m coming out with my book on the collapse of antiquity, as to how Greece and Rome ended up in feudalism as a result of the debt dynamics. I’m dealing with the final chapter. The ending of Rome was not simply to bequeath feudalism to the West, but to transform Christianity, and to turn Christianity from a religion of resilience for the poor, to oppression by the rich, and just say, “You can you can have as much usury as you want. It’s okay. You can oppress the people as long as you give charity to the church for us to spend it on your deathbed. It’s okay.”
The oldest con in the book. I think it’s really vital to have that history, because I think a lot of people have a conception of the world that the way it is, is the way it’s always been. And I think one of the great things about your book, …and Forgive Them Their Debts, is that shows, in fact, that’s not how the world was and it doesn’t have to be that way. It’s a deliberate choice by people in power. So I want to really thank you again for taking the time to speak with me and tell our listeners everything you’ve just told us.
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