MichaelHudsonontheHistoryofDebtCancellation,AusterityinEurope andRentalCosts
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ReesJeannotte(RJ):Helloandwelcome I'mReesJeannotte,andyouarewatchingKnowYour Stuff JoiningmetodayiseconomistandanthropologistMichaelHudson Heisaprofessorof economicsattheUniversityofMissouri,KansasCity,andanauthorofmanybooks,includingKilling theHostJforJunkEconomicsandhismostrecent andforgiveThemtheirDebts Today,we'llbe talkingwithhimabouthislatestbook andforgivethemtheirdebts,theEurozonecrisisandthe problemofeverincreasingrentalandhomeownershipcostsaroundtheworld ProfessorMichael Hudson,thankyouforjoiningus
MichaelHudson(MH):Goodtobehere
RJ: How did you come to be both an economist and an anthropologist and in fact, combine the two theculminationofwhichisinlargepartatleastisyourlatestbook...andforgivethemtheirdebts?
MH:Well,IbeganasaneconomistonWallStreetdealingwiththirdworlddebtfortheChase ManhattanBankinthe1960sandbythe1970sfortheUnitedNationsInstituteofTrainingand ResearchUnitarewritingabouthowtheThirdWorldwasunabletopayitsforeigndebtstothe UnitedStatesandothercreditors UnabletopaywithoutsubmittingtotheIMFausterityprograms, withouthavingtoselloffitsrawmaterialsanditsindustryandimposeapermanentdebtcrisis Andat MexicoCityataunitourmeetingin1979/78 IgaveaspeechtopointoutthattheThirdWorldcould notpayitsdebts,andthiswasfouryearsbeforethatMexicodebtdefault Therewasariot,andI realizedthatthewholeissueofdebtcancellationandthewholeideathatdebts,chronically,couldnot bepaidagainandagainledmetowanttowriteahistoryofdebtcancellationsandhowsocietyhad handledtheproblemofdebtsgrowingbeyondtheabilitytobepaid Justsimplybecauseofcompound interestrisingsteadily,compoundingmuchfaster,thananeconomycangrow Soittookaboutayear towriteaboutGreece,Romeandthebiblicallands ButthenwhileIwasstudyingIsrael,Irealized thattherewerehintsofearlyearliertraditioninBabyloniaandSumerandBronzeAge,Mesopotamia ofdebtcancellation SoIbegantoreadtheliteratureonSumerandBabyloniaandtheworddebtmust neverappearintheindex AndIhadtoreadthewholecontext,thewholebook,inordertofindout aboutthis AndIrealizedthatmosthistoriesofantiquitywerewhatwouldhappenifamodern economist,especiallyaThatcheriteorrightwingeconomist,wouldgetinatimemachineandgoback tothreethousandBC Howwouldtheyhavecreatedaneconomy?Ofandofcourse,itwouldhave beenaneconomyjustlikeArgentina.OrGreece.Itwouldhavegonebankruptinahurryand conqueredbythesurroundinglands.SoIgotveryinterested,andwroteahistoryofthatkindofa historyofdebtcancellationinSumerandBabylonianbyabout1984.AndafriendofmineatHarvard introducedmetotheheadoftheanthropologydepartmentthere,CarlLamberg-Karlovsky. Anthropologyincludedthearchaeologydepartment,andwedecided...Ibecamearesearchfellowin Babylonianarchaeology,andinthe1990swedecidedthatbecausemostAssyriologistshadnever talkedaboutdebt.Let'sbegintohaveaconference.Howdidproperty,howdidlandownershipbegin?
Howdideconomicrentbegin?Howdidalltheeconomicsofenterprise,interestbearingdebt,credit, contracts?HowdidtheyallbeganinMesopotamia?Andsowedecidedonaseriesofvolumesthat culminateinthethirdvolumewhichwasahistoryofdebtcancellationsinMesopotamia.Well,I submittedofthefirstdrafttotheuniversitypressandtheysentitouttoreadersasacademicpresses do.Andallofthereaderssaiditisinconceivable.Thisisacrazybook.Itisinconceivablethatany country,anysocietycouldhavecanceledthedebtsbecausethenthecreditorswouldn'tlendanymore money.Andthisiswhatpeoplelikeus,SamuelCramerwrote.Andjusteverybodybelievedthatin the1980sandearlynineties.Andwhattheydidnotunderstandwas,numberone,mostdebtswere owedpalaceandthepalacehadachoice.Eitheritcancollectandreducethewholepopulationto bondage,inwhichcasethepalacedoesn'tgetanyrent.Thecreditorsgetalltherentandtheoligarchy takesformandthenthelocalcityisdefeatedbyinvaders.Ortheycanceleddebtsrestoringeconomic order.AndIbegan...Wedecidedtoinvitearchaeologistsand,basicallyAssyriologists, [00:05:28]inaudible[00s]readerswhowould Everythingtheyknewfromtheirparticularperiodof Babylonian,Sumer,theNeo-BabylonianperiodinIsrael Andwegot[00:05:44]inaudible[00s] confirmationofhowenterpriseandeconomictechniquesandprofitseekingcontractsallbeganinthe palatialeconomy Andthatmoneyitselfdidnotbeginasbarterasthefreeenterpriseboyssay Money itselfwascreatedasameansofpayingtaxesandfeestothepalace Andbasicallyyouhadan enterpriseandprivatepropertybeginningatthepalatialsector Notinthegovernment,notinthe privatesector
RJ:TheKeyhereasbarterdidn'thappen,ofcourse Thisisbarterdidn'thappeninthewaythat peoplewould
MH:AndrightintheUS,SpringerjustdidahandbookofmoneyandcreditandIwrotethelead articleontheoriginsofmoney.Showingthatthebartertheorywasmadeupbyaveryrightwing economists,byAustrianeconomistswhohatedgovernment.Almostallthemonetarytheoriesare donebyrightwinganti-socialiststhatsaygovernmentplaysnoroleatall.Moneyisbestwithout government.Leaveittotheprivatebanks.Wewillplansocietybetter.Andbasicallythelibertarians, thefreeenterpriseboys.Advocateahighlycentralizedeconomy,muchmorecentralizedthanSoviet Russia,muchmorecentralizedthanChina.ButtheywanteverythingcentralizedinWallStreetorthe CityofEngland.Thebanks.Theywantthebankstobeinchargeofeverything.Andtheyallsaythat thisisallforthebest.AndsowefindasinantiquitytodaythroughSumeria,Babylonian,Greece, Rome,wheneverafinancialoligarchyistakenplace,ithascreatedadepression,adisasterandan economiccollapse Almostallancienthistorianshavefoundthis ThisiswhatLivyandDionysius wroteaboutintheirhistories Ah,Plutarch,thehistoriesofRome Andthat'swhythefreeenterprise boystodayintheUnitedStates,certainly,havestoppedteachingeconomichistoryintheeconomic curriculum IfyougotogetaneconomicsdegreeintheUnitedStates,younolongerstudyhistory It's out Youdon'tstudyeventhehistoryofeconomics It'sasifeconomicsbeganin1980withMargaret Thatcher,MiltonFriedmanandotherrightwing Andsoit'sreallyacensorshipabouthow civilization'sbeenevolvingforthelastfewthousandyearsandhowit'sdealtwithdebtissues So,the publicationsthatIdidforHarvard,fivebigcolloquiaontheoriginsofmoneyandprivatizationand landownershipandlaborandeconomicaccountingandcontractsafterfinishingfivecolloquia,thenI decidedtowritethepopularsummaryofitall Andthat'sthebookandforgiveusourdebts
RJ:Itwouldbeinterestingtoknowwhyyouchosethattitle Ofcourse,theimageonthecoverofthe bookitdepictsJesusasmercilesslywhippingamoneylender,presumablybeforetossinghimoutof thetemple.IcanimaginephotoshoppingsomeonelikeJamieDiamond'sheadontopofmoneylender. Youknow,manypeoplewouldthinkthat.Yeah.Whydidyouchoosethoseimages?Thatimage, though,thattitle?
MH:Idon'tthinkIhaveeverchosenthetitletoanyofmybooks.I'mnotverygoodatchoosingtitles. Mypicturewasthetitle.Andthat'sbecauseIhadwantedtocallthebookBronzeAgeFinance.And
mypublishersaidnobodyandnobodyknowswhattheBronzeAge.BronzeAgefinance.Whatdoes thatmean?Youhaveto...Andshesaid,whatyou'vereallywrittenaboutisJesus'sfirstsermonand thefirstsermonthatJesusgavewas...HeunrolledthescrollofIsaiahandtalkedabouttheyearofour Lord.MeaningtheJubileeyear,andsaidhehadcometoproclaimthat.Andshesaidthatthatisthe revolutionarypartofyourbook.Peoplethinkthatthelargeprayerisallaboutforgiveusoursins.But inthetimeJesuswrote,therewasawholefightovertheissue.JusticeinRome.Therewereriots demandingdebtcancellation,riotsinGreece.AwholewarwithMithridatesintheNearEastallover debtcancellation.AndthatwaswhatJesus'sfirstsermonwasaboutandthatwastheLord'sPrayer wasabout.Andthatwaswhatconservative,whattheoriginalJudaismhadbeenaboutbeforethe rabbinicalclass,thePharisees,whobasicallywerethewealthycreditorclasssortoftookoverand subvertedtheolderJewishreligionthatJesuscametotrytorevive.So,shethoughtIshouldtieitinto Christianitybecausewe'relivinginaChristiansocietyandmorepeoplearefamiliarwiththeLord's Prayer,forgivingtheirdebtsthantheyarewithoutBronzeAgefinance
RJ:Thisiswherethecreditorclass,IguessaroundthetimeofChrist,wonthebattleagainstcentral power Thepalace,thetemple,atleastinwesternRome,westernRomanEmpire Andtherewasa paradigmshiftthen,ofcourse,inhowwethinkofdebt
MH:ThatmakesWesterncivilizationdifferentfromeverythingthatwentbefore.Allearlier civilizationintheNearEast,theyhadanideaoftheeconomyisalwaysgettingoutofbalance,always polarizingbetweentherichandthepoorandcausingpovertyandultimatelydeeppopulationand militarylossasaresultofthecreditorsenslavingthedebtors.Reducingthemtoclientageorserfdom orbondage,andthenearnearestwasdifferent.Theyrealized...Theyhadacompletelydifferent economicmodelandamuchbettereconomicmodel,muchmoremathematicallysophisticatedthan anymodelthatI'dseeninmodernacademia.Andtheirmodelsaid,look,youhavenointerestbearing debtgrowingexponentially,doublingevery[00:12:04](inaudible).[0.0s]Andyouhavetheeconomy growinginanS-curveveryslowly.Soagainandagain,youhaveaninherentinstabilityandyoudon't haveacentralpowertokeepwipingouttheinequities,tokeeprestoringbalancethenyou'regoingto haveanimbalancedeconomy.Well,moderneconomicmodelsareallbasedonequilibriumtheoryand thereisnothingmoremathematicallystupidthanequilibriumtheory.Itsaysthatthebusinesscycleis. self-correcting.Itisimpossiblethatpeoplebecomepoor.Impossibletobeincomeimpoverished becausethereareautomaticstabilizers.Andifyou'rejustgetthegovernmentoutofthewayandlet WallStreetruneverything,everybodywillbehappyandprosperous Lookatthestockmarket Well, theproblemisthatinAmerica,10percentofthepopulationown80percent,85percentofthestocks Thestockmarket'sgonewayup Governmentdebtsdonewayup Andtheincomeforthe90percent ofthepeoplehavegonedownsince2008 Andtheminimumwagehasnotgoneupatall Soyouhave thefinancialeconomygrowingattheexpenseoftherealeconomyofgoodsandservices The populationisbeingimpoverished Andyeteconomistssayweregettingricher,meaningthattheir classthefinancialclassgettingricher Thisisthetravestyofmoderneconomics Andit'samazingthat intheBronzeAge[00:13:38](inaudible)BC,[00s]theyhadbetter Wehavethetrainingmanuals thattheytaughtthesescribalstudentsthatthemathematicstheyuseweresuperiortothemathematics underlyingthemathofthemainstreamrightwingmodelsthatsaydebtcanneverbeaproblemthat weusetoday
RJ:Sothisislikeinthosedaystheyhadsortofaninvertedconceptofthemoralhazard Right And it'sbeencompletelyflippedaround.Socanyouexplainwhatthemoralhazardisandthenhowshould democraticsocietiesreallybethinkingaboutdebt?Andweoftenthinkaboutevenjustpersonaldebts. Ormaybesomeonehadmurderedsomebody.Theyhaveto.Imean,inAmericaisagreatexample whereyoujustyougetlifeimprisonment.Thereisnoredemption,itseemslike.Howdowecomeon ofthoseconcepts?Whichshouldwebemovingawayfromthem?
MH:Well,therightwingeconomicfashionintheUnitedStatesnowisthatofDouglasNorth followingtheAustrianschool,sayingcivilizationprogressesifthereisasanctityofcontract.A contractisacontractandyouneedastabilityofcontract.Evenifthecontractisunfairandtherefore youmustnotcancelthedebtsbecauseotherwiseyou'dcheatthewealthypeoplewho'vemadea contracttogettheirmoney,evenifthecontractsaystherestoftheeconomyhastostarve Suicide rateshavetogoup Theeconomyhastoimpoverishitself Acontractisacontractandthat'sprogress That'sDarwinianeconomics Andinantiquity,theyputeconomicbalanceasbeingthekey Andthey said,ofcourse,youhavetohavethepalatialorcivicauthoritycomeinandcancelthecontracts Ifthe priceofmakingthedebtorspaythecontractsthatthey'reforcedtosignunderyourmoneyoryourlife, signthecontract Ifthatcauseseconomiccollapse,asitultimatelydidinRomeandcenturyafter centuryinRome,forfivecenturies,youhadeconomicrevoltsoftheplebeiansandthepoorwanting debtcancellation Andineverycase,therightwing,thecreditorswonnotbyargument,butby assassinatingthepoliticalleaders,endingupbykillingCaesar Buttherewasawholeseriesof centuryafteracenturyofassassinationoftheGracchibrothers,thereformers,awholeseriesof reformers,justliketoday ThebasisofChicagoschooleconomicsisyoucannothaveafreemarketif you'renotwillingtoassassinateeverycritic Theywenttotheysaid,lookatChile Wecameinand wesaidoureconomistsdown Andwesaid,herearethelaborunionleadersyouhavetoassassinate Herearethelandreformersyouhavetoassassinate Herethesocialists,youhaveassassinate And theystartedhundredsofthousandsofassassinations,allfromChiletoArgentina Allinahuge assassinationprogram,sponsoredbytheCIA,sayingthisisafreemarket We'redoingthisfor freedom We'redoingthisfordemocracy Andthisbecamethisstorywasactuallyunique Eventhe wealthypeopleinantiquity,allknewthatthedebtcausingaproblemandthattheproblemwith societybasicwascausedbygreediness ThatwaswhatSocrateswrote That'swhattheSolonof Athenswroteinhispoetrywhenhecanceledthedebts.It'swhatLivyandalloftheRomanhistorians, thestoicswrote.Nowhereinantiquityeverfindtheideathatrichpeopleshouldbeabletoenslaveand impoverishasocietyatlarge.Theydon't.Howdowedealwith.Asystemoflawstopreventthe wealthycreditorsriskfromreducingtherestofthepopulationtobondage.Thatwastheirideaof economics.
RJ:There'slotsoflightbulbmomentswhenyoureadthebook.Butonethingthatstruckmeisthat reallyrevolutionsactuallyreallyonlystartedhappeninginearnestwhenthesedebtcancellation startedstoppedhappening,right?That'sright Andtherearesomanyinterestingthingsinthebook, butI'dliketoaskyouaboutwhatthemodernequivalentsoftheseancientinstitutionswouldbe,the palaceandthetemple Anddotheybehaveliketheyshouldbeorshouldtheybebehavinglikethe templeandthepalace?Imean,someoftheansweryou'vealreadygiven,buthowdotheybehavelike that?
MH:Well,whatIfoundoutinlookingatBronzeAge,Mesopotamia,itit'ssodifferentfrommodern societythatitwasmuchharder I'dbeenknownasafuturistinthe70'sworkingattheHudson InstituteandtheFuturesgroup It'seasiertoforecastthefuturethanitistounderstandandliquidate thepalaceandthetemples We'reisolated,wereseparatedfromtherestofsociety Therewerethree groups Andsotherewasapalace,therewerethetemplebasicallycontrolledbytheroyalfamily And nowthey'recommunitiesatlargewithitsownbodyofcommonlaw SoHammurabi'slaws,for instance,weren'tacode,theydidn'tapplytosocietyasawhole Theywereonlyappliedtothepalace sectorrelativetotherestofsociety.Thestructurewascompletelydifferent.Ifoundinordertoexplain theoriginofdebtandcommerceandinterestratesandprofitsandlandownership.Ihadtodescribea societysoalienfromours.Itisitveryhardtogetusedto,butIhadtogowaybeyondthedebtissue itself.Andtalkaboutthecontext.
RJ:Sodowe.Imean,dowehaveinstitutionsthatmightbesimilartosomethinglikelikea centralizedinstitutionmaybe?Idon'tknowlikethecentralbanksoftoday.
MH:No,theyonlyhaveexactlytheopposite.Thecentralbanksworkforthecommercialbanksand forthecreditors.In1913inAmerica,theFederalReservewasbrokenofffromtheTreasuryinorder toshiftmonetarymanagementawayfromtheTreasuryintotheprivatebanksofNewYorkCityand otherlocalbanks Centralbanksaretheantithesisoftheancientpalacesbecausetheyrepresentthe creditorintereststhere Theyactasthelobbyistsforthebanks Actually,youhadtheWallStreet lobbyist,AlanGreenspan,asheadoftheFederalReserve Theirjobistobailoutthebanksandto makethebanks Andevenwhenthatimpoverishesthecustomers,eventhebanksmakefraudulent loanssuchasthethejunkmortgagecrisisthatburstin2008 Thebanksweresaveddespitethefact thatitwasthelargestfraudthatbeenseeninAmericanhistory Theyweresaved Anallofthefake fraudulantdebtswereimposedonthehaplessmortgagedhomebuyers,resultinginamillionfamily kickedoutoftheirhomes Andtheresultisthatrentsaregoingupveryrapidlyhere Housingprices aregoingupveryrapidly Andpeoplenow Americanspaysomuchmoneytofinancialsectorfor debtservice,formortgages,studentloans,carloans,creditcardloans,thathavelessandlessmoneyto spendongoodsandservices Andthat'swhytheAmericaneconomyhasbeenshrinkingnowfor12 years,2008 SincetheObamacrisis,theeconomyhasgonedownbecausethebanksandthecreditors weresaved,nottheeconomy
RJ:Thisiswhatyoucallregulatorycapture.
MH:Yes,regulatory,butnotonlyregulatorycaptureoftheFederalReserveanditsintellectual captureofsociety.SowehaveanItriedtowritethisbookandthesequel,TheCollapseofAntiquity, tobasicallyprovideamindexpansionexercisetounderstandthatinsteadofwritingdownthedebts causingacrisis,ifyoudon'twritedownthedebts,there'sgoingtobeafinancialcrisisandanausterity program Soyou'regoingtoenduplookinglikeGreeceorArgentinaorLatvia
RJ:Thisisthethingnowthatwe'reontheGreece Thisisaninterestingexample,becauseatthetime oftheGreekcrisis,Imean,there'sstillan Crisis,obviously,butatthetimewhenitwasalloverthe news Youhadthesituation,ofcourse,wheretheyweredemandingthatGreeceshouldpayitsdebts Youoftensaythatdebtscan'tbepaid,won'tbepaid
MH:Wait,wait.That'satrickquestion.AndIgottocallyouonthetrick.YousayGreeceshouldpay itsdebts.It'sdebtswherethedebtsowedtoacrookedtaxevadingclass.TheGreekdebtstoforeigners wereabout50billioneuros.ChristineLagardeoftheIMFhadalistofalltheSwissbankaccounts thatGreekshipownersandindustrialistsandfinanciershadillegallyputtheirmoneyoutsideofGreece intoSwitzerland.Allthemoneywasthere.Ithadbeenstolen.Soitwasn'ttheGreekpeopledidn'towe thedebts.Thesearedebtsthatthewealthypeopleowedtothetaxauthoritythatwerenotpaid.They weretaxevasiondebts.AndtheEuropeancommunitysaid,well,aretheGreekpeoplehavetopaythe debtsthatthewealthyclasshadcrookedlyavoidedpaying.Sotheystoodupforthecrooksand imposeddebts,evenforyoungpeopletobethepay.TheIMFhadbasicallyusualjunkeconomics theorythatoh,Greecewillbemuchbetter.Itwillallrecoveronceitpays.Well,ofcourse,ithasn't recovered.Ifthere'sanyinstitutionthatshouldbeabolished,iftheIMF,whichasyouknow,isa branchoftheDefenseDepartmentbasicallytokeepothercountriessubservienttotheUnitedStates. AndIdiscussedtheGreekcrisisinKillingtheHost,whichispublishedasDerSektorinGermanyby Klett-Cotta WhereIoutlineallofdebtintheGreekcrisis TheArgentinacrisisandotherfinancial crises
RJ:Well,whatIwastryingtogetouttherewassortofthedisingenuousnessfromtheEUthatthey wouldsay,Imean,theconstantrepeatingoftheymustpaytheirdebts,theymustpaytheirdebtswhen theymusthaveknowntheycouldnotbepaidback Andofcourse,asyoupointedout,whohadtopay thembackisalsoaquestionorwhoowedtheactualdebts Butwhat'sthereal,Imean,theymust knowthat Sowhatistherealaimofdoingthis?Imean,Irememberseeingawebsite,forexample,I
don'tknowifit'sstillup,but...They'reauctioningoffGreekislands,Greek....Thisisthekey,Ithink iswhatthealsotheoligarchsinancienttimesdidtoo.Assetgrabbing.
MH:Yes.That'sit.Itisanassetgrab.Ineconomicsyouhavesomethingcalledrevealedpreference andthatisyouassumethatwhat'sintended thatwhathappensiswhat'sintended Soyoucansay thatwhatthecentralbankersofGermanyintendedwastoreduceGreece'spopulation,toincreasethe suiciderate,toshortenlifespans,tocollapsetheeconomytothepointwhereGermanscouldcomein andinsistthatGreecehadtobuyexpensivesubmarinesandmilitarywearsfortheirmilitarythat GreecewouldhavetoselltoGermanyelectricutilitiesandotherthings Germanymadethisapower grabthatithadhaditseyesonforover50years,eversinceitbackedthecolonelsandbackthe assassinationsoftheGreekcommunistsafterWorldWarTwo
RJ:Tothinkaboutamoresensiblewaytodealwithadebtcrisis Maybeyoucanusethemostrecent exampleofanationaldebtcancellation,namelyhereinGermany
MH:That'sright.TheGermaneconomicmiraclewastheallieddebtreformsof1947/48wherethey essentiallywipedoutallofthedebtsexceptforthedaythattheemployersowedtheiremployees.You know,theworkers,andminimumbankworkingbalancesatthebanks.Itwaseasyforthealliesto cancelthedebtsowedtoGermanpredators.BecausethecreditorswereNazisandthewholeideawas theywanttowipeoutthe...Youdon'twanttoleavetheformerNaziswithfinancialcreditorpowerto takeovertheeconomyagain.Youwantacleanslate.AndcancelingthedebtswastheGerman economicmiracle.Becausenowtheeconomycouldoperatewithoutpersonaldebt.Withoutmuch publicdebt.Withoutcorporatedebt.Anditwasabletotakeoff.Today,essentiallyyou'redealingwith acriminalizedbankingclassthatIthinkweshouldtreatinthesamewaythatthealliestreatedthe Nazisatthatpoint Andifyoudon'tcancelthedebtsowedtothem,theeconomyisgoingtoshrink, andshrinkandpolarizeandwe'regoingtohaveessentiallyaNeo-feudalismcontrolledbythecreditor classlikeyouhadinRomeintheDarkAges DoyoureallywantanewDarkAge?
RJ:No,notparticularly,no Thisleadsusintothefinancialcrisisof2008,whereyouwereamong, probably,thefewpeoplethatpredicteditaccuratelythatitwouldhappen Itdid Anditwaslargely basedonthatgiantprivatedebtbubble Privatedebtissomethingthatwejustdon'thearabout Itried tolookforthetotalsonprivatedebtworldwide YoufindoutthedebttoGDPratioforfourpublic debt governmentdebt,butit'sneveraboutprivatedebt
MH:Thisisbecausetherightwingpeoplewanttoabolishgovernment.Theythinkwhatdoesthe governmentowedebtfor?ApartfromthemoneyitowestheUnitedStatesformilitaryspendingand NATO,governmentsowedebtforpensionandforhealthcare.TherightwingprograminGermany andEuropeistogetridofpensions,tolowerthem,tomakeeverybodyhavetofinancializethe pensionsystem,insteadofGermany'spayasyougosystem,whichisquitegood.Theywanttogetrid ofallsocialspending.Andsotheylookatgovernmentdebtasbeingtheadversaryofprivatedebt.For instance,intheUnitedStates,PresidentClintonfinallyranabudgetsurplusinthelastyearofhisrule. Andwhathappenedwhenagovernmentrunsasurplus,thatmeansthatitdoesn'tspendmoneyinto theeconomy.Theeconomyhastobereliantonbankstogetcreditbecauseeveryeconomyneeds credittoworkon.Andthebankssayifthegovernmentdoesn'tprovidetheeconomywithspending moneybyspendingdeficitsintotheeconomytopromoteemployment,thenpeoplewillhaveto borrowfromthebank Andiftheyborrowfromthebank,they'retheirfamilywillenduplookinglike GreeceorArgentina They'regoingtobeIhavetopaymoreandmoreoftheirincomeasinterest We, thebankerswillendupwiththehouses,willendupwithprivateindustry Wewillendupcontrolling everything,includinggovernment Soforthousandsofyears,thetensionofcivilizationhasbeen becomebetweenwhoisgoingtoplayinsociety Willitbedemocraticgovernmentsorwiserulers seekingstability,justmilitarysecurityreasons?Orwillitbeafinancialoligarchythatwantstoget richbyimpoverishingtherestofsociety?Theproblemisthatwetalkaboutdebt Oneperson'sdebtis
anotherperson'ssavings.Andifyouhave10percentofthepopulationcalledthesaversandtheyhold 90percentofthepopulationanddebt,that'sthesituationyouhavetoday.Everyeconomycanbe lookedatashowmuchofthepopulation,90percentinAmericaispayingdebtstothetop10percent. Andthatrightthereisthekeytotheneweconomicwarfare.Andit'snotthekindofclasswarfarethat thesocialiststalkedaboutacenturyago.It'stheoldfashionedfinancialwarfarebetweencreditorsand debtorsthat'sbeengoingonforthousandsofyears.Andthat'swhyIwrotethebooktoexplainhow thiswholefightbegan.
RJ:Soausterityobviouslyplaysakeyrolehereaswell It'sintimatelylinkedwiththeexpansionof privatedebt Canyouexplainhowthatis?
MH:Well,whenyouhaveafamilybudget,ifyou'reinGermanyandyourrealestatepricesaregoing up,whilerealestatepricesgoingupinGermany,ahomeorabuildingofficebuildingisworth whateverabankwilllendagainstit AndbanksnowfindthewaytogetrichistodowhatAmerican andBritishbanksdo EightypercentofAmericanandBritishbankcreditismortgagecredit They lendagainsthousesandtheresultisahugeinflationofrealestateprices Well,ifGermanshaveto paymoreandmoreoftheirmonthlyincome,eitherforrentorformortgageinterestorfordebtservice likeinAmerica,thenthey'regoingtohavelessandlessmoneytospendongoodsandservices.And you'regoingtoenduplookinglikeNewYork,wherethestoresaregoingoutofbusiness.Fifth Avenue.MadisonAvenue.Broadway.Yougodownthestreetsandblockafterblock,"forrent"signs areemptystores.
MH:ThesamethinghappeninginthestreetthatIliveininthisthreeblockblockarea.It'ssortoflike ahighstreettypearea.Boutiquestreet.Thereareatleasttwelve.Shopsclosed.Wehaveamayoral racecomingup Peoplejustcan'taffordtherents Wehaveamayoralracecomingup Oneofthebig topics,ofcourse,ofthatistherentalpricesinthecityofMunich It'sjusteverywherethesame,of course,inmajorcities Whatshouldcandidatesreallybe,Imean,there'slotsoftalkaboutdoingcaps, cappingtherentsandsoonforsixyearsandthiskindofthing Buttherentsaretoohighalready You capthemattheratethey'reat,then,Imean,doesn'tmakeitanymoreaffordable Imean,whatshould theybedoing?
MH:There'sasimplewaytokeephousingpricesdown,andthatisyoupreventlandpricesfrom goingupbyimposing,bydoingwhatAdamSmith,JohnStuartMillandthewholeclassical economicsofthe19thcenturyadvocated Theland,pricesgoupnotbecauseofenterprise,but becauseofpopulationgrowth,butmostlybecauseofbankcredit Ifyoutaxtheincreaseintheland value,thenthebankswillnotbeabletolendagainstthat NowGermanyhasthelowerlowestreal estatetaxesofalmostanycountry Andthat'sbecauseithasatraditionofnothavingarealestateclass dominatedsociety,notaDonaldTrumptypeeconomy.ButifGermanybeginstofollowtheUSand Englishpatternandyouletthebankslendmoreandmoretoinflatehousingprices,thenyou'regoing toyou'regoingtocontinuetoshrink.Germanyisbeginningtoshrink.AndI'veseenbankreportsthat say,look,ifwecanjustlowerGermanlivingstandardsby20percentlowerthanby30percent,then we'regoingtohavetheseGermantechniciansandworkers.They'regoingtohavetoemigrate.The Germanpopulationmustfallby30percentin20years.Yourincomesmustfallby50percentinorder toletthebanksmaketheGermanrealestatemarketlookliketheUSmarket.
RJ:WhowasSayingthatagain?Whoissayingthat?
MH:ThebankmodelsshowthattheGermanpopulationmustfall,livingstandardsmustfallby20 percent,30percentofyourlifespansmustshorten,yoursuicideratesmustgoupandyourskilled labormustemigrateinorderforyourrealestatemarkettoprovidetherevenuetothebankingsystem ThatwillmakeyourbankingsystemlookliketheAmericanbankingsystemandtheBritishbanking system Eightypercentofthemoneywillallgointorealestate It'sacircularflowpushingup,
pushingup,pushingupthepriceofhousing,causinganumbrellaforrentstogoupandGermanywill enduplookinglikeGreece.Thatistheeconomicplan.Youreconomicleadersofallyourparties excepttheLinkewantGermanytoenduplookinglikeGreece.That'stheirplan.Theysaythatthat's progressandit'sprogressforthebankingclass.Andthisistheimplicitwarthatsomehowisnotbeing discussedinGermany.
RJ:YouoftenhavetalkedaboutEuropeasadeadzone You'vecalleditadeadzone I'dliketoknow whyyouthinkit'sadeadzone Whereareweheading?What'sthefuturelooklikeforforEurope?
MH:TheideaofdeadzonewasformulatedbytheUS defensesecretaryunderBush Andthereason it'sadeadzoneisyoudon'thaveanyabilitytospendmoneyintotheeconomybecauseofthe The Eurozoneisadeadzone,becauseyoucannotrunbudgetdeficitsofmorethan3percent,becauseyou believethatbudgetdeficitsshouldbeavoidedinordertomakesurethatallofthecreditiscreatedby banksatahighinterest Andhowdidbanksgreatcredit?Theylenttothehousingandinflateasset prices SotheEurozonehasaplanofassetpriceinflationforbanks,forrealestate,forstocksand bonds Theyaretobesupported You'vecreatedaboutfourtrillioneurosjusttosupportthestockand bondmarkets Whenyoucouldhavespentthisintotheeconomy,youcouldhavespenttheeconomy andmakingEuropeajustautopia.Andinstead,youjustusedthattopushupstockandbondprices forthe10percentwhoseobjective,whoseeconomicmodelistoimpoverishyou.Thisiscrazy.
RJ:Yeah.Sowhat'stheanswerhere?Imean,I'veheardthatintheUnitedStatesthereissome movementonpublicbankingandstufftopubliclyownedbanksandsoon.Shouldwebelooking towardssomethinglikethat,democratizingthecentralbanks?
MH:Youcannotdemocratizeacentralbank Theyarethelobbyistsforthebanks Youneedtohave thetreasury Youdon'tneedacentralbank TheTreasury,whichisappointedbydemocraticelected representatives,shouldbeincharge,notunelected Thecentralbankersareprettymuchbrainwashed Theybelievethatthewaytomakeaneconomyprosperousistoimpoverish90percentofthe population Ifpeoplewerebrainwashedlikethat,youwon'tgetridthem Youhavetostartallover again Insteadofre-educatingsomebody,youhavetocreateanewinstitutionandthenewinstitutions shouldbedevelopedwithintheTreasury ButaslongasyouhavetheEurozonenotpermittingbudget deficitsofmorethan3percentandbelievingthatabalancedbudgetisanideal,itreallymeansletthe centralbanks,letthecommercialbankstakeoverandprovidetheeconomy'scredit Commercial bankslenddifferentlyfromwhatapublicbankwoulddo Commercialbankslendforcorporate takeovers Forassetstripping Forraiding Tolendagainstassets Toinflatepricesforrealestateor forcorporateraiders Wherepublicbankscanspendmoneyintotheeconomytomaketheeconomy richer AndtheGermaneconomyisshrinking Itdoesn'thavetobethisway,butinordertohavean alternativetothisway,youhavetohaveadifferenteconomictheory.Andthat'snottaught universitiesinGermany.Youreconomicdepartmentsareveryrightwing.Anditbasicallythey're lookingataparalleluniverse.Akindofsciencefictionworldinwhichprivateenterpriseandcreditors andbankswillmakeeverybodyrichandnotimpoverished.It'saninsideoutworld.
RJ:Youhavereleased..Youmentioneditearlier.YoureleasedaGermanversionofKillingthe Host.It'scalledderSektor.Ihighlyrecommendpeoplegoandcheckitout.I'vereadittwicebackto back Ifounditsointeresting AndIwouldliketoaskifthere'sgoingtobeaGermanadditionof andforgivethemtheirdebts
MH:Yes It'sbeingtranslatednow It'stakenaboutayeartobetranslated ABerlintranslatoris doingit AndI'mhopingthatKlett-CottamaypublishitasIdidmyFinanceImperium,whichmy SuperImperialismbook AndI'mwaitingto Iwantedtohavemyowntranslationdonebysomebody whoknewassyriology,insteadofturningitovertoapublisher,tosomeonewhodidn'tknowthe
Assyrialogicalterms.Sothatshouldbefinishedinaboutamonthortwo.AndthenI'llbeturningit overtothepublisherandit'llprobablytakethemuntilnextyeartodoit.
RJ:Andyoualsomentionedthatthey'llbementionedinthebookthatthere'llbeasequel.You mentionedittodaythatthey'llbeinthatthere'llbeasequel Whencanweexpectthat?
MH:I'mjustfinishingitnowinEnglish That'llbepublishedlaterthisyear IthinktheCollapseof Antiquity,toshowitcollapsesbecauseofdebt Andit'spartofatrilogy,thefinalvolumewillbethe tyrannyofdebtabouthowfromtheMiddleAgestothepresent,how IfyoulookatEnglandand countriesinthe12thcenturyand13thcentury,youhadthepapacytreatingtheroyalgovernments, justliketheIMFtreatscountriestoday AndyouhavetheprotestsbyMatthewParisandotherEnglish historianssayinglookatlookatwhatit'sdonebythedemandwepayPeters(inaudible)toRomeand howit'simpoverishingusall Whatishappeningtodayispartofanageoldstoryandhappensagainin everyera SoIwanttohaveawholehistory Awholehistoryofdebtleadinguptothe20thcentury
RJ:ProfessorMichaelHudson,thankyousomuchforjoiningus.
MH:It'sbeenverygoodtobehere Thankyouforhavingme
RJ:Andthankyouforwatching Pleasedon'tforgettosubscribetoourYouTubechannel Clickon thebellifyou'dliketoreceivenotificationwhenwereleasenewmaterial Andifyou'dlikewhatyou justsawandwouldliketosupportusinourwork,youcandosobywayofdonation Allthe informationonhowtodonate Youcanfindatactivismorg Thanksonceagainandwe'llseeyounext time