Latest podcast: Michael Hudson talks with Ellen Brown on what a debt jubilee might look like

Walt: Hello and welcome. I’m Walter McRee, Ellen’s co-host and colleague at the Public Banking Institute, and today we offer a special full feature of a conversation with Ellen and the renowned economist and author and polymath our friend Michael Hudson. Michael’s views on economics and the history that shapes our understanding of them shed unique light on many of our assumptions about money and the money systems we depend on. Besides condemning the traditional Academy of Economists for being oblivious to history and the real workings of money, Michael suggests with tongue in cheek that we’re stuck with no ability short of an armed revolution to reclaim the monetary power from an oligarchy that has been amassing vast, anti-democratic wealth for centuries and shows no signs of stopping. So, let’s get right into this discussion with Ellen Brown and Michael Hudson.

Ellen: [00:02:01] My guest today is Dr. Michael Hudson, who is a Wall Street financial analyst, professor of economics at the University of Missouri, Kansas City, and author of over two dozen books. We’re also delighted to have him on our Public Banking Institute Advisory Board. Paul Craig Roberts, who was former assistant treasury secretary under Reagan, called Michael the greatest economist on the planet — quite an endorsement! His latest production is a third updated edition of his blockbuster book Super Imperialism: How America Rules the World. It’s great to be speaking with you again, Michael.

Michael: [00:02:41] It’s good to be here. We always have a good discussion.

Ellen: [00:02:44] So, one thing among many that you’re an expert on is debt – and this mountain of debt that is likely to take down our economy, and the whole global economy, the way it’s going. I particularly appreciated your book And Forgive Them Their Debts, where you explored the historical origins of our credit system going all the way back to the Sumerians and Babylonians. And they managed to maintain a stable economic system for over a millennium, using a technique that you explored there and that we would like to be able to use now. So could you give us some of that background and talk about why we can’t do it today or whether we can?

Michael: [00:03:37] Well, basically, the Sumerians and Babylonians had what George Friedrich Knopp called the state theory of money a century ago. As a matter of fact, I’m in about three months republishing all of my academic articles on the origins of money and land tenure and fiscal policy and a collection of Temples of Enterprise. And my basic point is something that is pretty close to what you’re saying in the sense that money wasn’t created by barter. It wasn’t created by individuals. It was created by the temples and palaces of Babylonia. Initially, they needed to have some way of account keeping. They needed a measure of value. They needed to measure how much grain was coming in, how much grain did they have to provide to their workforce in the temples and the workshops? How much wool did they need and how much were they able to sell their wares for silver abroad? So, what they needed was some means of keeping all of these accounts in a common denominator. You never had this in the West. You didn’t have this in linear B writing for Greece and the 1600 to 1200 B.C. But the Sumerians had a simple solution. They created money essentially as a means of fiscal management. They created a grain standard measured into bushels and that was dovetailed into a silver standard, with one shekel of silver equaling one bushel of grain, so you can keep accounts in a common denominator.

[00:05:26] And this required the first real prices to be administered, and they were administered prices. And yet there was a mixed economy. There was a private sector outside of the temples and palaces and grain prices could go up and down, according to whether they were just to harvest or whether there was a shortage. But the price of grain and silver were kept stable for payment of taxes and fees and advances to the government during the years, so that you wouldn’t have inflation or different price differences disturbing things. So here’s how the economy worked. If you’re Sumerian or Babylonian and you went to the Ale House during the year and you had ale, you do what Americans would do when they go to a bar. Often, you’d put it on the tab to be paid at payday. So, during the year, the crop year, the Babylonians would go to the ale house. They’d mark down what they had, and payday came when the crop was in on the threshing floor. And so grain was measured out on the threshing floor and paid by the people who went to the bar, to the ale lady. And then the ale lady would take some of this grain and she would pay the palace or the temple that advanced the money to the ale house. This has occurred not only in Sumer and Babylonia.

[00:07:12] It occurred, say, in Japan. In the 17th century, the temples had sake, and the temples produced the sake. And every once in a while there’d be a crop failure. People couldn’t pay. But in Japan, the temples would say, hey, the crops failed, you owe the debt for all the sake you’ve had. We’re going to foreclose and you will lose the land. And so there were uprisings, and debts were canceled. Well, in Sumer, in Babylonia, when money was first traded, you didn’t need an uprising. The ruler said, Well, we understand that if the crops fail after you’ve run up these debts that you’re supposed to pay on the threshing floor, we’re just going to say you can’t pay and we don’t want you to fall into bondage to our tax collectors. You’re not going to lose your land. You’re not going to lose anything. We’re just going to wipe out the agrarian debts when there’s a crisis. Same thing with business loans all the way from Sumer down through Greece and Rome, for 3000 years, if investors would make a commercial loan to a ship captain or a caravan leader and if the caravan were robbed or if the ship sank, then they wouldn’t have to pay the creditor — that was written off. So, at the time that you first have money created, it was created basically to pay the temples and the palaces that advanced the goods and services to the private sector, to the economy at large.

[00:08:59] And the debts could be left unpaid because the government was basically the creditor, not a debtor, as it is today. The government would say, OK, the debt can’t be paid. What we want is stability. We’re going to wipe off the debts to begin next year with a clean slate, and we can all begin again in balance. So, you had money creation essentially by the government. All of the money was the silver created by the temples. Well, all of this was pretty well understood. But around the 19th century, you begin to have a socialist movement and industrial capitalists were evolving into socialists. And they said, Look, we can’t depend on the current kind of banks we have. These are predatory banks. They don’t lend for industrial development, they don’t lend to help the economy. They lend basically to grab assets, and we need banks that are actually going to make loans to industry and we need the government itself to provide the funding for industry and governments to run deficits so that they can spend on building basic infrastructure, so that we can provide low cost transportation and education and health care, so that our industry can compete with other countries. That was the doctrine of Germany, Central Europe, France and the United States.

Ellen: [00:10:38] Well, if I can stop you for a second, can you define industrial capitalism?

Michael [00:10:44] Essentially industrial capitalism was the idea that in order to have a manufacturing industry that would be competitive and in world markets, you had to undersell other industrial producers. Industrial capitalism was an attempt basically to free economies from the legacy of feudalism. The whole 19th century value theory, which was the doctrine of industrial capitalism, said “We don’t need a landlord class where landlords increase the cost of production. And if we have a landlord class, and if we have predatory bankers taking as much money as they can in land, rent and in interest, then we’re never going to be able to afford to undersell other industrial producers. And we’re just going to lose out and become what today is called a Third World country. So, industrial capitalism was the doctrine of freeing economies from the legacy of feudalism, getting rid of landlords and replacing the kind of predatory medieval banking that wasn’t a very nice form of banking. With productive banking, productive credit and government credit would basically promote prosperity for the country rather than letting landlords and bankers take all the money that they could, and rent at interest. And that was why they developed value theory, value theory and cost value what is the necessary cost of production? Well, it’s labor and it’s the capital goods that you need.

[00:12:42] But land rent isn’t the cost of production (necessary). Payment of interest isn’t really a necessary cost of production if it’s a public utility. The government can provide money as a public utility. That ended up with Knopp’s State Theory of Money, and this was how money and prosperity first developed around in the third millennium and second millennium B.C. Well, as you can imagine, the bankers didn’t like this, and the bankers said, “No, no, the government and the palaces and the temples didn’t play any role at all in the creation of money. It was just individuals would barter, and some individuals liked metal because metal doesn’t wear, you can’t wear it away. It’s standardized, it’s easy, it’s small and compact. And you can’t imagine going around pulling grain out of your pocket to pay every time you got a beer or ale.” Well, what they didn’t say was, “Well, OK, People wanted to save in silver. Who made the silver, where did the silver come from? How do we avoid counterfeiting? How do we avoid impurity? Who refined the silver? And how do you measure it?” Well, throughout all of antiquity, from silver in Babylonia down to Greece and Rome, all the money was always made in the temples. That’s why the word money comes from the Temple of Juno Moneta in Rome, where the coins were struck to finance Rome’s war-spending. So, it was the temples that were in charge of refining the silver and also overseeing the weights and measures.

[00:14:41] And when money was developed, it was really developed as a part of the weights and measures system. If you’re going to manage a specialized economy with workshops for specialized labor, and the laborers were mainly war widows and war orphans and a few slaves in Sumer and Babylonia, well, then you’re going to have to have some means of organizing this. Well, the anti-government people in the 19th century, and even today, are the monetary mainstream, the mainstream of what you’ll learn if you have the misfortune to study economics in the universities. They said No, no, you just trade for metal. Alan Greenspan, he said, nobody could have cheated in antiquity because you’d lose your reputation. Well, obviously that wasn’t the case because all through the Bible, there are denunciations of crooked merchants using false weights and measures, adulterating coinage and all of that. So a kind of fake origin-myth of money and credit was developed in which government played no role at all and playing no role at all, it didn’t play a role in canceling debts. And in this fake origin-myth, the role of early governments was to protect creditors.

[00:16:26] It’s almost the neofascist origin myth that’s promoted by Douglas North, based on what he himself calls the new institutional economics. And that means that economics without institutions, without any public institutions, the institutions are all your friendly neighborhood bankers and landlords and monopolists. And he said civilization took off when you begin cutting transaction costs, and you begin cutting transaction costs by saying you’re not going to protect debtors. Protecting debtors is a transaction cost. Let the creditors simply have the security of contract, so that they can enslave the debtor, so that they can take their land away, so that they can concentrate all the land in their own hands, just like Rome’s oligarchy did. And you have this travesty of economic history by the mainstream, immediately the bankers and the Chicago School that run the Nobel Prize Committee gave the Nobel Prize to Douglas North. This is wonderful. Minimize transaction costs. What’s the biggest transaction cost of government regulation to get out of the way? What’s an even worse transaction cost of government money creation and credit creation, which really interferes with our private money creation? The government would even today interfere with collecting student debt, interfering with the ability of creditors to have easy transactions where student debtors won’t have enough money to buy a home or have a life of their own and have to live in penury.

[00:18:19] So, you have this this whole kind of presentation of a so-called natural theory of money that goes all the way back to the Stone Age, just ending up in today’s right-wing, creditor-oriented opposition to any government money creation, any government protection of debtors. Any thought that long-term interest should take priority over short-term asset-grabbing and short-term regulation. Regulation is considered to be a transaction cost, usury laws are a transaction cost. They interfere with the free market forces of the ability to cheat people. So basically, I found that archaeologists, Assyriologists, Egyptologists, for decades they haven’t even been willing to speak to economists because they realize that economists have tried to barge into anthropology and archaeology to pretend that there is this modern right wing monetary theory and practice that would have prevented civilization ever from developing in the first place if it really would have happened the way the textbooks say. And these are the theories that are taught to economic students as if, well, this is how the Stone Age data, all of this attempt at government socialism, social democratic protection of debtors, all of this is just a long detour. Let’s go back to the beginning. Like as things were in the Stone Age and of course, the result of all this is going to be the same as it was in Rome to bring about a dark age.

Ellen: [00:20:14] So about the debt jubilee, which is what you need to do when debt accumulates, right? Can we do that now and if we could, how would we do it and could we do it with student debt? I think you’ve addressed those questions before.

Michael: [00:20:30] There’s a basic principle behind it, a jubilee, and that is: that what are you going to do when debts are unable to be paid? If you look at all the monetary textbooks, they say, well, the creditor lends money to the lenders, cattle or seed to a farmer, and the farmer makes a surplus and pays out of the balance. But the problem is that almost all economies debts grow faster than the economy. The Babylonians actually had a economic model that is more sophisticated mathematically than any model that’s used today by the IMF or others, and the model is very simple. There are two graphs, two lines. One is the compound growth of interest. It’s exponential: a equals x squared. And there’s a model of the growth of the real economy, like a herd of cattle. And that’s an s curve tapering off. And now obviously, the exponential growth of debt accumulating is faster than the S curve. The Babylonian scribes were actually taught these mathematical models. We have the textbooks. They were all published in the nineteen thirties, mainly by a French theorologist, and they realized that, well, when you’re going to have debt that can’t be paid, the ruler has a choice. Is he going to let the debtors who can’t pay fall into bondage, lose their assets, become impoverished and essentially have to emigrate to get free of debt, or run away, run away. And that was a frequent problem in antiquity.

[00:22:18] Or are we going to say, OK, we’re not going to sacrifice the whole economy and let you fall into poverty like an IMF austerity program, just because the creditors want to take all of your property and your income and your money. So, the idea was that in order for an economy to keep growing, you had to have the stability of people being able to break even without running into debt. So, that logic was why we mentioned industrial capitalism. The industrial capitalism of the 19th century didn’t try to make labor pay for its education. There was free education. It didn’t make labor pay for health care. There was public health care. That was the basic conservative policy of Britain’s Prime Minister Benjamin Disraeli. You would have the government subsidizing public infrastructure, everything from transportation, water and sewer. If you would have privatized all of these, these basic human needs, then labor would have had to pay the price for it, and employers could not have afforded to pay their employees enough money to cover all of this and compete abroad. The employees would have had to go deeply into debt if they would have got their existing wage levels and if they would have got deeply into debt, ultimately, they never would have been able to become a home market. They wouldn’t have been able to buy houses of their own. You would have essentially the predators becoming just like the medieval landlords, owning all of the assets in society, controlling the income and reducing the rest of the population, essentially to debt peonage.

[00:24:26] Well, if you want to avoid debt peonage, if you don’t want your country to look like the victim of an IMF austerity program, then you have to write down the debts. Take the student debts, for instance, that you and I have spoken about before. If you want these students who owe hundreds of thousands of dollars, many of whom don’t have a job, or they may owe $50,000 because they went to a for profit technical school that didn’t teach them anything and they can’t pay, … If you want these graduate students to be able to afford to do what you and I can do and we were young, get a job, but that will enable you to buy your own home, and rise into the middle class and survive well, then you’ve got to write down the student debts. Education should have been provided freely. There shouldn’t have been any student debt at all. It should have been subsidized just like water. Clean water is subsidized just like health care is subsidized in other countries. That’s not the way it was done here. So, somehow, by privatizing education, health care, bribing people, bankruptcy if you have to go into a hospital. All of this privatization has made the United States so high, cost an economy that it can’t compete with other economies and the economy’s doing just what happened in Rome.

[00:26:11] It’s polarizing between creditors at the top and the one percent and debtors the 99 percent at the bottom. Well, what do you do? There are a number of proposals. Some people say, well, maybe the government can just print the money and pay off all the student loans by paying the banks, paying the creditors, paying the homeowners that can’t afford to pay their rent because of the mortgage, because of the pandemic. But then what you’re going to do is the government will create money just to pay the one percent to make it whole. But that doesn’t really help the homeowners. So, the problem is, well, a parallel to the student debt is the real estate debt that you’re having here in New York. There are 200,000 families that are subject to eviction here in New York because there was a moratorium on rental payments and on mortgage payments during the pandemic from, I think, 2020. Well, what are you going to do now that the eviction moratorium expires in another month or so? If are you going to throw, all of these homeowners and renters into the streets and make them sleep on the subways? What are you going to do? Obviously in Babylonia, we have the laws of Hammurabi saying around 1750 B.C. what he would do. Hammurabi said. not only if crops fail, but if there’s a disease that people get sick, the debts don’t have to be paid.

[00:27:57] Because if we have a pandemic then, and you try to collect the debts, people are going to be impoverished. The amazing thing is here we have 4000 years ago, and they were more socially advanced than we are. We are today by saying we’ll throw them all out. Well, I think on your recent posting your article that you put up, you discuss the Swiss World Economic Forum suggestion that somehow you should create a huge bank to monetize all of this, to somehow make the creditors whole, and all of this is a huge grab by the one percent to grab control of the monetary system basically for itself. Although operating through the Federal Reserve, just like the banking and the creditor system works through the Federal Reserve today, the opposite of the State Theory of Money. The opposite of economies that are going way ahead of us like China that has kept banking and money creation in the public sector’s hands. So, you’re really having a civilizational opposition between what Rosa Luxemburg billed socialism or barbarism. Either you’re going to have the creditors taking over and the debtors falling further and further behind until everyone ends up like a student debtor that can’t pay the loan, or a rental tenant or homeowner that is out of work and fell behind in the payments and is going to be evicted. What kind of economy do you want?

Ellen: [00:29:51] Yeah, but how do we reverse that now? I know President Biden thinks that he doesn’t have the power to just forgive debt. Of course, not all student debt even is federal, but I think it’s one point seven-five trillion dollars’ worth of student debt outstanding is federal. So, can they just write that off?

Michael: [00:30:13] Of course he could. He doesn’t want to. Biden’s on the far right of the political spectrum. It was he who, as you know, wrote into the bankruptcy law that student debts cannot be wiped out by bankruptcy. That means that if a student debtor can’t pay, they have to go into penury for their entire life. They can’t say we can’t pay, so the debts are bad loans. The fact is that the banks that made these loans and the government that extended these loans, most of the debts, as you know, our government, the government sold them. But the government made bad loans, predatory loans, loans that were designed to finance the big universities, not finance the students. They were essentially they were loans made the students to pay enormous increases in tuition to the big universities that are basically real estate companies that hold classes in some of the real estate to get tax exemption on the rest of their real estate. Columbia University and NYU in New York that are the big real estate owners in the city, essentially these were bad loans.

[00:31:32] Well, bad loans should be written off, and the umbrella logic for wiping out student debt is these are bad loans and bad debt means a bad loan. Bad loans should be written down if they’re behind, write them off. Now, some people will say, Gee, some people have already gone to the effort of paying their student debts. Well, good for them. They were able to. But most people can’t. And if you keep the student debt on the book, which of course, can be written off by the same way that Obama kept doing writing presidential findings or notes, he could just say, this is my ruling. Maybe later you can dispute it,. My ruling is we’re wiping off the debt now. Or he could have a Democratic Party put it to a vote. Bernie Sanders would say, make everybody vote on whether the Senate wants to write down student debts and let people who disagree with it, let it be very clear who they are so that they can be voted out of power.

Ellen: [00:32:45] Well, they did have the Fed buy mortgage-backed securities in 2008 2009, bailed out the banks by moving them onto the books of the Federal Reserve, right? But then the Fed kept collecting on these mortgages. But they could do that with student debt, I would think and just rip it up or not, not collect for a while. And it seems to me you could do that with the federal debt, too, because it really would be owed to ourselves. So, what’s the point of paying interest to ourselves, which then goes back to the Treasury? Just rip it up. The debt is the money supply.

Michael: [00:33:20] Well, yeah, that’s a trick language there. Because when you say pay the debt to ourselves, ”ourselves” are the 1%.

Ellen: [00:33:31] I’m thinking of the federal debt, it really would be the federal government owing it to itself. So, what’s the point of holding it on the books of the Fed?

Michael: [00:33:42] Right. So, I mean, this could be solved technically by bookkeeping, but the very discussion of what we’re talking about has been thwarted by this false view of how money and interest-bearing debt was created in the first place and a theriologists have been making it very clear for the last 30 years. And so that’s why I’m publishing all these articles tracing the origins. So, you say, wait a minute, the way that money and credit and land tenure and whether governments are going to support the interest of creditors or debtors goes way back in history and the societies that survived well protected debtors from the creditors. The societies that collapsed into a dark age like Rome, were societies that let the creditors write all the rules and impoverish and reduce the debtors to serfdom. So, history really shows that choice. Either you’re going to have a free economy, meaning an economy free of debt and also free of economic rent, unearned income. Or you’re going to have a predatory economy, which is called a free market economy, meaning we don’t have any protection for consumers or debtors or the population at large and free for predators. And that choice is not taught in economics departments, but it’s the central choice for governments from Europe and Asia they’re discussing whose model do we want to follow? Do we want to follow the Chinese model that’s very successful and has kept money and banking in public hands and avoided poverty and in fact pull their population out of poverty? Or do we want to follow the U.S. model that’s impoverishing what used to be a prosperous population, which model we are going to follow?

Ellen: [00:35:52] So, can you talk a bit about what the Chinese do with debt? I know they carried it on their books for a long time, but now we’ve got this Evergrande issue and these empty apartments and so forth.

Michael: [00:36:04] Well, the Chinese basically have created a credit in order to enable factories to be built and real estate to be built. And in the past, when a factory, for whatever reason, there could be a supply chain, there could be a problem when a large factory or a means of production couldn’t pay. The government had a choice. Are we going to foreclose and just say, OK, you can’t pay your close down. We’re going to sell off your property to whoever has the money to buy it? Or do we really want to keep you in business because you’re essential, you’re part of our growth plan. So, what they do is if the debt can’t be paid, gee, we’ve made a bad loan, bad us. We’re going to write down the debt so it can be paid because the ideal of the Chinese government is to keep existing businesses in business, not close them down. And you’re not going to say take a factory all of a sudden it couldn’t get some input because there sanctions against it. So, we’re going to close it down and let landlords take it over and turn it into gentrified property so that China ends up looking like lower Manhattan with all of the expensive lofts for renters, for what used to be an industrial buildings.

[00:37:35] The choices that you can write down the debt in order to keep the economy solvent. The idea is to keep the economy solvent. Now, obviously with Evergrande, they have a choice. They could have simply said, oh, they couldn’t pay the debt. You default, OK, you default, and your investors are going to lose money, but we’re going to lose money and the government. But you know, that’s OK. The investor shouldn’t have made the loans to you or bought your stock. And we’re going to make sure that somebody can finish the building which you begin to create. We’re going to make sure that the Chinese homebuyers who’ve already prepaid for apartments that weren’t paid, we’re going to put these buyers first, we’re not going to put the bondholders first. We’re not going to put the billionaires first. We’re going to put the individual families and the suppliers that have advanced you the money. We’re going to put the small creditors first, not the big creditors. And if we wipe out debts, we’re going to make sure that we make the small, creditors whole. That’s protecting the 99 percent, protecting the base so that the economy does not suffer a major disruption.

Ellen: [00:39:03] So, no matter, even if we wrote off the debts, you’re still going to have these trillions of dollars at the top. And, you know, very poor people at the bottom. So, I saw somewhere where you didn’t think taxing the rich would work. Roosevelt did. He raised the the tax rate, the top tax rate to ninety four percent or whatever. What do you think about that for an idea?

Michael: [00:39:29] Obviously, you need progressive taxation, but I think you really want to tax the right thing. The 19th century was very clear. Classical economists saying you don’t want the tax to fall on labor, you don’t want it to be a sales tax, you don’t want it to be an income tax that normal middle-class people. You want the income tax to fall to collect basically the economic rent. You want the taxes to fall on the one percent, not the 99 percent and America’s first income taxes, I’m sure you know, only the top one percent had to pay it because the top one percent were the big bankers. They were the Wall Street speculators. They were the trust builders. They were the monopolists; they were the creditors. They were the ones who had to pay. Not the population at large. And so that left the American economy to be very competitive because the bottom 99 percent were free of an income tax, didn’t have that many sales taxes, and could afford to be low priced labor to their employers. And that enabled America to undersell Europe and to undersell the whole rest of the world when it was still on an industrial economic path.

Ellen: [00:40:49] And what about a land value tax I’ve seen that you wrote about that.

Michael: [00:40:52] Promote because when land prices go up, they’re not created by the landlords, what land rents go up because of the rental location. The house in a positive neighborhood or there’s more prosperity. The landlords, just as John Stuart Mill said, make price gains and rent in their sleep. So, the idea is that the land rent, monopoly rent and also financial rents interest. All of this should be the tax base. And if it not, you know, either it should be the tax base, if it’s in private hands, or these should be public utilities, that land should be a public utility. And the government should receive the rent and credit in China is a public utility. So, in China, when the Chinese pay interest on their borrowings, whether it’s business or a private person, the government receives the rent, not an independent financial class that gets richer and richer and then tries to take over government for itself, which is what financial classes do when they get wealthy enough to make such an attempt.

Ellen: [00:42:12] And this is something that I just been teasing my own brain with. So, it seems to me that the Federal Reserve obviously bailed out Wall Street after 2008, 2009. They should be able to bail out Main Street. I mean, we’ve worked for 10 years trying to get public banks set up, and it’s obvious to me that we need a source of liquidity. I know there’s this whole movement and the Fed, but you know that’s not going to happen. The Fed’s not going anywhere. But there needs to be some way that we can turn that liquidity into Main Street into small businesses. And so do you have any ideas about that?

Michael: [00:42:57] What you’re advocating is violent revolution. You don’t there’s no way the Federal Reserve was created to serve the banks against the people. The Federal Reserve was designed to replace the Treasury to take money control out of the Treasury and break it up into 12 local districts, mainly New York. That would be dominated by the bankers. The Federal Reserve was meant to take economic policy out of the hands of Washington and put it in the hands of Wall Street. That’s the Fed’s role. The Fed is not going to support the 99 percent. The Fed is there to support the one percent, and it’s not going to change. And now that the Fed has done such a great job in the last since 1914 in supporting the one percent, the one percent have been wealthy enough to take over the government. So, even though the government names the head of the Federal Reserve, the government is taken over by the financial sector also. Democracy has not been a very efficient way of taking monetary power out of the hands of banks and putting it in the hands of the government to use monetary policy in the public interest.

[00:44:19] That’s the problem. It took a revolution in China and a pretty blunt bloody revolution to do that. I don’t see a revolution coming in the United States, but there is no way possible that you can reform either the Federal Reserve or the IMF, which is a branch of the Defense Department and the military industrial complex. Basically, the job of the IMF is to make loans to Third World oligarchies and debt governments and force governments to privatize and sell off the public domain to U.S. and allied foreign privatizers. It’s to impose austerity on the rest of the world. So, just as the role of the Federal Reserve is to impose austerity on the U.S. population, the IMF role is to impose austerity on the rest of the world’s population. You’re not going to do this. These are not deformable institutions that you you’d have to start all over with a new institution and the only I don’t see how you can do that in a democracy because democracies, as Aristotle said, turn into oligarchy pretty quickly and oligarchy are then make themselves into hereditary aristocracy, which is what’s happening in America today. And at the end of that road, you have Rome and a new Dark Age.

Ellen: [00:45:46] This whole great reset idea, the reason they need a reset, they do resets every 30 years or so because the money system collapses and so they have to do is the equivalent of a clean slate. What they do is they let it all collapse and then they put in some other system. We need another system and we don’t want the great reset that’s planned by the World Economic Forum because these are the private creditors that you’re talking about, the big private businesses, they’re not us and there’s no democracy in that system. So, it seems to me that we have to come up with an alternative that will work and have it ready to go and say, no, no, we can do it this way. So, what do you recommend? How are we going to fix this?

Michael: [00:46:35] You stated it absolutely correctly. We do need a new system, but who’s going to design it? You don’t want to leave it to the World Economic Forum because like the World Wrestling Forum, it sort of controlled in a very centralized position. And its aims are not, they’re not going to make the reset in the interests of the 99 percent. They’re going to say, don’t let this crisis go to waste. Here’s our chance for a power grab. Here’s our chance to bring about, to restore feudalism. We can roll back society for two thousand years. We can get back in the Roman Empire. We can have feudalism again. That’s our reset, and that’s the reset that the financial sector and the one percent would love. So, the only way that we can create an alternative is number one, to say that the long historical experience for five thousand years of how money and debt have taken place, and we know what kind of monetary management and public management succeeds, then it’s a management where the rulers of Sumer, Babylonia, all the Bronze Age rulers, kept the financial sector in check by promoting social stability. But once you had civilization move to Greece and Rome and the West, the West didn’t have any kings, or at least not divine kings. You didn’t have any kings to cancel the debts. You had century after century of the revolts in Rome and Greece urging debt cancellation. But they didn’t work.

[00:48:17] They all failed. And so, you can show that if you fail to reform the monetary system in a way that preserves economic growth, you’re going to get poorer and poorer and fall into feudalism. And so, I guess a combination of studying anthropology and economic history on the one hand and then looking at: why is China able to succeed so much better than the US economy and Europe? Why? What is it doing right? And it turns out that what it’s doing is exactly what Germany and the United States and England and France did in the 19th century. They’re following the logic of industrial capitalism and building up a domestic market, and the idea was that industrial capitalism was going to evolve into socialism. Well, it didn’t devolve into socialism in the West, but it did lead to a revolution and socialism in China. And now that possibly spreading to the rest of Asia. So, you have that as a modern example. You have Bronze Age finance as another example, and there are certainly enough so that you can see that this doctrinaire propaganda that economic students are taught about how the private sector is always good and government interference is always bad, especially when it supports the 99 percent and increases transaction costs. Well, you have two roads before you, and we have to make it clear where each of these roads are leading.

Ellen: [00:50:05] . And so going back to the to the system of the Sumerians and the and the Babylonians, we have this sort of myth that for five thousand years, gold has been the basis of the money system. Our gold has been money, but that wasn’t really true. It was really an accounting system.

Michael: [00:50:27] And well, I think the first time you begin to find gold is in the Royal Tombs ofUr, and gold was sort of like the nouveau riche invaded, military invaders like gold. Gold was always the the metal of military conquest. Until really the 20th century, most of the world was on a silver standard, but silver was all provided by the government and the exchange rate of silver,. the monetary value of silver was always set by government, and also because silver was the basis of the credit system. Ever since the very first interest rates are documented, they were all stable for century after century. You have the same interest rate. Interest rates were always regulated by government, and they still are. There’s never been a free market setting of interest rates in any society. So, it’s amazing to see how the textbooks describe how a parallel universe would work if there weren’t any government. And if the private sector suddenly automatically created a world in balance where everybody was happy. Well, why would anybody read this kind of science fiction that is so obviously at odds with the fact that the role of government is to keep the wealthy in the private sector in check to prevent the financial class, the landlord class, the monopolists from taking over the society and taking over government and running the economy for themselves instead of for the population at large. You really need an alternative view to economics because the economics discipline today no longer talks about economic history. It no longer talks about the history of economic thought.

[00:52:27] It’s all sort of very technical mathematics and kind of junk economics. That’s what my book J Is For Junk Economics is all about. So, you need an alternative. What are you going to call it? I guess all you can call it is  futurism or future studies or future-ology. But I think economics now is almost a right-wing religion and doesn’t belong in the social sciences. I think it belongs in the literature department as science fiction, and you need a new social science future studies. You could call it sociology, but the University of Chicago has screwed up sociology just as badly as it’s done for economics, making it all about status and the status quo. Anthropology was an attempt to deal with what I’m dealing with, with Mesopotamia. But now there are anthropologists whom I know say it’s all about underwater basket weaving now, so it’s not really about how civilization developed. It’s about tribal societies of the modern world that haven’t developed. So, you really need some kind of a new discipline and a new name for it. It’ll be independent. Just like in America, after the Civil War, the government, the Republicans came in and they said, Look, we don’t want to have the prestige universities because they’re teaching British free trade theory. We’re going to have to need a whole new set of universities to teach reality economics. And so, they created  state universities, they created business schools, and they taught protectionist economics and real world economics, real history instead of the kind of Yale, Harvard, English, Frontier economics.

Ellen: [00:54:33] We have this whole movement now for to go local, to form little local communities, maybe have their own cryptocurrency. And I saw one commentator suggesting that if you had a cryptocurrency backed by commodities, for example, the farmers could basically back their cryptocurrency with corn futures or whatever. So, you could actually collect something with your cryptocurrency. You could turn it in in the future for some food. But it seems to me, even if you have a bunch of little cryptocurrencies, you have to have some way to exchange, you know, to measure. It’s like you said, it’s a weights and measures thing. You’ve got to have a standard for measuring what your crypto is worth relative to some other communities crypto, so that if you don’t have whatever batteries in your community, you have to have a way to get them. So, anyway, do you have any thoughts on that?

Michael: [00:55:29] Well, that’s what you’re saying, what money is all about and trying to pay by trading crops for something else. Now we’re back in the so-called barter stage. Civilization didn’t begin with barter, but it ended with barter. It began with the credit economy. Then came a money economy. Money was to pay debts. And finally, when the when the creditors took over, the money economy collapsed in Rome, and you had sunk into a barter economy. So, I think what the idea of paying in crops for batteries is how to cope with an economy that’s falling into a dark age of barter and localized production. And that would be nice if the world didn’t fall into barter and localized production, but you may have to migrate to Asia in order to get into Mexico.

Ellen: I’ve been speaking with Michael Hudson, who has his latest book is called Words Sorry. It’s the third edition of his original blockbuster Super Imperialism How America Rules the World. And his website is Michael Hyphen Hudson dot com.

Michael: [00:57:13] Oh, I should add that I do have another book coming out in three months. We just finished making the index The Destiny of Civilization. And these are my China lectures that I’ve been giving for the last few years in China. The circulation is 250,000 viewers per lecture. So, very popular there. And I was asked basically the same question you asked How do we go on a different path? All your questions will be answered in the destiny of civilization.

Ellen: [00:57:43] Okay, great. All right. I look forward to it. Thanks, Michael.

Michael: [00:57:48] Thanks, Elle,