1 00:00:10,920 --> 00:00:14,440 Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast. 2 00:00:14,560 --> 00:00:19,560 Speaker 1: I'm Tracy Allaway and I'm Joe, So Joe. I think 3 00:00:19,560 --> 00:00:22,640 Speaker 1: we've spoken about this a lot, but one of the 4 00:00:22,760 --> 00:00:27,240 Speaker 1: defining factors of the COVID crisis and its impact on 5 00:00:27,280 --> 00:00:31,840 Speaker 1: the economy has been this this idea that economic time 6 00:00:31,960 --> 00:00:35,720 Speaker 1: has sort of stopped. People weren't going out as much, 7 00:00:35,760 --> 00:00:39,120 Speaker 1: they weren't shopping as much, they weren't eating, but financial 8 00:00:39,240 --> 00:00:43,240 Speaker 1: time kept going. So even though businesses aren't getting revenue 9 00:00:43,240 --> 00:00:45,639 Speaker 1: and income, they still have to pay rent, pay back 10 00:00:45,680 --> 00:00:48,880 Speaker 1: any loans they might have, and pay taxes and things 11 00:00:48,920 --> 00:00:51,240 Speaker 1: like that. I think you actually wrote about this, uh 12 00:00:51,640 --> 00:00:54,920 Speaker 1: when we were just getting started with the coronavirus crisis. Yeah, 13 00:00:54,960 --> 00:00:57,960 Speaker 1: that was kind of like identified as the early theme, 14 00:00:58,000 --> 00:01:00,440 Speaker 1: which is like, Okay, even if we can get through 15 00:01:00,520 --> 00:01:04,200 Speaker 1: this crisis in a expedient manner, which at least in 16 00:01:04,240 --> 00:01:06,760 Speaker 1: the US, we haven't, you still have this issue of 17 00:01:06,800 --> 00:01:09,600 Speaker 1: like bills pile up today or next week or the 18 00:01:09,640 --> 00:01:13,639 Speaker 1: month later, and without revenue, Uh, those bills suddenly become 19 00:01:13,720 --> 00:01:18,399 Speaker 1: defaults and potentially bankruptcies. Right, That's exactly right. So a 20 00:01:18,400 --> 00:01:21,039 Speaker 1: lot of the policy responses we've seen so far have 21 00:01:21,200 --> 00:01:25,920 Speaker 1: been focused on bridging that gap between economic time and 22 00:01:25,959 --> 00:01:28,120 Speaker 1: financial time, if you want to call it that, and 23 00:01:28,120 --> 00:01:31,480 Speaker 1: they've been offering things like tax relief and loan forbearance. 24 00:01:31,560 --> 00:01:36,920 Speaker 1: But the question, of course is eventually, you know, people 25 00:01:36,959 --> 00:01:38,959 Speaker 1: are going to have to pony up the money that 26 00:01:39,040 --> 00:01:42,960 Speaker 1: they owe, and what happens at that point, especially after 27 00:01:43,120 --> 00:01:47,600 Speaker 1: they may have injured months, um, possibly even years of 28 00:01:47,880 --> 00:01:50,800 Speaker 1: economic weakness, right, and less revenue than they would otherwise 29 00:01:50,840 --> 00:01:53,760 Speaker 1: have gotten. Yeah, I mean, I think one way to 30 00:01:54,040 --> 00:01:57,840 Speaker 1: sort of like conceptualize the policy responds, at least in 31 00:01:57,920 --> 00:02:00,280 Speaker 1: the US, is that to some extent, you have the 32 00:02:00,280 --> 00:02:04,600 Speaker 1: Federal Reserve having back stopped a fairly significant portion of 33 00:02:05,120 --> 00:02:08,000 Speaker 1: credit market and done a number of things that actually 34 00:02:08,040 --> 00:02:11,639 Speaker 1: caused um, sort of credit issuance to boom even in 35 00:02:11,680 --> 00:02:13,800 Speaker 1: the middle of the crisis, so that companies would have 36 00:02:13,880 --> 00:02:17,200 Speaker 1: enough liquidity, and then the other side of the coin, 37 00:02:17,639 --> 00:02:20,919 Speaker 1: so to speak, would be fiscal policy makers and then 38 00:02:20,919 --> 00:02:24,920 Speaker 1: the health policy makers trying to sort of get us 39 00:02:24,919 --> 00:02:27,560 Speaker 1: to that other side so that all these bridge loans 40 00:02:27,600 --> 00:02:30,360 Speaker 1: that have been taken out can actually be paid for 41 00:02:30,480 --> 00:02:34,080 Speaker 1: at the other end. Yeah, that's right, And of course, 42 00:02:34,360 --> 00:02:37,360 Speaker 1: the concern that you hear quite a lot. Is always 43 00:02:37,360 --> 00:02:43,000 Speaker 1: that one man's or one person's repayment is another person's income. Right, 44 00:02:43,040 --> 00:02:45,880 Speaker 1: So if you stop the flow of rent, for instance, 45 00:02:46,120 --> 00:02:49,000 Speaker 1: landlords aren't going to be getting the income that they're 46 00:02:49,040 --> 00:02:51,120 Speaker 1: expecting to get. And I know there's probably not a 47 00:02:51,120 --> 00:02:54,000 Speaker 1: lot of sympathy for landlords at the moment, But the 48 00:02:54,120 --> 00:02:57,720 Speaker 1: concern is that that ends up impacting the banking system, 49 00:02:58,200 --> 00:03:01,480 Speaker 1: ends up impacting the flow of credit, which feeds back 50 00:03:01,520 --> 00:03:05,880 Speaker 1: into the economy in a negative way. So today, instead 51 00:03:05,880 --> 00:03:09,680 Speaker 1: of talking about debt forbearance, we're going to be focusing 52 00:03:09,760 --> 00:03:12,600 Speaker 1: on something slightly different, and that is the notion of 53 00:03:13,000 --> 00:03:17,000 Speaker 1: debt forgiveness. So not just telling everyone that they can 54 00:03:18,000 --> 00:03:21,239 Speaker 1: pay their bills or their debts in a few months time, 55 00:03:21,280 --> 00:03:25,840 Speaker 1: but actually writing them off right. That is not something 56 00:03:25,880 --> 00:03:29,160 Speaker 1: that we've ever really done much in this country. There 57 00:03:29,200 --> 00:03:31,799 Speaker 1: was a lot of talk about it um after the 58 00:03:31,840 --> 00:03:35,280 Speaker 1: Great Financial Crisis, after two thousand and nine, there really 59 00:03:35,320 --> 00:03:38,440 Speaker 1: wasn't much you hear about it. With student loans, you 60 00:03:38,440 --> 00:03:40,680 Speaker 1: hear about the idea of like, Okay, this time we 61 00:03:40,720 --> 00:03:44,280 Speaker 1: need a wash. But I would say books sort of 62 00:03:44,400 --> 00:03:48,520 Speaker 1: culturally and politically we're sort of allergic to this idea 63 00:03:48,560 --> 00:03:52,160 Speaker 1: of just sort of writing them off. Yeah, I think 64 00:03:52,240 --> 00:03:55,880 Speaker 1: that's exactly right. Okay, without further ado, we're going to 65 00:03:55,920 --> 00:03:58,680 Speaker 1: get into all of that. We have the perfect guests 66 00:03:59,040 --> 00:04:02,920 Speaker 1: for this particular topic. We have Michael Hudson. He's the 67 00:04:02,960 --> 00:04:06,480 Speaker 1: president of the Institution for the Study of Long Term 68 00:04:06,520 --> 00:04:10,800 Speaker 1: Economic Trends, also a professor of economics at the University 69 00:04:10,840 --> 00:04:14,960 Speaker 1: of Missouri, Kansas City. He's also the author of numerous books, 70 00:04:15,000 --> 00:04:19,080 Speaker 1: including and Forgive Them Their Debts, which is a sort 71 00:04:19,080 --> 00:04:23,159 Speaker 1: of very long term history and overview of the tension 72 00:04:23,200 --> 00:04:26,760 Speaker 1: between creditors and borrowers, a really good book. So the 73 00:04:26,800 --> 00:04:29,360 Speaker 1: perfect person to give us perspective on what's going on 74 00:04:29,440 --> 00:04:32,760 Speaker 1: right now and how it compares to thousands and thousands 75 00:04:32,800 --> 00:04:36,840 Speaker 1: of years ago. Professor Hudson, thanks so much for joining us. Well, 76 00:04:36,839 --> 00:04:38,839 Speaker 1: it's good to be here, Tracy, thanks for having me. 77 00:04:40,760 --> 00:04:45,760 Speaker 1: So maybe just to begin, I mean, where do we begin? Um? 78 00:04:45,880 --> 00:04:48,440 Speaker 1: Can you sort of give us your top level view 79 00:04:48,800 --> 00:04:53,960 Speaker 1: of how you view the coronavirus crisis and the impact 80 00:04:54,040 --> 00:04:58,120 Speaker 1: on the economy in terms of creditors versus borrowers, Like 81 00:04:58,279 --> 00:05:01,040 Speaker 1: where does the power actually you lie at the moment, 82 00:05:01,480 --> 00:05:05,520 Speaker 1: and where's the biggest pain threshold. Well, both of you 83 00:05:05,720 --> 00:05:09,279 Speaker 1: who have already in the introduction gone over what the 84 00:05:09,360 --> 00:05:12,560 Speaker 1: problem is. And I think it's much easier to understand 85 00:05:12,600 --> 00:05:17,560 Speaker 1: the logic of debt cancelations right down if you look 86 00:05:17,560 --> 00:05:21,279 Speaker 1: at what happens if you leave business as usual, What 87 00:05:21,400 --> 00:05:24,880 Speaker 1: happens if you leave things the way they are right now? Well, 88 00:05:25,240 --> 00:05:28,039 Speaker 1: I think of restaurants, for instance, restaurants in New York 89 00:05:28,040 --> 00:05:31,840 Speaker 1: City have been closed or operating at a minimal basis 90 00:05:31,880 --> 00:05:37,880 Speaker 1: for six months. They've accrued back rents UH and taxes. UH. 91 00:05:37,920 --> 00:05:42,080 Speaker 1: There's no way that they can reopen and hope to 92 00:05:42,200 --> 00:05:46,160 Speaker 1: earn the six months rent uh in the next two 93 00:05:46,240 --> 00:05:49,080 Speaker 1: or three or maybe four years. UH. And if they 94 00:05:49,160 --> 00:05:52,120 Speaker 1: did have to pay the rents that have accrued when 95 00:05:52,120 --> 00:05:55,479 Speaker 1: there are no revenues at all, then they're going to 96 00:05:55,520 --> 00:05:59,000 Speaker 1: have to go out of business. And there's talk of 97 00:05:59,000 --> 00:06:02,159 Speaker 1: of rest Bronson, New York City going out of business. 98 00:06:02,240 --> 00:06:05,640 Speaker 1: You could say the same for Jim's. You've seen the 99 00:06:05,839 --> 00:06:11,200 Speaker 1: Metropolitan Opera closed down, UH, Carnegie Hall concert stopping. So 100 00:06:11,600 --> 00:06:16,680 Speaker 1: you're having an interruption in economic activity. And the main 101 00:06:16,720 --> 00:06:20,680 Speaker 1: effect of debt people think of debt is transferring interest 102 00:06:20,760 --> 00:06:23,680 Speaker 1: and money to the creditors. But in this case, we're 103 00:06:23,720 --> 00:06:29,080 Speaker 1: talking about transferring property to creditors. We're talking about landlords 104 00:06:29,200 --> 00:06:31,320 Speaker 1: or people who have bought a house in a mortgage. 105 00:06:31,680 --> 00:06:34,280 Speaker 1: They've lost their job or they're on a part time basis, 106 00:06:34,680 --> 00:06:37,600 Speaker 1: and UH, they're in danger of defaulting on the mortgage. 107 00:06:37,920 --> 00:06:41,920 Speaker 1: And there's a danger of the same kind of decline 108 00:06:42,440 --> 00:06:46,320 Speaker 1: in home ownership today that you had after two thousand 109 00:06:46,440 --> 00:06:49,520 Speaker 1: nine when they were the widespread defaults. So the question 110 00:06:49,640 --> 00:06:53,440 Speaker 1: is radical as it seems to write down the debts. 111 00:06:53,920 --> 00:06:58,240 Speaker 1: Is even more radical to say, well, let's transfer property 112 00:06:58,400 --> 00:07:02,520 Speaker 1: at to creditors. Let's close down business family businesses that 113 00:07:02,560 --> 00:07:05,840 Speaker 1: have been there for many decades. Uh, let's not completely 114 00:07:06,520 --> 00:07:09,720 Speaker 1: leave the economy and a closed down position. The reason 115 00:07:10,160 --> 00:07:14,160 Speaker 1: people have canceled debts over the time is to restore 116 00:07:14,280 --> 00:07:18,600 Speaker 1: economic normalcy. And this has been going on for over 117 00:07:18,880 --> 00:07:23,040 Speaker 1: three thousand years, five thousand years. My book, UH, what 118 00:07:23,280 --> 00:07:26,640 Speaker 1: is much of the UH news right now? Our acts 119 00:07:26,640 --> 00:07:30,200 Speaker 1: of God by insurance companies. So you can look at 120 00:07:30,200 --> 00:07:32,880 Speaker 1: the virus as being a kind of act of God. 121 00:07:33,240 --> 00:07:36,080 Speaker 1: What do you do when something happens from outside the 122 00:07:36,080 --> 00:07:40,480 Speaker 1: economy is not the fault of the income earner? Is 123 00:07:40,480 --> 00:07:43,120 Speaker 1: not the fault of the restaurant, it's not the fault 124 00:07:43,280 --> 00:07:46,880 Speaker 1: of the homeowner who's lost a job. It's just happens 125 00:07:46,920 --> 00:07:50,680 Speaker 1: from outside the economy. Well, for thousands of years, not 126 00:07:50,760 --> 00:07:54,240 Speaker 1: only in Babylonia, but in in Rome, when there was 127 00:07:54,280 --> 00:07:59,400 Speaker 1: a problem, a disease, a flood, or a drought, the 128 00:07:59,480 --> 00:08:02,600 Speaker 1: ruler would say, Okay, the taxes don't have to be paid, 129 00:08:03,160 --> 00:08:05,400 Speaker 1: and in fact, the debts don't have to be paid. 130 00:08:05,680 --> 00:08:08,480 Speaker 1: Most depths in the past where tax debts, and if 131 00:08:08,520 --> 00:08:11,360 Speaker 1: they're not paid, the problems really taxes. And here in 132 00:08:11,400 --> 00:08:16,600 Speaker 1: New York that's especially important. Uh, the transport system has 133 00:08:16,640 --> 00:08:20,880 Speaker 1: been almost empty for six months. It's run up at 134 00:08:20,880 --> 00:08:24,040 Speaker 1: dept of four billion dollars. The city has run up 135 00:08:24,040 --> 00:08:28,440 Speaker 1: a debt of about six billion dollars. What is going 136 00:08:28,520 --> 00:08:34,679 Speaker 1: to happen? The mayor has talked about drastically closing city services, 137 00:08:35,080 --> 00:08:40,440 Speaker 1: laying off municipal labor, raising the transport fares on the subway. 138 00:08:40,640 --> 00:08:42,640 Speaker 1: Obviously there's going to be a break in the chain 139 00:08:42,679 --> 00:08:45,160 Speaker 1: of payments. How do you avoid that? Well, there are 140 00:08:45,160 --> 00:08:47,800 Speaker 1: a number of ways of avoiding that. One would be 141 00:08:48,000 --> 00:08:52,160 Speaker 1: for the Federal Reserve to simply create the credit to 142 00:08:52,840 --> 00:08:56,480 Speaker 1: sustain the system for people who can't pay to transfer 143 00:08:56,520 --> 00:09:01,720 Speaker 1: income to the restaurants enough to pay the costs of operation, 144 00:09:01,920 --> 00:09:05,640 Speaker 1: the rents and the labor costs to pay a carry 145 00:09:05,720 --> 00:09:08,880 Speaker 1: gate hall and the metropolitan opera enough not to go under. 146 00:09:09,240 --> 00:09:12,000 Speaker 1: The other way is to simply write down the debts, 147 00:09:12,040 --> 00:09:15,520 Speaker 1: because if you if you don't write down the state 148 00:09:15,720 --> 00:09:19,080 Speaker 1: and local and public debt in this case, you're going 149 00:09:19,120 --> 00:09:23,959 Speaker 1: to have a slash of government services. And the government 150 00:09:24,000 --> 00:09:26,439 Speaker 1: has said, well, what can we sell off? We're going 151 00:09:26,520 --> 00:09:29,240 Speaker 1: to have to begin to sell off public header prises 152 00:09:29,280 --> 00:09:32,600 Speaker 1: like Chicago sold off the parking meters in the streets. 153 00:09:32,840 --> 00:09:36,120 Speaker 1: We're going to have to sell off parks. Uh, we're 154 00:09:36,120 --> 00:09:39,080 Speaker 1: gonna turn roads into toll roads. You can see the 155 00:09:39,120 --> 00:09:41,400 Speaker 1: problems they're going to occur. You have to look at 156 00:09:41,400 --> 00:09:43,720 Speaker 1: it as an overall system, and if you don't write 157 00:09:43,760 --> 00:09:48,640 Speaker 1: down the debts, or if you don't provide the money, 158 00:09:48,800 --> 00:09:52,520 Speaker 1: uh just print the money to let's the economy tread 159 00:09:52,520 --> 00:09:56,240 Speaker 1: water what you call time out of time. Then you're 160 00:09:56,240 --> 00:10:01,240 Speaker 1: going to have a drastic uh change in shrinkage of 161 00:10:02,040 --> 00:10:05,200 Speaker 1: the overall economy and we'll end up looking like Greece 162 00:10:05,880 --> 00:10:21,320 Speaker 1: did a few years ago. So what is an example 163 00:10:21,600 --> 00:10:24,240 Speaker 1: in a history. I mean, you mentioned you you do 164 00:10:24,320 --> 00:10:26,640 Speaker 1: a lot of work with history, and you mentioned this 165 00:10:26,760 --> 00:10:31,080 Speaker 1: idea of debt forgiveness going back five thousand years. What's 166 00:10:31,120 --> 00:10:33,720 Speaker 1: the what's the sort of relevant period we might look 167 00:10:33,720 --> 00:10:36,320 Speaker 1: to a specific example where a disease came or some 168 00:10:36,360 --> 00:10:40,760 Speaker 1: act of God happened in the solution was right off 169 00:10:40,760 --> 00:10:45,280 Speaker 1: the debts. Well, the Laws of Hammurabi were announced around 170 00:10:45,280 --> 00:10:50,360 Speaker 1: seventy BC are an example. That's the first uh set 171 00:10:50,360 --> 00:10:53,199 Speaker 1: of laws that explicitly referred to an act of God, 172 00:10:53,600 --> 00:10:58,040 Speaker 1: in this case added the storm God. Amurabi says that 173 00:10:58,160 --> 00:11:02,079 Speaker 1: if the storm God added floods the fields or canceled 174 00:11:02,120 --> 00:11:05,440 Speaker 1: the debts floods the fields that causes a drought, then 175 00:11:05,640 --> 00:11:07,680 Speaker 1: the taxes don't have to be paid and the debts 176 00:11:07,880 --> 00:11:11,120 Speaker 1: don't have to be paid. In another part of the 177 00:11:11,600 --> 00:11:14,240 Speaker 1: Laws of Murabi, he said, if there's a disease and 178 00:11:14,520 --> 00:11:18,440 Speaker 1: the disease prevent people from operating in normal activity, then 179 00:11:19,000 --> 00:11:21,960 Speaker 1: the depths that they are canceled. Now, the reason he 180 00:11:22,000 --> 00:11:24,800 Speaker 1: did that was if he did not cancel those depths 181 00:11:24,840 --> 00:11:28,880 Speaker 1: of the cultivators. And we're talking about an agricultural economy, 182 00:11:29,000 --> 00:11:32,680 Speaker 1: low surplus economy. Then you would have the debtors fall 183 00:11:32,720 --> 00:11:37,440 Speaker 1: into bondage to the creditors, just like you have in 184 00:11:37,480 --> 00:11:40,679 Speaker 1: the Bible, a debt bondage when you can't pay the debts. 185 00:11:40,720 --> 00:11:45,679 Speaker 1: And if a debtor ended up owing his labor time 186 00:11:45,920 --> 00:11:50,839 Speaker 1: to the creditor, then he wouldn't have the opportunity to 187 00:11:51,160 --> 00:11:54,280 Speaker 1: work on corvet labor, that is public labor to build 188 00:11:54,280 --> 00:11:57,679 Speaker 1: the castle, the walls, to dig the irrigation ditches. He 189 00:11:57,720 --> 00:12:00,160 Speaker 1: wouldn't be able to serve in the army. And if 190 00:12:00,160 --> 00:12:02,839 Speaker 1: you have the crops to the creditor, and we're talking 191 00:12:02,880 --> 00:12:07,360 Speaker 1: about thirty three and the third percent interest for prop loans, 192 00:12:07,640 --> 00:12:11,360 Speaker 1: then he wouldn't be able to pay the taxes. So 193 00:12:11,720 --> 00:12:16,280 Speaker 1: the Hammurabi would have the palace economy would have not 194 00:12:16,360 --> 00:12:21,199 Speaker 1: only collapsed, but you would have had the wealthy creditor 195 00:12:21,280 --> 00:12:26,600 Speaker 1: class emerging from the palace bureaucracy, the local local leaders, 196 00:12:26,880 --> 00:12:29,200 Speaker 1: and the first thing they would have done once they 197 00:12:29,240 --> 00:12:33,480 Speaker 1: got power was to overthrow the king, as they did 198 00:12:33,480 --> 00:12:37,560 Speaker 1: in Byzantium. UH powerful enough to overthrow the king and 199 00:12:37,600 --> 00:12:40,560 Speaker 1: take and UH prevent the king from having the power 200 00:12:40,600 --> 00:12:43,520 Speaker 1: to tax them, and the whole economy would have turned 201 00:12:43,880 --> 00:12:47,720 Speaker 1: into an oligarchy instead of a steady state system. Now, 202 00:12:47,880 --> 00:12:52,120 Speaker 1: the idea behind Hammarabi was taken over from the Sumarians 203 00:12:52,240 --> 00:12:55,199 Speaker 1: UH and their word for these depth cancelations. Think of 204 00:12:55,280 --> 00:12:57,960 Speaker 1: it as a clean slate. Everything goes back to the 205 00:12:57,960 --> 00:13:01,280 Speaker 1: way things were before the christ Us. And the word 206 00:13:01,360 --> 00:13:05,240 Speaker 1: for clean slate in Sumerian was a margie from Amma 207 00:13:05,679 --> 00:13:08,800 Speaker 1: the mother. It was the mother condition, meaning it's the 208 00:13:08,800 --> 00:13:12,040 Speaker 1: original condition. The whole idea is, how do you come 209 00:13:12,080 --> 00:13:14,960 Speaker 1: out of a crisis, whether it's a doubt, drought, or 210 00:13:15,120 --> 00:13:18,360 Speaker 1: disease and end up in the kind of way you 211 00:13:18,400 --> 00:13:21,760 Speaker 1: were before, which you assume to be rough balanced. People 212 00:13:21,840 --> 00:13:25,199 Speaker 1: produce enough to live and pay their taxes and get 213 00:13:25,240 --> 00:13:29,440 Speaker 1: by and conduct normal activity. How do you restore the 214 00:13:29,480 --> 00:13:32,720 Speaker 1: ability of life to get back to normal uh so 215 00:13:32,800 --> 00:13:35,440 Speaker 1: that the equivalent would be in modern days. How do 216 00:13:35,480 --> 00:13:38,920 Speaker 1: you let restaurants reopen without having to say, well, we're 217 00:13:38,960 --> 00:13:41,400 Speaker 1: just going to go out of business rather than pay 218 00:13:41,440 --> 00:13:43,800 Speaker 1: all the money that we owe that we end up 219 00:13:43,800 --> 00:13:47,040 Speaker 1: working for the landlords and uh for the creditors through 220 00:13:47,120 --> 00:13:51,280 Speaker 1: the city. How do you enable the cities to start 221 00:13:51,360 --> 00:13:54,600 Speaker 1: their transportation system again at afford at rates that people 222 00:13:54,840 --> 00:13:57,800 Speaker 1: can afford to pay on the subway or the other transportation. 223 00:13:58,120 --> 00:14:02,760 Speaker 1: How do you prevent the economy from being permanently wounded? 224 00:14:03,160 --> 00:14:05,719 Speaker 1: And again, the only way to do it is to 225 00:14:06,559 --> 00:14:09,720 Speaker 1: write down UH say the deaths don't have to be paid. 226 00:14:10,040 --> 00:14:14,719 Speaker 1: Somebody has to suffer because as Tracy pointed out, that 227 00:14:14,840 --> 00:14:18,439 Speaker 1: one person's death is another person's claim. And uh, if 228 00:14:18,480 --> 00:14:21,880 Speaker 1: you don't pay the debt, then some uh saver or 229 00:14:22,120 --> 00:14:24,640 Speaker 1: the creditor is not going to be paid. And in 230 00:14:24,640 --> 00:14:27,760 Speaker 1: this case it would be either the landlords are not 231 00:14:27,800 --> 00:14:33,360 Speaker 1: paid or in special conditions where small small landlords, they'd 232 00:14:33,400 --> 00:14:36,240 Speaker 1: lose the property in some way. The banks and the 233 00:14:36,280 --> 00:14:40,880 Speaker 1: creditors are obliged, obliged to take the loss because they're 234 00:14:41,200 --> 00:14:44,880 Speaker 1: rich enough to take the loss without disrupting society. If 235 00:14:44,920 --> 00:14:48,200 Speaker 1: you have the debtors absorb the loss, society is disrupted 236 00:14:48,200 --> 00:14:52,000 Speaker 1: and torn apart, and the tax systems turn apart. If 237 00:14:52,040 --> 00:14:54,840 Speaker 1: the creditors lose, well they're not quite as rich as 238 00:14:54,880 --> 00:14:57,560 Speaker 1: they used to be, but they still get by. That's 239 00:14:57,560 --> 00:15:00,960 Speaker 1: why Hammurabi did not cancel the business debts debts of 240 00:15:01,080 --> 00:15:04,680 Speaker 1: merchants debts that were denominated in silver for trade. None 241 00:15:04,720 --> 00:15:09,400 Speaker 1: of the silver business steps were canceled. Only the personal 242 00:15:09,480 --> 00:15:13,080 Speaker 1: debts manly of cultivators on the land were canceled. Same 243 00:15:13,080 --> 00:15:16,800 Speaker 1: thing in Rome when UH Emperor Hadrian canceled the debts. 244 00:15:17,320 --> 00:15:21,280 Speaker 1: Roman been UH engaged in fighting with the north, with 245 00:15:21,320 --> 00:15:24,160 Speaker 1: the Germans. He canceled the debts so that you wouldn't 246 00:15:24,200 --> 00:15:27,520 Speaker 1: have the army falling into bondage the creditors so it 247 00:15:27,520 --> 00:15:30,840 Speaker 1: couldn't fight in the army anymore, and UH defend Rome. 248 00:15:31,040 --> 00:15:34,360 Speaker 1: Fifty years later Marcus Aurelius did the same thing for 249 00:15:34,400 --> 00:15:38,320 Speaker 1: the same reason. So almost every economy has in the past, 250 00:15:38,720 --> 00:15:41,120 Speaker 1: has UH come to the point where it says, well, 251 00:15:41,480 --> 00:15:45,000 Speaker 1: it's easier to make the creditors absorb the loss than 252 00:15:45,040 --> 00:15:47,840 Speaker 1: to have the rest of the economy fall into bondage 253 00:15:47,920 --> 00:15:53,280 Speaker 1: and a transfer property to U endow a creditor class 254 00:15:53,320 --> 00:15:56,800 Speaker 1: at forecloses, and UH we end up in an economy 255 00:15:56,880 --> 00:15:59,600 Speaker 1: with a very different shape. Do you really want the 256 00:15:59,640 --> 00:16:03,440 Speaker 1: econom made a change and straight that way? So I 257 00:16:03,720 --> 00:16:07,680 Speaker 1: think there's a general sense out there that debt forgiveness 258 00:16:07,800 --> 00:16:13,560 Speaker 1: or debt jubilieves are a really leftist policy. And I mean, 259 00:16:13,600 --> 00:16:16,960 Speaker 1: you just gave us all these great historical examples. Hammurabi 260 00:16:17,160 --> 00:16:20,760 Speaker 1: wasn't exactly a liberal, right. He set out some pretty 261 00:16:20,800 --> 00:16:24,680 Speaker 1: tough punishments for for crime, for I think theft. Some 262 00:16:24,840 --> 00:16:27,840 Speaker 1: thefts were punishable by death. You laid out a really 263 00:16:27,880 --> 00:16:31,880 Speaker 1: good rational economic reason why he would be interested in 264 00:16:31,920 --> 00:16:36,080 Speaker 1: depth forgiveness. But I'm curious why that rationale doesn't seem 265 00:16:36,160 --> 00:16:40,720 Speaker 1: to resonate in modern day times, especially in the US. 266 00:16:40,760 --> 00:16:44,120 Speaker 1: As Joe kind of mentioned in the intro, whenever you 267 00:16:44,320 --> 00:16:47,080 Speaker 1: talk about debt forgiveness in the States, even if it's 268 00:16:47,120 --> 00:16:49,840 Speaker 1: something like student loans, you seem to get this knee 269 00:16:49,920 --> 00:16:54,120 Speaker 1: jerk reaction from people who say, well, you know, I 270 00:16:54,240 --> 00:16:57,400 Speaker 1: paid my student loans, why do you get a free ride? 271 00:16:58,120 --> 00:16:59,920 Speaker 1: And it feels like once the system is in motion, 272 00:17:00,000 --> 00:17:02,480 Speaker 1: it's very hard to change it. Why do you think 273 00:17:02,520 --> 00:17:06,120 Speaker 1: the attitudes are so different now to I guess what 274 00:17:06,160 --> 00:17:11,560 Speaker 1: they were in in ancient Samaria. I think because of unfamiliarity, 275 00:17:12,080 --> 00:17:15,600 Speaker 1: uh with with history and the fact that you meant that, uh, 276 00:17:15,920 --> 00:17:20,720 Speaker 1: the left in America doesn't discuss debt or finance. I 277 00:17:21,000 --> 00:17:25,320 Speaker 1: don't think I've had any discussions about finance or debt 278 00:17:25,359 --> 00:17:29,280 Speaker 1: for business or even monetary policy with the left at all. 279 00:17:30,119 --> 00:17:33,400 Speaker 1: I've talked with federal reserve branches. I talked to Wall 280 00:17:33,440 --> 00:17:36,560 Speaker 1: Street people, I talked to financial people, I talked to 281 00:17:36,800 --> 00:17:41,080 Speaker 1: a Republican politicians. Nobody on the left has been interested 282 00:17:41,119 --> 00:17:45,560 Speaker 1: in this. And in fact, in China, where I was 283 00:17:45,600 --> 00:17:49,000 Speaker 1: a professor for the last few years in Beijing at 284 00:17:49,000 --> 00:17:52,720 Speaker 1: Peking University, I went over a few years ago along 285 00:17:52,760 --> 00:17:55,600 Speaker 1: with David Harvey at colleague of mine from Cooney here 286 00:17:55,600 --> 00:17:59,159 Speaker 1: in New York, and UH, we didn't find any discussion 287 00:17:59,240 --> 00:18:01,760 Speaker 1: in China. What are you going to do about the 288 00:18:01,840 --> 00:18:06,440 Speaker 1: Chinese housing boom that's come up with all of the 289 00:18:06,480 --> 00:18:10,119 Speaker 1: people borrowing to buy a real estate on credit. And 290 00:18:10,400 --> 00:18:14,840 Speaker 1: because everything has to be couched in terms of Marxist 291 00:18:14,840 --> 00:18:17,359 Speaker 1: capital there, because they say that there are Marxist state 292 00:18:17,920 --> 00:18:21,240 Speaker 1: David Harvey said, well, you know Marks more than Volume 293 00:18:21,280 --> 00:18:24,440 Speaker 1: one of Capital, which is all about labor and UH, 294 00:18:24,440 --> 00:18:28,800 Speaker 1: employee employees working for their employers their volumes two and three. 295 00:18:28,800 --> 00:18:33,040 Speaker 1: In Capital, Volume three, Mark talks about how debt grows 296 00:18:33,320 --> 00:18:37,480 Speaker 1: by its own purely mathematical laws which have nothing to 297 00:18:37,560 --> 00:18:42,520 Speaker 1: do with the economic rate of growth. UH. The financial 298 00:18:42,560 --> 00:18:47,120 Speaker 1: system is wrapped around UH the economy as a whole 299 00:18:47,119 --> 00:18:52,640 Speaker 1: and really is independent from capitalism. It existed long before capitalism. Uh, 300 00:18:52,680 --> 00:18:57,240 Speaker 1: and probably and obviously is existing after capitalism In China, 301 00:18:57,560 --> 00:19:00,359 Speaker 1: they did not seem very interested in the lend of 302 00:19:00,440 --> 00:19:03,159 Speaker 1: approach at all. In fact, we could see that it 303 00:19:03,200 --> 00:19:06,560 Speaker 1: made them feel very uncomfortable to talk about that. So 304 00:19:06,720 --> 00:19:09,520 Speaker 1: I think the people who are realizing that something has 305 00:19:09,560 --> 00:19:13,840 Speaker 1: to be done about that are mainly financial. They're mainly 306 00:19:13,840 --> 00:19:16,840 Speaker 1: in Wall Street. For years I worked with Chase Manhattan 307 00:19:17,520 --> 00:19:20,359 Speaker 1: is our balance of payments economists, And it was the 308 00:19:20,400 --> 00:19:23,280 Speaker 1: banks that saw, well, wait a minute, how much can 309 00:19:23,520 --> 00:19:26,200 Speaker 1: a third world country afford to pay? How much can 310 00:19:26,640 --> 00:19:29,760 Speaker 1: such and such an industry afford to pay? The banks 311 00:19:29,800 --> 00:19:33,760 Speaker 1: know that many sectors can't pay. The rest of the 312 00:19:33,760 --> 00:19:36,679 Speaker 1: economy isn't looking at this because there's an assumption. Like 313 00:19:37,160 --> 00:19:40,000 Speaker 1: you said that, the assumption is that anybody can pay 314 00:19:40,320 --> 00:19:42,960 Speaker 1: if they just cut back on they're spending enough. But 315 00:19:43,040 --> 00:19:45,919 Speaker 1: that's not the case. Uh. You mentioned student loans, and 316 00:19:45,960 --> 00:19:48,920 Speaker 1: certainly many people think, well, I really straight by to 317 00:19:48,960 --> 00:19:53,120 Speaker 1: pay my student loans. Why would other student loans be forgiven? Well, 318 00:19:53,160 --> 00:19:55,600 Speaker 1: the answer is simple. If you were able to straight 319 00:19:55,680 --> 00:19:58,199 Speaker 1: by and pay your student loans, good for you. You 320 00:19:58,240 --> 00:20:01,360 Speaker 1: were able to survive most of the people who don't 321 00:20:01,359 --> 00:20:04,560 Speaker 1: pay their student loans are not paying because they're going 322 00:20:04,600 --> 00:20:07,320 Speaker 1: to the movies, or they're gambling, or they're consuming more. 323 00:20:07,560 --> 00:20:10,359 Speaker 1: They're paying because they really don't have the money to 324 00:20:10,440 --> 00:20:15,040 Speaker 1: do what you did to to scrape and pay, especially minorities, 325 00:20:15,040 --> 00:20:18,480 Speaker 1: so have gone to junk colleges, the sort of private 326 00:20:19,119 --> 00:20:21,320 Speaker 1: colleges that say they're going to get them a job 327 00:20:21,359 --> 00:20:25,920 Speaker 1: and manual labor some kind of technology that really doesn't work. 328 00:20:26,160 --> 00:20:30,120 Speaker 1: There are many people stuck with loans that they're unable 329 00:20:30,160 --> 00:20:32,800 Speaker 1: to pay. And if they do pay, it suppose that 330 00:20:33,080 --> 00:20:36,359 Speaker 1: all the people student loans now actually have to pay 331 00:20:36,640 --> 00:20:39,919 Speaker 1: the student loans. If they then they're not going to 332 00:20:39,960 --> 00:20:43,160 Speaker 1: have enough money to take out a mortgage to buy 333 00:20:43,920 --> 00:20:46,840 Speaker 1: a home of their own uh and form a family. UH. 334 00:20:46,880 --> 00:20:49,040 Speaker 1: They're going to have to live with their parents. UH. 335 00:20:49,160 --> 00:20:52,120 Speaker 1: They get married, what are the children going to move 336 00:20:52,119 --> 00:20:54,840 Speaker 1: in with the wife? And kids going to move in 337 00:20:54,840 --> 00:20:57,880 Speaker 1: with their parents? The having to pay the student loan 338 00:20:58,000 --> 00:21:01,639 Speaker 1: crowds out the ability to go to mortgage loan to 339 00:21:01,760 --> 00:21:04,040 Speaker 1: take out other loans you need. And then of course 340 00:21:04,119 --> 00:21:08,560 Speaker 1: you have the medical UH debt that is probably the 341 00:21:08,600 --> 00:21:13,280 Speaker 1: maiden source of bankruptcy for many many people, you get sick, 342 00:21:13,520 --> 00:21:16,480 Speaker 1: you go into the hospital, or even if you get tested, 343 00:21:16,800 --> 00:21:20,160 Speaker 1: you're you're broke. And if the Federal Reserve is direct 344 00:21:20,240 --> 00:21:23,400 Speaker 1: when it said that half the Americans cannot raise four 345 00:21:23,480 --> 00:21:27,560 Speaker 1: hundred dollars in an emergency, and it costs uh that 346 00:21:27,640 --> 00:21:30,280 Speaker 1: much just to have a COVID test. UH, And it 347 00:21:30,359 --> 00:21:33,119 Speaker 1: costs maybe two thousand dollars or more if you go 348 00:21:33,160 --> 00:21:35,520 Speaker 1: in and just to go and be admitted to a hospital. 349 00:21:35,760 --> 00:21:38,960 Speaker 1: You can imagine the devastation that this causes to people 350 00:21:39,080 --> 00:21:42,480 Speaker 1: that UH, not paying a debt is not a matter 351 00:21:42,520 --> 00:21:46,280 Speaker 1: of choice. It's a matter of the money, isn't there Michael, 352 00:21:46,320 --> 00:21:48,880 Speaker 1: I want to go back to something you said, which 353 00:21:48,920 --> 00:21:51,040 Speaker 1: is just that you know, you could look at the 354 00:21:51,080 --> 00:21:55,640 Speaker 1: current situation in which all these different entities, whether it's restaurants, 355 00:21:55,760 --> 00:22:00,480 Speaker 1: whether it's museums, whether it's the New York City Transit Authority, UM, 356 00:22:00,520 --> 00:22:02,239 Speaker 1: they all owe a lot of money. And there are 357 00:22:02,240 --> 00:22:04,920 Speaker 1: sort of two different paths we could take. We could 358 00:22:04,960 --> 00:22:07,720 Speaker 1: cancel all the debt or or some level of it 359 00:22:07,840 --> 00:22:11,520 Speaker 1: canceled debt, or you have the government print a lot 360 00:22:11,520 --> 00:22:14,560 Speaker 1: of money and UM sort of allow people just give 361 00:22:14,600 --> 00:22:16,760 Speaker 1: it to people to make them whole. And you also 362 00:22:16,840 --> 00:22:18,439 Speaker 1: said they're going to sort of back to the ancient 363 00:22:18,480 --> 00:22:20,960 Speaker 1: times that UM, a lot of the debt that was 364 00:22:21,000 --> 00:22:25,280 Speaker 1: in fact canceled was tax debt, so public debt essentially 365 00:22:25,359 --> 00:22:28,840 Speaker 1: that the cost of the debt cancelation would essentially be 366 00:22:28,880 --> 00:22:31,600 Speaker 1: on the public sector balance sheet. And so I'm curious 367 00:22:31,640 --> 00:22:37,639 Speaker 1: whether functionally speaking, you know, talking about debt cancelation in 368 00:22:37,760 --> 00:22:41,160 Speaker 1: terms of ripping it up sounds pretty radical. Talking about 369 00:22:41,520 --> 00:22:45,400 Speaker 1: massive fiscal aid UM so that all these different entities 370 00:22:45,400 --> 00:22:48,119 Speaker 1: could pay their bills during the crisis sounds a little 371 00:22:48,280 --> 00:22:51,840 Speaker 1: less radical. But I'm curious if functionally they're kind of 372 00:22:51,880 --> 00:22:55,359 Speaker 1: the same thing. This idea that what UM sort of 373 00:22:55,359 --> 00:22:58,480 Speaker 1: in the ancient days was putting the you know, having 374 00:22:58,520 --> 00:23:01,400 Speaker 1: the public balance sheet be the bearer of the losses. 375 00:23:02,080 --> 00:23:06,439 Speaker 1: It's more translatable to aggressive fiscal expansion as opposed to 376 00:23:06,480 --> 00:23:11,280 Speaker 1: pure debt ripping up per se. That happens very well. Uh. 377 00:23:11,520 --> 00:23:15,160 Speaker 1: China is able to cope with this quite well because 378 00:23:15,320 --> 00:23:18,679 Speaker 1: it's a monetary policy. It's central bank is part of 379 00:23:18,680 --> 00:23:22,520 Speaker 1: the government. Uh. There are many companies in China for 380 00:23:22,600 --> 00:23:26,439 Speaker 1: the last ten years are longer that have not been 381 00:23:26,480 --> 00:23:28,800 Speaker 1: able to pay the debt. What do you do when 382 00:23:28,800 --> 00:23:33,880 Speaker 1: a a industrial company can't pay the debt. Well, in UH, 383 00:23:33,920 --> 00:23:36,120 Speaker 1: in the West, if a company can't pay a debt, 384 00:23:36,200 --> 00:23:39,000 Speaker 1: it goes bankrupt and it's sold to the highest bidder, 385 00:23:39,240 --> 00:23:42,520 Speaker 1: and it could be a foreign buyer, and UH it 386 00:23:42,600 --> 00:23:46,679 Speaker 1: closes down and the workers are unemployed. But what the 387 00:23:46,720 --> 00:23:50,560 Speaker 1: Bank of China does. The government simply keeps creating the 388 00:23:50,640 --> 00:23:56,240 Speaker 1: credit and UH lending the bank the money that the 389 00:23:56,520 --> 00:23:59,840 Speaker 1: corporation that's the debt or the money now here that 390 00:24:00,359 --> 00:24:04,080 Speaker 1: the company would be called a zombie corporation. But China 391 00:24:04,119 --> 00:24:07,159 Speaker 1: will just keep lending it the money. And then because 392 00:24:07,200 --> 00:24:09,960 Speaker 1: it creates the money, it'll write it, write it off. 393 00:24:10,400 --> 00:24:12,840 Speaker 1: It's easy to cancel the debts when the debts you're 394 00:24:12,880 --> 00:24:16,399 Speaker 1: canceling or owe to yourself. Honorabi could cancel the debts 395 00:24:16,600 --> 00:24:19,200 Speaker 1: because most of the debts ultimately were over to the palace. 396 00:24:19,560 --> 00:24:24,119 Speaker 1: He didn't have to deal with a independent financial class 397 00:24:24,320 --> 00:24:25,959 Speaker 1: that said, wait a minute, we're going to lose if 398 00:24:25,960 --> 00:24:28,280 Speaker 1: you cancel the debts. We're going to overthrow you if 399 00:24:28,320 --> 00:24:31,360 Speaker 1: you tried to do that. He was canceling debts to themselves. 400 00:24:31,440 --> 00:24:34,960 Speaker 1: The Roman emperors were canceling debts owed to themselves, not 401 00:24:35,080 --> 00:24:39,359 Speaker 1: to the wealthy Romans now in China is canceling it 402 00:24:39,480 --> 00:24:43,800 Speaker 1: will because China's government provides the credit. It premises that 403 00:24:44,480 --> 00:24:47,920 Speaker 1: finance and banking should be a public utility. It should 404 00:24:48,000 --> 00:24:51,360 Speaker 1: not be privatized. And the advantage of having a banking 405 00:24:51,400 --> 00:24:54,840 Speaker 1: is a public utility, or like operating the Federal Reserve 406 00:24:54,920 --> 00:24:58,240 Speaker 1: here is a public utility. Is you can create the money. 407 00:24:58,680 --> 00:25:02,720 Speaker 1: You can lend to keep a restaurant afloat, or a 408 00:25:02,840 --> 00:25:06,960 Speaker 1: museum afloat, or a city UH and state afloat, and 409 00:25:07,000 --> 00:25:12,040 Speaker 1: then you can simply wipe out the debt and you're 410 00:25:12,040 --> 00:25:14,960 Speaker 1: only canceling the debt to yourself. You're not threatening to 411 00:25:15,000 --> 00:25:17,600 Speaker 1: take it away from any banker or a bond holder 412 00:25:17,960 --> 00:25:21,840 Speaker 1: or a stockholder. So by making finance a public utility, 413 00:25:23,040 --> 00:25:28,320 Speaker 1: or at least making the credit emergency credit public utility, UH, 414 00:25:28,359 --> 00:25:31,200 Speaker 1: you create the credit and then you say, okay, we've 415 00:25:31,200 --> 00:25:34,480 Speaker 1: provided you the credit. And when we provide your credit 416 00:25:34,640 --> 00:25:39,200 Speaker 1: in a shutdown, this is not inflationary. I think Germany 417 00:25:39,440 --> 00:25:44,600 Speaker 1: is paying its labor of the normal wage income. The 418 00:25:44,680 --> 00:25:49,840 Speaker 1: Federal Reserve could create enough credit to keep most employees 419 00:25:49,880 --> 00:25:53,680 Speaker 1: have lost the jobs able to break even. Most restaurants 420 00:25:53,680 --> 00:25:57,719 Speaker 1: and most renters who are unable to do business, they 421 00:25:57,720 --> 00:26:00,959 Speaker 1: will owe a debt to the Federal Reserve that will 422 00:26:01,000 --> 00:26:05,120 Speaker 1: continue to keep them afloat. And then when the crisis 423 00:26:05,200 --> 00:26:08,000 Speaker 1: is over and the vaccine is in and life goes 424 00:26:08,040 --> 00:26:11,359 Speaker 1: back to normal, the federals say, Okay, we've provided the credit. 425 00:26:11,480 --> 00:26:13,560 Speaker 1: Now we can just wipe it out and life can 426 00:26:13,600 --> 00:26:16,560 Speaker 1: go back to normal. The idea is to restore the 427 00:26:16,600 --> 00:26:20,159 Speaker 1: status quote on ANTI. The idea is to make the 428 00:26:20,200 --> 00:26:39,440 Speaker 1: economy is workable as it was before the crisis, since 429 00:26:39,480 --> 00:26:43,840 Speaker 1: we were touching on fiscal stimulus as as one way 430 00:26:44,400 --> 00:26:48,920 Speaker 1: to keeping the economy afloat and making sure that there 431 00:26:48,920 --> 00:26:52,359 Speaker 1: are jobs available for people. I'm Joe is going to 432 00:26:52,359 --> 00:26:53,720 Speaker 1: make fun of me for doing this, but I'm just 433 00:26:53,760 --> 00:26:56,639 Speaker 1: gonna go out, go ahead and ask you, what do 434 00:26:56,680 --> 00:27:01,200 Speaker 1: you think about m MT Modern monetary theory. It feels 435 00:27:01,200 --> 00:27:04,119 Speaker 1: like it's maybe one version of what you're saying. And 436 00:27:04,160 --> 00:27:06,479 Speaker 1: I know, um, I guess you would have worked with 437 00:27:06,520 --> 00:27:11,240 Speaker 1: Stephanie Kelton when she was at the University of Missouri 438 00:27:11,359 --> 00:27:14,159 Speaker 1: Kansas City with you, what do you think about that 439 00:27:14,200 --> 00:27:17,920 Speaker 1: policy and how much difference or daylight is there between 440 00:27:18,480 --> 00:27:22,200 Speaker 1: MMT and its policy recommendations and the kind of depth 441 00:27:22,200 --> 00:27:26,119 Speaker 1: forgiveness that you are discussing and advocating. Well, I was 442 00:27:26,200 --> 00:27:29,119 Speaker 1: one of the developers of m m T uh in 443 00:27:29,280 --> 00:27:34,560 Speaker 1: the late nine things seventies, UH, and Stephanie was our 444 00:27:34,640 --> 00:27:37,760 Speaker 1: department chairman there. We were all brought to Kansas City 445 00:27:37,800 --> 00:27:42,800 Speaker 1: together in order to popularize m m D and Stephanie 446 00:27:42,840 --> 00:27:46,400 Speaker 1: and I have gone around the world together giving lectures 447 00:27:46,400 --> 00:27:50,920 Speaker 1: on it. She usually gives the introductory lecture about how 448 00:27:51,640 --> 00:27:56,679 Speaker 1: running a deficit uh pumps money into the economy, and 449 00:27:56,720 --> 00:27:59,080 Speaker 1: then I follow up with a second and the economy 450 00:27:59,119 --> 00:28:03,040 Speaker 1: needs to be pumped up or el will have austerity. 451 00:28:03,119 --> 00:28:04,760 Speaker 1: And then I give the lecture to say, well, the 452 00:28:04,760 --> 00:28:09,960 Speaker 1: economy is really two sectors. There's the financial sector finance, insurance, 453 00:28:09,960 --> 00:28:12,880 Speaker 1: and real estate, the property sector on the one hand, 454 00:28:13,320 --> 00:28:16,960 Speaker 1: and then there's the production and consumption sector on the other. Now, 455 00:28:17,000 --> 00:28:21,240 Speaker 1: most MMT people talk about the government printing money into 456 00:28:21,280 --> 00:28:25,920 Speaker 1: the regular economy of production and consumption people who work 457 00:28:25,960 --> 00:28:29,480 Speaker 1: and produce things. But you've just seen uh. The main 458 00:28:29,520 --> 00:28:32,040 Speaker 1: practitioner of m m T, of course is Donald Trump, 459 00:28:32,320 --> 00:28:36,120 Speaker 1: and uh he just did uh the enormous uh ten 460 00:28:36,200 --> 00:28:39,960 Speaker 1: trillion U MMT example, but he didn't put He only 461 00:28:39,960 --> 00:28:42,720 Speaker 1: put two trillion of that into the economy. The rest 462 00:28:42,720 --> 00:28:45,800 Speaker 1: of the money went into the stock market, in the 463 00:28:45,840 --> 00:28:48,320 Speaker 1: bond market. So the question is who are you going 464 00:28:48,360 --> 00:28:50,680 Speaker 1: to run m m T four. Are you going to 465 00:28:50,760 --> 00:28:53,640 Speaker 1: run it, uh in just in order to pump up 466 00:28:53,840 --> 00:28:57,640 Speaker 1: the stock and bond prices and real estate prices and 467 00:28:57,880 --> 00:29:00,640 Speaker 1: to keep the death system in place, or are you 468 00:29:00,720 --> 00:29:03,240 Speaker 1: going to pump it into the economy and let the 469 00:29:03,280 --> 00:29:07,360 Speaker 1: economy survive. Something has to give either the either the 470 00:29:07,360 --> 00:29:11,680 Speaker 1: economy loses or the financial sector loses. And that really 471 00:29:11,920 --> 00:29:15,280 Speaker 1: is UH the debate an m m T. Mr Trump 472 00:29:15,280 --> 00:29:17,880 Speaker 1: didn't call what he was doing MMT, but it's exactly 473 00:29:17,920 --> 00:29:22,320 Speaker 1: what mm T is. Creating the government just simply creating 474 00:29:22,560 --> 00:29:26,200 Speaker 1: the credit. That's what quantitative easing is. Uh. That was 475 00:29:26,280 --> 00:29:28,920 Speaker 1: all m MT, but it was MMT going into the 476 00:29:28,960 --> 00:29:31,640 Speaker 1: stock market. And most of us in Kansas City are 477 00:29:31,880 --> 00:29:35,640 Speaker 1: trying to upgrade prosperity for the economy as a whole, 478 00:29:35,920 --> 00:29:40,960 Speaker 1: for labor and industry and agriculture, not simply high asset prices. 479 00:29:41,760 --> 00:29:44,600 Speaker 1: So something you brought up and I thought it was 480 00:29:44,640 --> 00:29:47,240 Speaker 1: interesting the way you framed it in comparison with China, 481 00:29:47,480 --> 00:29:51,520 Speaker 1: and then what you identified right there, you know, thinking 482 00:29:51,560 --> 00:29:55,400 Speaker 1: about MMT as a political project, or think about your 483 00:29:55,400 --> 00:29:58,960 Speaker 1: own work, of course as a political project, how much 484 00:29:59,040 --> 00:30:02,400 Speaker 1: can you ide defy it as essentially what you said 485 00:30:02,440 --> 00:30:06,440 Speaker 1: of no longer having the financial sector be this sort 486 00:30:06,480 --> 00:30:09,000 Speaker 1: of third entity out there. You have the sort of 487 00:30:09,040 --> 00:30:13,040 Speaker 1: productive capacity of the economy, you have the government. And 488 00:30:13,080 --> 00:30:15,240 Speaker 1: in China, as you described it, the sort of there 489 00:30:15,280 --> 00:30:18,440 Speaker 1: isn't much daylight between the financial sector and the government, 490 00:30:18,800 --> 00:30:22,120 Speaker 1: whereas in the US the financial sector is its own 491 00:30:22,800 --> 00:30:26,240 Speaker 1: distinct set of private interests that's distinct from the government 492 00:30:26,280 --> 00:30:30,240 Speaker 1: and distinct distinct from actual productive capacity. So how much 493 00:30:30,320 --> 00:30:34,680 Speaker 1: is in your view the solution essentially collapsing the financial 494 00:30:34,720 --> 00:30:38,200 Speaker 1: sector so that it's just it can no longer represent 495 00:30:38,320 --> 00:30:42,880 Speaker 1: its own interests distinct from everything else. Well, what are 496 00:30:42,960 --> 00:30:45,560 Speaker 1: its interests? I think you can say that a lot 497 00:30:45,600 --> 00:30:49,640 Speaker 1: of the problems that America's UH been in slowing them 498 00:30:50,040 --> 00:30:53,160 Speaker 1: for the last ten years, really slowing down since two 499 00:30:53,240 --> 00:30:57,840 Speaker 1: thousand nine, has been financialization. And the problem is that 500 00:30:57,960 --> 00:31:01,720 Speaker 1: the financial sector UH the and create credit for the 501 00:31:01,800 --> 00:31:04,880 Speaker 1: reasons that m m T would, The financial sector creates 502 00:31:04,920 --> 00:31:09,840 Speaker 1: credit against assets against collateral. Eight of bank loans are 503 00:31:09,960 --> 00:31:14,280 Speaker 1: for real estate, and so as the credit standards have 504 00:31:14,360 --> 00:31:17,200 Speaker 1: been loosened for real estate, banks will lend more and 505 00:31:17,240 --> 00:31:21,240 Speaker 1: more and more money against any given UH piece of 506 00:31:21,520 --> 00:31:25,080 Speaker 1: real estate. And the effect of financialization has been to 507 00:31:25,880 --> 00:31:30,240 Speaker 1: increase to inflate real estate prices. Banks will lend money 508 00:31:30,320 --> 00:31:33,280 Speaker 1: against stocks and bonds and UH they'll learn money to 509 00:31:33,920 --> 00:31:37,200 Speaker 1: finance corporate takeovers. And they also lend money, of course 510 00:31:37,200 --> 00:31:41,560 Speaker 1: for education. And just as a house is worth whatever 511 00:31:41,600 --> 00:31:44,280 Speaker 1: a bank will lend against it for the new buyer, 512 00:31:44,520 --> 00:31:47,320 Speaker 1: and education is going to be worth whatever a bank 513 00:31:47,600 --> 00:31:52,000 Speaker 1: is going to lend to a student to buy an education. 514 00:31:52,040 --> 00:31:55,960 Speaker 1: And as banks have made loans of government guarantees with 515 00:31:56,000 --> 00:31:59,760 Speaker 1: no risk, they've made loans without taking into account the 516 00:32:00,000 --> 00:32:02,760 Speaker 1: aility to pay. When I went into Wall Street sixty 517 00:32:02,840 --> 00:32:06,880 Speaker 1: years ago, the first question any banker would ask is 518 00:32:07,200 --> 00:32:11,520 Speaker 1: can the borrower pay well? Right now, that's not asked anymore. 519 00:32:11,560 --> 00:32:15,520 Speaker 1: Now that the f h A is guaranteeing mortgages and 520 00:32:15,600 --> 00:32:19,880 Speaker 1: the student loan are guaranteed, banks don't have to worry 521 00:32:19,880 --> 00:32:23,280 Speaker 1: about repayment. So they're just creating as much credit as 522 00:32:23,280 --> 00:32:26,320 Speaker 1: they can without reference to the ability to pay. The 523 00:32:26,360 --> 00:32:29,200 Speaker 1: government isn't looking at the ability to pay the f 524 00:32:29,480 --> 00:32:34,040 Speaker 1: h A. Now, let's mortgages be UH extended up to 525 00:32:34,080 --> 00:32:38,800 Speaker 1: the point where they absorbent of the borrower's income to 526 00:32:38,880 --> 00:32:42,280 Speaker 1: pay the mortgage that will be guaranteed. Will imagine if 527 00:32:42,360 --> 00:32:45,200 Speaker 1: the government if you're paying forty three if your income 528 00:32:45,400 --> 00:32:49,000 Speaker 1: to pay your mortgage, you're paying taxes maybe a ten, 529 00:32:49,080 --> 00:32:53,880 Speaker 1: or you're paying health insurance, you're paying f I, your 530 00:32:53,960 --> 00:32:57,520 Speaker 1: Social Security. Withholding, there's been less and less and less 531 00:32:58,080 --> 00:33:01,560 Speaker 1: income available to spend on goods services because more and 532 00:33:01,640 --> 00:33:04,800 Speaker 1: more American income is being used to pay the financial 533 00:33:04,800 --> 00:33:08,920 Speaker 1: sector and its associated real estate and UH insurance sector. 534 00:33:09,000 --> 00:33:11,440 Speaker 1: So as more money is paid to the financial sector, 535 00:33:11,840 --> 00:33:15,240 Speaker 1: is debts grow. Same thing for corporations. As corporations have 536 00:33:15,360 --> 00:33:20,560 Speaker 1: to pay more money to the bondholders UH and dividends 537 00:33:20,680 --> 00:33:24,000 Speaker 1: and the banks, there's less and less for new capital 538 00:33:24,040 --> 00:33:27,480 Speaker 1: investment in the economy's drinking, largely because there's been a 539 00:33:27,520 --> 00:33:31,280 Speaker 1: diversion of income away from the real economy, the production 540 00:33:31,320 --> 00:33:35,200 Speaker 1: and consumption economy, to the financial sector. So the financial 541 00:33:35,200 --> 00:33:38,680 Speaker 1: sector in the United States, let's face it, has become dysfunctional. 542 00:33:39,040 --> 00:33:43,520 Speaker 1: And I think almost every financial manager that I know 543 00:33:44,040 --> 00:33:48,440 Speaker 1: realizes that the sector is become dysfunctional, and they're saying, 544 00:33:48,440 --> 00:33:50,800 Speaker 1: this is a hell of a way to make a living. Uh. 545 00:33:51,360 --> 00:33:52,920 Speaker 1: I'm going to play by the rules of the game, 546 00:33:52,960 --> 00:33:55,440 Speaker 1: but I would be nice if the rules of the 547 00:33:55,440 --> 00:33:58,360 Speaker 1: game were for me to be a banker and I 548 00:33:58,440 --> 00:34:02,120 Speaker 1: was actually helping the economy instead of just diverting income 549 00:34:02,200 --> 00:34:05,840 Speaker 1: from the economy into the banking system. So somehow the 550 00:34:06,160 --> 00:34:10,080 Speaker 1: financial system has to be restructured so it can cope 551 00:34:10,160 --> 00:34:13,759 Speaker 1: with a coronavirus, chroma or act of God like we're 552 00:34:13,760 --> 00:34:17,440 Speaker 1: having now and be able to restore normalcy. And I 553 00:34:17,480 --> 00:34:20,720 Speaker 1: think the only way to do it UH would be UH. 554 00:34:21,120 --> 00:34:24,680 Speaker 1: China has shown the most successful way of doing it. 555 00:34:24,920 --> 00:34:29,040 Speaker 1: There was hardly any interruption of activity there. There's a 556 00:34:29,200 --> 00:34:31,840 Speaker 1: very quick recovery, and it's because of the way that 557 00:34:31,960 --> 00:34:36,680 Speaker 1: China has structured financial sector under public direction instead of 558 00:34:36,760 --> 00:34:41,600 Speaker 1: leaving it to individual banks for clothes, take over real estate, 559 00:34:41,960 --> 00:34:46,120 Speaker 1: grad factories and UH create UH make the economy look 560 00:34:46,200 --> 00:34:52,480 Speaker 1: like Greece. UM. I have a related question, but I 561 00:34:52,520 --> 00:34:55,880 Speaker 1: think when when most people think about m MT and 562 00:34:56,440 --> 00:34:59,960 Speaker 1: policy prescriptions, they think about things like a job scare 563 00:35:00,040 --> 00:35:03,560 Speaker 1: and tee or maybe a green new deal. But you 564 00:35:03,640 --> 00:35:07,560 Speaker 1: just mentioned this idea of Trump as an m m 565 00:35:07,600 --> 00:35:10,880 Speaker 1: T or himself spending lots of money, but maybe spending 566 00:35:10,880 --> 00:35:16,239 Speaker 1: it in the wrong way. How useful is an economic 567 00:35:16,320 --> 00:35:22,319 Speaker 1: theory that can lead to such different policy outcomes. The 568 00:35:22,400 --> 00:35:25,440 Speaker 1: important thing about m m T is you realize that 569 00:35:26,080 --> 00:35:29,760 Speaker 1: money doesn't Governments don't have to borrow to spend money. 570 00:35:30,040 --> 00:35:32,960 Speaker 1: Governments can create the money. Uh. They don't have to 571 00:35:33,000 --> 00:35:36,719 Speaker 1: borrow from a bank or a bond holder to lend out. 572 00:35:37,160 --> 00:35:39,680 Speaker 1: They can. The effect of borrowing from a bond holder 573 00:35:40,080 --> 00:35:44,040 Speaker 1: uh and and creating money is identical. If a central 574 00:35:44,080 --> 00:35:46,640 Speaker 1: bank will print the money to spend them to the economy. 575 00:35:46,920 --> 00:35:50,640 Speaker 1: It's no more inflationary than borrowing from a bondholder because 576 00:35:50,640 --> 00:35:55,600 Speaker 1: the bond holder do what a bank does. Simply take decide, okay, 577 00:35:55,640 --> 00:35:58,240 Speaker 1: I'm not going to spend money on other financial assets. 578 00:35:58,480 --> 00:36:01,239 Speaker 1: A bond holder is not going to up back consumption 579 00:36:01,280 --> 00:36:05,280 Speaker 1: spending in order to lend money to the government. Definitely. 580 00:36:05,520 --> 00:36:08,920 Speaker 1: An m m T S point is that government money 581 00:36:08,960 --> 00:36:12,879 Speaker 1: creation is no more inflationary than borrowing, and you don't 582 00:36:12,920 --> 00:36:16,880 Speaker 1: have to borrow and pay interest to an independent financial 583 00:36:16,920 --> 00:36:20,160 Speaker 1: sector where you're limited to what bond holders will let 584 00:36:20,200 --> 00:36:23,520 Speaker 1: you do. You can simply print the money, and by 585 00:36:23,560 --> 00:36:27,400 Speaker 1: printing it you save the amount of taxes that have 586 00:36:27,600 --> 00:36:30,880 Speaker 1: to go to paying interest. You would save h the 587 00:36:30,920 --> 00:36:33,400 Speaker 1: amount of taxes that have to go to advertise and 588 00:36:33,440 --> 00:36:37,160 Speaker 1: pay down the debt. UH. Certainly for states and local 589 00:36:37,920 --> 00:36:41,440 Speaker 1: governments here it would be the probably the only way 590 00:36:41,480 --> 00:36:45,799 Speaker 1: the states and local governments can avoid drastic downsizing is 591 00:36:46,640 --> 00:36:50,440 Speaker 1: government lending to them, not going to private bond holders. 592 00:36:50,520 --> 00:36:53,800 Speaker 1: Because in New York, UH, if New York State borrows 593 00:36:53,800 --> 00:36:56,560 Speaker 1: from private bond holders, the bond holders will say, well, 594 00:36:56,640 --> 00:36:59,920 Speaker 1: you'll have to balance the budget by selling off proper 595 00:37:00,239 --> 00:37:05,160 Speaker 1: or cutting back public services, less transportation, and with less transportation, 596 00:37:05,440 --> 00:37:07,839 Speaker 1: people are just going to begin moving out of out 597 00:37:07,840 --> 00:37:10,680 Speaker 1: of New York. It'll become not as livable as it 598 00:37:10,760 --> 00:37:13,839 Speaker 1: used to be. So uh that that's the main thing 599 00:37:13,920 --> 00:37:16,680 Speaker 1: that m MT says that there are two ways of 600 00:37:16,960 --> 00:37:22,040 Speaker 1: creating of financing governments printing it borrowing, and the effect 601 00:37:22,040 --> 00:37:25,319 Speaker 1: on inflation is identical. I want to ask you, I 602 00:37:25,360 --> 00:37:28,480 Speaker 1: want to go back to this situation in China again 603 00:37:28,920 --> 00:37:31,480 Speaker 1: real quickly. We actually uh several months ago, we actually 604 00:37:31,480 --> 00:37:34,319 Speaker 1: talked to our Bloomberg, one of our economists here at 605 00:37:34,360 --> 00:37:37,120 Speaker 1: Bloomberg Tom Orlick, who is a new book, Uh, China 606 00:37:37,239 --> 00:37:39,759 Speaker 1: The Bubble That Never Pops, And we talked about some 607 00:37:39,880 --> 00:37:41,719 Speaker 1: of this, which is that due to the structure of 608 00:37:41,760 --> 00:37:44,839 Speaker 1: finance in China, um that all of this sort of 609 00:37:45,239 --> 00:37:48,320 Speaker 1: the debt bubble is about to explode fearst they're misguided, 610 00:37:48,360 --> 00:37:52,120 Speaker 1: there's sort of based on a misunderstanding. Nonetheless, I'm curious 611 00:37:52,120 --> 00:37:54,440 Speaker 1: what you see as the costs of a system like 612 00:37:54,480 --> 00:37:57,680 Speaker 1: that that because some critics would look at it and say, okay, yes, 613 00:37:57,719 --> 00:38:01,520 Speaker 1: you could certainly keep companies a lot. I've indefinitely, but 614 00:38:01,760 --> 00:38:06,399 Speaker 1: what about corruption? What about productivity? What about the sort 615 00:38:06,400 --> 00:38:08,640 Speaker 1: of what in the West we might say as well, 616 00:38:08,640 --> 00:38:12,640 Speaker 1: what about the disciplining effect of the market by having 617 00:38:13,080 --> 00:38:17,040 Speaker 1: by not allowing you know, companies to roll over their debts? Uh? 618 00:38:17,120 --> 00:38:21,000 Speaker 1: And definitely do you see costs associated with the Chinese 619 00:38:21,000 --> 00:38:25,759 Speaker 1: system whereby okay, uh, debts and bankruptcies aren't as much 620 00:38:25,760 --> 00:38:30,200 Speaker 1: of an issue necessarily or systemic, But what are but 621 00:38:30,320 --> 00:38:33,040 Speaker 1: in terms of um, you know, keeping all these companies 622 00:38:33,040 --> 00:38:36,360 Speaker 1: alive with sort of ongoing access to credit. Well, I 623 00:38:36,360 --> 00:38:39,200 Speaker 1: think the recent weeks newspapers have shown there's just as 624 00:38:39,280 --> 00:38:43,040 Speaker 1: much corruption in the United States. Uh financial system, Uh, 625 00:38:43,120 --> 00:38:45,600 Speaker 1: as there is in China. I mean, look at the 626 00:38:45,680 --> 00:38:47,840 Speaker 1: Deutsche Bank and look at all the banks that have 627 00:38:47,920 --> 00:38:51,719 Speaker 1: been uh uh involved, Um there are. Ten years ago, 628 00:38:51,800 --> 00:38:55,120 Speaker 1: corruption was a very serious problem in China, and UH 629 00:38:55,480 --> 00:38:57,960 Speaker 1: when I had lecture there to students, there was you 630 00:38:57,960 --> 00:39:01,160 Speaker 1: could see the idealism I hadn't in any other country, 631 00:39:01,760 --> 00:39:05,120 Speaker 1: an idea that they can really they'll graduate, they'll go 632 00:39:05,160 --> 00:39:09,120 Speaker 1: into government, They're going to clean up corruption. Uh. And 633 00:39:09,160 --> 00:39:12,160 Speaker 1: really they felt it was their country and they had 634 00:39:12,160 --> 00:39:15,040 Speaker 1: a chance of actually shaping the economy because it was 635 00:39:15,080 --> 00:39:19,319 Speaker 1: something entirely new. Well, the problem ten years later that 636 00:39:19,360 --> 00:39:22,280 Speaker 1: we can see is a cleaning up corruption does entail 637 00:39:22,400 --> 00:39:25,560 Speaker 1: a lot of government oversight into the economy. And uh 638 00:39:25,840 --> 00:39:28,759 Speaker 1: some of the cost of cleaning up corruption is a 639 00:39:28,880 --> 00:39:32,520 Speaker 1: very heavily regulated economy. They're trying to get rid of 640 00:39:32,760 --> 00:39:35,960 Speaker 1: corruption now and that's there. Uh from what I what 641 00:39:36,040 --> 00:39:41,000 Speaker 1: I'm told by Chinese businessmen, it seems to be working 642 00:39:41,480 --> 00:39:44,320 Speaker 1: uh quite well, certainly compared to what it was before. 643 00:39:44,640 --> 00:39:47,400 Speaker 1: But getting back to the other question, UH, what is 644 00:39:47,440 --> 00:39:50,839 Speaker 1: the cost? Begin by what the benefit? The benefit is 645 00:39:51,200 --> 00:39:56,400 Speaker 1: When there's an economic downturn like a coronavirus. The company 646 00:39:56,440 --> 00:40:00,040 Speaker 1: did not go out of business layoff its employees to 647 00:40:00,120 --> 00:40:03,560 Speaker 1: be sold to foreign buyers. It was the economy was 648 00:40:03,640 --> 00:40:08,160 Speaker 1: able to maintain stability. So the cost really is UH 649 00:40:08,520 --> 00:40:13,400 Speaker 1: money is cost free if the government creates it. Borrowing 650 00:40:13,480 --> 00:40:15,839 Speaker 1: is not cost free, but money creating has cost free 651 00:40:15,880 --> 00:40:19,600 Speaker 1: as long as it's not inflationary. And China does not 652 00:40:20,480 --> 00:40:24,040 Speaker 1: create money in an inflationary way. It creates money simply 653 00:40:24,120 --> 00:40:28,360 Speaker 1: to stabilize UH employment in a way that has not 654 00:40:28,520 --> 00:40:31,920 Speaker 1: caused any more inflation there than it would here. If 655 00:40:31,960 --> 00:40:36,200 Speaker 1: New York City in New York State received money creation 656 00:40:36,320 --> 00:40:41,440 Speaker 1: to just continue up, continue operation, that wouldn't inflate prices 657 00:40:41,480 --> 00:40:44,839 Speaker 1: at all. In fact, what we're in now is that deflation. 658 00:40:45,239 --> 00:40:47,640 Speaker 1: If we don't write down the debts, then the debt 659 00:40:47,680 --> 00:40:51,479 Speaker 1: service is going to cause a deflation of prices. That's 660 00:40:51,520 --> 00:40:55,360 Speaker 1: the real problem today, not inflation, but deflation, as people 661 00:40:55,400 --> 00:40:58,319 Speaker 1: can can't afford to buy goods and services and have 662 00:40:58,440 --> 00:41:01,160 Speaker 1: to cut back their family budget and by less and 663 00:41:01,239 --> 00:41:05,799 Speaker 1: less to UH employ fewer and fewer people producing and 664 00:41:05,840 --> 00:41:09,759 Speaker 1: selling goods and services, fewer restaurants in business, and and 665 00:41:09,800 --> 00:41:14,440 Speaker 1: so on. So if if you look ahead to the future. 666 00:41:14,719 --> 00:41:16,960 Speaker 1: And you know, if you recognize that there may be 667 00:41:17,520 --> 00:41:23,000 Speaker 1: some desirable aspects of Chinese style command economy as you're describing, 668 00:41:23,080 --> 00:41:24,799 Speaker 1: or at least one where the government has a little 669 00:41:24,840 --> 00:41:29,480 Speaker 1: bit more influence over the financial industry. Do you see 670 00:41:29,520 --> 00:41:36,600 Speaker 1: the US becoming more like the Chinese system? Or alternatively, 671 00:41:36,800 --> 00:41:39,839 Speaker 1: do you see China becoming more like the U S 672 00:41:39,840 --> 00:41:43,879 Speaker 1: system because of global competition. I'd be curious to get 673 00:41:43,880 --> 00:41:47,520 Speaker 1: your views if you had to choose China. China certainly 674 00:41:47,560 --> 00:41:50,920 Speaker 1: is not going to privatize banking. It is absolutely drawing 675 00:41:50,960 --> 00:41:53,160 Speaker 1: the line. It is not going to let banking be 676 00:41:53,320 --> 00:41:58,879 Speaker 1: private because credit is the main public utility. UH An 677 00:41:58,880 --> 00:42:02,600 Speaker 1: economy is basically plan there was credit system, Who's going 678 00:42:02,640 --> 00:42:06,640 Speaker 1: to supply the credit? UH America is turning into a 679 00:42:06,680 --> 00:42:10,680 Speaker 1: centrally planned economy, not planned by Washington, but planned by 680 00:42:10,680 --> 00:42:14,520 Speaker 1: Wall Street, just like UH European countries are planned by 681 00:42:14,920 --> 00:42:18,520 Speaker 1: their financial sector. And the problem is who's going to 682 00:42:18,560 --> 00:42:21,000 Speaker 1: do the planning and what is their planning going to 683 00:42:21,040 --> 00:42:22,600 Speaker 1: be for. Is it going to be to make the 684 00:42:22,640 --> 00:42:25,239 Speaker 1: economy grow or is it going to get rich off 685 00:42:25,320 --> 00:42:29,279 Speaker 1: the economy by shrinking the economy? UH that the whole 686 00:42:29,360 --> 00:42:32,960 Speaker 1: question I don't see the United States getting more like China, 687 00:42:33,080 --> 00:42:37,640 Speaker 1: despite uh MMTV used modestly. I I see the United 688 00:42:37,640 --> 00:42:41,960 Speaker 1: States getting more like Greece. Uh in England, austerity, more 689 00:42:41,960 --> 00:42:46,560 Speaker 1: and more austerity, a slow crash, a slow debt deflation. 690 00:42:47,040 --> 00:42:49,640 Speaker 1: And uh, that's what I've outlined in my book Killing 691 00:42:49,640 --> 00:42:52,719 Speaker 1: the Host. I described debt deflation, which was discussed in 692 00:42:52,760 --> 00:42:57,080 Speaker 1: the nineteen thirties when it was actually happening and when 693 00:42:57,120 --> 00:43:00,160 Speaker 1: people had to pay their debts and couldn't have had 694 00:43:00,239 --> 00:43:02,760 Speaker 1: to buy goods and services. What happened in the Great 695 00:43:02,760 --> 00:43:06,840 Speaker 1: Depression is happening to get again today, but it's happening 696 00:43:06,880 --> 00:43:10,719 Speaker 1: in slow motion. It's interesting the Grease comparison, because I 697 00:43:10,760 --> 00:43:15,359 Speaker 1: remember the Grease comparisons like in eleven and people would say, oh, 698 00:43:15,360 --> 00:43:17,240 Speaker 1: the U. S has all this national debt, we're becoming 699 00:43:17,280 --> 00:43:19,360 Speaker 1: like Greece. But you're using it in a different way, 700 00:43:19,800 --> 00:43:22,400 Speaker 1: not that uh, we're piling on all this debt, but 701 00:43:22,520 --> 00:43:25,359 Speaker 1: that we're unwilling to spend and going into this sort 702 00:43:25,360 --> 00:43:27,680 Speaker 1: of forced austerity mode. And of course we might see 703 00:43:27,680 --> 00:43:30,680 Speaker 1: it here in New York City. Without further aid, I'm 704 00:43:30,680 --> 00:43:33,880 Speaker 1: gonna ask you a bigger question, you know. On episode 705 00:43:33,960 --> 00:43:37,040 Speaker 1: after episode, interview after interview that Tracy and I do 706 00:43:37,920 --> 00:43:42,040 Speaker 1: on this podcast, this sort of idea that like we've 707 00:43:42,040 --> 00:43:44,719 Speaker 1: had this like forty year run in a way of 708 00:43:44,760 --> 00:43:47,200 Speaker 1: the existing model seems to come up, and it comes 709 00:43:47,239 --> 00:43:50,880 Speaker 1: up when we talked to economists, we recently talked to 710 00:43:50,880 --> 00:43:53,839 Speaker 1: Paul McCulley a few others, this idea that really over 711 00:43:53,840 --> 00:43:57,480 Speaker 1: those at last forty years, we've crystallized this idea of 712 00:43:57,960 --> 00:44:01,880 Speaker 1: the sort of financialized, asset driven economy. And I'm curious 713 00:44:01,880 --> 00:44:04,560 Speaker 1: whether you um sort of see the same day as 714 00:44:04,640 --> 00:44:08,000 Speaker 1: roughly forty years ago, either some turning point or some 715 00:44:08,160 --> 00:44:11,520 Speaker 1: great acceleration towards now. And I'm curious also it's like, 716 00:44:12,080 --> 00:44:16,239 Speaker 1: is coronavirus is this crisis a turning point for that 717 00:44:16,360 --> 00:44:18,360 Speaker 1: or is it just in your view, just going to 718 00:44:18,440 --> 00:44:22,480 Speaker 1: sort of keep accelerating on the existing trajectory. Well Night 719 00:44:22,640 --> 00:44:25,640 Speaker 1: certainly was a turning point. You had Margaret Thatcher in 720 00:44:25,680 --> 00:44:28,959 Speaker 1: England and Ronald Reagan in the United States. The whole 721 00:44:29,000 --> 00:44:33,399 Speaker 1: tax system was shifted to favor real estate UH and 722 00:44:33,680 --> 00:44:37,080 Speaker 1: the financial system, not the real economy. And then you 723 00:44:37,200 --> 00:44:41,359 Speaker 1: had the shift of American corporate employment to wait low 724 00:44:41,400 --> 00:44:45,000 Speaker 1: wage countries in Asia so yes, nineteen eighty was the 725 00:44:45,040 --> 00:44:49,080 Speaker 1: turning point, and all of the trends made that from 726 00:44:49,120 --> 00:44:53,160 Speaker 1: World War two UH to nine eight for more and 727 00:44:53,200 --> 00:44:57,880 Speaker 1: more prosperity for labor were suddenly reversed. In retrospect, the 728 00:44:57,960 --> 00:45:00,919 Speaker 1: nineteen seventies looked like a golden age now, but since 729 00:45:01,040 --> 00:45:04,279 Speaker 1: nineteen eighty, real wages haven't really gone up very much. 730 00:45:04,560 --> 00:45:07,520 Speaker 1: Death has gone way way up. So you've had a 731 00:45:07,640 --> 00:45:11,160 Speaker 1: depth driven economy that leverage to economy. You had the 732 00:45:11,160 --> 00:45:14,840 Speaker 1: corporate takeover UH and corporate rating movement again in the 733 00:45:14,880 --> 00:45:19,000 Speaker 1: nineteen eighties. UH. You had the as interest rates came 734 00:45:19,080 --> 00:45:24,440 Speaker 1: down from my former boss that chased both workers. In 735 00:45:24,800 --> 00:45:28,200 Speaker 1: nineteen eighty, you've had You had the greatest bond market 736 00:45:28,280 --> 00:45:33,839 Speaker 1: boom in history, bond prices sword, stock market sword. You had. 737 00:45:33,880 --> 00:45:39,879 Speaker 1: You created huge financial wealth without creating actual industrial and 738 00:45:40,200 --> 00:45:44,360 Speaker 1: consumer wealth. So you had a shift of the beneficiaries 739 00:45:44,400 --> 00:45:49,120 Speaker 1: of the system from labor and business to UH, finance, 740 00:45:49,200 --> 00:45:53,000 Speaker 1: the Wall Street, the real estate sector, and the insurance sector. 741 00:45:53,080 --> 00:45:57,000 Speaker 1: So the whole economy changed nineteen eighty, and it's changed 742 00:45:57,040 --> 00:46:00,120 Speaker 1: in a way that has left us now depth and 743 00:46:00,480 --> 00:46:03,000 Speaker 1: the economy's run up as much dead as it can 744 00:46:03,400 --> 00:46:06,680 Speaker 1: it can't really push up anymore, although the Federal Reserve 745 00:46:06,960 --> 00:46:10,440 Speaker 1: can certainly keep pushing up the stock market, but it 746 00:46:10,480 --> 00:46:12,959 Speaker 1: is not pushing up the economy the way it's going, 747 00:46:13,320 --> 00:46:16,279 Speaker 1: and so I don't see the economy as recovering. The 748 00:46:16,320 --> 00:46:20,239 Speaker 1: coronavirus is simply leftist idling at a low level, and 749 00:46:20,280 --> 00:46:22,719 Speaker 1: I don't see any way of getting out of the 750 00:46:22,840 --> 00:46:26,720 Speaker 1: level as long as we have to pay the debt legacy. Uh, 751 00:46:26,760 --> 00:46:30,279 Speaker 1: the arrears that have all mounted up and are just 752 00:46:30,920 --> 00:46:36,120 Speaker 1: a burden on families, on businesses, uh, and on states 753 00:46:36,120 --> 00:46:40,080 Speaker 1: and localities. They can't carry it. And UH it's crunch time. 754 00:46:40,480 --> 00:46:44,560 Speaker 1: And unless you alleviate the depth problem, you're going to 755 00:46:44,600 --> 00:46:48,480 Speaker 1: be in a slow new depression. It's always a good 756 00:46:48,520 --> 00:46:52,200 Speaker 1: podcast when you can go from Hammurabi to Mark Margaret Thatcher. 757 00:46:52,280 --> 00:46:56,000 Speaker 1: I think all right, Professor Hudson, thank you so much 758 00:46:56,040 --> 00:46:59,719 Speaker 1: for joining us. I really enjoyed that conversation. Thank you. Yeah, 759 00:46:59,760 --> 00:47:25,120 Speaker 1: that was great to be here for having so Joe, 760 00:47:25,160 --> 00:47:30,319 Speaker 1: that was a wide ranging conversation, it was, and you know, 761 00:47:30,480 --> 00:47:33,120 Speaker 1: of course it did touch on a lot of themes 762 00:47:33,120 --> 00:47:37,400 Speaker 1: that we've discussed lately. But a I liked um. I 763 00:47:37,480 --> 00:47:40,239 Speaker 1: liked his sort of obviously historical perspective, that's a big 764 00:47:40,280 --> 00:47:42,400 Speaker 1: part of what he's known for. But I thought the 765 00:47:43,160 --> 00:47:47,719 Speaker 1: comparisons to the sort of Chinese model were pretty interesting, 766 00:47:47,800 --> 00:47:51,040 Speaker 1: and it's sort of helped me crystallize, like, sort of 767 00:47:51,080 --> 00:47:54,440 Speaker 1: what are some of the tensions here, perhaps about going 768 00:47:54,440 --> 00:47:56,960 Speaker 1: at things in a different way, whether it's through much 769 00:47:57,000 --> 00:48:02,360 Speaker 1: more um fiscal fiscal authorities, central realization of credit and spending, 770 00:48:02,719 --> 00:48:07,000 Speaker 1: sort of a sort of useful, useful current counterpoint I think, 771 00:48:07,000 --> 00:48:10,040 Speaker 1: to how things work out. Yeah, and it actually reminded 772 00:48:10,080 --> 00:48:12,640 Speaker 1: me quite a bit of the episode we recorded with 773 00:48:12,800 --> 00:48:15,799 Speaker 1: Victor Schutz a few months Definitely, I think he made 774 00:48:15,800 --> 00:48:18,759 Speaker 1: similar points about what works in the Chinese model and 775 00:48:18,800 --> 00:48:22,160 Speaker 1: this idea of the US perhaps moving closer to it. 776 00:48:22,880 --> 00:48:25,000 Speaker 1: There is another thing that I was thinking about, which 777 00:48:25,080 --> 00:48:31,720 Speaker 1: is Professor Hudson's point about when something like this happens 778 00:48:31,760 --> 00:48:34,799 Speaker 1: in the economy, you know, an act of God, as 779 00:48:34,840 --> 00:48:36,880 Speaker 1: you put it, you know there's going to be pain, 780 00:48:37,360 --> 00:48:42,200 Speaker 1: and the policy prescription is basically all about finding who 781 00:48:42,320 --> 00:48:45,839 Speaker 1: can bear that pain most efficiently, or who can bear 782 00:48:45,880 --> 00:48:49,960 Speaker 1: it with minimum disruption to the economy. And you know, 783 00:48:50,000 --> 00:48:52,560 Speaker 1: as he put it, it's usually the creditors they have 784 00:48:52,960 --> 00:48:56,120 Speaker 1: lots of money, they can do this, or they could 785 00:48:56,120 --> 00:48:58,600 Speaker 1: be back stopped by the government, which has the balance 786 00:48:58,680 --> 00:49:04,240 Speaker 1: sheet to endure the pain. Yeah, I mean it's right exactly. 787 00:49:04,280 --> 00:49:07,359 Speaker 1: I mean it's almost like you could say that initially 788 00:49:07,400 --> 00:49:10,600 Speaker 1: in the crisis, that sort of March and April consensus 789 00:49:10,640 --> 00:49:13,759 Speaker 1: is like, nobody should have to endure the pain, right, 790 00:49:14,080 --> 00:49:16,440 Speaker 1: that this was like a true act of God. It 791 00:49:16,520 --> 00:49:20,160 Speaker 1: was extraordinary, and we're going to get things back to normal. 792 00:49:20,280 --> 00:49:21,880 Speaker 1: No one should be permanently put out of work, no 793 00:49:21,920 --> 00:49:24,640 Speaker 1: one should have to lose their businesses. And we actually 794 00:49:24,640 --> 00:49:26,920 Speaker 1: did a lot of spending that was on a scale 795 00:49:27,200 --> 00:49:31,279 Speaker 1: and sort of monot say generosity, but maybe generosity is 796 00:49:31,320 --> 00:49:34,719 Speaker 1: the word that was sort of unparalleled throughout history. I mean, 797 00:49:34,719 --> 00:49:39,719 Speaker 1: the fact that Unemployment Insurance um I was supposed to 798 00:49:39,760 --> 00:49:43,000 Speaker 1: basically be a complete replacement for the medium worker, fact 799 00:49:43,000 --> 00:49:46,600 Speaker 1: that we had no strings attached, almost paral protection program, 800 00:49:46,640 --> 00:49:49,360 Speaker 1: money for small businesses and so forth. But you know, 801 00:49:49,400 --> 00:49:52,800 Speaker 1: we did lose that appetite pretty quickly, and it's like, okay, 802 00:49:52,960 --> 00:49:55,600 Speaker 1: even though the fact that public health authorities failed to 803 00:49:55,640 --> 00:49:58,680 Speaker 1: contain the virus or people's behavior failed to a few 804 00:49:58,680 --> 00:50:02,319 Speaker 1: months later is like, right, you're kind of out of luck. 805 00:50:02,320 --> 00:50:04,719 Speaker 1: Get back to work, find a job. Do we have 806 00:50:04,760 --> 00:50:07,560 Speaker 1: to do? It's like we didn't that that appetude really 807 00:50:07,600 --> 00:50:10,200 Speaker 1: did not last very long in this country. Yeah. Well, 808 00:50:10,239 --> 00:50:12,040 Speaker 1: I mean not just that, but a lot of the 809 00:50:12,160 --> 00:50:15,560 Speaker 1: forbearance programs that were either past or the ones that 810 00:50:15,600 --> 00:50:19,560 Speaker 1: were discussed, like the payroll tax cut, all of those 811 00:50:19,560 --> 00:50:23,759 Speaker 1: are still predicated on people eventually paying that money back. So, 812 00:50:23,800 --> 00:50:26,080 Speaker 1: for instance, in the housing market, I think most of 813 00:50:26,120 --> 00:50:30,040 Speaker 1: the forbearance programs are renewed every three months, So you 814 00:50:30,080 --> 00:50:34,760 Speaker 1: can kind of see this wall of forbearance maturities coming 815 00:50:34,920 --> 00:50:37,560 Speaker 1: every three months, and at some point you get the 816 00:50:37,600 --> 00:50:40,040 Speaker 1: sense that they're not going to be rolled over, and 817 00:50:40,640 --> 00:50:42,440 Speaker 1: you know, all of a sudden, the bills are going 818 00:50:42,480 --> 00:50:45,200 Speaker 1: to come do again, and you're probably going to have 819 00:50:45,280 --> 00:50:48,480 Speaker 1: a rerun of the economic pain that we experienced in March. 820 00:50:49,360 --> 00:50:51,360 Speaker 1: The other thing to think about, it's not something that 821 00:50:51,400 --> 00:50:53,640 Speaker 1: we really went into, but you know, there's a lot 822 00:50:53,719 --> 00:50:56,760 Speaker 1: of like talk about the future of X, the future 823 00:50:56,800 --> 00:50:59,960 Speaker 1: of cities, the future of offices, the future of working 824 00:51:00,080 --> 00:51:02,920 Speaker 1: from home, the future of e commerce and stuff like that, 825 00:51:03,000 --> 00:51:05,520 Speaker 1: and you know, all that's important, but there is a 826 00:51:05,560 --> 00:51:09,319 Speaker 1: sort of sinister way to think about that, which is 827 00:51:09,400 --> 00:51:12,960 Speaker 1: because remember, you know, something that Professor Hudson said is like, 828 00:51:13,040 --> 00:51:14,640 Speaker 1: you know, the idea is like to just go back 829 00:51:14,640 --> 00:51:18,680 Speaker 1: to the previous state. And I forget the word he cited, um, 830 00:51:18,880 --> 00:51:22,239 Speaker 1: but it's like, no, the purpose of a forgiveness and 831 00:51:22,280 --> 00:51:25,040 Speaker 1: a blank slate is just just go back to the 832 00:51:25,040 --> 00:51:28,440 Speaker 1: pre the pre normal. And if you're sort of preoccupied 833 00:51:28,520 --> 00:51:30,640 Speaker 1: with thinking about the future of X and how will 834 00:51:30,800 --> 00:51:34,280 Speaker 1: coronavirus change everything, which there were like tons of articles 835 00:51:34,320 --> 00:51:37,280 Speaker 1: about for the last six months, it almost like provides 836 00:51:37,280 --> 00:51:41,000 Speaker 1: a pretext in a way for not doing the clean slate. 837 00:51:41,040 --> 00:51:43,080 Speaker 1: In other words, it's like, well, we can't just go 838 00:51:43,120 --> 00:51:44,840 Speaker 1: back to the old normal and we can't just wipe 839 00:51:44,840 --> 00:51:48,000 Speaker 1: everything out because everything is going to change post coronavirus, 840 00:51:48,160 --> 00:51:50,960 Speaker 1: and maybe something's will change. But you can sort of 841 00:51:51,000 --> 00:51:55,040 Speaker 1: see how that rhetoric becomes a sort of excuse for 842 00:51:55,640 --> 00:51:59,600 Speaker 1: not making everyone whole. I feel like there's a tension 843 00:51:59,680 --> 00:52:03,800 Speaker 1: there because on the one hand, someone like Michael Hudson 844 00:52:03,960 --> 00:52:06,920 Speaker 1: is very clear that the existing system is flawed, But 845 00:52:07,040 --> 00:52:09,800 Speaker 1: on the other hand, the whole point of the debt relief, 846 00:52:10,160 --> 00:52:12,759 Speaker 1: as you put it, is that blank slate to go 847 00:52:12,840 --> 00:52:15,520 Speaker 1: back to where we were before. So there's a tension 848 00:52:15,600 --> 00:52:18,960 Speaker 1: between wanting to fix the system and using a big 849 00:52:18,960 --> 00:52:22,000 Speaker 1: moment of change to do so, and doing maybe what 850 00:52:22,120 --> 00:52:25,279 Speaker 1: might be most economically expedient and just going back to 851 00:52:25,320 --> 00:52:29,240 Speaker 1: the system as it was before. Yeah, no, no easy, 852 00:52:29,280 --> 00:52:32,760 Speaker 1: no easy. Uh. Answers to resolving that and that always 853 00:52:32,800 --> 00:52:34,920 Speaker 1: sort of is the challenge post to sort of crisis 854 00:52:34,920 --> 00:52:37,719 Speaker 1: policy makers of how do you fix the system and 855 00:52:37,760 --> 00:52:39,759 Speaker 1: repair system at the same time, they're kind of it's 856 00:52:39,800 --> 00:52:42,840 Speaker 1: kind of different at the same time. Yeah, under immense 857 00:52:42,880 --> 00:52:46,160 Speaker 1: time pressure as well. Well, this is why we aren't policymakers. 858 00:52:46,239 --> 00:52:49,200 Speaker 1: So we just talked about it, all right, Uh, shall 859 00:52:49,239 --> 00:52:52,520 Speaker 1: we leave it there? Let's leave it there. This has 860 00:52:52,560 --> 00:52:56,240 Speaker 1: been another episode of the All Thoughts podcast. I'm Tracy Alloway. 861 00:52:56,320 --> 00:52:59,200 Speaker 1: You can follow me on Twitter at Tracy Alloway and 862 00:52:59,239 --> 00:53:01,080 Speaker 1: I'm Chill I Send though You can follow me on 863 00:53:01,160 --> 00:53:05,240 Speaker 1: Twitter at the Stalwart. Follow our producer on Twitter, Laura Carlson. 864 00:53:05,440 --> 00:53:08,640 Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of 865 00:53:08,640 --> 00:53:12,640 Speaker 1: a podcast, Francesca Levie at Francesco Today, and check out 866 00:53:12,680 --> 00:53:16,120 Speaker 1: all of our podcasts under the handle at podcasts. Thanks 867 00:53:16,160 --> 00:53:16,640 Speaker 1: for listening,