WEBVTT - Michael Hudson On Why The US Risks Becoming The Next Greece 0:00:10.920 --> 0:00:14.440 Hello, and welcome to another episode of the All Thoughts podcast. 0:00:14.560 --> 0:00:19.560 I'm Tracy Allaway and I'm Joe, So Joe. I think 0:00:19.560 --> 0:00:22.640 we've spoken about this a lot, but one of the 0:00:22.760 --> 0:00:27.240 defining factors of the COVID crisis and its impact on 0:00:27.280 --> 0:00:31.840 the economy has been this this idea that economic time 0:00:31.960 --> 0:00:35.720 has sort of stopped. People weren't going out as much, 0:00:35.760 --> 0:00:39.120 they weren't shopping as much, they weren't eating, but financial 0:00:39.240 --> 0:00:43.240 time kept going. So even though businesses aren't getting revenue 0:00:43.240 --> 0:00:45.639 and income, they still have to pay rent, pay back 0:00:45.680 --> 0:00:48.880 any loans they might have, and pay taxes and things 0:00:48.920 --> 0:00:51.240 like that. I think you actually wrote about this, uh 0:00:51.640 --> 0:00:54.920 when we were just getting started with the coronavirus crisis. Yeah, 0:00:54.960 --> 0:00:57.960 that was kind of like identified as the early theme, 0:00:58.000 --> 0:01:00.440 which is like, Okay, even if we can get through 0:01:00.520 --> 0:01:04.200 this crisis in a expedient manner, which at least in 0:01:04.240 --> 0:01:06.760 the US, we haven't, you still have this issue of 0:01:06.800 --> 0:01:09.600 like bills pile up today or next week or the 0:01:09.640 --> 0:01:13.639 month later, and without revenue, Uh, those bills suddenly become 0:01:13.720 --> 0:01:18.399 defaults and potentially bankruptcies. Right, That's exactly right. So a 0:01:18.400 --> 0:01:21.039 lot of the policy responses we've seen so far have 0:01:21.200 --> 0:01:25.920 been focused on bridging that gap between economic time and 0:01:25.959 --> 0:01:28.120 financial time, if you want to call it that, and 0:01:28.120 --> 0:01:31.480 they've been offering things like tax relief and loan forbearance. 0:01:31.560 --> 0:01:36.920 But the question, of course is eventually, you know, people 0:01:36.959 --> 0:01:38.959 are going to have to pony up the money that 0:01:39.040 --> 0:01:42.960 they owe, and what happens at that point, especially after 0:01:43.120 --> 0:01:47.600 they may have injured months, um, possibly even years of 0:01:47.880 --> 0:01:50.800 economic weakness, right, and less revenue than they would otherwise 0:01:50.840 --> 0:01:53.760 have gotten. Yeah, I mean, I think one way to 0:01:54.040 --> 0:01:57.840 sort of like conceptualize the policy responds, at least in 0:01:57.920 --> 0:02:00.280 the US, is that to some extent, you have the 0:02:00.280 --> 0:02:04.600 Federal Reserve having back stopped a fairly significant portion of 0:02:05.120 --> 0:02:08.000 credit market and done a number of things that actually 0:02:08.040 --> 0:02:11.639 caused um, sort of credit issuance to boom even in 0:02:11.680 --> 0:02:13.800 the middle of the crisis, so that companies would have 0:02:13.880 --> 0:02:17.200 enough liquidity, and then the other side of the coin, 0:02:17.639 --> 0:02:20.919 so to speak, would be fiscal policy makers and then 0:02:20.919 --> 0:02:24.920 the health policy makers trying to sort of get us 0:02:24.919 --> 0:02:27.560 to that other side so that all these bridge loans 0:02:27.600 --> 0:02:30.360 that have been taken out can actually be paid for 0:02:30.480 --> 0:02:34.080 at the other end. Yeah, that's right, And of course, 0:02:34.360 --> 0:02:37.360 the concern that you hear quite a lot. Is always 0:02:37.360 --> 0:02:43.000 that one man's or one person's repayment is another person's income. Right, 0:02:43.040 --> 0:02:45.880 So if you stop the flow of rent, for instance, 0:02:46.120 --> 0:02:49.000 landlords aren't going to be getting the income that they're 0:02:49.040 --> 0:02:51.120 expecting to get. And I know there's probably not a 0:02:51.120 --> 0:02:54.000 lot of sympathy for landlords at the moment, But the 0:02:54.120 --> 0:02:57.720 concern is that that ends up impacting the banking system, 0:02:58.200 --> 0:03:01.480 ends up impacting the flow of credit, which feeds back 0:03:01.520 --> 0:03:05.880 into the economy in a negative way. So today, instead 0:03:05.880 --> 0:03:09.680 of talking about debt forbearance, we're going to be focusing 0:03:09.760 --> 0:03:12.600 on something slightly different, and that is the notion of 0:03:13.000 --> 0:03:17.000 debt forgiveness. So not just telling everyone that they can 0:03:18.000 --> 0:03:21.239 pay their bills or their debts in a few months time, 0:03:21.280 --> 0:03:25.840 but actually writing them off right. That is not something 0:03:25.880 --> 0:03:29.160 that we've ever really done much in this country. There 0:03:29.200 --> 0:03:31.799 was a lot of talk about it um after the 0:03:31.840 --> 0:03:35.280 Great Financial Crisis, after two thousand and nine, there really 0:03:35.320 --> 0:03:38.440 wasn't much you hear about it. With student loans, you 0:03:38.440 --> 0:03:40.680 hear about the idea of like, Okay, this time we 0:03:40.720 --> 0:03:44.280 need a wash. But I would say books sort of 0:03:44.400 --> 0:03:48.520 culturally and politically we're sort of allergic to this idea 0:03:48.560 --> 0:03:52.160 of just sort of writing them off. Yeah, I think 0:03:52.240 --> 0:03:55.880 that's exactly right. Okay, without further ado, we're going to 0:03:55.920 --> 0:03:58.680 get into all of that. We have the perfect guests 0:03:59.040 --> 0:04:02.920 for this particular topic. We have Michael Hudson. He's the 0:04:02.960 --> 0:04:06.480 president of the Institution for the Study of Long Term 0:04:06.520 --> 0:04:10.800 Economic Trends, also a professor of economics at the University 0:04:10.840 --> 0:04:14.960 of Missouri, Kansas City. He's also the author of numerous books, 0:04:15.000 --> 0:04:19.080 including and Forgive Them Their Debts, which is a sort 0:04:19.080 --> 0:04:23.159 of very long term history and overview of the tension 0:04:23.200 --> 0:04:26.760 between creditors and borrowers, a really good book. So the 0:04:26.800 --> 0:04:29.360 perfect person to give us perspective on what's going on 0:04:29.440 --> 0:04:32.760 right now and how it compares to thousands and thousands 0:04:32.800 --> 0:04:36.840 of years ago. Professor Hudson, thanks so much for joining us. Well, 0:04:36.839 --> 0:04:38.839 it's good to be here, Tracy, thanks for having me. 0:04:40.760 --> 0:04:45.760 So maybe just to begin, I mean, where do we begin? Um? 0:04:45.880 --> 0:04:48.440 Can you sort of give us your top level view 0:04:48.800 --> 0:04:53.960 of how you view the coronavirus crisis and the impact 0:04:54.040 --> 0:04:58.120 on the economy in terms of creditors versus borrowers, Like 0:04:58.279 --> 0:05:01.040 where does the power actually you lie at the moment, 0:05:01.480 --> 0:05:05.520 and where's the biggest pain threshold. Well, both of you 0:05:05.720 --> 0:05:09.279 who have already in the introduction gone over what the 0:05:09.360 --> 0:05:12.560 problem is. And I think it's much easier to understand 0:05:12.600 --> 0:05:17.560 the logic of debt cancelations right down if you look 0:05:17.560 --> 0:05:21.279 at what happens if you leave business as usual, What 0:05:21.400 --> 0:05:24.880 happens if you leave things the way they are right now? Well, 0:05:25.240 --> 0:05:28.039 I think of restaurants, for instance, restaurants in New York 0:05:28.040 --> 0:05:31.840 City have been closed or operating at a minimal basis 0:05:31.880 --> 0:05:37.880 for six months. They've accrued back rents UH and taxes. UH. 0:05:37.920 --> 0:05:42.080 There's no way that they can reopen and hope to 0:05:42.200 --> 0:05:46.160 earn the six months rent uh in the next two 0:05:46.240 --> 0:05:49.080 or three or maybe four years. UH. And if they 0:05:49.160 --> 0:05:52.120 did have to pay the rents that have accrued when 0:05:52.120 --> 0:05:55.479 there are no revenues at all, then they're going to 0:05:55.520 --> 0:05:59.000 have to go out of business. And there's talk of 0:05:59.000 --> 0:06:02.159 of rest Bronson, New York City going out of business. 0:06:02.240 --> 0:06:05.640 You could say the same for Jim's. You've seen the 0:06:05.839 --> 0:06:11.200 Metropolitan Opera closed down, UH, Carnegie Hall concert stopping. So 0:06:11.600 --> 0:06:16.680 you're having an interruption in economic activity. And the main 0:06:16.720 --> 0:06:20.680 effect of debt people think of debt is transferring interest 0:06:20.760 --> 0:06:23.680 and money to the creditors. But in this case, we're 0:06:23.720 --> 0:06:29.080 talking about transferring property to creditors. We're talking about landlords 0:06:29.200 --> 0:06:31.320 or people who have bought a house in a mortgage. 0:06:31.680 --> 0:06:34.280 They've lost their job or they're on a part time basis, 0:06:34.680 --> 0:06:37.600 and UH, they're in danger of defaulting on the mortgage. 0:06:37.920 --> 0:06:41.920 And there's a danger of the same kind of decline 0:06:42.440 --> 0:06:46.320 in home ownership today that you had after two thousand 0:06:46.440 --> 0:06:49.520 nine when they were the widespread defaults. So the question 0:06:49.640 --> 0:06:53.440 is radical as it seems to write down the debts. 0:06:53.920 --> 0:06:58.240 Is even more radical to say, well, let's transfer property 0:06:58.400 --> 0:07:02.520 at to creditors. Let's close down business family businesses that 0:07:02.560 --> 0:07:05.840 have been there for many decades. Uh, let's not completely 0:07:06.520 --> 0:07:09.720 leave the economy and a closed down position. The reason 0:07:10.160 --> 0:07:14.160 people have canceled debts over the time is to restore 0:07:14.280 --> 0:07:18.600 economic normalcy. And this has been going on for over 0:07:18.880 --> 0:07:23.040 three thousand years, five thousand years. My book, UH, what 0:07:23.280 --> 0:07:26.640 is much of the UH news right now? Our acts 0:07:26.640 --> 0:07:30.200 of God by insurance companies. So you can look at 0:07:30.200 --> 0:07:32.880 the virus as being a kind of act of God. 0:07:33.240 --> 0:07:36.080 What do you do when something happens from outside the 0:07:36.080 --> 0:07:40.480 economy is not the fault of the income earner? Is 0:07:40.480 --> 0:07:43.120 not the fault of the restaurant, it's not the fault 0:07:43.280 --> 0:07:46.880 of the homeowner who's lost a job. It's just happens 0:07:46.920 --> 0:07:50.680 from outside the economy. Well, for thousands of years, not 0:07:50.760 --> 0:07:54.240 only in Babylonia, but in in Rome, when there was 0:07:54.280 --> 0:07:59.400 a problem, a disease, a flood, or a drought, the 0:07:59.480 --> 0:08:02.600 ruler would say, Okay, the taxes don't have to be paid, 0:08:03.160 --> 0:08:05.400 and in fact, the debts don't have to be paid. 0:08:05.680 --> 0:08:08.480 Most depths in the past where tax debts, and if 0:08:08.520 --> 0:08:11.360 they're not paid, the problems really taxes. And here in 0:08:11.400 --> 0:08:16.600 New York that's especially important. Uh, the transport system has 0:08:16.640 --> 0:08:20.880 been almost empty for six months. It's run up at 0:08:20.880 --> 0:08:24.040 dept of four billion dollars. The city has run up 0:08:24.040 --> 0:08:28.440 a debt of about six billion dollars. What is going 0:08:28.520 --> 0:08:34.679 to happen? The mayor has talked about drastically closing city services, 0:08:35.080 --> 0:08:40.440 laying off municipal labor, raising the transport fares on the subway. 0:08:40.640 --> 0:08:42.640 Obviously there's going to be a break in the chain 0:08:42.679 --> 0:08:45.160 of payments. How do you avoid that? Well, there are 0:08:45.160 --> 0:08:47.800 a number of ways of avoiding that. One would be 0:08:48.000 --> 0:08:52.160 for the Federal Reserve to simply create the credit to 0:08:52.840 --> 0:08:56.480 sustain the system for people who can't pay to transfer 0:08:56.520 --> 0:09:01.720 income to the restaurants enough to pay the costs of operation, 0:09:01.920 --> 0:09:05.640 the rents and the labor costs to pay a carry 0:09:05.720 --> 0:09:08.880 gate hall and the metropolitan opera enough not to go under. 0:09:09.240 --> 0:09:12.000 The other way is to simply write down the debts, 0:09:12.040 --> 0:09:15.520 because if you if you don't write down the state 0:09:15.720 --> 0:09:19.080 and local and public debt in this case, you're going 0:09:19.120 --> 0:09:23.959 to have a slash of government services. And the government 0:09:24.000 --> 0:09:26.439 has said, well, what can we sell off? We're going 0:09:26.520 --> 0:09:29.240 to have to begin to sell off public header prises 0:09:29.280 --> 0:09:32.600 like Chicago sold off the parking meters in the streets. 0:09:32.840 --> 0:09:36.120 We're going to have to sell off parks. Uh, we're 0:09:36.120 --> 0:09:39.080 gonna turn roads into toll roads. You can see the 0:09:39.120 --> 0:09:41.400 problems they're going to occur. You have to look at 0:09:41.400 --> 0:09:43.720 it as an overall system, and if you don't write 0:09:43.760 --> 0:09:48.640 down the debts, or if you don't provide the money, 0:09:48.800 --> 0:09:52.520 uh just print the money to let's the economy tread 0:09:52.520 --> 0:09:56.240 water what you call time out of time. Then you're 0:09:56.240 --> 0:10:01.240 going to have a drastic uh change in shrinkage of 0:10:02.040 --> 0:10:05.200 the overall economy and we'll end up looking like Greece 0:10:05.880 --> 0:10:21.320 did a few years ago. So what is an example 0:10:21.600 --> 0:10:24.240 in a history. I mean, you mentioned you you do 0:10:24.320 --> 0:10:26.640 a lot of work with history, and you mentioned this 0:10:26.760 --> 0:10:31.080 idea of debt forgiveness going back five thousand years. What's 0:10:31.120 --> 0:10:33.720 the what's the sort of relevant period we might look 0:10:33.720 --> 0:10:36.320 to a specific example where a disease came or some 0:10:36.360 --> 0:10:40.760 act of God happened in the solution was right off 0:10:40.760 --> 0:10:45.280 the debts. Well, the Laws of Hammurabi were announced around 0:10:45.280 --> 0:10:50.360 seventy BC are an example. That's the first uh set 0:10:50.360 --> 0:10:53.199 of laws that explicitly referred to an act of God, 0:10:53.600 --> 0:10:58.040 in this case added the storm God. Amurabi says that 0:10:58.160 --> 0:11:02.079 if the storm God added floods the fields or canceled 0:11:02.120 --> 0:11:05.440 the debts floods the fields that causes a drought, then 0:11:05.640 --> 0:11:07.680 the taxes don't have to be paid and the debts 0:11:07.880 --> 0:11:11.120 don't have to be paid. In another part of the 0:11:11.600 --> 0:11:14.240 Laws of Murabi, he said, if there's a disease and 0:11:14.520 --> 0:11:18.440 the disease prevent people from operating in normal activity, then 0:11:19.000 --> 0:11:21.960 the depths that they are canceled. Now, the reason he 0:11:22.000 --> 0:11:24.800 did that was if he did not cancel those depths 0:11:24.840 --> 0:11:28.880 of the cultivators. And we're talking about an agricultural economy, 0:11:29.000 --> 0:11:32.680 low surplus economy. Then you would have the debtors fall 0:11:32.720 --> 0:11:37.440 into bondage to the creditors, just like you have in 0:11:37.480 --> 0:11:40.679 the Bible, a debt bondage when you can't pay the debts. 0:11:40.720 --> 0:11:45.679 And if a debtor ended up owing his labor time 0:11:45.920 --> 0:11:50.839 to the creditor, then he wouldn't have the opportunity to 0:11:51.160 --> 0:11:54.280 work on corvet labor, that is public labor to build 0:11:54.280 --> 0:11:57.679 the castle, the walls, to dig the irrigation ditches. He 0:11:57.720 --> 0:12:00.160 wouldn't be able to serve in the army. And if 0:12:00.160 --> 0:12:02.839 you have the crops to the creditor, and we're talking 0:12:02.880 --> 0:12:07.360 about thirty three and the third percent interest for prop loans, 0:12:07.640 --> 0:12:11.360 then he wouldn't be able to pay the taxes. So 0:12:11.720 --> 0:12:16.280 the Hammurabi would have the palace economy would have not 0:12:16.360 --> 0:12:21.199 only collapsed, but you would have had the wealthy creditor 0:12:21.280 --> 0:12:26.600 class emerging from the palace bureaucracy, the local local leaders, 0:12:26.880 --> 0:12:29.200 and the first thing they would have done once they 0:12:29.240 --> 0:12:33.480 got power was to overthrow the king, as they did 0:12:33.480 --> 0:12:37.560 in Byzantium. UH powerful enough to overthrow the king and 0:12:37.600 --> 0:12:40.560 take and UH prevent the king from having the power 0:12:40.600 --> 0:12:43.520 to tax them, and the whole economy would have turned 0:12:43.880 --> 0:12:47.720 into an oligarchy instead of a steady state system. Now, 0:12:47.880 --> 0:12:52.120 the idea behind Hammarabi was taken over from the Sumarians 0:12:52.240 --> 0:12:55.199 UH and their word for these depth cancelations. Think of 0:12:55.280 --> 0:12:57.960 it as a clean slate. Everything goes back to the 0:12:57.960 --> 0:13:01.280 way things were before the christ Us. And the word 0:13:01.360 --> 0:13:05.240 for clean slate in Sumerian was a margie from Amma 0:13:05.679 --> 0:13:08.800 the mother. It was the mother condition, meaning it's the 0:13:08.800 --> 0:13:12.040 original condition. The whole idea is, how do you come 0:13:12.080 --> 0:13:14.960 out of a crisis, whether it's a doubt, drought, or 0:13:15.120 --> 0:13:18.360 disease and end up in the kind of way you 0:13:18.400 --> 0:13:21.760 were before, which you assume to be rough balanced. People 0:13:21.840 --> 0:13:25.199 produce enough to live and pay their taxes and get 0:13:25.240 --> 0:13:29.440 by and conduct normal activity. How do you restore the 0:13:29.480 --> 0:13:32.720 ability of life to get back to normal uh so 0:13:32.800 --> 0:13:35.440 that the equivalent would be in modern days. How do 0:13:35.480 --> 0:13:38.920 you let restaurants reopen without having to say, well, we're 0:13:38.960 --> 0:13:41.400 just going to go out of business rather than pay 0:13:41.440 --> 0:13:43.800 all the money that we owe that we end up 0:13:43.800 --> 0:13:47.040 working for the landlords and uh for the creditors through 0:13:47.120 --> 0:13:51.280 the city. How do you enable the cities to start 0:13:51.360 --> 0:13:54.600 their transportation system again at afford at rates that people 0:13:54.840 --> 0:13:57.800 can afford to pay on the subway or the other transportation. 0:13:58.120 --> 0:14:02.760 How do you prevent the economy from being permanently wounded? 0:14:03.160 --> 0:14:05.719 And again, the only way to do it is to 0:14:06.559 --> 0:14:09.720 write down UH say the deaths don't have to be paid. 0:14:10.040 --> 0:14:14.719 Somebody has to suffer because as Tracy pointed out, that 0:14:14.840 --> 0:14:18.439 one person's death is another person's claim. And uh, if 0:14:18.480 --> 0:14:21.880 you don't pay the debt, then some uh saver or 0:14:22.120 --> 0:14:24.640 the creditor is not going to be paid. And in 0:14:24.640 --> 0:14:27.760 this case it would be either the landlords are not 0:14:27.800 --> 0:14:33.360 paid or in special conditions where small small landlords, they'd 0:14:33.400 --> 0:14:36.240 lose the property in some way. The banks and the 0:14:36.280 --> 0:14:40.880 creditors are obliged, obliged to take the loss because they're 0:14:41.200 --> 0:14:44.880 rich enough to take the loss without disrupting society. If 0:14:44.920 --> 0:14:48.200 you have the debtors absorb the loss, society is disrupted 0:14:48.200 --> 0:14:52.000 and torn apart, and the tax systems turn apart. If 0:14:52.040 --> 0:14:54.840 the creditors lose, well they're not quite as rich as 0:14:54.880 --> 0:14:57.560 they used to be, but they still get by. That's 0:14:57.560 --> 0:15:00.960 why Hammurabi did not cancel the business debts debts of 0:15:01.080 --> 0:15:04.680 merchants debts that were denominated in silver for trade. None 0:15:04.720 --> 0:15:09.400 of the silver business steps were canceled. Only the personal 0:15:09.480 --> 0:15:13.080 debts manly of cultivators on the land were canceled. Same 0:15:13.080 --> 0:15:16.800 thing in Rome when UH Emperor Hadrian canceled the debts. 0:15:17.320 --> 0:15:21.280 Roman been UH engaged in fighting with the north, with 0:15:21.320 --> 0:15:24.160 the Germans. He canceled the debts so that you wouldn't 0:15:24.200 --> 0:15:27.520 have the army falling into bondage the creditors so it 0:15:27.520 --> 0:15:30.840 couldn't fight in the army anymore, and UH defend Rome. 0:15:31.040 --> 0:15:34.360 Fifty years later Marcus Aurelius did the same thing for 0:15:34.400 --> 0:15:38.320 the same reason. So almost every economy has in the past, 0:15:38.720 --> 0:15:41.120 has UH come to the point where it says, well, 0:15:41.480 --> 0:15:45.000 it's easier to make the creditors absorb the loss than 0:15:45.040 --> 0:15:47.840 to have the rest of the economy fall into bondage 0:15:47.920 --> 0:15:53.280 and a transfer property to U endow a creditor class 0:15:53.320 --> 0:15:56.800 at forecloses, and UH we end up in an economy 0:15:56.880 --> 0:15:59.600 with a very different shape. Do you really want the 0:15:59.640 --> 0:16:03.440 econom made a change and straight that way? So I 0:16:03.720 --> 0:16:07.680 think there's a general sense out there that debt forgiveness 0:16:07.800 --> 0:16:13.560 or debt jubilieves are a really leftist policy. And I mean, 0:16:13.600 --> 0:16:16.960 you just gave us all these great historical examples. Hammurabi 0:16:17.160 --> 0:16:20.760 wasn't exactly a liberal, right. He set out some pretty 0:16:20.800 --> 0:16:24.680 tough punishments for for crime, for I think theft. Some 0:16:24.840 --> 0:16:27.840 thefts were punishable by death. You laid out a really 0:16:27.880 --> 0:16:31.880 good rational economic reason why he would be interested in 0:16:31.920 --> 0:16:36.080 depth forgiveness. But I'm curious why that rationale doesn't seem 0:16:36.160 --> 0:16:40.720 to resonate in modern day times, especially in the US. 0:16:40.760 --> 0:16:44.120 As Joe kind of mentioned in the intro, whenever you 0:16:44.320 --> 0:16:47.080 talk about debt forgiveness in the States, even if it's 0:16:47.120 --> 0:16:49.840 something like student loans, you seem to get this knee 0:16:49.920 --> 0:16:54.120 jerk reaction from people who say, well, you know, I 0:16:54.240 --> 0:16:57.400 paid my student loans, why do you get a free ride? 0:16:58.120 --> 0:16:59.920 And it feels like once the system is in motion, 0:17:00.000 --> 0:17:02.480 it's very hard to change it. Why do you think 0:17:02.520 --> 0:17:06.120 the attitudes are so different now to I guess what 0:17:06.160 --> 0:17:11.560 they were in in ancient Samaria. I think because of unfamiliarity, 0:17:12.080 --> 0:17:15.600 uh with with history and the fact that you meant that, uh, 0:17:15.920 --> 0:17:20.720 the left in America doesn't discuss debt or finance. I 0:17:21.000 --> 0:17:25.320 don't think I've had any discussions about finance or debt 0:17:25.359 --> 0:17:29.280 for business or even monetary policy with the left at all. 0:17:30.119 --> 0:17:33.400 I've talked with federal reserve branches. I talked to Wall 0:17:33.440 --> 0:17:36.560 Street people, I talked to financial people, I talked to 0:17:36.800 --> 0:17:41.080 a Republican politicians. Nobody on the left has been interested 0:17:41.119 --> 0:17:45.560 in this. And in fact, in China, where I was 0:17:45.600 --> 0:17:49.000 a professor for the last few years in Beijing at 0:17:49.000 --> 0:17:52.720 Peking University, I went over a few years ago along 0:17:52.760 --> 0:17:55.600 with David Harvey at colleague of mine from Cooney here 0:17:55.600 --> 0:17:59.159 in New York, and UH, we didn't find any discussion 0:17:59.240 --> 0:18:01.760 in China. What are you going to do about the 0:18:01.840 --> 0:18:06.440 Chinese housing boom that's come up with all of the 0:18:06.480 --> 0:18:10.119 people borrowing to buy a real estate on credit. And 0:18:10.400 --> 0:18:14.840 because everything has to be couched in terms of Marxist 0:18:14.840 --> 0:18:17.359 capital there, because they say that there are Marxist state 0:18:17.920 --> 0:18:21.240 David Harvey said, well, you know Marks more than Volume 0:18:21.280 --> 0:18:24.440 one of Capital, which is all about labor and UH, 0:18:24.440 --> 0:18:28.800 employee employees working for their employers their volumes two and three. 0:18:28.800 --> 0:18:33.040 In Capital, Volume three, Mark talks about how debt grows 0:18:33.320 --> 0:18:37.480 by its own purely mathematical laws which have nothing to 0:18:37.560 --> 0:18:42.520 do with the economic rate of growth. UH. The financial 0:18:42.560 --> 0:18:47.120 system is wrapped around UH the economy as a whole 0:18:47.119 --> 0:18:52.640 and really is independent from capitalism. It existed long before capitalism. Uh, 0:18:52.680 --> 0:18:57.240 and probably and obviously is existing after capitalism In China, 0:18:57.560 --> 0:19:00.359 they did not seem very interested in the lend of 0:19:00.440 --> 0:19:03.159 approach at all. In fact, we could see that it 0:19:03.200 --> 0:19:06.560 made them feel very uncomfortable to talk about that. So 0:19:06.720 --> 0:19:09.520 I think the people who are realizing that something has 0:19:09.560 --> 0:19:13.840 to be done about that are mainly financial. They're mainly 0:19:13.840 --> 0:19:16.840 in Wall Street. For years I worked with Chase Manhattan 0:19:17.520 --> 0:19:20.359 is our balance of payments economists, And it was the 0:19:20.400 --> 0:19:23.280 banks that saw, well, wait a minute, how much can 0:19:23.520 --> 0:19:26.200 a third world country afford to pay? How much can 0:19:26.640 --> 0:19:29.760 such and such an industry afford to pay? The banks 0:19:29.800 --> 0:19:33.760 know that many sectors can't pay. The rest of the 0:19:33.760 --> 0:19:36.679 economy isn't looking at this because there's an assumption. Like 0:19:37.160 --> 0:19:40.000 you said that, the assumption is that anybody can pay 0:19:40.320 --> 0:19:42.960 if they just cut back on they're spending enough. But 0:19:43.040 --> 0:19:45.919 that's not the case. Uh. You mentioned student loans, and 0:19:45.960 --> 0:19:48.920 certainly many people think, well, I really straight by to 0:19:48.960 --> 0:19:53.120 pay my student loans. Why would other student loans be forgiven? Well, 0:19:53.160 --> 0:19:55.600 the answer is simple. If you were able to straight 0:19:55.680 --> 0:19:58.199 by and pay your student loans, good for you. You 0:19:58.240 --> 0:20:01.360 were able to survive most of the people who don't 0:20:01.359 --> 0:20:04.560 pay their student loans are not paying because they're going 0:20:04.600 --> 0:20:07.320 to the movies, or they're gambling, or they're consuming more. 0:20:07.560 --> 0:20:10.359 They're paying because they really don't have the money to 0:20:10.440 --> 0:20:15.040 do what you did to to scrape and pay, especially minorities, 0:20:15.040 --> 0:20:18.480 so have gone to junk colleges, the sort of private 0:20:19.119 --> 0:20:21.320 colleges that say they're going to get them a job 0:20:21.359 --> 0:20:25.920 and manual labor some kind of technology that really doesn't work. 0:20:26.160 --> 0:20:30.120 There are many people stuck with loans that they're unable 0:20:30.160 --> 0:20:32.800 to pay. And if they do pay, it suppose that 0:20:33.080 --> 0:20:36.359 all the people student loans now actually have to pay 0:20:36.640 --> 0:20:39.919 the student loans. If they then they're not going to 0:20:39.960 --> 0:20:43.160 have enough money to take out a mortgage to buy 0:20:43.920 --> 0:20:46.840 a home of their own uh and form a family. UH. 0:20:46.880 --> 0:20:49.040 They're going to have to live with their parents. UH. 0:20:49.160 --> 0:20:52.120 They get married, what are the children going to move 0:20:52.119 --> 0:20:54.840 in with the wife? And kids going to move in 0:20:54.840 --> 0:20:57.880 with their parents? The having to pay the student loan 0:20:58.000 --> 0:21:01.639 crowds out the ability to go to mortgage loan to 0:21:01.760 --> 0:21:04.040 take out other loans you need. And then of course 0:21:04.119 --> 0:21:08.560 you have the medical UH debt that is probably the 0:21:08.600 --> 0:21:13.280 maiden source of bankruptcy for many many people, you get sick, 0:21:13.520 --> 0:21:16.480 you go into the hospital, or even if you get tested, 0:21:16.800 --> 0:21:20.160 you're you're broke. And if the Federal Reserve is direct 0:21:20.240 --> 0:21:23.400 when it said that half the Americans cannot raise four 0:21:23.480 --> 0:21:27.560 hundred dollars in an emergency, and it costs uh that 0:21:27.640 --> 0:21:30.280 much just to have a COVID test. UH, And it 0:21:30.359 --> 0:21:33.119 costs maybe two thousand dollars or more if you go 0:21:33.160 --> 0:21:35.520 in and just to go and be admitted to a hospital. 0:21:35.760 --> 0:21:38.960 You can imagine the devastation that this causes to people 0:21:39.080 --> 0:21:42.480 that UH, not paying a debt is not a matter 0:21:42.520 --> 0:21:46.280 of choice. It's a matter of the money, isn't there Michael, 0:21:46.320 --> 0:21:48.880 I want to go back to something you said, which 0:21:48.920 --> 0:21:51.040 is just that you know, you could look at the 0:21:51.080 --> 0:21:55.640 current situation in which all these different entities, whether it's restaurants, 0:21:55.760 --> 0:22:00.480 whether it's museums, whether it's the New York City Transit Authority, UM, 0:22:00.520 --> 0:22:02.239 they all owe a lot of money. And there are 0:22:02.240 --> 0:22:04.920 sort of two different paths we could take. We could 0:22:04.960 --> 0:22:07.720 cancel all the debt or or some level of it 0:22:07.840 --> 0:22:11.520 canceled debt, or you have the government print a lot 0:22:11.520 --> 0:22:14.560 of money and UM sort of allow people just give 0:22:14.600 --> 0:22:16.760 it to people to make them whole. And you also 0:22:16.840 --> 0:22:18.439 said they're going to sort of back to the ancient 0:22:18.480 --> 0:22:20.960 times that UM, a lot of the debt that was 0:22:21.000 --> 0:22:25.280 in fact canceled was tax debt, so public debt essentially 0:22:25.359 --> 0:22:28.840 that the cost of the debt cancelation would essentially be 0:22:28.880 --> 0:22:31.600 on the public sector balance sheet. And so I'm curious 0:22:31.640 --> 0:22:37.639 whether functionally speaking, you know, talking about debt cancelation in 0:22:37.760 --> 0:22:41.160 terms of ripping it up sounds pretty radical. Talking about 0:22:41.520 --> 0:22:45.400 massive fiscal aid UM so that all these different entities 0:22:45.400 --> 0:22:48.119 could pay their bills during the crisis sounds a little 0:22:48.280 --> 0:22:51.840 less radical. But I'm curious if functionally they're kind of 0:22:51.880 --> 0:22:55.359 the same thing. This idea that what UM sort of 0:22:55.359 --> 0:22:58.480 in the ancient days was putting the you know, having 0:22:58.520 --> 0:23:01.400 the public balance sheet be the bearer of the losses. 0:23:02.080 --> 0:23:06.439 It's more translatable to aggressive fiscal expansion as opposed to 0:23:06.480 --> 0:23:11.280 pure debt ripping up per se. That happens very well. Uh. 0:23:11.520 --> 0:23:15.160 China is able to cope with this quite well because 0:23:15.320 --> 0:23:18.679 it's a monetary policy. It's central bank is part of 0:23:18.680 --> 0:23:22.520 the government. Uh. There are many companies in China for 0:23:22.600 --> 0:23:26.439 the last ten years are longer that have not been 0:23:26.480 --> 0:23:28.800 able to pay the debt. What do you do when 0:23:28.800 --> 0:23:33.880 a a industrial company can't pay the debt. Well, in UH, 0:23:33.920 --> 0:23:36.120 in the West, if a company can't pay a debt, 0:23:36.200 --> 0:23:39.000 it goes bankrupt and it's sold to the highest bidder, 0:23:39.240 --> 0:23:42.520 and it could be a foreign buyer, and UH it 0:23:42.600 --> 0:23:46.679 closes down and the workers are unemployed. But what the 0:23:46.720 --> 0:23:50.560 Bank of China does. The government simply keeps creating the 0:23:50.640 --> 0:23:56.240 credit and UH lending the bank the money that the 0:23:56.520 --> 0:23:59.840 corporation that's the debt or the money now here that 0:24:00.359 --> 0:24:04.080 the company would be called a zombie corporation. But China 0:24:04.119 --> 0:24:07.159 will just keep lending it the money. And then because 0:24:07.200 --> 0:24:09.960 it creates the money, it'll write it, write it off. 0:24:10.400 --> 0:24:12.840 It's easy to cancel the debts when the debts you're 0:24:12.880 --> 0:24:16.399 canceling or owe to yourself. Honorabi could cancel the debts 0:24:16.600 --> 0:24:19.200 because most of the debts ultimately were over to the palace. 0:24:19.560 --> 0:24:24.119 He didn't have to deal with a independent financial class 0:24:24.320 --> 0:24:25.959 that said, wait a minute, we're going to lose if 0:24:25.960 --> 0:24:28.280 you cancel the debts. We're going to overthrow you if 0:24:28.320 --> 0:24:31.360 you tried to do that. He was canceling debts to themselves. 0:24:31.440 --> 0:24:34.960 The Roman emperors were canceling debts owed to themselves, not 0:24:35.080 --> 0:24:39.359