Debt

Risky Debt Spending Of Bottom Half Is Bolstering The Economy

Published by Anonymous (not verified) on Mon, 30/07/2018 - 2:00am in

Tags 

Debt, inequality

By almost every measure, the U.S. economy is booming. But a look behind the headlines of roaring job growth and consumer spending reveals how the boom continues in large part by the poorer half of Americans fleecing their savings and piling up debt.

Interview with Martin Sandbu of the Financial Times

Published by Anonymous (not verified) on Fri, 27/07/2018 - 9:47pm in

I was interviewed by Martin Sandbu of the Financial Times about the nature of money, in particular the importance of borrowers to the creation of money. A video was filmed at Bank Job, a wonderful charity dedicated to a) promoting understanding of money, b) cancelling the debts of the people of Walthamstow and c) using art to both advocate and fundraise. A link to their website is included here.

Ann being interviewed by Daniel Edelstyn

 

 

 

 

 

 

 

 

 

 

 

Loan Stars

Published by Anonymous (not verified) on Tue, 10/07/2018 - 5:00pm in


A new game show called “Paid Off” will relieve a contestant’s student loan debt - if they win. Even the quiz show economy sucks for millennials.

An Analysis of Financial Flows in the Canadian Economy

Published by Anonymous (not verified) on Fri, 06/07/2018 - 6:35am in

An essential but perhaps overlooked way of looking at the economy is a sector financial balance approach. Pioneered by the late UK economist Wynne Godley, this approach starts with National Accounts data (called Financial Flow Accounts) for four broad sectors of the economy: households, corporations, government and non-residents.

Here’s how it works: in any given quarter or year each sector can be a net borrower or lender, but the sum of the four sectors’ borrowing/lending must equal to zero. This is an accounting identity reflecting the fact that one sector’s borrowing must be another’s (or the combination of all others’) lending.

Consider a government deficit. The flip side of that deficit is that some other sector(s) is in credit by the same amount. For example, a $1 billion in government borrowing must be matched by $1 billion in lending from some combination of households, businesses and non-residents. The same is true about the balances for any other sector. The overall balance for the domestic economy (households, corporations and government) must be offset by an equivalent balance vis-à-vis non-residents.

We can look at these flows over time and map them on to events and policy actions affecting the Canadian economy. Some caution must be taken around interpreting causation in this analysis, but it is a useful framework for thinking about what’s happening in the economy.

Figure 1 shows the four sector balances going back to 1990 (as a percentage of GDP). The lead up to and period after the 2008 global financial crisis is also of great interest. Lines above zero represent a credit position, or net lending; below zero is a deficit position, or net borrowing.

Figure 1:

Source: Statistics Canada, Financial Flow Accounts, Table: 36-10-0578-01 (formerly CANSIM  378-0119)

 

Let’s start with government, in this case the combined federal and provincial government balance (in grey). Many readers will remember the large government deficits of the 1980s and early 1990s, which were headline news and to this day have biased the thinking of all political parties towards austerity. In the early 1990s, those government deficits were largely financed by households (blue) and non-residents (yellow).

As the Canadian economy recovered from a bad recession in the early 1990s, it gained strength through the rest of the decade. Strong revenue growth combined with spending restraint drove combined federal and provincial deficits to zero by 1997, followed by surpluses for most of the next decade (apart from two very small deficits in 2002 and 2003).

In the wake of the 2008 financial crisis we then see the government balance drop to a deficit of 4.7% of GDP in 2010, reflecting expansionary fiscal policy. Relative to GDP these later deficits are nowhere near as large as the deficits in the early 1990s. In each case of deficit, however, it is useful to remember the flip side: the private sector wanted to buy government bonds. Around 2008-10 in particular, investors wanted safe havens in which to place their money.

The changing behaviour of households (in blue) is significant. Historically, it was households who were net lenders to corporations and governments. I was not able to get data prior to 1990 online but that surplus position for households continues before 1990 as well.

That dynamic changes in the mid-1990s. As governments borrowed less, households lent less. But when governments turn to deficits after 2008 it is not households from whom they are borrowing (as would have been expected given historical patterns). Indeed, households become net borrowers as of 1997 and remain so to this day, with net borrowing peaking at 4.8% of GDP in 2007. There is some retrenchment back to 2.2% of GDP by 2009, but household borrowing starts to grow again in the 2013 to 2017 period, and hits 3.5% of GDP in 2017.

This should not be a surprise to anyone following the Canadian economy, in particular the run-up in mortgage debt in recent years. This era, especially 2001 onward, is characterized by very low interest rates, which enable households to take on more debt for a given level of income. And as home prices rose, this new equity for homeowners allows for even greater debt loads. Unfortunately, these data do not break down the distribution within the household sector, so the total is masking some deeply indebted households while some percentage of wealthy households would be in credit positions.

What about corporations? Historically corporations borrowed from households (before the period in Figure 1), but starting in the 1990s, then really picking up in the 2000s is the fact that corporations become net lenders. A study from Statistics Canada attributed this to surging profits accompanied by a slowdown in capital investment (i.e. machinery, equipment and factories) and an increase in financial investments. This pattern of “dead money” – in the words of then-governor of the Bank of Canada Mark Carney – has deteriorated in recent years and the corporate sector even goes into deficit in 2015.

Figure 2 breaks out the corporations balance into financial (banks, insurance companies, etc) and non-financial corporations. Financial corporations are consistently in a net lender position, as would be expected. Non-financial corporations show greater volatility, but notably swing into a net borrowing position since 2012.

Figure 2: Net financial investment of financial and non-financial corporations

 

Finally, go back to Figure 1 and look at non-residents. In the early 1990s non-residents lent to Canadian governments, but during the 1999-2007 period Canadian corporations were net lenders to non-residents, perhaps reflecting trade and investment liberalization.

After 2008, we see a dramatic shift to non-resident lending, and at fairly large magnitudes of around 4% of GDP per year. Even while government deficits shrink after 2010, the total inflows from non-residents continue through to 2017. These data do not tell us from which countries the flows from non-residents are coming, although the US is historically Canada’s largest foreign investor by far, followed by several European countries (Netherlands, Luxembourg, UK and Switzerland).

Overall, this analysis shows some major shifts in the relationships across sectors of the Canadian economy. The shift of households into an ongoing deficit position is notable, as is the role of non-resident lending in recent years. Restrictions to dampen housing markets and the introduction of foreign buyer taxes in BC and Ontario suggest non-resident lending will decline as a share of GDP. And the record levels of household indebtedness, plus increases in interest rates, also point to a potential rebalancing for the household sector.

** With thanks to Joelle Leclaire and David Pringle for comments on an earlier draft.

An Analysis of Financial Flows in the Canadian Economy

Published by Anonymous (not verified) on Fri, 06/07/2018 - 6:35am in

An essential but perhaps overlooked way of looking at the economy is a sector financial balance approach. Pioneered by the late UK economist Wynne Godley, this approach starts with National Accounts data (called Financial Flow Accounts) for four broad sectors of the economy: households, corporations, government and non-residents.

Here’s how it works: in any given quarter or year each sector can be a net borrower or lender, but the sum of the four sectors’ borrowing/lending must equal to zero. This is an accounting identity reflecting the fact that one sector’s borrowing must be another’s (or the combination of all others’) lending.

Consider a government deficit. The flip side of that deficit is that some other sector(s) is in credit by the same amount. For example, a $1 billion in government borrowing must be matched by $1 billion in lending from some combination of households, businesses and non-residents. The same is true about the balances for any other sector. The overall balance for the domestic economy (households, corporations and government) must be offset by an equivalent balance vis-à-vis non-residents.

We can look at these flows over time and map them on to events and policy actions affecting the Canadian economy. Some caution must be taken around interpreting causation in this analysis, but it is a useful framework for thinking about what’s happening in the economy.

Figure 1 shows the four sector balances going back to 1990 (as a percentage of GDP). The lead up to and period after the 2008 global financial crisis is also of great interest. Lines above zero represent a credit position, or net lending; below zero is a deficit position, or net borrowing.

Figure 1:

Source: Statistics Canada, Financial Flow Accounts, Table: 36-10-0578-01 (formerly CANSIM  378-0119)

 

Let’s start with government, in this case the combined federal and provincial government balance (in grey). Many readers will remember the large government deficits of the 1980s and early 1990s, which were headline news and to this day have biased the thinking of all political parties towards austerity. In the early 1990s, those government deficits were largely financed by households (blue) and non-residents (yellow).

As the Canadian economy recovered from a bad recession in the early 1990s, it gained strength through the rest of the decade. Strong revenue growth combined with spending restraint drove combined federal and provincial deficits to zero by 1997, followed by surpluses for most of the next decade (apart from two very small deficits in 2002 and 2003).

In the wake of the 2008 financial crisis we then see the government balance drop to a deficit of 4.7% of GDP in 2010, reflecting expansionary fiscal policy. Relative to GDP these later deficits are nowhere near as large as the deficits in the early 1990s. In each case of deficit, however, it is useful to remember the flip side: the private sector wanted to buy government bonds. Around 2008-10 in particular, investors wanted safe havens in which to place their money.

The changing behaviour of households (in blue) is significant. Historically, it was households who were net lenders to corporations and governments. I was not able to get data prior to 1990 online but that surplus position for households continues before 1990 as well.

That dynamic changes in the mid-1990s. As governments borrowed less, households lent less. But when governments turn to deficits after 2008 it is not households from whom they are borrowing (as would have been expected given historical patterns). Indeed, households become net borrowers as of 1997 and remain so to this day, with net borrowing peaking at 4.8% of GDP in 2007. There is some retrenchment back to 2.2% of GDP by 2009, but household borrowing starts to grow again in the 2013 to 2017 period, and hits 3.5% of GDP in 2017.

This should not be a surprise to anyone following the Canadian economy, in particular the run-up in mortgage debt in recent years. This era, especially 2001 onward, is characterized by very low interest rates, which enable households to take on more debt for a given level of income. And as home prices rose, this new equity for homeowners allows for even greater debt loads. Unfortunately, these data do not break down the distribution within the household sector, so the total is masking some deeply indebted households while some percentage of wealthy households would be in credit positions.

What about corporations? Historically corporations borrowed from households (before the period in Figure 1), but starting in the 1990s, then really picking up in the 2000s is the fact that corporations become net lenders. A study from Statistics Canada attributed this to surging profits accompanied by a slowdown in capital investment (i.e. machinery, equipment and factories) and an increase in financial investments. This pattern of “dead money” – in the words of then-governor of the Bank of Canada Mark Carney – has deteriorated in recent years and the corporate sector even goes into deficit in 2015.

Figure 2 breaks out the corporations balance into financial (banks, insurance companies, etc) and non-financial corporations. Financial corporations are consistently in a net lender position, as would be expected. Non-financial corporations show greater volatility, but notably swing into a net borrowing position since 2012.

Figure 2: Net financial investment of financial and non-financial corporations

 

Finally, go back to Figure 1 and look at non-residents. In the early 1990s non-residents lent to Canadian governments, but during the 1999-2007 period Canadian corporations were net lenders to non-residents, perhaps reflecting trade and investment liberalization.

After 2008, we see a dramatic shift to non-resident lending, and at fairly large magnitudes of around 4% of GDP per year. Even while government deficits shrink after 2010, the total inflows from non-residents continue through to 2017. These data do not tell us from which countries the flows from non-residents are coming, although the US is historically Canada’s largest foreign investor by far, followed by several European countries (Netherlands, Luxembourg, UK and Switzerland).

Overall, this analysis shows some major shifts in the relationships across sectors of the Canadian economy. The shift of households into an ongoing deficit position is notable, as is the role of non-resident lending in recent years. Restrictions to dampen housing markets and the introduction of foreign buyer taxes in BC and Ontario suggest non-resident lending will decline as a share of GDP. And the record levels of household indebtedness, plus increases in interest rates, also point to a potential rebalancing for the household sector.

** With thanks to Joelle Leclaire and David Pringle for comments on an earlier draft.

Global Economy A Giant Debt Scam,What the Financial Elite Don’t Want You to Know

Published by Anonymous (not verified) on Mon, 11/06/2018 - 9:01am in

Tags 

Capitalism, Debt

Capitalism collapsed in 2008, just as communism had collapsed in 1991 — the system we have now is something else This is an argument Varoufakis has made many times, including in his 2011 book “The Global Minotaur.” As he expressed it to me, the financial crisis of 2008 led to “a wholesale collapse of what used to be called capitalism,” which has not recovered nearly as much as most people believe. What we have instead is an almost galactic-scale system of moving debt around to conceal the various flaws and shortfalls in the system. Varoufakis calls it “bankrupt-ocracy,” in which enormous but endangered or bankrupt financial institutions wield enormous power over the rest of society. “That’s not capitalism.” And on the subject of shell games …

Why a federal surplus will cost you money

Published by Anonymous (not verified) on Thu, 07/06/2018 - 5:54pm in

People have been led to believe, wrongly, that their personal financial circumstances will improve when the federal budget is in surplus but the opposite is true.  A federal surplus occurs when the government taxes more than it spends, (and what the hell point is that?). The net result  is billions of dollars being sucked out of the economy.

The post Why a federal surplus will cost you money appeared first on Renegade Inc.

The IMF’s Surprising Interventions in the Politics of Austerity

Published by Anonymous (not verified) on Tue, 01/05/2018 - 5:23pm in

The politics of austerity remains the central economic policy debate of our age. How far should governments restrain public spending given increased deficit and debt levels? Which economic policy targets warrant the highest prioritisation – reducing national debt to secure economic credibility, or using fiscal and other policy levers to bolster economic growth? The IMF, as a key source of authoritative economic policy expertise, has taken a somewhat surprising stance – seeking to reshape how these austerity-related economic policy questions get understood. Some argue that the Fund, after a brief flirtation with Keynesianism in 2008, reverted to pre-crisis fiscally conservative orthodoxy. In fact, as my new book details, the Fund’s role within the politics of austerity has been much more critical and heterodox than that.

The IMF & World Bank’s Spring meetings with finance ministers and central bankers are one key forum where the IMF performs its mandated role as conduit of international economic co-ordination, and its self-appointed role as global arbiter of ‘sound’ economic policy. Christine Lagarde set out the IMF’s policy priorities for the 2018 meetings, warning of the dangers of rising protectionism. Departing from the Fund’s customary under-statedness, Lagarde ominously warned that the multilateral trade ‘system of rules and shared responsibility’ was ‘in danger of being torn apart’.

For the liberal-oriented IMF to urge all to ‘redouble our efforts to reduce trade barriers and resolve disagreements without using exceptional measures’ is perhaps not surprising.  However – other elements of the Fund prescriptive policy discourse indicate clearly that the IMF is not what it used to be. Key departures include increased enthusiasm for counter-cyclical economic policy, a more sceptical view of financial markets and their causal links to instability and systemic risk, and heightened appreciation of ‘non-linear’ threats such as deflation and hysteresis (ratcheting up long-term unemployment). Gone, too, are the days of ‘one-size fits all’ policy recommendation. The post-crash Fund offers more differentiated policy advice, and betrays much less fiscal and intellectual conservatism than it used to. This, as Ilene Grabel put it, is ‘not your grandfather’s IMF’.

The IMF and the Politics of Austerity substantially revises our understanding of the IMF’s economic policy thinking. The IMF has worked to redefine ‘sound’ fiscal policy and expand policy space for certain advanced economy governments, countering hawkish voices in politics of austerity debates. Fund intellectual authority has been used to challenge important elements of the pre-crisis economic orthodoxy, highlighting the damaging folly of all countries pursuing fiscal consolidation at once. Its crisis-defining economic ideas, and crisis legacy defining ideas, were important in constructing particular interpretations of the global financial and Eurozone crises in ways which prioritised particular policy responses.

For a decade now, the IMF has consistently challenged the singular focus on cutting public expenditure to bring debt and deficits down, and has advanced the case for tackling inequality using macroeconomic policy – including increased social transfers and augmented progressivity of income taxes. This unearths an important but under-explored potential linkage between Fund ideas, and ideational influence, and policy space enjoyed by governments.

The Repertoire of IMF Economic Ideas

Back in 2008, Fund leadership articulated what one might term a ‘Keynesian’ market failure understanding of the crisis, focussing on deficiencies of confidence and aggregate demand, and on the destabilising properties of financial markets. The Fund’s re-emphasising of Keynesian insights into liquidity traps and higher fiscal multipliers sat outside the normal policy ideas of most advanced economy governments. These had high policy salience given the conjuncture, yet they were not the lessons policy-makers had drawn from academic economics up until the crisis. The IMF advocated coordinated global fiscal stimulus, and then deployed its scientific reputation to make a series of carefully targeted interventions in the ‘growth ‘versus’ austerity’ debate.  Along the way, Fund economists put down a series of intellectual markers, spelling out flaws in the ‘expansionary fiscal contraction’ thesis, highlighting the increased potency of expansionary fiscal policy and public investment under recessionary conditions, and underlining how fiscal consolidation can be self-defeating.

Tackling inequality, surprisingly, is also now a major IMF policy priority. The Fund urges advanced economy governments to ensure that the burdens of adjustment and benefits of economic recovery are distributed equitably. Social spending and social transfers should be targeted on lower earners. This issue is justified as central to the Fund’s core mandate because IMF Research has unearthed a link between higher inequality and lower growth. The Fund’s repeated advocacy of redistributive fiscal policy, and greater progressivity of income tax, contrasts starkly with the pre-crash IMF’s reputation for austerity.

One important finding from the research is that there is a breadth, along a surprisingly wide continuum, of policy approaches reconcilable to ‘mainstream economic thinking’ in the wake of the global financial crisis. Thus there is no one single ‘lesson from economics’ that policy elites can imbibe. Rather, there is a cacophony of voices, and a range of respectable academic economic opinion. The ideological spectrum from advocates of ‘expansionary fiscal contraction’ to fulsome supporters of counter-cyclical fiscal activism covers a vast array of policy positions and prioritisations. Those seeking to adopt positions anywhere along this spectrum can seek and find corroboration from holders of Nobel prizes.

This gives the IMF scope to choose and prioritise within this menu of respectable economic thinking. The selection of which economic ideas and insights are afforded primacy is highly significant. In this light we can better appreciate the political role played by the Fund and other actors seeking to shape understandings of sound economic policy conduct. They can foreground particular rationales, insights and prioritisations when making policy recommendations. Whilst Fund surveillance and commentary is cloaked in scientific and technocratic parlance, how economic theory is invoked in its recommendation is inherently political.

The Malleability of Economic Orthodoxy

Analysing how the IMF contributes to prevailing understandings of sound or appropriate fiscal policy in this way reveals the malleability of economic policy credibility, and the contingent, changeable nature of economic policy orthodoxy. How prevailing views of ‘sound’ policy change is a deeply political process in which the Fund, for all the emphasis the institution places on the technocratic, scientific nature of its work, is intimately involved. As such, the IMF’s interpretive framework for evaluating economic policy is a key site of power in world politics.

The book’s analysis explores and reveals how economic ideas are always rooted in normative positions and ideological assumptions about how the economy and policy work. Isolating specific fiscal policy effects is difficult because factors other than fiscal policy have an impact on the economy, and growth has effects on fiscal policy as well as vice versa. Various techniques have been developed in economics to attempt to assess fiscal policy effects, but none is perfect. No ultimate ‘scientific’ judgement is possible and the economics profession is and always will be divided on this. In the background are underlying ideological views on the efficacy and desirability of public spending, state intervention, and public power playing a major role in the market economy.

Talking to lots of IMF economists, one discovers that the Fund is not uniform and singular, but rather contains various subcultures of economic thinking. This begets an internal politics of economic ideas with which IMF innovators have to contend. Social norms within the IMF need to be navigated by IMF staff and leadership seeking to advance or promote new economic policy understandings or positions. My research establishes institutionally constituted cognitive filters, such as operating within the Fund’s scientific and technocratic culture and its sedimented body of existing economic policy knowledge, through which IMF staff make sense of their role as pragmatic policy economists. This generates internal ‘hoops’ through which new ideas need to pass if they are to gain acceptance widely within the organisation and get taken up. To capture this I outline mechanisms of internal ideational change at the IMF: reconciliation (to existing Fund ideas), corroboration (using the IMF’s knowledge bank), and authoritative recognition (by leading economists). Also crucial is operationalisation – to achieve maximum longevity and increase their chance of shaping ‘how the Fund gets done’, ideas need to be, as one insider put it, ‘baked into guidance’. That is, incorporated into technical notes circulated to Fund desks as a guide to their day-to-day work. Provided these important ‘form’ conditions are met, the actual content of new post-crash IMF thinking is surprisingly open given the relatively broad repertoire of Fund thinking, past and present.

Yet once ideas gain acceptance internally, the real challenge comes when Fund leadership and surveillance missions seek to gain ‘traction’ for its new thinking with member governments. Whilst the IMF enjoys a privileged position in constructing economic rectitude, it has little direct leverage over countries not borrowing from it. For example, IMF entreaties to make income tax more progressive and use more social transfers to reduce inequality may, in some cases, fall on deaf ears. Thus, in seeking to reshape the politics of austerity, the IMF’s reforming reach exceeds its grasp.

Ben Clift is Professor of Political Economy at the University or Warwick, UK. His latest book, The IMF and the Politics of Austerity in the Wake of the Global Financial Crisis has recently been published with Oxford University Press. His broader research interests lie in comparative and international political economy, and he has published widely on the IMF, French and comparative capitalisms, the politics of economic ideas, capital mobility and economic policy autonomy.

The post The IMF’s Surprising Interventions in the Politics of Austerity appeared first on Political Economy Research Centre.

Bronze Age Redux

Published by Anonymous (not verified) on Sat, 28/04/2018 - 11:13am in

Tags 

Debt, jubilee

A GATHERING OF THE TRIBES
BRONZE AGE REDUX: On Debt, Clean Slates And What The Ancients Have To Teach Us

The Michael Hudson Interview by Harold Crooks for A Gathering of The Tribes Magazine.        

One of the most compelling sequences in the Oscar-winning Inside Job, Charles Ferguson’s indictment of Wall Street’s role in the 2008 global financial meltdown, involved not the banker culprits but their supporting cast. These were the Ivy League accomplices. Ferguson mightily skewered these economists for the cover they gave the sub-prime Hamptons dwelling wise guys whose rescue turned out to be a pretext for one of the largest reverse-Robin Hood wealth transfers in history. Though for the foreseeable future they enjoy their tenured posts, control prestigious academic journals and continue to prey on the unformed minds of students, the speculative financial implosion has shaken confidence in the economics academy. And through those cracks (to borrow from Leonard Cohen) shards of light are getting in. Economists once on the academic fringes – in university outposts like the University of Missouri Kansas City and Bard’s Levy Institute – are being looked to not only for understanding how to prevent bankers from setting the economy on fire again, but on how to build a social system that works for the majority.

          

Among the most brilliant of these heterodox economists is Michael Hudson. Coming to New York City in the 60s to study under a renowned classical music conductor, Michael switched to economics when he became beguiled by an accidental acquaintance with what he saw as the aesthetical flows inter-connecting natural and financial cycles and public debt.

His biography contains elements of an epic novel: growing up the son of a jailed Trotskyist labor leader in whose Chicago home he met Rosa Luxembourg’s and Karl Liebknecht’s colleagues; serving as a young balance of payments analyst for David Rockefeller whose Chase Manhattan Bank was calculating how much interest the bank could extract on loans to South American countries; touring America on Vatican-sponsored economics lectures; turning after a riot at a UN Third World debt meeting in Mexico to the study of ancient debt cancellation practices through Harvard’s Babylonian Archeology department; authoring many books about finance from Super Imperialism: The Economic Strategy of American Empire [1972] to J is For Junk Economics: A Guide to Reality in an Age of Deception [2017]; and lately, among many other ventures, commuting from his Queens home to lecture at Peking University in Beijing where he hopes to convince the Chinese to avoid the debt-fuelled economic model off which Western big bankers feast and apply lessons he and his colleagues have learned about the debt relief practices of the ancient civilizations of Mesopotamia. 

          

I talked to Michael about his forthcoming book Forgive Them Their Debts: Lending, Forfeiture and Redemption that comes with an astounding re-reading of the Bible and the true meaning of the life and persecution of Jesus. Based on scholarly breakthroughs in decoding ancient languages, it places a debt cancellation message inherited from Babylonian times at the center of Mosaic law and the Jewish Bible. And when it comes to Jesus, his message is revealed to be a social justice message. Through the lens of this reinterpretation, Jesus was actually an activist advocating for debt cancellation. He died not for the sins of the people but for their debts. 

          

My interview began with a question about the subject of his new book. I knew Michael has a following well beyond the professional classes. Some years ago on exiting the fancy Park Avenue apartment we borrowed to interview him for our film Surviving Progress [co-directed with Mathieu Roy], I was astonished to witness the Puerto Rican door man rush up to shake his hand and thank him for his appearances on progressive cable shows. It made me wonder if his book re-interpreting the Bible was designed to reach a working class audience, possibly even Trump voters.


Michael: Not at all. I originally wrote the book Forgive Them Their Debts: Lending, Forfeiture and Redemption, From Bronze Age Finance to the Jubilee Year as an extension of the archeological and the Assyriology work that I’ve been doing at Harvard University at the Peabody Museum since 1984. I originally called the book Bronze Age Finance, because I wanted to undertake a study of the origin of debt, and how societies dealt with debt that grew so large that it forced populations into debt bondage, and dependency …. 

And I wanted to study the background of Clean Slates, debt cancellations, and I found out that they begin in Sumer around 2500 BC. Every new ruler, when they would take the throne, would start his reign by canceling the debts. In Sumer, the word for that was amargi, in Babylonian the word during Hammurabi’s dynasty was andurarum. Then, after translating many of these debt cancellations from Hammurabi’s dynasty, and from neighboring near Eastern countries, I realized that this affected the interpretation of the Bible because the Jubilee year in the Bible, Hebrew deror, is a cognate to Babylonian andurarum, and the Jubilee year was word-for-word exactly the same debt cancellation and freeing of the bond servants and restoration of land that you had occur for 1,000 years in the Near East, and was still occurring in the first millennium BC. 

So my aim was not at a religious audience. The initial writing of the book was for economic historians and archeologists and Assyriologists who were part of the group at Harvard that has done the five volumes that I’ve co-edited on the origins of economic practices in the ancient Near East.



Tribes: That said, somewhere in the back of your mind, were you anticipating that what you discovered in antiquity would have application in the present?

Michael: Well, from the very beginning, after working on Wall Street, I realized something that should be mathematically obvious. The debts now today are too large to be paid without bankrupting society and polarizing it, in much the way that has occurred again and again in history. It occurred in Rome, it occurred earlier in Sparta. You have a constant historical movement here. So my focus primarily was to trace the history of debt cancellations. 

What I realized is that when Luke 4 reports the first speech of Jesus, when he goes to the temple and gives his first sermon, he unrolls the Scroll of Isaiah, and says he has come to proclaim the Jubilee year …. The word he used, and that Isaiah used, the deror, was this Babylonian, Near Eastern long tradition that was common throughout the whole Near East. 

Now most of the Biblical translations miss this point. They were translated in the 17th and 16th century, when people didn’t know cuneiform, so they had no idea what these words meant and what the background of the Jubilee year was. And 50 years ago, there was almost a universal idea that the Jubilee year was something idealistic, utopian, and could never actually be applied in practice. But we know that in Babylonia, Sumer and Near Eastern regions, it was applied in practice.

Not only do we have the royal proclamations, we have the lawsuits by debtors saying “This creditor didn’t forgive me the debt,” and the judgments for that. Each member of Hammurabi’s dynasty after him ending up with this great grandson Ammi-Saduqa had more and more detailed anderarum acts, debt cancellations, to close all the loopholes that creditors tried to resort to. 

So what Jesus was referring to was a very tangible fight. In his time, this was the fight throughout Greece, it was the fight throughout the whole ancient world – the fight to promote debt cancellation. The Dead Sea Scrolls show this.

For instance, Melchizedek 12 is a huge midrash of all of the Biblical citations of the Jubilee year, tying them together. And we now understand that the Dead Sea Scrolls were not a sectarian Essene product, but they were basically the library of the Temple of Jerusalem, that was sent and put in these caves for safekeeping during the civil wars. 

So what Jesus was referring to was what was the class war between creditors and debtors that swept throughout the whole period, including Rome itself. This has not been clear to most people who think they’re taking a literal version of the Bible. It’s very funny that the people who call themselves fundamentalist Christians will have dioramas of dinosaurs and human beings all sharing the same landscape, literally. But what they ignore is, if you take the Bible literally, it’s the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation.

Tribes: That’s extraordinary. Elsewhere you’ve made the point that it is important to understand the Bible was rewritten after the Jews returned from their Babylonian exile. What’s the significance of this in terms of your reading of Old Testament texts?

Michael: I wouldn’t say that the Bible was re-written after the exile, it was really codified and put together after the exile. This has been the normal view of the Bible for the last 60 or 70 years in Biblical scholarship, that realizes when it was put together and under what circumstances. It was put together logically to weave the tradition of debt cancellation into the whole Jewish history. To make it really the history of how the debt crises had disrupted Jewish and Judean/Israelite society for hundreds of years.

Tribes: What are the textual sources that give you confidence in your reading of the Bible?

Michael: The first textual sources are the Laws of Hammurabi, the debt cancellations of the Sumerians, Enmetena, Urukagina … In my book I go epoch by epoch. Sumerian, the neo-Sumerian, Ur III period, the intermediate period, the Babylonian period, right down to the Egyptian Rosetta Stone, which is a similar debt cancellation. There are hundreds of documented official debt cancellations in great detail. These were inscribed publicly on bricks in the temples, or on statues that were put in the temples, or buried in the temple foundations. The central act of a ruler coming to power in the Near East was a debt amnesty. Forgiveness of money or taxes or duties owed to the palace, and debts owed to the palace. And by extension, debts owed to royal collectors, and to creditors in general, most of whom had some relationship to the palace. 

Business debts were not forgiven.

The debts that were forgiven were personal debts, agrarian debts, and the idea was to liberate the bond-servants so that they could be available to perform the corvée labor, which was the main kind of taxation in the Bronze Age, and serve in the army. If you were a debtor and you were a bond-servant to a creditor, you wouldn’t be available for corvée labor. You would be working (for) the creditor, you wouldn’t be available for the army. And you have this very clearly in Sparta in Greece, for instance, by the third century BC. The ranks of the army were depleted because the citizenry had lost its land tenure, and that’s what led kings Aegis and Cleomenes and Nabis to push for a debt cancellation to restore land ownership. 

So what we find is something that occurs not only in the Biblical lands, but in Greece, Rome, Egypt, the rest of the Near East. It was universal at that time, and there’s been almost no economic history of this. Either in the Bronze Age, or in Classical Antiquity. When I began to write this book in the 1980s, it was generally believed that these debt cancellations were simply utopian statements as I said. There was no idea that they were actually enforced. The idea seemed radical at the time. But now, after the five volumes that my group has published through Harvard, now these ideas are generally accepted by Assyriologists and archeologists. But they haven’t spread to the public at large yet, because of cognitive dissonance. People can’t believe that the debts actually were canceled. But this is what revolutions were all about in Greece and Rome for hundreds of years.

Tribes: And I’m assuming that there was sufficiently sophisticated knowledge of economics to explain that Clean slates, debt cancellation, Jubilees, were more than a self-serving interest of the nobility or the aristocracy, the monarch to have soldiers to go to war, that there was some larger purpose than merely freeing up peasants so that they could serve in military campaigns, that there was some knowledge that this was necessary for a sustainable economic system.

Michael: Bronze Age rulers in Sumer and Babylonia never explained the reason or logic behind their acts. Later, Egyptians in the first century BC explained to Roman historians what the logic was. But the early Egyptian Pharaohs – nobody would explain. All we have are the records, “Here is the ruling.” There was no abstract economic logic as such, there was no discussion of abstract principles. That only occurred in the first millennium BC, and it’s in the first millennium that Egyptians explained it to the Roman historians – that if you didn’t cancel the debts, you wouldn’t have anyone to fight in the army or perform the corvée labor that Egypt and other countries depended on to build their basic infrastructure. 

The reason there wasn’t an abstract discussion was that there was no Milton Friedman or Margaret Thatcher to advocate a libertarian free-enterprise economy. Their economy was what seemed natural to them, and it never occurred to them to develop economics and an individualistic explanation of things. It simply seemed this is how a fair world works.

Tribes: Did promulgating these Clean Slates that you’re describing occur in relatively primitive societies of their era, or even in more complex ones?

Michael: I don’t like the word primitive. The societies were complex. The palatial economies of Sumer, Babylonia, other Near Eastern regions, Egypt, were by no means primitive. We’re not talking about tribal societies basically, or anthropological type societies, we’re talking about complex urban cultures, and really the origins of Western civilization are to be found not in Greece and Rome, or even in Judah and Israel, but in Sumer and Babylonia, where almost all of the techniques of economic enterprise, the charging of interest, weights and measures, monetary coinage begin.

Tribes: You’ve touched on this, but just so that I have it, whose debts got canceled in antiquity, and by whom were they canceled?

Michael: You begin with by whom they were canceled. Rulers canceled the debts. And it was very easy for them to do that without opposition, because in the beginning most of the debts that were owed to the palace itself – both in fees for services the palace provided, or the temple provided (the temple was part of the palace economy), or for land rent by sharecroppers, or for the provision of water and agricultural services to the land. So most of the debts were owed to the rulers themselves, or to their palace (tax) collectors who gradually became independent creditors by the wealth they made. So they were essentially debts owed to wealthy people who could afford not to collect it. 

If the debts had been collected, then the rulers would be undercutting their ability to obtain the labor of debtors – the agrarian debtors – for as I said, corvée services and for the army. The debts that were canceled were personal, agrarian debts. They were called barley debts. Silver debts, among merchants, were not canceled. Business debts were not canceled. Only debts by subsistence farmers were canceled so that they would not be subjected to bondage to the creditors, and so they would not forfeit their lands to monopolists who wanted to acquire the land and would essentially disenfranchise the population.

Tribes: Okay, so moving forward to the time of the Jesus figure and the New Testament, was debt forgiveness still an important practice under the Romans?

Michael: No. The Romans were the first society not to cancel the debts, and there was civil war over that. A century of civil war from 133 BC, when the Gracchi Brothers were killed for supporting the indebted population, to 29 BC when Augustus was crowned. There was a civil war where the advocates of debt cancellation were put to death. Just as Cleomenes in Sparta, in the late third century, was put to death, and Agis, his predecessor earlier in the third century BC, were put to death for advocating debt cancellation. So there was three centuries of constant civil war over this, and ultimately the creditors won, largely by political assassination of the advocates of debt cancellation, who almost all came from the upper class. They were upper class reformers, they were not lower-class particularly. They were the scholars, just as Jesus was a rabbi. 


So there was essentially not only personal assassination of advocates of debtors interests, advocates of pro-debtor laws and debt cancellation, but Sparta as a backer of oligarchy would attack democracies that sought to cancel the debts.

Tribes: You touched on that very effectively, and we used you talking about this time period, (in our documentary film) Surviving Progress. But I’ve seen it suggested that some scholars dispute the fact that debt cancellation could’ve been a reality at the time of Jesus, that the idea of a Jubilee makes no sense, because if debts could be canceled, who would lend money?

Michael: Well that’s the big fallacy. Most debts did not occur from lending money. It’s easier today to figure if you have a debt, you must have borrowed it. But three quarters of the debts in Babylonia, for instance – where we have records because they were on clay, cuneiform records that were baked and have survived – most debts were simply unpaid bills. The debts were unpaid taxes, unpaid debts, unpaid rent, and unpaid obligation for services that had been supplied. There was no initial lending of money, necessarily. Maybe one quarter of the circumstances were that. 

So the people who say lenders wouldn’t have lent miss the point that it’s like if somebody at the end of the spring doesn’t have enough money to pay the income tax that’s due. Nobody’s lent them this money, but the tax is due. So it’s an obligation that mounted up in the normal course of life, but they’ve fallen into arrears on it. It’s a payment arrears, not the result of a loan, except in some cases.



Tribes: Fascinating. This leads you to what for many readers of this interview and I assume of your book will come as an astonishing assertion: that Jesus was crucified for his views on debt. Who exactly in your reading of the Christ story are the powerful creditors that were so threatened by Jesus?

Michael: Well, just as the Bible said, they described the Pharisees as having greed and representing what they called the greedy class. And of course the main opponent of Jesus was Hillel. And it was Hillel that devised the Prosbul, which was an addendum to a debt note whereby the borrower would promise not to avail himself of his rights under the Jubilee year. So essentially the debtor would waive the rights under the Jubilee year, so that the creditor could collect even if the Jubilee year were done. And Jesus quite correctly said, “Look, every single book of the Bible from Kings onwards to Isaiah and the books of the prophet, this is the center of Mosaic law.” 

And the Bible, the Mosaic law, realized that by the first millennium, the kings not only in Israel and Judea, but in Persia and elsewhere, were basically representing the ruling class, the wealthy class. And the Bible is sort of unique in historical documents for showing that most of the kings were not good kings. The whole Jewish Bible is about bad kings. So Judaism took the debt cancellation out of the hand of kings, where it had been in the Near East, and put in the very center of their religion. In Leviticus 25, again and again the prophets would say, “We’ve freed you from bondage, and if you’re going to maintain Judaism, you have to respect the debt cancellation.” And the Biblical prophets warned, if you don’t cancel the debts, you’re going to be destroyed by Assyria, or by Babylonia. They blamed the capture and destruction of Judea and Israel on the fact that they had veered away from the law of God and did not cancel the debts.

Tribes: Did Jesus have any defenders amongst the elite?


Michael: He must have. I think many of his followers were from the elite. We know that he must have, because there was a whole Melchizedek sect, apparently, there was a whole group we know from the Dead Sea Scrolls that all of these different groups were producing these midrashes, which are collections of the Biblical statements of debt cancellation. It was very widespread as part of the war between debtors and creditors that was occurring throughout the entire region.

Tribes: So this would’ve been, in terms of today’s parlance, this would’ve been the kind of liberal, progressive elite of the era?

Michael: Yes. But a progressive elite that also had grounding in traditional Judaism, saying, “Wait a minute, this is what the center of our Bible is all about.”

Tribes: If Jesus was an activist, as you argue, was he part of a social movement to cancel debts?



Michael: Well, he was obviously trying to create his own social movement. We don’t know if there were other social movements there, and we don’t really know much about the Jubilee year in between the return of the exiles to Judah and the time of Jesus. They didn’t write on clay tablets, they wrote on perishable materials, so we don’t have the family wills, legal records, dowries and all the credit transactions that we have in the ancient Near East, where they wrote on clay.

Tribes: When does the concept of a general debt cancellation disappear historically?



Michael: I guess in about the second or third century AD, that was downplayed in the Bible. After Jesus died, you had, first of all, St Paul taking over, and basically Christianity was created by one of the most evil men in history, the anti-Semite Cyril of Alexandria. He gained power by murdering his rivals, the Nestorians, by convening a congress of bishops and killing his enemies. Cyril was really the Stalin figure of Christianity, killing everybody who was an enemy, organizing pogroms against the Jews in Alexandria where he ruled. 


It was Cyril that really introduced into Christianity the idea of the Trinity. That’s what the whole fight was about in the third and fourth centuries AD. Was Jesus a human, was he a god? And essentially you had the Isis-Osiris, ISIS figure from Egypt, put into Christianity. The Christians were still trying to drive the Jews out of Christianity. And Cyril knew the one thing the Jewish population was not going to accept would be the Isis figure and the Mariolatry that the church became. And as soon as the Christian church became the establishment rulership church, the last thing it wanted in the West was debt cancellation. 

You had a continuation of the original Christianity in the Greek Orthodox Church, or the Orthodox Church, all the way through Byzantium. And in my book And Forgive Them Their Debts, the last two chapters are on the Byzantine echo of the original debt cancellations, where one ruler after another would cancel the debts. And they gave very explicit reason for it: if we don’t cancel the debts, we’re not going to be able to field an army, we’re not going to be able to collect taxes, because the oligarchy is going to take over. They were very explicit, with references to the Bible, references to the jubilee year. So you had Christianity survive in the Byzantine Empire. But in the West it ended in Margaret Thatcher. And Father Coughlin.



Tribes: He was the ’30s figure here in the States.


Michael: Yes: anti-Semite, right-wing, pro-war, anti-labor. So the irony is that you have the people who call themselves fundamentalist Christians being against everything that Jesus was fighting for, and everything that original Christianity was all about.



Tribes: Has any modern society declared a Jubilee without a revolt of the creditor class?



Michael: Yes. There was a wonderful debt cancellation, the major debt cancellation of the modern era in 1947 and ’48: the German monetary reform, called the German economic miracle. The Allies canceled all German debts, except for debts owed by employers to their employees for the previous month, and except for minimum bank balances. It was easy for the Allies to cancel the debts, because in Germany most of the debts were owed to people who had been Nazis, and you were canceling the debts owed to the Nazis, who were the creditors at that time. Freeing Germany from debt was the root of its economic miracle. So that is the prime example of a debt cancellation in modern times that worked.

Tribes: Okay, now we’re coming up into the present. One in three Americans are reported to have a debt that’s been turned over to a private collection agency, and the ACLU found cases of court warrants being issued over almost every kind of consumer and medical debt. What forms of debt relief would you propose in the current circumstances?



Michael: Well the guiding principle is that debts that can’t be paid, won’t be. Default rates are rising, many people simply can’t pay their debt, unless they lose their home, unless they lose their job, or in some cases now, unless they lose their freedom and are put into debtor’s prisons down South. As you privatize prisons, they need someone else to put in the prisons besides black people. Debtors are the people who are keeping the privatized prison business going these days. 

So basically, you need, every few years, a start-over.

Tribes: Absent a world war or some such catastrophe, what might it take for debt cancellations to be adopted today as economic policy, given the power of Wall Street and the creditor class?

Michael: The first way to achieve this is by simply showing how debt tends to grow at compound interest, that it’s growing and growing, and all of the growth in American GDP, Gross Domestic Product, since 2008 has been to the financial sector to pay for the rising debt overhead. The tragedy was that when President Obama took office, he broke every promise that he’d made. He’d promised to write down the junk mortgage debts to the amount that could be paid. …

Tribes: That’s the subprime-

Michael: Yes. He essentially appointed Wall Street lobbyists to the key positions, as I’ve outlined in my book Killing The Host. The result is that the debts were not written down when they could’ve been. That means that the debts have been growing and growing and growing, and we’re in a chronic crisis, there has been no recovery. We are still in the 2008 debt crisis, and it cannot be resolved until the debts are written down. There’ll just be more and more poverty and more and more economic polarization.

Tribes: We’re very close to the end, Michael. Practically speaking, if for some unbelievably sci-fi circumstances, you found yourself as the President of the United States, in terms of debt cancellation, what would you focus on in terms of leading us back to a kind of sustainable future?

Michael: The issue of debt cannot be segregated from the overall organization of society. 

Now, just imagine if instead of banks and their bondholders holding student loans and profiting from it, if the government had made these loans, the government could easily forgive them, because it would be forgiving money owed to itself. But when you privatize not only education, but also student loans, that is what has led to the student loan crisis. It was completely unnecessary. But Joe Biden, as senator for the credit card companies centered in Delaware, pushed it through, saying, “We’ve got to make education a profit center for the banks. Our purpose is not to educate the population, it’s to create a situation where in order to get a job, in order to get a union card, they have to go into a lifetime of debt to the banks that cannot be wiped out by bankruptcy.” That’s the Democratic Party policy. And it’s what’s tearing the country apart. 

And it’s unnecessary, it’s Thatcherism. So Obama was really the American Margaret Thatcher in pushing forth this privatization. To do it, he realized you have to put in place a huge prison system, which you also privatize to give himself another constituency, especially in the southern states.  I don’t think Americans have realized that it doesn’t have to be this way. There was an alternative, and it was spelled out throughout the 19th century by nearly all the classical economists. The alternative has worked before for thousands of years in history. That’s why I wrote the history of the ancient Near Eastern and Judaic economies.



Tribes: Here’s a question drawn from this morning’s news, I got it right out of the Times. Steve Bannon is quoted as saying the following: “The new politics is not left versus right, it’s globalist versus nationalist.” Comment?

Michael: I think he’s quite right. The globalists are the neoliberals. They want to prevent any government from having the power to check their own oligarchic power. This is the same fight that occurred in Greece and Rome and Babylonia. For the last 5,000 years you’ve had a fight by people who want to be wealthy, breaking free of taxes, breaking free of regulations, and privatizing. They want to privatize what normally would be the public sector. And just as in antiquity, today’s neoliberals use violence. They call themselves free marketers, but they realize that you cannot have neoliberalism unless you’re willing to murder and assassinate everyone who promotes an alternative. That’s the first thing that the Chicago Boys did in Chile, after the murder of President Allende.

Tribes: That’s Milton Friedman?



Michael: Yes. Friedman’s gang closed every university economics department, except for the Catholic University that used the Chicago textbooks. That was followed by a decade of political assassination throughout Latin America, leading to the oligarchy in Brazil that has just put its presidential candidate Lula in jail. So you’re having the neoliberals use violence essentially to privatize, to turn the whole world economy into Margaret Thatcher’s England. A privatized set of monopolies by an elite class, essentially reducing the population at large to something very close to neo-feudalism.

Tribes: When I read the Steve Bannon quote to you, you immediately said he’s right, but I assume you wouldn’t go so far as his program to, in his words, “deconstruct the administrative state;” you wouldn’t be on board with that?

Michael: No. You asked what is the fight about? The fight is whether the state will be taken over, essentially to be an extension of Wall Street if you do not have government planning. Every economy is planned. Ever since the Neolithic (era), you’ve had to have (a form of) planning. If you don’t have a public authority doing the planning, then the financial authority becomes the planners. So globalism is in the financial interest – Wall Street and the City of London, doing the planning, not governments. They will do the planning in their own interest. So neoliberalism is the fight of finance to subdue society at large, and to make the bankers and creditors today in the position that the landlords were under feudalism.



Tribes: John Maynard Keynes famously quipped about policy makers being slaves to defunct economic theories. If orthodox economics is bankrupt, and our politics are slaves to defunct economic theories, where are we to look today for schools of economic thought with more to offer?

Michael: I think classical economic thought, from Adam Smith culminating in Marx, the last great political economist in the classical British/French tradition, discussed all the problems we have. The fight between finance capital and industrial capital is discussed in Volume 3 of Marx’s Capital. People imagine that we’re in industrial capitalism, but we’re really not. Industrial corporations have been taken over and financialized, run for financial gains, not for profit.

So the problem is now not simply the exploitation of wage labor. It’s that the financial system tries to operate without labor at all. It tries to depopulate instead of build up the population. It tends to impoverish the population instead of making money on a growing internal market. So an understanding of the distinction between what the 19th century classical economists hoped would be industrial capitalism and the tragedy of the finance capitalism that’s emerged since World War I, if people are aware of that, essentially that’s the best guide to the future.

That’s what I described in my book Killing The Host, and I’ve tried to provide a basic vocabulary in J Is For Junk Economics. If you have a vocabulary that can pierce through the euphemisms that you get in the mass media for economics, a vocabulary itself will organize your thoughts into a logical way of coping. So in addition to my book And Forgive Them Their Debts, these other two books are what I have to say about how to structure an economy.

Tribes: So it comes down to empowering people with a vocabulary that pierces what?



Michael: That pierces the fog of the euphemism of the mass media discourse that make it appear as if when GDP goes up, everybody is getting rich. When all the growth in GDP is only for the 1%, only for the financial sector, and the 99% are more and more impoverished.

Tribes: So one illustration of what you’re talking about in terms of the difference between finance and industrial capitalism would be explained by how such a huge proportion of available capital in our society today is going into stock buy-backs, for instance?

Michael: 92% of corporate revenue in the last five years has gone either into stock buy-backs or higher dividend payouts. That means only 8% has gone into new investment to expand production or employ more labor. So the financial business plan is one of asset stripping and shrinkage, not growth.

Nobody in the 19th century imagined that industrial capitalism would evolve along these self-destructive lines. They all believed that the most technologically efficient system would win out in a kind of Darwinian or Spencerian struggle of the fittest. But instead, you’ve had a covert, parasitic financial counter-revolution. The rentier class – land rent, monopoly rent, and high finance – have fought back and created a fallacious vocabulary whose objective is to deceive the population into thinking that giving more money to the wealthy 1% will trickle down to the 99%, instead of seeing this 1% income as extractive, not productive.

Tribes: I’ve been reading a lot recently about the dissolution of the nation-state in the face of these forces of globalization and financialization. Given that the nation-state is associated with the most prosperous and egalitarian periods in modern history, in terms of income and wealth distribution et cetera, et cetera, … under what circumstances do you imagine that finance capital can be overthrown?

Michael: It can only be overthrown democratically. It can’t be overthrown by force, because finance capital in control of the state has a monopoly on force. It can only be achieved, probably in one country after another, by having policies and essentially an understanding of what a viable economic constitution would be. And to realize that politics is basically economics. And that the alternative to government and the nation-state is Wall Street and the financial interest in the City of England and Frankfurt. The question is, who do you want to run the economy? The 1% and the financial sector, or the 99% through politics? The fight has to be in the political sphere, because there’s no other sphere that the financial interests cannot crush you on.



Tribes: Good. Okay, thanks, Michael.



Michael: Thank you.

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Jesus: the economic activist

Published by Anonymous (not verified) on Sat, 28/04/2018 - 11:02am in

Debt Jubilee, April 26, 2018
THE HUDSON REPORT: The history of debt cancellation and Jesus’s economic justice activism  

Here is the direct download link.

Left Out, a podcast produced by Paul Sliker, Michael Palmieri, and Dante Dallavalle, creates in-depth conversations with the most interesting political thinkers, heterodox economists, and organizers on the Left.  

The Hudson Report is a new weekly series produced by Left Out with the legendary economist Michael Hudson. Every episode we cover an economic or political issue that is either being ignored—or hotly debated—that week in the press.
In this episode we discuss the ancient history of debt cancellation, the untold life of Jesus as an economic justice activist, and more largely Professor Hudson’s forthcoming book, “…and forgive them their debts,” out in summer 2018.

Michael Palmieri: Professor Michael Hudson welcome back to another episode of The Hudson Report.

Michael Hudson: It’s good to be back here. 

Michael Palmieri: I know we usually cover topical or current event that’s been either ignored or hotly debated in the weekly news cycle. But I thought it would be much more interesting this week to talk about your forthcoming book “…and forgive them their debts, credit and redemption through the Bronze Age to the Jubilee Year” scheduled to be released early summer 2018. And I thought it was interesting in two ways, one–Easter’s three weeks passed and yet a lot of your work is centered around Christianity and the life and activism of Jesus. The second reason is that you’ll be leaving for the next few weeks to teach at Peking University in China.

But can you explain or maybe give a little bit of a summary as to what the book looks at and describe it. I know it’s focused on the origins of debt and debt forgiveness. But can you elaborate a bit more? 

Michael Hudson: It’s a history of the origins of interest bearing debt – the origins of interest and Sumer in the third millennium BC, in an epoch when most debts were owed to the palace, either for taxes or for fees for services. Periodically for a thousand years, from Sumer, Babylonia, and other Near Eastern countries, when new rulers took the throne, they would begin their reign with a debt amnesty.

We’re familiar since medieval times for European rulers often freeing the prisoners when they came to power. But the amnesties in Sumer and Babylonia extended to everything that was owed to the palace. They were general cancellations of personal debts, mainly agrarian debts by cultivators – citizens who also manned the military.

The idea was to restore the economy to the stability that existed before widespread debts ran up during the preceding ruler’s reign. What was “restored” was an idealized “original” or “normal” state in which nobody owed debts to the palace. 

These debt remissions extended in due course to debts owed to palace collectors – and, by Babylonian times (from about 2000 to 1600 BC), to debts owed to individual creditors. Most agrarian and personal debts were cancelled, but not debts among businessmen that were owed to each other. They were left in place.

The guiding logic of these debt cancellations was spelled out by Egyptians. If rulers had not cancelled these debts, they would have faced a situation in which indebted cultivators were falling into permanent bondage. Their labor would have been pledged to their creditors, and thus would not be available to perform the corvée labor that had to be mobilized each year to build basic infrastructure – walls, temples, palaces and other basic construction that was public or communal in character.

Also if the debtors on the land had to pay private creditors, they wouldn’t be able to pay their stipulated fees or taxes run up to the palace. So for two thousand years throughout the Bronze Age (circa 3200 to 1200 BC), there was a tension between the rulers and the emergence of a private wealthy class of creditors who used their money to try to become landowners. By about 1800 BC you had cultivators pledging their land to creditors and losing it. You begin to find large aggregations of landholdings, all at the expense of palace authority and its ability to levy taxes on labor, crops or money. 

The big picture therefore is that for thousands of years you have a tension between centralized authority, which needed to preserve economic balance and wanted the population (and hence, the army) to keep growing, and wealthy creditors, traders and land buyers who made gains by impoverishing the rest of the population. That was the same dynamic found in early Greece and Rome. In fact, it’s a dynamic that you still have today.

The difference is that today’s governments have been taken over and captured by creditor interests. The result is that today’s ethic is the opposite of the first few thousand years of debt. Today’s ethic, ever since Rome, is a sanctity of debt, not of its cancellation. All debts have to be paid – regardless of how this may impoverish and polarize society.

But in Sumer, Babylonia, Egypt and the Biblical lands there was a royal understanding that if poor cultivators – the 99 percent – had to pay the debts that they ran up, they would fall into bondage to the 1 percent, and forfeit their land to their creditors. Rulers sought to prevent this from happening, because if they had not intervened, they would have a citizenry available to serve in the army. They wouldn’t have taxes. They would have had a kind of Margaret Thatcher type economy – and quickly been conquered by outsiders or overthrown from within.

Michael Palmieri: This gets us to where we began in the first episode of The Hudson Report. We spoke about the ACLU report called ‘A Pound of Flesh,’ about the “modern-day debtors’ prisons” that are beginning to pop up throughout society.

Michael Hudson: Shakespeare’s famous “pound of flesh” owed by the Merchant of Venice actually was a zero interest loan. So debt problems arose even before interest came to be charged. But obviously, once you begin to charge interest, debt expands exponentially at a geometric rate. Babylonian scribes were taught to calculate these doubling times. So one of the aims of my book is to explain how interest began.

There’s no question that when it began, the objective was not to find a way to impoverish society, polarize it and impose austerity. But that’s how matters ended up. Interest was innovated in the Sumerian temples and palaces, basically in the form of trade credit. The palace consigned export and import trade to entrepreneurs. Sumer – present-day Iraq – had very rich soil, deposited by rivers over the millennia. But it didn’t have hard stone, metal or gems. So Sumer had to trade in order to get the copper and tin that gave their name to the Bronze Age.

This trade had to be financed on credit. The palace and the temples employed war widows, children, the blind and other people who couldn’t make a go of things on the land. They were set to work to weave textiles or make other handicrafts, which were turned over to traders. These traders exported these handicrafts northwest to Turkey and eastward across the Iranian plateau. That’s how the Sumerians obtained the tin, copper and other raw materials, like stone and silver.

There was a transmutation of this practice of charging interest to creditors to merchants who could pay. Interest began to be charged on debts in general, including advances of fees owed to the palace by cultivators on the land. That’s where problems arose, especially when there was a crop failure or when members of a family got sick.

Most of these debtors didn’t actually borrow money. They simply ran up debts and arrears. Most debts thus did not result from loans, but were unpaid bills, headed by those that were owed to the palace or its collectors.

It was this debt that led to the designation of some basic commodities as “money,” assigned fixed prices so as to pay the palace. (My website has a recent dictionary entry on early money stemming from these debts owed to the palace, not from barter.) So you had debt and credit before you had money.

Here’s how the system worked. Archaic economies were credit economies. The palace advanced land to sharecroppers, as well as draught animals and various services. These rural deaths were supposed to be paid at the end of the harvesting season. We have tens of thousands of contracts outlining this. The debts had to be paid on the threshing floor. 

Let’s say you were a cultivator and wanted to go out to the local alehouse for a beer. The ale lady would mark up the amount of money that you owed. Your bill (the tab) would be paid on the threshing floor. Everything was done by credit. Payment was once a season, on the threshing floor – unless there was a flood or crop failure. In such cases rulers cancelled debts that were owed. (In that case, the ale women would not owe the palace for the beer that had been advanced during the crop year.) So cancelling such debts was the way to preserve economic balance and stability.
Most of the earliest monetized transactions were public in character. So my book also is about the balance between the public sector and the private sector, although these terms are rather anachronistic. It was really the palace and the temples vis-a-vis the communally family-based economy at large.

Michael Palmieri: It seems like there’s a lot covered in the book and we’re looking forward to its release this summer. 

I wanted talk a bit about the Biblical dynamics in your forthcoming book. I thought it would be interesting to talk about the life of Jesus and the way he’s portrayed today. But before we go into that, there’s a key point that you’ve brought up: the linguistic origins of the words “debt” and “sin,” and how understanding the connection can bring a different view to Christianity and Jesus’s teachings. 

Michael Hudson: In almost ancient society – not only Indo-European speakers, but also Semitic-speaking and other ancient Near Eastern societies – the basic kind of debt that had be paid was wergild: a fine for injuring other people, paid to the victims. The largest fine was for manslaughter. Punching them in the nose, or cutting off their beard or insulting them was subject to such wergild debts.

The logic was explicit, and I cite it in my book. In order to prevent fights among families – feuds and feud justice based on physical retaliation – you would pay reparation. That was the primordial archaic debt. The word for these payments or “debt” in many languages (in German it’s Schuld for obligation) also became the word for “sin.” The debt was owed to atone for the offense or “sin” – atonement or redemption. You would redeem the injury you did to another person by paying money. So the paramount idea was a debt was a payment for offence and the offence later became thought of sin. Redemption meant literally to redeem this debt oo to pay it. That is why Jesus was called the Redeemer – annulling the debts and also the sins of mankind in a vast Clean Slate.

So it’s not that running into debt was sinful. It’s just the reverse: When you commit an offence or a sin, you have to pay the injured party to make them whole, so that there won’t be resentment and fighting between the families of the offender (the “sinner-debtor”) and the victim (who in this case is in the position of “creditor”). 

The original semantics of sin and debt linguistically is therefore just the opposite of what most people believe.

Michael Palmieri: That being said, could you walk us through a text that if no one’s read, at least they are familiar with: The Ten Commandments. Some of those commandments can be understood very differently from the perspective of ancient society as you describe it. 

Michael Hudson: They were formulated in a society where debt was the main disruptive economic feature. For instance, the commandment “Thou shalt not covet my neighbor’s wife.” At that time, creditors would make loans to debtors, who would have to put up collateral. The most typical collateral they would put up would be their household slave girl, or otherwise their daughter or wife. The woman would have to go live in the house of the creditor, and usually had to have have sex with them. That’s how employer/employee relations were back from the Bronze Age through the Iron Age.
Already in 2350 BC, the laws of Urukagina in Sumer had a special sanction saying that a wife can’t have two husbands. The idea against coveting someone’s wife meant that you can’t take another person’s wife as a debt servant to have sex with.

The commandment “Thou shalt not steal” referred to making a loan and foreclosing on land or seizing property and not returning it. That was looked at socially as a form of theft.

The commandment “Thou shalt not take the Lord’s name in vain” referred to taking an oath. Creditors were notorious for lying. The books of Plutarch and other authors are rife with examples of creditors lying. In Babylonia everything had to be written down. In Egypt the same thing – every creditor claim had to be written down and witnessed.

The idea was to enforce behavior in keeping with the Ten Commandments and the laws of Leviticus, which said that every fifty years there has to be a clean slate – a deror, a jubilee year. The Hebrew word for the Jubilee year was cognate to the word for the Babylonian clean slate, andurarum. These debt cancellations also freed bond servants and returned land to debtors who had forfeited it. You could go right down through the Ten Commandments and see that their aim was to prevent the corrosive effects of debt tearing society apart.

Michael Palmieri: This is eye-opening. I can’t help but think about the contrast between the way that we’re speaking about Jesus and biblical teachings when you look at the current evangelical fundamentalist movements in the U.S., which focus much more on piety and political questions or economic questions of taxation, abortion, and even support for war. There’s such a contradiction there. I don’t know how you understand how the two connect, or if you want to speak more about how the transition occurred. 

Michael Hudson:  Christianity began as a protest movement, but it was a protest movement that was very conservative. We know from the Dead Sea Scrolls – essentially the library of the Temple of Jerusalem hidden to protect it from the Romans – that what Jesus wanted to do was just what he announced in the first sermon that he gave. It is reported in Luke, Chapter 4. He said “I’ve come to proclaim the year of the Lord,” meaning the Jubilee Year. He unrolled the scroll of the Prophet Isaiah that described the Jubilee Year.

He said that the rabbis who opposed to be cancelling debts – the Pharisees, a conservative group of rabbis led most notably by Hillel – had developed a special clause that was similar to what the Babylonian creditors had tried to do. It was called the prosbul clause. A debtor who needed money would have to sign a waiver saying, “I agree not to avail myself of the rights that the Bible promises me in the Jubilee Year. So if the debts are cancelled, I waive my rights and the creditor can foreclose anyway.”

Jesus explained in his sermon that this was against the Mosaic Law – the law of Leviticus, chapter 25. It was in fact against everything the Old Testament talks about. (My book has the relevant Dead Sea scrolls.) But rabbinical Judaism was being taken over by pro-creditor Pharisees. Luke quotes Jesus as describing them as being avid for money, and working for the creditor class.

At that time the great social fight not only in Judea but also in Greece and Rome was between debtors and creditors. There was a region-wide civil war. There were assassinations of Roman pro-debtor advocates such as the Gracchi brothers in 133 BC. A century of civil war followed, in which even Julius Caesar, who enacted a modest debt reform, was killed. Sparta’s King’s Agis and Cleomenes were killed for cancelling the debts. There were armed uprisings throughout Greece and Asia Minor over this. 

This was a universal fight. But somehow, the economic message of Jesus has been taken out of context. It is as if what he was talking about was otherworldly. But he was talking about something very worldly – the debt issue. Jesus wanted to restore the debt cancellation as it was supposed to be according to Leviticus 25. 

Later rabbinical scholars in medieval Spain, most notably Maimonides, urged the observance of the Jubilee Year. So Hillel’s prosbul was not universal among the rabbis. But for the last 2000 years there’s been a rabbinical argument over this. 

Until my Harvard group began to publish its findings about 20 years ago, you had a general prejudice among Biblical historians that the Jubilee year couldn’t really have been enforced because it would have caused economic disaster. My book shows that when you look at 2000 years of Sumerian, Babylonian and Egyptian practice, the moral was that if rulers didn’t cancel the debts, there would be an economic and fiscal disaster. 

The idea of debt amnesties was to prevent debt from tearing society apart – to prevent the kind of crisis that the United States has been in since 2008, when President Obama didn’t cancel the junk-bond debts, or the debts that tore the Greek economy apart – when the IMF and Europe imposed them on Greece instead of letting it default on debts owed to French and German bondholders.

The great struggle of antiquity is being repeated today. Whether society is going to insist on the sanctity of debt being imposed to a degree that impoverishes most of the population – or that economic stability should be restored by subordinating the debts to the ability to pay, and the ability of society to keep operating on a viable basis. 

Michael Palmieri: Well Professor Hudson, thank you so much for laying that out there for me and for the audience that will hear this interview. It’s always eye opening and engaging. We can’t wait until this book releases early this summer 2018. Thanks again for joining another episode of The Hudson Report.

Michael Hudson: It’s really good to be here, as always. I’m glad we had a chance to discuss it. 

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