On Contact with Chris Hedges has the interview The history of debt forgiveness.
Economist and author Michael Hudson, author of ‘…and Forgive Them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year’, shares with journalist Chris Hedges how ancient cultures forgave debt cyclically to prevent debt peonage and the rise of an oligarch elite.
This is the first discussion of Michael Hudson’s new book where I got enough detail to understand exactly what he was proposing for the modern world. It turns out that Chris Hedges is the ideal interviewer to get this information to come out. As he says, Chris Hedges has a seminary background so that the religious aspects of the thesis are right up his alley.
The headline of my previous post “He Died for Our Debt, Not Our Sins” becomes meaningful to me in a way that did not become apparent when I read that other article.
The “commercial” interlude in the video should be skipped over. The people who made that commercial obviously never heard the interview they were interrupting. Sort of like the editorial page of The Wall Street Journal. The people writing the editorials and the op-ed pieces seemed to be completely oblivious to the news that was in The Wall Street Journal itself, often on the same day the editorial appeared.
December 26, 2018
I was thinking that part of what Michael Hudson says in this interview undercuts the message of Modern Money Theory (MMT), of which Hudson is one of the founding pioneers. He talks about how important it was for the rulers to collect taxes from the citizens to fund the activity of the government. In fact, MMT makes the technical point that the government does not need to collect taxes in order to fund its activities.
The way Michael Hudson should have phrased it was that the government needed the efforts of the citizens to provide the goods and services to the government that the government needed to carry out its mission for the good of the society. (Hudson did specifically mention the military service, but there is much more than just that.) The fact that the government collects taxes is the incentive for people to do work for the government to earn the currency provided by the government so that they can pay their taxes. Without the collection of taxes, the public could feel free to ignore the government provided currency, and use whatever means they wanted to use for trade among themselves. They could also refuse to do work for the government if their were no incentive to need the official government currency. Since the government only accepts its own currency for payment of taxes, fines, and fees, the citizens must earn at least enough of it to pay those obligations. Of course, while the system of official currency is in place, it is easier to use that system for other trade purposes as well. Since the money is in general circulation, people who don’t provide direct goods and services to the government can earn the official currency by trade with others who do get some of their money directly from the government.
In modern times we are starting to see things like crypto-currencies (Bit Coin) as an alternative to the official currency. So far these have not been major competitors to the official government currency.
Automatic Debt Reduction
Let us not forget the role inflation used to play as an automatic debt reducer. In the days of union strength before 1980, salaries and income kept up with inflation due to contract negotiations with unions and the spill over effect even to non-unionized workers. With long term debt like mortgages and student loans, the principle started to pale compared to people’s income. The inflation effect was just as important as amortization. Eventually the debt was easily paid off.
Now that incomes no longer keep up with inflation, inflation is no longer the friend of the borrower and the bane of the lender. The children of the baby boomers and the millennials are in a completely different economic ballgame than their parents were.