Transcript, rec 20th Match 2020
The Federal Reverse is at the heart of most of the monetary ills affecting America. If it was not for the Fed, America would never have been able to enter WWI, there would have been a negotiated peace and the existing power structures would of remained in place. Meaning? The dictators that came in to fill the power vacuum created by WWI, Hitler, Lenin would have never been able to come to power. Imagine a 20th Century without Communism or Fascism. No holocaust. The Lindberghs were well aware that War feeds the Fed!
Michael Hudson, one of America's preeminent Economists, Professor of Economics and author of “Killing the Host” and “and Forgive Them Their Debts,” provides valuable insights to Debt & Power
Michael: Too much debt is when it’s beyond the ability to be paid. At a certain point every debt grows beyond the ability to be paid because of the magic of compound interest. At 5 percent interest, a debt doubles every 15 years. If you can imagine since the whole debt take-off in 1945, the first 15 years gets you to 1960. Then, the debt doubles again by 1975, & doubles again by 1990, then again by 2005, & then today – 64 times the relatively small debt owed back in 1945, some 75 years ago. And the creation of yet new credit (peoples’ debt to the banks and to wealthy savers) has grown at a similar rate even without new lending taking place, so the debt overhead actually has grown much, much more than that 5% a year. It’s grown more like 15% per year. That is much faster than national income or GDP. This disparity in expansion paths means that more and more income and GDP needs to be paid each year, So, to answer your question, too much debt is when it can’t be paid, that is, can’t be paid without transferring property to creditors, reducing consumer spending and home ownership rates, and plunging the economy into austerity in which only the wealthy financial class is affluent.
When a debt can’t be paid, you either default & lose your property as creditors foreclose on your home or drive you into bankruptcy, or, if you’re a corporation, they drive you under & a corporate raider takes you over. Or, you write down the debt.
Interest-bearing debt was first invented in the third millennium BC, maybe 2800 2700 in the ancient Near East. The first records are about 2500 BC. Interest rates were about 20%. Rulers were obliged to think about your question: how to maintain economic balance and avoid too much debt. The answer they found was that when each new ruler would take the throne, they would proclaim a Clean Slate. Its terms were basically those of the Judaic Jubilee Year, whose word deror was a cognate to Babylonian andurarum. This Babylonian practice was put in the middle of Mosaic law, in Leviticus 25. It returned land to debtors who had forfeited them to foreclosing creditors, and it freed debtors who had fallen into debt bondage. This periodically avoided too much debt, by regularly wiping out personal debts – mainly agrarian debts denominated in grains. However, business debts were left in place, to be settled among the well-to-do who could afford it.
Western civilization became Western by making a radical break from what went before. Classical Greece and Rome didn’t have any debt cancellations, because they didn’t have any palatial authority to do so. They had chieftains, but they didn’t have an independent palace with authority to overrule the ambitious families that became the oligarchy. So from the time that the Roman oligarchy overthrew the last king in 509 BC down to the time when Julius Caesar was killed in 44 BC, you had five centuries of debt revolts. The plebeians in Rome, like many Greeks, demanded the debts be cancelled.
But the oligarchy resisted this policy, seeking to hold onto its creditor claims that kept the population at large in dependency and outright bondage. In the 7th and 6th centuries BC, most Greek cities were overthrown by leaders called tyrants. They were basically reformers who overthrew the closed local aristocracies, cancelled the debts and redistributed land to the people. Solon abolished debt bondage in Athens in 594 BC (but did not redistribute land) via his “shedding of burdens,” his seisachtheia, referring to the debt burden. A similar radical restructuring occurred in Sparta.
In the United States since 2008, the Federal Reserve has created $4.5 trillion of credit to the stock a& bond market and mortgage market to support prices for real estate. The aim has been to make housing more expensive, enabling the banks to collect on their mortgages and not go under. This credit keeps the debt overhead in place, thereby keeping the keep the financial system afloat instead of facing the reality that debt needs to be written down. Because if it is not written down, the “real” economy will be hollowed out. In that sense the financial overgrowth is largely fictitious wealth.
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