Interview: Dr. Michael Hudson

Greetings System Failure Readers,

We have a special treat for you today! On the podcast version of System Failure, we interviewed legendary historian and economist Dr. Michael Hudson. We crafted our questions to provide a basic overview of Dr. Hudson’s earth-shattering work. Below, please find the transcript of the conversation.

The discussion included the importance of distinguishing between earned versus unearned income, and the age-old dichotomy between (1) writing down debts to the actual ability of debtors to repay versus (2) the mass foreclosure that ultimately ruins societies. According to Dr. Hudson, this dichotomy was the main preoccupation of the ministry of Jesus, but has since been covered-up by powerful oligarchies. Discover more from Dr. Hudson at michael-hudson.com.

And now we bring you the man himself: Dr. Michael Hudson…

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Brian: All right, Nate, we've done it. This is the System Failure Podcast number 50, and it's an exciting one.

Nathan: Yes, number 50. Yes, that's impressive, Brian. That means we've been at this for more or less a year now, which is pretty exciting. And I love the idea that for episode number 50, we are all bringing you the specialist of special guests. That's going to be Dr. Michael Hudson, who is...something of an academic hero of mine, as you'll hear when we get him on the line. He is a titan among heterodox economists, professor of economics at the University of Missouri, Kansas City. Former Wall Street analyst. His latest book is Temples of Enterprise, Creating Economic Order in the Bronze Age Near East. It's a collection of articles tracing familiar economic conventions like money and markets all the way back to Bronze Age Mesopotamia. Dr. Hudson also has a number of articles included in the new Dictionary of MMT that has just been published. That's “Modern Monetary Theory”. And as mentioned, a number of Professor Hudson's articles appear in that volume on the origins of money and coinage in antiquity and the balance of payments dimension of foreign debt. Additionally, you can also find Dr. Hudson, if you'd like to support his work, on Patreon by simply searching for his name, spelled conventionally, Michael Hudson on Patreon. Quite a resume, eh, Brian?

Brian: Well, to put it briefly, he's super interested in the history of debt and debt forgiveness, right?

Nathan: Yes. Dr. Hudson is the one who is the origin of this idea that Christianity has a financial dimension to it. And that is to say that the sin and the salvation, and the armageddon of Christianity all are perfectly intelligible from a financial perspective, but that financial perspective has subsequently been hidden from us by worthies such as St. Augustine of Hippo, who did favors for the Roman oligarchy by rejiggering Christianity in a way that was beneficial to the balance sheets of the rich instead of detrimental in the way that debt forgiveness is. So that's his main hook. And so we are really excited to bring Dr. Hudson to you today.

Brian: Yes. I can hardly wait.

Nathan: All right. Well, without further ado, let's get to the interview.

Brian: All right.

Nathan: And we're here with noted heterodox economist Dr. Michael Hudson. Dr. Hudson, how are you today?

Dr. Hudson: I'm pretty good. Thank you.

Nathan: We are electrified to have you on the podcast today. Your ideas are some of the foundation thoughts that go into the constellation of ideas we like to call System Failure. So we are delighted to have you, sir. And I suppose I should give you just a little. Well, I just wanted to give you a little bit of a brief anecdote about how your work has impacted my life. And the reality for me is I'm one of these student loan sob stories. I started my first job out of college, and my net salary every month was $2,200. And my student loan payment was $1,200. And I spent about 10 years in that cul-de-sac just going round and round and round. And that really was deleterious to my mental state. The depression that comes with being a debt peon is really, until you experience it, it is something else. And then around 2017, I think it was 17, because you, Dr. Hudson, were making the rounds on YouTube promoting your book …And Forgive Them Their Debts. And so, of course, I ordered it on Amazon and I was blown away. The way that you describe debt and the way that Western society thinks about debt with respect to the Bronze Age, the Fertile Crescent, Mesopotamia, in the aftermath of the agricultural revolution, and the way that Greco-Roman society and Christianity dealt with those ideas was, well, it was earth-shattering for me, and it really pulled me out of a place of hopelessness and depression. It made sense of what was happening to me in a way that, well, it just hadn't made any sense before, as you can probably imagine. So that was a great experience. I just loved …And Forgive Them Their Debts. And then, of course, when Collapse of Antiquity came out last year, I mean, at this point, your books are an instant buy on Amazon for me. And I'm happy to report that I've worn out the binding of Collapse of Antiquity to where I've had to tape it back together. I've been through that volume quite a bit. I'll have to order another copy from the good folks over at Islet. So that's where I'm coming from personally, and that's been the preoccupation of System Failure. 

Dr. Hudson: Okay

Nathan: Now, Dr. Hudson, the way that you rolled out the ideas in …And Forgive Them Their Debts was pretty stimulating. But since COVID, we in Portland, Maine here, Portland, Maine has really become a poster child for some of your older ideas that you articulated in your 2015 book, Killing the Host. Like here in Portland after COVID, we have watched the rents explode. Portland, every time one of these magazines does a top 10 destinations to move to, Portland, Maine is always in that top 10 list somewhere as an ideal location for those who want to get away from the humdrum of city life and escape to somewhere that has a little bit more of a bucolic feeling. The working waterfront and lighthouses of Portland are always a great example. And as a result of that, everyone moved here during COVID, and they haven't left, and the rents here have just exploded. And as a result of that, we have seen in the aftermath of COVID a mass closure of bars, restaurants, and coffee shops. Proprietors can't seem to offer workers enough money to report to work. And the public sentiment that's in circulation is that nobody wants to work anymore. But your theory that the FIRE sector is actually cannibalizing the real economy makes much more sense than just no one wants to work anymore. Could you lay that theory out for us?

Dr. Hudson: Well, the finance, insurance, and real estate sector, landlords and bankers, extracts land rent and interest, and that forces up the cost of living and also the cost of doing business to pay workers. So labor income and business profits... are squeezed as a result of that. The problem today is for labor to get jobs that enable them to break even without going into debt or being exposed to COVID as a condition of their employment. I think COVID and other diseases are like crop failures. They're global, but they're external developments from outside the internal dynamics of the economic and social system. And by contrast, economic rent has become part of society's economic structure. It's evolved through different political alliances and has taken different forms over time. Credit relations and land tenure are built into any economic system as part of it. But today's banking system and absentee land ownership are different from anything that has gone before. Society recognizes the need to protect itself against COVID, but the Western societies no longer feel a need to protect themselves from rising land rent, housing prices, monopoly rent, or debt and credit charges and late fees. So just as disease tends to spread at an exponential rate of growth, so does the debt overhead and the interest-bearing debt. It expands by compound interest. And both rent and disease pandemics may lead to depopulation. They have that in common. COVID has increased death rates and it's shortened lifespans, which I guess is why workers don't want to have to work and get exposed to it. Interest, land rent, and monopoly rent stifle growth in living standards and investments and that leads to economic collapse. Russia's population plunge with Western neoliberalism in the 1990s exemplifies this common denominator. Birth rates are falling throughout the West, so that's what they have in common, but they're quite different in character.

Nathan: That's such a great point. I love this idea that we jump in response to external threats like COVID, but we are sanguine and unguarded when it comes to internal threats. And I loved the way you tied in depopulation there, Dr. Hudson. The connection between economics and population growth or degrowth, well, I'm living that out. I'm 40 years old. My fiance is 37. And we are trying desperately to get the finances together to have kids. And it is not easy in today's economic environment. So it's easy for us to see how depopulation could happen. That's great.

Dr. Hudson: Well, I want to say one thing about that. You mentioned that you were getting, I think, $2,200 a month. When I went to work in 1961, my salary was $100 a month. And yet I didn't have any problem buying a house on that salary because you could get a mortgage that absorbed up to 25% of your income. And so everyone, even on low salaries, could afford to buy a house at that time. That's the difference. It's not how much you make. It's the ratio of the housing prices and the mortgage interest compared to what you make.

Nathan: Yes, that's a great point. We'll have to make sure to tie some of the questions we intend to ask you. We're going to factor in the explosion in asset prices that's been the result of the way that we do business here in America. This whole business, Dr. Hudson, of the finance, insurance, and real estate sector cannibalizing or gobbling up the rest of the productive economy where people actually provide goods and services to each other. This all fits into your 2015 book, Killing the Host. And so I have another question on that front here. It seems to me that the main theme to Killing the Host was this distinction between earned and unearned income. And so my question for you, sir, is what is the distinction between earned and unearned income emphasized by classical economists such as Adam Smith, David Ricardo, and John Stuart Mill?

Dr. Hudson: Well, the common denominator among all the classical economists was their value theory. And the purpose of distinguishing value from price was to define rent as the excess of price over intrinsic cost value. And the political content of this contrast was to free markets from land rent and from monopoly rent, including unproductive financial overhead. For Adam Smith, land rent and monopoly rent were levies permitted by legal privilege. That is private law, not by any contribution to production that was made by Britain's hereditary landlord class. They just collected rent. Owners of monopolies had bought their privilege in return for lending money to governments, mainly to wage war. So Adam Smith opposed wars and projects of empire as the cause of public debts and their interest overhead. For Ricardo, rent was the excess of price over intrinsic cost value. And ultimately, he reduced all this to the labor costs. No labor was provided by landlords or monopolists, apart from insider dealing enforced by themselves or by their ancestors to obtain land and other property by conquering it in the first place. And Ricardo said this rent was increasing as a result of population growth. He thought it was a result of access to less fertile soils. And this increased food prices and hence landlord rents, diverting income away from the industrial employers who had to pay their labor higher wages to buy more expensive food. And he said this was going to be the Armageddon of industrial capitalism, that a point would be reached where rent was so high that employers could not make a profit anymore by employing labor to produce manufactured goods. Mill described rent as what landlords made in their sleep, that is, without any productive effort of their own. So in the absence of such effort, there was no justification for rentiers to claim to earn their rents. But rents increased and interest grew by the purely mathematical laws of compound interest without any reference to the economy's ability to pay or to any productive effort made by landlords or monopolists or bankers to be part of the production process.

Nathan: That's a hell of a perspective. I love that. I remember sitting in my barber's chair a couple, three weeks ago, getting my hair cut. And I was trying to explain, my barber always wants to know what's going on with System Failure, and I tried it. For small business owners, depending on your audience, you try to tailor your message a little bit. And so I thought, what's the best way I'm going to be able to make this man understand your point here, Dr. Hudson. And it does feel like, correct me if I'm engaging in a reckless hyperbole here but it seems to me that the the heart of the earned versus unearned income discussion is that a lack of distinction between those two was going to allow us to unwind the capitalist revolution against the medieval and feudal landlords of the Middle Ages where I'm imagining guys that own factories in Manchester—so someone like Engels—their whole goal was to drive down the salary they would have to pay their workers by clearing away the overhead claimed by landlords. The rent charged by landlords, of course, is unnecessary to the productive capacity of the factory. And so the idea is to clear away all of that non-productive overhead to create a more effective capitalist economy. Have I got that more or less right, Dr. Hudson?

Dr. Hudson: Yes. They didn't want to drive down the living standards of labor because they assumed that the wages were basically the cost of living. But they wanted to drive down the cost of living that was pushing wages up. At that time, it was the cost of food that was the major cost. Today, it's the cost of paying [monopoly prices for food and other necessities and interest] on the debts that one needs in order to get a home and just break even.

Nathan: Another example might be if you had a business where there was a lot of commercial shipping, like trucks. Trucks have to pay tolls on highways, and that's going to be a part of your cost of doing business. But the tolls themselves don't help you do business. They're just there because there's only one road, and some government authority has set up a toll booth on that road. And so you would classify the tolls you have to pay as unearned or unproductive income. 

Dr. Hudson: It's mainly the financial sector that has promoted this. The financial sector extended loans to the state of Indiana to build its notorious road. And the money that was demanded by the bankers was so high that more and more drivers are simply avoiding the toll road and taking the back roads.

Nathan: So the FIRE sector, the finance sector, as you just mentioned, benefits from public confusion about this distinction between earned and unearned income that the foundation thinkers of capitalism were so careful to articulate. And so before we get too conspiratorial, I just wondered, what is your sober view, sir, on the elimination of that distinction between earned and unearned income? Are we talking about a concerted, top-down conspiracy? Or are we just talking about a bunch of independent actors who are similarly incentivized but uncoordinated in making this happen? I know you've mentioned the economist Bates in your previous interviews. Is someone like Bates, is someone cutting them a check directly to destroy, to obfuscate or confound the difference between earned and unearned income? What are we dealing with here?

Dr. Hudson: Well, there's no conspiracy. It's right out in the open. And it had to be out in the open because the whole purpose of denying the distinction between earned and unearned income was to convince the population at large to think that way. Academic economists had to work for universities and universities have come more and more under the domination of their donors so you couldn't get a university job without teaching a kind of economics that was friendly to the donors. So I think you had society's landlords and creditors in the late 19th century wanting to replace the value theory and the definitions of classical economics. Above all, the definition of rent is unearned income that we've just discussed. And there were two major lines of attack. In the United States, John Bates Clarke, claimed that all income was earned, indirectly if not directly. There was no distinction between value and price. And British utilitarian price theory redefined the idea of value as whatever the market decided to pay, reflecting the payer's utility for the good or service that was being obtained. So there no longer was any distinction between value and price, and hence there was no concept of economic rent in this. For the anti-socialist Austrian school, the interest was simply a payment for time. So it couldn't be avoided because it was just how society was organized, and profits were made for the time that it took to produce commodities by roundabout production, as Böhm-Bawerk stated. Consumers chose to pay interest because they were impatient. Choosing to consume in the present instead of waiting and investing their money to be able to consume more later. This approach led Marx to quip that the Rothschild family must be the most abstinent family in Europe if it were refraining from consumption in order to make money. Obviously, that pointed to the inherent nonsense of Austrian theory. There was no concept of economic need forcing debtors to borrow simply to survive. And ever since economics has become this sort of junk economics with no value or rent theory, and without that distinction between price and value and economic rent as unearned income, you can't explain what's wrong with today's economy.

Nathan: It does feel like all of this happened just prior to the advent of mass media to where you could make such a fundamental economic change and no one would find it odd that these new schools of economics are so different from their predecessors. On this topic, Dr. Hudson, could you describe to us how failure to distinguish between earned and unearned income, as you mentioned, basically, according to the economists of the late 19th century, most notably the Austrians, if there's money in my bank account, I must have earned it. The destruction of the distinction between earned and unearned income distorts Gross Domestic Product. I've heard you use, for example, in the past, if the Chinese saddled their university students with student loan debt and then added it to their GDP as if this was reflective of the productive capacity of their country. Could you speak to that for us?

Dr. Hudson: Well, GDP analysis of a Gross Domestic Product is really Gross Domestic Cost. And productivity is defined as whatever anyone earns. No, I shouldn't say earn. Whatever income someone receives is counted as the cost of doing business and producing the product. So the head of Goldman Sachs, Lloyd Blankfein, claimed that his firm's partners were the most productive workers in the United States, as proved by their income and bonuses. Well, indeed, the U.S. national income and product accounts include such payments as the cost of producing GDP. So rent and interest and monopoly rent are not treated as transfer payments to rentiers, but as an intrinsic cost of production. So not only is interest counted as part of GDP, but late fees on credit cards and other debts are counted in GDP as “providing economic services”. So the result is to overstate the real production by whatever all of these external costs, and basically economic rent is external to society. It's socially and technologically unnecessary, but it's become built into today's economy because the finance, insurance, and real estate sector have pretty much taken over the tax rules and the whole intellectual picture of the economy. And it's these overhead costs that are deindustrializing the United States and other neoliberalized economies in North America and Europe. And this is a byproduct of our failure to understand the difference between earned and unearned income. And what we can cut back as unnecessary in order to devote society's resources to actual production, to raise living standards and other means of living, instead of just transferring income to a rentier class.

Nathan: I see. Dr. Hudson, could I just ask you to buttress that point by explaining how imputed rent works with respect to gross domestic product?

Dr. Hudson: Well, for instance, GDP, you can look at it, interest is considered a service…and monopoly rents. There's no distinction between monopoly rents and the actual cost of production. So if companies raise the price of food recently or the price of products because they're monopolies, that's all included as if this payment of higher prices to include rent were actually all a product, instead of only a part of the actual cost of production. The value is what's important. But if you say there's no such thing as value and price and value are the same thing, then you don't have any theoretical basis for distinguishing what's a necessary cost of production and what is merely a transfer payment to the privilege of owning land or being able to create credit if you're a bank and charge interest on it. Charging interest is considered a cost of doing business because businesses borrow money in order to produce. Well, you have a lot of money being borrowed that has nothing to do with production. It could be borrowed to take over companies by private capital and deindustrialize them. So the expenses of deindustrializing the economy are counted as the cost of production. That's the nonsense that you get from not accepting the classical distinctions between value, price and rent.

Nathan: That is so well said. I love the point you just made about making no distinction between value and price leaves us unable to distinguish between unnecessary, unproductive costs or the payments for things that are necessary versus unnecessary. It leaves you no way to compare cost and value since you've defined them as the same thing. That's great. I think, Dr. Hudson, we've already touched on this a little bit, but what do you foresee? We already touched on this with respect to the fate of the city of Portland, Maine here, but I wonder what you foresee will be the ultimate consequences of failure to make this crucial distinction between earned and unearned income. What is your prophecy for the next five, ten years?

Dr. Hudson: Well, the reason why the classical political economists developed their distinction between earned and unearned income, and between value and price, was to form a logic to quantify and tax away land rent, which exists simply as a result of favorable location, not any productive act by the landlord. And the idea was to situate, take natural monopolies and their choke points, such as communication, transportation, healthcare, education, into the public domain as basic needs. And the idea was for these basic needs, instead of being made private monopolies, the government would produce them as a kind of infrastructure that Simon Patten said was a fourth factor of production. Its job wasn't to make a profit like industrial capital. It was government capital, but the idea was to lower the cost of doing business by providing education, health care, either at subsidized rates or freely as public health care. And doing that, getting rid of the monopolies, would enable society to operate at a much lower cost instead of forcing employees into debt in order to pay for their education, pay for their health care contributions, leaving less and less money to pay for consumption. And ultimately, the more debt they took on, the less they were able to consume, and the more money was provided to the financial sector. The financiers did not use their money to buy goods and services. They used it for making more loans or loans to take over companies and essentially turn the industrial corporate society into a rent extraction opportunity, a monopoly. And so the whole purpose of classical economics was to prevent this, and if you can quantify how much of the landlord income is actually the payment for the buildings, what it costs to make a building, as opposed to the increase in the land valuation. And the land valuation goes up as a result of public expenditure for parks and schools especially. And just as people make more money, they tend to spend it on the first need, housing. And as banks lend more and more money for housing, they increase the cost of housing, obliging house buyers to go further and further into debt. And the homeowners think, oh, we're getting rich. The housing prices are going up and creating a middle class. But new entrants have to pay much more. And, of course, that's what has created the racist divide in American society. Until about 2005, it was almost impossible for black people to get mortgages. They were excluded from early banking after World War II, and for over 50 years, white people were able to get mortgages and buy homes by paying only 25% of their income as mortgages, because that was the limit that banks would lend on. Now the limit is raised to 43%, and prices are so much higher that the home ownership among black people [has fallen], especially since the mass evictions under President Obama after 2008, when he bailed out the banks for their junk mortgages and tried to make the hapless borrowers pay, 8 million families were thrown out, and you've had homeownership rates in America fall from about 59% of the country to below 50%, and much of that has been borne by the racial minorities here. So that's part of the whole result of not calculating how much of this increase in housing prices is done not by the cost of building and construction, but just the banks lending enough money to homebuyers and the price of a house is whatever a bank is going to lend. And banks have lent more and more money relative to the house value. So if you look at the price for all the real homes in the United States, the homeowners now own less than 50%, less than half of the value of their homes. Most of it is owned by the banks, and that means that the money that they're paying for housing is paid as interest. The banks end up with much more money than the sellers of the homes, over the duration of the mortgage. And if that were taxed away, if you would have a land tax, then the land rent would not be capitalized into the price of a house. It would be taxed away, and the price of housing would fall by between 50% and 60% or 75%. So it's the failure to tax away land rent, which is what Adam Smith, Ricardo, and Mill urged. This failure has caused the increase in housing prices that's priced American and Western labor out of the market.

Nathan: Your point, Dr. Hudson, about redlining, in which African-American families were prevented from accessing mortgage instruments, you said until 2005, but I think the Sally Maes and the Freddie Macs were not open to African-American families until at least the late 70s. Now, in full interest of full disclosure here, both myself and my brother are whiter than a loaf of Wonder Bread. But once you miss getting on the bottom rung of that real estate ladder, you're stuck and you're locked out of participation in society. And that's just how I've been feeling. So in terms of redlining, I feel personally that I'm getting a taste of what it's like to be a minority in America all these centuries, even though neither of us are minorities. So that was a great point.

Dr. Hudson: I'm not a minority either, although I'm part Indian. However, in 1980 when I tried to take out more of a mortgage on my house on the Lower East Side, East 2nd Street between A and B, the bank sent an assessor over. He kept running outside to see if there were a lot of Puerto Ricans in the neighborhood. Is somebody stealing his hubcaps? And then he told me only a (I won't say the word he said) but only a so-and-so would live in this neighborhood. And so because of the minorities in my neighborhood, I as a white person could not get a higher mortgage. I ended up selling, and I'd paid $45,000 for the house. I ended up selling it for $210,000, and they threw in a $500,000 co-op loft as part of the deal. So the banks were not willing to sell anywhere near the normal white person's price because there were non-whites in my neighborhood.

Nathan: That is so crazy.

Dr. Hudson: I made a complaint to the Anti-Discrimination Commission. Nothing was ever done to follow that up. So Chase Manhattan was a vicious, rotten, racist mortgage lender.

Nathan: It's so hard to believe that that's real. Obviously, we're a little bit younger than you are, sir, and that just seems...I just cannot believe that that was the real state of affairs on the ground here in the United States. That is something else. With respect to failing to make a distinction between earned and unearned income, is the forecast then just a debt deflation until we reach levels of economic dysfunction that will mean the end of the American empire? Will it be the case that the FIRE sector will just keep consuming a greater and greater percentage of our overall economic pie until the entire thing lapses into chaos. Is there any reason to hope that that might not be the case, Dr. Hudson?

Dr. Hudson: It would have to take a shift in tax policy and of economic understanding of the very principles that you and I have been discussing for the last half hour. If they understand that economic rent, landlord rent, and interest are not earned, and that this should be public in character—if you tax away rent—you wouldn't have to tax personal income and profits. And you'd have much more income available for raising living standards and corporate investment than you do now. Ricardo, already in 1819, was explaining why rent would rise so far that a point would be reached where industrialists could not make a profit in England anymore. He was talking about land rent, but today the rent that's expanding exponentially is credit. Interest is financial rent. Because it stems from the privilege of privatizing banking and not treating banking and credit as a public utility. Well, China is doing that, and that's saved China from all of the kind of overhead costs that you have here, and almost all civilizations apart from Western civilization have followed all of this.

Nathan: That's a great point. When I think of the Soviet Union, I always want to think of the things that the Soviet Union did well alongside the things that went catastrophically for them. But one thing that's obvious about the Soviet Union is they went through an entire industrial revolution in virtually a single generation. So it's interesting to hear concrete examples like the one you just related, Dr. Hudson, where running banks instead of for-profit entities, running them as public utilities instead. That gives you a clear advantage in terms of economic competitiveness. So that's a great example. So we're going to pivot here, we're talking about the 19th and 20th centuries, Dr. Hudson, and I want to get into your 2018 book …And Forgive Them Their Debts. And by way of a transition, I have this last question: is there a relationship between earned and unearned income and the concept of debt forgiveness, which we're about to flesh out here? Is there any overlap at all between these two concepts, or would you describe them as totally separate and distinct?

Dr. Hudson: They didn't have a value and price theory. It was purely pragmatic, the reason that debts were forgiven. They were only personal debts denominated in grain. They were the debts of cultivators that were forgiven. Business debts were not forgiven. They were denominated in silver. So there was no problem there. But the Bronze Age and early classical antiquity was an era of labor shortage. If cultivators or any of the population found themselves threatened with debt bondage, they'd run away. So if the Sumerian and the Babylonian kings and their Middle Eastern neighbors did not cancel consumer debts owed by cultivators, the debtors would have been obliged to work off their debts by bondage to their creditors. And that would have prevented debtors from working on public works infrastructure during the off-season. All societies— this went way down through medieval Europe—corvée labor was needed to build city walls or temples. Even the pyramids were built by corvée labor. And the cultivators were obliged to serve in the army. They were the infantry. And if rulers had permitted a large portion of their cultivators to fall into bondage, they couldn't have served in the army. They wouldn't have been available for public infrastructure construction, and they would have run away, or they would have supported invaders and said, we'll go over to your side if you cancel our debts. Or they would have simply overthrown the rulers. And the Bronze Age rulers saw that if they let a wealthy creditor class emerge, the creditors were called big men, absorbing the land of their debtors. If rulers would have let that happen, they would have done what oligarchies did in classical Greece and Rome. They would have used their money to take their labor that was working for them and overthrown the kings and made themselves rulers in their own interest. They would have polarized their economies, much as led to the decline and fall of Rome.

Nathan: I see. So just to recap, you're saying that the Bronze Age kings of Mesopotamia were heavily incentivized to enact periodic debt forgivenesses, and it wasn't because they were nice guys, and it certainly wasn't because they'd been studying their Adam Smith. It was because they wanted to prevent anyone from becoming powerful enough to challenge their lineage for power. Have I got that more or less right?

Dr. Hudson: That's right, but even behind that, there was a concept of economic order. The rulers are very conservative. They said, you know, we have an economy where cultivators are producing crops. This is not a money economy primarily. This is a credit economy. During the year, the cultivators would run up debts. For instance, if they'd go to the local beer hall, the ale woman would write up what they owed on the tab, just like modern workers will often run up a tab to be settled at payday. Well, the payday in antiquity was harvest time. And at harvest time, all of the debts that had been run up in the year, including there were debts to priests for performing marriage ceremonies or burials, would finally be paid on the threshing floor in grain. Well, the problem is what happened if there was a flood or something and people couldn't pay. Hammurabi's laws said that if the storm god, Adad, caused a flood, the debts wouldn't have to be paid. Well, that meant that the workers wouldn't have to pay the ale woman. And the ale woman wouldn't have to pay the palace or temples for the beer and ale that they'd been supplying all during the year. And you wipe out the disorder, this interference with a normal society in balance where everybody could afford their living, their liberty, and nobody fell into bondage. So the key was just how do we avoid disorder? How do we prevent this well-ordered society from changing? And they all thought that the root of this disorder was personal greed, and you had to reverse the results of personal greed, especially by creditors taking over the land and the liberty of their debtors.

Nathan: Outstanding. It makes so much sense when you put it that way. But I could imagine, Dr. Hudson, that someone who is hearing this for the first time—this is a really foreign concept to those of us growing up in a context of the 21st century here—someone who is hearing this for the first time might object that debt forgiveness as a legit economic institution would discourage lending and investment. How would you respond to someone who leveled that disagreement?

Dr. Hudson: No investment was canceled. Businesses' debts were not canceled because if a businessman loses his business to another businessman, he still had his rights as a citizen to his own self-support land. Every citizen had their own means of support. So what were canceled were only the consumer debts of cultivators. And they were canceled because if cultivators couldn't pay, it was because of some disturbance. It could be a flood. It could be a drought. It could be military activity. When there was a military activity, the rulers wanted to return everything to the mother condition, as they put it, the original condition, the way a society was supposed to be organized. They didn't let the kind of debt overhead develop that Western societies developed. And in terms of who would lend the money, most of these debts were not the result of borrowing money. Very few cultivators borrowed money. They ran up debts during the year, and most of the debts they ran up were debts to the palace, if not for taxes, then for the advance of agricultural inputs and other needs they had during the year. And as I said, these were paid at harvest time to settle obligations during the crop year. The same was the case all the way into, say, 12th century England. Money was only used as a means of denominating the debts that were to be paid out of the harvest at that time. So we're not talking about lenders losing the money. The idea was that money itself was only a means of denominating obligations that had mounted up. And the idea was that if obligations mounted up that couldn't be paid, then they shouldn't be mounted up. And they were a source of disorder and so they were simply wiped out. They were not the result of loans. They were arrears, and that's what is left out of account. Islamic law had a similar practice. All non-Western societies had that practice. In Muslim India, the rental population was kept solvent by canceling the debts when there was a weather problem. But when the British came in, they insisted on the sanctity of credit instead of the sanctity of debt cancellation, and they insisted that debts be paid without any reference to the ability to be paid under normal circumstances, and so many Indians lost their land to the creditors. That's been going on for the last few centuries, and you have vast wealth created by creditors foreclosing and taking over the land.

Nathan: You're making me think now of David Graeber's Myth of Barter. The mythology that we've evolved over time is that we started with a hunting and gathering situation and you would have to wait for a double coincidence of wants. Like suppose, Brian, you make arrows and I make clothes out of animal hides, but I need arrows and you need clothes and we have to wait until we both need an equivalent amount of each other's product, and then we can make a trade. And the idea was that money was the intermediary that facilitated the trade there. But Graeber pointed out that, obviously, if you borrow a cup of sugar from your neighbor, that's just going to go into your overall social debt. You just know you borrowed sugar from your neighbor, and so you'll be happy to give him a cup of sugar when he next comes to visit you. But the point is that they didn't need money. You could just keep track of everyone's relative debts in a social fashion there. And so that's what makes the idea that debt forgiveness would discourage lending and investment nonsensical because we're talking about debts that are just...if you're a farmer, you get paid once a year. So it makes sense that you would just run up debts until that once a year rolls around and you make your payment, as you mentioned, Dr. Hudson, on the threshing floor.

Dr. Hudson: Also, David, as an anthropologist, was talking about an epoch of mutual aid. And a neighbor that's lending sugar is not going to insist that you become a bond servant. There was a different mentality.

Nathan: Yes, that's a great point. I mean, I had the experience of reading David Graeber's book, finishing it, putting it down, and then going on the internet to find out that he hadn't survived the COVID era, which was just crushing. I mean, talk about a mind we could use in the current time. It's just tragic that the man has gone too early.

Dr. Hudson: It wasn't only COVID. He had another minor condition, and they went to the doctor. From the way his widow tells me, it was that the doctor was incompetent and didn't give him a test that he needed. And the COVID simply exacerbated this condition. And David wasn't the kind of guy who simply would wear a mask anyway. He tended to melt into crowds wherever he was. But it was medical malpractice by the awful British medical system that caused this problem, according to his widow.

Nathan: Well, the sense of tragedy is compounded by that revelation. That is terrible. Well, I really regret we haven't got David's voice in 2024. Unbearable. All right, I'm going to shake that off and move on to the next question here. My next question, Dr. Hudson, is this whole concept of debt forgiveness is formalized in Hammurabi's Code; in any number of places in Mesopotamian Bronze Age society. It eventually found its way into the Jewish tradition, the Jewish literature that now we think of as the Old Testament or the Pentateuch. Could you describe how this Mesopotamian institution of debt forgiveness made its way into the Jewish tradition?

Dr. Hudson: Well, the Babylonian word for the clean slate, debt cancellation, was “andurārum”, meaning “free flow”, as in bond servants being free to go back to their family. And that was a cognate to the Hebrew word “deror”. Andurārum, deror. It seems that when the exiled jewish families returned to Israel under the Persian permission they incorporated the Jubilee Year into the core of Mosaic law in Leviticus 25. Recently there's been [found] whole archives of the Jewish population in Babylonia and they assimilated to the Babylonians. We have their wills and their marriage agreements. They picked up all of the Babylonian rules for andurārum. And the wording of Leviticus 25 was almost word for word from Hammurabi's laws. In the first place, the personal debts were annulled. And secondly, the bond servants who had been pledged to creditors, usually the daughters or wives, were liberated and free to return to their homes. And house slaves also were returned to their former owners who had pledged them to their creditors. And in the third place, land tenure rights that had been forfeited to creditors or sold under economic duress were returned to their families. And similar acts of these were found throughout the 3rd millennium, 2nd millennium, and early 1st millennium throughout the Middle East, even in the Assyrian Empire. So there was a general broad recognition of the fact that the natural tendencies of economies was to polarize if they were not checked by royal fiat, to restore a well-ordered economy. And that's what makes the economics of the third millennium, second millennium of the Bronze Age so much superior to modern economics. We have the mathematical training of scribes. They've all been preserved, and they're more sophisticated than anything used by the National Bureau of Economic Research. Or anything that I was taught in my PhD at NYU. On the one hand, you had the Babylonians calculate the growth of herds, and they were an S-curve tapering off. And they also had to calculate how long does it take a debt to double and redouble and quadruple, and that was by compound interest. And they showed that the [growth] rate of compound interest of debt was much higher than the ability to pay out of the growth of herds or the increase in grain production that had remained fairly stable or more slowly growing. And that concept of the distinction between the debt overhead and the economy's ability to pay without losing their land, without having lower living standards, without losing their property and falling into bondage. That's completely missing from the economic models talked about today. So there's no way of understanding why the Western economies are deindustrializing. In biblical times, certainly at the time that the Bible was edited, after the return from exile, they all understood this.

Nathan: So it was the episode of the Babylonian Captivity in which the Jews—who had been captured by Nebuchadnezzar and brought back as prizes to Babylon—learned about all this. I love your statement, Dr. Hudson, how Babylonian economics are more sophisticated than anything out of the [National Bureau of Economic Research] today. But that really is eye-opening, and it really illustrates the story well. So just a point of order here. We're talking about debt cancellation and debt forgiveness. I think the real dichotomy we're discussing here, and you'll have to confirm for us, sir, is we're talking about writing down debts to the actual ability of debtors to repay versus foreclosure, with foreclosure being the option that ends in disaster reliably. Have I got that more or less right? 

Dr. Hudson: Yes

Nathan: And additionally, you were referencing the 25th chapter of Leviticus there. Just an interesting note that I've learned from you is that that is the text that's stenciled onto the Liberty Bell as it hangs in Philadelphia. “Let freedom ring throughout the land.”

Dr. Hudson: Yes, but freedom is not liberty. Liberty is freedom from bondage. Liberty was the freedom to go wherever you wanted and to return to the family. Now freedom is something general. They've taken the economic concept out of freedom. Now President Biden says freedom is democracy, like what we have in Ukraine or what we have in Israel. They are the two main democratic free countries, according to Biden. So the concept of freedom is completely divorced from what liberty meant in antiquity. So the Liberty Bill should be changed: “we want freedom just like Ukraine and Israel”.

Nathan: I just pulled up the full text from Leviticus Chapter 25, verse 10: “Proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you” (with reference to the Jewish word for the periodic debt forgivenesses). And then the last line, “you shall return every man unto his possession, and you shall return every man unto his family.” So that's interesting. So with the mention of Leviticus Chapter 25—this is really the part of your whole rap, sir, that I just find to be absolutely electrifying—could you describe to us how Jesus fits into this situation as the culmination of Jewish prophecy, as a product of Jewish tradition, and describe Jesus' role in all this, as described in Luke Chapter 4?

Dr. Hudson: Well, it wasn't simply Jesus' role to begin with. We know now from the Dead Sea Scrolls that there was a large movement among the Jews to make sort of midrashes, quotations from all of the different parts of the Bible, including the prophets that mentioned debt cancellation. But in terms of Jesus, Luke describes him as going back to the temple in his native city, and he unrolled the scroll of Isaiah, proclaiming the Year of the Lord. That is the good news. The word “gospel” meant good news, and wherever it was used, it was always used in conjunction with debt cancellation. And that meant it was time for the Jubilee year to be proclaimed. Now, the problem was that by Jesus' time, it was quite different from what it was five centuries earlier. The powerful financial oligarchy had emerged among the Pharisees, for instance, whom Luke claimed loved money. And the well-to-do classes resisted Jesus, but demands for debt cancellations were very widespread. And since the return from exile, these wealthy families had emerged and created basically a rabbinical school. One of the leaders was Hillel, who introduced the Prosbul, which was a clause in loan contracts where the debtor signed agreeing not to avail himself of his rights under the Jubilee Year. Well, similar clauses had been drawn up almost 2,000 years earlier by Babylonian creditors in the second millennium, but they were all nullified in court proceedings. But the rabbis basically overthrew the whole core of Judaism, and that left the traditional Jews to become Christians. And it was not only Jesus, it was others at the time, just as throughout antiquity for 500 years in Greece and Rome, there'd been debt revolts. But Jesus became the center of what was reported in the Bible, because at that time, the writing in Judea and other Western countries was not on clay tablets, and so we just don't have the letters that they wrote anymore.

Nathan: I see. Rabbi Hillel, I think he lived out his life in the 2nd century BC, if I've got my history more or less in order here. Could I just ask you, Dr. Hudson, I'm just noticing that there's a rise of this philosophy or way of thinking among the Pharisees and other leaders in Roman Judea at the same time that the Roman Empire itself is being consumed and enlarged by an oligarchy class during the Roman Republican period. Is there any connection between the two that you know of? Are the local Jewish worthies in occupied Palestine copying the Roman oligarchy to whom they owe obligations? Why are both things happening at the same time? Or just a giant coincidence?

Dr. Hudson: Gradually, you had a rise in economic prosperity. Economies were becoming productive and rich enough to afford the emergence of a wealthy oligarchy independent of the kings. There was a whole break in Near Eastern civilization around 1200 B.C. There was bad weather. Apparently there was a drought. And you had in Mycenaean Greece, for instance, the palaces disappeared. And so you had very early on, when interest-bearing debt was brought to the Mediterranean, to Greece and Rome around the 700s BC, you didn't have any kings in the West. These were Near Eastern. There was no central authority able to cancel the debts. There was always human greed as a constant. But wherever this had emerged in primitive indigenous communities, communities had always taken moves to keep this greed in check. But Western civilization didn't have any of these checks and balances. And when debt was brought to Greece and Italy, you had basically mafia-type aristocracies controlling the land. These had to be overthrown by the Greek tyrants in order to sort of free their societies. There was a social revolution in the 7th and 6th centuries that overthrew the mafia-type aristocracies, and the tyrants were the reformers who paved the way for democracy taking place. So we're talking about a universal phenomenon. Nobody was copying anyone else. They didn't have to copy. You had essentially credit becoming privatized in the West as opposed to being a public function in Near East and Asiatic societies. Only the West had privatized the land and money and credit in the way that it's done to the extreme case that no earlier society was rich enough to have been able to afford.

Nathan: I see. Well, that's a great segue into my next question. I do want to just rewind the clock a few centuries and go back to the foundation of the Roman Republic and the ouster of Tarquin in 509 BC. A couple weeks ago, I was at the Isabella Stewart Gardner Museum in Boston, and I was staring at Sandro Botticelli's The Story of Lucretia, which is the story of the rape of Lucretia, the daughter of one of the Roman oligarchs in 509 BC under the king. And the story is set up to show how Tarquin had to be ousted and the Senate had to be founded and the Republic had to be founded. 

Dr. Hudson: This is a propaganda story. The rapists were the oligarchs. Not the people. This is propaganda inverting reality. Creditors were able to abuse the debtors all throughout Babylonian and biblical law. You had rules for what happens when the debt servant becomes pregnant. Well, obviously, she'd become pregnant by the owner, just as American slaves were impregnated by their owners. So when the kings were overthrown, it was the oligarchs that were egoistic and domineering, not the oppressed people. And so a whole different meme was suggested. We oligarchs are the generous, gentle people. It's you people—that we’re enslaving and taking your land—that are the greedy people. And this was made by the oligarchs into the founding myth of Rome as a complete overthrow of the kings. And you have to realize what the kings were doing. Rome was founded at a time when there was a great labor shortage in Italy as elsewhere. Rome was founded by offering immigrants—runaways, basically–you can leave the country you're in (your local oppressive oligarchy who's trying to reduce you to bondage). You're going to run away to us; we're going to give you land. And the early kings of Rome, as Livy describes, were protecting the population from an oligarch. But basically, by the late 500s, you had not only runaways coming to Rome, but you had wealthy oligarchs coming to Rome, taking their money from cities that wouldn't let them rule, sort of like the Cuban Batista supporters moving to Florida. And they became even more right-wing than the local Roman oligarchs, and they conspired to overthrow the king and make Rome just as rotten as the Etruscan and the other neighboring Italian autocracies had become.

Nathan: Yes, well, it was a lovely piece of propaganda showing the rape of Lucretia. But one thing I picked up from your book, Collapse of Antiquity, which came out last year, was this great piece in Livy who describes Tarquin as cutting down tall poppies prior to being ousted in 509 BC. And that recalls an older story about the “tyrant” Periander of Corinth in his conversation he had with Thrasybulus. And I got that from your book here. The idea, in other words, of taking a scythe and cutting poppies or grass such that they're all the same length instead of all different lengths stands in as a metaphor for debt forgiveness. Have I got that mostly right?

Dr. Hudson: Well, the idea was to cut everyone down to scale, down to size, to promote economic equality and to prevent an unequal oligarchy from emerging and monopolizing the land. And as I said, Periander and the other so-called “tyrants” were the reformers, and their idea was: we're going to redistribute the land and cancel the debts. That's what the tyrants did. Solon of Athens only canceled the personal debts. He didn't redistribute the land, and that made the Athenian population so resentful that Solon decided to go on a set of travels. The whole idea was to prevent an oligarchy from developing and taking over the government and making the laws in their own favor and making it possible for society to do whatever it wanted, to impose pro-creditor rules instead of pro-debtor rules.

Nathan: Outstanding. Okay, great. I think you've already given quite a good hearing to how the Roman oligarchy developed and how they got away with not enacting debt forgiveness policies. So I'd like to move on and ask you, Dr. Hudson, could you describe for us some of the dysfunction that went on in Rome, specifically the dysfunction that led adherents to the brand new Christian faith to believe they were living through the end times. Could you describe the Fall of Rome in these terms and how it was related to the abuses of the oligarchical class?

Dr. Hudson: Well, by the 3rd and 4th century, you had throughout the whole ancient world a revulsion against luxury. You had a whole movement for austerity in the religions of Persia. And in Rome itself, on the one hand, you had basically the wives of the oligarchs joining in this revulsion against the oligarchy. And the oligarchs themselves were fighting amongst themselves for power and to try to become the emperors themselves. Some of the leaders hired Germanic and other warlords to fight against rivals. At a point, these warlords gained power, and Romans themselves were joining the wives.

Nathan: So Christianity was born into this world of revulsion against the oligarchy and into internecine fighting amongst the oligarchy. So that is the lens or the filter through which Christianity was formalized. Have we got that right, Dr. Hudson? 

Dr. Hudson: Yes. 

Nathan: And the notion of debt forgiveness, or writing down debt to the actual ability of debtors to repay, is something that could have saved Roman society from their collapse, even though the Christian philosophy may have arrived very late. So there must be some connection between the contemplation of the twilight of Roman society, which these people were living through, and the way that the New Testament is structured.

Dr. Hudson: Well, remember, when Constantine converted to Christianity, he moved the center of the Empire to Constantinople. That became the new Rome, and the result was that Christianity became Orthodox Eastern Christianity, and Constantinople was the center. But there were also four other patriarchs. There was Antioch, there was Alexandria, there was Jerusalem, and Rome was left as a completely decadent patriarchate. There was a Roman pope, but it was controlled by local families in control of Rome. Vatican history refers to the 10th century popes as the pornography. It was rule by the concubines that was utterly corrupting Christianity. What you had in the East was not what you had in Rome in the West.

Nathan: I see. Fascinating. And then the next chapter in the story is Augustine of Hippo, who was a 4th century African bishop who arrived on the scene to—I guess his contribution, and you'll have to give us the details here, Dr. Hudson—his contribution was chiefly to invert the idea of sin and forgiveness to refer to personal sexual license. St. Augustine grew up as something of a rake, right? He enjoyed wine, women, and song in his early days, and he felt remorseful or apologetic about that history. And so he wove that into his theology—this idea that forgiveness is more about personal sexual sins and less about falling into hopeless and irrecoverable debt or debt bondage. Does that all track?

Dr. Hudson: He was also an opportunist and a power-mad himself. The problem Augustine faced was to obtain Roman support against the real Christians. In his North African area, these were the Donatists. The Roman landowners were creditors, so the new reversal of Christianity could not accept the Lord's Prayer calling for debt cancellation. Augustine called in the Roman troops to fight against Christians. His problem was, how do we get rid of Christianity and call it Christianity? His biographer, Peter Brown, calls him the real founder of the Inquisition. He was the disaster that made Western Christianity what it was: anti-Christian and absolutely antagonistic to the Christianity that survived in Constantinople in the East. Well, Augustine said what Jesus meant wasn't to cancel the debts at all, but what needed to be forgiven was sin, mainly of a sexual or other egoistic character. And that forgiveness was only available from the Church. It was deemed egoistic to undertake, for instance, good works by oneself. Or to cancel debts—that was condemned as being egoistic. Only by turning money over to the church, which meant the poor (the clergy who were acting as proxies for the poor)—that was the only hope for redemption from sin and egotism that was inborn with Adam. Well, the creditors making loans were not Adam. But if you said well, no, the sin has nothing to do with making loans at all. It has nothing to do with debt forgiveness. It's only inborn from Adam and it's that you all want sex. I think he was describing his own class. And those advocating debt forgiveness were attacked militarily and [fought] against the sort of anti-Christian Romans who really had turned religion into the doctrine of landowners and creditors. They inverted Christianity. This had already begun under Cyril of Alexandria earlier, but that was the point at which Christianity in the West stopped being Christian.

Nathan: Listening to your description of Original Sin as being connected to pulling the wool over the eyes or a financial scam—it's like layers of calcified brainwashing being washed away all at once. That's quite a story, Dr. Hudson. You had mentioned in the question prior to this one the five patriarchates of early Christianity, and that's a great segue into your latest work, which has yet to come out. Which I believe the trilogy you're calling Tyranny of Debt, and that this new volume about the Crusades is yet unnamed? Or maybe you have a working title already?

Dr. Hudson: I've retitled it as The Political Alignment of Creditors: From the Crusades to World War I.

Nathan: All the way to World War I? Okay.

Dr. Hudson: And after that, I have Super Imperialism and my other books. So once I finish this book, I've already written about modern society. But these first three books are how the whole situation was set up for the world to change for the worst after World War I.

Nathan: Just as a sneak preview into this new work of yours, could you describe how the Crusades were actually a consolidation of power by Rome, one of the five aforementioned patriarchates?

Dr. Hudson: Well, the papal dictates of 1075 laid out a plan for an imperial papacy to demand obedience by secular kings. And the Pope said, first of all, we want the power of investiture. That is, we want to enable popes to appoint the bishops in every kingdom. And church land was typically the largest land in any kingdom. It was larger than the royal domain. And control of its revenues gave power, basically, to Rome by saying, send all your money to us. Don't use it for domestic development. And already in around 1054, the Christians had broken from Eastern Christianity and said we want to take over all of the other churches with war. And so they said, well, how are we going to take it over? We don't have an army. So the popes recruited Norman warlords, like Robert Guiscard in southern Italy and Sicily who made a deal with the pope saying they would make him king if he agreed to make his kingdom a fiefdom of the papacy and pledge fealty to the pope in exchange for kingship and giving regular support to the pope. And William the Conqueror, another warlord, Norman, made a similar pledge to make England a fiefdom of Rome in 1066 and pay Peter's pence. Armies needed financing, and the papacy arranged the financing by reversing Christianity's long standing opposition to usury.

Nathan: I always thought it odd, the business of the Crusades. The Crusades were purportedly about liberating the Holy Land from Muslim forces. But that had been 500 years prior. I think it was the 7th century when Jerusalem was first taken over by Islam. And then the other odd thing about the Crusades is that the Crusaders laid siege to both Constantinople and Antioch, which were Christian cities. It just makes no sense at all. The propagandistic excuse for the Crusades makes no sense at all when you consider what actually went down during that time.

Dr. Hudson: Well, the Crusades were against Christians, not against Constantinople until the end. The Crusades were against neighboring Christian countries like Germany that resisted the takeover of Rome. They wanted to reform the papacy and make it less utterly corrupt and greedy, and so they were attacked. Another crusade was against the Cathars in France that had the idea that the papacy and the existing order was devilish and evil, not sacred. So you had Rome attack the Cathars, and they were attacking parts of what is now Yugoslavia that followed Eastern Orthodoxy and Constantinople instead. So the first task of the Romans was, how do we get rid of all the Christians and take over the Christian areas and make them basically our own colonies? And at the very end, of course, they did attack Constantinople and loot it, and that basically paved the way for the Ottoman Empire to replace Christianity there. The Roman destruction of Christianity became self-destructive throughout the West, opening it up to invasions further east. But the essence of the Crusades was a fight against Christians, including the Eastern Orthodox churches, who were the main Christians. So it wasn't a fight against Islam. Every fight they made against Islam, they lost. They only conquered other Christian countries, and that's the real story of the Crusades.

Nathan: Obviously, the Roman Church failed to unify Christianity all under Roman Catholicism, because the Eastern Orthodox Church is still a major influence in Christianity. Could you just briefly describe how the Eastern Orthodox Church managed to avoid getting folded into the Church of Rome? 

Dr. Hudson: Well, the patriarch of Constantinople, after the Crusades, met in a general Christian council and was actually willing to reunite the church, given the Roman control. But his own clergy and the population at large was resentful at the Crusaders’ looting of Constantinople and the papacy's domineering barbarism, as well as its idiosyncratic theology of the Trinity and Mariolatry. None of this was in Jesus' Christianity at all. They said, we want to maintain the Christianity of Jesus, not the people, not the Roman popes who seem to hate everything that Jesus said. So, of course, we can't be a part because we're Christians and you're not. That summarizes what happened at the Council.

Nathan: Could you tell us, Dr. Hudson, how closely are the Crusades related to interest-bearing debt becoming acceptable again to European society? I understand that interest-bearing debt got a bad name after the collapse of Roman society in the 3rd and 4th centuries. So how did interest-bearing debt become acceptable again to European society in the aftermath of the Crusades?

Dr. Hudson: Well, as I mentioned, the way that the popes were able to conquer other non-Roman Christian areas was to recruit warlords to take over. But even William the Conqueror and his successors in England, they all needed financing for the wars against the Germans and the Cathars, as I said. And so the popes took the lead in recruiting bankers to make loans to finance the wars against other Christians. And there was local opposition [to kings incurring such debts and raising taxes to pay them]. For instance, the English barons wanted to draw up the great charter, the Magna Carta, and King John asked the Pope to excommunicate supporters, which the Pope did. And then his son, Edward III, wanted to raise taxes to finance, to go deeply into debt to the Italian bankers to finance the papacy's war against the Germans in southern Italy. And there was a civil war, and the new pope excommunicated the opposition to taking on debt. So what became un-Christian, subject to excommunication, was the opposition to interest-bearing debt, not the support of it. And by the 12th and 13th centuries, the Schoolmen (the intellectuals class) drew a superficial distinction between usury and interest. They said that if usury was paid for a loan that served the church, such as going to war against other Christians who resisted Roman domination, or if a bank paid interest to depositors to re-lend the money to the poor, then interest was permitted. And all that was finally ruled [permissible] by Leo X, the Medici Pope, in 1515. So it was [Roman] Christianity that introduced not only the banking families to Europe, but ended the whole Christian opposition to debt. For instance, one permitted charge under the Churchmen was for late payment. And in principle, that was supposed to compensate the lender for not being able to use this money to make commercial trading profits for himself. But in reality, the due date of the loan to the English kings was almost immediate, and so the penalty fees began mounting up almost immediately. As Mathew Paris, the great chronicler of the 13th century, described, legitimate costs of doing business were included, such as enabling creditors to create fictitious travel costs and other expenses. All of this was called pragmatic. And so you had the whole ending of Christian opposition to credit. The Medicis and other bankers, took over the papacy for themselves and made [the popes] tools of the financial class that was emerging as a cosmopolitan class that in time replaced the church as the power over all of the states of Europe, the supranational power that took over and has survived down to the present world.

Nathan: Yes, obviously, the Medici of Florence being one of the most famous banking families of all time, the most famous banking family of all time, once they sit their own on the throne of St. Peter, then they can really make some changes. And I am also given to understand that the Fuggers of Germany, themselves devout Catholics, but on the other side of the battle lines in the Protestant Reformation, they were involved in getting guys like John Calvin to allow the taking of interest for the rising Protestant powers of the era?

Dr. Hudson: Well, Protestantism was created by the financial interests. Here was the problem that bankers had. If they lent money to the Catholic kings, the Catholic kings were so oppressive that they kept going bankrupt. They couldn't raise the money to pay for the wars, and they kept defaulting. And what the banks wanted was the modern national state. They wanted states that had a parliament that, instead of opposing debts, as they did under the kings, parliaments would be willing to borrow money to wage wars to defend themselves against the Catholics who were attacking them, by pledging all of the revenue of the whole population. And the modern states, [with] the power to tax and pledge public debts, were essentially created with constitutions to satisfy the banking interests, enough to be able to raise credit. And the modern states, ever since the Protestant Reformation, have become basically agents of the international financial class.

Nathan: Dr. Hudson, reading your work really has made me view compound interest as this device that has all manner of constructive potential, but also has the potential for serious destruction. It has to be carefully managed, and this nature of debt is something that the upper classes often want to sweep under the rug or hide from us. But the management of debt is something, since it has such destructive potential, a narrative here emerges about Jewish tradition in the years since the Flavians arrived and totally genocided Imperial Judea and spread the Jewish community to the winds. The beginning of the Diaspora, I think, usually is traced to about that time. And then during the entirety of the Middle Ages, when debt has a bad name, thanks to the collapse of Rome, when the crowned heads of Christendom need to borrow some money, of course, they turn to the Jewish community.

Dr. Hudson: No. It was the Italian bankers, not really the Jewish community at all. They confiscated the wealth of the Jewish community. The kings did not borrow from the Jews. Many of the local landlords and individuals had borrowed, but not the royal debts. We're not talking about Jewish creditors or international bankers. They were not the international bankers. These were the Italians and the Transalpine Cahorsins, not the Jews. That's very important to avoid that kind of anti-Semitic crap.

Nathan: Well, that's why we ask the questions. It does seem as though a great deal of the pogroms that went on during the Middle Ages, particularly in England or in the Ukraine, were just a matter of anti-Semitism and not a matter of the fact that Jewish communities loaned money and Christian communities didn't?

Dr. Hudson: Not all Jews were creditors. They were brought in. Their role was to be merchants, and they had, across the spectrum, an array of mercantile activity. The First Crusade initially was led by Peter the Hermit. Even before the official First Crusade went to Constantinople, Peter the Hermit led a whole populist group across Germany and spent all their time killing the Jews. That was really the first mass murder of Jews. That was the Crusades from the beginning. And he said we're killing them for Christ, because if we're going to have one Christian church running every country with the same rules we can't have any other group with its own rules. We have to have only Christian rules. They were trying to get an autocracy, a dictatorship under one rule. It wasn't specifically against Jews. It was against other Christians just as much. But on their march towards Constantinople, they killed entire Jewish populations of German cities. And finally, because they were so disorganized, they tried to fight against Islamic groups. Unfortunately, they were all killed or enslaved. And you had the rest of the official Christians who had been invited to Constantinople to help protect it against the eastern invaders. These were the knights and the aristocracy and other people who had gone. They came later [after Peter’s army] and ended up double-crossing the eastern emperor and trying to seize all of his lands. They were shown to be just land-grabbers and barbarians. And that was why the East looked at Roman Christianity as basically a neo-barbarian move that had nothing to do with their view of Christianity.

Nathan: I see. Okay, well, my final question for you, Dr. Hudson, is this: given the insane history of anti-Semitism, of which you've just given us a partial history, how do we make sense of the current goings-on with respect to Palestine and Israel in 2024? If you could comment on that, we would be much appreciated.

Dr. Hudson: Well, I don't think you can say that Netanyahu…Israel's run by the right-wing Likud party, no longer by the Labor Party that was earlier, but the whole idea of Israel as an apartheid state from the beginning was utterly different from the sort of first wave of Jewish immigration to the United States that was largely educated, middle-class, German population that was assimilated. And when I grew up, basically in Hyde Park in Chicago, basically a Jewish neighborhood, my friends, everybody I knew who was Jewish was thoroughly assimilated. And by the 1960s, when I went into banking, it had become passé to be anti-Semitic. And I didn't hear of any anti-Semitism. All this occurred later on, and I knew many of the people who became Zionists, and they all had experienced anti-Semitism in the United States or in other countries. And the whole root of anti-Semitism really started in western Ukraine, in Galicia. And so Leon Trotsky, in his autobiography, describes growing up in Odessa and the pogroms that were done at that time. So you had two different strands of Judaism. The one strand was a reaction against the anti-Semitism of Europe, saying we need to be safe in having our own land. And that led wealthy Jewish funders like the Rothschilds to press for a Jewish state. And many of the English supporters were all for that, as was Hitler. He said, well, that will get them out of Europe. Of course there should be a Jewish state. Let them just leave. And in England, it was pretty much the same. And Netanyahu and the right-wingers said, well, it's a people without a land and a land without the people. And the policy of the Likud party was to make Israel a land without people, meaning a land without a non-Jewish population. And Netanyahu has said that the great enemy of the Zionists were the American and the European liberal Jews, the assimilated Jews, who did not want to be separate. Who did not want to say that non-Jews are a different race, basically. And so you have this split in Judaism today with, I think, what you've seen in Israel under the Likud Party and its policies today are antithetical to all of the assimilationist Jewish groups that I grew up with as a teenager.

Nathan: That's quite a breakdown. Well, Dr. Hudson, that's about all I can think to pick your brain about today. We sincerely appreciate your appearance on the System Failure podcast. Absolutely outstanding. So thank you very much for your time and attention, sir.

Dr. Hudson: Thank you, and I look forward to reading the transcript.

Nathan: Absolutely. All right. Well, there he goes, folks, Dr. Michael Hudson. All right, folks. Well, that was a great episode of System Failure. If you wish to send us an email about the contents of that interview, please do so. We'd love to hear from you. You can drop us a line at knopp@substack.com. And if you want to subscribe to the weekly newsletter, then you can do that at knopp.substack.com. We hope to see you all online, and we shall see you on the next episode. Take care, everyone!

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