there were all kinds of legal corners that were cut and it showed you that they were bound and determined to finally get edwin edwards and they did. but he survived it and now he is in his rv traveling the country. >> in the last iowa caucuses in 2008 barack obama won the democratic caucuses and went on to win the presidency. mike huckabee won the republican of iowa caucuses but dropped out of the race two months later. see what a caucus looks like with video from previous years on line with the c-span video library. now through tuesday our c-span cameras are following the 2012 republican candidate that events throughout the state every morning live from iowa. political guests are taking your calls on washington journal. tuesday night live coverage of two of the caucuses of the central and western parts of the stage on c-span and c-span2 and later on the results of 1800

caucus's plus candidate speeches. use c-span's 2012 web site to watch videos of candidates on the campaign trail to see what the candidates have set on issues important to you and read the latest from candidates, political reporters from social media sites at c-span.org/campaign2012. >> now the author of greenback planet and david greater appearing at the texas book festival to talk about their book. there are audience questions for just over an hour. >> fabulous to see such a crowd. the wonder of it has to do with the fact that the dollar might be relevant topic. we are really lucky to have two fabulous prolific writers with

us today. what two topics could be more relevant than to talk about the decline in this climate of economic crisis? david graeber and h. w. brands to talk about their new books. i am assuming we won't have any trouble getting questions from the audience and let me do some housekeeping things first because i am hoping when you are all done over here you will go back in that tent and buy the books and the book signing tend, 15 minutes after the end of the session, the authors will sign their book at the book signing tend. one thing about the festival. i don't know about you guys but this is my favorite festival. i love south by southwest. [applause] i have never seen anything like it. the people who put this on our doing large work. the pending on which one you are thinking about. along with celebrating books and

authors the festival benefits texas public library and literacy across the state and we need that. proceeds from sales of all books and merchandise in the sales tend benefit these efforts. we are celebrating our sixteenth anniversary this year and the past 15 years the festival has contributed $2.5 million to libraries that enriched 35,000 children in low-income schools throughout the state. i want each and every one of you to buy the books from both these guys and you will read great books and benefit this wonderful mission. i am not an expert on the death of the dollar. i am paul stekler and i know about politics and i found both of these books fabulous. two quick introduction. i loved it when i began searching the web trying to figure out who david was and in the background on david graeber the author of debt:the first five thousand years who wrote a sequel, the next 5,000 years the first description i found it

wikipedia stated he is an american anthropologist and an anarchist. i am not sure how anarchist's get together to write those books but i like the idea. he currently holds a position of reader in the social and apology and goldsmith, university of london. he previously taught at yale. he was the author of a number of books and essays for the new left review. he did dissertation work we were talking about on the legacy of slavery and the endlessly fascinating island of madagascar are which partially dealt with in this book. in 2006 he delivered the malinowski memorial lecture at the london school of economics and honored outstanding anthropologist's who fundamentally shake the study of our culture. glad to have him here today. [applause]

secondly we have our own h. w. brands who teaches at the university of texas and as far as i can tell he has written 24 books. the holy time he is actually out. she is writing books most of the time. he is the dixon alan centennial prof. of history at the university of texas. before that vanderbilt and texas a&m. he is a finalist for the pulitzer prize begins the trader to his class, radical presidency of franklin delano roosevelt and first american called life and times of benjamin franklin in 2000. twenty-four books. he has presented eight times here. he is a passed texas award winner at this festival at he has not one but two book said the festival this year. if you can't get enough of him now come back tomorrow and that book is the murder--the love of j mansfield along with the book we are discussing today. to agree back planet:how the dollar conquered the world and threatened civilization as we

know it. sounds horrible. maybe it is. what i would like to start off with today is each of our authors talk about their books for a few minutes and i will ask a few soft ball questions and leave the hardball questions to you guys and give you a prompt to have people queue up to ask those questions and keep those questions going on as long as we can before you go out to buy their books. can you tell me about that? >> why that? why do we have that? one of the questions i asked when writing the book is what is that? one thing i was trying to explain was the strange moral power that debt has over a. it all started with a conversation with someone i met at a party about madagascar. i was talking about the third world debt crisis and being

involved in these campaigns around the year 2000. talking about the effects of structural adjustment policies inflicted by the imf. some examples in madagascar they were forced to cut the budget radically to repay citibank and other banks and approve interest rates and as a result had to get rid of their malaria eradication program to keep mosquitoes away from the island's. there was an epidemic in which 10,000 people died. the reaction was terrible. they borrowed the money. not saying they shouldn't pay the debt at all. this is a rather remember royal lawyer the liberal activist lawyer that i was talking to. what other thing would cause someone to say it is really sad about those dead babies but of course you have to pay the debt. come on. what other circumstance someone like that actually improves the death of 5,000 babies?

something about death has this moral hold over us. that is what i was trying to address. where does that come from? if you want to know what a debt is it is a promise. a certain type of promise. it is a promise that has been corrupted in a certain sense by mathematics and ultimately by violence. you can only return a promise which is a deeply personal thing into an impersonal form like a debt leverage will something that can be exactly quantified when there is an element of coercion. from their, we make it transferable. a promise that you can't give the promise to someone else and how promises become mathematical. the history of that is what the book is about. >> let's move from debt to

dollars. >> i wrote about the dollar. the short answer is always asked to write the book but the answer to why i said yes is i had been talking about a dollar for 3 years that i have been teaching american history. it is easy to take it for granted. you pull the dollar bailout of your pocket and spend it but if you think about it for a minute there's a certain magic involved in that because the piece of paper you pull out of your pocket is not worth a dollar. it might be worth a nickel or something or even better if you walk around with $100 bills because $5 the cubs were some one hundred dollars. i regularly ask my students why is this so? what is it that makes this piece of paper worth five hours of someone's time or 5 large pieces or something like that and we get into the legal background of it. i do a magic trick where -- i don't often do magic tricks but i do a magic trick.

maybe i can do it now. here it is. i have this piece of paper. not many of you can see it but it is a $5 bill. if i take it in to the cvs down the way or any store aiken exchange this for $5 of really solid stuff. food or medicine or whatever it might be. this piece of paper, this piece of paper isn't worth intrinsically $5 but there is something on the piece of paper that affects this magic that makes it worth $5. probably those of you in the back row won't be able to see but for anybody there is a magic formula that is printed on this piece of paper that makes it worth $5. takes a piece of paper into in thickly with a nickel and transforms it into something worth $5. do any of you know what that

magic formula is? show of hands? anybody? no? somebody is waving money back there. u.s. treasury is a good start but that is not a magic formula. way back. legal tender. there it is. fine print on the front it says this note is legal tender for auld that's public and private which means if you are offering something for sale that is worth of 5,000 -- of $5 pricetag and 5 walks in with one of these you have to take it and that is the magic. but why does it work? congress can say -- that is where the formula comes from -- congress passed the first legal tender act in the middle of the civil war. until then dollars in american history were calling the money. they were bold or silver. there were private notes circulating that represented

themselves as money but they were not legal tender. you didn't have to take those notes anymore than you have to take a check. i started writing this book because it had historical interest but as i was writing it even since it has come out it has developed a greater contemporary interest. one of the things i say at the end of the book is the dollar is almost certainly going to lose its privileged standing as the world's reserve currency. and foreign creditors in the united states are going to do their best to diversify their currency portfolio. what do you know? in the paper couple days ago reuters had a report that china has agreed with the nation's -- associated southeast asian nations that trading in that block will be done in chinese yuan rather than in dollars. that i read something yesterday that flew in the face of my

magic trick. it seems that the legislature of louisiana. this just happened in the last couple days, legislature of louisiana passed a law that says people who sell second-hand goods cannot accept cash for those goods. they cannot. in the first place, this strikes me as probably in violation of federal law because if it is legal tender it is legal tender. secondly, it raises some really interesting questions about the direction of the dollar. if cash isn't good any more than what in the world are we going to go to? that is a long winded way of saying -- that is what roadblock. >> that is louisiana you are talking about. >> let me throw a question out to both of you to start out with

and frozen specific questions about the books. we are in the middle of what everybody seems to agree is an economic crisis around world. part of that crisis is the place of the dollar. chinese currency or the euro is in any better shape. obviously hasn't done very well in the 20 years of the japaneses. we have this incredible crisis over the debt crisis which i think you would say is not what everybody thought it was. so where exactly considering where you are coming from, history of that and a history of the greenback what are we liable to be getting into in the twenty-first century? is their place for the dollar? >> it is hard to know where to start. just going to attach something.

the actual amount of dollars is $0.03. that is how much the federal reserve pays to make up no matter what the denomination. the system of money we have now, one thing that is important to remember is it took a long time for the u.s. the last large nation in world to come to the central bank model. they got rid of it -- but the basic model for how modern money works isn't a lot of ways the opposite of the way people talk about it in mainstream political discourse. i give the example of the origin of the bank of england. in 1694 a group of london merchants made a loan to the king of england to fight war in france. and he gave them a right to take the 1.2 million pounds he owed them and to lend it to other people in the form of bank

notes. that is what british pound sterling bank notes actually are. i don't have any in my pocket any more but if you look at the ten pound note it says i promise to pay the bearer the sum of 10 pounds. it is not actually 10 pounds but a promise to pay 10 pounds. at that time silver or gold worth something. and that mainly affected you can pay your taxes to cancel the debt. but it is circulating government debt. in a way that is what money has continued to be, modern money. federal reserve works with more smoke and mirrors than the bank of england but it is a safe printable. they make money with a magic wand and lend to governments and circulated that. that money effectively is circulating government that. as a result government got rid of the debt entirely. there was a study that recently came out of the clinton administration when they were trying to get rid of the deficit

or do a budget surplus what would happen if they got rid of the debt entirely and they concluded it would cause an economic catastrophe. you need -- banks would have to make up all the money. insert periods of american history they did do, but when andrew jackson got rid of the debt the results -- it was the one time anybody ever has. the way the wheels are turning in the opposite direction, money isn't actually the scarce resource like petroleum or something which there's only so much of but the question is how much we create. that is the real political struggle. it was very similar. for most of the cold war history the country has been holding the treasury bond. the u.s. can write checks that treated as gold and use as reserve currency in the rest of the world. they just rolled over. west germany was one of the

bigger holders. japan, south korea. what do they all have in common? they are under u.s. military protection. in a way the amount of the death is the same that increases along with military spending so they are lending us the money to create these armies that sits on top of the man never pay it back. china is more complicated. that is the system of the challenge. it is simply true that for the last few hundred years the global reserve currency has tended to be that of a global military power. i don't think that is a coincidence. how it works we could all talk about but it strikes me that that is what is being contested with the primacy of the dollar. not only what other currency would replace the dollar but possibly replace the u.s. military -- >> question of the future of the dollar's closely related to the future of the american economy

as david has suggested. the country that has the biggest most powerful economy dictates the terms of world finance. you can see in the case of the united states, united states was the most productive economic power in the world by the beginning of the 20th century. at that point it remained an international debtor but during the first world war to bring this about, during the first world war, very heavily in the united states, for being a debtor nation to the world's largest creditor and the era of america's creditorship when the creditors plan of the world from 1910 to the 1980s it was during that period that the dollar in american diplomats robles, international financial systems. the system that originated at the end of the second world war. at that time america's industrial production and

industrial gdp was equal to the rest of the world combined and with that kind of leverage the united states was in a position to dictate to the rest of the world. the world financial system, the others were linked to the dollar and the dollar was gold. the gold tab was considered important because something like a gold standard has always been a check on government from producing more and more of the notes. if you have legal tender. for the first time the united states it came into effect in the 1860s and it occasion did the did the great controversy because until then governments could not be trusted not to just run the printing press and run the printing press until the dollar became worthless. that is what happened to the confederate currency during the civil war. the union government was more circumspect and it won the war and was able to redeem those legal tender dollars.

but gold still remained the model of currency. gold because government can't produce it. only god can produce gold. and gold remains a linchpin of world currency from 1945, end of the second world war, until the 1970s but by then the united states had slipped when it was still the no. one power in the world economically but it no longer had the advantage over the rest of the world that it had. this was inevitable. wasn't the result of any particular policy decision by the united states or its leaders those contributed. lyndon johnson tried to find the war in vietnam and fight the great society put great strain in the u.s. budget but the larger issue was since 1945, 1945 until the 1960s the rest of the world began to recover from world war ii. the united states was in a very basic way the only winner of

world war ii and the united states stood atop a pinnacle of economic power. the american economy continued to grow after 1945 until you could say the top of the mountain got taller but the slopes of the mountain got toller faster. 5-year >> host: 70s america probably had something on the order of a third world gdp and would continue to decline and it is down to around 1/4 to 1/5 of gdp now. under these circumstances quite unrealistic to expect that the dollar will continue to have its way that it had 60 years ago. this doesn't mean the united states will be knocked from its perch immediately and entirely. there is no single currency that is a viable alternative to the dollar at least not at the moment. much more likely there will be some sort of market basket of currencies or the individual sovereign debt, sovereign will

fund with large foreign currency holdings will diversify instead of holding dollars and euros and you on. it is more or less inevitable. there are three hundred million people in the united states and seven billion people in the world. things are going to even out a bit more than they were 60 years ago. >> one of the wonderful things about both these books despite the fact that both these gentlemen are teachers who can really write which is not something you see, these are really great books to read. these books are also more than an op-ed piece about that and the dollar today. they are histories and really interesting histories most of us don't know much about. so i will put data on the spot. one of the most interesting things you wrote about was talking about debt and virtual money in the context of the slave trade with africa. such an amazing chapter. talk a little bit about that.

>> one of the fascinating things to me. i discovered all sorts of crazy things as i was researching this book ranging from debt cancellation in mesopotamia to the free market populism that comes out of medieval persia. one of the things that struck me was the slave trade. when i was involved in these debt campaigns one of the arguments was africa is the most indebted continent in the world and the argument -- you simply -- look what you did was. a fair case but you can make that case even stronger if you look at how the slave trade was conducted. it was carried out through manipulation of debt. people were coming in and militarily taking people away. that didn't happen but it was often an initial stage and it

was followed by creating these relief elaborate deathtraps so the whole thing was a very complex credit scheme where merchants in england would forward funds to merchants working overseas who would forward funds to african merchants and everybody would be advancing to someone else undulate got to the local level where for example one common pattern was to put men at war between people who have -- because indebted canes had to figure out a way to pay back their creditors but even more common ones to advance goods to get people caught in credit traps. another way was to corrupt the legal system so that any crime you have to pay an enormous penalty and if you can't pay the penalty you get sent away. there are all sorts of separate techniques but there's a gigantic network of debt traps. what i find interesting is in from decree important in itself.

model of what could happen in human history and in a lot of places is a very rapid traumatic catastrophic aversion of what i call human economy converted into commercial economy because you do have very complex systems of debt that exist in traditional societies but if you look at money as an anthropologist and look around world the most common use of money in places were you don't have states is not to exchange goods and services which are usually -- there are some complex gift systems where you actually dispose of your house and acquire tools and ordinary things that they do have money and use it for social relations with one another. yet people are not just settle in fines if there are quarrels and a marriage needs to be negotiated. the social relations are carried out through money and we would

consider economic relations are and. what happened is this is the way the system can be corrupted so people show up. the way i usually put it is imagine what would happen to our society if space aliens showed up with powerful weaponry and we would give a million dollars to anyone who provides with workers and we will not say what happens to them. someone will take the bait. when they ended up doing was converting what happened in monetary system used to rearrange relations with these people into ways of extracting people and i think if you look at how many or originated in the form we had is a process like that that probably happened 5,000 years ago in places like mesopotamia of which the records are now lost. >> there are a number of

important figures in american history that appear in your book. two of them are figures that are very important to me when i was a young political scientist doing an analysis on the populist party's rise in the midwest. most important figure was william jennings bryan and his gold speech which you can hear recordings of years later as one of the great speakers in american politics. big part of william safire's book on speeches. it delivered in a different way and -- my own political hero when i was a kid, richard nixon -- don't tell anybody. tell us how brian and nixon affected the dollar in their own times. >> richard nixon would roll over in his drive if compared to william jennings bryan. but in a very fundamental way they were aiming for the same

thing. william jennings bryan became the spokesman of the populist movement in the 89s and at the heart of the populist movement was of belief that the financial system of the united states was tilted against farmers, specifically, ordinarily people generally but farmers specifically and they had a specific complaint. namely falling prices for farm products. the price of corn went down by half the 201870s 1890s. cotton was more than that. this was a very serious problem for farmers because farmers typically operate under conditions of debt and debtors are seriously disadvantaged when prices fall. if you bar on the one hundred dollars when we is $1 a bushel you have to grow 100 bushels of wheat to pay it back but as price falls $0.50 you have to grow 200 bushels of wheat to pay it back so the fundamental goal

for the trick behind managing money supply is to get the money supply to grow at the same rate as the economy as a whole and if you do then prices overall will remain stable. the fall in prices was in certain respects a consequence of the success of the american economy. the economy was growing faster than the money supply. ..aster than the money supply so prices were falling. farmers were disadvantaged by this. their spokesman william jennings bryan claimed the way to alleviate their distress was to expand the money supply. this made perfectly good economic and financial sense but it seemed to those people who were creditors that it was a kind of theft because it devalued the dollar and meant that what they were owed was worth less than it had been the day before.

the preferred method of evaluation for the populist was the real modernization of silver. their campaign slogan was free silver. what brian and the populists wanted to do was severed the connection between the american money system and gold. the problem as they saw it and they were right was there was not enough gold to go around. if we could expand the money supply by adding silver which constitutionally was part of the american money supply from the beginning but it fell lot of circulation, then the debt burden of farmers would be diminished and prosperity would return to the heartland. this was the goal and this became the crucial issue of the campaign of 1896 in which american voters had to make a decision. and the vote came down to a crucial decision by a new class of people. farmers were going to vote for

william jennings bryant and the democrats and free silver and the owners of the big corporations were going to oppose him and free silver and vote for william mckinley and the preservation of the gold standard. the wild card was the industrial workers who worked for the capitalist the shed the standard of living of the farmers. which we would they go? all sorts of shenanigans were employed to get the urban workers to side with the farmers or the capitalists. when it came down to where they mated decision in favor of their bosses rather than their working-class comrades. with this, the idea of adding silver to the currency went out the window. america's grip on the gold standard lasted in the 1930s until 1971 when richard nixon

did what william jennings bryan advocated by cutting the united states off for the international gold standard. nixon would be greatly chagrined to be compared with william jennings bryant but there it is. >> i have questioned about that. is it really true that the wizard of oz is about that? one interpretation of the book is all about but yellow brick road, going to the emerald city of oz, emerald city being green but the story that dorothy and farmer blown away from her farm, sometimes feel roosevelt in the back room, the scarecrow is the farmer with no brain and gets foreclosed on, feet in woodsman is the industrial proletariat with no hard and the cowardly

lion is the political class to won't do anything about it. [applause] >> does that mean the wizard is mark hanna running the campaign of william mckinley and sat on his front porch the entire time? >> a lot of interpretations. >> this is the interpretation. it arose the same time the wizard of oz came out. the arthur, frank baum, never acknowledged that this was what he was doing and i don't know if he decided ok, hy didn't actually do it but if people want to read into it was a will may be so, maybe he thought it was better if he never did and it may simply have been -- it may simply have been people reading into it what they wanted to read into it. i think it was something in between.

there were certain imagery that would have come naturally to anyone of populist leanings during that period. and so the fact that dorothy is theodore backwards is a stretch. you would really have to turn theodore roosevelt on his head. it is an interesting story. historians have been dining out on it ever since and frank baum is long since dead so he can't deny it. >> one more question and we will take questions from the audience. you can cue up over here with as much room as we have. one of the interesting things about david's book is the idea of morality. i was taken with the idea that an anthropologist writing history, world wide history and that that debt is a bad thing used effectively and politically in the last made a debt crisis in the summer time.

the whole idea of comparing household debt to american debt which there may be problems with. they're not the same thing. the concept of debtors' prison which we were talking about. talk to me so we can have more questions about the idea of debt and morality. >> one thing i found which is fascinating when i was researching the ideas of debt in the great world religions is words for debt and see in in many languages are the same. that is true in sanskrit. is not true in hebrew but in aramaic. in the lord's prayer, forgive us our trespasses is the anglican translation, earlier translation was forgive us our debts which is what it says in the air america. just as we forgive those who owe us money. the idea is we don't actually forgive those who owe us money

it. do we? that theme shows up over and over again but is intensely ambivalent. like the beginning of plato's republic which begins me opening salvo of western political philosophy starts with this -- just this is a matter of paying your debt. socrates blows that out of water. that is ridiculous. if not that than what? that question is asked in almost all the great religions. if you go back to the origins of hindu philosophy they start with your life is a debt to the gods. we repay for that sacrifice. but that is not true at all. you also odette your parents which you repaid by becoming a

parent. you repay the sages by becoming a sage. you repaid by realizing there isn't a debt. it raises the question how can you owe something to the cosmos? that would mean the cosmos is a partner which is absurd. with absurdity you realize there's no debt. in the bible face start with morality is that but it is actually forgiving debts. through redemption and canceling debt. there's a great tradition of debt cancellation that is truly divine. that ambivalence for buddhist examples as well is constant and reflected in this strange gil morales we were people to act like a friend of mine at st. you can't cancel their debts. that is absurd. the idea that debt and morality is the same thing. look at world history ended is impossible to find a money lender who is not represented as evil. how do you swear that?

there is a fundamental in coherence behind the way we talk about these things. the historical legacy of systems of violence we are no longer able to see strikes me that the most powerful way invented to take a relation of fear and coercion and make it seem moral -- a conqueror -- i could kill you and didn't so you owe me your life. therefore you owe me. i will tell you how much you owe me. i am allies guy who let you off the hook. after that you better give up the money. suddenly the guy who's the victim is running around feeling like a chump all the time. you turn the moral relation around. the only real reply is who oppose what to? will moment you say that you're using the language of that. they have to use the language of

that because it is the language of people running things but they use it to slowly blow away and say that morality is something else. they have an stuck in that situation. we have to use the language of debt and we slowly move away but never completely move away from it. >> a few counterexamples to the principle that death is considered a bad thing. alexander hamilton considered the national debt a good thing. he encourage the federal government to take on the revolutionary war-and hamilton did this with great calculation because he understood creditors have a great interest in the success of what individuals or enterprises of the money and if the wealthy people of the united states, bondholders, if they vote -- if they were owed money by the federal government then it would be in their interest to ensure the success of the

federal government. so hamilton believed the federal debt would be a natural blessing. it would insure the success of the new federal government. in the early 20th century the u.s. government engaged in dollar diplomacy. the essence of the dollar diplomacy was to encourage especially regimes in latin america to transfer of the debt that they owed european banks and bankers to american banks and bankers. this would eliminate the temptation of the european government to secure the debt owed to their bankers to send in gunboats and make sure the interests of these latin american countries looked toward new york rather than europe. so that is something that has been used for political purposes in american history since the united states began its business. >> one of the things you might incorporating your answer as i open it up to the question and

answer period time is that means there must be a great thing we owed china. >> i could sail lot about that. >> if you of the bank of thousand dollars you have a problem and if you of the bank of million dollars the bank has a problem. >> that is how i started the book. [applause] >> the corollary is in the brave new future if the dollar is not the currency the entire world, what does it mean for our ability to buy your books later on? but that said let's go to the first question. >> the question is the sovereign debt in the u.s. what does it do to the future growth output of the u. s?

the effect -- historically debt has been the growth of empire. >> you want to take that? >> i will give a start. to the extent that the debt is owed to non-american is what sort of terms to foreign creditors insist to roll over the debt? if china is happy to rollover the debt it is no problem. if china for example decides it will insist on higher interest rates or take its money elsewhere then that puts a crimp on the american economy. interest rates have to rise to attract the money and roll over the death and the interest rate the fed pays the treasury pays filter through the economy and interest rates go up. to the extent that the debt is so internally from one american to another or one generation to another in terms of the

productivity -- there is the issue that takes a outside the realm of economics per se which is are there political ramifications? -- during the 1970s the arab oil producers decided that embargo shipments of oil to the united states during the 1970 war. that was not an economic decision but a political decision. economically they might as well sell it to whoever is willing to pay. if there should become a political component to decisions regarding america's that then that would raise all sorts of difficult and explosive political consequences. >> the sovereign debt crisis is disingenuous to compare countries in different political

persuasion. if you look at the countries with a real sovereign debt crisis there almost invariably countries that don't control their own currency. some place like "the other barack: the bold and reckless life of president obama's father" -- simply agrees or argentina which control their own currency or other of things they can do or a country like america where we create currency still used as a world reserve currency in an entirely different position. we will never be in the same position as greece and argentina. not fair comparison. they take on a different kind and much more long term. >> just a lot of talking congress about passing a balanced budget amendment. is this successful and what would be the likely economic impact? >> if the amendment were passed or if the budget were balanced? [laughter] >> i guess both. >> if the amendment were passed

it would be like passing an amendment saying we will all go to heaven. it would have about as much effect because if you look at the budget of the state of texas nearly every state has a balanced budget requirement but all sorts of subterfuges are reported to to get around that and if you think the federal budget is designed according to a rather creative accounting principles now, just imagine what it would be if you had to balance it each year. ..

if the budget had to be cut a trillion dollars a year. >> just to add, i want to recall the whole debate under clinton. they actually had a budget surplus, and pretty much everybody across the political spectrum started looking into what that might really mean over the long-term if they got rid of the debt entirely, realize that this would be a terrible idea and that goes from the clinton people-to-people like alan greenspan, the ayn rand ian who started saying, you know, if you have to come up for an excuse to why he was anti-keynesian he couldn't say if there is no government debt there will be no money supply and he didn't want to say that so he said it will be socialism because there will be such a surplus that the government will have to put the

money somewhere they let to buy something and logically they will buy things people want to label start nationalized everything and we will end up having a communist economy. [laughter] >> we of that room for more questions. here comes somebody. >> can you explain, can you explain what in the world is -- >> yeah, i can. as a matter fact, which one? wampum is made from a certain type of shell, a nice white and purple clam. and it was used as largely a way of me came arrangements and contracts and peacemaking by native americans across the northeast coast, but when settlers showed up there was a very, they really didn't have

access to gold and silver. they used a credit system and wampum was a way of trading with native americans in the fur trade. it became an actual currency of the trade. there is no evidence that native americans actually used it to buy and sell things to each other but it became a trade currency that was then adopted as legal tender and most of the northeastern colonies. it was in a 17th century largely. so they took this, you know, barely casual means of making political negotiations and turned it into money. it is rather similar to what happened in a famous purchase in manhattan which is one of those classic examples of two people thinking somebody -- something totally different was going on. dutch settlers were thought they were buying a piece of land. the people on the other side thought this was a presentation of a gift of rare exotic up as a pledge of good faith to establish political treaty which would involve the access to

land. >> i will piggyback on that briefly. the fundamental money problem in the american colonies during the first few decades of american national existence was a shortage of money. the british government, the british colonial government disallowed paper money, the provincial assemblies could not issue paper money so people were stuck with gold and silver. the gold and silver are rare and they were especially rare in the colonies. and so the colonists got used to devising other means of currency. wampum was one. in virginia they would denominate things in terms of tobacco. in tennessee when andrew jackson won out there is a young man in his early 20s in 1790 tennessee at the time was still part of north carolina anyone out there to practice as a lawyer. there wasn't enough money to go around so his legal fees were often quoted as pay and a curse of land, so if you wanted a wheel at what cost you 80 acres and if you had litigation that

would be a quarter section or something like that. so these are all sort of markers of value and there are ways of doing triangular trade. is one person wants to do something you could barter back and forth but that is a binary thing. once the economy gets more complex than that, then you have to have something that stands in for value, and gold and silver are considered the best. paper was disallowed so you would use whatever you could come up with. >> the by going to your book traitor to his class, i'm going to lead up to this question. if you go back to roosevelt making -- in 1933 to help the farmers who lost tons of money through the banks, the banking regulations were in place for 60 years until i believe 1993 is

when our luster is congress removed the regulations on banking. my question leading up to this is the comments about deregulation or regulation by the banking industry, alan greenspan's philosophy of free markets. >> in history it is notoriously difficult to determine cause and effect but i will just say going along with what you mention, in 1933 franklin roosevelt and congress passed a number of banking regulations trying to ensure that banks not do again what they had done during the 1920s, namely they took depositors money and they invested in the stock market. and it seemed like a really good idea. as long as shares were going up because while they might be able to land it out that 3% on mortgages, they could make 25% a

year on the stock market. and they were paying their depositors 2% and pocketing the rest. it seemed like a wonderful thing until the stock market crashed in 1929. and in the depositors, who would put their money in banks rather than buying shares of stock themselves because of the perceived greater security in banks, bound that they had lost their money and they had no reward. so, under the roosevelt administration, the democratic new deal congress passed regulation to make sure the banks couldn't do that. they couldn't take your deposit and then go play the stock market with it. those regulations were in place until the 1990s. they were repealed in the 1990s, and eight years later we have a financial crisis of 2008. now, it is impossible to prove the yawns the shadow of any doubt that one led to the other. as i say, business is causation

in history and impossible to prove because you can't rerun the experiment with a different premise. but it certainly does seem suggestive that there was nothing like 1929 during the whole period of 1933 until the regulations were repealed. and then within just a few years after the repeal of the regulation along comes 2008 which is the worst financial crisis since 1929. so i guess you could make that point as well. >> i would add one thing. when we use the word regulation i think it is important to remember that regulation has not stopped. we have got this weird works trap when they do regulations that banks don't like it called regulation. when we deregulation banks like it is not some our free market. is already laid and in the incredibly elaborate code which banks used in part by writing. >> the follow-up to that is, do you think that they will ever get around to regulating trading

and derivatives? >> i don't know the answer to that question but i did read an article in "the washington post" a couple of days ago saying that president obama has raised more money from wall street and the financial community for his re-election than all of the republicans combined. so a democratic incumbent has ties that close to wall street, i'm not going to hold my breath for tighter regulations in the near future. >> could you comment on the federal reserve and its shareholders and also the current policies that have been audited or abolishes -- abolish. >> the federal reserve has been everybody's favorite whipping boy since 1913 when it was created. the federal reserve had made its share of missteps, but if you compare america's financial history during the 19th century, up until the creation

of the federal reserve, and then how things were from 1913 until the present, you would see that the wild rollercoaster ride of panic in bubble and panic and bubble, there was a panic of 1819 and there was a panic of 1837, there was a panic of 1857, there is a panic of 1873, there is a panic of 1907 and then the federal reserve was created in 1913. yesterday there was a panic in 1929 and the fed really got that one wrong. the fed allowed the money supply to shrink by as much as a third, which had devastating consequences for the economy as a whole but the fed learned from that, and the american financial system from then forward has performed a whole lot better than it did before there was a fed. now, as to the question, ron paul contends that the federal reserve is unconstitutional. and if you look at the

constitution in particular, if you look at section 8 of article i, which specifies enumerated powers of congress, it says the congress that congress has the power to coin money. it doesn't say that congress has the power to print money. this is where ron paul and the libertarians say that the federal reserve is unconstitutional. now, they do have a supreme court decision in their favor. in 1870, the supreme court ruled, remember those legal tender notes that came out during the civil war? in 1870s the supreme court ruled that the legal tender law and the notes were unconstitutional. but before that jolt to america's financial system could work its way through the economy, to the justices retired. ulysses grant appointed two new ones and they change their minds and they said that legal tender was constitutional.

so with ron paul wants to go back to the 1870 decision, that's his prerogative but since the early, mid-1870s, the supreme court had said it is constitutional so i guess we are going to live with it until we get a -- >> actually as a result of the constitutional laws, points are still produced by the federal government. it's the dollar bills that aren't. >> we have got time for two more questions. a woman in the wonderful jacket and a man with a cowboy had. >> hi. i'm curious to hear your opinion about the phenomenon that our current generation of students is dealing with, the graduation is pretty much what you would call eight crushing debt and would you call that a death trap? >> yes. >> and if so what do you think the impact of that is going to be? >> yeah, well throughout most of human history, sort of nightmare

scenario of total social breakdown that people envisioned was precisely the debt trap. one or 2% of the population would end up with all the resources and end up leading it to everybody else and people would start falling so deeply into debt they would have to sell members of their family. their children would be pond. they would have to work for households of strangers and they might have to sell themselves to work for others into slavery and there was various mechanisms put into place to make sure that didn't happen. most famous of which is debt cancellation. you see mesopotamia, clean slate start over, all debts are canceled. commercial debts would often be left aside the consumer debts wiped out which we believe is another version of the same thing. the point alloys make is that you know, if aristotle were somehow put in a time machine and naturally transported to hear, he would probably think the distinction between selling yourself to work forst