.. debt. [inaudible conversations] >> fabulous to see such a large crowd here today. i wonder if it has to do with the fact that the death and the dollar are relevant topics today. we are really lucky to have two fabulous prolific writers with us today. what two topics could be more relevant than to talk about today's climate of economic crisis? david graeber and h. w. brands here to talk about their new books. are am assuming we won't have trouble getting questions from the audience but a few housekeeping things first. i hope when you are done over here and impressed with the two

authors you go back to the tent next to us and by the books. in the book signing tend. 15 minutes after the end of the session or maybe 15 seconds the authors will sign their books at the book signing tend. one thing about the festival. i don't know about you but this is my favorite festival. i love south by southwest. [applause] this festival is fabulous. the people are doing the lord's work depending which lord you are thinking about. along with celebrating books and authors the festival benefits the texas public library and literacy across the state. we need that. proceeds in the sale of all books and merchandise in the sales tend benefit these efforts. we are celebrating our sixteenth anniversary this year. the past 15 years the festival contributed $2.5 million to libraries to enrich 35,000

children in low-income schools throughout the state. i want each of you to buy the books from both of these guys because you will read great books and benefit this wonderful mission. i am not an expert on the debt and the dollar. i am paul stekler and are in or about politics and i found these books fabulous. i loved it when i began searching the web to figure out who david was and in the background the author of debt:the first five thousand years. you wonder about the next 5,000 years. the first description i found stated he is an american anthropologist and an anarchist. i am not sure how anarchist's get together and write these books. he holds a position of leader in the social anthropology and goldsmith, university of london. he previously taught at yale and is the author of a number of

books and essays and articles for the new left review. dissertation work in the authors tend focusing on the legacy of slavery and endlessly fascinating island of madagascar which is partially dealt with in this book. in 2006 he delivered the malinowski memorial lecture at the london school of economics and honored outstanding anthropologist who fundamentally shake the study of our culture. we are glad to have him here today. >> thank you so much. [applause] >> secondly on this panel we have h. w. brands who teaches in texas and as far as i can tell he has written 24 books. this is the only one that is out. he is writing books most of the time. is the dixon allan anderson centennial prof. of history at the university of texas. he taught at vanderbilt and, a

tee time finalist for the pulitzer prize. a traitor to his class for the radical presidency of franklin delano roosevelt and the first american. the life and times of benjamin franklin. like i said, 24 books. he presented eight times here. he is the past texas award winner at this festival and has not one but two books at the festival this year. if you can't get enough now come back tomorrow. that book is the murder of jim fisk for the love of j mansfield along with the book we are discussing today, greenback planet:how the dollar conquered the world and friends civilization. sound like a horror movie and maybe it is. what i would like to start out with is have each of our offers talk about the book if you manhattan are the last few softball questions and leave the hardball questions to you guys. we will have people ask those questions and keep those questions going as long as we can before they go out and buy their books. can you tell me about that?

>> why do we have that? one of the questions i asked when writing the book is what is dead? one than i was trying to explain was the strange moral power that debt has over us. it all started with a conversation i had with someone i met at a party about madagascar. i was talking about the third world debt crisis and these debt campaigned as an activist. something that the effects of structural adjustment policies inflicted by the imf and some examples in madagascar's they cut the budget radically to pay citibank and other banks with approved interest rates and got rid of their eradication program which kept mosquitos away from the highlands and there was an

epidemic in which 10,000 people died. the reaction was terrible. surely you are not saying they couldn't pay the debt at all. i thought about it and said this is a rather liberal lawyer that i was talking to. what other thing would cause someone to say it is sad about that -- you have to pay the debt. default? what other circumstances would someone approve of the death of 5,000 babies? something about that has absolute moral hold over us. that is what i was trying to address. where does that come from? it is a promise by 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 return a promise which is a deeply personal thing into an impersonal form like a debt into math something that can be exactly quantified when there's an element of coercion. from their, that also makes it transferable. you can't give a promise to someone else. if you want to understand the origin of money is how promises become mathematical and the history of that is what the book is about. >> let's move from debt to dollars. >> i wrote about the dollar. i was asked to write the book but the answer to why i said yes is i had been talking about the dollar in 30 years i had been teaching american history. something you need to take for granted. pull the dollar bailout of your pocket and spend it but if you think about it a minute there's

a certain magic involved because the piece of paper you pull out of your pocket is not worth a dollar. might be intrinsically worth a nickel or something or even better if you walk around with hundred dollar bills in your pocket because $5 becomes worth $100. are regularly asked my students why is this so? what makes this piece of paper worth five hours of someone's time? we get into the legal background. i do a magic trick -- in fact maybe i can do it now. here it is. i have got this piece of paper. not very many of you can see it but it is a $5 bill. if i take it into the cbs down the way i can exchange this for $5 of really solid stuff, food or medicine or whatever it might

be done this piece of paper isn't worth intrinsically $5 but there's something on the piece of paper that in fact this magic and makes it worth $5. probably those in the back won't be able to -- anybody, there is a magic formula that is printed on this piece of paper that makes it worth $5. takes a piece of paper that intrinsically is worth a nickel and transforms it into something worth $5. do any of you know what that magic formula is? show of hands? anybody? somebody is waving money. u.s. treasury is ago start but that is not a magic formula. way back. legal tender! there it is! in fine print on the front it

says this note is legal tender for all debts, public and private which means you are offering something for sale and put a $5 price tag on it and i walk in with one of these you have to take it. that is the magic. 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 cooling money. they will gold or silver. there were private notes circulating that represented themselves as money but 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 since it came out it has developed greater contemporary interest. one thing i say at the end of the book is the dollar is almost

certainly going to lose its privileged standing as world reserve currency. and foreign creditors to the united states will do their best to diversify their currency portfolio. what do you know? just in the paper couple days ago reuters had a report that china has agreed with the association of southeast asian nations that trading in that block will be done in chinese yuan rather than in dollars and then i read something yesterday which flew in the face of my magic trick. it seems that the legislature of louisiana -- just happened in the last couple days -- the legislature in louisiana passed a law that says that people who sell second-hand goods can accept cash for those goods and 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, erases some really interesting questions about the direction of dollar. if cash is not good anymore what are we going to go to? that is a long winded way of saying -- >> that is louisiana you're talking about. >> let me from a question out to both of you to start out with. some specific questions about the books. we are in the middle of what everybody seems to agree is an economic crisis around the world and part of that crisis is the place of the dollar. the chinese currency or the euro is in any better shape obviously hasn't done very well in 20 years since the japanese

collapse. we just had this incredible crisis over the debt crisis which you would say is not what everybody thought it was. where exactly considering where you're coming from from the history of debt and the history of the greenbacks were we getting into in the twenty-first century? is there a placement for the dollar? is this debt crisis going to blow the entire economic system? >> hard to know where to start. our attack something on to what you said. the actual amount of dollars is $0.03 which is how the federal reserve takes them no matter what the denomination. the system of money we have now it is important to remember that it took a long time for the u.s. to come to the central bank mall. they got rid of it.

the basic model for how modern money works is the opposite of the way people talk about it in mainstream political discourse. i like to 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 a war in france and he gave them the right to take the 1.2 million pounds that he now owed them and lend it to other people in the form of bank notes. that is what british pound sterling bank that actually are. i don't have any in my pocket any more but if you look at 810 pound note from the queen it says i promise to pay the bearer of a sum of 10 pounds. is not actually 10 pounds but a promise to pay 10 pounds. at that time it was worth

something. the way that affected is you pay taxes or cancel the debt with a credit. is circulating government debt. in a way that is what money has continued to be. the federal reserve works with more snow and mirrors but ultimately the same principle. they make up money with a magic wand and landed and circulate. that money effectively is circulating government debt. as the result the government got rid of the debt entirety. there is a study under the clinton administration when they were trying to get rid of the deficit or drew a budget surplus, what happened if they got rid of the debt entirely? they concluded it would cause an economic catastrophe. you need -- banks would have to make up some money. in second periods they did do. when andrew jackson got rid of the debt it was the one time anybody has. the way the wheels are turning in the opposite direction as we

think they are money isn't actually the scarce resource like petroleum or something where there's only so much. but how much we create and who gets it. that is the real political struggle. on a global scale is similar for most of cold war history. the countries actually were holding the treasury bond. the u.s. has this advantage it can raise checks and treat them like gold and use reserve currency by the rest of the world. there used to be west germany was one of the bigger holders and gold states and japan and south korea. they are all under u.s. military protection in one way or other. in a way the amount of debt is the same or increases with military spending so people are lending as the money to create these armies that never quite pay it back. now that china is involved is

more complicated but that is the symptom being challenged and it is simply true that the last few hundred years the global reserve currency tended to be that of premier world military power. are don't think that is a coincidence. strikes me that that is what is being contested. the primacy of the dollar. not what currency would replace it but what would replace the u.s.'s military model. >> the question on the future of the dollar is related to the future of the american economy. david just suggested the country that has the biggest and most powerful economy is the one that dictates the terms of world finance. you can see this in the case of the united states. the united states was the most productive economic power in the world by the beginning of the 20century. at that point it remained an international debtor but during the first world war and it is always worse than bring this

about, as the belligerents -- united states tipped from being a debtor nation to the world's largest creditor. in the era of america's creditorship, lasted from 1910 to 1980 and it was during that period that the dollar and american diplomats wrote the rules of the international financial system. specifically the system that originated at the end of the second world war. at that time america's industrial production gdp was roughly equal to that of the rest of the world combined. with that kind of leverage the united states was in a position to dictate to the rest of the world. the world financial system, other currencies were linked to the dollar and the dollar was pegged for bold and the gold had was considered important because something like a gold standard has always been a check on

governments from producing more and more notes. if you have legal tender. for the first time the united states came into effect in the 1860s and it occasioned agreed controversy because until then government could not be trusted not to just run the printing press until was useless. the government was more circumspect and won the war and was able to redeem those legal tender dollars. gold still remained a model of currency because governments can't produce it. only god can produce gold and gold remained a linchpin of world currency from 1945, an end of the second world war until the 1970s but by then the united states had slipped. it was still no. one power in

the world economically but no longer had the advantage over the rest of the world that it had. this was inevitable. it was not the result of any particular policy decision by the united states or its leaders those contributed that lyndon johnson simultaneously decided the war in vietnam and put great strain on the u.s. budget but the larger issue was since 1945 until the 1960s the rest of the world began to recover from world war ii. the united states was in a 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 so you could say the top of the mountain got taller but the slopes of the mountain are taller faster so by the early 1970s america had a third world gdp and would

continue to decline and it is down to around a fifth of world gdp now. under these circumstances it is 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 a market basket of currency or the individual sovereign debt or sovereign will fund and people who have large foreign currency holdings diversify. instead of holding dollars they hold dollars and euros. more or less inevitable. there are three hundred million people in the united states and seven billion people in the world. under those circumstances things are going to even out a bit from where they were 60 years ago. >> one of the wonderful things

about both these books besides the fact that both these gentlemen are teachers who can really write which is not something you always see in scholars, these are really great books to read. these books are also more than just an op-ed piece about that and the dollar but there histories and really interesting histories about things we don't know much about. i will put data on the spot. one of the most interesting things you wrote about was talking about that and virtual money in context of the slave trade in africa. such an amazing chapter. talk about that. >> one of the fascinating things. i discover all sorts of crazy things ranging from debt cancellation amendments in mesopotamia to free-market populism is out of sharia in medieval persia. one thing that struck me was the

slave trade. when i was involved in these drop the dead campaigns one of the arguments is africa is the most indebted continent in the world and who is what to who? if you don't know look what you did to was which is a fair case. you make that case even stronger her if you look at how the slave trade was conducted. it was entirely carried out through the manipulation of that. the stage where people were coming in and taking people away did happen but it was often an initial stage and followed up by creating these really elaborate deathtraps so that the whole thing was a complex credits screen where merchants in england would forward funds to merchants overseas and forward funds to african merchants and everyone would be advancing to someone else until it got to the local level where one common pattern was fun and wars between

people because indebted kings needed a way to pay back their creditors. even more common was to advance goods to get people caught in credit traps. another way was to corrupt legal system so that any crime you can enormous penalty if you can't get a penalty gets underway. there are all sorts of techniques but there's a gigantic network of that traps. it is interesting because it is important in itself. one reason, the model of what can happen in human history and other places, very rapid catastrophic version of what i call it human economies committed in 2 commercial economies. you have complex systems in traditional societies but if you

look at money as an anthropologist the most common use of money in places where you don't have states is not to exchange goods and services which are usually complex gift systems where you dispose of your calls and require tools but they do have money and if there are quarrels or a marriage needs to be negotiated, social relations are carried out through money and what we would consider economic relations aren't. this is not the way the system can be corrupted. people show up, the way i usually put it is imagine what would happen to our society if space aliens showed up with incredibly powerful weaponry, no morality whatsoever and said we will give a million dollars to

anybody who provides human workers and won't say what happens to them. somebody will take the bait. what they ended up doing was converting what had been monetary systems to arrange relationships between people in 2 ways of extracting people. if you want to look at how many originated in the form we have it with a process like that the probably happened 5,000 years ago in mesopotamia of which the records are lost. >> there are a number of important figures in american history that appear in your book. two of them are very important to me when i was a young political scientist doing an analysis on a populist party's rise and fall. in the midwest the most important was william jennings bryan -- you can hear recordings -- one of the great speakers of american politics.

a big part of william safire's book on speeches. great speeches were delivered in a different way because he sounds kind of squeaky. william jennings bryan across the goal and my own political hero richard nixon. don't tell anybody. tell us how william jennings bryan and nixon affected the dollar in their own times. >> richard nixon would roll over in his grave to be compared to william jennings bryan. in a fundamental way they were aiming for the same thing. william jennings bryant became the spokesman of the populist movement in the 1890'ss and at the heart of the populist movement was a belief that the financial system of the united states was tilted against farmers specifically. ordinary people generally but farmers specifically. they had a very specific complaint, namely falling prices for farm products. the price of corn went down by

half between the 1870s at 1890s. cotton was a little more. this was a very serious problem for farmers because farmers typically operate under conditions of that and debtors are seriously disadvantaged when prices fault. if you are a $100 when week is $1 a bushel you have to grow 100 bushels to pay it back. but if it is $0.50 you need 200 bushels to pay it back. the fundamental goal for the trick behind managing a money-supply is to get the money supply to grow at the same rate as the economy as oil hole. if you do then prices overall will remain stable. the fall in prices was a consequence of the success in the american economy. the economy was growing faster

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. .. passed i think it would wreak havoc with any way of understanding the budget simply because if the budget were actually balanced in the very short-term -- now if there were built into the budget has to be balanced after the year 2030 let's say and it were passed next year then you could face things in but if he kicked and in quite short order, well it would aggravate our recession dramatically if the budget had to be cut via trillion dollars a year. n >> just to add, i recall therpl, whole debate under clinton which i think is very telling. eally mr

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 for strangers and renting yourself to work for strangers is some kind of a legalistic distinction. he would look at americans and say these people are desolate. i think they social crisis everybody is terrified for much of human history is happened to us and we have made up his language for what people used to think of a slavery is now called freedom. [laughter]

[applause] that is what is happening and i think the old-fashioned remedy might be exactly that. >> where would you advise people to put their money today? [laughter] and what you think of the current wall street social protest? >> where to put your money today? [laughter] i don't think i'm getting paid enough to offer that kind of advice. [laughter] what do i make of the occupy wall street protest? i think it is fascinating. i am a little bit surprised that it took this long. [applause] in fact if you remember the original agenda of the so-called tea party movement was its complaint against the bailout of wall street, but biden by maneuvers that i don't entirely comprehend, it was largely taken over by the republican