see how the reporters back in the room covered it and how the bundits and the policymakers and some of the public opinion people that form public opinion in newspapers, you know, how they all wrote about it everybody was beginning to throw flags and say, wait a minute, is this america? can you really prosecute somebody like this and use testimony that's supposed to be secret from another grand jury, a state grand jury? there were just all kinds of legal corners that were cut. but it showed you that they were bound and determined to finally get edwin edwards. and they did. so that's -- but he survived it and now he's -- now he's in his rv traveling the country. >> and now h.w. brands author of greenback planet and david graber author of debt appearing at the texas book festival in austin to talk about their books. they spoke and took audience

questions for just over an hour. [inaudible conversations] >> it's great to see so many people out here today. it's fabulous to see such a large crowd out here today. i'm wondering does this have anything to do with the debt and the dollar might actually be relevant topics today? [laughter] >> and talk in today's climate, david graber and w.h. brands are here to talk about their new books. i'm assuming we won't have any trouble getting questions from the audience but let me do a couple of housekeeping things first, 'cause i'm hoping when you're all done over here and you're impressed with the two authors you're going to go back to that tent right next to here and buy their books. 15 minutes at the end of the session -- or actually it's so

close. it might be 15 seconds. the authors will sign their books at the book-signing tent. one thing about the festival and i don't know about you guys, this is my favorite festival. i love by south by southwest and acl film festival. i've never seen anything like this. this if he will is fabulous. the people that put this on are doing the lord's work. [laughter] >> depending upon which lord you're thinking about but along with celebrating books and authors the festival benefits the texas public libraries and literacy across the state and, boy, do we need that. proceeds from the sales of all books and merchandise in the sales tent benefit these efforts. we are celebrating our 16th anniversary this year and under the past 15 years the festival has contributed $2.5 million to libraries and reached more than 35,000 children in low-incomed schools throughout the state. i want each and every one of you to buy the books from both these guys because you're going to be able to read great books and

also benefit this wonderful mission. i'm not an expert in the debt and the dollar. my name is paul stekler and i know a little bit about these two books. in custody when i began surfing the web trying to figure out who david was and in the background on david graber the author of debt: the first 5,000 years, the first description stated he's an american anthropologist and an anarchist. [laughter] >> i'm not sure how anarchists get together to actually sit down and write those books but i like that idea he currently holds the position of reader in the social anthropology and gosmiths, university of london. he has previously taught at yale. he's the author of a number of books, essays and articles for harper's the nation, the new left review. his dissertation which we were talking over on the author's tent talking about the legacy of

slavery and the island of madagascar which is partially dealt with in this book. if 2006 he delivered the memorial lecture at the london school of economics that awards outstanding sociologists and we're glad to have him here today. >> thank you so much. [applause] >> secondly, on this panel we have our own w.h. bill brands who teaches at university of texas and as far as i can tell, since he's written -- is it 24 books. st this the only time he's out. he's just writing books most of the time. he's the dixon allen anderson centennial professor of history at the university of texas. before that he taught at vanderbilt and texas a & m. he's a two-time finalist for the pulitzer price for trader of his class and radical presidency of franklin delano president and the life and times of benjamin

franklin, 2000. like i said, 24 books. he's presented, i believe, eight times. he's a past texas award winner for this festival but he has not one but two books at the festival this year. if you can't get enough of him now, come back tomorrow and that book is the murder of jim physic for the love of jayne mansfield along with the book we're discussing, greenback planet how the dollar conquered the world and threatened the civilization as we know it. it actually sounds like a horror movie, and maybe it is. and what i would like to start off today is have each of our authors talk about their books for a few minutes and i'll ask a few softball questions. i'm going to leave the hardball questions to you guys and i'll give you a prompt when we're going to begin to have people cue up and ask those questions and we'll keep those questions going on as long as we possibly can before you go out and buy their books. david, can you tell me about debt, why? >> why? >> why debt. why do we have debt?

well, you know, one of the questions i asked when first questions i asked when writing the book is what is debt? because one of the things that i was trying to explain the strange moral power that debt has over us. it all started actually with a conversation i had with someone i had met at a party about madagascar. i was talking about the third world debt crisis and how i'd been involved in the drop the debt campaigns as an activist in the year 2000. i'm talking about the effects of structural adjustment policies inflicted by the imf. david has some examples in madagascar they were forced to cut the budget radically to cut the budget at approved interest rates and as a result they had to get rid of their malaria rerad indication program which kept mosquitos away from the highlands and there was an epidemic in which 10,000 people died and that's terrible but they borrowed the money.

surely you're not saying they shouldn't pay it at all. this is a rather liberal activist i was talking about. what other thing would cause someone to say well, you know, it's really sad about all those debt babies but of course, you have to pay the debt, default? what other circumstance would someone like that actually approve of the death of 5,000 babies? something about debt has this absolute memorial hold over us and that's what i was trying to address. where does that come from? a debt -- what a debt is, if you want to know what a debt is, it's promise but it's a certain type of promise and the way i like to future it's a promise that has been corrupted in a certain sense by mathematics and also by violence because you could only turn 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. and that also makes it transferrable. in a way if you want to understand the origins of money is how promises become mathematical and the history of that is what the book is really about. >> yes, sir. let's move from debt to dollars. greenbacks. >> yes, i wrote about the dollar -- the short answer is i was asked to write the book but the answers to why i said yes is i have been talking about the dollar in the now 20 years. but there's a certain kind of magic involved in that because the piece of paper you pull out of your pocket is not worth a dollar. it might be intrinsically a nickel on. it works something better if you happen to have $100 in your

pocket because $5 becomes worth $100. and i regularly ask my students why is this so? what is it that makes this piece of paper worth i don't know five hours of someone's time or five large pizzas or something like that? and we get into the legal background of it and i do a magic trick where i don't very often get to do magic tricks but i do a magic trick. in fact, maybe i can do it now. yeah, here it is. okay. i've got this piece of paper. not very many of you can see it but it's a $5 bill. and if i take it into the cvs or something down the street i can exchange it of $5 of food or $5 of medicine, whatever it might be but this piece of paper isn't worth intrinsically $5 but there is something on the piece of

paper that affects this kind of magic, that makes it worth $5. and probably those of you in the back row won't be able -- you certainly can't see but for anybody there is a magic formula that is printed on this piece of paper that makes it worth $5. it takes a piece of paper that's intrinsically worth a nickel and transforms it into something to $5. does any of you know what that magic formula is? a show of hands anybody? no. somebody is waving money back there. yes. [inaudible] >> well, u.s. treasury is a good start. but that's not the magic formula. in the way back. legal tender. there it is, okay? in fine print on the front says this note is legal tender for all debts public and private. which means if you're offering something for sale and you put a

$5 price tag on it and i walk in one of these, you have to take it. and that's the magic. but why does it work? congress can say -- and that's where the formula comes from. congress passed the first legal tender act and in the middle of the civil war. until then dollars in american history were coin money. they were cold or silver. there were private notes that were circulating that represented themselves as money but they weren't legal tender. you didn't have to take those notes anymore than you have to take a check. now, i started writing this book because it had historical interests but as i was writing it and even since it come out, it has developed greater contemporary interest. one of the things that i say at the end of the book is that the dollar is almost certainty going to lose its privileged standing as the world's reserve currency. and foreign creditors to the united states are going to do

your -- do their best for public contrary. reuters has a report that china has agreed with the association of scene nations that trading in that bloc will be done in yuan and i saw a piece that flew in the face of my magic trick. it seems like the legislature of louisiana the legislature of louisiana say people that sell secondhand goods cannot accept cash for those goods. and they cannot. now, in the first place this strikes me it's probably in violation of federal law because if it's legal tender it's legal

tender and it raises some interesting questions about the direction of the dollar. if cash isn't good anymore, then what in the world are we going to go to? so that's a long-winded say of saying, that's why i wrote the book. >> remember, that's louisiana that you're talking about. [laughter] >> let me throw a question to both of you to start with. and let me throw 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, okay, assuming that chinese currency or the euro, especially the euro is in any better shape. the yuan hasn't done very well since the japanese collapsed. at the same time, we've just had this incredible crisis over the dead crisis which, david, i think you would say is maybe not what everybody thought it was.

so where exactly -- considering where you guys came from the history of the debt and the history of the greenbacks what are we liable to be getting into in the 21st century? i mean, is there a replacement for a dollar? is this debt crisis going to blow up in our entire debt system? you go first? >> well, it's hard to -- it's hard to know where to start. >> a large question, i realize. >> i was just going to tack something on you said. i think the actual amount of dollars worth is 3 cents that's how much the federal reserve pays the mint to pay them. no matter what the denomination. the system of money we have now -- one thing it's important to remember is that it took a long time for the u.s. -- during the last large nations in the world to come over to the central bank model. i mean, there was a big fight early on and they got rid of it. but the bank model for how modern money works is in a lot of ways almost the opposite in the way people talk about it in

in the meantime political discourse. i always like to give the example of the origins of the bank of england. in 1694, a group of london merchants made a loan to the king of england, william ii to fight a war in france. it's always war and he gave them the right to take the 1.2 million pounds that he now owed them and to lend it to other people in the form of bank notes. that's what british pound sterling bank notes actually are. and, in fact, i don't actually have any in my pocket anymore but if you look at a 10-pound note it has a picture of the queen and it says, i promise to i pa the bearer the sum of 10 pounds. it's not actually 10 pounds. it's a promise to pay 10 pounds at that time silver, worth of silver and gold and now it's worth up to something. and the way that's mainly affected so you can cancel your debt with a credit but its

circulating government debt and that is what has modern money has continued to be. and ultimately it's the same principle they make up money with a magic wand and they circulate it. and the money effectively is circulating government debt. as a result if the government got rid of the debt entirely. there was a study that came out under the clinton administration when they went into a budget surplus what happened if they got rid of the debt entirely and they concluded it would cause an economic catastrophe because banks would have to make up all the money and in certain periods of american history they did do. when andrew jackson got rid of the debt the results were not exactly sal tuary. it's the one time anybody has. it's the one time the wheels have turned in the opposite direction.

the question is how much we create and who get it and that's the real political scale. for most of cold war history the countries that were actually holding the treasury bonds -- you know, the u.s. has an amazing advantages that can create checks that are treated as gold and nobody ever crashes them for that reason they roll them over. west germany was one of the bigger holders, the gulf states, japan, south korea what do they all have in common. they are under u.s. military protection one way or the other. have u.s. military bases and the amount of the debt, exterior debt is almost exactly the same -- it increases along with military spending. so these people are lending us the money to create these armies that sit on top of them and never quite pay it back. now, that china has gotten involved it's a little more complicated. that's the system that's being challenged. it is simply true for the last few 100 years the global reserve

currency has tended to be the premier world military power. i don't think that's a coincidence. how exactly it works we could all talk about. so it strikes me that -- that's what's being contested. it's not what other currency would replace the dollar but would replace the military hegemon. >> the question of the future of the dollar is very closely related to the future of the economy. and as david just suggested, the country that has the biggest most powerful economy is usually the one that dictates the finance. you can see that with the united states. the united states was the most productive economic power of the world by the beginning of the 20th century. at that point it remained an international debtor but during the first world war and as david said it's always wars that bring this about. during the first world war as the beling rentals burned very heavily in the united states the united states tipped from being a debtor nation to the world's largest creditor.

and the era of america's creditorship -- that when it was a creditor from the world lasting from the 1910s to the 1980s and it was during that period that the dollar and american diplomats wrote the rules of the international financial system, specifically, the bretton woods system that was instituted in the second world war. at that time america's industrial gdp was roughly equal to that to the rest of the world combined. and with that kind of the united states was able to dictate to the other country. other koreans were linked to the dollar and the dollar was pegged to gold and that gold peg was considered quite important because something like a gold standard had always been a check on governments from producing more and more of the notes. if you have legal tender -- and as i said for the first time in the united states this came into

the effect in the 1860s. and it occasioned a 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, the currency became worthless. that's what happened to the confederate currency during the civil war. the union government was more circumspeck and won the war and it was able to redeem those legal tender dollars but gold still remained the model of a currency. gold because governments can't produce it. only god can produce gold. and gold remained the lynch pin of world currencies from 1945, the end of the second war, until the 1970s. but by then the united states had slipped -- it was still the number 1 power in the world economically. but it no longer had the advantage over the rest of the world that it had. this was inevitable. this wasn't a result of any particular policy decisions by

the united states or by its leaders, although, those contributed, it's true. that lyndon johnson to fund the great society put a great strain on the budget but the larger issue was that since 1945 -- from 1945 until the mid-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 of a pinnacle of economic power. the american economy continued to grow after 1945. and so you could say that the top of the mountain got taller. but the slopes of the mountain got taller faster. so by the early 1970s, america probably had something on the order of a third of world gdp. and it would continue to decline. and it's down to around a quarter to a fifth of world gdp now. so under these circumstances it's quite unrealistic to expect

that the dollar will continue to have the sway that it had 60 years ago. now, this doesn't mean that 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 will be some sort of market basket of currencies or the individual sovereign wealth funds and people who have large foreign currency holdings will simply diversify they will hold dollars and euros and yuan. it's more or less inevitable if you ask me. there are 300 million people in the united states. there's 7 billion people in the world. and so, you know, under those circumstances, things are going to even out a bit than what they were seven years ago. >> one of the wonderful things about these books, besides both these gentlemen are teachers that can write which is not what you always see in scholars,

these are really, really great books to read. is that these books are also more than just an op-ed piece about debt and the dollar today, they're histories. and really, really interesting histories about things that most of us don't know most about. so i'm going to put david on the spot here. one of the most interesting things that you wrote about was talking about debt and virtual money in the context of a slave trade within africa. it was an amazing chapter. can you talk a little bit about that? >> yeah. one of the fascinating things to me -- i discovered all sorts of crazy things when i was researching this book, you know, ranging from debt cancellation of mesopotamia to the fact that the free market poppism comes out of shari'a and medieval persia. one of the things that struck me was the slave trade because when i was involved in these drop the debt campaigns, one of the whole arguments was africa is the most indebted continent in the world

and they laid the argument, well, who owes what to you. you don't owe to us we don't owe you, look what you did to us which is a fair case and you can make the case stronger in how the slave trade was conducted because it was entirely carried out through the manipulation of debt. the stages where people were coming in and taking people away, you know, it did happen but it was often an initial stage and it was followed up by creating these really elaborate debt traps so that the whole thing was a very complex scheme where the merchants in england would forward funds to merchants working valleys, would forward funds to african merchants and everybody would advance something to somebody else where it got to the local level where one for example one common pattern was to foment wars to people that would happen otherwise because indebted kings had to figure out some way to pay back their creditors. another common one was to

advanced goods to get people caught in credit traps. another way was to a corrupt legal system so that any crime, you know, you have to pay an enormous penalty and if you can't pay the penalty you'll get sent away but it was gigantic network of debt traps. and why i find it interesting, you know, it's intrinsically important in itself but one reason is it provides a model of what must have happened in human history and a lot of other places. this is a very rapid traumatic, catastrophic version of, you know, what i -- what i call human economies are converted into commercial economies because you do have these very complex systems of debt that exist in traditional societies. but if you look at money as an anthropologist and you look around the world, the most common use of money in places where you don't have states is

not to exchange goods and services which are usually -- there's complex gift systems where you actually dispose of your cows and your acquired tools, you know, ordinary things we buy and sell and they do have money and they use it for social relations with another. if people to have settle finds if there's quarters. if there's a marriage that needs to be negotiated so social relations are actually carried out of money and what we would carry out economic relations aren't. this sets up a way the whole system can be corrupted so people show up -- the way i usually put it i imagine what would happen to our society with a bunch of space aliens showed up with incredible powerful weaponry and no morality, whatsoever, and said okay, well, give a million dollars to anybody who provides us human workers. we're not going to say what happens to them, just go ahead. you know, somebody is going to take the bait and it only takes

a few. but what they ended up doing was converting what had been monetary systems used to rearrange relationships into people into ways of extracting people. and i think if you want to look at how money originated in the form that we have, it was exactly a process like that that happened in places like 4,000 years ago in places like mesopotamia in which records are lost. >> there are important figures in american history that appear in your book, two of them are figures that are very important to me back when i was a young political scientist doing analysis on the poppist party's rise and fall in the midwest the most important figure was williams jennings bryant and his speech that could hear and it's a big part of william sapphire and he sounds kind of squeaky

and you got william jennings bryant the cross of gold and my own political hero when i was a kid richard known. i don't tell anybody. [laughter] >> so tell us how bryan and nixon. >> richard nixon would roll over in his grave to be compared william james bryan. they were aiming for the same thing. william jennings bryan became a poppist speaker moment and there was a belief that the financial system of the united states was tilted against farmers, specifically. ordinary people generally but farmers specifically. and they had a very specific complaint, namely, falling prices for farm products. the price of corn went down by half between the 1870s and the 1890s. wheat was comparable. cotton was a little bit more than. this was a very serious problem

for farmers because farmers typically operate under conditions of debt. and debtors are very seriously disadvantaged when prices fall. if you borrow $100 when wheat is -- $1 a bushel, you have to grow 100 bushels of wheat to pay it back but if the price falls to 50 cents you have to grow 200 bushels of wheat to pay it back. and so the fundamental goal or the trick behind managing a 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 risk facts a consequence of the success of the american economy. that is the economy was growing faster than the money supply. and so prices were falling. farmers were disadvantaged by this. and farmers, their spokesman

william jennings bryan, a way to alleviate their distress was to expand the money supply and this made perfectly economic and financial sense. but it seemed to those people who were creditors that it was a kind of theft because to devalue the dollar meant that their debt -- what they were owed was worth less than it had been the day before. the preferred method of devaluation for the populist was the remonetization of silver and their campaign slogan was free silver. what bryan and the populists wanted to do was to sever the connection between the american money system and gold. the problem as they saw it -- and they were right, was that there wasn't 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 very beginning but it had fallen out of circulation in the last

20 years, 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. ..

>> with this, pretty sober, the idea of adding silver to the currency went out the window. america went to the gold standard it lasted until 1971 when richard nixon did what william jennings bryan had advocated by cutting the united states off from the international gold standard. nixon would be greatly chagrined to be compared with brian, but there it is. [laughter] >> i've a question about that actually. is a true the "wizard of oz" is actually about that? because one interpretation of the book, it's all about the yellow brick road, right? going to the emerald city of oz, an ounce. emerald city being green. but also the story that they always say dorothy is a farmer

who's blown away from her farm. sometimes you see theodore roosevelt -- same thing backwards. this scarecrow is the farmer who has no brain and, therefore, gets foreclosed on. the tin woodsman is the -- has no heart. the cowardly lion is a political person who won't do anything about it. [laughter] [applause] >> so does that mean the wizard is actually mark hanna running the campaign of william mckinley and sat on his front -- sat on his front porch of the entire time? >> yeah, this is the interpretation. interpretation rose almost the same time as the "wizard of oz" came out. the author never acknowledged that this was what he was doing. and i don't know if he decided okay, you know, i didn't

actually do it but if people want to read into it what they will, maybe so. maybe he just thought it was better if he ever did. and maybe, it may simply have been well, it may simply have been people reading into it what they want to read into it. i suspected it was something in between and that there was certain immaturity that would have come naturally to anyone of populist leaning during that particular period. and so, the fact that dorothy is theodore backwards, that seems a bit of a stretch. given to you will have to turn into roosevelt quite on his head to be anything like dorothy. it's an interesting story. historians have been dining out on ever since and frank is dead so he can't it. >> i want as one more question they will start taking questions from the audience, and you can queue up over here come in as much room as we have but one of

the interesting things about david's book is the whole idea of morality. i was taken by the get somebody who's an anthropologist when history, worldwide history of debt. we think of debt, debt is a bad thing. that was used very effectively politically in the last debt crisis. the whole idea of comparing household debt to american debt, which there may be some problems with, they're not exactly same thing. the concept of debtors prison which bill and dave and i were talking about. to talk to me a little bit about recruiters we have more questions about the whole idea of debt and morale become and perhaps the political uses of the. >> okay. one thing i found which is why fasting when i was researching some ideas of debt, is that word for dead in sin in many of the languages are the same. that's true in san script, it's not too in hebrew but it is true

in aramaic. and the lord's prayer were says forgive us our trespasses, as the anglican translation, earlier translation was forgive us our debts which is ou actualy says in arabic but it says forgive us our debts just as we forgive those who owe us money. the idea is we don't actually forgive those who owe us when we really deserve it. [laughter] >> depends on how nice we are. >> yeah, there is a lesson. that theme shows up over and over again. it's a little bit like the beginning of plato's republic, opening western political philosophy, starts with this whole couple sang justice is just a matter of paying your debt. socrates blows that one out of the water right away. no, it isn't, that's ridiculous. okay, not that, then why? that question, is in a way asked

in almost all the great religious works. if you go back to the origins of hindu philosophy company start with your life is a debt to the gods, you repay it through death. but then they make it clear that such would all. he also only debt to your parents. you retain that by this you repay that make becoming a parent. so anyway what you do, you repay the debt by realizing there isn't a debt. it raises the question how can you owe something to the cosmos? when you realize the absurdity you realize there is no debt. in the bible, they start by the framing, browse as debt and they say it is actually forgiving debt. retention, canceling debt. there's a great tradition of debt cancellation. there is that ambivalence goes, buddhist example as well, is

constant and is reflected in the strange dual morality whereby people do act like that friend of mine i met at a party who said you can't have people cancel their debts, the idea that debt and morale is the same thing, look throughout world history. it's almost impossible to find a money lender who is not represent as evil. how do you square that? there's a fundamental moral incoherence, mine behind will talk but these things which i think is a historical legacy that we no longer even are able to see. it strikes be the most powerful weight ever invented, take relation of sheer coercion and make it seem moral, any mafioso knows that, or a conqueror, look, i could kill you, i didn't kill you. therefore,, you know, you only, i will tell you exactly how much you owe me. i'm a nice guy and we'll let you off the hook for the next couple of months but you better show up

with the money after that. turn the moral relations around. the only real reply you can possibly make to that is weight in the who owes what to do here? at the moment you said you're using the language of debt. i think that's what's happening in these religious tax. they have to use that because that's the length of stone at them. but they just ignore to sort of slowly blow it away and say really morality is something else. stuck in that situation the kind that used the leverage of debt, we know there's something wrong with it and it was slowly kind of move away but never completely move away from it ever since. >> i would like to give to become examples to the general principle that debt is considered a bad thing. alexander hamilton, considered national debt to be good thing. he encouraged the federal -- hamilton did this with great calculation because he understood that creditors take

great interest in the success of whatever individuals or enterprises or the money. and if the wealthy people of the united states, these were the bondholders, if they became interested, 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 was one who believed that a federal debt would be a national blessing. it would ensure the success of the new federal government. in early 20 century, the u.s. government engage in what is called dollar diplomacy. the essence of dollar diplomacy was to encourage especially regimes in latin america, to transfer the debt that they owed to european banks and bankers to american banks and bankers. this would eliminate the temptation of the european government to secure the debts owed to their bankers, and it would make sure that the

interests of these latin american countries now look towards new york rather than toward your. death has been something that has been used for political purposes, at least am welcome in american history, since the net seats began. >> one of the things you might want to incorporate in your answers, i'm going to open this up, is first of all, that means it must be a great thing we owe china. >> i could say a lot about that. >> there is the old saying, if you owe the bank a thousand dollars, you have a problem. if you owe the bank a million dollars, the bank has a problem. [laughter] [applause] >> the corollary of that is in a brave new future, if the dollar is not the currency of the entire world, what does it exactly mean for i believe to be able to buy your books later on? let's go to the first questioner. >> i don't know if it is for a

the few, the question is the sovereign debt -- [inaudible] what does it do to the future growth, economic output of u.s.? started, debt is been detrimental to the growth of new relations of empire. >> i'll give it a start. to the extent that the debt is owed to non-americans, then it becomes an issue of what sort of terms do the foreign creditors insist to roll over the debt? so if china is quite happy to continue to roll over its debt, then it's no product in china, for example, just -- decides no, it's going to insist on higher interest rates or take as many of her, and that puts a crimp on

the american economy. interest rates have to rise to attract a mature over the debt comes in interest rates that the fed pays, the treasure based filters to the comic of experts in everything else goes up. to the extent that the debt is owed internally, just one individual american to another, or one generation to another, then in terms of the productivity of the america becoming that part is i wash. there's also the issue of, and this is, it takes outside rome of economics per se, and that is, arthur political ramifications? over example of this is not on the subject of debt although it did contribute to america's trade debt. during the 1970s the arab oil producers decided that they would embargo shipments of oil to the united states during the 1973 war. that was not an economic decision. that was a political decision. economically they might as well sell it to whoever was willing to pay. so if there should become a political component to decisions

regarding america's debt, then that would raise all sorts of very difficult and potentially explosive political consequences. >> i think that, it's a little disingenuous to compare countries better in very different political situation but if you look at the countries that have real sovereign debt crisis, they're almost always countries who don't control their own currency. someplace like greece network argentina where it was tied to the dollar, countries which control their own currencies have other things they can do. in a country like america or we can create currency that is still used, in an entirely different position. and so we're never going to be the same situation as greece and argentina, so it's not a fair comparison. what could have other problems but they take on a very different kind, much more long-term. >> there's a lot of talk in

congress about passing a balanced budget amendment. if this were successful what would be the likely economic impact? >> if the amendment were passed or if the budget were balanced? [laughter] >> i guess both. >> i think if the amendment were passed it would be like passing an immense and we're all going to go to heaven. it would have about as much effect, because if you look at the budget in the state of texas, nearly every state has a balanced budget requirement. but all sorts of stuff for shootings are restored to get around that. if you think the federal budget is designed according to rather read creative accounting principles now, just imagine what it would be if you had to balance it each year. so in the first place i would be extremely surprised if such an

amendment were passed. but if it were passed, i think it would, wreak havoc with anyway understand the budget simply because if the budget were actually balanced and very short term, now, if they were built into, the budget has to be bounced out of year 2030, let's say, and were passed next year, then you could face things in. but if you take it in quite short order, well, it would aggravate our recession dramatically. if the budget had to be cut by a trillion dollars a year. >> just add, i want, recall the whole debate under clinton which i think is very telling. we had a budget surplus. pretty much everybody an epochal specters are looking into what that might mean over the long term if they got rid of the debt entirely can realize that this would be a terrible idea. that goes from the clinton people to people like alan greenspan.

who started saying, yeah, he had come up with excuse what would be a good idea to use anti-keynesians we can say that would mean if there's no government debt to be no money supplies and have to do and is not going to work. he said it would mean socialism because it was such a surplus become a lot to put that money somewhere, logically filled by things people want so they will start nationalizing everything and was hard having a communist economy. >> we have room for more questions. >> here comes somebody. >> could you explain what the world is -- [inaudible] >> i can. what is want him. it is a certain type of shell

which you get, nice white and purple clam, wampum claims. it was used as the misuse largely as a way of making treaties and arrangements and contracts and peacemaking by native americans across the northeast coast. bonesetter showed up there was a very, they didn't have access to gold and silver. wampum was actually systematize in a way trading with native americans in the for trade, became a currency of trade. there's no evidence that native americans used to buy and sell things which other but he became a trade currency that was then adopted in legal tender and most northeastern colonies. in the 17th century largely. so they took this fairly casual means of making political negotiations and turned into money. it's summer to happen of the famous purchase of manhattan, which is one of those classic

examples to people thinking something totally different was going on. the dutch settlers doctor buying a piece of land, ripping people off, giving them peace of trinkets but the people on the other's side thought this was a presentation of the gift of rare exotica as a good faith to establish political treaty which would involve use rights, access to land. >> i will piggyback on the answer britain. the fundamental money from indy mac and colonies with stage during the first few decades american national existence was a shortage of money. the british government, the british colonial government disallowed paper money, the provincial, for example, you could not issue paper money. people were stuck with gold and silver. but gold and silver are rare and they were especially rare in the colonies. and so the colonists got used to devising of the means of currency. wampum was one. in virginia and they would you nominate things in terms of

comedy that should how much tobacco. in tennessee when andrew jackson after as a young man in the 1790s, tennessee of them still part of north carolina. he went out there to practice as a lawyer. the wasn't enough money to go around and so his legal fees were often quoted and paid in acres of land. so if you wanted a will, that would cost you 80 acres but if you're litigation, that would be x. portion. so these are all markers of value, and they are ways of doing triangular and other trade. if one person wants to do something else, you could barter back and forth but that's a binary thinker once the economy gets more complex than that then you have to have something that stands in for value. gold and silver were considered the best. paper was disallowed and so you would use whatever you could come up with.

[inaudible] i'm going to lead up to this question. if you go back to roosevelt put in the banking regulations, insurance in the 1933 to help the farmers who have lost tons of money to the banks, these banking regulations were in place for 60 years until i believe 1993 is when our congress removed the regulations on banking. my question, leading up to this, is what's your comments about deregulation or regulation of the banking industry? alan greenspan's philosophy of free markets? >> in history, it's the torso difficult to determine cause and effect but i will just say, going along with what you mentioned, in 1933 franklin roosevelt and congress passed a number of banking regulations in trying to ensure that banks not

do again what they've 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 out. because while they might be able to lend it out at 3% on mortgages, they could make 25% a year on the stock market. and they were paying their depositors 2% and pocketing the rest. and it seemed like a wonderful thing, until the stock market crashed in 1929. and then the depositors who have put their money in banks, rather than buying shares of stocks themselves, because of the perceived greater securities in banks, security and bank, found that they lost their money and they had no recourse. so under the roosevelt administration, democratic new deal congress passed legislation to make sure that banks couldn't do that. they couldn't take a deposit and then go play the stock market. those regulations were in place

until the 1990s. they were repealed in the late 1990s, and eight years later we had the financial crisis of 2008. now, it's impossible to prove beyond a shadow of any doubt that one led to the other. as i say, the business of causation in history is 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 him during the whole period until the regulations were repealed. and then within a few years after repeal of the regulation of august 2008 which is the worst financial crisis since 1929. so i guess you could make that what you will. >> i would add one thing. will use the word regulation i think it's important to remember that regulation has not stopped. it has changed its nature.

we have this weird wordwrap where new regulations that banks don't like it's called regulation. when we deregulation that banks do like, it's not, it's a free market. >> a follow-up to that is, do you think that we will ever get around to regulating trading in derivatives? >> i don't know the answer to that question but i did read an article in the "washington post" a couple days ago saying that president obama has raised more money from wall street and the financial community for his reelection and all of the republicans combined. so when a democratic incumbent has ties that close to wall street, i'm not going to hold my breath. >> could you comment on the federal reserve and its shareholders, and also the

current policy? >> do you want to take that? >> sure. federal reserve has been everybody's favorite i think voice since 1913 when it was created. the federal reserve has made its share of missteps, but if you compare america's financial history during the 19th century, up until the aggression of the federal reserve, and then how things were from 1930 -- 1913 until the present, the wild coaster ride of panic and bubble and panic and bubblegum there's a panic of 1819, a panic of it 1837, a panic of 1857, there was a panic of 1893, a panic of 1907. than the federal reserve is created in 1913. yes, indeed, it 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 a devastating effects to

the economy as well. the fed on 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, if you look at section eight of article one which specifies enumerated powers of congress and says 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 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 of the civil war? in 1870, the supreme court ruled

the later tyndall dash of the legal tender law and the notes were unconstitutional. but before that jolted american financial could work its way through the economy, two of the justices retired, ulysses grant appointed two new ones. and they change their mind and they said that legal tender was constitutional. so if ron paul wants to go back to the 1870 decision, that's his prerogative. but since the early mid-1870s, supreme court has said it is constitutional so i guess we're going to leave with it until we get president paul. >> as a result of that constitutional law, going just so produced by the federal government. it's just dollar bills and especially for those of us who are just object of the supreme court of 1870. we have time for two more questions. the woman in the wonderful jacket and a man with a cowboy hat. >> i'm curious to hear your

opinion about the phenomenon that our generation, our current generation -- what you'd call a crushing debt. and would you call that a debt trap? >> yes. >> so what you think the impact of that is going to be. >> yes, well, most of human history sort of nightmare scenario, total social breakdown that people envisioned was precisely the debt trap. one or 2% of population would end up with all the resources, and lineage of the else and people started falling deeper into debt they would have to tell members of the family, their children, they would end up having to work for households of strangers. you might have to sell themselves to work for others into slavery. there was various mechanisms put into place to make sure that wouldn't happen. most things of which is simply debt cancellation. mesopotamia, every new king

would say clean slate, start over. the jubilee was another version of the same thing. the point i was making is that if aristotle were some output anytime a sheen and magically transported to hear, he would probably make a distinction between selling yourself to work for strangers and rented yourself to work for strangers, but kind of a legalistic distinction. he would look at americans and see these people are desolate. they have great social crisis and everyone is terrified for much of human history. we made at this language were what people used to think of a slavery is now called freedom. [laughter] that's what's happening. the very old-fashioned remedy might be exactly what's called for right now. >> where would you invite people to put their money today?