Then, an event happened that changed my life. My best friend growing up was Gavin MacFadyen. You may know him as a famous documentary film maker and founder in London of the Centre for Investigative Journalism. He had introduced me to Terence McCarthy who was an Irish communist and was the translator of Marx’s Theories of Surplus Value.
In one evening we talked about changes in the water level in America. The sunspot cycle and the water level would go up and down, causing a crop failure that would lead to an autumnal drain of money from the stock and bond market, causing a periodic financial crisis.
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I registered at NYU and got a job with the Savings Banks Trust Company, which was the one commercial bank that all the savings banks put their own reserves in. There were 135 savings banks in New York and there are none anymore, they’ve all been cannibalized, they’ve been bought out by the commercial banks. But my job was to trace the savings in New York, how it grew exponentially and compare this to how it was lent out for mortgages. The chart of these deposits was like a heartbeat.
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I had to take a money and banking course taught by an ideological Greek professor Stephen Rousseas, who had never worked in a bank in his life — none of my professors had ever worked in a bank, everything they know from the textbooks — and he had an article by a man who subsequently became a friend of mine, Hyman Minsky, who thought that the business cycle could be explained by savings banks putting their reserves in the commercial banking system that would be lent out to the economy. I said, “Look, what you called a commercial banking system is one bank, the bank I work for and we don’t make any loans at all to the economy. We buy bonds.”
So I got a C-plus in the course, he said I didn’t understand textbook economics. I realized that there was an absolute contradiction between how the real economy worked and what was in the textbooks.
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So every ruler, when they would take the throne in Sumer and Babylonia, for a thousand years, would start their rule by cancelling the debts with a clean slate, an amnesty. It’s the same amnesty of the kind that Egypt’s Rosetta Stone commemorates. Everybody knows that the Rosetta Stone has trilingual inscriptions of Greek, Egyptian and Coptic. But few know that it’s a fiscal debt cancellation.
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Already in Hammurabi’s time 1750 BC, scribes would calculate the growth of compound interest, and at that time it was 20% interest. This growth diagram is the same exponential chart that I’d drawn up in the savings banks in the 1960s to trace the growth of American debt. So they were quite aware of the fact that debts couldn’t be paid and that, if you insisted on them be paid, you would have debtors falling into bondage. So they freed the bond servants, or for debtors had sold their means of self-support, the land, they returned the land that had been sold under economic distress.
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We then followed it up with another meeting at the British Museum on the origins of money and accounting, and the idea that money was created not for barter, not for trade in goods and services, but to denominate debts.
