How usury destroyed the economy

Chicago lawyer Thomas Geoghegan shows up on Democracy Now! to discuss his recent article in Harper's Weekly, “Infinite Debt: How Unlimited Interest Rates Destroyed the Economy,” in which he argues that usury destroyed the American economy by driving capital away from productive, wealth-creating sectors and into the maw of the financial industry.

[T]his isn’t some left-wing progressive critique circa 2009. Adam Smith, in The Wealth of Nations, warned how important it is to have interest rate caps on the financial sector, or all the money will gush into there and out of productive uses. Keynes, in The General Theory of Employment, Interest, and Money, the great classic, 1936, has a little chapter at the end saying, “Yes, we have deficit spending. I’ve got this way of getting out of the Depression. By the way, we’ve got to keep the interest rate caps on the banks.”

Well, we took that stuff off, the thing that was kind of an instinct in human and legal civilization, from the time of the Code of Hammurabi up to the present, and we created all these incentives for money to go into speculation, derivatives, because we addicted the economy to very, very high rates of return by squeezing money out of people. And the way in which we disinvested from the economy was, in my view, not so much globalization or trade as the fact that we had preteens in shopping malls who were running up, you know, debts where they were paying 25, 30 percent interest, when investors could only get five, four, three percent from our globally competitive industry.

Watch it.