have been written in recent years on the problems facing us due to our
nation's enormous debt. Indeed, many more could be written before the full
scope of the debt problem and its consequences have been exhausted. One of
the best books I've read which describes the debt problem in its simplest and
most fundamental terms was written by one Richard Hoskins, entitled War
had the privilege of speaking with Mr. Hoskins about this, his most famous
book, which was first published in 1985. His book anticipated by many years
the infamous credit crisis of 2007-2008. Hoskins' intimate knowledge of U.S.
monetary and economic history, as well as that of his native Virginia, makes
him uniquely qualified to analyze our nation's current monetary and economic
problems since, in his words, "The things that are going to happen in
the future have already happened in the past."
In the hour
that we spoke over the telephone, Hoskins shared his views on the current
global debt crisis, the possibility for another credit crash, the outlook for
inflation/deflation, China, and many other topics of interest.
is a transcript of my interview with Mr. Hoskins.
Q: What led
you to write War Cycles/Peace Cycles?
got into the brokerage business with old Francis I. DuPont & Co. in New
York, which was the biggest brokerage house in the world at the time but it
has since gone out of business. At the time I was being trained and we used
to sit beside all the old brokers and talk to them all day long. And they'd
tell us about the way things were in the 1920s and '30s and in the Great
Depression when they were coming along and what the stock market was doing.
And frankly what they were saying had very little relationship with the books
that we were required to study.
I got very
much interested in the history of money when I compared what I was told by
these old brokers in New York; remember I'm 82, and I got very much
interested in what they were saying and what had actually happened here in
Virginia. Then I got to work here in Lynchburg, Virginia, where I now live
and I found that Lynchburg had as many different kinds of money as we've had
in the whole United States. So I said, "Why in the world doesn't someone
say something about these things and these regular cycles?" I felt that
when these cycles come up people should make note of it.
emphasized in your book the use of scrip and bank notes for promoting a
healthy monetary system. What can you tell us about this?
had tobacco notes here in Virginia at one time and most people don't even
know what that is. But 150 years ago that was the thing in America. And that
tobacco note was worth 800 pounds of prime leaf tobacco that was tested and
stored in a warehouse, and they issued a tobacco note on it. These notes were
traded from New York to New Orleans as money right in Lynchburg, VA. We were
the second largest producer of dark leaf tobacco in the world.
The King of
England demanded taxes to be paid in gold and silver. Now where in the world
is Virginia going to get gold and silver to pay the taxes? So Virginia
printed scrip and we kept the value steady. New England tried doing that but
they inflated it out of the roof and North Carolina did the same. But
Pennsylvania and Virginia kept their scrip just as level as anything you ever
saw. You could buy anything anywhere in the colonies with Virginia scrip.
Well we went
down to Mexico and paid five of our Virginia scrip dollars for three of their
dollars in silver and we took it back to Virginia and paid our taxes to
England in Spanish silver dollars. And England didn't care where it came from
just as long as they got it. Well that's not in our history books and it
ought to be. The prime thing is we made our own money. We fought a [civil]
war with the United States for four long years and we were outnumbered four
to one and we had almost nothing but we printed our own scrip and we paid for
our guns, our uniforms and our ammunition - we paid for everything with our
Virginia scrip. So it can be done.
Q: Do you
think we'll ever see the return of scrip in this country?
absolutely inevitable. I've had Arabs order this book, War Cycles/Peace
Cycles. And let's face it, there are better books out there, goodness
knows! But this is a book talking about us [Americans] and what we did in
emergency times. And in emergency times we make our own money in order to eat
and in order to live. And so [the government] passed a law saying you can't
do that anymore because our scrip was a lot better than U.S. dollars. But it
doesn't make any difference because in one form or another people will
produce scrip. Over in England they're doing it and there are several islands
off England where they're issuing their own scrip and it's accepted in the
Q: So you can
see it coming here?
the United States, in disaster areas like California and New York I foresee a
time when they're going to have to do something. What else can they do?
They've got this horrendous debt-usury system that has outlived its
usefulness. In North Dakota they've got their own state bank and they show a
surplus every year. It's a state run bank, not a private run bank like the
[Federal Reserve] in the U.S. It's natural to assume that people will seek
sound money solutions in difficult times.
Lynchburg, they needed bridges and roads and money for a canal to run goods
from Richmond and Tidewater on into the mountain region of Ohio and so forth.
How did we get money? We printed scrip and we taxed it out of circulation.
You wanted to go across the bridge built with your scrip, you had to pay
scrip. So the money was going out of circulation as fast as it was coming
into circulation. You didn't have to take scrip but everybody did. It can be
used to pay taxes and then it vanished from circulation and then they printed
up new money.
For people to
say that the dollar is the only thing we can use, they've lost their
ever-loving minds! They haven't studied their history books and they don't
know what we're capable of. And these people that
have a monopoly on the money system and have issued all this horrendous debt
all over the country, their time is coming. And I think it might be closer
than a lot of people realize.
Q: Where are
we in the long-term economic cycle in your view? Are we going to see
inflation or deflation in the years ahead?
guess is as good as mine. We do know what the short-term is, however. Every
four years at election time the market peaks out. We've been doing this for a
long time and everybody knows that. The next one is coming up in 2012. It
might be a little early this time because it was a little bit early last
time, but around 2012 it should be the time that everything peaks out. Then
two years later [the cycle] should bottom out. But everything moves so fast
now that it's hard to keep a schedule, but that's the normal schedule.
Q: In your
book you talk about the intricate relationship between war and the economy.
Do you see the U.S. returning to war anytime soon?
we run into a big problem with money, what do we always do in a usury system?
We go to war. And what's the reason for that? We go to war to borrow money
into existence, to force people to borrow money into existence. And then
they'll have money to spend on ice cream cones and cars and boats and
everything else after all the killing is done. This time they built something
we never heard of before - usury notes or IOUs that resulted from building
houses. Everybody had to have a house and everybody had to borrow money for
the house and the banks were issuing bonds all over the place. Well it just
so happened that it all came to an end. And when it came to an end all the
money that it been borrowed into existence carried interest that must be
paid, because if you don't pay interest on an IOU what do they call it? They
call it default, bankruptcy, call it anything you want, but it came in a
hurry and all these banks were up to their necks in IOUs that had no
collateral worth speaking of.
Now all of a
sudden we had to have money and going to war is too slow. We've been fighting
these brushfire wars ever since World War II and that keeps the money rolling
and keeps a certain amount of money being borrowed into existence all the
time. It helps a lot but we had to do something and do it fast, so they did
something that had never been done before. They went up to Washington and
voted a great big war debt overnight. They called it a stimulus bill. It was
more than what World War I and World War II cost and they did it in one day!
And there they were with money all over the place. But it didn't even wet the
surface of the problem because so much money had been borrowed and there were
so many bonds had been issued that it did little to pay for the IOUs that
were coming due. It still doesn't.
certainly boggles the mind.
lot of those bonds are now selling for pennies on the dollar. What are they
going to do? Well they just don't talk about it. It's never happened before.
So we borrowed enough money for a major war and it worked for almost 24
months but now it's getting a little bit sloppy and things are looking toppy,
although the market should go up for another four to five months anyway, but
it looks toppy. But if we head into another deflation, now that's another
problem that they don't allow to happen anymore.
We know what
happened to Genghis Khan's great empire. He had the greatest empire in the
world and he had a money system exactly like ours. He printed paper money and
he had a way of making people take his paper money - if you didn't take his
paper money he'd cut your head off. His money system worked for a long time
but finally there came a time when people started issuing too much money and
they became too independent and the time came they refused to take it. And
the empire collapsed because of the money system.
I'm 82 years
old so I'm not going to live to see all of this come to fruition. But right
now it seems to me like there's a lot of people
jockeying for position to become the leaders of the next great political
movement in America. I've seen liberals becoming conservative and
conservatives becoming liberal. They all call themselves Tea Party people and
you wouldn't recognize what people call themselves
right now. I'll tell you this, there's no need for people to go through all
the things I see coming. If they don't do something and get this thing under
control like we did over 200 years ago then we're going to have widespread
warfare in this country.
Q: So where
are we in the long-term war/peace cycle?
have tried a war cycle. A war cycle on top of a war cycle? I guess that's
referring to the possibility for a third quantitative easing program (QE3) I
Will that lead to inflation? Sooner or later it's bound to lead to inflation.
What about a deflation? Well in deflation some people don't eat. Now you've
got revolution. I don't think [the government] will allow that, not with the
high unemployment we've got right now. If you are forced in deflation to find
a way to feed your family, to feed your children, what would you do? I'm
afraid that would lead to widespread revolution.
Q: So is it
safe to assume that the current Administration will do all it can to stave
They've got to do that and at the same time they've got to try to stop
inflation from getting out of hand. But inflation is the way the world goes.
Given the choice between inflation and deflation, they'll choose inflation
every time. Just look at what the dollar has done over the last 50 years.
This thing has to come to an end. But with the people we've got right now
running the government I don't think they care about anything except getting
Q: In War
Cycles/Peace Cycles you briefly mentioned the Arab Petrodollar War, which
led to the confiscation of American oil properties in Arab countries in the
1970s. You concluded that this forced world merchants to borrow new money
into existence to pay the increased oil prices. Does this assessment still
hold true for the high oil prices of recent years?
people who own the oil fields are the corporations. The people who own the
corporations are the banks and the entity which owns the banks is the
international trade cartel. When you raise the oil price or lower the oil
price that's the same as adjusting the money supply and it's done so very
fast. I think that's the way they do it. Most of these oil companies are
owned by companies outside the Arab countries in which they're located. These
Arabs countries have plenty as a percentage.
not why [the U.S.] is going to war over there. The Arabs have started no
interest banking in most of these states. And no interest banking is a real
killer to usury banks [i.e. banks that charge interest on loans]. The Bible
says you're not supposed to have any interest [on loans] but we don't pay any
attention to the Bible anymore. But so does the Islamic holy book, the Quran.
In the Arab world they've been on a religious kick since about 1900 and it's
getting deeper and deeper. And one of the things they believe is that you
shouldn't charge interest. So they opened a bunch of no interest banks. And
those no interest banks took over all the business that had been handled by
the interest banks, or by the usury banks, out of the West and all the local
branches in these Arab countries. Well the usury banks weren't going to stand
for that, so one by one each of these countries with a usury banking system
were being shut down. The Western banks let them open back up with the
provision that it had to have a usury system.
It was so
obvious back when I wrote the book that I predicted that the Arab countries
would be one of the major places where the U.S. would be going to war.
Q: So you're
saying that U.S. involvement in the Arab world has more to do with interest
banking than with oil, per se?
Absolutely. Back in 1980 interest rates were around 20 percent. If you just
paid the interest on a 15 year loan of, say $100,000, at the end of that 15
year period you would have paid $300,000 in interest and still had to pay off
the loan principal of $100,000. That's the way interest works. That's why the
usury banks lent the kings of all the various European countries money so
freely. And [the interest] built up. And at any one time the people took the
money and spent it for their own uses but then there was no more money left,
so they had to borrow more money. And if you want to borrow more money you've
got to have a war because people don't voluntarily borrow anything. But if you
get a war started you get plenty of money.
European countries, in fact all the countries of the world, were overwhelmed
in debt. And all the interest alone keeps the banks alive. Without a dime of
principal ever being paid back - just the interest
alone - that's what's causing all the world's troubles.
Q: Have you
ever seen a country with a usury debt system survive the test of time? What
does history tell us happens to a country that embraces such a system?
Let's take a country that we all know about, Rome. It got started and we know
it became great and then the bankers came in. And these were the same bankers
that had come into Egypt and had taken over Egypt earlier in history. They
took over Rome and one of the first things they did was run the farmers out
of business. Because a farmer who produces his own food and through his
cottage industry raises everything he needs doesn't need anything else or
anybody. He's self-sufficient. So the first thing the bankers did was to go
after the self-sufficient farms. The countryside was soon deserted but the
city of Rome was almost a million people.
taxes started. There's nothing too good for the political leaders. You could
hire a Roman army and with that army go in and whip another province or
country and rule that country for a year or two and then you had to turn it
over to the Roman government. But during that year or two everything that you
got out of that country was yours. If you were a banker and could afford to
hire a Roman army, in many cases it was really worth it.
Q: So how did
it all end up?
ended up with only five banking families owning all of Rome. Where were the
Romans? They had moved out because the taxes they had to pay were unbearable.
Each child that was born was taxed and since the girl babies produced less
than the boy babies, they left the girl babies out in the open to die of
exposure. At the time of Jesus there were more Greeks and Greek slaves being
buried in Roman cemeteries than there were Romans. There were almost no
Romans left in Italy. They had gone to North Africa, Spain and France and all
over the place. For armies the Romans had to hire Germans, Syrians and
soldiers from all over.
Then the time
came for them to rebuild the walls of Rome. Since it was prohibitively
expensive to have children, people in Rome had generally stopped having them.
And the walls of Rome were rebuilt only an eighth of the length of the
original walls. That's how much the cities had declined in population. All
the food that came to Rome came from Egypt and Egypt was a monopoly belonging
to the banking families. The food came on lots of ships but they found they
could ship the food much cheaper in these huge container ships. Instead of
seeing hundreds of sailing ships all over the Mediterranean you'd only see
maybe one big container ship a week. When the Vikings finally found their way
into the Mediterranean they went from one end to the other and cleaned it out
and those big ships were gone, and Rome starved. And when Rome starved they
couldn't collect anymore taxes, which meant they
couldn't pay the soldiers, which meant the soldiers went home and all of a
sudden the borders of Rome collapsed and the invaders came in. And what did
they find when they came? They found cities that were virtually vacant, much
probably the best example you can find of what happens to a country when it
goes over to usury in a big way. We've only been into usury banking for about
500 or 600 years now in a big way. Sooner or later the same type of thing
will happen to us. Birth rates will go down and foreigners will come in. And
a debt-free foreigner is worth a lot more than a person up to his neck in
debt driving a Mercedes, because that guy has the potential to borrow more
money into existence while the guy driving the Mercedes is through.
Q: Is the
China economic story for real or is it a another
over-hyped economy destined to go to the same way as Japan and the Soviet
China that we see in the newspapers is not the China that really is. Today
the corporations are running China. The banks own the corporations. Who set
up the banking system in China? I haven't heard that widely discussed but I'd
imagine it's the same people that set up Japan's banking system. If that's
so, then China's banking system runs the country because the borrower is
slave to the lender, that's the law. China is something different than what
we're being told in the media. China is no more Chinese than Japan is
Japanese or America is American. And it's not by accident that all the big
corporations are going over to China or that all these Americans are going
Q: In your
book you mentioned the "1920s Turkey Shoot" where half the banks
"gobbled up" the other half. You went on to predict another
"Turkey Shoot" where the banks will once again go on a takeover
rampage. Do you still foresee this happening?
has been happening and it's still happening right now. Frankly all you need
is one big bank and a few branches around town. And that's what we're headed
to and that's what we're going to get.
Q: What do
you think will become of the banking industry before all is said and done?
banking industry as we know it is an alien entity. Take for instance the Bank
of Amsterdam. They were at one time the biggest bank in the world and they
didn't charge a dime of interest, none at all. A ship captain would come in
and he needed cargo and a crew. The Bank of Amsterdam would round up a cargo
and crew for him and send him on his way. The people who put up the money for
this venture got a share of the enterprise. If the ship sunk on the high
seas, there was insurance that took care of it. If it went over the seas and
made a lot of money and came back to Amsterdam, then everyone who had a share
in the enterprise got their share of the profit. If the trip was loss then
they all took their loss. That's the way it was run and it was the biggest
commercial operation in the entire world. And it ran until Napoleon shut it
down and instituted usury banking. Incidentally, the Bank of Amsterdam model
was the same way banks ran in Virginia at one time before the usury banks
took over. We did very well here for 200 years without it.
Q: Do you
have any thoughts on the emergence of the micro lending industry?
just another facet of the old usury game. I'll tell you, we've got to
straighten out this country, there's no question about it. But we've also got
to help out some of these other people in other countries that require help
and are being bamboozled. Because if we don't nobody else will.
Editor, The Daily Durban Deep/XAU Report