The rulers of ancient civilizations may have understood debt relief better than some of today's Nobel laureates.

With each new story about ordinary Americans struggling to keep their heads above water despite little to no help from our leaders in Washington, UMKC economist Michael Hudson seems more and more prescient. In this February 2009 interview with the Renegade Economist, Hudson discusses the unfolding debt crisis and contrasts the Obama administration's response with the way rulers handled debt relief in biblical times.

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In many ways, Hudson explains, the rulers of 2000 B.C. understood economics better than some of today's Nobel Prize winners. "They realized that debts tend to grow in excess of the ability to pay, and when the debts did that in antiquity, the ruler would cancel the debts." Though today's web of creditors is far more complex than anything Sumerian leaders had to deal with, Hudson maintains that "one way or another the debts are going to have to be written down to the ability to pay. Otherwise, they're not going to be paid!"

While the FIRE sector is wrapped around the real economy and extracts interest like a parasite, "the fact is, you can't serve both the parasite and the host." The government, Hudson argues, has a choice between saving the economy or saving the creditors, and it has clearly chosen the latter path. As a result, the U.S. is in danger of becoming an oligarchy. Barack Obama promised change, but Hudson doesn't believe he'll achieve any meaningful economic progress as long as he's employing the same team of insiders who helped break the Russian economy in the 1990s. In the wake of his midterm defeat, will the President finally begin to draw on the lessons of the past, or is he doomed to repeat it?

Tim Price is a Junior Fellow at the Roosevelt Institute.