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Banking as a Public Utility – with Ellen Brown

Published by Anonymous (not verified) on Thu, 23/07/2020 - 10:21am in

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Interviews

Killing the Host on ‘It’s Our Money‘, July 20, 2020.

Ellen Brown: [00:00:00] My guest today is Dr. Michael Hudson, who we’re delighted to have on our Public Banking Institute Advisory Board, and who really should be advising the Federal Reserve and the Treasury, but BlackRock seems to have gotten the job. Paul Craig Roberts, who is former Assistant Treasury Secretary under Reagan, called Michael Hudson the greatest economist on the planet. He’s a Wall Street financial analyst, Professor of Economics at the University of Missouri, Kansas City, and author of over two dozen books, including Killing the Host and one called … and Forgive Them Their Debts, which are both particularly relevant today. So it’s great to be speaking with you, Michael.

Michael Hudson: [00:00:43] It’s good to be back, Ellen.

Ellen Brown: [00:00:45] Thanks. So, you recently wrote in The Washington Post the Corona virus outbreak is serving as a mind expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid, won’t be. A debt jubilee may be the best way out. So, for anyone who hasn’t heard you explain this before, could you explain what you mean by a debt jubilee, and why it may be the best way out, and what the real crisis is that it’s the best way out of?

Michael Hudson: [00:01:21] Well, there was the debt problem that’s been mounting up ever since World War II. Every economic recovery, every business cycle since 1945 has started from a higher level of debt. Most people thought they were getting rich off debt because most bank credit – 80 percent of bank loans – are mortgage loans. They’re made against real estate. Banks have sought to expand the market, and have lent more and more against real estate. In the 1960s when I first bought a house, you had to have debt service absorb not more than 25 percent of your income. You had to put down 30 percent of the price of the house. So basically, a house was worth whatever a bank would lend.

But by the time that the economy collapsed in 2008 – or rather, by the time the financial system collapsed – banks were making loans with zero down payment. You didn’t need 30 percent. The requirement that mortgage payment be affordable – 25 percent of your income – went out the window. Banks would lend any amount of money, regardless of what you were making. And even the interest didn’t have to be paid. Instead of having a self-amortizing mortgage where you’d own the house after 30 years of paying the bank, you’d pay the bank after 30 years and you wouldn’t own any more at all, because you wouldn’t be paying any amortization.
So basically, banks lent so much money against housing, inflating it up to such a high price, that after paying the mortgage costs – or, if you can’t afford a house, if you’re a renter – after paying the debt service and the credit card debt, the other debt, and after paying the insurance costs and taxes, you really don’t have much left for basic goods and services that you produce, except for the bare minimum of food, clothing and transportation.

So a point was reached already by the time the virus broke out of how the economy can continue to grow. For 95 percent of the population, the economy stopped growing in 2008, when Obama bailed out the banks and left all the bad debts in place. Since 2008, all the growth of GDP – all the increase in national income – has accrued just to the wealthiest five percent of the population. That means that for 95 percent of the population the economy hasn’t been growing at all. It’s been shrinking.

The question is, how are you going to grow if you leave all of the debt service in place, if you leave all of the debt pyramided housing in place? Bonds and stocks are so high-priced that they don’t yield an income for retirement anymore. The economy reached a point already by the beginning of this year that it had to choose either to pay all the debts, continue paying the growth in income to the five percent that basically are the creditor and financial class, or write down the debts and let the economy grow again.
The basic issue is, who is the economy going to be run for? Is it going to be run for the banks and Wall Street, or for Main Street? Well, you said I should be a adviser to the Federal Reserve and Treasury. They wouldn’t pay any attention to anything I say, because they run the economy for Wall Street. As you’ve just seen, the Federal Reserve has created a virus of quantitative easing since 2008. First, four and a half trillion dollars for the Obama bailout, and then another two trillion that is set to go up to 10 trillion, essentially just to buy stocks and bonds and push up the prices of assets that the five percent own.

So the Federal Reserve basically is working against Main Street. It’s working only for its constituency, which are the commercial banks, instead of trying to think how can the economy free itself from this debt overhead? It certainly can’t work its way out of debt because nobody’s earning enough money to amortize, that is to pay off the principal. All they can do is try to pay the current interest charges. So the economy has painted itself into a corner. And that’s the problem that I address in Killing the Host and all the books that I write and all the interviews that I do.

Ellen Brown: [00:06:51] I totally agree with all that. You mentioned this four and a half trillion, which is levered up. I just wondered, how do they get away with that? I mean, it’s not a bank. Why did they figure ten to one? Tthey could do 100 to one. The Federal Reserve can issue whenever it wants. I guess one of my basic questions about the Federal Reserve is that people say they could actually go bankrupt, their balance sheet doesn’t balance, and all that. Do they actually have a balance sheet that counts?

Michael Hudson: [00:07:25] Sure they have a balance sheet. The question is, what is a balance sheet? You have assets on the left-hand side and liabilities and net worth on the right-hand side. The Federal Reserve can create a credit / deposit, just like a bank does. If you go to a bank and want to borrow money, the bank will create an account for you just on the computer. “Here’s $100,000 we’re putting in your checking account. Go buy a house or do anything.” In exchange, the bank has an asset, a claim on you for repayment with interest. Well, the Federal Reserve also can do anything on its balance sheet. It can tell corporations and the banks, “We’re the Statue of Liberty: Give us your poor junk loans, give us your bad debts, give us all of the junk, and we will create a deposit – 100 cents on the dollar for it – and we will pick up all of your bad loans. And we know that the loans can’t be paid, because the economy can’t pay.”
On the asset side of the balance sheet, we’ll say we have the claim against you. And we will then give you the money for it. And we will try to make sure that we don’t have to lose money on these assets that we’ve let you pledge to us, because we’re going to keep bidding up the market higher and higher. We can do that not only by buying stocks, junk bonds and packaged mortgages, but we can do financial tricks.

You mentioned Paul Craig Roberts before, former Undersecretary of the Treasury for International Affairs. He told me that what the Federal Reserve is doing these days is manipulating the forward market. It will go into Wall Street and it will say, “We promise to buy the Dow Jones average at 50 points higher than it is today, next week.” Well, once it makes a promise to buy, the speculators will see that and they will begin to bid up the prices to what the Federal Reserve promises to pay for the stocks. It can keep doing that, week after week and month after month and it can keep pushing up the stock market. That’s how it pushes up the bond market by promising to buy bonds at a higher and higher price. That means that an existing bond will yield less interest income. They can just continue to inflate the economy with credit, like a Ponzi scheme.

So the Federal Reserve is the official Ponzi scheme that keeps finance capitalism operating in the United States. Obviously, at some point every exponential growth scheme has to stop, because otherwise you’d have an infinite amount of debt. So at a certain point, the Fed will sit down with the main Wall Street firms and the main billionaires that are behind these firms, and say, “Well, you know, the game is over. We’ve got to let it go.” These investors will say, “OK, we’ll take the money and run.” That’s what a lot are all doing already. “We’re going to buy gold. We’re going to buy real estate in New Zealand, so we have somewhere to run to when the economy collapses.” They’re just going to drop everything, sell out and there will be a crash with the pension funds and the small savers who aren’t in on the game, losing whatever they have.

Ellen Brown: [00:11:27] This goes on over and over. My question about the Fed’s balance sheet, though, does their balance sheet have to balance?

Michael Hudson: [00:11:35] Every balance sheet balances, because any transaction is a balance. If you’re a physicist talking about a man falling flat on his face, that’s equilibrium. Anything can be looked at as a duality of two sides of the same coin. The two sides are assets and liabilities. And if I promise to pay you $100,000 for a broken down car, I can say that I have an asset worth $100,000, and you have a $100,000 IOU from me. That balances. It’s just not a realistic balance. So balance sheets do have to balance, but they don’t have to be realistic.

Ellen Brown: [00:12:24] Of course. I think we need a universal basic income. And you think we need a debt jubilee and we need to discuss what those are. But let’s say they’re paid by the Federal Reserve. The argument against that is that, like real helicopter money where you just drop money on the people, you can’t bring it back and therefore it would be inflationary, whereas what they do is supposedly reversible. So if you buy an asset, you’re putting money into the economy. And then if the economy overheats, as they say, then you can always sell the asset back and pull the money back and shrink the money supply. And you can’t do that with the UBI or writing off debts or all those various things. But it seems to me that they never can reverse their quantitative easing anyway. What do you say to that argument?

Michael Hudson: [00:13:17] You’re quite right. Remember, the Federal Reserve helicopter only flies over Wall Street. It doesn’t fly over the economy. All this $4.5 trillion of quantitative easing, and all the $2 trillion that it’s created under the Trump by the CARES Act – all this could have been spent into the real economy. It could have been spent building infrastructure. It could have been spent supporting basic income. It could have been spent on the people and Main Street. Instead, it was only spent on Wall Street. The idea is that if you buy an asset, you can always make a profit. That created the middle class from 1945 to about 2008. The way that almost all the middle-class wealth in America was accumulated was through the rising price of housing. In other words, every family that bought a house had to pay more and more of its income, and a higher and higher price to get a house. That’s enriched the people who were fortunate enough to have been able to buy real estate in 1945: white people, not blacks, not Hispanics; they were red-lined. But if you were a white person with a job, you could get onto the middle-class debt treadmill, and actually make it work for you – for a while.
Everybody thought that they could just keep borrowing money to make an even larger asset-price gain. Remember, in 2006, 07 and 08, people thought that if you borrow as much as you can, forget the interest rate, you can pay back the banks out of the rising price of the housing. But then the housing price stopped and you had nine or 10 million families lose their homes in the great Obama foreclosures. He said, “Either I can support the banks or I can support my voters. Who am I going to support? Well, the banks are my campaign contributors and I’m going to support my donor class.” He invited them to the White House and said, “I’m the guy standing between you and the mob with pitchforks.” the voters for me, the people that Hillary called the deplorables. He said, “I’ll protect you,” and he did indeed. No banker went to jail. He gave the banks enormous amounts of money, at the cost of the 10 million families that he exploited. The cost was stopping industrialization in this country, stopping the domestic market and bringing on the Obama depression.

That’s the policy that Biden is committed to follow. He committed himself in the last few days, saying that his intention to get re-elected is not to appeal to Bernie Sanders or the left or the working class, but to try to get enough Republicans to vote for him that he can beat Trump. He’s supporting the position he pushed as vice president, supporting the banks, trying to write down Social Security, cut back Social Security, cut back Medicare, cut back social spending in order to give to the donor class on Wall Street. So we’re going to see Obama with an exclamation point with the Biden-Republican program likely to come to this country.

Ellen Brown: [00:16:35] We’re in a sorry state, I think. So your proposal then would be that we have a debt jubilee. So can you describe what that is and where the term came from and how you would actually do it?

Michael Hudson: [00:16:50] The term jubilee came from the Bible. It was pronounced “yobel.” The J was pronounced Y, as in Spanish and Hebrew. “Yobel” was the term used in Leviticus 25, saying that every 50 years you will cancel the debts, and you will free the debt servants who’ve been subjected to bondage, and you’ll return all of the slaves that have been pledged to creditors as the main collateral to the debtor, and you’ll return the land that they also lost. The yobel was the horn that was blown on the jubilee to signal it. But the word that they used in addition to yobel was deror, which was a cognate to the Babylonian word andurarum. It had been used ever since the Hammurabi and the Babylonian dynasty back in 1750 BC. Hammurabi, like every other member of his dynasty, started his reign by claiming an anderarum, a clean slate, a debt cancellation. He did this because he realized that debts grew faster than the ability to pay. If you didn’t write down the debts, you would have much of the population falling into debt to the creditors, including wealthy members in the palace bureaucracy. Hammurabi and other Near Eastern rulers realized that if you let people fall into debt to the creditors, they would have to spend their labor working for the creditors on their land, and wouldn’t be able to work on the public corvée infrastructure work. They wouldn’t be able to build palaces or walls, and they wouldn’t be able to pay their crops as taxes, because they’d owe it as interest to their creditors.

The reason I mentioned Hammurabi and selected him is because in his laws. You have the first example of an Act of God clause. One of Hammurabi’s laws said that if there is an act of God, if the storm God Adad floods the fields with water and you can’t harvest the crop, or if there’s a drought, then you don’t have to pay the rents or tax debts. “You’re freed from the debts because we don’t want you to fall into bondage to the creditors, because then you’d pay them the surplus and we wouldn’t have it at the palace.” And in other parts of his laws he said if there’s an epidemic, if there is a sickness, or if there’s a military defeat, then debts are cancelled because the whole idea is we’re not going to let the money that people owe grow to such a large rate that the economy shrinks and people fall into bondage. He knew very well that if the population fell into bondage, then either they would defect. There was constant warfare. Either they’d go over to somebody else’s side, or there’d be a revolution and they would overthrow the ruler and cancel the debts.
Attempts to overthrow rulers who didn’t cancel the debts were made all through Greek and Roman antiquity, from the eighth century BC down to the time of the first century B.C. in Rome. There were constant debtor revolts. The question ever since Roman times has been, what do you do when the debts get too large to pay? Well, the debts were simply written down in the Near East. They were not written down in Rome. Instead, you had a small oligarchy taking over the economy and enslaving or reducing most of the population to bondage. The result was the Dark Age.

So to get back to your question, how do you cancel the debts? Look at what’s happening right now with the virus. A lot of people are unemployed – what’s the number 20 million or 40 million unemployed? They’re not able to pay their rents or, if they bought a house, they’re not able to pay their mortgage and other debts. So rents and mortgages are going unpaid. Beginning in July, and especially in August, there’s talk of large-scale evictions. Millions of Americans who’ve lost the job will not get any more money from the government. They’ve had to use the stimulus money just to buy food on the table and break even. So if you don’t write down the debts for these people, if you don’t cancel the rents and say, “OK, we know that you didn’t have a job, you can’t pay the rent.”
The same is true for businesses, especially for restaurants. If you don’t free them from the rents, then they’re going to go out of business and they’ll be unemployed. And, you’re going to have a gigantic homeless problem in the United States. You can just imagine the political results of all that. For one thing, now that the rents aren’t being paid, homeowners have been saying … and businesses, restaurants and stores … that they have insurance against the interruption of business. The insurance companies, which are just as crooked as the banks in this country, are saying, “Well, we can’t afford to pay you. It’s true, you got insurance, but if we paid you, then we’d go broke. So we’re not going to pay you.”

And the landlords, meanwhile, say, “Well, if we don’t get the rent, then we can’t pay the banks and the banks will foreclose.” That’s one reason why Wall Street is soaring. This is a bonanza for the really rich billionaires and multibillionaires and big companies like Blackstone. They think, “Oh, boy, there’s going to be another wave of foreclosures. Trump is doing as wonderful a job for us as Obama did.” Under Obama, homeownership fell from 57 percent to about 51 percent. And now there’s so many people who’ve been unable to pay their mortgages, that they’re going to lose their homes. The banks will sell the homes and office buildings in a convulsion of sell offs. Blackstone and other speculators are all going to be able to get rich and homeownership is going to plunge in the United States by another five points. We’ll be turning away from being a home-owning middle-class society into a rentier society that’s more and more impoverished. That is the result of what’s going to happen if the debts are not written down.

So the question is, is it really worth subjecting the economy to poverty, to homelessness, to close down businesses, to end the middle class in order to pay debts to the financial class that have made all the gains and growth since 2008? Or do we want to say, “OK, the debts can’t be paid.” That means that the mortgages won’t be paid, the loans won’t be paid, and some of these trillions of dollars that the financial sector and the Five Percent and the One Percent have made are going to be given back? Well, the One Percent says, “We’re not going to give back a penny. We are going to insist that the debts be paid. It’s worth it to us to impoverish the economy so we can get richer, even if by getting one dollar, we’re willing to make the economy lose a billion dollars because that’s all we care about.” That’s the point at which the American economy has reached today. Most of the discussions in the mainstream press don’t spell out the fact that if the economy does not write down the debts, we’re in for a chronic depression that will last until the debts are finally written down.

Ellen Brown: [00:25:47] So if you were to write them down, it would have to be up to Congress, like you say. I mean, they’re the only one with the leverage to do it. They’ve got control.

Michael Hudson: [00:25:56] Or, it can be up to the people in a revolution. In Rome there were revolutions to do it.

Ellen Brown: [00:26:01] That’s true. I think there are a few Congresspeople we could get to bring a bill or something. How would you do it? Would the banks just write off those mortgages or, you know, there are some landlords who … like little old ladies who have rented out some rooms and that’s their income, for example. I mean, there are some people that really probably don’t deserve to be in that position. But the banks, we definitely don’t seem to mind writing down their loans. I just wondered exactly, if you were to have the ability to implement such a law, how would you write it?

Michael Hudson: [00:26:38] You have to let nature take its course. You have to let the banks go under. You had a wonderful chance in 2008 for the banks to go under. We’ve spoken before on this show about what the FDIC proposed under Sheila Bair. She said, “Look, the most incompetent, worst-managed bank in the worst trouble is Citibank.” She said, “We could have taken it over.” There was enough money in Citibank to pay all the insured depositors. The speculators, stockholders and some bondholders would have been wiped out. But the bondholders are the wealthiest One Percent. We could have taken it out. And then, Citibank could have been operated as a public bank, which is what you’re talking about.

The fact is that banking should be a public utility. Privatized banking has not really helped the economy, because it makes loans basically against collateral. When you make loans against collateral – the house, real estate, corporate stocks and bonds – the effect of bank lending is to increase the price of this collateral. You end up with a high-priced economy: high housing prices, high retirement-income prices, high insurance prices. And you can’t have a viable public banking system built on the wreckage of the commercial banking system that has almost committed suicide, as you’ve described. You’re not going to be able to go forward.
You can’t simply return to normalcy because normalcy was a situation that brought us to this problem to begin with. You can’t simply keep lending, bailing out the banks and giving them more and more money to increase the debt more and more, because at a certain point the debt can’t be sustained. There will be a write-down of debts, one way or another. The question is, how will the debts be written down when they can’t be paid? Either you’re going to have foreclosures, which was the Obama and the Biden Democratic Party solution, or you’ll have the creditors and the banking system lose. If you were to rewrite the laws to take away all of the special tax favoritism for the financial sector, all the special deregulation and favoritism for the banks, they’d go under and the government could easily take them over and operate them as public banks, more and more like savings banks used to be. They wouldn’t necessarily be able to create credit except for public-authorized purposes. They wouldn’t be able to make the takeover loans, the predatory payday loans, and the other kinds of predatory finance that the commercial banking system has become in this country. So the problem isn’t simply a debt write-down; it’s to restructure the financial system to make it into a public utility instead of a private monopoly.

Ellen Brown: [00:29:54] Right. I totally endorse that. That sounds great. So, I saw you wrote recently about the question of whether it wouldn’t be inflationary doing all these bailouts. You said no, that we’re actually in an era of deflation, and basically the way the Fed has been doling out money to the financial sector makes the deflation issue worse. Can you explain that?

Michael Hudson: [00:30:24] There are two kinds of prices in the economy. One is prices for goods and services that people buy: the consumer price index for food, clothing, shelter; the other is the price of assets. What we have is asset-price inflation. The banks have been bailed out to lend more and more money against assets, that is, the collateral that they lend against. So banks have created this huge rise in housing prices. The basis of middle-class wealth has been created by banks increasing the price of real estate, the price of stocks and bonds. But increasing the price of real estate means that in order to buy a home of your own, or in order to rent a home, you have to pay more of your income to the financial sector, to the banks for the mortgage. Rent is for paying interest. Speculators, absentee owners, and real estate developers will borrow money from a bank in order to pay all of the rent basically for interest. What they’re after is the capital gain – the price rise. But as prices rise for real estate, stocks and bonds, the rest of the population has to pay more income, not only for housing but for a retirement income, and for monopoly goods and services. We turn into a rentier economy. More and more income is paid for economic rent, not for profits, not for wages, not for goods and services, but as a carrying charge for assets that are financed by bank credit. This is where the financial sector undercuts the economy.
This is not capitalism, in the sense that it is not industrial capitalism. It’s not what people expected in the 19th century. Finance capitalism can be thought of as the failure of industrial capitalism to free economies from rent and interest and from the legacy of feudalism. The finance capitalism that we have is the road back to feudalism. It’s neofeudalism. It’s neoserfdom. It’s turning the population into debt serfs, debt peons who have to pay all of the income that they have to the creditor, and don’t have enough money to buy goods and services. So of course, goods and services prices are actually falling, because people don’t have enough money to buy them. That’s because more and more of their income is paid for access to financialized housing, financialized public utilities and financialized monopoly services.

Ellen Brown: [00:33:09] That’s my argument too. You could pour money into the real economy in the form of universal basic income or any other kind of helicopter money, relieving student debts, etc. And because that economy is actually short on money, it would fill that gap, the difference between debt and the money available to repay it. And the money that trickles up, that goes into the other … There are actually two economies and the money that goes into the financialized economy never comes back. I wish I could prove that, but it seems to me you can just see that that’s true. There’s only so many shoes you can buy. All the rest of your big money goes to big things like bribing politicians or buying Iowans their yachts or something like that.

Michael Hudson: [00:33:57] There’s a simple explanation. The money doesn’t go back to the real economy, the production and consumption economy. The goes into the financial economy. It is recycled into bidding up the price of houses and stocks and bonds. And this price can go down and it can disappear. It can be eradicated, and always is in a financial collapse. So the question is, what is the economy? There are really two economies. There’s the production and consumption economy of workers producing goods and services, and buying what they produce. And there’s the financial economy. It’s really more than the financial economy. It’s the finance, insurance and real estate sector — the FIRE sector. When the money goes out of the goods and service economy into the rent and interest economy, it goes from the 99 Percent into the hands of the One Percent. So you can have the Main Street — the 95 or 99 percent of the population — and the financial economy that are becoming very much like the hereditary landlord class that ruled Europe off in the Middle Ages until the 19th century when industrial capitalism was supposed to free economies from this predatory class.
Industrial capitalism seemed to be taking off until World War I, but World War I changed everything. Since then, you have had a degeneration of industrial capitalism into its antithesis finance capitalism, which is really a fall back into neofeudalism and neoserfdom. Where will the Americans emigrate to when there are no jobs and they lost their houses?

Ellen Brown: [00:35:43] Yeah, they’ll go to Mexico. I saw a joke about that, something about, “Are you coming in or going out?”

Michael Hudson: [00:35:48] Well, they’d better learn Spanish.

Ellen Brown: [00:35:50] Yeah. Yeah. Saw another joke it was the Statue of Liberty said, “Another year like this and gone back to France.” Yeah, well, it’s been great talking to you.

Michael Hudson: [00:36:03] By the way, the Statue of Liberty holding the torch, that iconography occurs very early in civilization. When Hammurabi cancelled the debts, he raised the sacred torch. And the announcement “the ruler has raised the sacred torch” was a symbol in Babylonia for proclaiming a debt cancellation.

Ellen Brown: [00:36:27] Oh cool. We have that right in New York Harbor.

Michael Hudson: [00:36:30] Yes.

Ellen Brown: [00:36:31] Okay, that’s great. All right. Well, it’s been wonderful talking to you, as always.

Michael Hudson: [00:36:36] The same here. I hope we can get into more details next time.

Photo by Micheile Henderson on Unsplash

AL-AKHBAR: Long interview with Léa El Azzi on capitalism after the pandemic, Europe, Greece, Lebanon & the IMF

Published by Anonymous (not verified) on Tue, 30/06/2020 - 4:03pm in

The pandemic is not the first crisis (if we can say so) that hit capitalism all over the world. what is the difference between this one and the previous crisis? 

The obvious one is that Covid-19 dealt capitalism an external shock, like an earthquake or a meteor that strikes at both production lines and consumption at once. In contrast, the 2008 financial collapse, for example, was an internal, an endogenous, shock that was created, within, by the system itself. Having said that, the reason why the pandemic will prove so damaging is that capitalism had never recovered from the 2008 crash. Back then, it was the financial sector that crashed and burned. Central banks and governments refloated the financial sector by means of trillions of dollars of new money. However, this liquidity did not turn into actual investment in the real economy. So, while the banks recovered, and the oligarchy found themselves with appreciating assets, the majority our there had to face harsh austerity. This boosted the disconnect between available liquidity and investment in good jobs and its associated disconnect between the world of money (that was doing well) and the world of the real economy (which was not). Company shared were high but profitability was low. So, when Covid-19 arrived on the scene, it acted like a pin that bursts a gigantic bubble. Reflating this bubble, in the absence of serious public investment, will not be possible however much money Central Banks pump into the financial markets.

Why does capitalism face so many problems and challenges, despite the absence of ideological competitors?

Because that’s what capitalism is wonderful at doing: Producing technologies that undermine itself. The process at work is fascinating: In the real economy, new machines come into play that cut down the content of labour per unit of output. New jobs are created lower down the hierarchy of work. This means that machines play an increasing role in producing great new products which the machines will never want and which humans are decreasingly able to afford. Meanwhile, in the world of money, financiers constantly create new forms of debt that disguise themselves as a form of private money. Its accumulation eventually leads to a crash due to a string of bankruptcies. The combination of these dynamics, in the real and in the money worlds, inexorably produce one crisis after the other.

Why throughout the years, the economic success was not accompanied by improvements in peoples’s lives? Is it one of capitalism problems now? 

Defenders of capitalism dispute this. They roll out statistics that show a steady increase in average living standards over the past one hundred and fifty years, presenting it as evidence that capitalism has been good for humanity. While it is true that average real incomes have increased, especially in China and other developing countries, it is not at all clear that this has been a victory either for capitalism or for humanity. Take China, for example. While it has relied on the market and on private enterprise, it would never have grown the way it did if it was not for the capacity of its government to direct investment and determine the income distribution in ways that capitalism would have made impossible – in other words, without the Communist Party and its structures. Additionally, defenders of capitalism ignore the simple fact that a rise in incomes does not necessarily mean a rise in the quality of life. To give an extreme, but not misleading, example, take Australia’s Aborigines. Before the Europeans arrived in Australia, they had no income. But they had a rich and fulfilling life. Today, their majority receive government benefits but lead broken lives. Is this progress?

Will Covid- 19 bring down capitalism? Or do you think it is just a battle inside the same capitalist camp, and capitalism will win again?

The death of capitalism has been pronounced so many times that it is unwise to do so once again. What I can say is, first, that Covid-19 has struck at a time when capitalism was particularly fragile (and, therefore, all the talk of a quick recovery is inane) and, secondly, how this crisis affects humanity will depend on what we do, on how we react. Nothing is written in stone.

If we will set another regime, what will be? and do you think China and Cuba could have an advantage after their role in fighting the virus and helping other countries? — Miatta Fahnbullah wrote in “Foreign Affairs” that “A new economic model is needed, one that adapts traditional socialist ideals to contemporary realities”, you agree?

Yes, of course. Strong public health systems have proven themselves immeasurably better, and more resilient, than private ones. Capitalism’s reliance on just-on-time supply chains that no collective agency can plan or direct is proving its Achilles Heal. How could we have organised production and distribution differently? What might Postcapitalism look like? I have been struggling with these questions for a long time. Alas, this coming September I am bringing out a new book that offers my answer, for whatever it is worth. It is entitled: ANOTHER NOW: Dispatches from an alternative present.

You said that “either we unite with progressives around the planet in a shared struggle for justice, or we surrender to the forces of nationalism and free-market fundamentalism”, how could reuniting progressives help in any way?and what is your plan beside the website?  

Let me give you a simple example: During every recent crisis, bankers banded together and forced governments to apply socialism – for them! The price was austerity and hardship for almost everyone else. This led to discontent. Discontent then breeds fascism, xenophobia, nativism, ultra-nationalism. The representatives of this misanthropic type of politics unite across borders (look at the love in between Trump, Bolsonaro, Modi, Le Pen, Salvini etc.). Is it not the time for progressives to band together in the interests of the majority in every country, on every continent?

This is what our Progressive International is about. How are we organising this, besides a website? In two ways. First, by putting together a global plan for shared, green prosperity. (We must be able to answer questions such as “How much should we spend on fighting climate change? Where will the money come from? How will we redistribute wealth from the few to the many and from the Global North to the Global South?”) Secondly, by organising global actions in support of local causes (e.g. a global campaign in support of a few striking women workers in, say, India). To accomplish these hugely hard, but essential, tasks the Progressive International has put together a Council, comprising leading activists from around the world, and a Cabinet, consisting of a few dedicated organisers working on our campaigns on a day-to-day basis. Our next meeting will take place on 18th September in Iceland, under the aegis of Katrin Jacobsdottir, the country’s Prime Minister.

What should be the role of the state in all of this, specially after the Covid 19 and critics to capitalism and private sectors which was not able to cope with the crisis?

The state’s role is crucial. Even politicians inspired by small-government libertarianism have had to call for governments to step in and, effectively, save everyone. The question is not whether the state has a role. The question is: On whose behalf is the state acting?

Part 2: Europe after the pandemic

How will Covid – 19 change Europe? 

It will make it even more fragmented, insular and wrought by nationalism. Europe’s historic failure came in 2010, when a financial sector crisis was dealt with as if it were a great opportunity to cement the policy of socialism for the bankers and austerity for everyone else. As a result, our democracies were poisoned and powerful centrifugal forces began to tear apart any sense of a union. Covid-19 simply reinforced these forces.

This is not a “traditional economic crisis”, and it’s been very long time since the world faced something alike, but we notice that governments and nations are making “traditional moves”, specially with  releasing new bonds. Yanis Varoufakis doesn’t agree with these procedures, but why should European institutions continue in supporting a failed financial system by saving creditors? And what should be done instead?

Because our political system belongs to the failed financiers. It is they who, for years, financed political campaigns. It is they that wrote the rules of our monetary union, both during the good and the bad times. And it is they who have the power to impose upon the rest of society that the rest of society bails them out from the mess of their own doing. It is oligarchy par excellence.

Why you said that the last thing businesses in Germany, in Italy, in France, in Greece need now is loans? and how loans could affect them?

It is crucial that we never mistake a bankruptcy for a case of illiquidity. If the estimated value of your future income is greater than your debt, you are solvent. But, you may be ‘illiquid’, i.e. lacking cash. In these cases, a loan is both sensible and useful. However, if your debt is lower than your future expected income, no loan can help – all it will do is magnify your debt and push you deeper in bankruptcy. It is in this sense that I said that businesses do not need loans so much now. They need cash injections or, better, a debt restructure – under conditions that society places upon them (e.g. how they treat their workers, the environment, their customers etc.)

Could European institutions finance governments directly?

The European Central Bank cannot, due to a severe restriction in its charter. But, there are a myriad ways in which member-state deficits and debts could be mutualised – the first step toward a proper union.

All we talk about is saving European economies and markets, what about citizens, and the social impact of the pandemic?

I never talk about anything other than our main task, which is to minimise human misery and to maximise shared, real, green prosperity. If I indulge in any discussion about banks, bonds and fiscal policy is because these are the tools by which so few people destroy the lives of so many.

Part 3: Greece and IMF

Did Greece recover after the program with IMF? – if no, why?

Of course not. The reason is simple: The joint IMF-EU program was never about helping the Greek people recover. It was all about, primarily, saving four or five French and German banks by cynically transferring their gargantuan losses onto Europe’s taxpayers, using the Greek Treasury as an intermediate stop for the bailout funds. A secondary role of this IMF-EU program was to force the people of Greece into permanent debt bondage so as to ‘teach’ others (e.g. the Spanish, Italians, French) an important lesson: You do as you are told or else…

Economically speaking, what were the benefits of the program and negatives?

Precisely zero benefits, unless you were an oligarch. As for the negatives, it suffices to mention two: First, permanent debt bondage. Second, desertification, as your young (especially the better educated) are migrating in droves.

If not asking for IMF “help”, what else could have Greece do?

Declare bankruptcy. And then take it from there. Yes, it would have been costly. But, with hard work it would have been possible, either inside or outside the euro, to climb out of the hole. Under the IMF-EU program, this was – and remains – impossible, the result being that all the sacrifices are wasted.

Part 4: Lebanon economic / financial crisis and its IMF Program 

The Lebanese government put recently a “Financial Recovery Plan”, claiming that the “lebanese economy is in free fall” and that an “international rescue package to backstop the recession and create the conditions for a rebound. In parallel a quick delivery on long-awaited reform measures is critical to help restore confidence”. The minister of finance started the negotiations with IMF, and government say that it is the only way out. Why? Is the IMF a solution for the problem or a problem itself? Can we really negotiate to get a better deal, or it’s a package “take it or leave it”, specially for a small country that every day one American responsable give a statement telling us what we should and should not do?

Just like Greece in 2010, Lebanon is facing a moment of truth, a great dilemma. Become a vassal of the IMF and hope for a miracle that becomes less and less likely in the era of the post-pandemic depression. Or, take the pain but also take matters in the hands of its people. There are no easy solutions. But there is a clear choice.

The IMF program can never work for the majority. It may end up a complete disaster, with even the richer Lebanese suffering hugely. Or it may end up as a partial disaster, leading to some benefits for the better off while the majority languish in deeper debt and misery than ever. In either case, the majority of young Lebanese, especially the better educated, will leave the country, thus draining it of its most precious capital. The reason the majority are condemned under the IMF program is that this is what it is meant to do: A mild restructure of banking, personal and public debt in exchange for a massive redistribution of income, and in particular wealth, from the poor to the oligarchy-without-frontiers. While the IMF can, potentially, restore in Lebanon a semblance of normality, this will be bought at the price of the permanent expropriation of whatever little prospects and wealth the ‘little’ people have.

The alternative takes courage and political organisation. Throwing out the IMF, unilaterally haircutting your dollar or euro denominated debt, nationalising the banks, launching a new currency under a reconstituted central bank… these would be the first steps. Undoubtedly, it is a thorny and treacherous path as the world’s powerful will treat your people as a rebel army. But, if they see that you are pulling together and are using this crisis as an opportunity to eradicate corruption and cronyism, they will eventually relent. Iceland was in the same situation at the beginning of the 2008 crisis. They followed this hard road. And they won. There is no reason why a small country cannot assert its right to sovereignty from the global oligarchy that the IMF represents.

FOR THE AL-AKHBAR SITE, in Arabic, CLICK HERE

What’s wrong with capitalism? Interviewed by Rudyard Griffiths

Published by Anonymous (not verified) on Sat, 20/06/2020 - 6:52pm in

Anish Kapoor on India, Israel, life in the UK and, of course, art, art and art. On DiEM-TV’s ANOTHER NOW, 15th June 2020

Published by Anonymous (not verified) on Wed, 17/06/2020 - 2:09am in

I spent Monday night, 15th of June, chatting with Anish Kapoor for an hour. I began by asking him about life in 1950s India as the child of a Punjabi Hindu Admiral and a Bagdadi Jewish mother. Our conversation moved on to a Kibbutz in Israel before landing in Blighty and in particular Hornsby Art School, where he encountered a kind of freedom that art schools lack today. It shifted to form and poetry, to his various phases as a sculptor and multi-faceted artist. Thatcherism, commodification, the joys of solidarity and the need for progressive internationalism entered our conversation almost uninvited. It was a joy and an honour to spend those sixty minutes with him. Highly recommended viewing, even if I am saying so myself!

Holding the Bailout Bag

Published by Anonymous (not verified) on Fri, 05/06/2020 - 12:32pm in

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Interviews

A podcast with journalist Paul Jay.

The Federal Reserve is directly buying stocks, bonds, junk bonds, mortgages, junk mortgages, all to prop up the value of assets owned by the top 5%. This does not spur much new production or create jobs. Michael Hudson joins Paul Jay on theAnalysis.news podcast

Transcript

Paul Jay

Hi, my name’s Paul Jay, and welcome to theAnalysis.news podcast. Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, and also a professor at Peking University in Beijing. He’s written or edited over 10 books on international finance, economic history and the history of economic thought. His newest book is J is for Junk Economics and most recently, And Forgive Them Their Debts, which Martin Wolf of the Financial Times cited as a Book of the Year for 2018.

Thanks for joining us, Michael.

Michael Hudson

It’s good to be here, Paul.

Paul Jay

So with so much bad news in the world, and when the stock market crashed in late February, why didn’t it stay crashed? Two months after the crash to 14 month lows, So at a certain point, almost historic lows,  the Nasdaq composite is closing in now on all time highs. Why?

Michael Hudson

There is only one reason for a stock or bond prices to go up. And that’s because of the flow of funds into the stock market. What had been supporting the stock market for the last 12 years was very largely stock buybacks by companies using their revenue to sort of close down their business, disinvest and buy their own stocks to at least keep the prices up. Well, what’s flowing into the market right now? Obviously, it’s not corporate profits buying their own stocks, and it’s certainly not popular money coming into the market by small investors thinking that stocks are going to earn more. All this money is coming into the market from the 10 trillion dollar bailout via the Federal Reserve. The Federal Reserve is going out directly and is buying stocks, bonds, junk bonds, mortgages, junk mortgages, all to prop up the value of assets.

Now, when it’s putting this money into the stock market, it’s buying stocks that are already issued and have long since —the proceeds have been spent on building factories or enterprises or as means of making money. So none of this bailout money, none of this 10 trillion going into the stock market has any effect at all on the real economy of production and consumption. It’s solely to support the assets that are held almost eighty five percent by the wealthiest 10 percent of the economy.

So the Fed has revived the stock market downturn. It’s come up, and what it said is, “Folks, you can bail out of the stock market, give us your junk bonds. That’s sort of like the Statue of Liberty for wealthy people. Give us your stocks. Sell your bonds. We’ll buy them all up at Federal Reserve expense and will purchase them. And we’ll also do our own forward buying to manipulate the stock market by promising to buy our stock, so  the higher price in the forward market. So that’s going to create a speculative demand for stock. So the speculative demand for stocks by Federal Reserve manipulation and the actual flow of funding money into the stock market from the government has been pushing it back up, giving the illusion of prosperity, at least for the 10 percent.

Paul Jay

But are they actually straightforwardly buying stocks to they’re buying corporate debt, which allows them to go buy their own stocks and also just making so much money, so cheap people can buy stock?But is the Fed actually straightforwardly buying stock?

Michael Hudson

That’s what it said it’s been doing. Or it’s buying packages. It’s buying—We don’t know exactly what it is buying because it doesn’t have the report. That’s why the Treasury left the Fed to do something that doesn’t have to be followed carefully. It took up Randy Wray at Bard College’s Libby Institute about a year just to untangle what the Fed had done after 2008 and 2009 with the big Obama bailout of quantitative easing. So we’re not going to know for later what’s been happening. But certainly corporations are not buying their own stocks now because that would make that that would be a political disaster and they just wouldn’t get more bailout money. So the money is coming almost entirely from speculators or from the Fed promising to buy what speculators buy at a higher price later on. So it’s manipulating the foreign exchange market just like the Leibor market was manipulated. Almost all the financial markets these days are manipulated by high finance in cahoots with the Central Bank. And if you don’t have that central bank backing, then there’s not going to be the flow of funds going into the markets.

And certainly small investors are not buying. Regular investors have already been getting out of the stock market for quite a few years now. It’s only for our professionals, often for a computer trading gets into the act. It’s an insider’s game that is basically fueled by the Central Bank.

Paul Jay

So you wrote an article called, The Coming Financial Horror, that the Federal Reserve Chairman Powell is essentially promoting a fantasy that there’s going to be relatively quick recovery, although recently he was saying it’s not going to be quite so quick as people thought. But this stimulus program they have, whether it’s propping up the stock market or buying corporate debt or funneling money directly to corporations—Is it going to have any effect that’s longer term than what it seems to be, because one can see that if they try to get the economy going again, and they haven’t done more on the side of consumer demand, who the heck’s going to buy us off to get the economy going again?

Michael Hudson

Well, now you’ve suddenly changed to another topic, to the economy. Obviously, the stock market isn’t the economy. The real fiction and what the Federal Reserve, Powell was saying, was that somehow a recovery in the stock market means a recovery in the economy. And all it means is that the wealthy investors are bailing out of the market and moving into their gated communities and, essentially, they’re pulling out. The whole stock buyback program of the last 10 years has been disinvesting. All of the insiders and the big investors know that the game is over.

That’s why there’s so much talk of moving to New Zealand. But the Coronavirus has, all of a sudden, provided a wonderful opportunity for the 10 percent. It’s enabled them to have an excuse for a huge bailout and an excuse to essentially make, enable them to get out of stocks, get out of bonds and avoid the crisis that’s coming, leading the Federal Reserve and the suckers, as they would say, holding the bag when the economy collapses. Obviously, there’s going to be a collapse, and there was going to be a collapse even before the Coronavirus. Everybody was talking about the decline in oil prices, which is not only going to hit the fracking companies and the oil companies with the low oil prices, but it’s also leading to very large defaults by Third World countries. Raw materials prices are going down. So they’re going to be a lot of third world debt defaults. They’re going to be a lot of breaks in the chain of payments.

But what the Corona virus did was somehow give an excuse for the government to create all of this money, saying it was going to be for small business. Well, obviously, it has not been for small business. And, you know, just think what the Fed could have done with this 10 trillion dollars. It could have put money, revive the economy by putting the money into building the means of production. Mainly in this case what’s needed is infrastructure rebuilding things like the New York City subway so people can get to work without their being so crowded that you’re probably going to catch a new virus when the regular service begins again. They could have begun rebuilding the economy, but none of this money has gone into the real economy at all. So the economy’s been left holding the bag. But at least the Fed has used this money. They did notice that they don’t call it taxpayer money for the bailout. “Taxpayer money”—-they only use that phrase when it’s for real production, or  to support employment or social spending. But when when the same money is created by the same process, the support of the stock and bond market, that’s never called taxpayer money. But it’s all the same thing. So you see that all of the lobbyists have sort of been waiting with a wish list of what they would like the government to do to take all of the bad loans off their hands. And the thing to realize is that the one percent, 10 percent realizes that the game’s over and they’re trying to—

Paul Jay

What do you mean when you say the game’s is over? What do you mean the game’s over?

Michael Hudson

The idea that the debts can be paid. The idea that somehow you can put money aside, and the money will grow for you. It will give you interest. The money will somehow be pushed into the stock market by buybacks without much income and push up stock prices. The idea that you can put in a million dollars and have the money go up through stocks or bonds or real estate without having the economy grow at all. That was a game because it’s not realistic.And it was a decoupling of the financial and real estate markets from the economy, and that whole decoupling—now, finally, you can only decouple so far before the fact that the rents are not being paid, the taxes are not being paid. The states and localities are having a huge tax shortfall that is forcing them to cut back services. And the commercial real estate; half of the Empire State Building tenants have not paid their rents for March and April. About maybe 40 percent of tenants, generally in the New York City commercial buildings, restaurants, storefronts—they’re  just not paying. So everybody’s expecting a break in the chain of payments. And at a certain point, the government can’t simply keep the pretense up when the economy’s plunging, and the stock markets are going up. People are going to realize, “wait a minute. Why  isn’t this money creation being spent to actually revive the real economy?

Paul Jay

So what happens when, in theory, this virus comes to an end? Oh, that, who knows? It could be year, two, three. But even before the end of the virus, these back grants, as you say are piling up. Debt servicing is piling up. At some point there’s going to be mass evictions. As you’ve written, mass evictions, foreclosures, bankruptcies are going to be inevitable. You’re advocating that these deaths should simply be written off. Is that what you’re proposing? And can you imagine them actually doing that?

Well, they’re not going to be paid one way or another. That’s the important thing. Imagine the 25 million unemployed. They’re not getting paychecks. How are they getting by? The only way they can get by is to run up their credit card debt. And by running it up, they’re going to be not paying the monthly usual charge. They’re going to be subject now to interest rates on the credit card that go up now from, maybe 20 percent to twenty nine percent or even more.

Michael Hudson

Companies are reported in New York City just to be packing up and moving out of their offices, others taking all the assets they can, leading to the kind of commercial real estate collapse that people were talking about in 2008. So what’s happening now is really the end of the whole Obama bailout, the whole depression. It was all, it was never possible to have a recovery of the economy, leaving the debts in place that existed in 2008. And the Federal Reserve’s quantitative easing of about four point six trillion managed to sustain it to the coronavirus time. And then that’s left up. All of these people who don’t have a job, you can just imagine what the situation is. It’s already about half of Americans reported that they don’t have four hundred dollars available if there’s an emergency like a health emergency, and they’re reported living paycheck to paycheck. Well, if you’re living paycheck to paycheck, and you don’t have a paycheck, you can just imagine what’s going to happen. The homeless problem is going to increase.

Normally, there would be state and local spending to somehow revive the economy or make work jobs. But that’s not going to happen because the revenue is all falling.  In New York and other states the quarterly, the real estate tax is going to be due in just a few weeks in June. And obviously, a lot of companies think, well, if we’re not going to be able to collect the rents because our tenants are moving out, we might as well take a risk and not pay the tax now because we may have a problem with the banks.

The banks are not lending money to the landlords, THE WORST THREAT ??? And they’re not lending money to the   businesses that have been closed down so they can pay the landlords, so the landlords can pay their mortgages to the banks. So right down the line, there’s going to be this break in the chain of payments and nobody can come up with any scenario whereby the debts can be paid. Now, the question then is, how are they not going to be paid if they’re not going to be paid by large foreclosures?

The New York Times today just said that Goldman Sachs is up, foreclosed on 10,000  homes. If they’re not going to be paid by foreclosures, then the only thing to do is to bail out the debtors by wiping out their debts. Or the Federal Reserve could have even created the money to pay the debts to give to the banks and save them. That’s what Obama had promised to do in 2008. Somehow he was going to enable the victims of the junk mortgages to pay the banks while they write down the value of the mortgage, the real value of the property, not the fictitious value. None of that was done. So right now, if the debts can’t be paid and you have foreclosures, then you’re going to have a very sharp concentration of property in the country and also home ownership. You, you’ve had homeownership rates dropped from about 58 percent in 2008 to about 51 percent now. That’s more than a 10 percent drop in the proportion of Americans that own their own homes. You’re going to have a concentration of homes and companies that have been buying them up. Like Blackstone has been a very major company buying up foreclosed properties. Goldman Sachs bought up a lot of foreclosed properties. You’re going to have, basically, the financial centers buying up real estate and turning the economy into a landlord ridden economy, rather than an economy that is of home ownership, which is what made America’s middle class wealthy by giving it most of the networth that it had.

Paul Jay

And that’s going to happen, not just in the real estate sector, but every sector. The concentration of ownership, which is already at ridiculous levels, it’s going to be extraordinary. I mean, small businesses to a large extent, are going to be wiped out. And it’s going to be a field day for anybody with cash to pick up these sectors of the economy at a bargain basement price.

Michael Hudson

Well, that’s why some of the stocks are going up. Wal-Mart stocks are going up.

The big  store chains have seen their stocks going up more than anyone else’s because the smaller stores, Macy’s and Sears and the other, J.C. Penney that went bankrupt last week. These companies, the retail sector was very largely bought out by predatory capital groups, private capital groups that essentially used them to loot them. The strategy was you’d buy a store. They tried to do this with McDonald’s, for instance. The idea was to buy a company. You immediately break it into two parts. You have the company sell the real estate to another part of another group that you’ve created. The group gets the real estate.The store that you’ve just bought out, instead of owning its property, signs a long term lease to pay a huge amount of rent to this real estate part that you’ve just created by splitting up the company. And you’ve created a value based on the prospective rental store income. And you pay yourself a management fee, you charge interest, you charge all sorts of other fees. And this is what is driven almost all of these stories. Toys R US, right down the line it’s driven them all under. Now, you’re going to have something like that occurring outside of the retail store industry for other sectors of the economy, as you point out. One sector after another. The companies that are struggling during this three month abatement are, all of a sudden, not going to be able to come up with the rent in three months or, supposedly your restaurant, for example. Restaurants your biggest expense is going to be the rent to the landlord. But if, you haven’t done any business for three months and you realize that if you go back to work and the landlord says, “OK, you’ll just pay it off in a year or two.” Well, then you realize that, wait a minute, all of the profit, all of the money that was paid to management is really just going to go for the landlord. And we’re not going to make any money at all ——left over after we pay the current rent and the back rent to the landlord, it’s best just to walk away, close down and move somewhere else. So there will be musical chairs as restaurants are closed down, stiff  their suppliers,  stiff anybody they can and hope that they may or may not start business somewhere else. But it’s going to be awfully hard to get bank credit once you stiffed the landlord and walked away from the bank financing. So there’s just not going to be financing for anyone except the very large and richest financial companies.

Paul Jay

So, when one does this sort of projection forward., you know, a few months, a couple years, it gets worse and worse unless there’s a massive public social expenditure on infrastructure programs of various types, but at a scale that’s more than anything even Roosevelt imagined during the New Deal. And that leads to, you know, a kind of development of a public sector that the right wing of the elites. I shouldn’t say the right wing. All the elites, essentially,  don’t want to see that kind of expenditure because it leads to people saying, “Well, if we’re spending all the public money, then why shouldn’t the public own this stuff?“

Michael Hudson

Well, that’s exactly where Wall Street was way ahead of you there. They knew that there would be pressure for just what you’re suggesting. The reasonable thing, if you really want to restore prosperity, is to develop an infrastructure for public spending programs, public transportation, to rebuild the roads and transports that have fallen apart, the parks. And so by giving this 10 trillion dollars all through the stock and bond market and for real estate mortgages. And by giving it all to the financial sector now, they can say, “We’re broke. We don’t have any money for social spending. We’ve already spent it. Look at how big the deficit is. And this is exactly what Mitch McConnell said to the states. He said the states have a tax shortfall. Well, let them take the money that’s in their pension funds. Let them lose the pension funds. Let them not pay any of the public sector workers that have agreed to get pensions in exchange for decade after decade of slow wage growth, saying, “Yes, we’d rather have a pension than a slow wage growth.

Now that that you tricked them into taking a long term promise, do what Donald Trump does, break the promise, break the deal and say,  „I’m sorry, you’re not going to get anything. We’re broke. And we gave all the money to the 10 percent. And if you don’t like it, vote for the other party.“ When you have the same donor class behind each party. So basically, there’s not going to be any money to spend into the real economy. It’s all been spent on the financial sector.

what happenw\ed was the the right wingers can now say we’ve got already spent the money. Look at how large the deficit is. And you’ve already had Mitch McConnell come out and say, „ Well, the states that are known are getting their tax revenues have a solution. Let them raid their pension funds, let them break even and pay the bondholders what they owe, and the other suppliers by essentially borrowing or emptying out the pension.

So what you’ve had, is he wants the states to act like Donald Trump has acted: Break the long term deal. For decades, public service workers have accepted low wage growth in exchange for pensions. They’re looking long term. They say, „OK, we won’t increase our wage demands, but we want the security that when we retire, we’re going to get a good pension.“ That’s what made public sector work attractive. But now that the workers have already worked at a low price and the same thing in the corporate sector, taking low wages for years now, the pensions that they were promised are going to be used instead to pay the bondholders because the states have to make a choice. And the states are going to choose the financial sector to the financial sector. The workers and capital and agriculture are just overhead. All of the real money is supposed to go to the financial sector or the fire sector. So all of this money that has been ostensibly saved, is really going to be just emptied out and given to the bondholders.

Paul Jay

But there’s a political calculation here. Just a few months away from the presidential election, if they don’t do something by the time the election comes around, it’s already a whole sections of the working class that never knew what poverty was, are sinking into it. And by the time election comes along whole sections of the American population are going to be in desperate straits. And this is going to doom the Trump presidency. They‘re  going to have to do something.

Michael Hudson

No. Well, Trump will try to blame it on the Democrats. He’ll say, „Give me control of Congress so that we can pass a law to get America back to work and make America great again. He will blame it on other Democrats and say that he didn’t cause the Corona virus. Of course, what he did——-And he can point out that the ten trillion dollar bailout was unanimous. Democrats and Republicans. The Democrats, Nancy Pelosi in Congress, which is in charge of writing the Cares Bailout Act, could have said, „Well, we want to make sure that the states and cities are bailed out, so the public services are not cut back and so they don’t have to raid the pension funds and screw all of the retirees as other Republicans want.

But the Democrats agreed with the Republicans to basically throw the workers under the bus, throw the retirees under the bus, throw the pensioners under the bus and focus on their donor class, the financial sector, the bondholders and the stockholders.

Paul Jay

In Canada and most of Europe, maybe all of Europe, the state subsidies have gone to businesses to continue paying wages, even if people are at home. Many countries are paying up to 80 percent, subsidizing 80 percent of workers wages. So, in fact, people aren’t suffering in the same way. And then when they want to start the economy again, everyone just goes back to work. And the U.S. didn’t didn’t do that.

Michael Hudson

Neither party did that because no politician in either party advocated that. Nobody is saying that. That is sort of the forbidden thing to say. And if you try to say it, people will say, „Well, if you don’t like it here, why don’t you go and live in Denmark?„

And so Trump will say, „Well, it’s  true that the virus happened on my watch. I’m the guy who can get rid of it. Wouldn’t you rather have me than Who? Whoever the Democrats end up putting up?“  Wouldn‘t you rather have me, a businessman trying to put America on its two feet, just like a real estate company would be rescued, instead of living like a socialist in a socialist country?These are the people who wanted to close down the economy even more. I Trump,I’m the guy who opened up the economy. My opponents want to close it down. That‘s not going to make you recover. I’m the guy who can make you recover.

Paul Jay

But the polling is showing almost everywhere, that most people think that the economy is being opened up in certain states far too early. And in the states where they’re doing it, they’re getting spikes in Corona virus. So I’m not so sure that argument’s going to work for Trump. But let me ask you a question. Let’s assume I’m right and Trump isn’t going to win because I’m betting he’s not. But let’s say Biden does win and the phone rings, which is highly unlikely. But let’s say it is for the sake of the Simental argument or puzzle here. And they call Michael Hudson and ask, „OK, we’ve been listening to your interviews. And what do you think we should do now that we’ve become taken over? Let’s, for the sake of arguments, say they actually take the White House and both houses of Congress. What should they do?

Michael Hudson

Well, I’ll say the Federal Reserve has been buying 10 trillion dollars worth of stocks. Let’s sell off all these stocks so that it’ll have enough money to begin funding state and local public sector investments. Now, selling all the stocks, of course, will crush the stock market.

The good thing about not bailing out the landlords, about not bailing out the stock market is the banks that have made big bets, especially on insuring third world debt, are going to go broke. And I would say now this time when Citibank, Bank of America and Wells Fargo become insolvent, wiping out its net worth as they did in 2008, this time take them into the public sector, make them public banks, and as a public banks, let’s not lend for corporate takeover loans. Let’s not lend money to corporate raiders to outsource and downsize companies. Let’s make lend for actual for loans that will actually rebuild the economy with tangible means of production, tangible infrastructure and back to the real economy instead. I think Mr. Biden would say, „Well, how much money did you contribute to my campaign? Oh, I see, well, thank you very much, sir.“

Paul Jay

I don’t think there’s any amount of money you could contribute to the Biden campaign that would get him to do that program.

Michael Hudson

I think that’s right. His mindset—

Paul Jay

Well, let’s take it somewhat more incrementally. But certainly there’s some banks that could be, that will be at the point of bankruptcy that the federal government could buy.

Insolvency. In other words, they would make bad bets. A lot of banks—-it’s very much like when the Greek bonds were collapsing and Greece was going to default five years ago under Syriza. Obama and Tim Geithner went to Europe and told the European banks. „Well, you know, we know that the biggest bondholders are the German and the French banks, but they’re not going to lose a penny because they bought credit default insurance from the American banks. And the American banks and especially Citibank, are going to go under. And if they go under, we are going to retaliate against you in Europe, and we’re going to drive you under.“ So the threats they made them was, they forced Europe to essentially tear Greece apart and impose a chronic depression on it. Well, right now, you have the same thing. The banks have made all sorts of loans and guarantees that cannot be paid without Federal Reserve support. And so the question is the whole financial model of the last 12 years, you could say that model since 1980, the model of getting rich purely financially without any real economy growing, downsizing the economy, outsourcing its production to China and other Asian countries, basically making the GDP, and for the bottom 95 percent of the population going down for the last 12 years.

The banks, basically the financial model of getting rich, purely financial engineering instead of industrial engineering hasn’t worked. The idea that the economy can grow and give all of the growth in GDP since 2008 only to the top five percent of the population. For 95 percent of the population the economy is already shrinking. Well if it’s already shrinking for 12 years, imagine the plunge that it’s going to take now. There is no way that an economy can grow when you’re doing to the American population what Europe and US diplomacy, did to Greece:  mass unemployment lifespans shortened, suicide rates rose and the Greek economy is now in utter stagnation while the wealthy Greeks have taken their money and run. They put it in Switzerland. So Greece, owed 50 billion euros to banks in Italy and France and Germany. But 50 billion euros were already on according to Christine Lagarde, the IMF already stashed away in Switzerland by tax avoiders. Now, obviously, in order to revive the economy here, you have to have a different model of growth. And instead of a financial model of growth, you need to do a number of things. You stop encouraging debt pyramiding because all the debt pyramiding is what has been shrinking the economy and leading to debt deflation. You would remove the tax deductibility of interest. That’s an obvious thing. You’d remove all of the special tax advantages that the real estate and the financial sector get like pretended depreciation on buildings again and again and again. Donald Trump says that he loves depreciation, and that’s why he’s never had to pay income tax. Insurance companies are not paying right now. The insurance companies are all simply refusing to pay the restaurants and the other economies for interruption of business because they said, „Well, we listed interruption of business for a number of causes, but you didn’t put the Corona virus on. You’ll have to sue us.“ Well, when you sue an insurance company, they get to take the entire claim off their book as if it’s a current payment and if it takes five years to get your case in the court to collect on the insurance, that costs about fifty thousand dollars in legal fees.

I’ve gone through this. And then at the end of five years, the insurance company figure, they will have made back enough money just by speculation so that they don’t have to spend an extra penny to repay. It’s all free tax write off money. So in order to re restore this financial life growth, you have to change the tax code and all of the gimmicks that have made financial speculation more profitable than direct investment and actually producing goods and services.

Paul Jay

Let’s assume that none of this gets done. Not much of it gets done. What happens in China now? Is China in a better position to recover? Can China recover if the American market is so depressed? And if China can recover in a way with somewhat decoupling from the United States, if that’s possible, what does that do to the geopolitics?

Michael Hudson

Well, China can recover for two reasons. Number one, most debts ultimately are owned to the public, to the government. The government runs the banks. They’re not upright, private banks, except to decide what to do. The banks are owned by the governments or the government. When a corporation in China is unable to pay the debt, the government doesn’t say, „OK, we’re going to have to close you down and sell you to the cheapest bidder and let some American buy you out at a distressed price.

The government will simply say,“ We’re going to write down the debt that we’ve given you so that we want to keep you in business. And we want to keep your employees in business so others not see the debt problem in China because the debts are forgiven when they can’t pay. That’s normally what socialist governments do. Secondly, others already for the last five years, I’ve had discussions in China about how to re reorient their economy for the Chinese people. The Chinese people, although they now have housing, it’s not the best housing in the world. And the idea is, they say, „Why should we use all of this factory capacity to export, to support the US, to export to the US and earn dollars? What do we need the dollars for? We’re just recycling the dollars into loans to the U.S. Treasury to hold it in bonds instead of getting foreign exchange and just acting as a workshop to the United States. Why don’t we act as a workshop to the Chinese people? We don’t need export income anymore. We’ve got the Belt Road Initiative. We’re developing markets throughout the Near East, Russia, Europe and China. We don’t need the U.S., but most of all, we have enough savings in our foreign exchange reserves and gold that we can begin to pay our workers more and create a thriving domestic market.

Well, one of the problems they had is what the Chinese do when they earn more money. The first thing they want to do is to buy a car. They’re buying a lot of Mercedes now. And there are already too many cars in China. So the problem China has is how can we make our factories work and produce more goods and services for China? And that aren’t cars and won’t add to pollution and won’t distort matters, won‘t distort the air?

That is what their current plan is. They’re decoupling from the US. And they’ve made a decision with Russia, Iran, other countries to essentially decouple their economy from the US and essentially try to write down military spending and unnecessary foreign spending as much as possible.

Paul Jay

So if that happens and it begins to work for China, one would think it fuels those forces within the United States that want to get more aggressive with China, even militarily. Steve Bannon has openly advocated a military confrontation in the South China Sea. When I mentioned this several times on air on the Analysis, when the Trump administration defense secretary was explaining to Congress why they needed such a record high military budget, he justified it with three words China, China, China. They’re already fairly poised in an aggressive fashion, but if the American economy is really down the toilet, and the Chinese begins to recover, it seems to me that that situation gets even more dangerous.

China doesn’t seem that worried about it. Because what can happen? The American naval presence is largely large aircraft carriers and ships that are very open and are really not a good weapon to have in the modern world. They’re very exposed. All the Americans really can do is threat. And you remember when Mao called them a paper tiger? Well, I think China still thinks that the US Army is a paper tiger. And it can make threats, but it can’t really follow through. And if there were any thought of it following through, China would make overtures to its neighboring countries and pretty much be able to share the China Sea and its oil rights with them. And very quickly trade almost the equivalent of Chinese Monroe Doctrine regarding the United States. So the US knows that it’s on the way out, that there’s very little that it can do militarily. And all of you, the U.S. can’t ever invade a country and there are no troops. Nobody’s going to invade China. You can’t defeat a country unless you invade it. All you can do is drop bombs and try to destroy it. But America’s very exposed in the east and so is Japan that hosts American troops in Okinawa. There are just too many exposures that the Americans have that China doesn’t have so much.

Paul Jay

So you think a lot of this rhetoric about China, China. China is just spending a lot of money on arms.

Michael Hudson

It’s not scaring the Chinese, and it’s all meant to just scare the Chinese.

And they’re like the Russians who say, „Well, what are you really going to do?“ And there is no scenario. I understand that the War College here tried to work out all sorts of scenarios. There’s no scenario in which the US comes out on top.

Paul Jay

Without leading to nuclear war, which leads to nobody coming out on top.

Right. I mean, presumably there could be nuclear war, but that wouldn’t benefit anyone. So, I mean, I suggested to China, „Well, now that Trump has raised tariffs 25 percent on Chinese imports, why don’t you impose a countervailing 25 percent export there? Told Trump that you want to help, and you want to help raise Chinese prices and make America more competitive. So you’re increasing your export tax and vastly increasing the prices that Chinese goods would cost to Americans. America is going to be left in as a high cost economy. And there is no way that the United States here can replicate Chinese industry without spending  on rebuilding a generation of rebuilding, without higher living standards, without essentially any kind of political acquiescence by the people. So the America’s disinvested physically in its factories and in the industry and also financially by the stock buybacks that have left companies up without the cash.

So American industry is all debt ridden and pyramided. And China’s isn’t because the government can always write down the debt and keep its industry going. So you essentially have a conflict between a productive financial system in China, very much like the Germans before World War One and an unproductive, predatory financial system in the United States. That’s added the cost and overhead and enormous wealth for one percent of the population by impoverishing the 99 percent and preventing its living standards from rising. And by forcing labor to survive only by going deeper and deeper into debt, leading ultimately to a grand default.

Paul Jay

All right. Thanks very much for joining us, Michael.

Michael Hudson

It’s good to be here.

Paul Jay

And thank you for joining us on the Analysis.News podcast.

Hi, my name’s Paul Jay, and welcome to the Analysis Dog News podcast. Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, and also a professor at Peking University in Beijing. He’s written or edited over 10 books on international finance, economic history and the history of economic thought. His newest book is J is for Junk Economics and most recently and Forgive Them Their Debts, which Martin Wolf of the Financial Times cited as a Book of the Year for 2018.

Thanks for joining us, Michael.

It’s good to be here. Paul. So with so much bad news in the world, when the stock market crashed in late February, why didn’t it stay? Crashed two months after the crash to 14 month lows. At a certain point, almost historic lows. The Nasdaq composite is closing in now on all time highs. Why? There is only one reason for a stock or bond prices to go up. And that’s because of the flow of funds into the stock market.

What had been supporting the stock market for the last 12 years was very largely stock buybacks by companies using their revenue to sort of close down their business, disinvest and buy their own stocks to at least keep the prices up. Well, what’s flowing into the market right now? Obviously, it’s not corporate profits buying their own stocks, and it’s certainly not popular money coming into the market by small investors thinking that stocks are going to earn more. All this money is coming into the market from the 10 trillion dollar bailout via the Federal Reserve.

The Federal Reserve is going out directly and is buying stocks, bonds, junk bonds, mortgages, junk mortgages, all to prop up the value of assets. Now, when one putting this money into the stock market, it’s buying stocks that are already issued and have long since the proceeds have been spent on building factories or enterprises or it means of making money. So none of this bailout money, none of this 10 trillion going into the stock market has any effect at all on the real economy of production and consumption.

It’s solely to support the assets that are held almost eighty five percent by the wealthiest 10 percent of the economy. So the Fed has revived the stock market downturn. It’s come up. And what it said is, folks, you can bail out of the stock market, give us your junk bonds. That’s sort of like the Statue of Liberty for wealthy people. Give us your stocks. Sell your bonds. We’ll buy them all up at Federal Reserve expense and will purchase them.

And we’ll also do our own forward buying to manipulate the stock market by promising to buy stock so that higher price in the forward market. So that’s going to create a speculative demand for stock. So the speculative demand for stocks by Federal Reserve manipulation and the actual flow of funding money into the stock market from the government has been pushing it back up, giving the illusion of prosperity, at least for the 10 percent. But are they actually straightforwardly buying stocks to buying corporate debt, which allows them to go buy their own stocks and also just making so much money, so cheap people can buy stock?

But is the Fed actually straightforwardly buy stock?

That’s what it said it’s been doing, or it’s buying packages it’s buying. We don’t know exactly what it is buying because it doesn’t have the report. That’s why the Treasury left the Fed to do something that doesn’t have to be followed carefully. It took up Randy Ray at the. At Bard College is Leiby Institute. About a year just to untangle what the Fed had done after 2008 and 2009 with the big Obama bailout of quantitative easing. So we’re not going to know for later.

What’s been happening.

But certainly corporations are not buying their own stocks now because that would make that that would be a political disaster.

And they just wouldn’t get more bailout money. So the money is coming almost entirely from speculators or from the Fed promising to buy what speculators buy at a higher price later on. So it’s it’s manipulating the foreign exchange market just like the labor market was manipulated. Almost all the financial markets these days are manipulated by high finance in cahoots with the central bank. And if you don’t have that central bank backing, then there’s not going to be the flow of funds going into the markets.

And certainly small investors are not buying. Regular investors have already been getting out of the stock market for quite a few years now. It’s only for our professionals, often for a computer trading gets it gets into the act. It’s it’s an insider’s game that is basically fueled by the central bank. So you wrote an article called The Coming Financial Horror that the Federal Reserve Chairman Powell is essentially promoting a fantasy that there’s going to be relatively quick recovery, although recently he was saying it’s not going to be quite so quick as people thought.

But is this stimulus program they have, whether it’s propping up the stock market or buying corporate debt or funneling money directly to corporations. Is it going to have any effect?

That’s longer term than what seems to be, because one can see that if they try to get the economy going again and they haven’t done more on the side of consumer demand.

Who the heck’s going to buy stuff to get the economy going again?

Well, now you’ve all sudden changed the topic to the economy. Obviously, the stock market isn’t the economy. The the real fiction and what the Federal Reserve power was saying was that somehow a recovery in the stock market means a recovery in the economy. And all it means is that the wealthy investors are bailing out of the market and moving into their gated communities and essentially they’re pulling out. The whole stock buyback program of the last 10 years has been disinvesting all of the insiders.

And the big investors know that the game is over. That’s why there’s so much talk of moving to New Zealand. But the coronavirus has all of a sudden provided a wonderful opportunity for the 10 percent. It’s big. It’s enabled them to have an excuse for a huge bailout and an excuse to essentially make enable them to get out of stocks, get out of bonds and avoid the crisis that’s coming, leading the Federal Reserve and the suckers, as they would say, holding the bag when the economy collapses.

Obviously, there’s going to be a collapse and there was going to be a collapse even before the corona virus. Everybody was talking about the decline in oil prices, which is not only going to hit the fracking companies and the oil companies with the low oil prices, but it’s also leading to very large defaults by Third World countries. Raw materials prices are going down. So they’re going to be a lot of third world debt defaults. They’re going to be a lot of breaks in the chain of payments.

But what’s the coronavirus did was somehow give an excuse for the government to create all of this money, saying it was going to be for small business. Well, obviously, it has not been for small business. And, you know, just think what the Fed could have done with this 10 trillion dollars. It could have put money, revive the economy by putting the money into building means of production, mainly in this case. What’s needed is infrastructure rebuilding.

Things like the New York City subway so people can get to work without their being so crowded that you’re probably going to catch a new virus when the regular service begins again. They could have begun rebuilding the economy, but none of none of this money has gone into the real economy at all. So the economy’s been left holding the bag. But at least the Fed has used this money.

They did notice that they don’t call it taxpayer money for the for the bailout taxpayer money. They only use that phrase when it’s for real production or for to support employment or social spending. But when it’s to the same money is created by the same process, the support of the stock and bond market, that’s never called taxpayer money. But it’s all the same thing. So you see that all of the lobbyists have sort of been waiting with a wish list of what they would like the government to do to take all of the bad loans off the hands.

And the thing to realize is that the one percent, 10 percent realizes that the game’s over and they’re trying to disrupt.

What do you mean when you say the game is over? What do you mean the game’s over?

The idea that the debts can be paid. The idea that somehow you can put money aside and the money will grow before you buy it will give you interest. The money will somehow be pushed into the stock market by buybacks without much income and push up stock prices. The idea that you can put in a million dollars and have the money go up through stocks or bonds or real estate without having the economy grow at all. That was a game because it’s not realistic.

And it is a decoupling of the financial.

And real estate markets from the economy and that whole decoupling. Now, finally, you can only decouple so far before the fact that the rents are not being paid. So taxes are not being paid. The states and localities are having a huge tax shortfall that is forcing them to cut back services. And the commercial real estate, half half of the Empire State Building tenants have not paid their rents for a March and April. About maybe 40 percent of tenants generally in the New York City for commercial buildings, restaurants as storefronts.

They’re just not paying. So everybody’s expecting a break in the chain of payments. And at a certain point, the government can’t simply keep the pretense up when the economy’s plunging and the stock markets are going up. People are going to realize, wait a minute, why isn’t this money creation being spent to actually revive the real economy? So what happens when, in theory this virus comes to an end? Oh, that who knows?

It could be year two three.

But even before the end of the virus, these back grants, as you say, are piling up. Debt servicing is piling up. At some point there’s going to be mass evictions. As you read, as you’ve written, mass evictions, foreclosures, bankruptcies are going to be inevitable. You’re advocating that these deaths should simply be written off.

Is that which is that you’re proposing? And can you imagine them actually doing that?

Well, they’re not going to be paid one way or another. That’s the important thing. Imagine the 25 million unemployed. They’re not getting paychecks. What how are they getting by? They’re the only way they can get by is to run up their credit card debt. And by running it up, they’re going to be not paying the monthly usual charge. They’re going to be so subject now to interest rates and the credit card that go up now from maybe 20 percent.

Twenty nine percent or even Marte’s companies are reported in New York City just to be packing up and moving out of their offices, other taking all the assets they can, leading to the kind of commercial real estate collapse that people were talking about in 2008. So what’s happening now is really the end of the whole Obama bailout, the whole depression. It was all it was never possible to have a recovery of the economy, leaving the debts in place that existed in 2008.

And the Federal Reserve’s quantitative easing of about four point six trillion managed to sustain it to the coronavirus time. And then that’s left up. All of these people who don’t have a job, you can just imagine what the situation is. It’s already about half of Americans reported that they don’t have four hundred dollars available if there’s an emergency like a health emergency and they’re reported living paycheck to paycheck. Well, if you’re living paycheck to paycheck and you don’t have a paycheck, you can just imagine what’s going to happen.

The homeless problem is going to going to increase. Normally, there would be state and local spending to somehow revive the economy or make work jobs. But that’s not going to happen because the revenue is all falling off the floor in New York and other states. The quarterly the real estate tax is going to be due in just a few weeks in June. And obviously, a lot of companies think, well, we’re we’re not going to be able to collect the rents because our tenants are moving out.

We might as well take a risk or not pay the tax now because we may have a problem with the banks. The banks are not lending money to the landlords who are spread. And they’re not lending money to the businesses that have been closed down so they can pay the landlords so the landlords can pay their mortgages to the banks. So right down the line, there’s going to be this break in the chain of payments and nobody can come up with any scenario whereby the debts can be paid.

Now, the question then is how are they not going to be paid if they’re not going to be paid by large foreclosures? The New York Times today just said that Goldman Sachs is up, foreclosed on 10000 homes. If they’re not going to be paid by foreclosures, then. The only thing to do is to bail out the debtors by wiping out their debts. Or the Federal Reserve could have even created the money to pay the debts to go to the banks and save them.

That’s that’s what Obama had promised to do in 2008. Somehow he was going to enable the victims of the junk mortgages to pay the banks. So while they write down the value of the mortgage, the the real value of the property, not the fictitious value, none of that was done. So right now, if the debts can’t be paid and you have foreclosures, then you’re going to have a very sharp concentration of property in the country and also a home ownership.

You you you’ve had homeownership rates dropped from about 58 percent in 2008 to about 51 percent now. That’s more than a 10 percent drop in the proportion of Americans that own their own homes. You’re going to have a concentration of homes and companies that have been buying them up, like Blackstone has been a very major company buying up foreclosed properties. Goldman Sachs is bought up foreclosed properties. You’re going to have basically a financial centers buying up real estate and turning the economy into a.

Leard ridden economy rather than an economy that is of home ownership. Which is what made America’s middle class wealthy by giving it most of the most of the networth that it had.

And that’s going to happen not just in the real estate sector, but every sector, the concentration of ownership, which is already at ridiculous levels. It’s going to be extraordinary. I mean, small businesses to a large extent are going to be wiped out. And it’s going to be a field day for anybody with cash to pick up these sectors of the economy at a bargain basement price.

Well, that’s why that’s why some of the stocks are going up. Wal-Mart stocks are going up.

The big the big store chains have seen their stocks going up more than anyone else’s because the smaller stores, Macy’s and Sears and the other J.C. Penney that went bankrupt last week are these start these companies. The retail sector was very largely bought out by predatory cashed up capital groups that private capital groups that essentially used them to loot them. The strategy was you’d buy a store. They tried to do this with McDonald’s, for instance. The idea was to buy a company.

You immediately break it into two parts. You have the company sell the real estate to another part of another group that you’ve created. The group gets the real estate, the store that you’ve just bought out instead of owning its property is signs a long term lease to pay a huge amount of rent to this real estate part that you’ve just created by splitting up the company. And you’ve created a value based on the prospective rental store rental income. And you pay yourself a management fee, you charge interest, you charge all sorts of other fees.

And this is what is driven almost all of these US stories, Toys R US right down the line. It’s driven them all under. Now, you’re going to have something like that occurring outside of the retail store industry for other sectors of the economy, as you point out, one sector after another. That’s the companies that are struggling during this three month abatement.

Are all of a sudden not going to be able to come up with the rent in three months or supposedly your restaurant, for example. Restaurants are your biggest expense is going to be the rent to the landlord. But if you haven’t done any business for three months and you realize that if you go back to work and the landlord says, OK, you’ll just pay it off in a year or two, will, then you realize that, wait a minute, all of the profit, all of the money that paid to management is really just going to go for the landlord.

And we’re not going to make any money at all left over after we pay the current rent and the back rents to the restaurant, to the to the landlord. It’s best just to walk away, closed down and move somewhere else.

So there will be musical chairs as restaurants are closed down stiff, their suppliers stiff anybody they can and hope that they may or may not start business somewhere else. But it’s going to be awfully hard to get bank credit once you stiffed the landlord and walked away from the bank financing. So there’s just not going to be financing for anyone except the very large and richest financial companies.

So when one does this sort of projection forward, you know, few months of a couple years, it does.

It gets worse and worse unless there is a massive public social expenditure on infrastructure programs of various types. But at a scale that’s more than anything even Roosevelt imagined during the New Deal. And that leads to, you know, kind of development of a public sector that the right wing of the elites. I shouldn’t say the right wing. All the elites essentially don’t want to see that kind of expenditure because it leads to people saying, well, if we’re spending all the public money, then why shouldn’t the public own this stuff?

Well, that’s exactly where Wall Street was way ahead of you there. They knew that there would be pressure for just what you’re suggesting. The reasonable thing, if you really want to restore prosperity, is to develop an infrastructure for public spending programs, public transportation, to rebuild the roads and transports that have fallen apart, the parks. And so by giving this 10 trillion dollars all through the stock and bond market. And for real estate mortgages. And by giving it all to the financial sector now, they can say, I’m just we’re broke.

We don’t have any money for social spending. We’ve already spent it. Look at how big the deficit is. And this is exactly what Mitch McConnell said to the states. He said other states are have a tax shortfall. Well, let them take the money that’s in their pension funds. Let them lose the pension funds. Let them not pay any of the public sector workers that have agreed to get pensions in exchange for decade after decade of slow wage growth, saying, yes, we’d rather have a pension than a slow wage growth.

Now that they now that you tricked them into taking a long term promise, do what Donald Trump does, break the promise, break the deal and say, I’m sorry, you’re not going to get anything. We’re broke. And we gave all the money to the 10 percent. And if you don’t like it, vote for the other party. It’s hard when you have the same donor class behind each party. So basically, there’s not going to be any money to spend into the real economy.

It’s all been spent on the financial sector. Look at how large the deficit is. And you’ve already had Mitch McConnell come out and say, well, the states that are known are getting their tax revenues have a solution. Let them raid their pension funds. Let them break even and pay the bondholders what they owe. And the other suppliers by essentially borrowing or emptying out the pension. So here’s what you’ve had, is he wants the states to act like Donald Trump is act that break the long term deal.

For decades, public service workers have accepted low wage growth in exchange for pensions. They’re looking long term. They say, OK, we won’t increase our wage demands, but we want the security that when we retire, we’re going to get a good pension. That’s what made public sector work attractive. But now that the workers have already worked at a low price and the same thing in the corporate sector, taking low wages for years now, the pensions that they were promised are going to be used instead to pay the bondholders because the states have to make a choice.

And the states are going to choose the financial sector to the financial sector. The workers and capital and agriculture are just overhead. All of the real money is supposed to go to the final financial sector or the fire sector. So all of this money that has been ostensibly saved is really going to be just emptied out and given to the bondholders unless they stay.

But there’s that there’s a political calculation here. And just a few months away from the presidential election, if they don’t do something by the time the election comes around, it’s already a whole sections of the working class that never knew what poverty was are sinking into it. And by that, by the time election comes along, whole sections of the American population are going to be in desperate straits. And this is this is this is going to doom the Trump presidency.

They’re going to have to do something. You. No.

Chuckles Well, Truncal, try to blame it on the Democrats. He’ll say, give me control of Congress so that we can pass a law to get America back to work and make America great again. He will blame it on other Democrats and say that he didn’t cause it. Coronavirus virus. Of course, what he did. And he can point out that the ten trillion dollar bailout was unanimous. Democrats and Republicans, the Democrats, Nancy Pelosi in Congress, which is in charge of writing the Carers Bailout Act, could have said, well, we want to make sure that the states and cities are bailed out so the public services are not cut back and so that they don’t have to raise the pension funds and screw all of the retirees as other Republicans want.

But the Democrats agreed with the Republicans to basically throw the workers under the bus so the retirees under the plan, throw the pensioners under the bus and focus on their donor class.

The financial sector, the bondholders and the stockholders in Canada and most of Europe, maybe all of Europe, the state subsidies have gone to businesses to continue paying wages, even if people are at home. Many countries are paying up to 80 percent, subsidizing 80 percent of workers wages. So, in fact, people aren’t suffering in the same way. And then when they want to start the economy again, everyone just goes back to work. And the U.S. didn’t didn’t do that.

Neither party did that because no politician in either party advocated that. Nobody is saying that. That is sort of the forbidden thing to say. And if you try to say it. Well, say, well, if you don’t like it here, why don’t you go and live in Denmark? And so Trump will say, well, it’s true that the virus happened on my on my watch. I’m the guy who can get rid of it. Wouldn’t you rather have me then?

Whoever whoever the Democrats end up putting up. OK. Hold on, hold on. The sound scaring up the sound screwed up again, start again with wouldn’t you rather have me? You’ll say, wouldn’t you rather have me trying to a businessman trying to put America on two feet just like a real estate company would be rescued instead of living like a socialist in a socialist country? That’s. These are the people who wanted to close down the economy even more.

I trump the guy who opened up the economy. My opponents want to close it down. And they just closed down. There’s not going to make you recover. I’m the guy who can make your recovery by.

But the polling is showing almost everywhere that most people think that the economy is being opened up in certain states far too early. And in the states where they’re doing it, they’re getting spikes in Corona virus. So I’m not so sure that argument’s going to work for Trump. Let me ask you a question. Let’s assume I’m right and Trump isn’t going to win because I’m betting he’s not.

But what let’s say Biden does win and the phone rings, which is highly unlikely. But let’s say it is for the sake of the Simental argument or puzzle here. And they call Michael Hudson and ask, OK, we’ve been listening to your interviews. And what do you think we should do now that we’ve become taken over? Let’s, for the sake of arguments, say they actually take the White House and both houses of Congress. What should they do?

Well, I’ll say well, the 10 the Federal Reserve has been buying 10 trillion dollars worth of stocks. Let’s sell off all these stocks so that it’ll have enough money to begin funding state and local public sector investment. Now, selling all the stocks, of course, will crush the stock market.

The good thing about and about not bailing out the landlords, about not bailing out the stock market is the banks that have made big bets, especially on insuring third world that are going to go broke. And I would say now that the this time when Citibank, Bank of America and Wells Fargo becomes insolvent, wiping out its net worth as they did in 2008, this time take them into the public sector, make them public banks. And it a public banks.

Let’s not lend for corporate takeover loans. Let’s not lend money to corporate raiders to outsource and downsize companies. Let’s make lend for actual for loans that will actually rebuild the economy with tangible means of production, tangible infrastructure and back to the real economy instead. I think Mr. Biden would say, well, how much money did you contribute to my campaign? Oh, I say, well, thank you very much, sir.

I don’t think there’s any amount of money you can contribute to the Biden campaign that would get him to do that program.

I think that’s right. His mindset. Well, let’s take it somewhat more incrementally. But certainly there’s some banks that could be that will be at the point of bankruptcy that the federal government could buy insolvency.

In other words, they were made bad bets. A lot of banks, it’s very much like when the Greek bonds were collapsing and a Greek Greece was going to default five years ago under Syriza, Obama and Tim Geithner went to Europe and told the European banks. Well, you know, we know that the biggest bondholders are the German and the French banks, but they’re not going to lose a penny because they bought credit default insurance from the American banks. And the American banks and especially Citibank are going to go under.

And if they go under, we are going to retaliate against you in Europe and we’re going to drive you under. So the threats they made them, you know, was they forced Europe to essentially tear Greece apart and impose a chronic depression on them? Well, right now, you have the same thing that the banks have made all sorts of loans and guarantees that cannot be paid without Federal Reserve support. And so the question is the whole financial model of the last 12 years.

So you could say the model since 1980, the model of getting rich purely financially without any real economy growing, downsizing the economy, outsourcing its production to China and other Asian countries, getting it, basically making the GDP and for the bottom 95 percent of the population going down for the last 12 years while all the growth has been for. Just let me take my take that off.

All right. Hello. No, I can’t. Sorry. That’s why I remember before I took it, I lost. Can can we. Hello? Yeah. Keep going. Now, where was I? What was I saying?

What about the banks? Basically, the financial model of getting rich, purely financial engineering instead of industrial engineering hasn’t worked. The idea that the economy can grow and give all of the growth in GDP since 2008 has gone only to the top five percent of the population for 95 percent of the population. The economy is already shrinking. Wolf, it’s already shrinking for 12 years. Imagine the plunge that it’s going to take now. There is no way that an economy can grow.

When you’re doing to the American population what Europe and the US diplomacy, the degrease, the mass unemployment lifespans shortened, suicide rates rose emigrate.

So if you if you it again, it. What do I know? Hold on, hold on, we just. Something just happened. Are you still there? Yes. OK. Keep going. Start going again.

Suicide rates, suicide rates rose in the Greek economy is up now and utter stagnation while other wealthy Greeks have taken their money and run. They put it in Switzerland. So Greece, over 50 billion euros to banks in Italy and France and Germany. But there was a 50 billion euros were already on. According to Christine Lagarde, the IMF already stashed away in Switzerland by a tax avoiders. Now, obviously, in order to re to revive the economy here, you have to have a different model of growth.

And instead of a financial model of growth, you need to do a number of things. You stop encouraging debt, pyramid it because all the debt pyramiding is what has been shrinking the economy and leading to debt deflation. You would remove the tax deductibility of interest. That’s an obvious thing. You’d remove all of the special tax advantages that the real estate and the financial sector and the financial sector get like up pretended depreciation on buildings again and again and again.

Donald Trump says that he loves depreciation and that’s why he’s never had to pay income tax. Insurance companies are not paying right now. The insurance companies are all simply refusing to pay the restaurants and the other economies for interruption of business because they said, well, we listed interruption of business for a number of causes, but you didn’t put the corona virus on. You’ll have to sue us. Well, by suing when you sue an insurance company, they get to take the entire claim off their book as if it’s a current payment and other if it takes five years to get your case in the court to collect on the insurance that costs about fifty thousand dollars in legal fees.

I’ve gone through this. And then at the end of five years, the insurance company figure, they will have made back enough money just by speculation so that they don’t have to spend an extra penny to repay. It’s all it’s all three tax write off money. So in order to re restore this financial life growth, you have to change the tax code and all of the gimmicks that have made financial speculation more profitable than direct investment and actually producing goods and services.

Okay, let’s face it. Let’s assume that none of this gets done. Not much of it gets done. What happens in China now? Is China in a better position to recover? Can China recover if the American market is so depressed? And if China can recover in a way with somewhat decoupling from the United States, if that’s possible? What does that do to the geopolitics?

Well, China can recover for two reasons. Number one, most debts ultimately are owed to the public, to the government. The government runs the banks. They’re not upright. Private banks, except to decide what what to do. The banks are owned by the governments or the government. When a corporation in China is unable to pay the debt, the government doesn’t say, OK, we’re going to have to close you down and sell you to the cheapest, better and, you know, let some American buy you out at a distressed price.

The government simply writes down the debt for the company. They keep the company. And it’s I’m sorry.

There was a big noise on the line when you said the government simply writes down, just pick it up from there.

The government will simply say to the company, OK, we understand you can’t pay, but we’re not going to write down. We’re not going to insist that we’re not going to close you down and force you to sell to the cheapest better and let some American or other foreign buyer buy you out cheaply. We’re going to write down the debt that we’ve given you so that we want to keep you in business. And we want to keep your employees in business so others not see the debt problem in China because the debts are forgiven when they can’t pay.

That’s normally what socialist governments do. Secondly, others already for the last five years, I’ve had discussions in China about how to re reorient their economy for the Chinese people. The Chinese people, although they now have a housing, it’s not the best housing in the world. And the idea is they say, why should we use all of this factory capacity to export, to support the US, to export to the US an earned dollars? What do we need the dollars for?

We’re just recycling the dollars into loans to the U.S. Treasury to hold it in bonds instead of getting foreign exchange and just acting as a workshop. The United States. Why don’t we act as a workshop? The Chinese people, we don’t need export income anymore. We’ve got the Belt Road Initiative. We’re developing markets throughout the Near East. Russia, Europe and China. We don’t need the US. But most of all, we have enough savings in our foreign exchange reserves and gold that we can begin to pay our workers more and create a thriving domestic market.

Well, one of the problems they had is what the Chinese do when they earn more money. The first thing they want to do is to buy a car. They’re buying a lot of Mercedes now. And there are already too many cars in China. So the problem, China adds is how can we make our factories work and produce more goods and services for China? And there aren’t cars and want and the pollution and won’t distort matters. Want to start the air?

That is what their current plan is. They’re decoupling from the US. And they’ve made a decision with Russia, Iran, other countries to essentially decouple their economy from the US and essentially try to write down military spending and unnecessary foreign spending as much as possible.

So if that happens and it’s begins to work for China, one would think it fuels those forces within the United States that want to get more aggressive with China, even militarily. Steve Bannon has openly advocated a military confrontation in the South China Sea. When I mentioned this several times on air on the analysis, when the Trump administration defense secretary was explaining to Congress why they needed such a record high military budget, he justified it with three words China, China, China.

They’re already fairly. Poised in an aggressive fashion, but if the American economy is really down the toilet and the Chinese begins to recover, it seems to me that that situation gets even more dangerous.

China doesn’t seem that worried about it because what can happen? The American naval presence is largely a large aircraft carriers and ships that are very open and are really not a good weapon to have in the modern world. They’re very exposed. All the Americans really can do is threat. And you remember when Mao called them a paper tiger? Well, I think China still thinks that the US Army is a paper tiger. And it can make threats, but it can’t really follow through.

And if there were any thought of following through, China would make overtures to its neighboring countries and pretty much be able to share the China Sea and its oil rights with them and very quickly create almost the equivalent of a Chinese Monroe Doctrine regarding the United States. So the US knows that it’s on the way out, that there’s very little that it can do militarily. And all of you, the U.S. can’t ever invade a country. There are no troops.

Nobody’s going to invade China. You can’t defeat a country unless you invade it. All you can do is drop bombs and try to destroy it. But America’s very exposed in the east and so is Japan that hosts American troops in Okinawa. There are just too many exposures that the Americans have that China doesn’t have so much. So you think a little bit of this rhetoric about China, China. China is just spent a lot of money on arms. It’s not scaring the Chinese and it’s all meant to just scare the Chinese.

And they’re like the Russians are going to say, well, what are you really going to do? And there is no scenario. I understand that the war we’re college here is tried to work out all sorts of scenarios. There’s no scenario in which the U.S. comes out on top. Without leading to nuclear war, which leads to nobody coming out on top, right? I mean, presumably there could be nuclear war, but nobody that wouldn’t benefit anyone.

So and Chad, I mean, I suggested to China, well, now that Trump has raised tariffs 25 percent on Chinese imports. Why don’t you impose a countervailing 25 percent export there? Told Trump that you want to help. And you want to help raise Chinese prices and make America more competitive. So you’re increasing your export taxed in vastly increasing your prices.

That Chinese goods look cost to Americans. America is going to be left in as a high cost economy. And there is no way that the United States here can replicate Chinese industry without spending a generation on rebuilding a generation of rebuilding, without higher living standards, without essentially any kind of political acquiescence by the people. So the America’s disinvested physically in its factories and in the industry and also financially by the stock buybacks that have left companies out without the cash. So American industry is all debt ridden and pyramid.

And China’s isn’t because the government can always write down the debt and keep its industry going. So you essentially have a conflict between a productive financial system in China, very much like the Germans before World War One and an unproductive, predatory financial system in the United States. That’s added the cost and overhead and enormous wealth for one percent of the population by impoverishing the 99 percent and preventing its living standards from rising. And by forcing labor to survive only by going deeper and deeper into debt, leading ultimately to a grand default.

All right. Thanks very much for joining us, Michael. It’s good to be here. And thank you for joining us on the Analysis.News podcast.

Photo by Alev Takil on Unsplash

Defining A Tyrant

Published by Anonymous (not verified) on Wed, 27/05/2020 - 9:58am in

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An interview on Gary Null’s Progressive Commentary Hour. We dig into debts during the cov-19 period in light of my book ‘…and forgive them their debts.’

Photo by Lopez Robin on Unsplash

Undermining public finance to drive privatization

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I spoke with James Ostaszewski and Alexander Reed Kelly, members of the Debt & Finance Working Group of the New York City chapter of the Democratic Socialists of America. Topics included governments, debt and my history with democratic socialists.

NYC-DSA is working with New York State legislators to enable the creation of public banks throughout New York State and supports the goal of debt cancellation. The conversation took place during the afternoon of Tuesday, May 19th.

The Hard Fist of American Imperialism

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Moderate Rebels Part 2 Super Imperialism, April 2020

TRANSCRIPT – HOW THE US MAKES COUNTRIES PAY FOR ITS WARS: ECONOMICS OF AMERICAN IMPERIALISM WITH MICHAEL HUDSON
| MODERATE REBELS, 24 APRIL 2020
Economist Michael Hudson explains how American imperialism has created a global free lunch, where the US makes foreign countries pay for its wars, and even their own military occupation.

Max Blumenthal and Ben Norton discuss the economics of Washington’s empire, the role of the IMF and World Bank, attempts to create alternative financial systems like BRICS, and the new cold war on China and Russia.
PART 2 OF 2 (Interview recorded on April 13, 2020)

Part 1: “US coronavirus ‘bailout’ scam is $6 trillion giveaway to Wall St – Economist Michael Hudson explains”

MICHAEL HUDSON: The World Bank has one primary aim, and that’s to make other countries dependent on American agriculture. This is built into its articles of agreement. It can only make foreign-currency loans, so it will only make loans to countries for agricultural development, roads, if it is to promote exports.

So the United States, through the World Bank, has become I think the most dangerous, right-wing, evil organization in modern history — more evil than the IMF. That’s why it’s almost always been run by a Secretary of Defense. It has always been explicitly military. It’s the hard fist of American imperialism.

Its idea is to make Latin American, and African, and Asian countries export plantation crops , especially plantations that are U.S.- or foreign-owned. The primary directive of the World Bank to countries is: “You must not feed yourself; you must not grow your own grain or your own food; you must depend on the United States for that. And you can pay for that by exporting plantation crops.”

BEN NORTON: Here at Moderate Rebels we talk a lot about imperialism. I mean it’s really the main point of this show. This program explores how US imperialism functions, how it works on the global stage, how neoliberal policies of austerity and privatization are forced at the barrel of a gun through the US military, through invasion and plunder.

We talk about it in Venezuela, Iraq, Syria and so many countries. But we often don’t talk about the specific economic dynamics of how it works through banks, loans, and bonds.

Well, today we are continuing our discussion with the economist Michael Hudson, who is really one of the best experts in the world when it comes to understanding how US imperialism functions as an economic system, not just through a system of military force. Of course the economics are maintained and undergirded by that military force. And we talk about how the military force is expressed through regime-change wars and military interventions.

But Michael Hudson also explains how the International Monetary Fund and the World Bank, the US financial system, banks and Wall Street all work together, hand in glove with the military to maintain that financial chokehold.

He spells this all out brilliantly in a book called Super Imperialism: The Economic Strategy of American Empire. He began to write that book in 1968, and then recently updated it in 2002, published again in 2003 with the war in Iraq and the war in Afghanistan, and kind of updated and showed how, even though the system that he detailed 50 years ago hasn’t really changed, it has shifted in some ways.
So today we’re gonna talk about how that international imperialist system dominated by the US works.

Michael Hudson is an economist and he’s also a longtime Wall Street financial analyst. He is also a professor of economics at the University of Missouri, Kansas City, and you can find his work at michael-hudson.com, which I will link to in the show notes for this episode.

So without further ado, here is the second part of our interview with Michael Hudson.

MAX BLUMENTHAL: I think it’s a good transition point to talk about another kind of scam you’ve identified. There’s a really hilarious aside in the second preface to your book “Super Imperialism,” where Herman Kahn, who is, I think a founder of the Hudson Institute, which you went to work for. He was also the inspiration for the Dr. Strangelove character and Stanley Kubrick’s film.
There’s an award that the neocons give out every year named for him; Benjamin Netanyahu is a recent award winner.

But Herman Kahn was he was on a panel for one of your talks, where you laid out your theory of “Super Imperialism,” and how the United States actually gets other countries to subsidize its empire, and is able to expand and carry out this massive imperial project without having to impose austerity on its own population, as other countries have to do under IMF control.

So Herman Kahn comes up to you after the talk and says, “You actually identified the rip-off perfectly.” And your book starts selling like hotcakes in DC, I guess among people who work for the CIA, and people who work in the military-intelligence apparatus.
MICHAEL HUDSON: What he said was, “We’ve pulled off the greatest ripoff in history. We’ve gone way beyond anything that British Empire ever thought of.” He said, “That’s a success story. Most people think imperialism is bad; you’ve shown how it’s the greatest success story — we get a free lunch forever!”

MAX BLUMENTHAL: Right. So explain the ripoff you identified there, and how it is being perpetuated under the Trump administration in ways that I think are pretty amazing, including through the imposition of unprecedented sanctions on something like one-third of the world’s population.

MICHAEL HUDSON: Well I wrote “Super Imperialism” in 1972, and it was published exactly one year after President Nixon took America off gold in August of 1971. he reason he took America off gold was that the entire balance-of-payments deficit from the Korean War to the Vietnam War was military in character.

Especially in the ’60s, the money that America was spending in Vietnam and Southeast Asia had to be spent locally. And the banks were French banks, because it was French Indochina. So all the money would be sent to Paris, to the banks’ head offices, turned over from dollars into francs, and General de Gaulle would end up with these dollars. Then every month he would send the dollars and want payment in gold. And Germany would do the same thing.

So the more America fought militarily, it depleted its gold stock, until finally, in August 1971, it said, “We’ve been using gold as the key to our world power ever since World War I, when we put Europe on rations. So we’re going to stop paying gold.”

They closed the gold window. And most of the economists were all saying, “Oh my heavens, now it’s going to be a depression.” But I said, “Wait a minute, now that other countries can no longer get gold from all this military spending” — and when you talk about the balance-of-payments deficit, it’s not the trade deficit, it’s not foreign investment; it’s almost entirely military in character.

So all this money that was spent abroad, how are we ever going to get it back? Well, these dollars we spend around the world, mainly for the 800 military bases and the other activities we have, these dollars end up in foreign central banks.

The question is, what are these foreign central banks going to do with these dollar inflows? Well we wouldn’t let foreign central banks buy American industries. We would let them buy stocks, but not become a majority owner.

A former mentor, the man who taught me all about the oil industry at Standard Oil, became undersecretary of the Treasury for international affairs. When Herman Kahn and I went to the White House, he said, “We’ve told the Saudi Arabians that they can charge whatever they want for their oil, but all the money they get, they have to recycle to the United States. Mostly they can buy Treasury bonds, so that we’ll have the money to keep on spending.” They could also buy stocks, or they can do what the Japanese did and buy junk real estate and lose their shirts.

So basically, when America spends money abroad, central banks really don’t speculate. They don’t buy companies. They buy Treasury bonds.

So we run a monetary deficit; the dollars are spent abroad; the central banks lend them back to the Treasury; and that finances the
budget deficit, but it also finances the balance-of-payments deficit. So we just keep giving paper IOUs, not gold.

I think President George W. Bush said, “We’re never really going to repay this. They get counters, but we’re not going to repay it.” And then, as a matter of fact, you have Tom Cotton a senator from [Arkansas] saying, “Well you know China holds savings of $2 trillion or so in US Treasury bonds. Why don’t we just not pay them? They gave us the virus; let just grab it and nullify it.”

We can nullify Iranian assets, Venezuelan assets — it’s like a bank can just wipe out other deposits you have, if it wants militarily. So the United States doesn’t have any constraint on military spending, as it did uner the gold standard.

Now Herman Kahn and I on another occasion went to the Treasury Department, and we talked about what the world would look like on a gold standard. I said, “Gold is a peaceful metal. If you have to pay in gold, no country with a gold standard can afford to go to war anymore. Because a war would entail a foreign exchange payment, and you’d have to pay this foreign exchange in gold, not IOUs, and you would end up going broke pretty quickly.”

Needless to say, someone from the Defense Department said, “That’s why we’re not going to do it.”

Here’s an example: Let’s suppose that you go to the grocery store and you buy food and then sign an IOU for everything that you buy. You go to a liquor store, IOU. You buy a car, IOU.

You get everything you want just for an IOU. But when people try to collect the IOUs, you say, “That IOU isn’t for collecting from me. Trade it among yourselves. Think of it as your savings, and trade it among yourselves. Treat it as an asset, just as you treat a dollar bill saved in a cookie jar and not spent.”

Well you’d get a free ride. You’d be allowed to go and write IOUs for everything, and nobody could ever collect. That’s what the United States position is, and that’s what it wants to keep.

And that’s why China, Russia, and other countries are trying to de-dollarize, trying to get rid of the dollar. They are buying gold so that they can settle payments deficits among themselves in their own currency, or currencies of friendly countries, and avoid dollars altogether.

BEN NORTON: Michael, in the first part of this interview, when we were talking about the coronavirus bailout and the $6 trillion that were just basically given to Wall Street, you mentioned that basically just a con scheme. But you said, really, that a lot of people are surprised, that they don’t think the system can work this way, because it just seems so blatantly stacked against them, so blatantly unfair.

Your book Super Imperialism is so mind-blowing because, in simplistic terms to someone who is definitely a non-expert like me, it just becomes so clear that, as you put it, the US for decades, since the end of World War Two, has been really obtaining “the largest free lunch ever achieved in history,” the way you put it.

I’m gonna read just two paragraphs here really quickly from your book, and then maybe ask you to unpack exactly how this works. But right at the beginning — and this is the updated version of your book, and we’ll link to your book in the show notes for this show. So anyone, I would highly recommend anyone listening could go buy Super Imperialism.

MICHAEL HUDSON: I’m going to be republishing it through my own institute. It’s very hard to get the book; that’s why I’m buying the rights back. It’s really not marketed in this country very much. So at any rate it’s on my website, and you don’t have to buy the book. You can go to my website and get many of the chapters.

BEN NORTON: Excellent, well I’m gonna link to your website in the show notes that’s michael-hudson.com. And thank you for putting that up, because I’ve been reading the PDF, and it’s incredible.

So you write in the the introduction to the new updated version, which you wrote in 2002, on the eve of the invasion of Iraq, you wrote:
“The Treasury bonds standard of international finance has enabled the United States to obtain the largest free lunch ever achieved in history. America has turned the international financial system upside down, whereas formerly it rested on gold, central bank reserves are now held in the form of US government IOUs, that can be run up without limit.

“In effect America has been buying up Europe, Asia, and other regions with paper credit, US Treasury IOUs that it has informed the world it has little intention of ever paying off.

“And there is little Europe or Asia can do about it except to abandon the dollar and create their own financial system.”

So this seems to me as an outsider to be totally insane, to be a total con scheme. Can you explain how that scheme works, and especially in light of neoliberal economics?

I took, just in college, basic introductory economics classes that were mandatory, especially microeconomics, and in those classes they teach you this neoliberal, libertarian form of economics, and they teach you the famous Milton Friedman quote, “There is no such thing in economics as a free lunch.” But you’re pointing out that actually, on the international stage, this whole thing is a giant free lunch for the US empire.

MICHAEL HUDSON: The financial economy is basically a free lunch. And if you’re going to get a free lunch, then you protect yourself by saying there is no such thing as a free lunch. Obviously it does not want to make itself visible. It wants to make itself as invisible as possible.

Most of these countries in Asia get dollars from US military spending. They say, “What are we going to do with the dollars?” They buy US Treasury bonds, which finance the military spending on the military bases that encircle them. So they’re financing their own military encirclement!

It’s a circular flow. The United States spends dollars in these countries; the local recipients turn them over for local currency; the local currency recipients, the food sellers and the manufacturers, turn the dollars over to the banks for domestic currency, which is how they operate; and the dollars are sent back to the United States; and it’s a circular flow that is basically military in character.
The gunboats don’t appear in your economics textbooks. I bet your price theory didn’t have gun boats in them, or the crime sector. And probably they didn’t have debt in it either.

So if you have economics talking as if the whole economy consists of workers spending their wages on goods and services; government doesn’t play a role except to interfere. But government is 40 percent of GDP, mainly military in character. So obviously, economics doesn’t really talk about what you think of the economy. It doesn’t talk about society.

It talks about a very narrow segment that it isolates, as if we’re talking about a small organ in the body, without seeing the body as a whole economic system, an interrelated system that is dominated and controlled by the finance and real estate sector, which also has gained control of the government.

And the finance, insurance, and military-industrial complex make themselves invisible and absent from the textbook, then people are not going to look there and ask, “How did that affect our life? How does that affect the economy?” And they’re not going to see what’s making the economy poor and pushing it into depression.

MAX BLUMENTHAL: Well I can’t give out IOUs on everything, on my own debts, because when the debt collector comes, I don’t have gunboats; I don’t have machine guns; I don’t have any gun.

I mean if I wanted to get a gun I couldn’t get one, because they’re all bought up in Virginia, across the river, because you know everyone’s panicking. And I’m sure they’re defending themselves by like having their guns accidentally go off and shoot their dogs.

But that’s kind of what’s missing as well from this theory is that, if people try to collect their debt on the US, the US can do severe damage to them, militarily or otherwise.

Let’s game this out. I mean how do you see this playing out in Venezuela, where the Venezuelan government has tried to go around US sanctions, has tried to to work with Russia and China to sell gold; it’s had something like $5 billion of assets stolen by the US through sheer piracy in the past year.

And now the US has dispatched I think more naval ships than we’ve seen in Latin America or in South America at any time in the last 30 years.

MICHAEL HUDSON: Well that’s the other part of “Super Imperialism”: debt bondage. Venezuela had a US-installed dictator, a right-winger, some years ago, and changed the law in Venezuela so that Venezuela’s sovereign debt, borrowsedin dollars, is backed by the collateral of its oil reserves. And it has the largest oil reserves in South America.

So the United States wants to grab the oil reserves. Just as Vice President Cheney said we’re going into Iraq and Syria to grab the oil, America would like all these oil reserves in Venezuela.

How does it get them? Well, it doesn’t have to technically invade. Finance is the new mode of warfare. The US tried to grab these reserves by saying, “Let’s block Venezuela from earning the money by exporting the oil and earning the money from its US investments to pay the foreign debt. So we’re just going to grab the investment, and we’re going to select a mini dictator. We’re going to give designate Mr. Guaidó as their head of state, and say, “This oil and bank deposits don’t belong to Venezuela; we’re arbitrarily taking it away and we’re giving the oil distribution assets in North America to Guaidó. We’re going to block Venezuela from paying the debt.”
That means it’ll default on a foreign debt, so the vulture funds and bondholders can now grab Venezuelan oil, anywhere, under international law, because it is pledged as collateral for its debt, just as if you’d borrowed a mortgage debt and you’d pledged your home and the creditor could take away your home, like Obama had so many people lose their homes.

But Venezuela still is managing to scrape by. So they may need a military force to invade Venezuela, like Bush invaded Panama or Grenada. It’s an oil grab. So what finance couldn’t achieve, finally you really do need the military fist. Finance is basically backed by military, and domestically by force, by the sheriff, by the police department. It’s the force needed to kick you out of the house.
So the question is, what is the defense by the indebted people in America? Does there have to be an armed revolution here to cancel the debts? Do they have to eat the rich? That’s the question shaping today’s politics in America.

I don’t see it being solved. If it is not solved by the indebted people simply starving to death, committing suicide, getting sick or emigrating, then there will have to be a revolution. Those are the choices in America.

Venezuela said, “We’re not going to starve quietly in the dark.” So there’s a military buildup pretending that it’s all about drugs, when Venezuela is threatening to interrupt the CIA’s drug trade. I mean that’s the irony of this! It’s the CIA that’s the drug dealer, not the Venezuelan government. So we’re in the Orwellian world that works through the organs or the New York Times, the Washington Post, MSNBC, National Public Radio, the real right-wing of America.

MAX BLUMENTHAL: I’m so glad you boiled it down like that. Because so much of what we do at The Grayzone is to punch holes in the propaganda constructs that are used to basically provide liberal cover for what is sheer gangsterism.

MICHAEL HUDSON: It’s much more black and white than gray.

MAX BLUMENTHAL: Yeah well, we should call it The Black and White Zone.

We’re seeing it as well in Syria, where we’ve had one kind of human rights propaganda construct after another. And now at the end of the line, as the whole proxy war ends, Trump says, “We have to keep the troops there because of oil. We need them to guard the oil fields.”
So it all becomes clear. But it’s unclear to everyone who’s been confused for the past years, following the way that the war has been marketed to them through these corporate media and US government publications that you just named. It’s just, we’re there for the oil.

BEN NORTON: Michael, I mean there are so many ways we could explore this topic further, and hopefully we can have you back more often in the future, because we definitely need more economics coverage. We frequently talk about the political side of a lot of these issues of US imperialism, but of course the economic element is absolutely integral to understand what’s happening.

I’m also very interested, you mentioned before we started this interview, that your book “Super Imperialism” is very popular in China, and that even in schools there people are reading it. The question of China I think is the central question of this century — the rise of China, the so-called “threat” that China poses, in scare quotes, to the US. Of course China doesn’t threaten the American people, but rather the chokehold that the US has on the international financial system.

And we have seen under Trump — I mean it’s been happening for years. It really actually began under Obama with the “Pivot to Asia,” and that was Hillary Clinton’s State Department strategy – to move toward the encirclement of China.

But now under Trump it has become the main foreign policy bogeyman of the Trump White House. And especially now with coronavirus, every day the corporate media is full of non-stop anti-china propaganda — “China is the evil totalitarian regime that’s going to take over the world, and we have to unite with the Republicans in order to fight against China.”

And we now even see figures openly defending the “new cold war,” as they call it. They say we’re in a new Cold War, as the right-wing historian from Harvard Niall Ferguson put it in the New York Times recently.

So I’m wondering, your book I think is even more relevant now than it was when you first wrote it, it’s so, so relevant. But what about the question of China? And what about the question of this new cold war? Do you think that could challenge the US-dominated financial system that was created after World War II, using the weapons of the World Bank and the IMF, as you spell out? Are we heading maybe toward the creation of a new international financial system?
(26:24)
MICHAEL HUDSON: What makes China so threatening is that it’s following the exact, identical policies that made America rich in the 19th century. It’s a mixed economy. Its government is providing basic infrastructure at subsidized prices to lower the cost of living and doing business, so that its export industry can make money. It’s subsidizing research and development, just like the United States did in the 19th century and early 20th century.

So America basically says to the rest of the world, “Do as we say, not as we do, and not as we’ve done.”

China has a mixed economy that is working very well. You can just see the changes occurring there. It realizes that the United States is trying to disable it, that that the United States wants to control all the sectors of production that have monopoly pricing — information technology, microchip technology, 5G communications, military spending.

The United States wants to be able to pay for goods from the rest of the world with overpriced exports, American movies, anything that has a patent that yields a monopoly price.

America, in the 1950s tried to fight China by sanctioning grain exports to China. You mentioned sanctions earlier, the first sanctions were used against China, trying to starve them with grain. Canada broke that embargo, and China was very friendly to Canada, until Canada’s prime minister now takes his orders from a small basement office in the Pentagon, and has agreed to grab Chinese officials. Canada is not a country anymore. So China does not feel so friendly towards Canada now that it’s become a US satellite.

China realized that it can’t depend on America for anything. The US can cut it off with sanctions like it has tried to do with Iran, with Venezuela, with Cuba. So the idea of China, Russia and other countries in the Shanghai Cooperation Organization has been: “We have to be independent within ourselves, and make a Eurasian trading area, and we will take off because we are successful industrial capitalism, evolving into socialism, into a mixed economy, with the government handling all of the monopoly sectors to prevent monopoly pricing here.”

“And we don’t want American banks to come in, create paper dollars, and buy out all of our industries. We’re not going to let America do that.”

I have gone back to China very often. I’m a professor at Peking University, and I have honorary professorships in Wuhan.. There are a number of articles on my website from the Chinese Academy of Social Sciences on de-dollarization, essentially how China can avoid the use of the dollar by becoming independent in agriculture, technology, and banking.

China’s threat of is that it will not be a victim. Victimizers always look at the victims as vicious attackers of themselves. So America says China is a vicious threat because it’s not letting us exploit them and victimize them. This is the Orwellian rhetoric of the bully. The bully always believes that the person he’s attacking is a threat. Just like in Germany, Goebbels said that their surefire way to mobilize the population behind any attack was to say, “We’re defending ourselves against foreign attack.”

So you have the American attack on China pretending to be defense against their wanting to be just as independent as the United States always has been. The United States doesn’t want any other country to have any leverage to use over the United States. The United States insists on veto power in any organization that it’ll join — the World Bank, the IMF, the United Nations.

And China essentially says, ok, this is the very definition of national independence, to be independent from other countries able to choke us, whether it’s a grain that we need, or technology, or the SWIFT interbank clearing system to make our financial system operate, or the internet system.

By waging this economic warfare against China to protect America monopolies, America is integrating China and Russia. And probably the leading Chinese nationalist in the world, the leading Russian nationalist, is Donald Trump. He’s saying, “Look boys, I know that you’re influenced by American neoliberals. I’m gonna help you. I believe that you should be independent. I’m gonna help you Chinese, Russians and Iranians to be independent. I’m going to keep pushing sanctions on agriculture to make sure that you’re able to feed yourself. I’m gonna push sanctions on technology, to make sure that you can defend yourself.” So he obviously is a Chinese and Russian agent, just like MSNBC says.
(32:09)

BEN NORTON: Yeah and Michael, this actually reminds me, I used to follow you regularly at The Real News, and I worked there for a bit, and unfortunately there was kind an internal coup there, and it has moved to the right a bit.
But the point is, a few years ago at The Real News, I remember you did an amazing debate between you and the Canadian economist Leo Panitch, and it was about the nature of the BRICS system.

This was before the series of coups that that overthrew the left in Brazil and installed the fascist government now of Jair Bolsonaro, a right-wing extremist. And at the time there was Dilma Rousseff, a progressive from the Workers’ Party. Brazil and Russia were helping to take the lead in the BRICS system. This is Brazil, Russia, India, China, and South Africa.
And of course the series of coups in Brazil, kind of ended that project of South-South regional integration. And also the rise of the right-wing, the far-right, in India with Narendra Modi.

But there was a moment there when the BRICS community, these countries were trying to build their own bank. China of course has a series of banks. You mentioned the Shanghai Cooperation Organization. So there have been these international institutions, multilateral institutions, created to kind of challenge the hegemony of the World Bank and the IMF.

I remember in that debate, Leo Panitch was arguing that, “Oh, the BRICS system and the Shanghai Cooperation Organization, all these institutions are just going to be the new form of neoliberalism. They’re just going to replace the World Bank and implement many of the same policies.” You disagreed with that.

So maybe can you kind of relitigate that debate here a little bit and just kind of articulate your position for our viewers?

MICHAEL HUDSON: The World Bank has one primary aim, and that’s to make other countries dependent on American agriculture. This is built into its articles of agreement. It can only make foreign currency loans, so it will only make loans to countries for agricultural development, roads, if it is to promote exports.

So the United States, through the World Bank, has become I think the most dangerous, right-wing, evil organization in modern in history — more evil than the IMF. That’s why it’s almost always been run by a secretary of defense. It has always been explicitly military. It’s the hard fist of American imperialism.

Its idea is to make Latin American, and African, and Asian countries export plantation crops , especially plantations that are US or foreign owned. The primary directive of the World Bank to countries is: “You must not feed yourself; you must not grow your own grain or your own food; you must depend on the United States for that. And you can pay for that by exporting plantation crops that can’t be grown in temperate zones like the United States.”

So China and Russia are not really agricultural economies. The buttress of America’s trade balance has been agriculture, not industry. Obviously, we de-industrialized. Agriculture, since World War II, has been the foundation of the trade balance.

The US demands foreign dependency on its grain, technology and finance. The purpose of the World Bank is to make other countries’ economies distorted and warped to a degree that they are dependent on the United States for their trade patterns.

BEN NORTON: Well Michael, isn’t it also true though that China has massive agricultural production, and Russia produces a lot of wheat, right?

MICHAEL HUDSON: Sure, but it doesn’t have to base its exports on agriculture to African countries. It can afford having African countries growing their own food supply so that they won’t have to buy American food.
Imagine, if China helps other countries grow their own food and grain, then America’s trade surplus evaporates. Because that’s the main advantage that America has, agribusiness.

BEN NORTON: Yeah it’s like that famous quote: If you give a man a fish, he’ll eat for one day; if you teach a man to fish, he’ll eat for the rest of his life. And then I think Marx, didn’t Marx complicate that?

MICHAEL HUDSON: But if you lend them the money to buy a fish, then he ends up bankrupt and you get to grab up all his property.

MAX BLUMENTHAL: Yeah I mean we saw this play out clearly in Haiti.

MICHAEL HUDSON: Yeah, that’s the typical — what America has when it has a free a reign, that’s exactly the Haiti story. That’s absolutely terrible. It’s depressing to read.

I get cognitive dissonance, because it’s just so unfair. It’s so awful to read; I avert my eyes from the page.

MAX BLUMENTHAL: Yeah I mean just observing all of this is what kind of brought me to the point where I concluded that there had to be another international financial system, when I saw how Haiti was brought to its knees. First with the School of the Americas graduates staging a coup, and Bill Clinton reinstalls Jean-Bertrand Aristide. It all takes place under the guise of goodwill by Washington. But Aristide is forced to sign off, basically sign away Haiti’s domestic agricultural production capacity. And the next thing you know, their rice economy’s wiped out, and they’re importing rice from Louisiana.

And the only economy left, the only economic opportunity left, is to work in these free trade zones for US companies. That’s just the model writ large. It helped lead to the next coup, that removed Aristide, and look where Haiti is today.

MICHAEL HUDSON: Right, it means, you must not protect your own economy; only America can protect its own economy. But you must not. That’s free trade, US-style.

MAX BLUMENTHAL: Right, going back to the JFK Seeds of Peace program. It’s big agro subsidies, and then you bomb the Third World with cheap seeds and cheap goods, and then you have a migration crisis.

MICHAEL HUDSON: Seeds for Starvation is what the program is known as. Because by giving a low price of foreign aid to these countries, they prevented domestic agricultural development, because no farmer could compete with free crops that America was giving. The purpose of the Seeds for Starvation program was to prevent countries from feeding themselves, and to make them dependent.

MAX BLUMENTHAL: Yeah, when I lived in LA I would meet families who had initially come across the border because of the program — they would point the finger directly at Seeds for Starvation. They’d say, “We came from rural Mexico, and our livelihood was wiped out.”
So this is a long-standing program. And we’ve seen in the coronavirus bailout five times more money provided to USAID for so-called stabilization programs than for hospital workers. That’s exactly what you just described: USAID is the spearhead of these programs which aim to wipe out land reform programs, and replace them with US aid in the form of these cheap seeds and so on, cheap bananas to Burundi, and everywhere else.

So do you see, through your experience in China, that Belt and Road is a genuine alternative to this model?

MICHAEL HUDSON: Well they’re certainly trying to make it so. By the way, what you’ve just described, it’s not a bug; it’s a feature. When you have the same problem occurring after 50 years, it’s either insanity — and we know it’s not — or it’s the intent. You have to assume at a certain point that the results of these aid programs are the intended results. And certainly if you look at the congressional testimony, Congress knows this, but the media don’t pick it up.

In China, they’re really trying to create an alternative. They want to break free from the United States. And if Trump’s policies of “America First” continue, and as he said, “We have to win every deal,” this means that any deal we make with the foreign country, that country has to lose.

So he’s integrating the whole world, and isolating the United States. When you isolate the United States, China realizes that what will be isolated is the neoliberal philosophy that is the cover story, the junk economics that justifies these destructive policies.
BEN NORTON: Well Michael, this was I think one of our most interesting episodes. We want to more economics coverage, so hopefully we can talk more with you and get some more of your analysis.

I guess just concluding here, I mentioned that the term Cold War has been thrown around a lot. And of course, the New Cold War is going to be different from the old cold war in a lot of different ways.

And of course Russia is not the Soviet Union at all. Russia does not have a socialist system. China’s system as you mentioned is mixed, there are still socialist elements, but even China’s economy is not nearly as state controlled as the Soviet Union was at the peak of the Cold War. So I’m wondering, it’s pretty clear if you listen to the rhetoric coming from the Pentagon, that “great power competition,” as they refer to it, is now the undergirding philosophy of US foreign policy. What is the economics of that?
Because the economics of neoliberalism, after the destruction of the Socialist Bloc, and George H. W. Bush’s declaration of a “New World Order,” which is of course just neoliberalism and US hegemony — in that period, the clear economic philosophy, the kind of guiding foreign policy, was destruction of independent socialist-oriented states and forcible integration of those countries into the international neoliberal economy. We saw that with Iraq; we saw that with former Yugoslavia; we saw that with Libya — which is really just a failed state.

So now I think we’re in a kind of new phase. The Pentagon released two years ago its national defense security strategy saying that the new goal of the Pentagon and US foreign policy is to contain China and Russia. That is the stated, professed goal. What does that look like economically going forward?

MICHAEL HUDSON: I think that’s quite right. It’ll contain Russia and China, and there’s nothing that Russia and China want more than to be contained.

In other words, they’re talking about decoupling from the US economy. And the US will say, “Well we’re not going to let them have access to the US market, and we’re not going to have anything to do with them.” And Russia and China say, “Boy that’s wonderful, OK, we’re on the same wavelength there. You can contain us; we will contain you. You go your way; we’ll go our way.”

So basically the Cold War was an attempt at neoliberalism and privatization. It’s Thatcherism. It’s, “How do we make China and Russia look like Margaret Thatcher’s England, or Russia in the 1990s under Yeltsin?”

“How do we prevent other countries from protecting their industry and their financial system from the United States financial system and US exports? How do we prevent other countries from doing for themselves what America does for itself? How do we make a double standard in world finance, and world trade, and world politics?”

The result of trying to prevent other countries from doing this is simply to speed the parting guest, to accelerate their understanding that they have to make a break. They have to create their own food supply, not rely on American food exports. They have to create their own 5G system, not let America’s 5G with its spy portals built in. They have to create their own society, and go their own way.
That was China’s philosophy before the 16th century. It was always the “Central Kingdom”; it always looked at itself as being independent from the rest of the world. It’s going back to that, except it realizes that it needs raw materials from Africa and other countries.

The question is, what is Europe going to do? Is Europe going to just follow the Thatcher right-wing deflationary Eurozone policies and end up looking like Greece? Or is it going to join with Eurasia, with Russia and China, and make a whole Asiatic continent?

The Cold War really is about what is going to happen to Europe. Because we have already isolated China and Russia and the Shanghai Cooperation Organization.

The question is what will happen to Europe, and what will happen to Africa?

BEN NORTON: Great, well I think that’s the perfect note to end on. We were speaking with the economist Michael Hudson. He is a Wall Street financial analyst and a distinguished research professor of economics at the University of Missouri – Kansas City.

He’s also the author of many books, and we were talking about Super Imperialism: The Economic Strategy of American Empire. He has two versions of that, and we will link to that book in the show notes of this episode.

We will also link to his website, where you can find a lot of great interviews with transcripts, his articles — and that’s michael-hudson.com.

Michael, thanks a lot. That was a really great, two-part interview. I learned a lot, and I think our viewers will benefit a lot.

MAX BLUMENTHAL: Yeah thanks a lot Michael.

MICHAEL HUDSON: Thank you. I hope we can fill out all the details in subsequent broadcasts.

MAX BLUMENTHAL: Absolutely.

unsplash-logoChristine Roy

Another Giveaway

Published by Anonymous (not verified) on Thu, 23/04/2020 - 12:21pm in

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TRANSCRIPT: US CORONAVIRUS ‘BAILOUT’ SCAM IS $6 TRILLION GIVEAWAY TO WALL ST – ECONOMIST MICHAEL HUDSON EXPLAINS
21 APRIL 2020

BY MODERATE REBELS
Facing the Covid-19 pandemic, the US Congress rammed through the CARES Act — which economist Michael Hudson explains is not a “bailout” but a massive, $6 trillion giveaway to Wall Street, banks, large corporations, and stockholders. 

Max Blumenthal and Ben Norton discuss the enormous financial scam with Hudson, who reveals how the economy actually works, with the Federal Reserve printing money so rich elites don’t lose their investments. 

Michael Hudson, “A debt jubilee is the only way to avoid a depression,” The Washington Post, March 21, 2020
Transcript

MICHAEL HUDSON: Just think of when, in the debates with Bernie Sanders during the spring, Biden and Klobuchar kept saying, ‘What we’re paying for Medicare-for-All will be $1 trillion over 10 years.’ Well, here the Fed can create $1.5 trillion in one week just to buy stocks.

Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it’s not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea is that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose — not for medicine, not for schools, not for personal budgets, not for full employment — but only to give to the 1 percent.

People hesitate to think that. They think, ‘It can’t possibly be this bad.’ But for those of us who have worked on Wall Street, for 60 years in my case, that’s what the numbers show.

But you don’t have the media talking about actual numbers. They talk about just words, and they use euphemisms. It’s a kind of Orwellian vocabulary, describing an inside-out world.

BEN NORTON: The world is suffering right now from one of the worst economic crises in modern history. Definitely the worst crisis since the 2008 financial crash. And many economics experts are saying that we’re living through the worst recession actually since the Great Depression of 1929.

Well joining us to discuss this today, we have one of the best contemporary economists, who is really well prepared to explain what has been going on in this global recession during the coronavirus pandemic. And specifically today we’re gonna talk about the $6 trillion bailout package that the US Congress has passed.

The Trump administration is basically taking Obama’s corporate bailout on steroids, and injecting trillions of dollars into the corporate sector. And today to discuss what exactly the coronavirus bailout means, we are joined by the economist Michael Hudson.

He is the author of many books. And in the second part of this episode we’re gonna talk about his book Super Imperialism: The Economic Strategy of American Empire. So that’ll be much more in the vein of kind of traditional Moderate Rebels episodes, where we talk about imperialism, US foreign policy, and all of that.

Michael Hudson is also a former Wall Street financial analyst, so he’s very well prepared to talk about the financial thievery that goes on on Wall Street. And he is a distinguished research professor of economics at the University of Missouri, Kansas City.

So Michael, let’s just get started here. Can you respond to this global depression that we’re living through right now amid the Covid-19 pandemic? And what do you think about this new bailout that was passed?

MICHAEL HUDSON: Well the word bailout, as you just pointed out, really was used by Obama and only applies to the banks. The word coronavirus is just put in as an advertising slogan.

Banks and corporations, airlines, have a whole wish list that they had their lawyers and lobbyists prepare for just such an opportunity. And when the opportunity comes up — whether it’s 9/11 with the Patriot Act, or whether it’s today’s coronavirus — they just pasted the word coronavirus onto an act, which should be called a giveaway to the big banking sector.

Let’s talk about who’s not bailed out. Who’s not bailed out are the small business owners, the restaurants, the companies that you walk down the street in New York or other cities, and they’re all shuttered with closed signs. Their rent is accumulating, month after month.

Restaurants, gyms and stores are small-markup businesses, small-margin businesses, where, once you have no sales for maybe three months and rent accruing for three months, they’re not going to have enough money to earn the profits to pay the rents that have mounted up for the last three months.

The other people that are not being bailed out are the workers — especially the people they call the prime necessary workers, which is their euphemism for minimum-wage workers without any job security. There have been huge layoffs of minimum-wage labor, manual labor, all sorts of labor.

They’re not getting income, but their rents are accruing. And their utility bills are accruing. Their student loans are accruing. And their credit card debts are mounting up at interest and penalty rates, which are even larger than the interest rates. So all of these debts are accruing.

The real explosion is going to come in three months, when all of a sudden, this money falls due. The governor of New York has said, “Well we have a moratorium on actually evicting people for three months.” So there are restaurants and other people, individuals, wage-earners, who are going to be able to live in their apartments and not be evicted. But at the end of three months, that’s when the eviction notices are going to come. And people are going to decide, is it worth it?

Well, especially restaurants are going to decide. And they’re going to say, “There is no way that we can make the money to pay, because we haven’t had the income to pay.” They’re going to go out of business. They’re not going to be helped.

The similar type of giveaway occurred after 9/11. I had a house for 20 years in Tribeca, one block from the World Trade Center. The money was given by the government to the landlords but not to the small businesses that rented there — the Xerox shops and the other things. The landlords took all of the ostensible rent loss for themselves, and still tried to charge rent to the xerox shops, the food shops, and ended up collecting twice, and driving them out.

So you’re having the pretense of a bailout, but the bailout really is an Obama-style bailout. It goes to the banks; it goes to those companies that have drawn up wish lists by their lobbyists, such as the airlines, Boeing and the large banks.

The banks and the real estate interests are going to be the biggest gainers. They have changed the real estate law so that the real estate owners, for a generation, will be income tax free. They are allowed to charge depreciation, and have other fast write-offs to pretend that their real estate is losing value, regardless of whether it’s going up and up in value.

Donald Trump says that he loves depreciation, because he can claim that he’s losing money, and gets a tax write-off, even while his property prices go up.

So there’s a lot of small print. The devil is in the small print of the giveaway. And then President Trump has his own half-a-trillion-dollar slush fund that he says he doesn’t have to inform a Congress or be subject to any Freedom of Information law. He gets to give to his backers in the Republican States.

And states and municipalities are left broke. Imagine New York City and other states. Most states and cities, have balanced budget constitutional restrictions. That means they’re not allowed to run a deficit.

Now if these states and cities have to pay unemployment insurance, and have to pay carrying charges on the schools and public services, but are not getting the sales taxes, not getting the income taxes, from the restaurants and all the businesses that are closed, or from the workers that are laid off, they’re going to be left with a huge deficit.

Nothing is done about that. There has been no attempt to save them. So three months from now, you’re going to have broke states, broke municipalities, labor that cannot, whose savings was wiped out.

As I’m sure you’ve reported on your show, the Federal Reserve says that half of Americans do not have $400 for emergency saving. Well now they’re going to be running up thousands of dollars of rent and monthly bills.

So the disaster is about to hit. They will not be bailed out. But no major investor, really will lose. You’ve seen last week, the stock market made the largest jump since the depression — the largest jump in in 90 years. And that’s because Trump says, “The economy is the stock market, and the stock market is the One Percent.”

So from the very beginning, his point of reference for the market and for the economy is the One Percent. The 99 Percent are simply overhead. Industry is an overhead. Agriculture is an overhead. And labor is an overhead, to what really is a financialized economy that is writing the whole bailout.

It’s not a bailout — it’s a huge giveaway that makes them richer than they ever were before.

BEN NORTON: Yeah and Michael, related to that — you mentioned that fine print is important. But I also have a kind of bigger question. And I don’t really know where exactly these numbers come from.

Officially the bailout is $2 trillion. Many media outlets reported it as effectively $4 trillion. But actually, according to Larry Kudlow — who is the director of the US National Economic Council, he’s the Trump administration’s kind of chief economist — Larry Kudlow is now saying that it’s actually $6 trillion in total, which is a quarter of all of US GDP.

And that includes $4 trillion in lending power for the Federal Reserve, as well as $2 trillion in the aid package.
So there is discussion of this aid package, but actually the aid package of $2 trillion is actually half the size of the $4 trillion that is given to the Federal Reserve.

What exactly is that $4 trillion that the Federal Reserve has? Is this some kind of slush fund, or how does it work?

MICHAEL HUDSON: No, the Federal Reserve was given special powers to create 10 times as many loans or swaps as others. The Federal Reserve represents the commercial banks and commercial investors.

Now here’s the problem: a lot of companies were issuing junk bonds. They were going way down in price, especially junk bonds for the fracking industry. The Federal Reserve says, “We’re going to be backed up by the Treasury. We can just create — as you know, Modern Monetary Theory — we can just create money on a computer, and swap. So we will, say, ‘Give us your poor.’ It’s like the Statue of Liberty: ‘Give us your poor, your oppressed,’ or Aladdin’s old lamps for new: Give us your junk bonds, and we will give you a bona fide Federal Reserve deposit.”

So the Federal Reserve has been pumping trillions and trillions of dollars into the stock market. That’s what’s been pushing up the stock market, the Federal Reserve. The bailout has gone to the stock market. As if the stock market got coronavirus! Stocks don’t get coronavirus! They don’t get sick on the virus! And yet it’s the stock market that’s going up through the Federal Reserve.

There’s also another $2 trillion dollars, $2 to $4 trillion that the US government has, over and above the $2 trillion that’s going to the people. So most of the calculations that have been published cite it as a $10 trillion bailout. Of which the newspapers, to avoid embarrassing Mr. Trump, only refer to the money given to the the wage earners. And they’re sort of embarrassed that the vast majority are given to the financial sector that doesn’t need a bailout, but that doesn’t want to lose a single penny from the virus.

So when you see the stock market recovered almost to what it was before the virus, while the economy is going down, you realize, wait a minute they’re saving the 1 percent, or the 10 percent of the population that own 85 percent of the stocks and bonds. They’re saving the banks. They’re not saving the people, and they’re not saving the economy; they’re not saving industry; and they’re not saving small businesses.

So it’s an amazing hypocrisy that the mainstream press is not discussing, which is why your show is so important.

MAX BLUMENTHAL: Yeah and here in Washington, DC, we got I think $500 million from the, I guess what you accurately describe as the stock market bailout. And that’s a lot less than a number of red states that are less populous than Washington, DC got. So there’s a massive shafting here.

And then the city has only been able to provide for certain parts of the economy. Undocumented immigrants, who do a lot of work here, got nothing from the city. Vendors, which are a big part of the informal economy in DC, even though they have to be regulated, got nothing.
And then you mention all of these sectors of the economy — young people, college-educated young people who are deep in debt, and therefore less inclined to spend — are getting shafted here.

So you have called for a solution — well I guess, knowing so many of those people, they contribute so little to the economy because they can’t; they’re just putting all their money into debt. So you have called for a debt jubilee.

You say that debts that can’t be paid won’t be, and this is the best way out.

Maybe you can explain to our viewers and listeners what that is and why it would be the best remedy?

MICHAEL HUDSON: Well here’s what happens if you don’t write down the debts that are just going to accrue in the next three months: If you don’t say, “The rents will not have to be paid, and workers will not have to pay the debts that mount up,” if you leave those debts on the books, and you make the workers liable to keep paying the student debts, and the other debts, and the mortgage debts, and the rents, then they’re not going to have any money left to buy goods and services.

When it’s all over, they’re going to get their paychecks, and off the top is going to be the wage withholding, and the tax withholding, and the Medicare, and if they don’t want to get kicked out of their houses, they’re going to have to pay all of this money that’s accrued while they’re not making an income.

So you’re going to have a shrinkage of the economy, a vast shrinkage. How can they afford to buy anything but the most basic necessities, the cheapest food, the necessary transport? Obviously they’re not going to buy the kinds of goods and services that are supposed to be part of the circular flow.

Economics textbooks say employers pay the workers so the workers can have enough money to buy what they produce. But the workers don’t spend their income only on what they produce. They spend most of their income on rent, on debt service, on taxes, on finance, insurance, and real estate. And this is the only part of the economy that is being enabled to survive.

So how can you have the superstructure of rents and debts, of insurance charges, on an economy that doesn’t have the income to buy goods and services? And if they can’t buy goods and services, you’re going to have the stores closing down, because people can’t afford to buy what the stores are selling.

You’re going to have a whole wave of closures. And you’re going to go down the streets, and certainly in cities like New York, or where I live in Queens, just outside of Manhattan, where block after block, they’re going to be “For rent” signs. It’s going to be empty.

And the only way to avoid that is for a debt write-down.

Now you’ve had this occurring for 5,000 years. I’ll give you an example that may be easy to understand.

In Babylonia, we have the Laws of Hammurabi, in 1800 BC. One of the laws says that when you would buy beer or other things, they would write it on a tab in the bar, in the ale house, and all the debts were owed when the harvest was in. You’d pay the debt seasonally.

Well Hammurabi said, if there’s a drought, or if there’s a flood, then you don’t have to pay the debts. Most debts were owed to the palace, and others.

The implied policy is that, “The reason we’re doing this is, if we don’t do that, then you’re going to have these debtors become debt servants, bond servants to the creditors; they’re going to owe their labor to the creditors; they’re going to lose their land to the creditors; and they won’t be able to work on public infrastructure projects; they won’t work for Babylonia; they won’t serve in the army, and we can be invaded; and they won’t be able to use their crops as taxes, because they’ll owe the crops as debts. So we’re going to write it down.”

So the whole idea for thousands of years, of every Near Eastern ruler starting his reign by writing down the debts, was to begin everything in balance.

Because they realized, just mathematically, debts grow at compound interest. You’ve seen the coronavirus increase at an exponential rate. That’s how debts accumulate interest, at an exponential rate.

But the economy grows in an S-curve, and then it tapers off. The American economy, the GDP since the Obama bailouts of 2008, the entire growth of the GDP has only accrued to 5 percent of the population. 95 percent of the GDP. But the population for 95 percent, the industry and agriculture, that’s actually gone down.

So we’re already in a 12-year depression, the Obama depression, that they like to call a recession, because most of the media are Democratic Party people.

But you’re going to have this recession turn into a genuine depression, and it will continue until the public debt, that is state and local debts, are written down; the mortgage debts written down; and the personal debts written down, starting with the student loans, the most obviously unpayable debt.

And the choice is, do you want to depression, or do you want the banks to be able to collect all the economic surplus for themselves? Well Donald Trump, supported unanimously by the Democratic Congress, says, “We want to protect the banks, not the population, not the economy. Let the economy shrink, as long as our constituents, the donor class, are able to avoid making a loss. Let’s make the loss borne by the 99 percent, not our donor class.”

BEN NORTON: Yeah, and Michael, you mentioned something, getting back to the Federal Reserve and understanding how this whole system works. I mean frankly it seems to me to kind of be a house of cards.

But you mentioned this idea of Modern Monetary Theory and just kind of creating money out of nothing. Can you talk more about that? You know this is a term that’s become more prominent, especially on the left: MMT, modern monetary theory.

There are socialists who argue in support of MMT and then there are others who are kind of skeptical of the whole notion that you can just print all this money to fund these social programs that you want to create, and that it won’t create inflation.

But at the same time, you and other people point out that that’s exactly how the economy already works. Where for instance, you want to fund a war, there’s never — you know frequently when someone on the left asks for universal health care or free public education, members not only of the Republican Party but many neoliberal Democrats often say, “Well yeah, where are you gonna get the money from?” And the response of some of the MMT supporters is, “Well we just fund the program, and we just create the money because we control the creation of the dollar.”

And we see that same attitude used actually by the Federal Reserve right now, but to bail out Wall Street. “Yeah we’re just gonna print” — they printed $1.5 trillion, and then just gave it, they just injected it right into Wall Street.

So does that not create inflation, or what exactly is happening economically there? I mean to me, it seems like a scam; it seems like totally a scam.

MICHAEL HUDSON: Since 2008, you have had the greatest inflation of money in history. And you have also had the greatest inflation in history, but it’s entirely asset price inflation.

You’re absolutely right: the money has gone into the stock market and the bond market, to support bond prices, meaning you’ve had the biggest bond boom in history. You’ve had a huge stock market boom. But consumer prices have gone down. So here you have an enormous amount of money creation, and consumer prices and real wages have been drifting down.

So they are really two economies. The question is, are you going to create money for public purposes by spending it into the economy, on industry, agriculture, and the goods and service production and consumption economy Or, are you going to put it into the financial economy?
Well the whole way of our banking system is that banks create credit. If you go into a bank and you take out a loan, you say, I’m gonna borrow $5,000 for something. The banker doesn’t go and say, let me see if we have any money to loan you; he says, okay I will write a loan on my computer. I will credit your deposit with $5,000, and you will sign this IOU, and we have an asset. And the asset is $5000, on which we’re going to charge interest on what we pay you.

So it’s just done by computer, on a balance sheet. And as long as money is created on a computer, the only cost is the electricity used to make that debt record.

Now the banks, when they make loans, 80 percent are against real estate. So they say, in case you can’t pay, you’re pledging your real estate – the home you’re buying, or the commercial building you’re buying, as collateral. So we’ll lend you up to 80 percent, maybe 100 percent, of the value of what you’re buying, and that’s the collateral we have.

So they lend against collateral. Well, if you lend the money against collateral to buy a building, or to buy stocks and bonds, which are the other collateral, then obviously this money you’re creating to buy houses, or commercial real estate, or stocks and bonds are going to bid the price up.

Banks don’t give loans for people who say, I want to go shopping and buy more goods because I need the money. That may be a little bit, that’s what credit cards are for, but that’s a small portion of the overall money supply. So banks don’t make loans to buy goods and services; they make loans to buy assets that obviously inflate the price of assets.

And the more money that you pay for houses that are rising in price, or medical insurance, or stocks and bonds, to make a retirement income for your pension fund; the more money you pay for houses that are inflating in price because of bank credit, the less money you have to buy goods and services.

So actually, the more money they create, the more consumer prices for goods and services fall. It’s the exact opposite of the usual theory.
On my website I have many articles about that, and I have something today in Counterpunch on that. It’s on how the economy works the opposite of the way the textbook says.

Now unfortunately the left-wing doesn’t really study finance and money much. The discussion of finance and money has been monopolized by the right-wing, so left-wingers think, they don’t realize that they’re picking up a kind of junk theory of monetary relations and debt relations that’s all picked up from the right-wing of the political spectrum.

It’s a kind of parallel universe. That’s not how the economy really works, but in a way that sort of is easy to understand. And it’s very easy to make an erroneous, oversimplified view of the world easy to understand.

And when it’s repeated again and again and again, in the media, the New York Times and MSNBC, people really think that, well, maybe that’s how the world works — more money is going to push up prices, so we better not push for it, we better go along with trickle-down theory.

And most of the left believes in trickle-down theory. The Democratic Party leadership is absolutely convinced, if you just give enough money to the top 1 percent, or 5 percent, or Wall Street, it’ll all trickle down.

BEN NORTON: Well of course the Democratic Party is not the left.

MICHAEL HUDSON: That’s right, but it pretends to be. And it has crowded out the left. You can see in the recent election primaries that its job is to protect the Republican Party from any critique by the left, interjecting itself in between the Republican Party and any possible reform movement.

BEN NORTON: Exactly.

MAX BLUMENTHAL: Well they stood up really strongly against the bailout — I mean what was it, 96 to nothing? And in the voice vote, I was listening to the voice vote last night in the House; I didn’t hear AOC’s voice against it.

MICHAEL HUDSON: They did a voice so that everybody could say, “Oh it wasn’t me!”

MAX BLUMENTHAL: No, no! So you mentioned that foreclosure king Steve Mnnuchin gets like a $500 billion slush fund. I haven’t heard much discussion about that. What will he do with this sort of opaque slush fund, and how will this — I mean it’s a leading question, but how will this kind of reinforce or consolidate inequality for the next generation?

MICHAEL HUDSON: Well gee, I hope he gives some of it to Kamala Harris, who was the attorney general who let him do all of this, and who thoroughly backed him and led the foreclosure, was the iron fist behind his foreclosure program. So I’m sure he’ll press for Kamala to be the vice president on the ticket.

The Democrats have a problem. How can they guarantee that they have their candidate win? Their candidate is Donald Trump. How can they make sure that they have such a weak candidate that he’s sure to lose to Donald Trump? And the choice is, we’ll get a vice president that’s so unpopular that they’re sure to lose.

Now it’s a race between Kamala Harris and the Minnesota lady.

MAX BLUMENTHAL: Klobuchar? The one who throws staplers at her staff. She seems very charming.

MICHAEL HUDSON: Uh, I don’t know about that. But my wife can’t even look at her on television. But I think that the pretense is that she’ll help get Minnesota, as if Minnesotans, where I’m from, are so dumb just to vote for somebody from there. But by getting Minnesota, they’ll lose the whole rest of the country.

So I think she’ll be the vice president, because that guarantees a Trump victory. And that will enable the Democrats to say, here — they’ll have the president they want, that is for their donor class, but they can say, “That’s not us; that’s the Republicans.” So that’s the Democratic strategy.

MAX BLUMENTHAL: Right, then they can raise loads of money for the “Resistance,” and all of the outside think tanks. And that was the old Republican, William F. Buckley strategy, is we’re better throwing rocks outside the building and raising a ton of money for the National Review than actually having to govern. And that seems like the Democratic strategy.

But I guess I was asking about how you see the economy transforming, because the Obama bailout sort of transformed it or consolidated the gig economy, where everyone has to work three to five jobs, and what was supposed to be a highly educated middle class is deeply in debt.

Where do you see it after this next tranche of stock market bailouts?

MICHAEL HUDSON: Ok, let’s look at three months from now. Smaller companies are going to be squeezed, because all of their expenses are going to go up. Small companies have had to run up debts, and they have all sorts of other problems, and their earnings, their prospective profits, are not going to look that good. Because there’s not going to be a market for the things that they sell, because of the debt deflation that I talked about.

So what’s going to happen? You’re going to have a bonanza for private equity capital. The liquid, the 1 percent that have access to bank credit and have their own equity capital are going to come in and pick up a lot of real estate that’s going to be defaulted on — just like they did after Obama evicted his constituency, the mob with pitchforks, and evicted them.
Blackstone will pick up more real estate. Big companies are going to pick up small companies. You’re going to emerge with a highly monopolized economy, much more centralized.

The important thing to realize about free-market economics and libertarianism, is libertarians advocate central planning, The Chicago School of monetarists advocate central planning; the free marketers want central planning. But the banks are to be the planners, not the government. They want to exclude the government from planning, except to the extent that they can take over the government, as Trump has done, and plan all of the income to be transferred to themselves from the rest of the economy.

So we’re going to have a much more centrally planned by a coalition of monopolies and the government. In the 1930s, that was called fascism.

MAX BLUMENTHAL: It’s what we call a “public-private partnership” or something.

MICHAEL HUDSON: Right.

MAX BLUMENTHAL: Just really quickly, and maybe we can kind of transition after this, but you mentioned Blackstone. I think this is one of the key components of the bailout. They own so much stake in so many of the companies getting bailed out. Can you just describe their role and what they are?

MICHAEL HUDSON: It’s appropriate that they were put in charge of bailout. So if they’re the largest company buying up defaulted real estate and buying, picking up the weak — it’s called moving assets from the weak hands to the strong — then they might as well be put in charge, because they’re going to be the company doing all the grabbing. So of course they’re in charge of it.

It’s called grabitization. That was the Russian word for privatization in the 1990s. So grabitization is I think a better word than public-private partnership. It’s not really a partner; it’s sort of a one-way partnership; there’s one subsidiary partner. It’s really financialization and grabitization.

MAX BLUMENTHAL: Right, just the looting of state assets.

BEN NORTON: Going back one step here, Michael, you were talking about the way that people should think about how the economy actually works. And I mentioned MMT. Can you kind of just walk through that again? Because you were talking about how actually, when the Fed creates — I mean really to me, as someone, I’m definitely not an economics expert, I just don’t understand really how this whole process works, because to me it just seems simply like, they’re literally just creating money and just giving it to banks, and corporate elites, and rich people.

I mean maybe that’s what it is. But I don’t understand, this is like the biggest scheme I can imagine, where the Federal Reserve is creating all of this money, printing — they’re physically printing money is my understanding. And then they’re just giving it to these banks, to bondholders. And then, but you said that what does is, instead of actually creating inflation, all that does is, if I understood correctly, it boosts the value of assets like real estate, while at the same time deflating wages and commodity prices.

So if that’s the case, then how should people who are advocating for socialized programs like Medicare for All, free public education, and maternity leave, and childcare, and all of these programs that the Bernie Sanders campaign and movement have been advocating for, how should we talk about the way to pay for all of those programs, if the reality of the economy is that the Fed is printing trillions of dollars, and then just giving that cash to banks?

MICHAEL HUDSON: Well I think the reason you’re having trouble understanding MMT is because what you described is what’s happening, but you think, “But that’s unfair!” And there’s a tendency to think, if it’s unfair —

MAX BLUMENTHAL: It’s not just unfair. It’s the biggest scheme I can imagine. There’s no other word other than just a con scheme.

MICHAEL HUDSON: Yes, and the brain recoils from thinking, “Can the government really be doing that to us?” Well, yes it can.
And just think of when, in the debates with Bernie Sanders during the spring, Biden, and Klobuchar keep saying, ‘What we’re paying for Medicare-for-All will be $1 trillion over 10 years.’ Well here the Fed can create $1.5 trillion in one week just to buy stocks.
Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it’s not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose — not for medicine, not for schools, not for personal budgets, not for full employment — but only to give to the 1 percent.

People hesitate to think that. They think, ‘It can’t possibly be this bad.’ But for those of us who have worked on Wall Street, for 60 years in my case, that’s what the numbers show.

But you don’t have the media talking about actual numbers. They talk about just words, and they use euphemisms. It’s a kind of Orwellian vocabulary, describing an inside-out world that they’re talking about.

They will buy stock; they’ll say we’re going to buy a million shares of Boeing; they’ll just write a check, and the check will be from the Federal Reserve, and Boeing will get the money. The Federal Reserve can create a deposit, just like a banker will write you a loan when you go in and borrow. It’s done on a computer – without levying taxes. The Fed can do the same thing.

Stephanie Kelton, my department chairman for many years at the University of Missouri at Kansas City, describes this. The University of Missouri’s website, New Economic Perspectives has a description of it. So if people want to google either her, UMKC, or what I’ve written, or Randall Wray at the Levy Institute, you’ll get walked through.

If you’re not already thinking in terms of balance sheets, which most people don’t, you have to sort of just read it again and again, and then all of a sudden, “Ah, now I get. It’s a ripoff! It’s created out of nothing. Now I get it.”

BEN NORTON: It’s just a house of cards. To me it proves the kind — there used to be this kind of very blunt orthodox Marxist view that the economy strictly follows politics, and it seems to me this is a case where the economy is just created by politics.

MICHAEL HUDSON: That’s true, and that’s not an un-Marxist position. Marx did distinguish between oligarchies and democracies, and finance capitalist economies and industrial capitalist economies.

MAX BLUMENTHAL: Right. And the $17 billion for “urgent national security measures” was straight into the pockets of Boeing, which had its 737 maxes falling out of the sky, and had been clamoring for this bailout for a long time.

I mean you saw 3M, the maker of these masks which are suddenly unavailable, gained a total exemption from lawsuits, if the masks that it mass-produced now somehow failed.

So all of these things stuffed into the bailout were what industry and finance had been clamoring for for years. And they finally had the opportunity to do it.

BEN NORTON: All right, we’re gonna take a pause there. That was the end of part one of our interview here with the economist Michael Hudson. He is a Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri Kansas City, and of course the author of many books on economics.

You can find some of his work at michael-hudson.com. We will link to that in the show notes. He has interviews with transcripts and articles.
You can also find some of his economics work and the work of some of his like-minded colleagues at the economics department at the University of Missouri Kansas City website. I will link to that as well in the show notes. You can find the show notes at moderaterebels.com.

In part two of this episode, we’re going to continue our discussion of the house of cards that is the international financial system, the economic system. And in the second part we’re going to talk about his book “Super Imperialism: The Economic Strategy of American Empire.”
This is an incredible book. You know here at Moderate Rebels, Max and I frequently talk about the political and military side of imperialism.

Michael Hudson just spells out, in easy-to-understand terms, how imperialism works at an economic level, how the US government and the Treasury, through the backing of military force, force countries around the world to buy US bonds, Treasury bonds, and how there’s basically just a con scheme where countries pay for their own US military occupation through buying US Treasury bonds.

Michael Hudson explains that all in really simple terms. And we also talk about the rise of China, and how China does pose a so-called threat, in scare quotes, to not the American people but rather to the hegemony of the US financial system — and the main financial instruments, the weapons that the US uses to maintain that hegemony, the International Monetary Fund, the IMF, and the World Bank.

And Hudson describes how, in his terms, the IMF, and the World Bank, specifically, are some of the most evil institutions that are really maintaining the American dictatorial, authoritarian chokehold on the global financial system.

If you want to support this program, Moderate Rebels, and the kind of independent interviews we do like this, giving a platform to some of these voices who you’re never going to hear in mainstream corporate media, you can go to Patreon.com/ModerateRebels. Please consider supporting us. And definitely join us in part 2. See you soon.

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