By Michael Hudson and posted with the author’s permission
My old boss Herman Kahn, with whom I worked at the Hudson Institute in the 1970s, had a set speech that he would give at public meetings. He said that back in high school in Los Angeles, his teachers would say what most liberals were saying in the 1940s and 50s: “Wars never solved anything.” It was as if they never changed anything – and therefore shouldn’t be fought.
Herman disagreed, and made lists of all sorts of things that wars had solved in world history, or at least changed. He was right, and of course that is the aim of both sides in today’s New Cold War confrontation in Ukraine.
The question to ask is what today’s New Cold War is trying to change or “solve.” To answer this question, it helps to ask who initiates the war. There always are two sides – the attacker and the attacked. The attacker intends certain consequences, and the attacked looks for unintended consequences of which they can take advantage. In this case, both sides have their dueling sets of intended consequences and special interests.
The active military force and aggression since 1991 has been the United States. Rejecting mutual disarmament of the Warsaw Pact countries and NATO, there was no “peace dividend.” Instead, the U.S. policy executed by the Clinton and subsequent administrations to wage a new military expansion via NATO has paid a 30-year dividend in the form of shifting the foreign policy of Western Europe and other American allies out of their domestic political sphere into their own U.S.-oriented “national security” blob (the word for special interests that must not be named). NATO has become Europe’s foreign-policy-making body, even to the point of dominating domestic economic interests.
The recent prodding of Russia by expanding Ukrainian anti-Russian ethnic violence by Ukraine’s neo-Nazi post-2014 Maiden regime was aimed at (and has succeeded in forcing a showdown in response the fear by U.S. interests that they are losing their economic and political hold on their NATO allies and other Dollar Area satellites as these countries have seen their major opportunities for gain to lie in increasing trade and investment with China and Russia.
To understand just what U.S. aims and interests are threatened, it is necessary to understand U.S. politics and “the blob,” that is, the government central planning that cannot be explained by looking at ostensibly democratic politics. This is not the politics of U.S. senators and representatives representing their congressional voting districts or states.
America’s three oligarchies in control of U.S. foreign policy
It is more realistic to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of the political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the economic and financial interests of their major political campaign contributors. A Venn diagram would show that in today’s post-Citizens United world, U.S. politicians represent their campaign contributors, not voters. And these contributors fall basically into three main blocs.
Three main oligarchic groups that have bought control of the Senate and Congress to put their own policy makers in the State Department and Defense Department. First is the Military-Industrial Complex (MIC) – arms manufacturers such as Raytheon, Boeing and Lockheed-Martin, have broadly diversified their factories and employment in nearly every state, and especially in the Congressional districts where key Congressional committee heads are elected. Their economic base is monopoly rent, obtained above all from their arms sales to NATO, to Near Eastern oil exporters and to other countries with a balance-of-payments surplus. Stocks for these companies soared immediately upon news of the Russian attack, leading a two-day stock-market surge as investors recognized that war in a world of cost-plus “Pentagon capitalism” (as Seymour Melman described it) will provide a guaranteed national-security umbrella for monopoly profits for war industries. Senators and Congressional representatives from California and Washington traditionally have represented the MIC, along with the solid pro-military South. The past week’s military escalation promises soaring arms sales to NATO and other U.S. allies, enriching the actual constituents of these politicians. Germany quickly agreed to raise is arms spending to over 2% of GDP.
The second major oligarchic bloc is the rent-extracting oil and gas sector, joined by mining (OGAM), riding America’s special tax favoritism granted to companies emptying natural resources out of the ground and putting them mostly into the atmosphere, oceans and water supply. Like the banking and real estate sector seeking to maximize economic rent and maximizing capital gains for housing and other assets,, the aim of this OGAM sector is to maximize the price of its energy and raw materials so as to maximize its natural-resource rent. Monopolizing the Dollar Area’s oil market and isolating it from Russian oil and gas has been a major U.S. priority for over a year now, as the Nord Stream 2 pipeline threatened to link the Western European and Russian economies more tightly together.
If oil, gas and mining operations are not situated in every U.S. voting district, at least their investors are. Senators from Texas and other Western oil-producing and mining states are the leading OGAM lobbyists, and the State Department has a heavy oil-sector influence providing a national-security umbrella for the sector’s special tax breaks. The ancillary political aim is to ignore and reject environmental drives to replace oil, gas and coal with alternative sources of energy. The Biden administration accordingly has backed the expansion of offshore drilling, supported the Canadian pipeline to the world’s dirtiest petroleum source in the Athabasca tar sands, and celebrated the revival of U.S. fracking.
The foreign-policy extension is to prevent foreign countries not leaving control of their oil, gas and mining to U.S. OGAM companies from competing in world markets with U.S. suppliers. Isolating Russia (and Iran) from Western markets will reduce the supply of oil and gas, pushing up prices and corporate profits accordingly.
The third major oligarchic group is the symbiotic Finance, Insurance and Real Estate (FIRE) sector, which is the modern finance-capitalist successor to Europe’s old post-feudal landed aristocracy living by land rents. With most housing in today’s world having become owner-occupied (although with sharply rising rates of absentee landlordship since the post-2008 wave of Obama Evictions), land rent is paid largely to the banking sector in the form of mortgage interest and debt amortization (on rising debt/equity ratios as bank lending inflates housing prices). About 80 percent of U.S. and British bank loans are to the real estate sector, inflating land prices to create capital gains – which are effectively tax-exempt for absentee owners.
This Wall Street-centered banking and real estate bloc is even more broadly based on a district-by-district basis than the MIC. Its New York senator from Wall Street, Chuck Schumer, heads the Senate, long supported by Delaware’s former Senator from the credit-card industry Joe Biden, and Connecticut’s senators from the insurance sector centered in that state. Domestically, the aim of this sector is to maximize land rent and the “capital’ gains resulting from rising land rent. Internationally, the FIRE sector’s aim is to privatize foreign economies (above all to secure the privilege of credit creation in U.S. hands), so as to turn government infrastructure and public utilities into rent-seeking monopolies to provide basic services (such as health care, education, transportation, communications and information technology) at maximum prices instead of at subsidized prices to reduce the cost of living and doing business. And Wall Street always has been closely merged with the oil and gas industry (viz. the Rockefeller-dominated Citigroup and Chase Manhattan banking conglomerates).
The FIRE, MIC and OGAM sectors are the three rentier sectors that dominate today’s post-industrial finance capitalism. Their mutual fortunes have soared as MIC and OGAM stocks have increased. And moves to exclude Russia from the Western financial system (and partially now from SWIFT), coupled with the adverse effects of isolating European economies from Russian energy, promise to spur an inflow into dollarized financial securities
As mentioned at the outset, it is more helpful to view U.S. economic and foreign policy in terms of the complexes based on these three rentier sectors than in terms of the political policy of Republicans and Democrats. The key senators and congressional representatives are not representing their states and districts as much as the economic and financial interests of their major donors. That is why neither manufacturing nor agriculture play the dominant role in U.S. foreign policy today. The convergence of the policy aims of America’s three dominant rentier groups overwhelms the interests of labor and even of industrial capital beyond the MIC. That convergence is the defining characteristic of today’s post-industrial finance capitalism. It is basically a reversion to economic rent-seeking, which is independent of the politics of labor and industrial capital.
The dynamic that needs to be traced today is why this oligarchic blob has found its interest in prodding Russia into what Russia evidently viewed as a do-or-die stance to resist the increasingly violent attacks on Ukraine’s eastern Russian-speaking provinces of Luhansk and Donetsk, along with the broader Western threats against Russia.
The rentier “blob’s” expected consequences of the New Cold War
As President Biden explained, the current U.S.-orchestrated military escalation (“Prodding the Bear”) is not really about Ukraine. Biden promised at the outset that no U.S. troops would be involved. But he has been demanding for over a year that Germany prevent the Nord Stream 2 pipeline from supplying its industry and housing with low-priced gas and turn to the much higher-priced U.S. suppliers.
U.S. officials first tried to stop construction of the pipeline from being completed. Firms aiding in its construction were sanctioned, but finally Russia itself completed the pipeline. U.S. pressure then turned on the traditionally pliant German politicians, claiming that Germany and the rest of Europe faced a National Security threat from Russia turning off the gas, presumably to extract some political or economic concessions. No specific Russian demands could be thought up, and so their nature was left obscure and blob-like. Germany refused to authorize Nord Stream 2 from officially going into operation.
A major aim of today’s New Cold War is to monopolize the market for U.S. shipments of liquified natural gas (LNG). Already under Donald Trump’s administration, Angela Merkel was bullied into promising to spend $1 billion building new port facilities for U.S. tanker ships to unload natural gas for German use. The Democratic election victory in November 2020, followed by Ms. Merkel’s retirement from Germany’s political scene, led to cancellation of this port investment, leaving Germany really without much alternative to importing Russian gas to heat its homes, power its electric utilities, and to provide raw material for its fertilizer industry and hence the maintenance of its farm productivity.
So the most pressing U.S. strategic aim of NATO confrontation with Russia is soaring oil and gas prices, above all to the detriment of Germany. In addition to creating profits and stock-market gains for U.S. oil companies, higher energy prices will take much of the steam out of the German economy. That looms as the third time in a century that the United States has defeated Germany – each time increasing its control over a German economy increasingly dependent on the United States for imports and policy leadership, with NATO being the effective check against any domestic nationalist resistance.
Higher gasoline, heating and other energy prices also will hurt U.S. consumers and those of other nations (especially Global South energy-deficit economies) and leave less of the U.S. family budget for spending on domestic goods and services. This could squeeze marginalized homeowners and investors, leading to further concentration of absentee ownership of housing and commercial property in the United States, along with buyouts of distressed real estate owners in other countries faced with soaring heating and energy costs. But that is deemed collateral damage by the post-industrial blob.
Food prices also will rise, headed by wheat. (Russia and Ukraine account for 25 percent of world wheat exports.) This will squeeze many Near Eastern and Global South food-deficit countries, worsening their balance of payments and threatening foreign debt defaults.
Russian raw-materials exports may be blocked by Russia in response to the currency and SWIFT sanctions. This threatens to cause breaks in supply chains for key materials, including cobalt, palladium, nickel and aluminum (the production of which consumes much electricity as its major cost – which will make that metal more expensive). If China decides to see itself as the next nation being threatened and joins Russia in a common protest against the U.S. trade and financial warfare, the Western economies are in for a serious shock.
The long-term dream of U.S. New Cold Warriors is to break up Russia, or at least to restore its Yeltsin/Harvard Boys managerial kleptocracy, with oligarchs seeking to cash in their privatizations in Western stock markets. OGAM still dreams of buying majority control of Yukos and Gazprom. Wall Street would love to recreate a Russian stock market boom. And MIC investors are happily anticipating the prospect of selling more weapons to help bring all this about.
Russia’s intentions to benefit from America’s unintended consequences
What does Russia want? Most immediately, to remove the neo-Nazi anti-Russian core that the Maidan massacre and coup put in place in 2014. Ukraine is to be neutralized, which to Russia means basically pro-Russian, dominated by Donetsk, Luhansk and Crimea. The aim is to prevent Ukraine from becoming a staging ground of U.S.-orchestrated anti-Russian moves a la Chechnya and Georgia.
Russia’s longer-term aim is to pry Europe away from NATO and U.S. dominance – and in the process, create with China a new multipolar world order centered on an economically integrated Eurasia. The aim is to dissolve NATO altogether, and then to promote the broad disarmament and denuclearization policies that Russia has been pushing for. Not only will this cut back foreign purchases of U.S. arms, but it may end up leading to sanctions against future U.S. military adventurism. That would leave America with less ability to fund its military operations as de-dollarization accelerates.
Now that it should be obvious to any informed observer that (1) NATO’s purpose is aggression, not defense, and (2) there is no further territory for it to conquer from the remains of the old Soviet Union, what does Europe get out of continued membership? It is obvious that Russia never again will invade Europe. It has nothing to gain – and had nothing to gain by fighting Ukraine, except to roll back NATO’s proxy expansion into that country and the NATO-backed attacks on Novorossiya.
Will European nationalist leaders (the left is largely pro-US) ask why their countries should pay for U.S. arms that only put them in danger, pay higher prices for U.S. LNG and energy, pay more for grain and Russian-produced raw materials, all while losing the option of making export sales and profits on peaceful investment in Russia – and perhaps losing China as well?
The U.S. confiscation of Russian monetary reserves, following the recent theft of Afghanistan’s reserves (and England’s seizure of Venezuela’s gold stocks held there) threatens every country’s adherence to the Dollar Standard, and hence the dollar’s role as the vehicle for foreign-exchange savings by the world’s central banks. This will accelerate the international de-dollarization process already started by Russia and China relying on mutual holdings of each other’s currencies.
Over the longer term, Russia is likely to join China in forming an alternative to the U.S.-dominated IMF and World Bank. Russia’s announcement that it wants to arrest the Ukrainian Nazis and hold a war crimes trial seems to imply an alternative to the Hague court will be established following Russia’s military victory in Ukraine. Only a new international court could try war criminals extending from Ukraine’s neo-Nazi leadership all the way up to U.S. officials responsible for crimes against humanity as defined by the Nuremberg laws.
Did the American blob actually think through the consequences of NATO’s war?
It is almost black humor to look at U.S. attempts to convince China that it should join the United States in denouncing Russia’s moves into Ukraine. The most enormous unintended consequence of U.S. foreign policy has been to drive Russia and China together, along with Iran, Central Asia and other countries along the Belt and Road initiative.
Russia dreamed of creating a new world order, but it was U.S. adventurism that has driven the world into an entirely new order – one that looks to be dominated by China as the default winner now that the European economy is essentially torn apart and America is left with what it has grabbed from Russia and Afghanistan, but without the ability to gain future support.
And everything that I have written above may already be obsolete as Russia and the U.S. have gone on atomic alert. My only hope is that Putin and Biden can agree that if Russia hydrogen bombs Britain and Brussels, that there will be a devil’s (not gentleman’s) agreement not to bomb each other.
With such talk I’m brought back to my discussions with Herman Kahn 50 years ago. He became quite unpopular for writing Thinking about the Unthinkable, meaning atomic war. As he was parodied in Dr. Strangelove, he did indeed say that there would indeed be survivors. But he added that for himself, he hoped to be right under the atom bomb, because it was not a world in which he wanted to survive.
Thanks, Dr Hudson, for another of your marvellous articles casting light into dark corners and explaining things that most of us did not understand.
Maybe Russia, as well as China, could and should benefit from your advice…
they only want Russia’s natural resources and territories instead of peace and coexistence. Never before has Europe shown its true face as it now has brazenly shown its nations, using Ukraine and Zoolinsky to satisfy its ambitious desires on Russia at any cost. zelensky hides. where is he? Talking to Trump about starting a new reality show. Do you want to be a president? He couldn’t reach Poland, the airport was under attack. So he’s defending his country in a makeshift bunker outside Kiev, waiting for DHL to deliver his Starlink Terminal on Tuesday. Either the Americans and NATO are stupid, idiots or devils at heart whose only intention is to force adversary countries to accept their “ways of life”, to accept the false, hegemonic and lucrative, deceitful paper money and broken financial system. Bad at best. War makes money, lots of filthy money and keeps the false economy profitable for the warlords. As long as there are brainwashed supporters, the conflict can only be resolved by the total destruction of the aggressor empire sooner or later. Prepare for the worst.
No they don’t, people who know what really happened in Ukraine will never turn against the Russians, for example the CIA military coup in Ukraine to overthrow their elected leader and the 8 years later when the Ukrainians bombed the republics separatists focusing on women, children and elderly people. I stand in solidarity with Russia, as do all who know and love the truth. Many Ukraine supporters appear to be part of a death cult. They would rather have a global nuclear war than leave Ukraine to its own devices. And the West is showing collective insanity. Perhaps many people here are too young to remember the Cold War. Go watch Threads, or if you can’t take it try The Day After.
The Anglo-Saxons are about to climax here – it has been their wet dream for centuries to see the Slavs attack each other… It was enough to poison the weakest of them – the Ukrainians – with rabid nationalism, and the result of that we are now witnessing In real time…
The West is so arrogant, stubborn and reckless… what’s wrong with accepting Russia’s demands?
Making Ukraine a neutral country, demilitarizing and denazifying that country, so simple. Why should NATO be adamant about getting closer to Russia? If that’s not aggression, I don’t know what is.
Vielen Dank für diese Darstellung, die ich genauso teile.
Do you have anything else apart from agitation and projections?
Do you know the difference between Russia & PRussia?
How can a prisoner be imprisoned?
I suppose you can shoot into a dead man and say I have killed him now the third time.
One thing everyone might want to be clear about: God does not take bullshit.
The more matter Jewmerica & hyenas are harvesting the more spirit they are loosing.
To “get your money for nothing and your chicks for free” shows the real stupidity of the selfchoosen ones.
One thing he missed though is the fact that these three groups are wagged by just one group.
The Oligarchic group that controls the Federal Reserve wherefrom comes the money that allows these other Oligarchic groups to function.
Hudson is already an economic advisor of the Chinese government. They even told him to write an update of his book “Super-Imperialism”, which he did. He’s also (or was at least) a professor of economics at Peking University.
MSM won’t interview him in US because he is critical of Fed reserve, but China is smart enough to employ him. One reason China is doing better.
Thank you very much – Once again, you’ve knocked it out of the park!
Wicked article. Thank you so much Dr. Hudson. A lot to think about. We are honored to benefit from your erudition & vast experience & insight.
Related but different –
Guess who’s back?
Sergei Glazyev !!!
He also gets a mention – via a reference to an old vineyardsaker link from 2014 – in this article by Mike Whitney:
The question is: will Putin listen to him now? Finally?
You beat me to it, Dreddster.
I’d spotted reference to Glazyev’s ‘thoughts’ at Moon of Alabama, read, it and immediately thought of Michael Hudson, wondered what he was thinking, came here, and here he was.
Having listened and read quite a bit of Doc Michael, I thought Glazyev’s recipe would receive a good many ticks from Doc Michael.
Example; ‘Kill’ all speculators, particularly foreign speculators.
Another; Instead of the Russian Central Bank following the designs of the Amerikan (and City of London Corporation) model, become more ‘Chinese like’.
Don’t if you know this but –
Glazyev was somewhat active on the airwaves around 2014-2015 – Maidan, the start of the “ATO”! in the East, the rise of the Ukrainian far-right etc.
There are a few (not many) videos of him on Youtube from back then.
He predicted absolutely everything – and was adamant that Russia had to act back then.
I had a feeling that Putin was referring to him (and others) when he said in his big speech announcing the independence of the Donbass – “I should have done this long ago”.
Check this out from June 2015 – it is as good as any introduction to this whole crisis, it predicts absolutely everything – and so is still 100% relevant & significant:
You have to keep pinching yourself – that he is saying this – in 2015!!!
Very smart man.
A lot of what he says – echoes Dr. Hudson’s article above, which fills in all the details.
These are the kinds of russian intellectuals that Andrei Martynov and the Saker keep referring to – and comparing to the pygmies in the west.
As the video goes on it gets scarier & scarier. He keeps talking in his calm manner – fully realistic & insightful.
And what he says at the very end is really chilling:
“So we have to understand that the key to resolving the catastrophe in Ukraine is to be found in Washington. That’s where Nazism has to be defeated.”
Glazyev video, brilliant.
If Putin didn’t listen then, wondering if he’s gonna follow his advice now:
“So we have to understand that the key to resolving the catastrophe in Ukraine is to be found in Washington. That’s where Nazism has to be defeated.”
Thanks Dreddster, will take a look. I had heard mention of him before, but mostly in passing.
As you note, reading the translation at Helmer’s site, of what he’d said….what?…Friday last?…..I too saw many ‘echoes’ of the great Doc Hudson, particularly in the ways Glazyev explains the Russian Central Bank has to upended, and have their course corrected.
That’s the great Doc Hudson on China, to a tee (so, that would be a very big, bolded tick from Doc Mick, methinks).
I’ve long felt Putin’s biggest ‘miscalculation’ was to think he could just let the Russian financial ‘heart’ roll along in the hands of people who think ‘boiler plate’ Yank financial capitalism – not industrial capitalism.
Time for a bit of ‘Russian socialism with ‘Russian characteristics’.
Many will scoff at such a notion. People who do so have not read or heard enough from the great Doc Hudson.
There’s a very good reason the Chinese offered to pay for the translation and publishing of Hudson 2nd edition of ‘Super Imperialism’ – they wanted to understand how a nation can be run with the state keeping an iron grip of the financing of the economy’s ‘spine’, and allow the ‘personal exertions’ of lots of little capitalists to grow off that spine.
And, to put not too fine a point on it, that’s the guts of Marx – it’s the national ‘characteristics’ employed, not the corporate characteristics, that differentiate national economies.
I’ve only just now had the chance to watch the video of Glazyev you provided, Dreddster.
TWHM – and others
Already back in 2014/2015 Glazyev was strongly recommending a bunch of “Hudson-like” economic changes to Russia’s economy as he was not happy with the state & pace of development of the economy.
I don’t remember all the details – but I think chief amongst them was lowering the interest rates to stimulate businesses & growth.
Obviously the backdrop has changed significantly now and the economy is being placed on a “war footing”.
I imagine he will be listened to more now – although there will be many high-level advisors providing their thoughts & analyses too, so I don’t know how much standing he has with Putin and the top brass.
One thing is clear though – the 30 year sincere & constant attempts by the Russian govt at integration with the west or at minimum a peaceful, amicable & beneficial (win-win) relationship are over – frankly through no fault of their own. Putin said recently about the special operation in Ukraine: “I had no choice”.
The Amis have not given up on their Neocon-inspired dreams of world domination.
All those papers from the 90’s – the Wolfowitz doctrine, PNAC (Project for a New American Century) etc – are still very much in force.
Along with those – we have Zbigniew Brzeziński’s Grand Chessboard book which highlights the huge importance of Ukraine as a “geopolitical pivot”. Note that he was venerated in American circles for bringing down the USSR via Afghanistan (“We have given the USSR it’s Vietnam”)
Sorry if I’m jumping about a bit – there is so much information to digest – I’ve been following it all for a very long time.
And this site is really brilliant – Thank-you Saker! Thank-you so much!!!
One more important thing on Ukraine.
Watch this – it will blow your mind as much as the last video – and it is imperative that more people become aware of this:
The CIA – 70 years in Ukraine: https://www.youtube.com/watch?v=jRicZc-cZ0I
Put simply, the war business is a racket and in the West it is promoted by all the other rackets that benefit from its enormous profits. Peace is only obtained by either acceding to the hegemon’s demands or suffering from its violent force, unless equal or greater military capability can be developed and brought to bear (no pun intended). The latter is what we’re seeing now with Russia’s attempt to defeat the aggressive proxy regime in the Ukraine, and in the broader effort to influence the policies of the surrounding countries toward respect of Russia’s security. If they are successful, the transformation to a more just multi-polar world may finally be initiated, which could be a significant trend toward peaceful resolution of future conflict.
Thank you so much Dr. Hudson
Here, here! Brilliant always.
>My only hope is that Putin and Biden can agree that if Russia hydrogen bombs Britain and Brussels,
> that there will be a devil’s (not gentleman’s) agreement not to bomb each other
1. Putin and (especially) Biden are just staff…”faces” if you like. Strategic decisions are made elsewehere. Replacing those names with Ставка and Pentagon may be closer to reality.
2. i do not see any possibility, that the driving force behind the chaos will be spared, or even – who knows – *wants* to be spared (fundamentalist, evangelical death cults, thirsting for the apocalypse like Premillennial
ism has its place in US politics)
Otherwise an excellent article on an invisible topic; invisible not only in corporate media.
We’re seeing a COLOSSAL failure of Russia’s financial and monetary policies.
Russia hasn’t addressed its financial failures over the last two centuries and keeps on repeating its financial and fiscal mistakes.
Vladimir Putin and his financial team, particularly its central bank group, never saw the Financial Empire clearly and its different private Currencies ($,€,£…). They were under the mistaken assumption that they’re separate entities and not different sides of the same coin. Their De-dollarization strategy was flawed, as nearly 60% of the funds (of $630 billion) are being frozen. Putin needs to fire the architect of this flawed investment strategy. Even in the recent China deal Russia wanted to be paid in euros (maybe Russia wanted to get euros from a different source, in case the trade with EU broke down). Will Russia address its financial failures?
Russia needs to immediately declare that nations that are freezing its financial assets to strangle Russians are declaring war against Russia and thereby a potential target for attacks. It needs to confiscate all assets of those nations that are freezing its assets. Russia will do better by selling its national resources in its national currency, Rubles. This is a great opportunity for Putin to modify all contracts to rubles with unfriendly countries. Sell gas to the EU only in Rubles. Sell oil to the U$A only in rubles. If Russia doesn’t act proactively and immediately in the financial sphere then it is to blame itself for its hardship. Will Russia grab the opportunity to get its financial house in order?
Rather sell only in gold. For why, see
or Dmitry Orlov https://cluborlov.wordpress.com/
Who determines the price of gold? Gold is just another manipulated commodity. Once it’s securitized, and packaged up to sell, it is easily manipulated!
Digging up gold and then burying it again in underground vaults is an exercise in futility.
How many times nations using the gold standard have defaulted? How about the UK & U$A under gold standard? Please understand gold’s history before promoting another instrument of the Private Imperialist Oligarchy.
This article goes to the heart of the matter – the material heart of the matter. Thank you very much indeed,
It’s %100 clear – the NATO is waging total war on Russia and this won’t end until Russia becomes another Yugoslavia… isn’t this is the perfect time for Eurasia to start the operation: BREAK THE BACK OF THE DOLLAR EMPIRE? Look forward to see that Russia/China deliver effective military hardware ( S-400, Sukhoi 35…) to Iran so that Tehran could immediately close off the Strait of Hormuz for maintenance/clean up purposes until further notice. I also would like to see Syria takes back the Golan Heights…etc.
Dr. Hudson, What is your advice for the Russian Federation in response to the economic sanctions introduced against it and the attack on the Ruble?
Dr Hudson would say NEVER defend it as if it was fixed exchange rates.
Dr Hudson understands MMT and worked with several MMT’rs in Greece and Italy and at University of Kansas with Stephanie Kelton and Randy Wray.
Just let the floating exchange rate find its level. If imports become too expensive because the Rouble falls. Russians will stop buying them as they only have a set amount of disposable income every month to spend on goods and services.
Russians will start buying local instead and help the local economy.
Why after Brexit when the £ dropped from 1.5 to 1.18 it was exporters to the UK that felt the pain.
As the exporters to the UK were losing their market share. A market share they spent years building up because their exports become too expensive. They had some tough choices to make it they wanted to keep their market share.
Cut hours worked
Go bankrupt like some of the Irish mushroom farmers and beef farmers.
Or slash their prices.
Or a mixture of the above.
As soon as exporters to the UK slashed their prices to try and keep their market share. The floating exchange adjusts upwards as the £ gets stronger again.
Russia made the mistake of trying to defend the Rouble using foreign exchange reserves in the 80’s and 90’s. What you do with fixed exchange atrs. They need to learn from that experience.
Stop taking on foreign debt. Their debt has to be in Roubles not dollars or Euros.
Warren Mosler stepfather of MMT who Dr Hudson has worked with explains it here.
Flew to Italy and explained to Italy and their central bank and treasury there was no need to default on their debt when they had the Lira. Italy listened and never defaulted.
Here’s Dr Hudson at the MMT conference in Italy.
I don’t believe VVP would have ordered the assult on Ukraine’s devils without being confident China is on board to dedollarize the world , so the true existantial threat is on the US ruled world order and not on Russia or China …Taiwan next!
Every crisis is a challenge or an opportunity, it all depends on how one play it.
China can help the world and Russia, by moving its assets out from the US$, €, £, ¥,… unless a written guarantee that they will never be frozen and equivalent gold from those countries deposited in China. Also, it can use the current developments to declare that it will only offer its minerals, goods and services in Renminbis. China can offer its digital yuan platform to nations for trading in respective national currencies. No more trade in reserve currencies. This will be a game changer.
The EU has shown its true colors and its malice is out in open. The US$, €, £,… are private currencies of the same private Financial Empire. Any nation trading using these private currencies is enabling private plantation and vassal states on the planet. Is your nation for good or evil? Is your nation trading in its national currency or private reserve currencies?
If Russia doesn’t address its financial sphere at this opportune time then it is at a significant disadvantage. Remember, this is how Duke of Wellington defeated Napoleon. Who provided gold at that time?
A remarkable essay, where complex subjects and issues are explained in a didactic, luminous and accurate way. Very likely, it seems that in the case of a total break with Russia the West would be by far the most damaged. Perhaps that comes from this why Biden and the European leaders have ordered Zelensky to raise a white flag to Putin.
Congratulations, Dr. Hudson, and thank you very much for your brilliant teachings.
Very welcome exegesis of the economic foundation of the Empire’s actions. Provided below is some additional economic data. Additionally, the Russians must establish a stable proxy government with control over reliable security forces after victory. There are two main US thrusts. 1) Suck Russia into an endless war against a local insurgency, and 2) weaken the Russian economy with economic isolation. The recent economic moves will cause the collapse of the ruble, serious inflation, and at least 2-3 years of recession in Russia. The hope is that a serious economic downturn coupled with a grinding insurgency will destabilize Russia and cause regime change or at the very least weaken it as an ally of China. Believe the following two links are valuable in understanding the US strategy outlined above.
The CIA in Ukraine:
The Economics of Russian Sanctions:
The Biden administration accordingly has backed the expansion of offshore drilling, supported the Canadian pipeline to the world’s dirtiest petroleum source in the Athabasca tar sands, and celebrated the revival of U.S. fracking.
I’m sorry. I quit reading right here. How is shutting down Keystone supporting the “ethical oil” from Alberta supporting the oil sands? How is supporting Whitmer in closing the Michigan/Ontario pipeline supporting the oil industry? How is ending oil exploration on federal lands supporting the oil industry? And are seriously asserting the extant US “leadership” is supporting fracking? I’m just a punter who lives in the sticks and I know for a fact that this is complete and utter crapola. Perhaps this is just an editing error, otherwise it is fiction.
Because Biden only “promised” to do these things, in reality he has done the opposite:
“New federal data shows the Biden administration approved 3,557 permits for oil and gas drilling on public lands in its first year, far outpacing the Trump administration’s first-year total of 2,658.”
Fracking grew tremendously under Obama/Biden and he is just paying lip service while allowing it to go ahead.
The DEMS have to give a few tokens to bamboozle the public while quietly supporting the extractive industries and backtracking on bigger questions. Don’t “read their lips”, watch their actions!
Thanks so much for this. M. Hudson always connects the dots. Thanks also to the Saker for providing the Russian perspective… our RT channel got cut off. Canadian and US media just lies. So, I’m very grateful for this. Crossing my fingers that the West sees reason…but not holding my breath.
“If China decides to see itself as the next nation being threatened and joins Russia in a common protest against the U.S. trade and financial warfare, the Western economies are in for a serious shock.”
It could still take a few weeks before this step is completed. In China, preparations are in full swing. For China, the right timing is crucial. I hope it will not take too long. There have been rumors of the PLA invading Taiwan. China has just announced 4 military drills in the South China Sea next to Taiwan. It would be good to shift the West’s focus from Ukraine to Taiwan.
“Will European nationalist leaders (the left is largely pro-US) ask why their countries should pay for U.S. arms that only put them in danger, pay higher prices for U.S. LNG and energy, pay more for grain and Russian-produced raw materials, all while losing the option of making export sales and profits on peaceful investment in Russia – and perhaps losing China as well?”
Europe will continue to blame Russia for their own failures and imminent downfall. Western politicians know no morals or ethics. These CIA puppets have no IQ. The masses are indoctrinated by the mass media, dissenters, not followers are immediately punished. The pandemic masses were a good textbook for successful nudging and social dividing in the West. The mass demonstrations over the weekend clearly showed that the masses are looking for common cohesion in the common “anti-Russia”. This is very dangerous, because dissenters are immediately silenced with draconian measures, group wedges. This is happening on all social levels from the board of directors, scientists, university professors, to policemen, cashiers, students, etc. Media channels are warming up, first russophobic scolding and soon they will publish sinophobic propaganda. The Europeans and especially the Germans will wake up when it is too late.
I support Russia. Although, we can’t say it out loud, not just yet, just as we had to keep quite during US’s blackmailing those opposed to taking the untested biomedical weapon injections for a flu-like illness, genetically engineered or not.
I”m with the one commenter above who writes “I stand in solidarity with Russia, as do all who know and love the truth.” I do too. As an American Deplorable I understand personally how much America hates its own countrymen so to believe its treatment of Russia is fair and just is a far, far stretch.
The truth stateside is that the election was stolen. I’m not a Trump fanboy but all the suppressed but available evidence points to that. What kind of “Democracy” is that, a Ukrainian “Democracy.” I’m embarrassed by the way our country and its sycophant media has disparaged and demonized the Russian people. US deplorable s know that characterization well and I hope the rest of the deplorable can see through the BS to understand that Russia has legitimate concerns it has tried to work out for years if not decades, only to be put through the Western style lawyer double and triple talk maze.
In this day and age what is there to be patriotic about. A good fraction of our country wants to secede. We have Schools that don’t teach, Police that don’t police, Leaders that don’t lead, health workers that kill, men that wear dresses, and over credentialed soft-skilled feminist women that are so miserable that over half of them on a cocktail of anti-depressants and Trader Joe wine.
One only look at our president to understand how far America has fallen. I think he accurately represents what we are. He is a fake, controlled, demented, incoherent, sock puppet. Even when he wasn’t the octogenarian vegetable he is now, he was stupid, corrupt, craven, rapacious, double-dealing mendacious lifetime politician. I have more respect for my dog groomer.
Sounds right to me…
With all due respect to Michael Hudson, Germany is not a victim.
Germany is a victimizer.
Germany is a crime partner of America with their allied machinations in Ukraine against Russia.
The following article provides the backstory of Germany’s criminal role in stoking the conflict in Ukraine for the past several years–and, more importantly, what Germany’s broader game is:
“For a start, Germany’s involvement in the Ukraine question itself is highly controversial. Germany actively promoted the unrest in Ukraine in late 2013 to push then President Viktor Yanukovich to hurry through his country’s EU accession. German intelligence encouraged street protests in Kiev while Berlin did the arm-twisting, which ultimately forced Yanukovich to agree to hold mid-term elections to test people’s will.
Germany, France and Russia backed such an approach as the best way out of the stalemate. However, within forty-eight hours of that deal, protests took a violent turn in Kiev’s main square and agents provocateurs working for western intelligence deployed snipers at vantage points to attack the security forces….
The bottom line is that Germany had a hand in destabilising Ukraine. The events in Ukraine expose the propaganda lie that its foreign policy offensive serves the interests of democracy and freedom. In reality, the Berlin government is working with an opposition movement whose leaders include Oleh Tyahnybok of the neo-fascist All-Ukrainian Union, or “Svoboda.” (Tyahnybok said recently that Russia would have to be “dismembered” and divided into “20 nation-states”!)….
This being the sordid backdrop, the big question is: What is Germany really up to?
The heart of the matter is that Germany is back on the path of militarisation for the third time in the past century. The vaulting German ambition is once again surfacing, first articulated by then the Foreign Minister and current President Frank-Walter Steinmeier in a Bundestag speech — and in a speech at the Munich Security Conference — in late January-early February 2014 to the effect that Germany was “too big and too important” to confine itself any longer “to commenting on world politics from the sidelines.”
Just like the Americans, British, Anglosphere or EuroNazi nations in general, Germany will reap what it has sown and fully deserve what is coming for it.
As they never fail to broadcast to the world, they all #SupportUkraine–and thus its essential neo-Nazi political elements like the Azov Battalion.
Here is the weblink to the article that I mentioned:
Germany Can No Longer Be Put Down
Ambassador (ret.) Badhrakumar is an eloquent son of communists with a fine nose for sniffing out Nazis. He is largely correct about the duplicity of Germany’s ELITES. This is another key paragraph:
“Germany is playing a brilliant game of hedging. It is heavily dependent on Russia for its vast market, massive natural resources and energy supplies, and, therefore, adopts a “win-win” attitude in the bilateral ties. However, Germany cannot and will not jeopardise its trans-Atlantic bonds, either. Atlanticism remains as the core of German strategies.”
However he misses a lot of nuance about German ordinary folks, most who are not interested in fighting Russia. And this article is now dated and useless given events of last 2-3 days. The German elites are as removed from the majority of their people as are the USUK elites.. German people are quite pacific and as brainwashed as any westerner since WW2. This Neo-Nazi and aggressive agenda is pushed by duplicitous hypocritical and satanic elites, sometimes forced by USUK. But I agree, often these elites are on “same transatlantic team.” Russians and the world have been on to them for a long time now..
So this false game of innocence was largely for internal consumption.
Regardless, all this is now moot. Germany and Europe made decisions in last days which cut off links with Russia and which will see it waste away. Medvedev was most mockingly prescient – Europe AND its institutions will be “almshouses” looking for handouts in a few years, like Island natives impressed by glass beads and trinkets a few centuries ago. Without energy, food, and a dead-weight ideology, there will be no need to worry about Europe as a factor quite soon.
“German intelligence” (BND) is a wholly-owned subsidiary of the CIA. ’nuff said.
It is worse than being a mere subsidiary of the CIA (debatable in itself).The BND had its own mind and special mission from Day #1.
The BND was formed by Nazi General Gehlen, who also led the intelligence work on the Eastern Front which killed almost 30,000,000 Soviets..
Do you see the optics? On the day Russia started its denazification campaign and faced the combined West, the current German head of the BND was in Kiev, organizing a neo-Nazi insurgency… and less than a week after the sitting German Chancellor laughed about genocide in the Donbass.
Current German elites have willfully burned bridges which will take generations to repair..
I think the role of Germany in this crisis looked very ambiguous for awhile. It seems to me that on the surface Germany hides behind NATO, the US and the WEF agenda. However I know nothing of the private conversations the German diplomats have with Russia and the other European countries. They may be discussing alternative end game strategies different than what the MSM media are being fed as the official script. Time will tell. However and simply put, I think Germany has finally shown her true colors and her bottom line.
With soaring inflation and resource shortages hitting Europe more and more, won’t businesses in China, India, and elsewhere be developing schemes to undercut Europe, and especially Germany, in markets in which Germany/Europe are currently major players? Will Germany/Europe even be able to afford a massive arms build up as its economic sinks into depression and workers are laid off en masse? I think the real anti-West sanctions may well end up being carried out by businesses out-competing Europeans everywhere across the planet beyond the West’s own markets, which themselves may soon have to start using protectionism to keep out exports in order to protect themselves? If that’s wrong, why?
I would expect that Russia will begin manufacturing patented drugs and selling them for a greatly reduced price. Pharmaceutical will have fatal case wide eyes and jaw dropping.
This article should discuss options open to Europe to close down all ties to the USA.
As the USA is clearly acting as a warring enemy of Europe, all diplomatic missions of the USA should be forcibly shut down, every USA corporation in Europe should be shut down forever and no US citizen should be allowed to live in Europe until 2100 without signing a statement describing US foreign policy since 1948 as the most inhuman and psychopathic behaviour of evil satanists imaginable.
The US dollar is already toilet paper.
If Eurasia sells the dollar en masse, the USA is finished financially.
Europe is playing Eva B. to the USA’s Adolf H. The suicide pact is rock solid. Any discussion of options to dump the USA would be a nice theoretical exercise, but that’s all it would be.
Wonderful food for thought as usual, Michael. One point at the end-Russia has definitely renounced first use of nukes, unlike the USA of course.
“My only hope is that Putin and Biden can agree that if Russia hydrogen bombs Britain and Brussels, that there will be a devil’s (not gentleman’s) agreement not to bomb each other.”
Why on earth would Russia bomb the monkey(s)? It will go after the organ grinder. If things go bad, mainland US will be hit. It will feel the consequences of its intransigence.
I have tried to write and publish about the US occupation of Germany (via its BRD puppet regime) for the last 20 years. It cannot be done in Germany or in German language, because it is considered a crime there. In the 80s, my father bought copies of Japanese anime (from the black market), and we had toys almost exclusively from Japan – ziods, gundam, godzilla, ghibli, and watched Japanese animated TV series (Wicky, Heidi, Sinbad…). Then, one year, I can’t remember which one because I was a child, but America SMASHED its iron fist on Japan and subverted all German-Japanese ties. Everything Japanese disappeared, and Germany and Europe were force-fed Mattel toys, US animation, und US series for kids on regime tv. Japanese movies were banned, and could only enter Europe through US distributors. This was not normal evolution or a free market. The Americans ended Japanese influence, just like that. Decades later, I asked leaders why Germany never has any Japanese, Chinese, Indian, Russian things – only American stuff. Their memorized answer is: because America is best. This is not true. America is the occupier. In 2012 I met the author of ‘Japan as Number One’, Ezra Vogel. The man gave a talk at Peking University talking freely, as if it were nothing, about his CIA work at Harvard on Japan, and how the USA ENDED Japan influence in the world, leading to 3 decades of decline or stagnation. Most Japanese firms like Sony, Sega, Nintendo are actually US-owned or -run. So these big CIA-Harvard-Washington overlords are responsible for a small boy me back in Germany in the 80s all of a sudden not being able get more Japanese toys and anime, but was forced to consume US stuff. Today, Germany and Japan ties are almost non-existent. The US drove a wedge in between them. Both markets are US occupied. That is the true meaning of ‘democracy’ – it is code for foreign rule. If they call you a ‘democracy’, that means you lost the war and are now fu**ed.
Thanks for sharing. My feeling is that US animation is desigbed as a form of propaganda for the kids to swallow. US animation used to be fun in the 1960’s but I can’t watch what my grand-children watch without seeing the propaganda tricks. Fortunately the young people are bright and they will learn to filter out the chaff eventually.
Niccolo Soldo (https://niccolo.substack.com/p/fuck-it-russias-final-break-with?utm_source=url):
“Ukraine is disposable in American eyes. That warmongering bitch Vicki “Fuck the EU” Nuland (she runs Russia policy in the US State Department) must be laughing her fat and disgusting ass off at how stupid the Ukrainians are to willingly sacrifice themselves for her project to surround, neutralize, and dismember Russia. All is going according to plan.
This crisis was not about Ukraine. Ukraine only provided the setting for which this crisis is playing itself out. The point of this crisis, from the US perspective, is to effect a final cut-off of Russia from Europe economically, so as to reduce Russian influence and increase US dominance on the continent while cashing in by way of LNG exports to replace Russian gas deliveries. That’s it. The USA is more than happy in seeing Kiev occupied by Russian forces, because it kills the NordStream 2 pipeline, and opens up new business for American LNG companies, as well as bigger business for US arms exporters.
The ideal situation to them is to see the Russians invade, overextend themselves, and fall into an Afghanistan-type quagmire, in which Ukraine is set ablaze, and Ukrainians, backed by massive arms deliveries from the USA, engage in a partisan/mujahideen guerrilla war with Russian forces to drain Russia and to embarrass it. Who cares how many Ukrainian cities are leveled, how many civilians die? It will all be pinned on Vladimir Putler anyway, at the Hague War Crimes Tribunal that they dream of in their sleep.”
Mr. Hudson, Germany is enjoying Western interest rates far below inflation and incredible deficits based on European Capital. I pay 3.5% for my 30 year mortgage and I assume Russians pay 20% now. How can you say they lost? The dollar, Euro, we all enjoy certain benefits, including protection of NATO, built to kill any one who doesn’t want to be “taxed” by the empire. But most of the benefits are wealth, name, fame, beautiful women (or whatever), and power. Surely Europe won its place at the table of noblesse oblige. They all feel very safe and well fed even in deep deficit. And the Brits love their bully, even their women. Don’t you have to be desperate to lend at 3-4% for thirty years when inflation is raging at 10%, and real estate, land, anything of physical value has doubled? Certainly, we, the consumers of cheap interest rates must celebrate our deal with the banks. I mean imagine, borrowing money at 3% and buying Bitcoin, or a futures in oil, or even wheat – you’d be rich! And God, how I love AI telling me how to write my emails. “Hey, Alexa. I need another beer.” Hey, we’re winning big time.
If Putin hasn’t read it yet.
His economic advisor better have.
Dr Hudson has worked with Stephanie 100’s of times.
Filled a sports stadium in Italy together. Teaching Italians how they can leave the EU.
The Chinese don’t let Hudson mention the small ethnic group, 2%, that comprises the majority of the donations? Such as the billionaires from that group who control Trump?
Such as the Secretary of State, the CIA Director, and so many more around The Biden, all being from that 2%?
Can’t even mention it, the elephant in the room, and especially since the war is taking place on the land of ancient Khazaria.
Oh, I understand, in Washington they are all “Anglo-Saxons.”
Take note … It will become very important.
Is exchange rate depreciation inflationary?
Trade and external finance mysteries – Part 1
Trade and finance mysteries – Part 2
It is imperative the great country of Russia understands the above.
Avoids the Orwellian traps set by the IMF, World bank and the Washington consensus called mainstream economics.
Quoting you: “The recent prodding of Russia by expanding Ukrainian anti-Russian ethnic violence by Ukraine’s neo-Nazi post-2014 Maiden regime was aimed at (and has succeeded in forcing a showdown in response) the fear by U.S. interests that they are losing their economic and political hold on their NATO allies and other Dollar Area satellites as these countries have seen their major opportunities for gain to lie in increasing trade and investment with China and Russia.”
In short – In desperate fear of the BRI. But, being who they are, they did it in the demented assumption that no one would ever buck up to their haughty, arrogant, forceful way of “diplomacy”.
Having read your “Super Imperialism”, Third Édition, I must admit that I really appreciate your clarifications as to the présent three-prong power structure in the US and the outlook as to things to come (didn’t expect it to be that gloomy but what can one do). Praying our almighty God is maybe all that can be done. He wouldn’t let His création destroyed in this manner.
Great article but you forgot to mention the fourth power structure in the US, which might be more powerful than a combination of the others. The fourth structure is the dream factory/brain washing machine that is the entertainment industry, with hollywood leading the field along with music, tv, media, news, pornography, etc. This structure greases the wheels, so that the other three structures don’t seem like such a big problem to the masses.
America hasn’t defeated Germany anytime in the last century.
Thank You Dr. Hudson.
I always appreciate your insights and books. I had felt for years that Vietnam War spending crashed the %US, but did not understand the drain of gold by that war until you explained it.
I will post this on my blogs drjohnsblog.substack.com and http://www.johndayblog.com .
May God’s love prevail (not rentiers)!
@Robert Rangewolf on February 28, 2022 · at 6:41 pm EST/EDT
The Chinese don’t let Hudson mention the small ethnic group, 2%, that comprises the majority of the donations? Such as the billionaires from that group who control Trump?
I suspect that Mr Hudson avoids this topic as his University tenure may be withdrawn in about 3.5 mins.
I can think of no other reason, and it is not the Chinese!
Having read Olaf Sholz’s speech concerning Mr Putin, a man for whom I regularly pray, I would have to say that Russia has been seriously defamed.
There is going to be a consequence, one which will involve “the head of the dog” or Washington rather than the hind leg or Berlin.
This will be Germany’s first and final victory over America!
What a nutty world to live in – perhaps at one level Herman Kahn was right.
Still more important: Who controls the dog?
Thank you Dr. Hudson for a very sobering article.
“My only hope is that Putin and Biden can agree that if Russia hydrogen bombs Britain and Brussels, that there will be a devil’s (not gentleman’s) agreement not to bomb each other.”
Question: If Brussels is hydrogen bombed, couldn’t we assume that *Mons, Belgium will also be hydrogen bombed?
Q2: Would anyone in their right mind trust the hegemon enough to make such a deal?
*The NATO headquarters are located in Brussels, Belgium, while the headquarters of Allied Command Operations is near Mons, Belgium. Wikipedia
For any curious Martin Armstrong has up a wonderful piece on monetary history of Russia and Ukraine. One can wet ones apetite with this morsel:
The ruble has been the Russian unit of currency for about 500 years. It was The monetary reform system instituted by Peter the Great (b 1672;1682-1725) that was a century ahead of most others in that it was based on the decimal system. The basic monetary unit, first coined in 1704, was the silver ruble of 100 kopecks. Other silver coinage consisted of the poltina (one-half ruble), polupoltina (one-fourth ruble), grivennik (ten kopecks), altyn (three kopecks) and kopeck. There were two copper sub-multiples of the kopeck: den’ga (one-half kopeck) and polushka (one-fourth kopeck); and three gold multiples of the ruble: double ruble, chervonets or “ducat” (about 2 and one-half rubles), and dvoinoi chervonets (double chervonets). Unfortunately, Peter’s profligate expenditures steadily eroded most of the value of this otherwise admirable currency. Still, Peter’s reforms made a lasting impact on Russia and many institutions of Russian government traced their origins to his reign.
Please ignore the Western propaganda.
Russian central bank raising interest rates to 20% to “defend” the currency is insane guys. Please take a lesson from Turkey, Venezuela, Argentina, etc. Doesn’t work. Makes it worse.
Russia has fallen into the first Orwellian traps set by the West.
Interest rate hikes are price hikes guys.Makes inflation worse.
1. The spot and forward price for a non perishable commodity imply all storage costs, including interest expense. Therefore, with a permanent zero-rate policy, and assuming no other storage costs, the spot price of a commodity and its price for delivery any time in the future is the same. However, if rates were, say, 10%, the price of those commodities for delivery in the future would be 10% (annualized) higher. That is, a 10% rate implies a 10% continuous increase in prices, which is the textbook definition of inflation! It is the term structure of risk free rates itself that mirrors a term structure of prices which feeds into both the costs of production as well as the ability to pre-sell at higher prices, thereby establishing, by definition, inflation.
2. The increased cost of credit gets passed into consumers as higher prices.
3. Those that horde the currency as savings now get paid more interest income and when they spend it. It can be inflationary.
Russia has to slash interest rates not increase them.
All explained here guys – rate hikes are not “tightenings”
Hiking does not reduce bank lending. The US hiked interest rates 9 times from 2015 and loans over the 9 rate hikes increased by 17%.
When the Pentagon, the IMF and World bank tells everyone the opposite and say hikes will reduce loans. Why did loans increase 17% in the US during 9 rate hikes?
Simple- the increased cost of taking out loans by businesses. Gets passed onto the consumer via higher prices.
Another historical example would be the following:
Starting in November 1970 when Arthur Burns was the Fed chairman the discount rate was 5.75% and inflation was running at 5.6% annually. By 1974 Burns had jacked up the discount rate to 8% — a 60% increase — and inflation had gone from 5.6% to 10% annually.
By November 1976 Burns had reduced the discount rate to 5.25% from 10% and inflation had fallen to 5% annually. Then by August 1979, which is when Volcker was appointed as Fed chairman, the discount rate was all the way back up to 10.5% and inflation had jumped to 11.8%.
Volcker continued to raise rates, pushing the discount rate to 13% by February 1980. The economy entered a recession in March of that year, but inflation was still running at 14%. Inflation would have kept on going and the recession, which at the time was the most severe in post-WWII history, would have deepened if rates had gone higher. However, other factors drove down prices: the deregulation of oil and gas industries; major oil discoveries in the North Sea and Alaska; and Ronald Reagan’s firing of air traffic controllers plus the period it ushered in, which was the breaking of the labor unions.
By 1992 the discount rate had fallen to 3% and inflation was running at about 3%. Then, when the discount rate was raised to 6% in 2000, inflation bounced back, too, and came in at just under 4%.
As you can see there is a total correlation between rates and inflation and it is certainly not the inverse correlation that most people believe. It’s a direct correlation. Raise rates and that raises the cost of goods and services and therefore it raises general price levels.
I have done articles showing that higher rates do not impede the growth of loans and credit. For example, in November 1976, when the discount rate was 5.25%, year-over- year loan growth was 7%. Yet in February 1980, when the discount rate was 13%, year-over-year loan growth was 13%.
Just look at the real data graphs and ignore the Western propaganda.
Chart the Fed funds rate and annual changes in the Consumer Price Index, the real data graph shows clearly that the relationship between interest rates and inflation are highly correlated and not in an inverse way.
Russia has increased interest rates from 9.5% to 20%
Fallen for the first Orwellian traps set by the West.
Are now going to be in big trouble guys.
For me has always been part of US geopolitical and foreign policy. To get countries to do that to make the crises even worse along with getting them to increase foreign debt holdings. It is textbook 101 on how to destabilise a country.
Russia should have slashed the rate.
Anybody who has the ear of the Russia government has to warn them guys or this is going to get very messy guys.
Just watch what happens now that Russia has increased rates to 20%. The inflation rate won’t fall it will follow the interest rate upwards.
If Russia then try and defend the currency as inflation follows the interest rate upwards by using foreign currency reserves. The US will win the economic war.
It is MMT 101 guys. How the US gained so much lower over South American countries and Turkey.
In the 90’s …
The marginal holder of ANY ruble bank deposit, at any Russian bank, had a choice of four options before the close of business each day.
1. Hold rubles in a clearing account at the Central Bank
2. Exchange ruble clearing balances for something else at the Central bank
3. Buy a Russian GKO (tsy sec), which is an interest bearing account at the Central bank.
4. Exchange rubles for $ at the official rate at the Central bank.
For all practical purposes, 3 and 4 competed with each other. Russia had to offer high enough rates on its GKOs to compete with option 4.
In that sense interest rates were endogenous. Any attempt by the Russian Central Bank to lower rates, such as open market operations, would result in an outflow of $US reserves. The conditions for a stable ruble could not coexist.
The net desire to save rubles was probably negative, the failure to enforce tax liabilities resulted in deficit spending even as the government tried to reduce spending, and the higher interest rate on GKO’s increased government spending even more.
At the time GKO rates were around 150% annually, and the interest payments themselves constituted at least the entire ruble budget deficit. The higher rates of interest were the driving factor behind the excess ruble spending which led to the loss of $US reserves.
With the $ in high demand due to a variety of factors, such as domestic taxed advantaged $US savings plans, insurance reserves, pension funds, and the like, and, exacerbating the situation, what could be called overly tight US fiscal policy, there was, for all practical purposes, no GKO interest rate that could stem the outflow of $US reserves.
The main source of $ reserves was, of course, $ loans from both the international private sector and international agencies such as the IMF. The ruble was overvalued as evidenced by the fact that $ reserves went out nearly as fast as they became available. The Russian Treasury responded by offering higher and higher rates on its GKO securities to compete with option 4, without success. This inability to compete with option 4 is what finally leads to devaluation under a fixed exchange rate regime.
Floating the ruble
On August 17th it was announced that option 4, for all practical purposes, was no longer available. This meant the ruble was now a floating currency. Option 3 now competed only with option 1, so the interest rate was suddenly exogenous.
It would be and could only be whatever the government determined to pay when it offered its GKO’s for sale. It could, for an extreme example, decide to pay 0%, and the excess clearing balances would have no choice but to remain as excess balances and earn no interest. That would make the interbank rate 0 bid between credit worthy counterparties.
Previously, with option 4 open, the penalty for excess government spending was higher rates on GKO’s and loss of $US reserves. With a floating exchange rate the penalty for excess spending is the exchange rate of the ruble.
And I could be wrong but I am pretty sure the Russian government has yet to understand that it can now automatically issue GKO securities at any rate it chooses.
They have fallen for the EU propaganda that the bond vigilantes will get you.
Which is true for the Eurozone where countries are not fully sovereign but never true for countries with full sovereignty.
Will Russia make the same mistakes whilst trying to defend the Ruble this time around like they did in the 90’s ?
Each and everyone of us better hope they don’t.
How much does energy play in what is going on? Some interesting quotes and essay:
“Thus, even before the Ukrainian invasion, oil prices were raised about as high as they could go, through low interest rates and generous debt availability. With all this stimulus, Brent Spot Oil prices in January 2022 averaged $86.51 in January 2022. Even now, with all the disruption of the attack by Russia against Ukraine, oil prices are below the $120 threshold that producers seem to need. This price issue, plus the corresponding low-price issues for natural gas and coal, is the problem that Russia is concerned about.”
Few people in America and Europe realize that the world economy is entirely dependent upon Russia’s exports of oil, coal and natural gas. This dependency can be seen in many ways. For example, in 2020, 41% of world natural gas exports came from Russia. Natural gas is especially important for balancing electricity from wind and solar.
Russia was clearly frustrated with the current situation, with NATO becoming increasingly assertive within Ukraine itself, even though Ukraine is not itself a NATO member. Russia is also aware that in some sense, it has far more power over the world economy than most people realize because the world economy is utterly dependent on Russia’s fossil fuel exports (Section 7). Sanctions against Russia will likely hurt the countries making the sanctions as much or more than they hurt Russia.
Always appreciate your assessment of global and domestic issues. We live in frightening times and Americans seem unaware of it. They believe Russia is the demon and America the good, therefore, public opinion is strong an unbending. Looking at history, it shows the West’s continuous efforts to break up Russia for personal wealth and to keep it perpetually weak.
Also, frightening is the Klaus Schwab Great Reset. What are your thoughts on this?
Michael Hudson is always worth reading……but…….he omits to explain how what was a Protestant Settler Country in the 17th Century turned into a country with ZERO Protestants on the Supreme Court…………
Likewise The State Department – affectionately known by the naive as Foggy Bottom – why is it populated almost entirely at all levels by descendants of East European Jews from the Shtetl and Russian Pale ?
Why are there so few Protestants ? There used to be a time when US Foreign Policy had East Coast “Europeans” with knowledge of history and negotiating skills – and reticence in public.
Now it appears – whether Clinton or Trump – the key positions are screened in Tel Aviv and sent out to mobilise American brawn with Israeli brain……….there is an almost German “Tollpatschigkeit” about the US nowadays with brainless motor-mouths infecting London – which too – once had a more reserved approach.
Poor Lavrov – he must have so hoped to meet his peers and negotiate – but he is like a seasoned teacher entering a classroom of drug-addled delinquents and hoping to teach calculus
@ Paul Greenwood
Wow, what an excellent comment thank you very much. love , love it!!! Poor Lavrov indeed!!!!!! and so will Dr. Kevin Macdonald who would have too many words to add of the Protestants who went to sleep never paying attention to the words of Ephesians 5 that there is a war to be waged! That there is indeed a spiritual war we are involved in.
and if it doesn’t get worse I’m afraid? Read this:
“Zelensky has not elaborated on the details of his Jewish upbringing, or his religiosity, but he also hasn’t shied away from expressing an occasional message of Jewish pride and a strong sense of solidarity with Israel. And that Jewish identity has been repeatedly seized on by enemies and rivals, and celebrated by Jewish supporters around the world.” https://www.theoccidentalobserver.net/2022/02/27/philip-giraldi-on-the-neocons-ukraine-russia-and-the-oligarchs/
Again thank you!!!
And here for your reading pleasure another wonderful piece of investigative work by none other than Dr. Joyce. The quotes are extremely important along with the history they provide. Take this as an example:
In a special investigation, the Pittsburgh Post-Gazette reported last week that Kolomoyskyi’s efforts to launder stolen Ukrainian money in the United States, via his Jewish associates in South Florida Mordechai “Motti” Korf and Uriel Laber, left a wake of economic devastation:
One of the richest men in Ukraine, the 59-year-old oligarch is accused of setting up shell companies, cleaning the money through U.S. properties and ultimately leaving a trail of boarded-up buildings, failed steel facilities, and millions in unpaid property taxes, court records show. While money was transferred into the country for one of the oligarch’s companies, his operators shut down Warren Steel in Ohio in 2016, owing millions in property taxes, utility bills and supplies. For weeks, workers were left without medical coverage because the insurance premium wasn’t paid, records and interviews show. “A lot of people left here very angry,” said Nancy Waselich, a former IT manager for the factory. “People bled for this place.” Though no one so far has been criminally charged, prosecutors have filed legal actions to seize properties that they allege were bought with money stolen from the Ukraine bank, where Mr. Kolomoisky was a major shareholder.
Fedin Shandor, a professor at Uzhgorod University and adviser to the government on tourist development, has described Kolomoyskyi as “a leech who sucks our blood here and puts it in Switzerland.” This “leech” has also made a game for years of poking Vladimir Putin, stating publicly in 2014 that Putin was “a schizophrenic shorty. He is completely inadequate. He has completely lost his mind. His messianic drive to recreate the Russian empire of 1913 or the USSR of 1991 could plunge the world into catastrophe.”
The entire piece a Truly Must Read for all!!!!!!!!!!!
“Europaische Wirtschaftsgemeinschaft” – Berlin 1942, The European Economic Community. The Document can be found at > https://www.worldcat.org/title/europaische-wirtschaftsgemeinschaft/oclc/31002821/editions?sd=desc&referer=br&se=yr&qt=facet_ln%3A&editionsView=true&fq=ln%3Aund <. It's in German language. —- My summary, EU is Nazi based corporate structure, Nato is Wehrmacht 2. Russia has read the tea leaves and are striking first; good for them. Prayers to all.
Congrats Iron Mike, that was the greatest, Michael Hudson article, I’ve read in 20 years.
“he hoped to be right under the atom bomb, because it was not a world in which he wanted to survive.”
Every correct thinking American should ask themselves: Which is a worse death, dying instantly in a nuclear flash, or starving to death in an ANTIFA “reeducation camp”?
I just came across this quote from the good old hawk George Friedman
“The primordial interest of the United States over which for a century we fought wars, the first, second, cold war, has been the relationship between
Germany and Russia
because united (!) they are the only force that could threaten us
– and to make sure that that doesn’t happen”
Still bugs me why so few get it.
That this whole thing is entirely and solely about resources, money and power. Nothing else. Not the Ukraine, Or the EU. Not even Russia.
Its a game of chess.
Its called prod the bear. Throw stones at him, Poke him with sticks when no one is watching.
Molest his cubs.
Until he eventually comes out with a blast.
He has taken the bait. Now we can roll. Let the games begin.
No need to do anything apart from heavily emotionalizing
the whole thing. Look what he has done. Shame.
Just let the whole thing play out by itself.
No more need for stimulation, The market will
pump itself up now.
Such a badly behaved bear. He needs to be apprehended. Killed. In fact all bears.
The Berlin bear.
Europeans especially in Germany are too educated or shall I say brainwashed – as opposed to being smart – to apprehend that its still the old cowboys chomping cigars playing their old game.
Sheep walking into the slaughterhouse. If people understood what has been going on here for over a century now – this would never happen.
The joke of the century – one more time.
Thank you for your eloquent and calm analysis. This is what I get from leafing through Russian media these days. A calmness and composedness as opposed to the hot headed barking and war mongering of the western papers.
The fact that no air force had been employed so far is seen as a weakness. The idea that it could be in order to protect as many lives and cities as possible does not occur to anyone, That the troops are barely in first gear.
It scares me that Russians are being hunted down these days like Jews some 80 years ago – without any respect for the most basic laws let alone most basic manners. Fair game.
And yet I do trust and believe it will be over soon. We are in the process of shedding old beliefs and behaviours
that simply no longer work. Our planet doesn’t need this shit anymore.
The US has never faced any serious repercussions of any of their activities apart from more monetary gains and self inflicted injuries.
My deepest respect to the Russian people for their calm and wisdom amidst the constant broken promises, humiliations and atrocities.
I have the funny feeling this time it will be different.
May god bless you all
May the truth – not war – prevail