UPDATE: This wonderful transcript is now available just underneath the video
The decline of the US dollar, the three ‘systems’, the sanctions war on Russia, on the eve of the publication of Prof. Hudson’s new book: The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism.”
BENJAMIN NORTON: Hey, everyone. I’m Ben Norton, and this is the Multipolarista podcast. And I have the great pleasure of being joined today by one of my favorite guests, one of I think the most important economists in the world today. I’m speaking with Professor Michael Hudson.
If you’ve seen any of the interviews I’ve done with Professor Hudson over the past few years, you probably know that he’s a brilliant analyst. He always has, I think, the best analysis to understand what’s going on economically and also politically, geopolitically, in the world today.
And right now is, I think, a very important moment to have Professor Hudson on today. We’re going to talk about the economic war on Russia and the process of economic decoupling between Russia and China and the West, which is something that Professor Hudson has talked about for many years. And that really has accelerated with the Western sanctions on Russia over Ukraine.
We’re also going to talk about the decline in U.S. dollar hegemony. A recent report from the International Monetary Fund, which is dominated by the U.S., acknowledged that the use of the dollar in foreign bank reserves is gradually declining.
Now, it’s not going to disappear overnight. But even the IMF is acknowledging that dollar hegemony is eroding. And, of course, the IMF acknowledged that the Western sanctions on Russia are going to further erode the hegemony of the U.S. dollar.
We now see Russia doing business with China in the Chinese yuan. Russia is also doing business with India with the Indian rupee. And of course Russia has been telling Europe that if it wants to buy Russian energy, it has to do so with Russian rubles.
So there’s so much to talk about today, Professor Hudson, but I want to begin in the first half of this interview today talking about a new book that you’re just about to publish.
Today is Monday, May 9th. You said on Wednesday, May 11th, the book comes out. And it’s called “The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism.”
And everything that I just prefaced this interview with, discussing the economic war in Russia and sanctions and decoupling, this is all deeply related to what you talk about in this book. And I had the pleasure of getting an early copy and reading through it. It’s a really important book, I think.
And you talk about this fundamental divide internationally – and this is a divide that actually goes back historically as well – between these three models for different economic systems you discuss: finance capitalism, industrial capitalism, and socialism.
And your argument is that the U.S. empire has been a force for imposing neoliberalism, which is a particular form of finance capitalism, which is nonproductive, in which finance capital destroys productive industries in pursuit of rent-seeking, and what you call the rentier class.
So instead of producing, as the classical bourgeois economists had said capitalism would be a productive system instead, finance capitalism is fundamentally a system of destruction and debt.
And your argument is that this is deeply rooted in U.S. foreign policy. This is the U.S. foreign policy strategy for expanding its economic power, is imposing this finance capitalist model on the world.
So can you expand further on your argument about the fight between finance capitalism, industrial capitalism, and socialism, and why you decided to publish this book now?
MICHAEL HUDSON: Well the book came out of a series of 10 lectures that I did for my Chinese audience. I’ve been a professor at Peking University for a number of years in economics, and have professorships at other universities, Wuhan and Hong Kong.
And I have a fairly large audience of about 65,000 people per lecture there. And I was asked to give my general overview, sort of a history of economic development in the West, for the Chinese.
And in order to understand today’s finance capitalism, you have to understand what industrial capitalism was, as it was described in the 19th century.
And it’s often forgotten, or played down, that industrial capitalism was revolutionary. What it was trying to do – from the physiocrats in France in the late 18th century to Adam Smith, John Stuart Mill, Marx, and the whole late-19th century flowering of socialism – the ideal of classical value theory and rent theory, was to say what is the actual value, the cost value of producing goods and services?
And what is earned by the capitalist, when he employs labor to make a profit, and what is unearned? And what is unearned was the landlord class. That was the hereditary warrior class that conquered all of the European kingdoms in the Middle Ages.
And the attempt by England’s industrialists was saying, look, we cannot become the workshop of the world; we cannot undersell foreign countries if we have a landlord class ripping off all of the money in land rent.
And if we have predatory banking, or the wealthy people just lend really for buying property, or making distressed loans or predatory loans that have nothing to do with financing actual capital formation.
Well, what made this capitalism revolutionary was the British industrialists and advocates of industry, even the bankers in Ricardo’s time, said, well, in order to overthrow the landlord class, which controls the House of Lords and all of the upper chambers of government in Europe, we have to have democratic reform.
If we have democratic reform and give voting to the people, they’re going to vote against the landlord class, and then we can have an efficient economy where our prices of our exports and our goods and services reflect the actual cost of production, not the rake off for the rentiers class, not the rake off of what landlords take, not the rake off of what predatory bankers take.
And the whole long 19th century leading up to World War One was this revolutionary value theory that depicted land rent and monopoly rent and financial returns as being unearned income and wanting to strip it away.
And all of this seemed to be moving toward socialism. The industrialists were all in favor of government public utilities, of government enterprise, because they said, if the government doesn’t provide health care, then individuals are going to have to pay it, and it’ll cost a lot of money, like it does in the United States.
And so you had the conservative prime minister of England, Benjamin Disraeli, saying, health, all is health, we’ve got to provide public health for the people.
And it was the conservative Bismarck in Germany that said, we’ve got to provide pensions. If labor has to save up for the pensions, then it’s not going to have enough money to buy the goods and services that we Germans are producing. We have got to make pensions public.
So all of this move towards socialism was not only in favor of increasing living standards, which soared in the 19th century, but also in freeing the economy from the rentier class, from the landlords, from the bankers.
And for the classical economists, a free market was a market free from landlords, free from bankers, free from monopolists.
Well, needless to say, the rentiers fought back. And by after World War Two, we’ve seen a continual anti-classical theory replacing the classical idea of free markets with a value of free theory, saying, well, everybody earns whatever they they have. All wealth is earned, not unearned. And if Goldman Sachs partners are paid more than anyone else, that’s because they’re so productive.
So you had a move rejecting classical economics, a junk economics, and a kind of artificial economics that doesn’t really talk about how finance capitalism has worked.
And as it turns out, the business plan of finance capitalism was so predatory that it was anti-industrial.
That’s why President Clinton in the United States moved to invite China into the International Labor Organization, saying, well, we can fight wage rises in America by a race to the bottom. We can we can hire Asians to do work, and that will cause unemployment here. And that’s wonderful for the industrialists. It will basically cut wages and keep American wages down.
Well, that basically is the strategy of finance capitalism, and the aim of finance capitalism is not to invest in factories, and plant equipment, and research and development, but to live in the short term, but to make money by financial engineering, not industrial engineering.
And it becomes predatory, and so you have the whole ideological attack on public enterprise. You have Frederick Hayek’s “The Road to Serfdom,” where you say, if government provides public healthcare, that’s “the road to serfdom,” where actually it’s finance capitalism that is the road to debt peonage and serfdom.
And you have now a whole disparagement of government. And all of this is a counter-revolution to the revolutionary impetus of industrial capitalism in its early stages.
And it’s true that corporations now are just as right-wing as the the banks and the hedge funds. But that’s because corporate industry has been taken over by the financial sector, and the heads of almost every industrial corporation are rewarded the how high they can push the stock price, to exercise the stock options they’re paid in.
And you increase the stock price not by investing more, not by hiring more labor or increasing productivity or increasing sales, but simply by using whatever income you have to buy back your stocks. And by buying back your stocks, this forces up their price.
And, most of all, by giving political contributions in this country to the Democrats and Republicans alike, who appoint Federal Reserve heads that have spent $7-9 trillion buying up stocks and bonds to increase the price of buying a retirement income, to increase Wall Street prices, to increase housing prices, and make America even less competitive industrially.
So finance capitalism is what has essentially de-industrialized the United States and turned the Midwest into a Rust Belt.
Well, the alternative, obviously, are the societies that have not followed this neoliberal finance capitalist plan. And the most successful economy, obviously, has been China, which is why it has been spending so much time there.
And China has done exactly what 19th-century United States, Germany, England, and France did. It has kept basic utilities, basic needs, housing, and above all, finance and banking, in the public domain, as public utilities.
Instead of having an independent financial sector operating on its own self-interest, the Bank of China creates the money. And the Bank of China lends money by deciding, where do we need to have investment in real estate to provide housing for the population at as low a price as we can make it? How do we build up the industry? How do we provide an educational system with training? How do we provide health?
And the fact is that the central planning in an efficient socialist style, not the Stalinist planning that everybody refers to of Russia, but a mixed economy as you have in China, which is truly a mixed economy, with guidance, like the French planification.
Well, that is obviously the way in which you survive and you avoid the kind of overloading the economy with debt service, with high rents, with high payments to the health-care monopoly in the United States, by avoiding all of this payment to a rentier class that has what the classical economists call unearned income, predatory income.
And instead of unseating them, we’ve put them in charge, and made the banks and Wall Street, and the city of London, and the Paris Bourse, the central planners.
So we do have central planning much more centralized than anything that was dreamed by the socialists. But the planning, the centralized planning is done by the financial sector.
And financial planning is short-termism; it’s short-term planning; it’s take your money and run. And that’s what is stripping and impoverishing the global economy today.
BENJAMIN NORTON: Absolutely. And, in your book, you write about the important distinction between the classical economic idea of a so-called free market, and how, you argue that, neoliberals turn that idea on its head.
So this is what you write in your book. And this is, again, Michael Hudson’s new book, “The Destiny of Civilization,” which is out this week. You write:
“The neoliberal ideology inverts the classical idea of a free market from one that is free from economic rent to one that is free for the rentier classes” – that is the rent-extracting classes – “to extract rent and gain dominance.”
So they they completely flip the idea of what it means to have a free market.
And then you note that, “in contrast to classical political economy, this neoliberal ideology promotes tax favoritism for rentiers, privatization, financialization, and deregulation.” And you discuss all of that.
That is, of course, what we could call the Washington consensus.
And then you argue that “U.S. foreign policy seeks to extend this neoliberal rentier program throughout the world.”
And you have a very interesting section of your book where you discuss this concept as “free-trade imperialism.”
So can you talk about what your idea of “free-trade imperialism” is and how it relates to U.S. foreign policy?
MICHAEL HUDSON: Well, the Nobel Prize is given basically for junk economics. And probably the worst junk economist of the century was Paul Samuelson.
He made the absurd claim that he proved mathematically that, if you have free trade then, and don’t have tariffs, and don’t have any government protection, then everyone will become more equal. At least the proportions between labor and capital will be more equal. Well, the reality is just the opposite.
And the term “free-trade imperialism” was actually created by a British historian of trade theory who pointed out that, wait a minute, when England went for free trade, the idea was, if we have free trade, we can stifle other countries from being able to industrialize, because if we have free trade, then we can tell America, we will open our doors to your markets – meaning the markets of the slave South, that Britain supported – and in exchange, you will open your markets to our industrial goods.
And America followed that until the Civil War, which was fought not only over slavery, but by the Republican Party after 1853 that said very explicitly, if we’re going to win the election – the Whigs never could win – if we, the new party, are going to win the election and industrialize America, we’ve got to integrate ourselves with the anti-slavery issue, with emancipation, but for us, the economic war of America is a war of, either we’re going to have protective tariffs in the North, or we’re going to end up as a non-industrial, raw materials-producing society, as the South wants.
And that was the debate from 1815, when the Napoleonic wars ended and world trade began again, until really the Civil War.
And America became strong in the way that Germany became strong too, by having protective tariffs, in order to have prices large enough to nurture what was called infant industry, to nurture American manufacturing.
And I wrote a long book about this, published some years ago based on my PhD dissertation, “America’s Protectionist Takeoff.”
Well, the English tried to fight against other countries protecting their economy, saying that if you just have free trade, you’ll get rich. Whereas the reality is, if we have free trade, you’ll get poor, if you’re not already able to have industrial and labor productivity and agricultural productivity on par with the most advanced countries.
Free trade was an attempt to prevent other countries from investing government money and building up their agriculture, and building up their industry, and building up their productivity, and creating a school system, to raise wages, to make wages more productive.
And the American protectionists said, well, we’re going to have a high-wage economy because high-wage labor undersells pauper labor. And skilled, well-fed, well-rested American labor can produce much more than the pauper labor of other countries that have free trade.
Well, what the leading American protectionist economist, Erasmus Peshine Smith, went to Japan and helped industrial help Japan break away from British free trade, helped Japan industrialize.
And other American economists, other foreign economists, all picked up the ideas of the American protectionist, like Friedrich List went to Germany promoting protectionism.
And Peshine Smith’s book, “The Manual of Political Economy,” was translated into all the foreign languages – Japanese, Italian, French, German.
And you had Europe realizing that free trade polarizes economies. Well, it was this that after World War One, and especially World War Two, when you had orthodox economics turning into basically propaganda.
That’s where you and Samuelson and others try to convince other countries, governments are bad, leave everything to the wealthy people, to the finance people, trickle-down economies, it’s all going to trickle down, don’t worry, just give more money to the rich, and don’t have any government interference with markets.
Whereas America had got rich by interfering with markets, to shape them in the years leading up to World War One.
But after World War One, America had already achieved its industrial dominance. And it was after World War One that America said, ok, now our protective tariffs have enabled us to outproduce all the other countries, and our protectionist agriculture especially – the most protected sector in America, has always been agriculture, since the 1930s.
Basically it said, well, now we can outproduce other countries, we can undersell them, now we can tell them to go for free trade.
And after World War Two, the Americans created the World Bank for economic impoverishment, and the International Monetary Austerity Fund.
And the World Bank’s leading objective was to prevent other countries from investing in their own food production.
The guiding line of the World Bank was, we’ve got to provide infrastructure for building up plantation agriculture in Latin America, and Africa, and other countries, so that they will grow tropical export crops, but they cannot be permitted to grow grain or wheat to feed themselves; they must be dependent on the United States.
And so the function of free trade, the World Bank, and the International Monetary Fund has been to finance dependency, backed up by the American support of dictatorships throughout Latin America who agree to have client oligarchies supporting pro-American trade patterns and avoiding any kind of self-reliance, so that the United States can do what it has recently done to Russia and other countries, impose sanctions – say, well, now that you depended on us for your grain, we can now impose sanctions, and you can’t feed yourself if you don’t follow the policies we want.
That was the policy that America tried to use against China after Mao’s revolution. And fortunately for China, Canada broke that monopoly, and said, well, we’re going to sell grain to China. And China was always very friendly to Canada in those earlier decades.
So basically, free trade means no government, no socialism. It means central planning essentially by Wall Street – countries should let American firms come in, buy control of their raw materials, resources, control of their oil and gas, and mineral rights, and forests and plantations, and basically let other countries send their whole economic surplus to the United States, where it will be duly financialized to buy out other countries’ raw materials and rent yielding resources.
BENJAMIN NORTON: Yeah, and in your book, you have a very funny passage that I think really encapsulates this ideology that you’re talking about here.
You referred to Charles Wilson, who was the secretary of defense under Eisenhower in the U.S., and he was also the former CEO of General Motors.
And he famously said, “What’s good for General Motors is good for the country.” And that idea has morphed into the idea that, “What’s good for Wall Street is good for America.”
And then you note that “this merged with evangelistic U.S. foreign policy that says ‘What’s good for America is good for the world.’ And therefore the logical syllogism is clear: ‘What’s good for Wall Street is good for the world.’”
And you describe this, you link it to the new cold war, this idea that what’s good for the U.S. is good for the world and what’s good for Wall Street is good for the U.S., therefore, what’s good for Wall Street is good for the world.
You argue, “We must recognize how finance capitalism has gained power over industrial economies, above all in the United States, from which it seeks to project itself globally, led by the financialized U.S. economy. Today’s new Cold War is a fight to impose rentier-based finance capitalism on the entire world.”
And this is such an important analysis. Because among those very few people of us who talk about this idea of the new cold war and how dangerous it is, there are very few people who frame it in economic terms.
Usually we frame it in political terms, right, the geopolitical interests between the US and the EU on one side, and China and Russia on the other.
And going back to Brzezinski and The Grand Chessboard, his 1997 book, where he talks about the importance of preventing near strategic competitors from emerging in Eurasia. That’s of course a geopolitical discussion and economics is part of it, but it’s often not at the forefront.
But your analysis I think is even more important, and more accurate, because your argument is not only is it geopolitical, but the geopolitical struggle is rooted in economics. And this is an economic struggle between systems.
So talk talk more about the new cold war and how you see it.
MICHAEL HUDSON: Well, as we’re seeing now, the world is dividing into two parts. We can see that in the fight against Russia, which is also a fight against China, and against India, as you noted. And it seems Indonesia and other countries as well.
The United States is pushing a world that can be controlled by American investors. The ideal of the American neoliberal plan is to do to other countries what it did to Russia after 1991: take all of your public domain, your oil companies, your nickel mines, your electric utilities, give them all to the wealthy oligarchy, that can only make money once it’s taken control of these companies, by selling the stocks to the West.
The West will buy out oil, just like Mikhail Khodorkovsky tried to sell Yukos oil to Standard Oil in the West. And we’ve got to put an oligarchy that will sell all of the national domain, all of the patrimony and natural resources, and all the companies, to American investors on the cheap.
The Russian stock market led all the stock markets in the world from 1994 up to about 1998. This was a huge rip off. The United States wants to be able to do that to the rest of the world.
And it was furious when Russia said, we’ve lost more population as a result of neoliberalism than we did in all of World War Two fighting against Nazism. We’ve got to stop.
And Russia began to say, we’ve got to use Russia’s population, and industry, and natural resources for Russia’s benefit, not for the United States’ benefit.
Well, the United States was absolutely furious with this. And the fury has erupted in the NATO war against Russia in the last few months, and what’s ongoing now.
And the United States says, U.S. State Department officials have said, what we want to do is carve up Russia into maybe four different countries: Siberia, western Russia, southern Russia or Central Asia, maybe northern Russia.
And once we’ve done that, we cut Russia off from China, then we go into China. We finance, we send ISIS and al-Qaeda into the Uyghur areas, the Muslim areas, and we start a color revolution there. And then we break up China, into a northern part, a southern part, a central part.
And once we break them up, we can more or less control them. And we can then come in, buy up their resources, and take over their industry, their labor, and their government, and get richer to obtain from China, Russia, India, Indonesia, and Iran the wealth that we’re no longer producing in the United States, now that we de-industrialized.
So the world is dividing into two parts. And it’s not simply the United States and its European satellites on the one hand versus the non-white population on the other hand; it’s finance capitalism versus the rest of the world, which is protecting itself by socialism, which in many ways fulfills what was the ideal of industrial capitalism during the 19th century, when industrial capitalism was actually progressive.
And it was progressive. That’s part of the whole theme of my book. It was revolutionary. It tried to free economies from the legacy of feudalism, from the legacy of hereditary landlords.
And now the financial class is no longer the landlord class, but the landlord class pays most of its rent to the financial class in the form of mortgage interest, as it borrows money to buy property and housing and commercial sites on credit.
And you have the kind of financialization that has increased housing prices in the United States to over 40% of income, that is officially guaranteed for mortgages. That has priced American labor out of the market.
Privatized health care, 18% of GDP, that is pricing America out of the world market. Debt, auto debt, student debt, which in other countries education is free; that’s pricing America out of the market.
So you have a basically un-competitive economy that’s committing financial suicide, following the same dynamic that destroyed the Roman empire, where a predatory oligarchy took over and maintained power by an assassination policy of its critics, just very similar to what America has been doing in Latin America and other countries.
So you’re having history repeat itself with this same kind of world split. And this split couldn’t have occurred back in the 1970s, with the Bandung Conference in Indonesia. There were other attempts by the Non-Aligned nations to break free of American imperialism, but they didn’t have a critical mass.
So right now, for the first time, you have a critical mass. And you have the ability of China, Iran, Russia, India, other countries together to be self-sufficient. They don’t need relations with the United States.
They can handle their own; they can create their own monetary system outside of the International Monetary Fund, which is basically an arm of the Defense Department. They can give loans to build up the infrastructure of countries outside of the World Bank, which is basically an arm of the Defense Department, the deep state.
So you have the American economy – essentially a merger between the military-industrial complex and the Wall Street FIRE sector, finance, insurance, and real estate – really cannot develop any more than the Roman Empire could develop, by trying to obtain militarily what it could not produce at home anymore.
Well, China and other countries, now that they have their industrial base, the raw materials, the food, the ability to feed themselves, the agriculture, and the technology, they can go their own way.
And so we’re seeing in the last few months the beginning of a war that is going to go on for, I think, 20 years, maybe 30 or 40 years. The world is splitting away.
And it won’t be a pretty sight, because the United States and its European satellites are trying to fight to prevent an inevitable break away they cannot prevent, any more than Europe’s landlord class could prevent industrial capitalism from developing in the 19th century.
BENJAMIN NORTON: Yeah, and this is a good segue to what I wanted to ask you about, Professor Hudson, which is the economic war on Russia.
And I should say, of course, that today is May 9th. Today is Victory Day in Russia, celebrating the Soviet Union’s victory over Nazi Germany in World War Two. Not the US and British victory over Nazi Germany, the Soviet victory, in which 27 million Soviets died.
And actually I should say that, here on YouTube, in the comment section, there are some Russians who are your fans, Professor Hudson, saying they’re thanking you for your cogent analysis of Russia.
But on the subject of Russia, Professor Hudson, we now have seen that since Russia’s military intervention in Ukraine on February 24th, we saw really what could be referred to as financial shock-and-awe. That’s a term that’s been used.
Just as when the U.S. invaded Iraq, it waged a military shock-and-awe campaign on Iraq. Well, now it is waging economic or financial shock-and-awe on Russia.
And Russia has been referred to as the most heavily sanctioned country in history. Which I think is probably accurate, although maybe the DPRK, maybe North Korea, is more sanctioned. But I mean we’re talking about levels of sanctions not seen against a country of this size ever.
And you can also refer to it as the contemporary equivalent of medieval siege warfare against Russia.
Joe Biden, in a speech in Poland, made it clear what Washington’s goal is: it’s regime change. The U.S. wants to overthrow the Russian government, as it did in the Soviet Union in 1991, and clearly install a a pliant alcoholic neoliberal puppet like Boris Yeltsin.
So can you talk about, from an economic perspective, what do you see as the effects of this economic war on Russia?
And specifically in terms of the concept of decoupling, which you have talked about for years, and you have said that the Western sanctions on Russia and China were accelerating that process of decoupling. And this was before the financial shock-and-awe we’ve seen.
So you talked about a move away from this neoliberal globalization where everything is interconnected, or at least capital is interconnected globally, to the creation of a kind of, what you could say is kind of an economic iron curtain.
But how do you see that also in terms of integrating the Eurasian economies more deeply?
And also what is the effect on the European economies, which my impression is that Europe is going to become what you call an economic dead zone, more and more reliant on the U.S., whereas Russia, China, and Iran, and even potentially India, Pakistan, Bangladesh, Indonesia – we’re seeing much more economic integration of Asia, which is, of course, where the majority of humanity lives.
MICHAEL HUDSON: Well you have used the words shock-and-awe, picking it up from the U.S. statements of shock-and-awe. There hasn’t been any shock-and-awe; there’s been a self-defeating piffle, and laughter.
That’s not all. There was an attempt to grab $300 billion of Russia’s foreign reserves, saying, well, any country that leaves their reserves in American banks or in the American Monetary Fund to stabilize their currency, we can grab if we don’t like their policy.
So the idea was, now Russia is going to go broke. It can’t afford to buy anything without U.S. dollars. And the people are going to get so angry, they’re going to vote against Putin. And then we can pour in our money to twerps like Navalny and other right-wingers who have promised to be the new Yeltsins.
Well, it didn’t work that way. They did grab the $300 billion of Russia’s reserves. Russia immediately said, ok, we have our own money. We now, fortunately, have enough oil and gas that we don’t have to sell to Europe and Germany. If they want to freeze in the dark and let their pipes burst when the weather gets cold, that’s their problem. We’ll sell to India, and China, and other countries.
And there was, for a few days, the ruble plunged, by saying, uh oh, what is Russia going to do? So all the foreign exchange traders thought, you can trust Biden to have a really brilliant policies.
I think Paul Krugman, the Nobel Prize winner, said Biden is the greatest American president since Roosevelt, or since Truman, that he was so smart. Well, that’s why Krugman got the Nobel Prize, for making statements like that.
So immediately Russia said, well, obviously we can’t get paid in dollars anymore, or in euros, because, you’ll just grab them, so you’ll have to buy oil and gas in rubles. We’re going to price it in our own currency. Just like China had talked about pricing its exports in yuan.
And so what has happened is that immediately the ruble not only recovered, but is now selling at a higher rate than it was before the American sanctions. So there was no shock at all. The Americans felt shock.
The Americans are shocked. The Americans are awed. The Russians are laughing and everything is going their way.
So it’s almost as if – I would not accuse Biden of being on the pay of Russia, and I would not say that the leaders of Congress are the Russian agents, but if they were Russian agents, if they were paid by Russia, they could not have done a better job of helping Russia catalyzing its protectionism that it wouldn’t do itself.
The fact is that President Putin and many of the people around him still were neoliberals. I mean, they began as neoliberals, in the ’90s.
They began by hoping that they could make an arrangement with Germany and Europe, that Europe would develop their industry and make Russia as efficient an economy as Germany or the United States. Well, obviously that hasn’t happened.
All the same, they didn’t think of imposing protective tariffs as the United States did. They didn’t protect their agriculture. They bought grain, and cheese, and other agricultural products from the Baltics, and from other countries.
Well, now that, once the Americans put on the sanctions, beginning already under the Trump administration, all of a sudden Russia had to produce its own food.
And it did. It made the investment. It is now the largest agricultural exporter in the world, not a food-deficit country. It’s not importing any more cheese from Lithuania and the Baltics. It has its own cheese segment.
And the sanctions are forcing Russia to do exactly what the United States, Germany, and other protectionist countries did in the 19th century, developing their own industry by isolating it from low-priced foreign imports that would be priced so low that the Russians otherwise could not afford to make the investment in factories, plants, equipment, research, and development.
So what the United States has done is actually catalyze Russia moving together.
And also, for three or four years, I have been talking with Russians, and with the Chinese, and other countries about the need to de-dollarize. If you want to develop your own economy, you have to develop your economy in your own interest with public spending and planning, independent from the United States.
Well, now everybody thought that, well, in a few years it may take a decade for China, Russia, Iran, all these countries to break away from the U.S. But America said, we’re going to help you, we’re going to speed up the breakaway process. We’re going to isolate you. So you’ve got to band together against us.
So that’s exactly what it has done. You can just imagine how the Russians are crying all the way to the bank about this.
And how China is watching what the Americans are doing to Russia, and listening to President Biden saying, you know, Russia is not our real enemy, our real enemy of China. And when we’re finished with Russia, then we’re going to go against China and do the same thing to it.
Well you can imagine what this is leading the Chinese government to try to plan to be sufficiently independent from the United States, so that similar type sanctions will not hurt it.
And President Xi in the last few weeks has said we’ve got to make China as independent as possible. We’ve got to make our own computer chips. We’ve got to not depend on the United States for anything, except maybe Walt Disney movies. That’s basically about it.
So it’s as if – you know, I had mentioned earlier that finance lives in the short term. American policy, being financial policy, lives in the short term. And it’s looking at if it can make a quick, a quick victory, and forget about what’s going to happen next.
I’m told that, years ago, already from the war with Iran, and then Iraq and Syria, in the State Department, if there were Arab specialists who spoke Arabic, they were all fired. Because they said, well, if you can speak Arabic, you must’ve learned Arabic because you’re sympathetic with them. You’re fired. We won’t have anyone who can read Arabic here.
Well, now in the last decade or so, they fired all the Russia specialists from the the State Department and CIA, saying, well, if you can read Russian, why would you want to learn Russian? You must like something in Russia. You wanted to learn it. You’re fired.
So they have people who have no idea of what’s happening in Russia, no idea what’s happening in these other countries. And they’re blinded by their ideology.
And if anyone would say, wait a minute now, public planning and making education a public utility is actually making them more competitive, well, that’s against the ideology. That’s not the corporate type.
And they’re taught, well, we really can’t trust people, maybe they’re tending toward socialism, and they’re out the door.
So you’re having American policy pretty much run by the blind, and the Europeans are simply taking orders, and money in little white envelopes from the United States, to just show their loyalty, and basically are willing to spend three to seven times as much for their energy, for their liquefied natural gas and oil, by buying from the United States, than they are by a long-term contract with Russia.
Europe is willing to spend now $5 trillion on putting together ports that can handle shipping tankers for liquefied natural gas instead of relying on the Russian pipeline, the Nord Stream Two, that’s already there.
So Europe is making an enormous sacrifice. If it doesn’t have Russian gas, and it refuses to pay rubles, it says, if you don’t give us our gas and oil for free, you’re attacking us, because we’ve been getting all of your oil and gas for free, because all the dollars, all the money we pay, you’ve recycled to the United States in your foreign reserves. Thank heavens, the U.S. can grab it all. If you don’t continue to give it to us for free, then you’re attacking us.
To the United States, other countries protecting their economy, other countries trying to raise their living standards, and especially other countries undertaking land reform, are viewed as enemies of the United States, because they’re an enemy of the neoliberal American financial system.
And the idea of the unipolar world where the United States gets all of the profits, and rents, and interests of the world economy, just as ancient Rome stripped its provinces by getting all of their wealth and income for themselves, not producing it at home, while impoverishing their own domestic population. It’s just an exact parallel.
So Europe is willing to say, well, ok, if we don’t have a Russian gas, well, that means that our chemical companies cannot buy the gas to make the fertilizer to make our crops grow, and our agricultural productivity is going to fall by about 50%.
We’re also going to spend a lot more money on America’s military, NATO arms to support NATO. So higher food, higher military spending, higher energy costs.
This ends Europe as an industrial rival to Asia, and Eurasia, I should say, because now the Chinese Belt and Road Initiative and other spending investment, capital investment, throughout Western Asia is creating a new productive plant that is not only self-sufficient, but is leaving the United States and Europe without any industrial competitive power. They’ve priced themselves out of the world market. They’re no longer competitive.
So the world is developing. And I’m sure the only way that the NATO countries can fight against it is militarily, by threatening to bomb. But they can’t fight economically. They can’t fight financially. They tried by disconnecting Russia from the SWIFT system. It put it in its own system very quickly.
It really is left without a strategy, except that it’s done a wonderful job of controlling the public relations dimension of this war, making it appear as if somehow other countries are the aggressors, in not letting America exploit them, and making it appear as if Russia is the aggressor in Ukraine, instead of NATO prodding and prodding Russia to say, we’re going to capture your port at Crimea, and we’re going to attack the Russian-speakers if you don’t fight back, and we’re going to keep bombing them year after year, from 2014 on, we’re going to keep bombing them until you protect them.
So all of this is treated as if America is purely defending itself. Well, this is what the Nazis said in World War Two. Hitler and Goebbels said, we can always mobilize a population to support our war by saying it’s a war to defend ourselves.
And that’s how the United States in Europe are doing it. Not only are they pulling a strategy out of Goebbels’ Nazi book, but a few weeks ago, Germany went to the museums, the military museums, where they had the old Panzer tanks from World War Two, and they sent the Panzer tanks, the Nazi tanks from World War II, to Ukraine, saying this is symbolic, now we can fight Russia with the same German Nazi tanks run by the neo-Nazi groups, that Zelensky is supporting, the same Nazi fight against Russia. We can reenact World War Two with the same tanks, even symbolically, to show that this is a fight of Naziism, and neoliberalism, against Eurasia.
BENJAMIN NORTON: We’ve also seen Germany not only re-militarizing, but also boosting its relations with Japan. There are some terrifying echoes of of World War Two.
But you mentioned something that I want to analyze a little bit more, which is the strength of the Russian ruble. I talked about the concept of financial shock-and-awe that was waged on Russia. And President Biden said, “the Russian ruble has become rubble,” he joked. He said the Russian ruble has become rubble.
Well, that’s actually not at all what happened. This is the value of the dollar to Russian rubles, right now [showing a graph]. Russian rubles are at 69 to the dollar. A few days ago, it was at 64, or 65 to the dollar, which is actually better than it was even before the Russian war in Ukraine, which began in February 24th.
And it did spike, and there was a peak here, at which it was devalued to 139 to the dollar, about half the value it has now. But in the months leading up to the Russian military intervention, in November and December, it was around 75 to the dollar.
So the ruble has actually strengthened despite these sanctions. And here’s a report from Reuters from five days ago, that was May 4th: the “Rouble leaps to over 2-year high vs dollar, euro as EU ups sanctions.” So the ruble is doing quite well.
And you talked about the Russian mechanism to force Europe to buy energy exports from Russia in the Russian ruble. And this graphic here, for people watching, it’s in Russian, but really it just shows this mechanism in which a European firm that wants to buy gas from Russia’s state owned gas giant Gazprom, it has to send the money in euros to the Gazprombank, which is the obviously the bank that works with Gazprom, and then it puts it in a special account in euros, and then that is sold in the Moscow exchange for Russian rubles.
And then those rubles are put in another special account, called a K account, that belongs to that European firm. It has two accounts, two special accounts with Gazprombank, one in euros, one in rubles. And then this special ruble account sends that money to Gazprom. And then once the money reaches Gazprom, that’s when Russia considers that the payment officially went through.
So this is the mechanism by which Russia is getting paid in rubles. And much of Europe claimed at first that they would not do so, but eventually they gave in. So that’s an incredible development.
And related to that, what I wanted to ask you about, is I think another reason that the Russian ruble has strengthened and stabilized is not only because Russia continues to maintain constant exports of energy to Europe and other parts of the world.
You can talk about the central bank policies. But one of the policies is that the Russian central bank has basically put the ruble on gold, which I think is a very interesting and historic development.
And we saw that from the beginning of April until the end of June, the Bank of Russia says that it’s going to buy gold at a fixed price of 5000 rubles per gram of gold. And then the question is whether or not in July, when this policy ends, if it’s going to continue, and if the ruble will basically become fixed, it become pegged to gold like the U.S. dollar was up until 1971.
So you don’t think it will be? So talk about this policy. Do you think that that the gold standard is going to come back? Or apparently you don’t think so.
MICHAEL HUDSON: No, Russia is not going on on the gold standard. What it is doing is investing, its foreign exchange in the only way that is not grabbable. It’s investing it in gold; it’s putting gold in its reserves.
It is not setting its exchange rate according to the price of gold, but it is buying gold with what it has been getting.
I want to go back to your talk about rubble. You talked about, “from ruble to rubble,” what President Biden said.
There have been a lot of pictures of rubble in the news for the last few days. For instance, there are talks of, here’s a Ukrainian picture, and look at this picture of a Russian tank, we shot it down, it’s rubble. Turns out it’s a Ukrainian tank, that they just say it was the Russian tank we shot down.
So basically, they’re taking their own destruction, and they’re saying that, while they’re being destroyed, they’re saying, no, this is a picture of Russia being destroyed, Russian assets, not Ukrainian assets being destroyed.
Well, the similar thing is with the Russian ruble. America says, look, we’ve isolated the the ruble. Well, what has happened? If you isolate the ruble and you say we’re not going to export anything more to Russia, so it’s not going to be able to spend any of its rubles on buying American or European products.
Well, meanwhile, Russia can continue to earn rubles from Germany and Europe, and it can continue to earn foreign exchange from other countries that it’s selling its agriculture to at rising prices, its oil and gas at rising prices, too. So obviously, the balance of payments is going way up.
And they believe that what is in store is a new monetary system that is an alternative to the dollar IMF system.
And in this system other countries will hold their reserves in each other’s currencies. In other words, Russia will hold Indian rupees and Chinese yuan. China will hold rupees and Russian rubles.
There will be the equivalent of what Keynes thought of as something like artificial special drawing rights that the banks will be able to create to help fund governments to undertake capital investment.
But for settlements settling balance of payments deficits among countries, once they don’t have enough foreign exchange to make a swap, they will use gold as the means of settlement, because gold is a pure asset. It’s not a liability.
Any foreign currency basically is held in a foreign country that has the power to do what America did to Russia and just grab it all, and say, we’re just wiping it all out.
It’s as if you have a bank account, and the bank says, we’ve just emptied out your account to give it to one of our friends, and you don’t have it anymore. You can’t do that if gold is held in your own country.
Venezuela made the problem of keeping its gold in England, trusting England, saying that, even if there is war, they’ll never interrupt gold and finance. And England just grabbed Venezuela’s gold.
So, obviously, countries are not going to leave their gold in other countries. Even little Germany has asked America to begin sending back the gold that it has in the Federal Reserve Bank of America because it’s worried that what if it ever buys Russian gas again? America will grab all of Germany’s gold, grab all the German money, and it’ll be like World War One all over again.
So this act that America did of grabbing Russian money, Afghanistan’s foreign reserves it grabbed, this is telling all the other countries, pull all your money out of dollars. What are they going to put it in? There’s not that much they can put it in that it is absolutely safe.
So gold is a flight to safety today, because it’s one of the things that all of the world realizes as having an international value for settling balance of payments deficits, that is independent of world politics.
So that’s the explanation. Russia is not going on gold. It’s going on an independent standard from the United States with gold as an element of its foreign reserve, just as it’s holding Chinese yuan and Indian rupees.
It’s not going on the rupee standard. It’s not going on the yuan standard. And it’s not going on the gold standard. But these are elements of its foreign reserves.
BENJAMIN NORTON: I have a question for you. It’s kind of a more technical question that I’ve always wondered. And I’ve tried to do research on this, because there’s not much information.
So we know that that the U.S. and European Union have frozen over $300 billion from Russia’s central bank foreign exchange reserves. And of course they did this after doing the same to Iran, to Venezuela, to Afghanistan, which is now threatening a famine in Afghanistan that could kill more people than died in the 20-year NATO-U.S. military occupation of Afghanistan, which is another topic that really needs to get more coverage.
And I should add, by the way, that the US and the EU, they’ve frozen nearly half of Russia’s central bank’s foreign exchange reserves, and are now saying they’re not going to give it back. So they stole it. I mean, they stole half of its reserves.
My question is, what is the mechanism by which they effectively freeze and steal those reserves?
Because my understanding is that there is of course a physical element of those reserves, which you’re talking about, which is gold. But not all of the $640 billion in Russia’s central bank reserves is physical currency, right? A lot of it is just computerized? It’s number in computers and bank accounts.
So when when the U.S. and the EU steal this money from central banks like in Russia or Afghanistan – obviously in the case of Venezuela, as you mentioned, they physically stole the gold. But if it’s not gold, is it physical cash stored in Moscow, like physical dollars and euros? Or it’s mostly just numbers in a computer, which is why they can steal it?
MICHAEL HUDSON: Every country needs to manage its exchange rates, and there’s always like an up-and-down and a zigzag in the flow of payments for imports and exports, investment, capital movements, debt service, all of that.
So countries want to stabilize their exchange rate. How do they do that? Well, most of the big exchange markets are in New York and in London.
So countries would leave their money in correspondent banks. Like when Iran, at the time under the shah, kept that foreign reserve in the Chase Manhattan Bank. So when Iran, after the revolution and Khomeini came in, and Iran wanted to pay interest on the foreign debt that the shah had run up, they told Chase, please, here’s our bondholders, please pay them.
Well Chase was told by the Treasury, don’t pay them, just take the money and hold it. So Chase said, we put a freeze on your account. And so Iran defaulted, and then Chase and the State Department said, oh, Iran defaulted, it missed the payment. Now, all the money that it’s due for foreign debt has to be paid all at once. And Chase paid all of the bondholders off. No more money in the account. It was all emptied out.
Suppose you had an account in Chase Manhattan. And they said, ok, now you’ve done something really bad, you put Michael Hudson on the show. We’re going to grab your account. We’re going to give it to Mr. Guaidó, because he needs the money in Venezuela because the people still are not voting for him. So all of a sudden, you won’t have money in your account. It’ll go to Mr. Guaidó’s account.
Well, that’s what happened with Russia. They took the money. They grabbed the money from Russia’s account. And they said, half the money we’re going to give to, I think, to the 9/11 people, because we all know that it was Russia that bombed the World Trade Center on 9/11.
And we’re going to give it to all sorts of other people who suffered all over the world. It’s all Russia’s fault.
BENJAMIN NORTON: But Professor Hudson, when you say that they seized Russia’s assets, you mean the assets held by the Russian central bank in foreign bank accounts?
MICHAEL HUDSON: Yes, yes.
BENJAMIN NORTON: And these are not physical assets, these are numbers in a computer, right?
MICHAEL HUDSON: In Venezuela’s case, Venezuela had used some of its oil company earnings to buy oil stations and refining companies and the United States actually grabbed the ownership of the gas stations and the refineries and distribution system that Venezuela had in America.
BENJAMIN NORTON: It’s called Citgo.
MICHAEL HUDSON: Citgo, yeah. Russia doesn’t really have any capital investments in the United States. It did have bank accounts, and that was all that the United States could grab.
BENJAMIN NORTON: So when you say that, when Russia, at least for now, the central bank is allowing convertibility of rubles at a set rate into gold, that’s a temporary policy to make sure that they have a physical asset that their central bank can hold on to, because if they have dollars or euros in their reserves, my understanding is that’s not physical cash, it’s actually just numbers in a computer, so they don’t have it physically in their bank reserves, so it’s easy to steal that money.
Obviously, if they had billions of dollars worth of cash, of paper cash, it would be much harder to steal it, but if it’s just on a bank account, if it’s numbers in a computer, then they can just freeze it.
So I think this is also a reflection of a point that you’ve also made about the financialization of the economy, is it’s also just a lot of this capital is not even physical capital.
MICHAEL HUDSON: Yes. Savings take the form – one person’s savings is another person’s debt. So these are Russia’s deposits in American banks that it used to buy or sell rubles, or to buy goods from America, or to receive payments in, if Russia exports something such as oil. Americans buyers of Russian oil would put the money into the Russian bank account.
They never dreamed that this would be grabbed. But now Russia says, ok, you’ve grabbed our money, now that means that we get to grab all of your assets in Russia. This is great! All of your stock holdings in nickel, and Yukos, and all these other companies, ok, you’ve got the money, we have the assets, look at us as just buying the assets on the cheap.
And the Western investors in Russia have all been selling their Russian assets to show that they’re good American citizens in NATO, and the Russians are buying up these European and American assets on the cheap, largely by borrowing money from the banks, that get the money from the central bank, now that they’re so wealthy, and all of the foreign exchange reserves is a result of the American shock-and-awe statement, that’s sort of shock-and-awe in reverse.
So Russia is coming through just fine. And you can imagine how the American strategists are gnashing the teeth. They don’t understand how Russia was able to avoid being bankrupted by this.
They really are not economists. They’re not really financiers. They’re foreign-policy strategists. They’re ideologues that are not very well educated in how to think about the future and how to recognize the fact that the world can actually change from what it is today into something else. And sometimes that change is not in America’s interests. That is sort of not a permitted thought over here.
So essentially, Americans and Europe are operating in the blind, and Russia and China, and Iran, and India, are all looking at how are we going to restructure the world so that we come out of it more prosperous than we were before, not more impoverished. That’s really what the world is dividing into.
BENJAMIN NORTON: Professor Hudson, I don’t know if this is directly related, but it’s it’s something that’s always been a very curious question in my mind.
Germany, back in 2016 and 2017, it moved, physically moved, its central bank’s gold reserves, which had been stored in New York, London, and Paris, and it physically moved those reserves, those gold reserves, to Frankfurt.
Now this was before the U.S. and Britain stole Venezuela’s gold reserves and other reserves. But do you know anything about what motivated Germany’s central bank to move the physical location of its gold reserves into Germany itself?
MICHAEL HUDSON: I don’t think it’s all moved yet. It’s still going on. Gold is very heavy, as heavy has lead, basically. And America said, well, we can only do a little bit, trickle by trickle. So America has been returning the gold very slowly.
So I think Germany, with all of its history of hyper inflation, I think just realizes that, now that gold is not used to settle balance of payments deficits anymore – the gold that Germany had in America was all of the exports that it made to the United States during the Vietnam War. This is Vietnam War gold.
You remember that President de Gaulle would every month cash in, the dollars that America spent in Vietnam would all be spent from Vietnam to Paris, the dollars would end up there, the central bank of Paris would essentially buy gold on the London exchange and keep the gold either in New York or in London.
Well, Germany, because America defeated Germany, and it wasn’t going to keep its gold in Russia, that defeated it even more, it said, well, ok, we’re cashing in our surplus dollars for gold, but we’re going to hold the gold in America.
But now it says, well, America is never going to settle its balance of payments deficits and its foreign debt in gold again, because it doesn’t have any balance of payments surplus, any ability to do that.
It’s going to spend its export surplus and its investment surplus on war. So it’s never going to be able to pay. That’s obvious. Let’s get the gold back.
That was the calculation that every country was making already a decade ago. They realized that America can never repay its foreign debt, unlike other countries.
When other countries can’t pay their foreign debt, they have to go to the International Monetary Fund, that tells them, well, we’ll make you a loan, but you have to sell off your natural resource reserves to the Americans, or we won’t lend you the money.
Well, basically, that’s not going to happen anymore. They realized that America is just going to say, haha, we’re just not going to pay.
Well, now other countries are saying, wait a minute, if America’s never going to repay its foreign debt, why do the Global South countries have to pay their debt to the IMF and the World Bank, all this dollar debt to dollar bondholders?
If America won’t pay, we don’t have to pay. Let’s have a clean slate. Let’s start from the beginning. And we’re only going to have debt and credit relations with friendly countries, not countries that want to go to war with us like America did in Afghanistan, Syria, Iraq, Iran, and now Russia.
So that’s basically what’s happening.
BENJAMIN NORTON: Great. And just to wrap up here, I have another question. And I know your time is limited, so I really appreciate you being here.
I have a quick question about the decline in U.S. dollar hegemony. We were talking about the strength of the ruble, the economic war on Russia; we talked about the bilateral trade that’s growing between Russia and China using the Chinese yuan, between Russia and India using the Indian rupee. And Iran also is talking about doing business with a basket of currencies.
I want to point to a report that was recently published by economists who work with the IMF. And I published an article about this over at Multipolarista.com, “IMF admits US dollar hegemony declining due to rise of Chinese yuan and sanctions on Russia.”
And there is this report that was published by the IMF, by these economists, and I cite you, Professor Hudson, in this report. It’s a working paper from the IMF, published in March, titled “The Stealth Erosion of Dollar Dominance.”
And here’s a graph, for people watching, here’s a graph from the report. And it shows not a large, but a noticeable and consistent decline in the use of the holding of the U.S. dollar in the foreign exchange reserves of central banks around the world. So this is around the world.
And it has declined in the past years from about 70% of central bank exchange reserves to about 60%. So a 10% decline. That’s not massive, but it’s steady and I think it’s going to accelerate.
And at the same time they’ve also found an increase in the use of what they call “non-traditional currencies” in the foreign exchange reserves of central banks around the world.
And here you can see this graph. I mean it looks like a significant influence because if you look at the y-axis it’s only from 90 to 100. But there is a significant increase in the use of other currencies in foreign exchange reserves, aside from the U.S. dollar, the euro, the Japanese yen, and the British pound. And the currency that is increasingly popular is the Chinese yuan.
So that’s one half of my question. The other half is about this interesting report that was published in the Financial Times, and it’s titled “Russia Sanctions Threaten to Erode Dominance of Dollar, says IMF.”
And the FT interviewed the IMF’s first deputy managing director, Gita Gopinath, who acknowledged that the sanctions imposed on Russia over its military intervention in Ukraine could lead to what she says “fragmentation at a smaller level.”
And she did say that the dollar is eroding influence, but “would remain the major global currency.”
So, that’s a two part question. I’m wondering if you could talk about the decline in U.S. dollar hegemony and how the sanctions will potentially erode that. And then the other half of the question is, can you comment on the declining use of dollars in foreign exchange reserves?
MICHAEL HUDSON: Well, this is what my book “Super Imperialism” was all about. When I first published it in 1972, I could see how the whole thing was unfolding for the next 50 years. And we just published last year a third edition of it, bringing it up to date.
Dollar hegemony means America’s entire balance of payments deficit in the ’50s, ’60s, and ’70s was military. So the dollars that were being pumped into the world economy were the result of military spending.
But the dollars would end up in foreign central banks, especially from Asia to France, Germany, others. What were they going to do with it? Well after 1971 they could not buy gold anymore, so all they could do was buy U.S. Treasury securities. IOUs.
And so they re-lent to the Treasury all the money that America was spending militarily. And the more money America spent in waging its cold war militarily against the world, the more money central banks would lend to the U.S. government to finance the U.S. deficit that was spent largely on the military-industrial complex and foreign military operations.
So dollar hegemony was a free lunch financing America’s almost 800 military bases across the world, to fight against communism, defined as any country that doesn’t let American industry and finance buy control of its raw materials, agriculture, resources.
And this has now come to an end. Right now America has grabbed Afghanistan’s, and Russia’s gold. All of a sudden it’s obvious that, this summer, there’s going to be an enormous squeeze on Third World countries, on the Global South.
Their energy prices are going to go way up, and that’s going to hurt them just like the oil shock of 1974 and 1975 did.
They’re going to have to pay higher food costs, because of food prices are going to go way up now that the Ukraine war is erupting.
And a lot of their foreign debt, dollarized debt service, is coming due. And they’re facing a choice: if they pay the foreign debt, they can’t afford to buy the oil and energy that they need to run their factories and heat their homes. They can’t afford to buy the food to feed their people. Whose interests are they going to put first?
Well of course their leaders are going to put America’s interests first, and their own interests second, because their leaders, if they’re a client oligarchy, are put in power by the U.S. military, as sort of miniature Pinochets, throughout Latin America and other countries.
So suppose other countries decide, well, we’re going to feed ourselves and we’re not going to wreck our economy just to pay foreign bondholders. We’re a sovereign country. We’re going to put our national interests first.
Well, then the United States can say, aha, we’re going to grab all of your foreign assets in the United States.
Well, other countries can say, oh, they’re going to do to us just what they did to Afghanistan and Russia. Let’s move our money out of the United States quickly. If we don’t have dollars, well, it’s true, we can’t pay our dollar bondholders, but at least we can, in international markets, we can buy the food and the energy we need.
And so the tensions, the disruption of world prices, and inflation, and trade that is a result of the NATO attack on Russia, now threatens to drive all of the southern hemisphere countries into an alliance with Russia, China, India, and all the rest.
So America basically is creating a new Berlin Wall, but the wall is isolating itself from other countries, and driving other countries all together into what I hope will be a happy, self-sufficient, non-U.S. globalized economy.
BENJAMIN NORTON: Well, I want to thank you, Professor Michael Hudson. It’s always a real pleasure having you. I know you’re very busy, so thank you for giving us so much of your time.
I’ll say that the comment section here on YouTube has been very vibrant, with some interesting conversation. And what’s nice is there are people from all over the world, from the U.S., Latin America, Europe, and from Russia. So it’s good to see a mix of people.
And for anyone who wants to listen to this, you can check out the podcast version if you look up Multipolarista on Spotify, and iTunes, and all the other podcast platforms.
And I’ll just say, while I wrap up here, that today we were talking about, at the beginning of this discussion, a new book that Michael Hudson is publishing this week. It is called “The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism.”
It’s a very good book. I had the privilege of getting a review copy early. So definitely check out that book.
You can also find all of Professor Hudson’s writings at michael-hudson.com.
Thanks, Professor Hudson.
MICHAEL HUDSON: It’s really good to be here. It was a good discussion.
Persistently low investment in conventional energy sources risks leaving the world running out of spare production capacity for crude oil, refined products, and natural gas, the energy ministers of two of OPEC’s top producers, Saudi Arabia and the United Arab Emirates (UAE), said on Tuesday.
Officials from the oil and gas producing countries in the Middle East have been warning for months—even before the Russian invasion of Ukraine—that recent low investments in new fields and production capacity would lead to dwindling energy capacity production once the global economy recovers from the COVID slump of 2020.
At a conference in Abu Dhabi today, the Saudi Energy Minister, Prince Abdulaziz bin Salman, said that “The world needs to wake up to an existing reality.”
“The world is running out of energy capacity at all levels,” Prince Abdulaziz bin Salman said, as carried by Bloomberg.
Not enough investment in global refining capacity is one of the key drivers of the global rally in gasoline, diesel, and jet fuel prices, Prince Abdulaziz bin Salman said on Monday, reiterating the Kingdom’s view that a rushed transition to cleaner energy fails to take into account realities.
If the industry is discouraged from investments, this will lead to a lack of supply, which will translate into inflation, and that will affect the end consumer, the minister said at the Future Aviation Forum in Riyadh.
At the Tuesday conference in Abu Dhabi, the UAE’s Energy Minister Suhail al-Mazrouei said that OPEC+ may not be able to guarantee enough supply when the world fully recovers from the COVID crash in demand.
The UAE minister also said that the extreme volatility in the oil market in recent weeks is the result of some buyers boycotting certain crudes; it is not connected with OPEC+ and is outside the alliance’s control, in an apparent reference to the boycott of Russian oil from Western buyers.
The UAE and Saudi Arabia are actually the only two oil producers believed to have sufficient spare oil production capacity, but they are unwilling to tap it, saying the market is balanced and any extreme volatility is the result of geopolitical factors.
excellent discourse, detailing how finance capitalism/predatory capitalism hollowed out the US capacity to impose its will on the world.
personal observation that control of the media and lack of political analyses among the entire class spectrum of the US prevents both its elected/appointed leadership and citizenry from grasping these concepts. most continue to believe the US retains both the hard and soft power dominance it had in 1945, hence the belief that it soon may unleash Nato as the precursor to the mighty US military crushing Russia like it did Grenada and Panama.
I work in IT. Right now we have backlogs on common commodity equipment that’s is moving form 9mon delays to 12 month delays. This is for equipment that was once stocked as cache to suffice orders with backfill from the factories. The reason our tech partners provide is that while they already suffered various delays due to covid disruptions, now they are claiming that various gasses like Neon used in chip fabrication is limited, with Ukraine having been a key supplier.
So, ok IT, tech, big deal, etc. But the problem is, the whole worked is intractably interdependent due to globalism. Competition drives out higher cost providers until the only way to get almost anything built is to have 6 different countries production capabilities involved. At a very high level in investment circles this is understood and market feed traders react to relevant announcements in real time, however since most of these relationships are company to company most interdependencies are proprietary knowledge.
A full war where trade actually stops (it hasn’t so far) would root out all these interdependencies, and give a many years of broken systems across the board.
So, my belief is that any protracted war is probably unviable simply from a logistics POV. Simple example. I got a lightening strike on a datacentre. it blew out the coupling to the power grid and needed to be replaced. Essentially it was just a building sized fuse. It was a 4 story office complex. Very common. Turned out there were no manufacturers of the component in Australia. We had to commission the manufacture of one in the Indonesia and have it air shipped to Sydney, whilst the building remained dark and unusable. This is not a war material, this is just how intertwined everything is. In the event of war, even if a nation like the USA has certified it’s military’s parts are 100% home supplied (they probably aren’t) how long can you even keep the factory going before a Cisco switch dies(China), or a PDU blows out (Vietnam), or a sensor system prevents a generator to start (South Korea)
That’s setting aside immediate military capabilities as in a frontal war existing assets will be destroyed very quickly and production will be invaluable. But when the whole factory breaks down, how much spitball repair can it take before it simply cannot continue production. I suspect that most factories would not still be alive in a year with highly restricted service parts.
Military dominance only works in cases where you can guarantee a quick outcome or low continual investment. It might not work so well if there are subs closing shipping lanes, or if your supplier becomes an enemy state.
first rate observation, sir.
Hudson is pretty good about identifying the interest groups that actively foment war. However, he does not emphasize the disproportionately Jewish character of the warmongers–the “AngloZionists” referred to by The Saker–and he is wrong about the beneficence of socialism. China has grown very rapidly during the last quarter century, but this growth has occurred despite, and not because of, the Chinese Communist Party. On average, Chinese have a high level of cognitive ability, and they were able to adopt Western technologies very fast. On a scale from 0 to 10, China’s degree of capitalism was still less than 4 as of 1990. It then increased to about 6.5 until Xi Jinping became president. This liberalization was another important part of China’s growth, but its average living standards are still below Mexico’s. China would do even better if it liberalized to the same extent as South Korea, let alone Switzerland (which is capitalist to a degree exceeding 8). The most serious problem is a rapacious elite such as the one that captured Russia in the 1990s (but was tamed by Putin). Such an elite has by now very much captured America and the UK.
‘However, he does not emphasize the disproportionately Jewish character of the warmongers …’
Does he really need to? This reader perceives his reticence on that subject as merely the wise discretion of a man who limits his commentary to the subject area in which he has the greatest expertise. That should be sufficient, I think, to let others identify the warmongers’ ethnicity, religion, country of origin, or whatever quite readily according to their own levels of understanding and purposes of inquiry.
Very well said, Arvy!
For those not familiar with the history of the USA, the (final) capture of the national political apparatus occurred circa 1910; the Agrarian-Populist political elements, championed by William J Bryan and the Democrats, had for many years been losing to the Republicans, the party of Industry and Finance.
After decades in the political wilderness, the Democrats chose to support the interests of Finance, and became a component of the Uni-Party which has ruled the USA for well over a century. There has been zero effective electoral choice at the national level in the USA since 1912.
” China has grown very rapidly during the last quarter century, but this growth has occurred despite, and not because of, the Chinese Communist Party. ”
This is nonsense, like saying :
The US has declined very rapidly during the last quarter century, but this decline has occurred despite, and not because of, the American Political Parties.
No. China’s development has everything to do with the CPC and it’s policies. In fact, in this interview, as well as others, Hudson points out that the CPC runs the banks, builds infrastructure, and schools the Chinese populace – among other things. Also, you can read Xi himself since his writings and speeches have been collected and are freely available.
I find your comparison of China to both South Korea and Switzerland ridiculously off – both economically and historically. You write, for example, that the ‘beneficence of socialism’ is wrong, yet are either ignoring, or are ignorant of, the fact that until the 80s the DPRK was more prosperous than SK ! It wasn’t until the US (in particular) began ‘investing’ (at the US taxpayer expense) a great deal of money into SK which began the latter’s rise as an industrial power. Switzerland, on the other hand, is a financial market, for decades a safe haven, with all the benefits of the interests thereof, for the ill-gotten gains of colonialists, big bankers, industrialists, dictators, etc. In effect, it has been a haven for all the financiers who’ve de-industrialized, and financed, the destruction of much of the West – the process of which Hudson points out in this very interview. Therefore, I find it strange you use Switzerland as a counter-example to China, an industrial powerhouse.
In addition, the total lack of mention of sanctions makes your argument suspect. I can’t think of a single nation engaging in the process of socializing its economy which has been utterly left alone by the US (and it’s hegemony through global dollarization) and/or the collective West. To opine as critics of socialism are wont to do that socialism ‘fails every time it’s tried’ while actively and perpetually interfering in that process of socialization can only speak more to subjective interests of the critic than the objectivity of their analysis.
You can say what you want about the communist ideology (and I have my observations about the communists of the “West”), but it cannot be denied that what the Chinese communist party has done in recent decades has been very intelligent and patriotic. It has economically and politically defeated the empire on its own terrain, without neglecting the welfare of the people, which is the fundamental objective.
– Switzerland, on the other hand, is a financial market, for decades a safe haven, with all the benefits of the interests thereof, for the ill-gotten gains of colonialists,
Good points. CCP has to do some serious house-cleaning to get China to be a landlocked state between Germany, France, Austria and Italia …and to be the de facto center of EU.
“China has grown very rapidly during the last quarter century, but this growth has occurred despite, and not because of, the Chinese Communist Party.”
Like Soviet Russia grew very rapidly to become the other 20th century superpower despite, and not because of, the Soviet Communist Party.
“Post hoc ergo propter hoc” ?
– he is wrong about the beneficence of socialism
As far as I remember the Siberian railways were build be political prioners – freezing to death -> proving “socialism” works.
you made those comment with such an “authority”, LOL.
You do NOT know anything about China!
Without CCP, without New China, period.
You Westerners just do not get it.
If S. Korea is so good, why would so many of them living in China? You do not know anything about S. Korea either
De-Dollarising and Delinking from Dollar-economy to accelerate with a bill to be passed by the senate of the Empire of Lies. A EOL Senate committee is expected to pass a bill on Thursday that could open members of the Organization of the Petroleum Exporting Countries and its partners to antitrust lawsuits for orchestrating supply cuts that raise global crude prices. This would enable EOL to Steal the Dollar reserves, and other assets of OPEC+ countries. The demarcation between the grubby anglo-saxons and 80% population of Earth has become stark today.
John Smith, Thanks for bringing that to our attention. It is way more significant that it appears. IMHO The other way they may try to get at Russia is to drive oil prices down to $20 a barrel, but in order to do that they need OPEC to flood the market with oil, as they did in ~ 2014. I really need to think about what the knock-on effects / unintended consequences of that will be. One obvious one will be the derailing of the climate change agenda, so I would expect to see articles to appear in the scientific journals that things are not as dire as the IPCC forecasted and that humanity has a 20 year reprieve. (lol)
We need to keep an eye on this. IMHO
Not 2014, look back to the 1980’s. The USA paid the Saudi’s in gold under the table to set the price of the oil market. The US setup the COMEX to manage the price of gold to facilitate this static trade. The purpose was that the USSR had pretty much one trade going on with the west, Oil For Wheat Grain.
When the USSR had internal supply disruptions of wheat production the USA struck this deal to lower the amount of wheat that could be bought with the USSR’s oil prompting increasing famine in the USSR.
There are various sources of this information available, but start with gold and oil price charts and observe the correlations over that time period. Also note that AFAIK the Saudi’s initially were reticent to accept a non physical gold deal, so the USA supplied physical coins with a unique stamp. Some of these are still around. Where the gold came from is just a guess, but given the fact that Ft knox isn’t permitted to be auditied, my guess is that the vault is empty.
In short, I’m sure Russia knows the oil price game by now and would have developed countermeasures, or at least plans. The last oil game was probably the final straw breaking the USSR.
The other thing to consider is that Ghawar is pumping 70% seawater (that was 10 years ago). It’s probably worse now. Third, all the OPEC nations inflate their reserves. OPEC agreements only allow a nation to supply a set percentage of known\proven reserves. So, if they pay for research that increases\overlaps reserves then they can balance national budgets by increased supply. This is a little game they play with each other. When push comes to shove I expect a lot of those reserve numbers will be ‘revised down’, somewhere around the point at which they start ‘reducing’ pumping for whatever other reason. Certainly not reducing because they don’t have much left worth extracting at current oil prices.
AFAIK, Russia has close to one of the world lowest all in cost’s per BBL, so killing them with low prices really just kills OUR suppliers who require higher rates.
I worked for a world-class steel foundry in the early ’80s. Our ‘custom’ business received inquiries from the ‘oil patch’ concerning high-nickel (actually nickel-based) alloys for use in pumping systems in certain foreign supplier environments. Later discussions homed in on Saudi Arabia and sea-water infiltration of the deposits. About that time steel castings were moving to Japanese foundries – or Japanese-owned facilities – so we didn’t follow the development.
Watching this video is absolutely essential for any understanding of economics today, rentier financiers possessing productive capitalism, the New Cold War, Russian sanctions, Southern Hemisphere autarky, and reasons for the Ukraine War.
It’s called “NOPEC” (sic).
Since I closely follow Dr. Hudson, there wasn’t much of anything new for me; but for those just getting initiated, this is an excellent point-of-entry. It appears his new book, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism, will become his third most important work after Super Imperialism and Killing the Host. What I’m most interested in learning from Dr. Hudson is the dynamics of 19th Century political-economy and the now obfuscated struggle between the rising Class of industrial capitalists and the Royalist and Rentier Classes and how that struggle formed the basis for the two world wars, and the two cold wars that followed, as well as how Fascism/Nazism is part of the foundation for Neoliberalism. Dr. Hudson made one reference in that regard, Erasmus Peshine Smith’s A Manual of Political Economy.
My understanding of what professor Hudson is is explaining clearly must happen within a near time frame of ten years or less for a global depression is but a year away. The empire of lies cannot maintain it’s military and financial domination over a world that no longer trust it.
Great for reference and understanding !
Michael Hudson: “… we’re seeing, in the last few months, the beginning of a war that’s going to go on for – I think – 20 years, maybe 30 or 40 years. The world is splitting away. It won’t be a pretty sight because the United States and its European satellites are trying to prevent an inevitable break away that they cannot prevent any more than Europe’s landlord class could prevent industrial capitalism from developing in the 19th century. “
It takes a very special intellect to see and describe accurately an historical turning point while it’s taking place. Hudson’s book should make for interesting reading for a long time.
The profound problem is that most of the buffoons who present a comment about the war in Ukraine or Chinese Russian aggression are completely ignorant to much or all of this and readily lap up the public relations diarrhea of the neocons and neoliberals who completely control the information war!!
This link is highly relevant in the context of the current direction of the economic situation>
Shiller Institute & La Rouche Org interviews Col Richard Black (1.10.58)
Col. Richard Black : U.S. Leading World to Nuclear War
Richard Black does not say anything that i do not know already… however it is vital that this info comes from an American ex-military source, as there are far too many who still cannot grasp the context of what is developing in the Ukraine and how it simply follows a set malevolent and predatory pattern of the US Deep State.
He is articulate and covers all the issues extremely well…the interviewer is also really good at asking the right questions.
Col. Richard Blacks suggestion that only a major catastrophe such as the financial implosion of the West, will focus minds on a new Treaty of Westphalia…is precisely what the Russians are planning to do as their own retaliatory sanctions against the West.
As Gonzalo Lira has pointed out, the Russians state that their own plans are already developed and unanimously agreed by the Russian Security Council >
Gonzalo Lira – the worst is about to happen (10.34)
Its not going to be nice…and the one thing that has kept the Russians back from retaliating against the many recent direct provocations by NATO, is the realisation that someone in the USA might just launch nuclear weapons…where the retaliation by Russia would turn the USA into ash within the hour, but also do a lot of damage to the rest of the World for a long time…
I note that Col Black downplayed the Russian nuclear capabilities (he suggested there was parity when the reality is that Russia has escalation-dominance) but the underlying message he puts across is fine and should still focus minds…
It’s quite disturbing that in America, we do have even one journalist/reporter who has a full grasp of understanding how the US financial hegemon functions.
After all, the US “FED”, The Federal Reserve is the central command post in maintaining the flow of US $$s that circulated around the world via loans/etc. to ‘bought-off nations’ like Japan, Australia and a host of others and by which those $$s + profits come back to The FED.
We’ve been reading “The Lord’s of Easy Money.” (Christopher Leonard) He details key aspects of how The FED operates: quantitative easing, negative interest rates (all started by Ben Bernanke) and other brutal measures that have destroyed many countries ’round the world along with much of the American society.
How is it, that we follow Italian experts in “the world economy” and are far better educated in how The Fed operates, while there is no reporter/journalist in the US who has a clue about the very Headquarters of the Hegemony: The Federal Reserve.
So here are some key questions that Dr. Michael Hudson should have been asked:
1. Explain The Fed’s “quantitative easing” in 2010, after the “crash” of 2008-09?
2. How did QE greatly widen the gap between the Super Wealthy vs everyone else in the US
3. Now that QE has ended with it’s “negative interest rates” what, exactly is The FED doing to dig itself out of this pit?
4. Are The FED’s current policies “driving” inflation up to the level of 15%? (Yes, that’s the real inflation rate that ShadowStats.com has measured without all the govt’s gimmicry.
5. China doesn’t have this privatized entity called “The FED.” What does their central bank do to see that money is poured back into its economy to lift up millions of its citizens?
Those and so many other pertinent questions should have been asked.
A good start, but I’ll provide some small answers and extensions;
QE was pretty mundane. Essentially we have FAS 157, section C as a key driver of the financial mess of the GFC, there were many action before that, but that accounting standard opened a floodgate. Basically, it allows for derivatives that are considered ‘exotic’ to be valued at par to creation index price in instances where no market exists that allows Mark To Market based valuation. So, the impetus for investment banks was to proliferate exotics by just using continuous deviations in each new tranche. This essentially meant that the investment banks could write up risk free unlimited debt without a car in the world as to if it went bad. They could literally take both sides of every trade if taken to the logical extreme. With both trades buried in derivatives you unpack\sell the winner mark it to market, and keep the losing trade inside the exotic as ‘Mark to value’. Since each package was a mix of AAA’s and junk the valuation was then simply supplied at inception (before losses are incurred) and retain the A\AA\AAA rating.
However these risks are meant to be offset with Credit Default Swaps if they are to be owned by a counterparty. So the investment bank writes up junk, packages it, and in some cases sells it. The new owner is protected by the CDS, which if triggered pays out the risk and kept the owner whole. Now, we all know that the underwriters had insufficient reserves to cover the CDS’s they wrote. That’s well known. However what poorly known is that the regulatory bodies that approve the trigger conditions often REFUSED to allow the trigger as they knew the counterparty would be insolvent. One such regulator was the ISDA, they are the reason why wall street and EU banks even still exist.
I worked all this out way back when I was at a desk in Merrill, not the best place to discover that it looks like ‘all banks are insolvent’ lol, but apropos given the fact that it was bailed out just for the stuff which could not be hidden. The vaults full of junk had to GO somewhere. That’s where the FED comes in. The truly heinous junk was flipped to the fed, which has bottomless coffers so can buy anything and just let it rot on the balance sheet, buying at PAR, which amounted to pure cash injections to in IB’s. If I found out that the IB’s were still insolvent I would not be surprised.
I know everyone like to point at the Fed, but the Fed is owned. It’s a public show we can watch that delivers the messages that others are writing. The BIS is probably doing that too, but the news is unusually quite about BIS goings on, probably for a reason.
So, IMHO, the CB’s are like fuel injectors in an engine, just another part of a massive machine. Not the controlling component itself, but, as we saw in the GFC, they are not only interdependent, but they are completely willing to step outside national boundaries if ‘rival’ CB is hamstring.
Nice summary, thanks.
It is so easy to get lost in the maze of discourse around international economy.
Hudson is a great help untangling it for us!
But there remains the task of demystifying all the terminology into some key systemic realities which are so blindingly simple, that they are nearly ALWAYS overlooked. I would like to promote 2 of these in the context of this article.
1. Money is NOT value – it is CLAIMS on value. One must focus on the claims because not all claims are truly valid – and this is the key to stripping the invalid claims of the Rentier class.
2. The freezing of foreign bank accounts can only be done if those accounts are domiciled in your own jurisdiction. For instance, USA cannot freeze an account held within a Russian bank. What? Did you send in a commando team to force the bank clerks in the Russian central bank in Moscow to type in a zero? Or to steal the gold there? People rarely understand that these unilateral actions of the USA are committed on US soil and the soil of their slave-countries in Europe and elsewhere. Hence it is important to keep your central-bank accounts onshore.
3.Although specific currencies are minted within a sovereign country, it will circulate outside thee jurisdiction of that country beyond the control of the sovereign. This will be the case whenever a sovereign allows the currency to leave its jurisdiction, and while ever the sovereign honors the claims that currency exerts within the sovereignty.
These are only 3 of the blindingly simple components comprising our economic machine.
There are quite a few more, I present these ones so that we can all seek them out when trying to shovel our way through the mountains of garbage uttered within this topic.
Hope it helps?
Michael Hudson recapitulates V.I. Lenin’s “Imperialism, the Highest Stage of Capitalism” published in 1912. In Chapter 2, The Banks and Their New Role, Lenin wrote: “…the beginning of the twentieth century marks the turning point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.” And in Chapter 3, Finance Capital and Financial Oligarchy:
“It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital, is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means the crystallization of a small number of financially “powerful” states from among all the rest….”
No surprise the Chinese and Russians like Michael Hudson. Based on their own historical experience and in-depth understanding of Marxist political economy, both Russia and China have been enormously successful in making capitalism “work” rationally and profitably, according to its own logic. It was V.I. Lenin who advocated in 1921 a “New Economic Policy” that was intended to quickly transform the backward Russian economy by introducing free market capitalism under state control. However, It was the Soviets, the councils of workers and soldiers — and not the Party — that constituted the revolutionary base on which the new socialist state power was established.
In 1967, Guy Debord, in Society of the Spectacle wrote: “Leninism was the highest voluntaristic expression of revolutionary ideology – a coherence of the separate governing a reality that resisted it…” (thesis 105) And further, “…The contradiction—the fact that a totalitarian bureaucracy trying to administer an industrialized society is caught between its need for rationality and its repression of rationality – is also one of its main weaknesses in comparison with normal capitalist development. Just as the bureaucracy cannot resolve the question of agriculture as ordinary capitalism has done, it also proves inferior to the latter in the field of industrial production because its unrealistic authoritarian planning is based on omnipresent falsification.” (thesis 106)
” However, It was the Soviets, the councils of workers and soldiers — and not the Party — that constituted the revolutionary base on which the new socialist state power was established.”
If “established” is perceived as being a fleeting moment in an ongoing lateral process, then you have replicated the myth across which de jure and de facto were temporarily bridged throughout “The Soviet Union”, and how increasing vibrations would undermine the “suspension bridges”.
As you quote above “a coherence of the separate governing a reality that resisted it” illustrates that Mr. Debord and others were aware of this bridge but described it slightly differently.
Included in some whom also understood contemporaneously with Mr. Debord, were those who understood that this was one of the reasons that “The Soviet Union” was not sustainable – another being the consequential practices of Gosplan contained in Mr. Debord’s quotation
” Just as the bureaucracy cannot resolve the question of agriculture as ordinary capitalism has done, it also proves inferior to the latter in the field of industrial production because its unrealistic authoritarian planning is based on omnipresent falsification.” (thesis 106) “,
That “external forces” would use such opportunities to make hay they were also aware – Mr. P.C.Roberts’ Alienation and the Soviet economy of 1971 refers -,
Consequently some realised that a salient question to consider was “How to drown a drowning man with the minimum of blowback ?” and implementing ensuing practices to accelerate/facilitate the transcendence of “The Soviet Union” which was a construct in large degree emulative of “their opponents” since they were mutually dependent to affect mutual sustainability, as Eurasia and Oceania were in 1984 as your own experience may have substantiated.
This was facilitated with the complicity of those seeking to make hay by undermining mutual dependencies as in 1971 with the alchemy of rendering gold into paper, in consequence of which in 1973 the Japanese zaibatsu, represented by Mitsui-Mitsubishi met with the Academy of Sciences of the Soviet Union to explore rendering their growing paper supplies into investments to develop “land bridges” from Kobe to Rotterdam via suspension bridges/tunnels from Honshu via Hokkaido to Primorskie Krai joining the upgraded Trans-Siberian railroad, and trans-shipping due to different railway guages as was the practice at Soviet Union’s borders in Belarussian SSR and Ukrainian SSR – the 1973 variant being from Kobe to Rotterdam, not Vladivostock to Lisbon, since those on Iberian Peninsula were not deemed to be “dependable” partners, given their close and developing associations with NATO.
The reduction of paper supplies was to be affected in return for various commodities from the Soviet Union facilitating further development of industrial capitalism in which Japan was currently a major emerging player.
This was facilitated by both parties understanding that in any lateral process change is a constant, and hence “totalitarianism” and “coherence” was/is never an option, but at best a changing approximation facilitating limited/limiting detente/obfuscation.
Since such is deemed “too complex” another popular bridge over troubled waters is “We won the Cold War” although a temporary construct subject to vibrations.
Iranian Islamic socialism works. In 6 years I’ve not seen an empty shelf, in fact finding an shop to rent can take several agents several months.
State enterprises, especially those run by the IRGC, controls 90% of the economy with ‘Bazaris’ and small farmers making up the rest.
Where else in the world can a bachelor live on $100/month?
Wonderful transcript thanks guys.
Glaznev needs to invite Professor Hudson to Russia to do talks to university students as he did in China. I’ve followed ,not so much him ,but the policies he advocates for many years. Every Western (and Japan) nation that gained economic power in the 19th/20th centuries did so by using the methods Hudson advocates here. China understood that and adopted many of those same policies to build the world’s greatest economy (PPP) today. Russia needs to adopt those policies now. There is no need to “reinvent the wheel” when the policies to build your economy are staring you in the face.You must only have the will to implement them.
– China understood that and adopted many of those same policies to build the world’s greatest economy (PPP) today.
CCP and CIA worked together during WWII.
From around 1970 there is a leak about how US elite would make sure American cars did not work .. because the buyers will always prefer quality cars, and Japan should offer the quality cars. Then it was expected industry would move to Asia (by design). Any communist will stress the “design” here is by CCP
Yeah, right, during WWII USSR and the U.S. were Allies. look at what is their relationship today!
“There hasn’t been any shock-and-awe; there’s been a self-defeating piffle, and laughter.”
“The Americans are shocked. The Americans are awed. The Russians are laughing and everything is going their way.”
Hilarious. But shouldn’t reverse shock-and-awe be awe-and-shock? Just a quibble.
Basically anyone actually competent was fired. And
“I think Paul Krugman, the Nobel Prize winner, said Biden is the greatest American president since Roosevelt, or since Truman, that he was so smart. Well, that’s why Krugman got the Nobel Prize, for making statements like that.”
The remaining ideologues are using computer models for economics and war-gaming, not just Climate, a pervasive mental atrophy. AI has literally eaten their brains. NATO-EU is running on an Artificial Intelligence autopilot. In credible this happened so fast.
Thank you for the transcript!
No puedo confirmar esta noticia en otros medios:
Google-translate from mod:
I cannot confirm this news in other media:
[PS. From the mod:
When he says “it’s true that corporations now are just as right-wing as the the banks and the hedge funds”, you know this is an ivory tower academic with little grasp of the leftist-globalist ideological hegemony now controlling the elite political class (except Trump supporters and populists), academia, media, judiciary, popular culture and much of the corporate world. He should check out ‘right-wing’ Twitter or Facebook sometime, and note what opinions get censored (hint: not leftist or pro big pharma ones). Has this learned economist even heard of woke, or the power of ideology?
Personally, I wouldn’t be quite so harsh because Hudson really does stand out from the blander academic/ivory tower crowd. However, I do agree that Hudson is much less heterodox and anti-establishment than his branding/positioning.
From his misrepresentation of Hayek (who would not support our present form of political economy) to sidestepping the elephant in the room that is how massively enormous and powerful government has become, Hudson doesn’t seem quite capable of or interested in directly challenging the power structure that actually rules today.
What’s the difference between ‘finance capitalism’ and ‘socialism’ in the trajectory of the US specifically or Zone A more generally? It’s all fascism – the merger of corporate power and government power. Or more generically, authoritarianism (or simply petty theft). It doesn’t really have much to do with finance as a function or market-based economics as a system. And it certainly despises the political side of political economy that tries to contain government to what it does well through mechanisms like national constitutions and rule of law.
Hudson worries about disparaging government as if the problem is government today isn’t powerful enough. Government in the US spends more currency units and has more regulations to support the ruling class in healthcare, education, national security, banking, media, etc., than any of the supposedly more socialist, or at least more ‘regulated capitalism’ models among the Eurolemmings today. And vastly more power/size/reach than those ‘progressive’ industrialization efforts of the 19th century. And yet Hudson implies the problem in America is that we don’t spend enough money on [insert XYZ part of the power structure]?
Its both interesting and revealing that arguments which take this line never seem to define the politically loaded key term – ‘left.”
The notion that a class based political position can be shoehorned into one which supports an opposite position – the Randian individualism and Thatcherite ‘no such ting as society, only the individual and the family’ of the ultra right wing individualist self ID woke cult – which, with its hierarchy of oppression, is the antithesis of class politics and solidarity is a testament to the power of propaganda.
Notwithstanding that this right wing approach has successfully injected its propaganda into the left body politic to the extent that much of the liberal left [mainly among the young naive and wet behind the ears] is enthusiastically doing the bulk of the water carrying for it the fact remains that what Nick labels as ‘left wing’ here is the exact opposite.
A problem issue tackled here:
First we heard about the ‘war in Ukraine’ then some sayng it’s a proxy war against Russia, and then an economic and information US war against Russia — and China. We hear about US war against South America, as against Venuzuela. Now, slowly creeping the collective mind is that the US is waging war against Europe. It is part of it total war against any potential or actual competitor, and US world domination.
Yes — the US is at war against Europe, as well as the rest of the wolrd, with the elite at war even against the bulk of the American people. The elite have yet to realize they are even at war against themselves, like an alcoholic or drug addict who is slowly killing himself.
Keep in mind that against currencies such as the euro, Swiss franc and others, the dollar is benefiting from capital flight in Euro countries and the higher interest rates imposed by the Fed. Joe long THIS will persist is a tough call. But if the mid term elections kneecap Biden (let’s hope!) we might start seeing some common sense policies both domestically and internationally.
Excelente questões sobre a realidade do império do mal e da mentira .
Excellent questions about the reality of the empire of evil and lies.
Exactly what I have pointed out for the last 3 months to the letter.
Even posted up the actual accounting that takes place with the changes long before anyone else did. With the Gazprom accounts and K accounts weeks before the press.
Whilst others were raving about gold and foreign reserves and didn’t understand them.
Who was right and bang on the money ?
So at last can we finally put to bed this gold standard nonsense that clogs up the internet. Would be a disaster for Russia.
Listen and learn from the real world and History.
How you do that is fully learn and understand MMT. Completely ignore the fire sectors propaganda that tries to attack it in order to hide the myths and lies that MMT exposes.
It takes years to learn MMT and you’ll never learn it by listening to the sound bites in the banking press that attack it. That everybody seems to think what MMT is. Are led by the nose to believe the bankers propaganda used to attack MMT.
There are no short cuts – study and learning is the only way to find out what MMT really is. Large parts of which Michael has covered here.
Once you fully understand it. The propaganda used by the neoliberal globalists will NEVER work on you. You will be immune to their lies and myths.
Understanding MMT is why I have been bang on the money for the last 3 months. Never lied once about how things really work.
No better place to start your education than here
The deficit myth
Time and time and time again MMT’rs were attacked by the gold bugs. However, who was proved right yet again ?
The truth always comes out in the end.
Whilst everyone else was scratching their heads wondering what the changes would mean . Who explained in great detail what it would mean and was proven right yet again ?
MMT’rs of course as they understand fully how different monetary systems operate in the real world and not in some fictional mankwi economic textbook. Free from the bank lobby, IMF, World Bank , mainstream press propaganda.
I think it does not take long to learn the basics of MMT, but it can a long time to unlearn all the nonsense we were brainwashed with. Have a ten year old listen to Warren Mosler explain it and he could likely get the idea down in 1/2 hour, understanding the differences between real wealth, money, and faith that that abstraction of wealth will be worth something in the future depends on sovereignty and the power of the government and people to properly handle reality and realistic expectations of return on investment of resources (material, time, labor). Even the value of gold depends on faith that it will be valuable in the future.
The reality is that Russia has oil, agriculture, education, knowledge, skills, industry, practical intelligence, military competence, and strenghth of character, and China has these resources too — real wealth — while the west has been squandering these things away for their fantasies.
“I think it does not take long to learn the basics of MMT, but it can a long time to unlearn all the nonsense we were brainwashed with”
Couldn’t have put it better Blue Pilgrim. The brainwashing has been relentless for at least 5 decades. As soon as they put The Berlin Wall on wheels.
The basics are a very strong foundation from which to learn from. However, the more you learn the more difficult it gets especially when you deep dive into the weeds of the assets and liabilities of the central bank, commercial bank and government balance sheets.
It was for me anyways as I never studied accounting and had to start with that first. Then put everything together.
– The reality is that Russia has oil, agriculture, education
It used to be Sberbank was more profitable than Gazprom.
What Russians need is cheap credit. Neither Gazprom nor Sberbank offer cheap credit.
Agreed MMT is easy to learn/understand. It’s the elementary chartalist observation that a nation can emit infinite amounts of its own currency unit. We have a simple word for that sentiment in American English: Duh.
The problem for MMT advocates is that it’s a concoction of policy ‘solutions’ in search of a problem that has nothing to do with the monetary plumbing intricacies. The US congress can (and does) spend all the currency units it wants to.
Citing Mosler is particularly ironic in this interview because he’s a millionaire financier – exactly the people MMT (supposedly) solves for! Such circular fun.
MMT wraps itself up in dense academese not because it has deep originality to offer on how to stop the empire’s war on Russia or any other major topic of the day but rather because it has no answer to meaningful questions. The “you don’t understand, here’s more homework” trope has been the defense mechanism for years.
MMT: We need to spend more money on healthcare.
Critic: The US already spends a huge amount of money on healthcare.
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
MMT: We need to spend more money on education.
Critic: The US already spends a huge amount of money on education.
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
MMT: A job guarantee solves poverty and inequality.
Critic: So why does MMT pay JG workers less than academic economists, hospital administrators, financiers, mercenaries, and other connected insiders who depend upon government for their paycheck?
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
MMT: Deficit spending is good.
Critic: Why not tax the rich more?
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
MMT: More aggregate spending is good.
Critic: Government is already enormous. The issue is distribution, not aggregate size.
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
MMT: You can’t just give money to people (earned income tax credit, social security, unemployment insurance, income guarantee, etc.) because it’s inflationary.
Critic: Wait, you just said spending is good. And by the way, when in history have buffer stocks worked to anchor prices? What empirical or logical argument do you have?
MMT: You don’t understand MMT. Here go read a bunch of irrelevant links that won’t address the topic.
On and on, this has been discourse about MMT for decades now.
Yes, I agree that Mosler is a con man. When I first read about MMT some years ago, Mosler claimed that it was the US government that created the US money supply. What he failed to mention was that in reality the US government borrows money it needs from the private sector plus taxation of the workforce. And then goes on to say that it is necessary for the US government to issue bonds i.e. borrow money that he “justifies” by claiming that this is what is used to control interest rates.
If the US Treasury created the US money supply their would be no US government debt of $39 trillion now, would there ? It would actually be a simple matter to control the rate of inflation of the currency by having the IRS delete a fraction back out of existence from tax receipts as necessary. This is exactly what the banks are required to do as the principal of the loans they create out of thin air are paid back.
I was hoping one of the MMT proponents would answer your point but I’m not seeing any replies.
The IRS deleting currency units is exactly what I think should happen. The undermining of progressive income taxation is one of the major ignored stories of the post-Bretton Woods era. After all, what would be the point of giving piles of USD to connected insiders if they had to turn around and pay taxes to fund the empire?
That MMT so studiously ignores this basic plumbing solution to increasingly aristocratic wealth concentration gives away the game that they are at best irrelevant for tackling the national security state and possibly intentionally deceitful/controlled opposition.
One point of complexity if you’re into the weeds: MMT sometimes plays fast and loose with the English words ‘money’ and ‘currency units’. It is quite true that the government has to emit currency units first before they can be taxed back, otherwise, obviously, no one has USD (or whatever national currency) in their possession.
That does not create money, though. Rather it transforms one form of money into another. The same fundamental assets (the aggregate value of the country’s human labor) exist whether the claim on those assets is quantified in amounts of fiat currency measured in millions or billions or trillions or whatever. That’s the beauty of math. The number line goes to infinity.
Very interesting view of what is driving world tensions. Makes a lot of sense.