"It's barbarism. I see it coming masqueraded under lawless alliances and predetermined enslavements. It may not be about Hitler's
furnaces, but about the methodical and quasi-scientific subjugation of Man. His absolute humiliation. His disgrace"
Odysseas Elytis, Greek poet, in a press conference on the occasion of receiving the Nobel Prize (1979)
One of "innovations" of neoliberalism was extension known since Ancient Greece concept of debt slavery to the whole countries. Here
is description based on Debt bondage - Wikipedia, the free encyclopedia
Debt bondage (also known as debt slavery or bonded labor) is a person's pledge of their labor or services
as security for the repayment for a debt or other obligation. The services required to repay the debt may be undefined, and the services'
duration may be undefined. Debt bondage can be passed on from generation to generation.
Debt bondage has been described
by the United Nations as a form of "modern day
slavery" and the [3] Most
countries are parties to the Convention, but the practice is still prevalent in
South Asia.
Debt bondage in India was legally abolished in
1976 but remains prevalent.
Debt bondage was very common in Ancient Greece. In ancient
Athens, Solon forbade taking out loans using oneself as a security
and ended such debts.
Europe
Classical antiquity
Debt bondage was "quite normal" in [4]
The poor or those who had fallen irredeemably in debt might place themselves into bondage "voluntarily"—or more precisely, might
be compelled by circumstances to choose debt bondage as a way to anticipate and avoid worse terms that their creditors might impose
on them.[5] In the
Greco-Roman world, debt bondage was a distinct legal
category into which a free person might fall, in theory
temporarily, distinguished from the pervasive practice of
slavery, which included enslavement as a result
of defaulting on debt. Many forms of debt bondage existed in both
ancient Greece and
[6].
Debt bondage was widespread in ancient Greece. The only city-state
known to have abolished it is Athens, as early as the
Archaic period under the debt reform legislation of
[7] Both enslavement for debt and debt
bondage were practiced in [8]
By the Hellenistic period, the limited evidence indicates
that debt bondage had replaced outright enslavement for debt.[8]
The most onerous debt bondage was various forms of paramonē, "indentured
labor." As a matter of law, a person subjected to paramonē was categorically free, and not a slave, but in practice his
freedom was severely constrained by his servitude. Solon's reforms occurred in the context of
democratic politics at Athens that required clearer
distinctions between "free" and "slave"; as a perverse consequence.
The selling of one's own child into slavery is likely in most cases to have resulted from extreme poverty or debt, but strictly
speaking is a form of chattel slavery, not debt bondage. The exact legal circumstances in Greece, however, are far more poorly documented
than in ancient Rome.
Nexum was a debt bondage contract in the early Roman
Republic. Within the Roman legal system, it was a form
of mancipatio. Though the terms of the contract would
vary, essentially a free man pledged himself as a bond slave (nexus) as surety for a loan. He might also hand over his son
as collateral. Although the bondsman might be subjected to humiliation and abuse, as a
legal citizen he was supposed to be exempt from corporal
punishment. Nexum was abolished by the Lex
Poetelia Papiria in 326 BC, in part to prevent abuses to the physical integrity of citizens who had fallen into debt bondage.
Roman historians illuminated the abolition of
nexum with a traditional story that varied in its particulars; basically, a nexus who was a handsome but upstanding
youth suffered sexual harassment by the holder of the debt. In one version, the youth had gone into debt to pay for his father's
funeral; in others, he had been handed over by his father. In all versions, he is presented as a model of virtue. Historical or not,
the cautionary tale highlighted the incongruities of subjecting one free citizen to another's use, and the legal response was aimed
at establishing the citizen's right to liberty (libertas), as distinguished from the
slave or
[11]
Cicero considered the abolition of nexum primarily a
political maneuver to appease the common people (plebs):
the law was passed during the Conflict of the Orders,
when plebeians were struggling to establish their rights in relation to the hereditary privileges of the
patricians. Although nexum was abolished
as a way to secure a loan, debt bondage might still result after a debtor defaulted.
For more details on indentured servitude in the American colonies, see
Indentured servant.
During the colonial history
of the United States, persons bonded themselves to an owner who paid their passage to the New World. They worked until the
debt of passage was paid off, often for years.[13]
In Peru a
peonage system existed from the 16th century until
land reform in the 1950s. One estate in Peru that existed
from the late 16th century until it ended had up to 1,700 people employed and had a prison. They were expected to work for their
landlord a minimum of three days a week and more if necessary to complete assigned work. Workers were paid a symbolic two cents
per year. Workers were unable to travel outside their assigned lands without permission and were not allowed to organise any independent
community activity. In the Peruvian Amazon, debt peonage is an important aspect of contemporary life
[14]
Asia
The Indian indenture system was an ongoing
system of indenture, based on debt bondage, by which perhaps two million Indians were transported to various colonies of European
powers to provide labour for the (mainly sugar) plantations. It started from the end of slavery in 1833 and until 1920.
Pawnage or pawn slavery is a form of servitude akin to bonded labor under which the debtor provides another human being as
security or collateral for the debt. Until the debt (including interest on it) is paid off, the creditor has the use of the labor
of the pawn.[15]
Debt bondage has been described by the United Nations as a form of "modern day slavery"[3]
and is prohibited by international law. It is specifically
dealt with by article 1(a) of the United Nations 1956
Supplementary Convention
on the Abolition of Slavery. It persists nonetheless especially in developing countries, which have few mechanisms for credit
security or bankruptcy, and where fewer people hold formal
title to land or possessions. According to some economists, for example
Hernando de Soto, this is a major barrier
to development in those countries because, for example, entrepreneurs
do not dare take risks and cannot get credit because they hold no
citation needed
Researcher Siddharth Kara has calculated the number
of slaves in the world by type, and determined that at the end of 2006 there were 18.1 million people subject to debt bondage.[16]
In India, the rise of
Dalit activism, government legislation starting as early as 1949,[17]
as well as ongoing work by NGOs and government offices to enforce labour laws and rehabilitate those in debt, appears to have contributed
to the reduction of bonded labour there. However, according to research papers presented by the International Labour Organization,
there are still many obstacles to the eradication of bonded labour in India.[19]
Reprinted from "SUPER CAPITALISM, SUPER IMPERIALISM by Henry C K Liu"
PART 1: A Structural Link
Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in
the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated
campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf).
Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is
currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly
in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.
Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strategy of American Empire
(1972-2003). While Reich, a liberal turned neo-liberal, sees "supercapitalism" as the natural evolution of insatiable shareholder
appetite for gain, a polite euphemism for greed, that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox
economist, sees "super imperialism" as the structural outcome of post-World War II superpower geopolitics, with state interests overwhelming
free market forces, making regulation irrelevant. While Hudson is critical of "super imperialism" and thinks that it should be resisted
by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability, if not the benignity,
of "supercapitalism".
The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist,
who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical
economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British
mountaineer who was killed in 1895 by an avalanche while reconnoitering Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote
The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability,
and developed the theory of over-saving that was given a glowing tribute by John Maynard Keynes three decades later.
The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism.
On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting
imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state
policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in
a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules
of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.
Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11
years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly
and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all
the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively
related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big
business monopolies or by other governments in the name of open markets.
A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in
that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus
country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing
regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation
(not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to
produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return
for English finished iron goods. The situation was similar to today's oil producing countries where despite plentiful crude oil,
refined petrochemical products such as gasoline and heating oil have to be imported.
In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to
raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the
manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored
an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy
that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it
an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist
government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective
characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.
Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England,
far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's
institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense
of its trading partners and it must be fought with protective tariffs and other protective devices of economic nationalism by the
weaker countries.
Henry Clay's "American system" was a national system of political economy. US neo-imperialism in the post WWII period disingenuously
promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading
partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around
the world were influenced by List's economic nationalism. The 1911 Nationalist Revolution in China, led by Sun Yat-sen, was heavily
influenced by Lincoln's political ideas - government of the people, by the people and for the people - and the economic nationalism
of List, until after the October Revolution when Sun realized that the Soviet model was the correct path to national revival.
Hobson's magnum opus, Imperialism, (1902), argues that imperialistic expansion is driven not by state hubris, known in
US history as "manifest destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital
formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo's theory
of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power
between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US
domestic economy. (See my article
Organization of Labor Exporting Countries [OLEC]).
Hobson's analysis of the phenology (study of life cycles) of capitalism was drawn upon by Lenin to formulate a theory of imperialism
as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies
and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of
the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist
powers has been completed." (Vladimir Ilyich Lenin, 1916, Imperialism, the Highest Stage of Capitalism, Chapter 7).
Lenin was also influenced by Rosa Luxemberg, who three year earlier had written her major work, The Accumulation of Capital: A
Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur ökonomischen Erklärung des
Imperialismus), 1913). Luxemberg, together with Karl Liebknecht a founding leader of the Spartacist League (Spartakusbund), a radical
Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD),
was murdered on January 15, 1919 by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung
(SA) led by Ernst Rohm.
The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world
over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for
super imperialism. Neo-liberalism, in its attempts to break down all national boundaries to facilitate global trade denominated in
fiat dollars, is the ideology of super imperialism.
Hudson, the American heterodox economist, historian of ancient economies and post-WW II international balance-of-payments specialist,
advanced in his 1972 book the notion of 20th century super imperialism. Hudson updated Hobson's idea of 19th century imperialism
of state industrial policy seeking new markets to invest home-grown excess capital. To Hudson, super imperialism is a state financial
strategy to export debt denominated in the state's fiat currency as capital to the new financial colonies to finance the global expansion
of a superpower empire. No necessity, or even intention, was entertained by the superpower of ever having to pay off these paper
debts after the US dollar was taken off gold in 1971.
Monetary Imperialism and Dollar Hegemony
Super imperialism transformed into monetary imperialism after the 1973 Middle East oil crisis with the creation of the petrodollar
and two decades later emerged as dollar hegemony through financial globalization after 1993. As described in my 2002 AToL article,
Dollar hegemony has to go,
a geopolitical phenomenon emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve
as the primary reserve currency for international trade because oil continues to be denominated in fiat dollars as a result
of superpower geopolitics, leading to dollar hegemony in 1993 with the globalization of deregulated financial markets.
Three causal developments allowed dollar hegemony to emerge over a span of two decades after 1973 and finally take hold in 1993.
US fiscal deficits from overseas spending since the 1950s caused a massive drain in US gold holdings, forcing the US in 1971 to abandon
the 1945 Bretton Woods regime of fixed exchange rate based on a gold-backed dollar. Under that international financial architecture,
cross-border flow of funds was not considered necessary or desirable for promoting international trade or domestic development. The
collapse of the 1945 Bretton Woods regime in 1971 was the initial development toward dollar hegemony.
The second development was the denomination of oil in dollars after the 1973 Middle East oil crisis. The emergence of petrodollars
was the price the US, still only one of two contending superpowers in 1973, extracted from defenseless oil-producing nations for
allowing them to nationalize the Western-owned oil industry on their soil. As long as oil transactions are denominated in fiat dollars,
the US essentially controls all the oil in the world financially regardless of specific ownership, reducing all oil producing nations
to the status of commodity agents of dollar hegemony.
The third development was the global deregulation of financial markets after the Cold War, making cross-border flow of funds routine,
and a general relaxation of capital and foreign exchange control by most governments involved in international trade. This neo-liberal
trade regime brought into existence a foreign exchange market in which free-floating exchange rates made computerized speculative
attacks on weak currencies a regular occurrence. These three developments permitted the emergence of dollar hegemony after 1994 and
helped the US win the Cold War with financial power derived from fiat money.
Dollar hegemony advanced super imperialism one stage further from the financial to the monetary front. Industrial imperialism
sought to achieve a trade surplus by exporting manufactured good to the colonies for gold to fund investment for more productive
plants at home. Super imperialism sought to extract real wealth from the colonies by paying for it with fiat dollars to sustain a
balance of payments out of an imbalance in the exchange of commodities. Monetary imperialism under dollar hegemony exports debt denominated
in fiat dollars through a permissive trade deficit with the new colonies, only to re-import the debt back to the US as capital account
surplus to finance the US debt bubble.
The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print
at will, continuing as the world's prime reserve currency for international trade and finance, backed by US geopolitical superpower.
Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollars to buy oil.
Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded
by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve chairman Alan Greenspan suggested recently.
It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.
Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced
to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies
in unregulated global financial markets. Thus "dollar hegemony" prevents the exporting nations, such as the Asian Tigers, from spending
domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real
wealth to the US in exchange for the privilege of financing further growth of the US debt economy.
Not only do these exporting nations have to compete by keeping their domestic wages down and by prostituting their environment,
the dollars that they earn cannot be spent at home without causing a monetary crisis in their own currencies because the dollars
they earn have to be exchanged into local currencies before they can be spent domestically, causing an excessive rise in their domestic
money supply which in turn causes domestic inflation-pushed bubbles. While the trade-surplus nations are forced to lend their export
earnings back to the US, these same nations are starved for capital, as global capital denominated in dollars will only invest in
their export sectors to earn more dollars. The domestic sector with local currency earnings remains of little interest to global
capital denominated in dollars. As a result, domestic development stagnates for lack of capital.
Dollar hegemony permits the US to transform itself from a competitor in world markets to earn hard money, to a fiat-money-making
monopoly with fiat dollars that only it can print at will. Every other trading nation has to exchange low-wage goods for dollars
that the US alone can print freely and that can be spent only in the dollar economy without monetary penalty.
The victimization of Japan and China
Japan is a classic victim of monetary imperialism. In 1990, as a result of Japanese export prowess, the Industrial Bank of Japan
was the largest bank in the world, with a market capitalization of $57 billion. The top nine of the 10 largest banks then were all
Japanese, trailed by Canadian Alliance in 10th place. No US bank made the top-10 list. By 2001, the effects of dollar hegemony have
pushed Citigroup into first place with a market capitalization of $260 billion. Seven of the top 10 largest financial institutions
in the world in 2001 were US-based, with descending ranking in market capitalization: Citigroup ($260 billion), AIG ($209 billion),
HSBC (British-$110 billion), Berkshire Hathaway ($100 billion), Bank of America ($99 billion), Fanny Mae ($80 billion), Wells Fargo
($74 billion), JP Morgan Chase ($72 billion), RBS (British-$70 billion) and UBS (Swiss-$67 billion). No Japanese bank survived on
the list.
China is a neoclassic case of dollar hegemony victimization even though its domestic financial markets are still not open and
the yuan is still not freely convertible. With over $1.4 trillion in foreign exchange reserves earned at a previously lower fixed
exchange rate of 8.2 to a dollar set in 1985, now growing at the rate of $1 billion a day at a narrow-range floating exchange rate
of around 7.5 since July 2005, China cannot spend much of it dollar holdings on domestic development without domestic inflation caused
by excessive expansion of its yuan money supply. The Chinese economy is overheating because the bulk of its surplus revenue is in
dollars from exports that cannot be spent inside China without monetary penalty. Chinese wages are too low to absorb sudden expansion
of yuan money supply to develop the domestic economy. And with over $1.4 trillion in foreign exchange reserves, equal to its annual
GDP, China cannot even divest from the dollar without having the market effect of a falling dollar moving against its remaining holdings.
The People's Bank of China announced on July 20, 2005 that effective immediately the yuan exchange rate would go up by 2.1% to
8.11 yuan to the US dollar and that China would drop the dollar peg to its currency. In its place, China would move to a "managed
float" of the yuan, pegging the currency's exchange value to an undisclosed basket of currencies linked to its global trade. In an
effort to limit the amount of volatility, China would not allow the currency to fluctuate by more than 0.3% in any one trading day.
Linking the yuan to a basket of currencies means China's currency is relatively free from market forces acting on the dollar, shifting
to market forces acting on a basket of currencies of China's key trading partners. The basket is composed of the euro, yen and other
Asian currencies as well as the dollar. Though the precise composition of the basket was not disclosed, it can nevertheless be deduced
by China's trade volume with key trading partners and by mathematical calculation from the set-daily exchange rate.
Thus China is trapped in a trade regime operating on an international monetary architecture in which it must continue to export
real wealth in the form of underpaid labor and polluted environment in exchange for dollars that it must reinvest in the US. Ironically,
the recent rise of anti-trade sentiment in US domestic politics offers China a convenient, opportune escape from dollar hegemony
to reduce its dependence on export to concentrate on domestic development. Chinese domestic special interest groups in the export
sector would otherwise oppose any policy to slow the growth in export if not for the rise of US protectionism which causes shot-term
pain for China but long-term benefit in China's need to restructure its economy toward domestic development. Further trade surplus
denominated in dollar is of no advantage to China.
Emerging markets are new colonies of monetary imperialism
Even as the domestic US economy declined after the onset of globalization in the early 1990s, US dominance in global finance has
continued to this day on account of dollar hegemony. It should not be surprising that the nation that can print at will the world's
reserve currency for international trade should come up on top in deregulated global financial markets. The so-called emerging markets
around the world are the new colonies of monetary imperialism in a global neo-liberal trading regime operating under dollar hegemony
geopolitically dominated by the US as the world's sole remaining superpower.
Denial of corporate social responsibility
In Supercapitalism, Reich identifies corporate social responsibility as a diversion from economic efficiency and an un-capitalistic
illusion. Of course the late Milton Friedman had asserted that the only social responsibility of corporations is to maximize profit,
rather than to generate economic well-being and balanced growth through fair profits. There is ample evidence to suggest that a single-minded
quest for maximizing global corporate profit can lead to domestic economic decline in even the world's sole remaining superpower.
The US public is encouraged to blame such decline on the misbehaving trading partners of the US rather than US trade policy that
permits US transnational corporation to exploit workers in all trading nations, including those in the US. It is a policy that devalues
work by over-rewarding financial manipulation.
Yet to Reich, the US corporate income tax is regressive and inequitable and should be abolished so that after-tax corporate profit
can be even further enhanced. This pro-profit position is at odds with even rising US Republican sentiment against transnational
corporations and their global trade strategies. Reich also thinks the concept of corporate criminal liability is based on an "anthropomorphic
fallacy" that ends up hurting innocent people. Reich sees as inevitable an evolutionary path towards an allegedly perfect new world
of a super-energetic capitalism responding to the dictate of all-powerful consumer preference through market democracy.
Reich argues that corporations cannot be expected to be more "socially responsible" than their shareholders or even their consumers,
and he implies that consumer preference and behavior are the proper and effective police forces that supersede the need for market
regulation. He sees corporations, while viewed by law as "legal persons", as merely value-neutral institutional respondents of consumer
preferences in global markets. Reich claims that corporate policies, strategies and behavior in market capitalism are effectively
governed by consumer preferences and need no regulation by government. This is essentially the ideology of neo-liberalism.
Yet US transnational corporations derive profit from global operations serving global consumers to maximize return on global capital.
These transnational corporations will seek to shift production to where labor is cheapest and environmental standards are lowest
and to market their products where prices are highest and consumer purchasing power the strongest. Often, these corporations find
it more profitable to sell products they themselves do not make, controlling only design and marketing, leaving the dirty side of
manufacturing to others with underdeveloped market power. This means if the US wants a trade surplus under the current terms of trade,
it must lower it wages. The decoupling of consumers from producers weakens the conventional effects of market pressure on corporate
social responsibility. Transnational corporations have no home community loyalty. Consumers generally do not care about sweat shop
conditions overseas while overseas workers do not care about product safety on goods they produce but cannot afford to buy. Products
may be made in China, but they are not made by China, but by US transnational corporations which are responsible for the quality
and safety of their products.
Further, it is well recognized that corporations routinely and effectively manipulate consumer preference and market acceptance
often through if not false, at least misleading advertising, not for the benefit of consumers, but to maximize return on faceless
capital raised from global capital markets. The subliminal emphasis by the corporate culture on addictive acquisition of material
things, coupled with a structural deprivation of adequate income to satisfy the manipulated desires, has made consumers less satisfied
than in previous times of less material abundance. Corporations have been allowed to imbed consumption-urging messages into every
aspect of modern life. The result is a disposable culture with packaged waste, an obesity crisis for all age groups, skyrocketing
consumer debt, the privatization of public utilities that demand the same fee for basic services from rich and poor alike, causing
a sharp disparity in affordability. It is a phenomenon described by Karl Marx as "Fetishism of Commodities".
Marx's concept of Fetishism of Commodities
Marx wrote in Das Kapital:[1]
The relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between
themselves, but between the products of their labor. This is the reason why the products of labor become commodities, social things
whose qualities are at the same time perceptible and imperceptible by the senses … The existence of the things qua commodities,
and the value relation between the products of labor which stamps them as commodities, have absolutely no connection with their
physical properties and with the material relations arising therefrom. It is a definite social relation between men that assumes,
in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse
to the mist-enveloped regions of the religious world. In that world, the productions of the human brain appear as independent
beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities
with the products of men's hands. This I call the Fetishism which attaches itself to the products of labor, as soon as they are
produced as commodities, and which is therefore inseparable from the production of commodities. This Fetishism of Commodities
has its origin … in the peculiar social character of the labor that produces them.
Marx asserts that "the mystical character of commodities does not originate in their use-value" (Section 1, p 71). Market value is
derived from social relations, not from use-value which is a material phenomenon. Thus Marx critiques the Marginal Utility Theory
by pointing out that market value is affected by social relationships. For example, the marginal utility of door locks is a function
of the burglary rate in a neighborhood which in turn is a function of the unemployment rate. Unregulated free markets are a regime
of uninhibited price gouging by monopolies and cartels.
Thus the nature of money cannot be adequately explained even in terms of the material-technical properties of gold, but only in
terms of the factors behind man's desire and need for gold. Similarly, it is not possible to fully understand the price of capital
from the technical nature of the means of production, but only from the social institution of private ownership and the terms of
exchange imposed by uneven market power. Market capitalism is a social institution based on the fetishism of commodities.
Democracy threatened by the corporate state
While Reich is on target in warning about the danger to democracy posed by the corporate state, and in claiming that only people
can be citizens, and only citizens should participate in democratic decision making, he misses the point that transnational corporations
have transcended national boundaries. Yet in each community that these transnational corporations operate, they have the congenital
incentive, the financial means and the legal mandate to manipulate the fetishism of commodities even in distant lands.
Moreover, representative democracy as practiced in the US is increasingly manipulated by corporate lobbying funded from high-profit-driven
corporate financial resources derived from foreign sources controlled by management. Corporate governance is notoriously abusive
of minority shareholder rights on the part of management. Notwithstanding Reich's rationalization of excessive CEO compensation,
CEOs as a class are the most vocal proponents of corporate statehood. Modern corporations are securely insulated from any serious
threats from consumer revolt. Inter-corporate competition presents only superficial and trivial choices for consumers. Motorists
have never been offered any real choice on gasoline by oil companies or alternatives on the gasoline-guzzling internal combustion
engine by car-makers.
High pay for CEOs
Reich asserts in his Wall Street Journal piece that modern CEOs in finance capitalism nowadays deserve their high pay because they
have to be superstars, unlike their bureaucrat-like predecessors during industrial capitalism. Notwithstanding that one would expect
a former labor secretary to argue that workers deserve higher pay, the challenge to corporate leadership in market capitalism has
always been and will always remain management's ruthless pursuit of market leadership power, a euphemism for monopoly, by skirting
the rule of law and regulations, framing legislative regimes through political lobbying, pushing down wages and worker benefits,
increasing productivity by downsizing in an expanding market and manipulating consumer attitude through advertising. At the end of
the day, the bottom line for corporate profit is a factor of lowering wage and benefit levels.
Reich seems to have forgotten that the captains of industry of 19th century free-wheeling capitalism were all superstars who evoked
public admiration by manipulating the awed public into accepting the Horatio Alger myth of success through hard work, honesty and
fairness. The derogatory term "robber barons" was first coined by protest pamphlets circulated by victimized Kansas farmers against
ruthless railroad tycoons during the Great Depression.
The manipulation of the public will by moneyed interests is the most problematic vulnerability of US economic and political democracy.
In an era when class warfare has taken on new sophistication, the accusation of resorting to class warfare argument is widely used
to silence legitimate socio-economic protests. The US media is essentially owned by the moneyed interests. The decline of unionism
in the US has been largely the result of anti-labor propaganda campaigns funded by corporations and government policies influenced
by corporate lobbyists. The infiltration of organized crime was exploited to fan public anti-union sentiments while widespread corporate
white collar crimes were dismissed as mere anomalies. (See
Capitalism's bad apples:
It's the barrel that's rotten)
Superman capitalism
As promoted by his permissive opinion piece, a more apt title for Reich's new book would be Superman Capitalism, in praise
of the super-heroic qualities of successful corporate CEOs who deserve superstar pay. This view goes beyond even fascist superman
ideology. The compensation of corporate CEOs in Nazi Germany never reached such obscene levels as those in US corporate land today.
Reich argues that CEOs deserve their super-high compensation, which has increased 600% in two decades, because corporate profits
have also risen 600% in the same period. The former secretary of labor did not point out that wages rose only 30% in the same period.
The profit/wage disparity is a growing cancer in
the US-dominated global economy, causing over-production resulting from stagnant demand caused by inadequate wages. A true spokesman
for labor would point out that enlightened modern management recognizes that the performance of a corporation is the sum total of
effective team work between management and labor.
System analysis has long shown that collective effort on the part of the entire work force is indispensable to success in any
complex organism. Further, a healthy consumer market depends on a balance between corporate earnings and worker earnings. Reich's
point would be valid if US wages had risen by the same multiple as CEO pay and corporate profit, but he apparently thought that it
would be poor etiquette to raise embarrassing issues as a guest writer in an innately anti-labor journal of Wall Street. Even then,
unless real growth also rose 600% in two decades, the rise in corporate earning may be just an inflation bubble.
An introduction to economic populism
To be fair, Reich did address the income gap issue eight months earlier in another article, "An Introduction to Economic Populism"
in the Jan-Feb, 2007 issue of The American Prospect, a magazine that bills itself as devoted to "liberal ideas". In that article,
Reich relates a "philosophical" discussion he had with fellow neo-liberal cabinet member Robert Rubin, then treasury secretary under
Bill Clinton, on two "simple questions".
The first question was: Suppose a proposed policy will increase the incomes of some people without decreasing the incomes of any
others. Of course Reich must know that it is a question of welfare economics long ago answered by the "pareto optimum", which asserts
that resources are optimally distributed when an individual cannot move into a better position without putting someone else into
a worse position. In an unjust society, the pareto optimum will perpetuate injustice in the name of optimum resource allocation.
"Should it be implemented? Bob and I agreed it should," writes Reich. Not exactly an earth-shaking liberal position. Rather, it is
a classic neo-liberal posture.
And the second question: But suppose the people whose incomes will rise are already wealthier than everyone else. Although no
one will lose ground, inequality will widen. Should it still be implemented? "I won't tell you where he and I came out on that second
question," writes Reich without explaining why. He allows that "we agreed that people who don't share in such gains feel relatively
poorer. Widening inequality also further tips the balance of political power in favor of the wealthy."
Of course, clear thinking would have left the second question mute because it would have invalidated the first question, as the
real income of those whose nominal income has not fallen has indeed fallen relative to those whose nominal income has risen. In a
macro monetary sense, it is not possible to raise the nominal income of some without lowering the real income of others. All incomes
must rise together proportionally or inequality in after-inflation real income will increase.
Inequality only a new worry?
But for the sake of argument, let's go along with Reich's parable on welfare economics and financial equality. That conversation
occurred a decade ago. Reich says in his January 2007 article that "inequality is far more worrisome now", as if it had not been
or that the policies he and his colleagues in the Clinton administration, as evidenced by their answer to their own first question,
did not cause the now "more worrisome" inequality. "The incomes of the bottom 90% of Americans have increased about 2% in real terms
since then, while that of the top 1% has increased over 50%," Reich wrote in the matter of fact tone of an innocent bystander.
It is surprising that a former labor secretary would err even on the record on worker income. The US Internal Revenue Service
reports that while incomes have been rising since 2002, the average income in 2005 was $55,238, nearly 1% less than in 2000 after
adjusting for inflation. Hourly wage costs (including mandatory welfare contributions and benefits) grew more slowly than hourly
productivity from 1993 to late 1997, the years of Reich's tenure as labor secretary. Corporate profit rose until 1997 before declining,
meaning what should have gone to workers from productivity improvements went instead to corporate profits. And corporate profit declined
after 1997 because of the Asian financial crisis, which reduced offshore income for all transnational companies, while domestic purchasing
power remained weak because of sub-par worker income growth.
The break in trends in wages occurred when the unemployment rate sank to 5%, below the 6% threshold of NAIRU (non-accelerating
inflation rate of unemployment) as job creation was robust from 1993 onwards. The "reserve army of labor" in the war against inflation
disappeared after the 1997 Asian crisis when the Federal Reserve injected liquidity into the US banking system to launch the debt
bubble. According to NAIRU, when more than 94% of the labor force is employed, the war on wage-pushed inflation will be on the defensive.
Yet while US inflation was held down by low-price imports from low-wage economies, US domestic wages fell behind productivity growth
from 1993 onward. US wages could have risen without inflationary effects but did not because of the threat of further outsourcing
of US jobs overseas. This caused corporate profit to rise at the expense of labor income during the low-inflation debt bubble years.
Income inequality in the US today has reached extremes not seen since the 1920s, but the trend started three decades earlier.
More than $1 trillion a year in relative income is now being shifted annually from roughly 90,000,000
middle and working class families to the wealthiest households and corporations via corporate profits earned from low-wage workers
overseas. This is why nearly 60% of Republicans polled support more taxes on the rich.
Carter the granddaddy of deregulation
The policies and practices responsible for today's widening income gap date back to the 1977-1981 period of the Carter administration
which is justly known as the administration of deregulation. Carter's deregulation was done in the name of populism but the results
were largely anti-populist. Starting with Carter, policies and practices by both corporations and government underwent a fundamental
shift to restructure the US economy with an overhaul of job markets. This was achieved through widespread de-unionization, breakup
of industry-wide collective bargaining which enabled management to exploit a new international division of labor at the expense of
domestic workers.
The frontal assault on worker collective bargaining power was accompanied by a realigning of the progressive federal tax structure
to cut taxes on the rich, a brutal neo-liberal global free-trade offensive by transnational corporations and anti-labor government
trade policies. The cost shifting of health care and pension plans from corporations to workers was condoned by government policy.
A wave of government-assisted compression of wages and overtime pay narrowed the wage gap between the lowest and highest paid workers
(which will occur when lower-paid workers receive a relatively larger wage increase than the higher-paid workers with all workers
receiving lower pay increases than managers). There was a recurring diversion of inflation-driven social security fund surpluses
to the US fiscal budget to offset recurring inflation-adjusted federal deficits. This was accompanied by wholesale anti-trust deregulation
and privatization of public sectors; and most egregious of all, financial market deregulation.
Carter deregulated the US oil industry four years after the 1973 oil crisis in the name of national security. His Democratic challenger,
Senator Ted Kennedy, advocated outright nationalization. The Carter administration also deregulated the airlines, favoring profitable
hub traffic at the expense of traffic to smaller cities. Air fares fell but service fell further. Delays became routine, frequently
tripling door-to-door travel time. What consumers save in airfare, they pay dearly in time lost in delay and in in-flight discomfort.
The Carter administration also deregulated trucking, which caused the Teamsters Union to support Ronald Reagan in exchange for a
promise to delay trucking deregulation.
Railroads were also deregulated by Railroad Revitalization and Regulatory Reform Act of 1976 which eased regulations on rates,
line abandonment, and mergers to allow the industry to compete with truck and barge transportation that had caused a financial and
physical deterioration of the national rail network railroads. Four years later, Congress followed up with the Staggers Rail Act
of 1980 which provided the railroads with greater pricing freedom, streamlined merger timetables, expedited the line abandonment
process, and allowed confidential contracts with shippers. Although railroads, like other modes of transportation, must purchase
and maintain their own rolling stock and locomotives, they must also, unlike competing modes, construct and maintain their own roadbed,
tracks, terminals, and related facilities. Highway construction and maintenance are paid for by gasoline taxes. In the regulated
environment, recovering these fixed costs hindered profitability for the rail industry.
After deregulation, the railroads sought to enhance their financial situation and improve their operational efficiency with a
mix of strategies to reduce cost and maximize profit, rather than providing needed service to passengers around the nation. These
strategies included network rationalization by shedding unprofitable capacity, raising equipment and operational efficiencies by
new work rules that reduced safety margins and union power, using differential pricing to favor big shippers, and pursuing consolidation,
reducing the number of rail companies from 65 to 5 today. The consequence was a significant increase of market power for the merged
rail companies, decreasing transportation options for consumers and increasing rates for remote, less dense areas.
In the agricultural sector, rail network rationalization has forced shippers to truck their bulk commodity products greater distances
to mainline elevators, resulting in greater pressure on and damage to rural road systems. For inter-modal shippers, profit-based
network rationalization has meant reduced access - physically and economically - to Container on Flat Car (COFC) and Trailer on Flat
Car (TOFC) facilities and services. Rail deregulation, as is true with most transportation and communication deregulation, produces
sector sub-optimization with dubious benefits for the national economy by distorting distributional balance, causing congestion and
inefficient use of land, network and lines.
Carter's Federal Communications Commission's (FCC) approach to radio and television regulation began in the mid-1970s as a search
for relatively minor "regulatory underbrush" that could be
cleared away for more efficient and cost-effective administration of the important rules that would remain. Congress largely went
along with this updating trend, and initiated a few deregulatory moves of its own to make regulation more effective and responsive
to contemporary conditions.
Reagan's anti-government fixation
The Reagan administration under Federal Communications Commission (FCC) chairman Mark Fowler in 1981 shifted deregulation to a
fundamental and ideologically-driven reappraisal of regulations away from long-held principles central to national broadcasting policy
appropriate for a democratic society. The result was removal of many longstanding rules to permit an overall reduction in FCC oversight
of station ownership concentration and network operations. Congress grew increasingly wary of the pace of deregulation, however,
and began to slow the pace of FCC deregulation by the late 1980s.
Specific deregulatory moves included (a) extending television licenses to five years from three in 1981; (b) expanding the number
of television stations any single entity could own from seven in 1981 to 12 in 1985, with further changes in 1995; (c) abolishing
guidelines for minimal amounts of non-entertainment programming in 1985; (d) elimination of the Fairness Doctrine in 1987; (e) dropping,
in 1985, FCC license guidelines for how much advertising could be carried; (f) leaving technical standards increasingly in the hands
of licensees rather than FCC mandates; and (g) deregulation of television's competition, especially cable which went through several
regulatory changes in the decade after 1983.
The 1996 Telecommunications Act eliminated the 40-station ownership cap on radio stations. Since then, the radio industry has
experienced unprecedented consolidation. In June 2003, the FCC voted to overhaul limits on media ownership. Despite having held only
one hearing on the complex issue of media consolidation over a 20-month review period, the FCC, in a party-line vote, voted 3-2 to
overhaul limits on media concentration. The rule would (1) increase the aggregate television ownership cap to enable one company
to own stations reaching 45% of our nation's homes (from 35%), (2) lift the ban on newspaper-television cross-ownership, and (3)
allow a single company to own three television stations in large media markets and two in medium ones. In the largest markets, the
rule would allow a single company to own up to three television stations, eight radio stations, the cable television system, cable
television stations, and a daily newspaper. A wide range of public-interest groups filed an appeal with the Third Circuit, which
stayed the effective date of the new rules.
According to a BIA Financial Network report released in July 2006, a total of 88 television stations had been sold in the first
six months of 2006, generating a transaction value of $15.7 billion. In 2005, the same period saw the sale of just 21 stations at
a value of $244 million, with total year transactions of $2.86 billion.
Congress passed a law in 2004 that forbids any network to own a group of stations that reaches more than 39% of the national television
audience. That is lower than the 45% limit set in 2003, but more than the original cap of 35% set in 1996 under the Clinton administration
- leading public interest groups to argue that the proposed limits lead to a stifling of local voices.
Newspaper-television cross-ownership remains a contentious issue. Currently prohibited, it refers to the "common ownership of
a full-service broadcast station and a daily newspaper when the broadcast station's area of coverage (or "contour") encompasses the
newspaper's city of publication".
Capping of local radio and television ownership is another issue. While the original rule prohibited it, currently a company can
own at least one television and one radio station in a market. In larger markets, "a single entity may own additional radio stations
depending on the number of other independently owned media outlets in the market".
Most broadcasters and newspaper publishers are lobbying to ease or end restrictions on cross-ownership; they say it has to be
the future of the news business. It allows newsgathering costs to be spread across platforms, and delivers multiple revenue streams
in turn. Their argument is also tied to a rapidly changing media consumption market, and to the diversity of opinions available to
the consumer with the rise of the Internet and other digital platforms.
The arguments against relaxing media ownership regulations are put forth by consumer unions and other interest groups on the ground
that consolidation in any form inevitably leads to a lack of diversity of opinion. Cross-ownership limits the choices for consumers,
inhibits localism and gives excessive media power to one entity.
Professional and workers' guilds of the communication industry (the Screen Actors Guild and American Federation of TV and Radio
Artists among others) would like the FCC to keep in mind the independent voice, and want a quarter of all prime-time programming
to come from independent producers. The Children's Media Policy Coalition suggested that the FCC limit local broadcasters to a single
license per market, so that there is enough original programming for children. Other interest groups like the National Association
of Black Owned Broadcasters are worried about what impact the rules might have on station ownership by minorities.
Deregulatory proponents see station licensees not as "public trustees" of the public airwaves requiring the provision of a wide
variety of services to many different listening groups. Instead, broadcasting has been increasingly seen as just another business
operating in a commercial marketplace which did not need its management decisions questioned by government overseers, even though
they are granted permission to use public airways. Opponents argue that deregulation violates a key mandate of the Communications
Act of 1934 which requires licensees to operate in the public interest. Deregulation allows broadcasters to seek profits with little
public service programming.
Clinton and telecommunications deregulation
The Telecommunications Act of 1996 was the first major overhaul of US telecommunications law in nearly 62 years, amending the
Communications Act of 1934, and leading to media consolidation. It was approved by Congress on January 3, 1996 and signed into law
on February 8, 1996 by President Clinton, a Democrat whom some have labeled as the best president the Republicans ever had.
The act claimed to foster competition, but instead it continued the historic industry consolidation begun by Reagan, whose actions
reduced the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005.
Regulation Q
The Carter administration increased the power of the Federal Reserve through the Depository Institutions and Monetary Control
Act (DIDMCA) of 1980 which was a necessary first step in ending the New Deal restrictions placed upon financial institutions, such
as Regulation Q put in place by the Glass-Steagall Act of 1933 and other restrictions on banks and financial institutions.
The populist Regulation Q imposed limits and ceilings on bank and savings-and-loan (S&L) interest
rates to provide funds for low-risk home mortgages.
But with financial market deregulation, Regulation Q created incentives for US banks to do business outside the reach of US law,
launching finance globalization. London came to dominate this offshore dollar business.
The populist Regulation Q, which regulated for several decades limits and ceilings on bank and S&L interest to serve the home
mortgage sector, was phased out completely in March 1986. Banks were allowed to pay interest on checking account - the NOW accounts
- to lure depositors back from the money markets. The traditional interest-rate advantage of the S&Ls was removed, to provide a "level
playing field", forcing them to take the same risks as commercial banks to survive. Congress also lifted restrictions on S&Ls' commercial
lending, which promptly got the whole industry into trouble that would soon required an unprecedented government bailout of depositors,
with tax money. But the developers who made billions from easy credit were allowed to keep their profits. State usury laws were unilaterally
suspended by an act of Congress in a flagrant intrusion on state rights. Carter, the well-intentioned populist, left a legacy of
anti-populist policies. To this day, Greenspan continues to argue disingenuously that subprime mortgages helped the poor toward home
ownership, instead of generating obscene profit for the debt securitization industry.
The party of Lincoln taken over by corporate interests
During the Reagan administration, corporate lobbying and electoral strategies allowed the corporate
elite to wrest control of the Republican Party, the party of Lincoln, from conservative populists.
In the late 1980s, supply-side economics was promoted to allow corporate interests to dominate US politics at the expense of labor
by arguing that the only way labor can prosper is to let capital achieve high returns, notwithstanding the contradiction that high
returns on capital must come from low wages.
New legislation and laws, executive orders, federal government rule-making, federal agency decisions, and think-tank propaganda,
etc, subsequently followed the new political landscape, assisting the implementation of new corporate policies and practices emerging
from corporate headquarters rather than from the shop floor. Economists and analysts who challenged this voodoo theory were largely
shut out of the media.
Workers by the million were persuaded to abandon their institutional collective defender to fend for themselves individually in
the name of freedom. It was a freedom to see their job security eroded and wages and benefits fall with no recourse.
Note
1. Das Kapital, Volume One, Part I: Commodities and Money, Chapter One: Commodities, Section I.
Next: PART 2: Global war on labor
Henry C K Liu is chairman of a New York-based private investment group. His website is at http://www.henryckliu.com.
@animalogic
respasses, as we forgive those who trespass against us ." is the translation presented in the
Revised Standard Version of the Bible. What is lost in translation is the fact that Jesus
came "to preach the gospel to the poor to preach the acceptable Year of the Lord": He came,
that is, to proclaim a Jubilee Year, a restoration of deror for debtors: He came to institute
a Clean Slate Amnesty (which is what Hebrew דְּרוֹר
connotes in this context).
It is quite possible to have balanced civilizations that lasts for thousands of years;
however it is impossible in the West, since the west is based on faulty assumptions about
reality.
Don't be spooked by those words. Do you know where the words sustainable and inclusive
come from? Tycoons didn't think them up. They're just parroting them to try and twist their
meaning. Those words are from the Addis Ababa consensus. Tycoons give lip service to those
words because if they don't, no one will give them the time of day.
AA is the consensus of the ECOSOC bloc, treaty parties of the ICESCR, 171 of them, the
overwhelming majority of the world. ECOSOC reports to the UNGA, the most participative and
least controllable UN organ. US UN delegates don't even dare mention the AA outcome –
they fixate on the Monterrey Consensus, two documents ago.
Inclusive means, don't let usurers like the IMF get you on the debt hook and immiserize
your people. Sustainable means no pillage of national wealth or resources and no imposition
of externalities (like Chevron did to Ecuador, for instance.) You will see that the outcome
document subordinates everthing the tycoons or the US want to human rights and rule of law.
Economic rights too. The outcome curbs US "Western" corporatist development by pulling WTO
and IMF under the authority of G-192 organizations like UNCTAD and ILO.
It's hard for people in US satellites to interpret this stuff because the underlying
intitiatives of the G-192 (that is, the world) are hidden from you and buried in US
propaganda. Xi is quoting his Five Principles, four of which are straight out of the UN
Charter. China has ratified the ICESCR. So China is not communist. China is not capitalist.
China is a member of the ECOSOC bloc. People in the US or its satellites have no idea what
that is, but it's vastly bigger than the Third International was. It's development based on
human rights. Tycoons and the US hate that shit but they can't stop it.
A couple of things that would go a long way to correct the goddamn stupidity running
rampant in this country are.
Correcting the following horrendous actions: The SCOTUS has passed down egregious
decisions that abridge the First Amendment and show contempt for the concept of
representative democracy. Buckley v. Valeo, 424 U.S. 1976 and exacerbated by continuing
stupid SCOTUS decisions First National Bank of Boston v. Bellotti, Citizens United v. Federal
Election Commission and McCutcheon v. Federal Election Commission.
These decisions have codified that money is free speech thereby giving entities of wealth and
power total influence in elections.
And-
Making it absolutely impossible for anyone to amass more than 100 million dollars extreme
wealth concentrates too much power.
The IMF system was designed to impoverish debtors. The purpose of the IMF was to make other
countries so poor and dependent on the United States so they could never be militarily
independent. In the discussion of the British loan for instance, in the 1930s the discussion in
the London Economic Conference was, "Yes, we're bankrupting Europe, but if we give Europe
enough money to avoid austerity, they're just going to spend the money on the military." That
was said by the Americans in the State Department and the White House again and again,
especially by Raymond Moley who was basically in charge of President Roosevelt's foreign policy
towards Europe.
The question is: how do you create an international financial system designed to promote
prosperity, not austerity? The Bretton Woods is for austerity for everybody except the United
States, which will have a free ride forever. The question that I'm involved with in the work
I'm doing in China and with other countries is how to create a system based on prosperity
instead of austerity, with mutual support between creditors and debtors, without the kind of
financial antagonism that has been built in to the international financial system ever since
World War I. Financial reform involves tax reform as well: how do we end up taxing economic
rent instead of letting the rentiers take over society. That is what classical economics
is all about: how do we revive it?
Oscar Brisset
Final question: these austerity and anti-labor policies which the IMF imposes on countries
of the global South seem to be well known practices from before the IMF was created, from what
you've discussed. Did the IMF invent anything new? In addition, in the 19th century, was
predatory lending something common, or was direct invasion always the go-to method for
subjugating a territory?
Prof Hudson
The 19th century was really the golden age of industrial capitalism. Countries wanted to
invest to make a profit. They didn't want to invest in dismantling an existing industry,
because there wasn't much industry to dismantle. They wanted to make profit by creating
industry. There was a lot of investment in infrastructure, and it almost always lost money. For
instance, there was recently a criticism of China saying, "Doesn't China know that the Panama
Canal went bankrupt again and again, and that all the investments in canals and the railroads
all went broke again and again?" Of course China knows that. The idea is that you make
investment not to make a profit on basic large infrastructure. The 19th century was basically
inter-state lending, inter-governmental lending, public sector lending. That's where the money
was made. The late 20th century was one of financialization, dismantling the industry that was
already in place, not lending to create industry to make a profit. It's asset-stripping, not
profit-seeking
@ uncle tungsten #24 with the appreciated link containing this quote
" A former insider at the World Bank, ex-Senior Counsel Karen Hudes, says the global
financial system is dominated by a small group of corrupt, power-hungry figures centered
around the privately owned U.S. Federal Reserve.
"
The posting ends with this quote
"We have a system of "neo-feudalism" in which all of us and our national governments
are enslaved to debt. This system is governed by the central banks and by the Bank for
International Settlements, and it systematically transfers the wealth of the world out of
our hands and into the hands of the global elite.
But most people have no idea that any of this is happening because the global elite also
control what we see, hear and think about. Today, there are just six giant media
corporations that control more than 90 percent of the news and entertainment that you watch
on your television in the United States."
What an ugly way to run a society. Moving society to public finance and abolishing private
finance is what is needed to save our species and what we can of the world we live in. I am
with China in advocating for Ad Astra because we can see the end of our ability to live on
this planet because of historical faith-based disrespect of it.
No we are not dealing with the analogue of the feudalism of Western Europe, with its
interlocking panoply of mutual obligations that was built around God.
No, we are witnessing the re-birth of the Asiatic mode of production in the Euro-American
countries as the absence of manufacturing production makes itself felt. To wit, like South
American countries, one sees the emergence of two classes, Masters and their Service Servants
(needed for performing all manner of useful but tedious manual service labor, from
dog-walkers to barbers to cooks...)
Significantly, as Americans, French, English and many others sold their jobs to Mexico,
China, Korea, Singapore, and Japan, it was precisely those countries that were given an extra
shot in the arm for breaking from the chains of the Asiatic Mode of Production.
It is particularly interesting that in America, the long-hair guy driving a 50-dollar
Chevy, is supporting Republicans, who have no better future for him than being a servant to
Financiers.
How COVID-19 may help IMF to reshape global economy (Full show) 16 Oct, 2020 20:42 17
Follow RT on
The International Monetary Fund (IMF) is offering loans to the world's poorest 81 countries
to help them rebuild their devastated economies, still reeling from the COVID-19 pandemic. But
accepting such loans paves the way for increased austerity, privatization, and greater income
inequality. RT America's Alex Mihailovich explains. Then former UK MP George Galloway joins RT
America's Faran Fronczak (in for Rick Sanchez) to weigh in. RT's Peter Oliver examines the
skyrocketing number of COVID-19 cases across Europe and the reimposition of harsh restrictions
to stymie its spread. Legal and media analyst Lionel and civil rights attorney Robert Patillo
debate proposals aimed at mitigating the perceived influence of the Federalist Society in US
courts. RT America's Trinity Chavez reports on the recent flyby of Venus where the BepiColombo
probe captured amazing new images of the planet. Plus, RT America's Steve Christakos joins for
"Jock Talk."
The tragedy of this situation the most of people who constitute fifth column will be
royally fleeced if this color revolution succeeds. As Ukrainian experience had shown the
immediate result will be the drop (2-3 times) of national currency against the dollar, mass
sellout of assets to the West at bargain process (for pennies on the dollar) as well as
continuation of the destruction of Soviet infrastructure. Western powers want 90% of
Byelorussian people to live on the level slightly above starvation and they have numerous
methods of achieving this goal directly and indirectly.
In two to three year Belorussia will be a regular debt slave of the West.
27 Sep, 2020 Around 200 have been detained as the Belarusian capital, Minsk and other cities
host rallies, during which the opposition plans to hold a "people's inauguration" of former
presidential candidate Svetlana Tikhanovskaya.
The action was called in response to the secret inauguration staged by long-time President
Alexander Lukashenko for himself earlier this week. Tikhanovskaya won't be attending the
protest, as she fled Belarus for Lithuania after the August 9 election, which the opposition
insists was rigged.
Thousands marched along Independence Avenue in Minsk, despite security forces thoroughly
preparing for the unsanctioned event and urging people to stay at home. Mobile internet speed
has been reduced in the capital. A local mobile operator said it has been ordered to do so by
the government. It may have been done to complicate communication among demonstrators.
The city's largest squares were blocked off, with seven subway stations in the center also
shut down. A convoy of armored vehicles has also been spotted outside Lukashenko's heavily
guarded residence.
Music was played from loudspeakers along the route of the march to drown out the chants of
the demonstrators, calling for Lukashenko's immediate resignation and a new, fair
election.
Police say that almost 200 people have been arrested in Minsk and other cities where
protests took place on Sunday.
The protests in Belarus have been marred by mass arrests from the very start, with
thousands of anti-government demonstrators detained in the weeks since the election. Police
have also been accused of using excessive force against demonstrators and mistreating
detainees. Three protesters have been killed during the unrest, according to official data,
with hundreds, including many officers, wounded.
Selfishness may be exalted as the root and branch of capitalism, but it doesn't make you
look good to the party on the receiving end or those whose sympathy he earns. For that, you
need a government prepared to do four things, which each have separate dictums based on study,
theorization, and experience. Coercion: Force is illegitimate only if you can't sell it.
Persuasion: How do I market thee? Let me count the ways. Bargaining: If you won't scratch my
back, then how about a piece of the pie? Indoctrination: Because I said so. (And paid for the
semantics.)
Predatory capitalism is the control and expropriation of land, labor, and natural resources
by a foreign government via coercion, persuasion, bargaining, and indoctrination.
At the coercive stage, we can expect military and/or police intervention to repress the
subject populace. The persuasive stage will be marked by clientelism, in which a small
percentage of the populace will be rewarded for loyalty, often serving as the capitalists'
administrators, tax collectors, and enforcers. At the bargaining stage, efforts will be made to
include the populace, or a certain percentage of it, in the country's ruling system, and this
is usually marked by steps toward democratic (or, more often, autocratic) governance.
At the fourth stage, the populace is educated by capitalists, such that they continue to
maintain a relationship of dependency.
The Predatory Debt Link
In many cases, post-colonial states were forced to assume the debts of their colonizers. And
where they did not, they were encouraged to become in debt to the West via loans that were
issued through international institutions to ensure they did not fall prey to communism or
pursue other economic policies that were inimical to the West. Debt is the tie that binds
nation states to the geostrategic and economic interests of the West.
As such, the Cold War era was a time of easy credit, luring postcolonial states to undertake
the construction of useless monoliths and monuments, and to even expropriate such loans through
corruption and despotism, thereby making these independent rulers as predatory as colonizers.
While some countries were wiser than others and did use the funds for infrastructural
improvements, these were also things that benefited the West and particularly Western
contractors. In his controversial work Confessions of an Economic Hit Man, John Perkins reveals
that he was a consultant for an American firm (MAIN), whose job was to ensure that states
became indebted beyond their means so they would remain loyal to their creditors, buying them
votes within United Nations organizations, among other things.
Predatory capitalists demand export-orientations as the means to generate foreign currency
with which to pay back debt. In the process, the state must privatize and drastically slash or
eliminate any domestic subsidies which are aimed at helping native industry compete in the
marketplace. Domestic consumption and imports must be radically contained, as shown by the
exchange rate policies recommended by the IMF. The costs of obtaining domestic capital will be
pushed beyond the reach of most native producers, while wages must be depressed to an absolute
bare minimum. In short, the country's land, labor, and natural resources must be sold at
bargain basement prices in order to make these goods competitive, in what one author has called
"a spiraling race to the bottom," as countries producing predominantly the same goods engage in
cutthroat competition whose benefactor is the West.
Under these circumstances, foreign investment is encouraged, but this, too, represents a
loaded situation for countries that open their markets to financial liberalization.
"... In addition to the key international financial institutions, WB and IMF, there are the so-called regional development banks and similar financial institutions, keeping the countries of their respective regions in check. ..."
Imagine, you are living in a world that you are told is a democracy – and you may even
believe it – but in fact your life and fate is in the hands of a few ultra-rich,
ultra-powerful and ultra-inhuman oligarchs. They may be called Deep State, or simply the Beast,
or anything else obscure or untraceable – it doesn't matter. They are less than the
0.0001%.
For lack of a better expression, let's call them for now "obscure individuals".
These obscure individuals who pretend running our world have never been elected . We don't
need to name them. You will figure out who they are, and why they are famous, and some of them
totally invisible. They have created structures, or organisms without any legal format. They
are fully out of international legality. They are a forefront for the Beast. Maybe there are
several competing Beasts. But they have the same objective: A New or One World Order (NWO, or
OWO).
These obscure individuals are running, for example, The World Economic Forum (WEF –
representing Big Industry, Big Finance and Big Fame), the Group of 7 – G7, the Group of
20 – G20 (the leaders of the economically" strongest" nations). There are also some
lesser entities, called the Bilderberg Society, the Council on Foreign Relations (CFR), Chatham
House and more.
The members of all of them are overlapping. Even this expanded forefront combined represents
less than 0.001%. They all have superimposed themselves over sovereign national elected and
constitutional governments, and over THE multinational world body, the United Nations, the
UN.
In fact, they have coopted the UN to do their bidding. UN Director Generals, as well as the
DGs of the multiple UN-suborganizations, are chosen mostly by the US, with the consenting nod
of their European vassals – according to the candidate's political and psychological
profile. If his or her 'performance' as head of the UN or head of one of the UN
suborganizations fails, his or her days are counted. Coopted or created by the Beast(s) are
also, the European Union, the Bretton Woods Organizations, World Bank and IMF, as well as the
World Trade Organization (WTO) – and – make no mistake – the International
Criminal Court (ICC) in The Hague. It has no teeth. Just to make sure the law is always on the
side of the lawless.
In addition to the key international financial institutions, WB and IMF, there are the
so-called regional development banks and similar financial institutions, keeping the countries
of their respective regions in check.
In the end its financial or debt-economy that controls everything. Western neoliberal
banditry has created a system, where political disobedience can be punished by economic
oppression or outright theft of national assets in international territories. The system's
common denominator is the (still) omnipresent US-dollar.
"Unelected Individuals"
The supremacy of these obscure unelected individuals becomes ever more exposed. We, the
People consider it "normal" that they call the shots, not what we call – or once were
proud of calling, our sovereign nations and sovereignly elected governments. They have become a
herd of obedient sheep. The Beast has gradually and quietly taken over. We haven't noticed.
It's the salami tactic: You cut off slice by tiny slice and when the salami is gone, you
realize that you have nothing left, that your freedom, your civil and human rights are gone. By
then it's too late. Case in point is the US Patriot Act. It was prepared way before 9/11. Once
9/11 "happened", the Patriot Legislation was whizzed through Congress in no time – for
the people's future protection – people called for it for fear – and – bingo,
the Patriot Act took about 90% of the American population's freedom and civil rights away. For
good.
We have become enslaved to the Beast. The Beast calls the shots on boom or bust of our
economies, on who should be shackled by debt, when and where a pandemic should break out, and
on the conditions of surviving the pandemic, for example, social confinement. And to top it all
off – the instruments the Beast uses, very cleverly, are a tiny-tiny invisible enemy,
called a virus, and a huge but also invisible monster, called FEAR. That keeps us off the
street, off reunions with our friends, and off our social entertainment, theatre, sports, or a
picnic in the park.
Soon the Beast will decide who will live and who will die, literally – if we let it.
This may be not far away. Another wave of pandemic and people may beg, yell and scream for a
vaccine, for their death knell, and for the super bonanza of Big Pharma – and towards the
objectives of the eugenicists blatantly roaming the world – see this . There
is still time to collectively say NO. Collectively and solidarily.
Take the latest case of blatant imposture. Conveniently, after the first wave of Covid-19
had passed, at least in the Global North, where the major world decisions are made, in early
June 2020, the unelected WEF Chairman, Klaus Schwab , announced "The Great Reset". Taking
advantage of the economic collapse – the crisis shock, as in "The Shock Doctrine" –
Mr. Schwab, one of the Beast's frontrunners, announces openly what the WEF will discuss and
decide for the world-to-come in their next Davos Forum in January 2021. For more details see
this
.
Will, We, The People, accept the agenda of the unelected WEF?
It will opportunely focus on the protection of what's left of Mother Earth; obviously at the
center will be man-made CO2-based "Global Warming". The instrument for that protection of
nature and humankind will be the UN Agenda 2030 – which equals the UN Sustainable
Development Goals (SDG). It will focus on how to rebuild the willfully destroyed global
economy, while respecting the ("green") principles of the 17 SDGs.
Mind you, it's all connected. There are no coincidences. The infamous Agenda 2021 which
coincides with and complements the so-called (UN) Agenda 2030, will be duly inaugurated by the
WEF's official declaration of The Great Reset, in January 2021. Similarly, the implementation
of the agenda of The Great Reset began in January 2020, by the launch of the corona pandemic
– planned for decades with the latest visible events being the 2010 Rockefeller Report
with its "Lockstep Scenario" , and Event 201, of 18 October in NYC which computer-simulated a
corona pandemic, leaving within 18 months 65 million deaths and an economy in ruin, programmed
just a few weeks before the launch of the actual corona pandemic. See COVID-19, We Are Now Living the
"Lock Step Scenario" and
this and this .
The Race
Riots
The racial riots, initiated by the movement Black Lives Matter (funded by the Ford
Foundation and Soros' Open Society Foundation), following the brutal assassination of the
Afro-American George Floyd by a gang of Minneapolis police, and spreading like brush-fire in no
time to more than 160 cities, first in the US, then in Europe – are not only connected to
the Beast's agenda, but they were a convenient deviation from the human catastrophe left behind
by Covid-19. See also this .
The Beast's nefarious plan to implement what's really behind the UN Agenda 2030 is the
little heard-of Agenda ID2020 . See The
Coronavirus COVID-19 Pandemic: The Real Danger is "Agenda ID2020" . It has been created and
funded by the vaccination guru Bill Gates, and so has GAVI (Global Alliance for Vaccines and
Immunizations), the association of Big Pharma – involved in creating the corona vaccines,
and which funds along with the Bill and Melinda Gates Foundation (BMGF) a major proportion of
WHO's budget.
Following the official path of the UN Agenda 2030 of achieving the SDGs, the 'implementing'
Agenda ID2020 – which is currently being tested on school children in Bangladesh –
will provide digitized IDs possibly in the form of nano-chips implanted along with compulsory
vaccination programs, will promote digitization of money and the rolling out of 5G –
which would be needed to upload and monitor personal data on the nano chips and to control the
populace. Agenda ID2020 will most likely also include 'programs' – through vaccination?
– of significantly reducing world population. Eugenics is an important component in the
control of future world population under a NOW / OWO – see also Georgia Guidestones ,
mysteriously built in 1980.
The ruling elite used the lockdown as an instrument to carry out this agenda. Its
implementation would naturally face massive protests, organized and funded along the same lines
as were the BLM protests and demonstrations. They may not be peaceful – and may not be
planned as being peaceful. Because to control the population in the US and in Europe, where
most of the civil unrest would be expected, a total militarization of the people is required.
This is well under preparation.
In his essay "The Big Plantation" , John
Steppling reports from a NYT article that a
"minimum of 93,763 machine guns, 180,718 magazine cartridges, hundreds of silencers and an
unknown number of grenade launchers have been provided to state and local police departments
in the US since 2006. This is in addition to at least 533 planes and helicopters, and 432
MRAPs -- 9-foot high, 30-ton Mine-Resistant Ambush Protected armored vehicles with gun
turrets and more than 44,900 pieces of night vision equipment, regularly used in nighttime
raids in Afghanistan and Iraq."
He adds that this militarization is part of a broader trend. Since the late 1990s, about 89
percent of police departments in the United States serving populations of 50,000 people or more
had a PPU (Police Paramilitary Unit), almost double of what existed in the mid-1980s. He refers
to these militarized police as the new Gestapo.
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Even before Covid, about 15% to 20% of the population was on or below the poverty line in
the United States. The post-covid lockdown economic annihilation will at least double that
percentage – and commensurately increase the risk for civil turbulence and clashes with
authorities – further enhancing the reasoning for a militarized police
force.
China's Crypto RMB
None of these scenarios will, of course, be presented to the public by the WEF in January
2021. These are decisions taken behind closed doors by the key actors for the Beast. However,
this grandiose plan of the Great Reset does not have to happen. There is at least half the
world population and some of the most powerful countries, economically and militarily –
like China and Russia – opposed to it. "Reset" maybe yes, but not in these western terms.
In fact, a reset of kinds is already happening with China about to roll out a new People's Bank
of China backed blockchain-based cryptocurrency, the crypto RMB, or yuan . This is not only a
hard currency based on a solid economy, it is also supported by gold.
While President Trump keeps trashing China for unfair trade, for improperly managing the
covid pandemic, for stealing property rights – China bashing no end – that China
depends on the US and that the US will cut trading ties with China – or cut ties
altogether, China is calling Trump's bluff. China is quietly reorienting herself towards the
ASEAN countries plus Japan (yes, Japan!) and South Korea, where trade already today accounts
for about 15% of all China's trade and is expected to double in the next five years.
Despite the lockdown and the disruption of trade, China's overall exports recovered with a
3.2% increase in April (in relation to April 2019). This overall performance in China exports
was nonetheless accompanied by a dramatic decline in US-China trade.
China exports to the US decreased by 7.9% in April (in relation to April 2019).
It is clear that the vast majority of
US industries could not survive without Chinese supply chains. The western dependence on
Chinese medical supplies is particularly strong. Let alone Chinese dependence by US consumers.
In 2019, US total consumption, about 70% of GDP, amounted to $13.3 trillion, of which a fair
amount is directly imported from China or dependent on ingredients from China.
The WEF-masters are confronted with a real dilemma. Their plan depends very much on the
dollar supremacy which would continue to allow dishing out sanctions and confiscating assets
from those countries opposing US rule; a dollar-hegemony which would allow imposing the
components of The Great Reset scheme, as described above.
At present, the dollar is fiat money, debt-money created from thin air. It has no backing
whatsoever. Therefore, its worth as a reserve currency is increasingly decaying, especially
vis-à-vis the new crypto-yuan from China. In order to compete with the Chinese yuan, the
US Government would have to move away from its monetary Ponzi-scheme, by separating itself from
the 1913 Federal Reserve Act and print her own US-economy- and possibly gold-backed (crypto)
money – not fiat FED-money, as is the case today. That would mean cutting the more than
100-year old ties to the Rothschild and Co. clan-owned FED, and creating a real peoples-owned
central bank. Not impossible, but highly improbable. Here, two Beasts might clash, as world
power is at stake.
Meanwhile, China, with her philosophy of endless creation would continue forging ahead
unstoppably with her mammoth socioeconomic development plan of the 21st Century, the Belt and
Road Initiative, connecting and bridging the world with infrastructure for land and maritime
transport, with joint research and industrial projects, cultural exchanges – and not
least, multinational trade with "win-win" characteristics, equality for all partners –
towards a multi-polar world, towards a world with a common future for mankind.
Today already more than 120 countries are associated with BRI – and the field is wide
open for others to join – and to defy, unmask and unplug The Great Reset of the West.
"... Russia heavily subsidised Ukrainian energy imports for decades – gas and oil. In a similar fashion, Russia is doing this with Belarus until the present time. Russia is the only possible consumer of what Ukraine used to manufacture – a market that has disappeared. Gas turbines used to be made in Ukraine. Now, this has moved to Russia. Of course, the skilled Ukrainians went to Russia with their know-how. ..."
"... To the best of my knowledge the USSR was the only empire that actually subsidized its colonies – Poland, East Germany, Ukraine etc. Russia is far better off without them. ..."
"... Ukrainian supermarkets are overflowing with French/German/Italian products. European supermarkets are devoid of Ukrainian products. ..."
Only a complete and utter incompetent (or a rabid Ukrainian nationalist) can call Ukraine
an independent state. It is de-facto a colony of the West. A debt slave.
I applaud the US response of supporting Ukraine's aspirations for a freer, more
Western-oriented country and that it continues to support Ukraine's territorial interests
over those of Russia's.
This was not about supporting Ukrainian aspirations for a freer, more Western-oriented
country. It is about kicking out Russia from Ukrainian markets and plundering Ukraine all by
themselves. Mainly by Germany and the USA -- to major players of Euromaydan color revolution.
For Germans this is return to "Drang nach Osten" on a new level, on the level of neoliberal
neocolonialism.
They used Western nationalists as their fifth column, but Western Ukrainian suffered from
the results no less then people in Eastern Ukraine. Many now try to move to Kiev, Kiev region
and further East in order to escape poverty and unemployment. Seasonal labor to Russia
(mainly builders) diminished rapidly. Train communication now is blocked, and for Western
Ukraine only Poland now represents a chance to earn money for the family to survive the
winter.
For the USA this is first of all about selling Ukraine expensive weaponry, wasting
precious Ukrainian resources on permanent hostility with Russia (with Donbas conflict as a
real win to further the USA geopolitical ambitions -- in line with the "Full spectrum
dominance" doctrine) , cornering Ukrainian energy market (uranium supplies for power
stations, etc.), destruction, or buy-out of a few competing industries other than extracting
industries and maquiladoras, getting better conditions for the EU exports and multinationals
operating in Ukraine (and initially with plans for re-export products to Russia tax free) and
increasing the country debt to "debt slave" level.
In other words this is a powerful kick in a chin by Obama to Putin. Not a knockdown, but
very close.
For Ukraine first of all that means rapid accumulation of a huge external debt --
conditions of economic slavery, out of which there is no escape. Ukrainian people paid a very
dear price for their Euromaydan illusions. They became mass slave labor in Poland.
Prostitutes in Germany. Seasonal picker of fruits in some other EU countries (GB, France). A
new European blacks, so to speak.
The level of fleecing Ukraine by the USA after Euromaidan can be compared only with
fleecing of Libya. The currency dropped 300%, and 80% Ukrainians now live in abysmal poverty,
while neoliberal oligarchs allied with the West continue to plunder the country. Gold
reserves were moved to the USA.
If I had to choose between two colonizers, I probably would prefer Russians. They are
still colonizers, but they are less ruthless and brutal colonizers.
@likbezIf I had
to choose between two colonizers, I probably would prefer Russians. They are still
colonizers, but they are less ruthless and brutal colonizers.
I agree with 90% of what you wrote, but I would like to correct the above.
Russia heavily subsidised Ukrainian energy imports for decades – gas and oil. In
a similar fashion, Russia is doing this with Belarus until the present time. Russia is the
only possible consumer of what Ukraine used to manufacture – a market that has
disappeared. Gas turbines used to be made in Ukraine. Now, this has moved to Russia. Of
course, the skilled Ukrainians went to Russia with their know-how.
To the best of my knowledge the USSR was the only empire that actually subsidized its
colonies – Poland, East Germany, Ukraine etc. Russia is far better off without
them.
Ukrainian supermarkets are overflowing with French/German/Italian products. European
supermarkets are devoid of Ukrainian products.
Wall Street is a highly influential financial district but its history is rarely talked
about. In order to understand the largesse of Wall Street and the system of global
capitalism, it is crucial to know Wall Street's history. Wall Street was founded on slavery
and, to this day, it remains a key pillar in upholding racial inequality and economic
oppression.
Michael Hudson: Debt, Liberty and "Acts of God"
Posted on
May 26, 2020
by
Yves Smith
Yves here. Michael Hudson recaps the logic of debt jubilees and other forms of debt relief, as practiced in
ancient times, when borrowers through circumstances outside their control were unable to make good. Monarchs
recognized the danger of letting creditors create a permanent underclass.
This is a short, high-level treatment and makes for an easy-to-digest introduction to Hudson's research
and ideas.
Western civilization distinguishes itself from its predecessors in the way it has responded to "acts of
God" disrupting the means of support and leaving debts in their wake.
The great question always has been who will lose under such conditions. Will it be debtors and renters at
the bottom of the economic scale, or creditors and landlords at the top? This age-old confrontation between
creditors and debtors, landlords and tenants over how to deal with the unpaid debts and back rents is at the
economic heart of today's 2020 coronavirus pandemic that has left large and small businesses, farms,
restaurants and neighborhood stores – along with their employees who have been laid off – unable to pay the
rents, mortgages, other debt service and taxes that have accrued.
For thousands of years ancient economies operated on credit during the crop year, with payment falling
due when the harvest was in – typically on the threshing floor. Normally this cycle provided a flow of crops
and corvée labor to the palace and covered the cultivator's spending during the crop year, with interest
owed only when payment was late. But bad harvests, military conflict or simply the normal hardships of life
occasionally prevented this buildup of debt from being paid, threatening citizens with bondage to their
creditors or loss of their land rights.
Mesopotamian palaces had to decide who would bear the loss when drought, flooding, infestation, disease
or military attack disrupted economic activity and prevented the settlement of debts, rents and taxes.
Recognizing that this was an unavoidable fact of life, rulers proclaimed amnesties for taxes and the various
debts that were incurred during the crop year. These acts saved smallholders from having to work off their
debts by personal bondage and ultimately to lose their land.
Classical antiquity, and indeed subsequent Western civilization, rejected such Clean Slates to restore
social balance. Since Roman times it has become normal for creditors to use social misfortune as an
opportunity to gain property and income at the expense of families falling into debt. In the absence of
kings or democratic civic regimes protecting debtor rights and liberty, pro-creditor laws obliged debtors to
lose their land or other means of livelihood to foreclosing creditors, sell it under distress conditions and
fall into bondage to work off their debts, becoming clients or quasi-serfs to their creditors without hope
of recovering their former free status.
Giving priority to creditor claims leads to widespread bankruptcy. At first glance, it seems to violate
our society's ideas of fairness and distributive justice to insist on payment of debt and rent arrears,
threatening to evict debtors from their homes and forfeit whatever property they have if they cannot pay the
rent arrears and other charges without revenue having come in. Bankruptcy proceedings would force businesses
and farms to forfeit what they have invested. It also would force U.S. cities and states to cope with
plunging sales- and income-tax revenue by slashing social services and depleting their pension funds savings
to pay bondholders.
But the West's pro-creditor legal and financial philosophy has long blocked debt relief to renters,
mortgagees and other debtors. Banks, landlords and insurance companies insist that writing down of debts and
rents owed to them by wage-earners and small business is unthinkable. So something has to give: either the
broad economic interest of most of the population, or the interest of the Finance, Insurance and Real Estate
(FIRE) sector. Banks claim that non-payment of rent would cause debt defaults and wipe out bank capital.
Insurance companies claim that to make their policy holders whole would bankrupt them. So the insurance
companies, banks, landlords and bondholders insist that labor, industry and the government bear the cost of
arrears that have built up during the economic slowdown, not themselves.[1]
Yet for thousands of years Near Eastern rulers restored viability for their economies by writing down
debts in emergencies, and more or less regularly to relieve the normal creeping backlog of debts. These
Clean Slates extended from Bronze Age Sumer and Babylonia in the 3
rd
millennium BC down to
classical antiquity through the Near East, including the neo-Assyrian, neo-Babylonian and Persian Empires.
Near Eastern Protection of Economic Resilience in the Face of Acts of God
For the palatial economies of Mesopotamia and its neighbors, resilience meant stabilization of fiscal
revenue. Letting private creditors (often officials in the palace's own bureaucracy) demand payment out of
future production threatened to deprive rulers of crop surpluses and other taxes, and corvée labor or even
service in the military. Individual creditors looked to their own advantage, not that of the overall
economy.
To preserve the flow of rents, taxes and basic corvée labor duties and service in the military, Near
Eastern rulers proclaimed Clean Slates that wiped out personal and agrarian debts. That restored normal
economic relations – an idealized
status quo ante
– by rolling back the consequence of debts –
bondage to creditors, and loss of land and its crop yield. From the palace's point of view as tax collector
and seller of many key goods and services, the alternative would have been for debtors to owe their crops,
labor and even liberty to their creditors, not to the palace. So cancelling debts to restore normalcy was
simply pragmatic, not utopian idealism as was once thought.
The pedigree for "act-of-God" rules specifying what obligations need not be paid when serious disruptions
occur goes back to the laws of Hammurabi c. 1750 BC. Their aim was to restore economic normalcy after major
disruptions. §48 of Hammurabi's laws proclaim a debt and tax amnesty for cultivators if Adad the Storm God
has flooded their fields, or if their crops fail as a result of pests or drought. Crops owed as rent or
fiscal payments were freed from having to be paid. So were consumer debts run up during the crop year,
including tabs at the local ale house and advances or loans from individual creditors. The ale woman
likewise was freed from having to pay for the ale she had received from palace or temples for sale during
the crop year.
Whoever leased an animal that died by an act of God was freed from liability to its owner (§266). A
typical such amnesty occurred if the lamb, ox or ass was eaten by a lion, or if an epidemic broke out.
Likewise, traveling merchants who were robbed while on commercial business were cleared of liability if they
swore an oath that they were not responsible for the loss (§103).
It was realized that hardship was so inevitable that debts tended to accrue even under normal conditions.
Every ruler of Hammurabi's dynasty proclaimed a Clean Slate cancelling personal agrarian debts (but not
normal commercial business loans) upon taking the throne, and when military or other disruptions occurred
during their reign. Hammurabi did this on four occasions.[2]
In an epoch when labor was the scarcest resource, a precondition for survival was to prevent rising
indebtedness from enabling creditors to use debt leverage to obtain the labor of debtors and appropriate
their land. Early communities could not afford to let bondage become chronic, or creditors to become a
wealthy class rivaling the power of palace rulers and seeking gains by impoverishing their debtors.
Yet that is precisely what is occurring as today's economy polarizes between creditors and debtors.
_______
[1]
Lawsuits are exploding over the role of insurance companies supposed to protect business
from such interruptions. See Julia Jacobs, "Arts Groups Fight Their Insurers Over Coverage on Virus Losses,"
The New York Times
, May 6, 2020, reports that "insurance companies have issued a torrent of
denials, prompting lawsuits across the country and legislative efforts on the state and federal levels to
force insurers to make payments. The insurance industry has argued that fulfilling all of these requests
would bankrupt the industry."
[2]I provide a detailed history of Clean Slate acts from the Bronze Age down through Biblical times and
the Byzantine Empire in
" and forgive them their debts"
(ISLET 2018).
The historical overlook ignores the function of bankruptcy to create the clean slate. Sure, a few
sentences are thrown in, but somehow completely overlooks entire types of bankruptcy that allow corporate
and individual restructuring to occur and preserve underlying value.
The whole debt jubilee ideas is just so unfair. Access to debt is by and large a privileged position in
the modern world. The rich have access to huge amount of capital at minimal cost while the poor have to pay
outrageous rates to buy a used car or pay for an emergency. To wipe the slate clean is overwhelmingly
beneficial to the rich and connected, while the poor remains renters stuck in wage slavery. And the
aftermath of a general debt jubilee means the poor will have even greater difficulty with accessing credit
to buy housing, durable goods, and things that allow them to build wealth.
There's already a much better solution that actually stimulates the economy and redistributes wealth.
Just give every natural person the same amount of money until the economy gets to where it needs to be. It
can also be channeled through building public goods like free college education and universal free
healthcare and public housing. For everything else, just let bankruptcies happen and clean out natural and
unnatural persons addicted to debt. Then the natural person get their fresh start and the unnatural
corporate persons can die a well deserved death.
You must be joking re bankruptcy.
And you completely misunderstand what Hudson is talking about for our modern day 'Little people' debt
issues. I suggest a far more thorough reading of Hudson.
"why do people say," you ought to go read what the author REALLY means".. as opposed to looking at
what was said?
I think what Astrid says is completely valid.
What about what was said ,doesn't reflect reality?
There is unequal treatment and how much money /credit you have completely changes "what you can get
away with".
Poor people don't go bankrupt they get evicted they go homeless.. their cars are repossessed. They
don't have the money for a lawyer to file bankruptcy papers..
Donald trump "goes bankrupt".. and comes out smiling on the other side
Just give every natural person the same amount of money until the economy gets to where it needs to
be.
Astrid
Yes, Steve Keen's solution. But also, all government privileges for private credit creation should be
abolished to eliminate perverse incentives to go into debt, which include the punishment of legitimate*
saving.
Also, an ongoing Citizen's Dividend, to replace all fiat creation for private interests, is a way, in
addition to saving, for all citizens to build equity for rainy days such as these.
'Just give every natural person the same amount of money until the economy gets to where it needs to
be'
Astrid – a basic income has been discussed but, due to the structures in our tax system and in the
operation of the so called 'Free Market' (a complete inversion of it's original meaning) -- I would think
that income would immediately be taken away by the fire sector interests and be used to balloon up asset
prices.
The fact that the cost of living – food, rent, housing has gone up is not really a natural market force –
(there is no natural market force or some magical invisible hand or some as yet undetermined phenomena to
be discovered) – because the market is man made.
In my view, the heaping on of debt fueled speculation combined with corruption's many companions –
co-joined political capture and tax favored status is driving the fundamental asset inflation which is
making everything so damned expensive – everything that used to make living and doing business less
expensive has been captured by creditors and their co-joined cohorts.
Below is a comment from the mid 1920's – don't know who wrote it
In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large
fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is
still true that it would be better to stop the speculative incomes at the source, rather than attempt to
recover them after they have passed into the hands of profiteers.
If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given
employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man
means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease
wages, unemployment, and increased cost of living.
If, however, a man's income is not made in producing wealth and employing labor, but is due to
speculation, the case is altogether different. The speculator as a speculator, whether his holdings be
mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no
wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ
labor and produce wealth.
If part of the speculator's income – no matter how large a part – be taken in taxation, it will not
decrease employment or lessen the production of wealth. Whereas, if the producer's income be taxed it
will tend to limit employment and stop the production of wealth.
Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the
source from whence they are drawn.
First pass"the need act"
https://www.congress.gov/bill/112-thcongress/house-bill/2990/text
Then, as the US gov't would be able to create money debt free .
They could distribute the money to Everyone . and not just wall street to get that money into
circulation . and drive the economy .. not too much not too little.
I think you are missing who Hudson said the "clean slates" were for. They were not for the big
creditors and rentiers, rather they were for the farmers and average people who had suffered some loss
that made them unable to provide their payments to their creditors and rentiers. It would be as if today,
those people who cannot work because of Covid-19 were forgiven their debts, so that when this pandemic
was over, they could start out fresh. That would be so much more a help to Main Street's economy than
just giving money to the top corporations.
I'm not against your ideas about free education and universal healthcare and I doubt Hudson is against
those either, but there is much more to the economy that just education and healthcare – things like food
production and the manufacturing of necessary items, and Hudson is looking at what has worked
historically.
Ah, Americans! "If there is nothing in it for me, then I'm against it!"
Haven't we had enough of that kind of thinking? Is someone else getting a break from their debt
REALLY going to hurt the rest of Americans? In fact, if it makes American's Main Street economy
stronger, doesn't that actually help all Americans? I hear that kind of thinking all the time when
I talk about forgiving student debt – as though somehow that debt is coming out of THEIR pockets
when it is not.
Too many Americans sound like temporarily distressed billionaires in their attitudes (it's all
about ME) instead of people who want all Americans to succeed.
Justice is justice and Hudson's plan would do nothing for rent slaves while giving houses to
those who used what is, in essence, the public's credit but for private gain to buy them.
Also, rent slaves tend to be poorer than those who "own" their own homes so Hudson's plan is
a form of welfare for the richer rather than a promotion of the general welfare.
In fact, if it makes American's Main Street economy stronger, doesn't that actually help
all Americans?
The Historian
Our focus should be on citizens, i.e. people, not businesses since justice for people is what
ultimately matters. What you are promoting is Main Street trickle-down.
Astrid, please re-read Hudson's article. He has been studying this subject for years and knows what he
is talking about. He deserves a closer read than what you gave him!
"Access to debt is by and large a privileged position in the modern world." While this statement is
narrowly true, in the US it isn't. Subprime debt, debt laddled onto those least able to pay it, was
behind the largest financial collapse in US history (so far) just 12 years ago.
"To wipe the slate clean is overwhelmingly beneficial to the rich and connected, while the poor
remains renters stuck in wage slavery." In a rentier economy, to eliminate the debts would be to
eliminate income streams for the rich and connected, Jerome Powell and Josh Hawley are already worried
about what it means to not bail out the poor. The Democrats can't hear this from the left, maybe when it
becomes Republican policy they will like it, that's typically how they roll.
"And the aftermath of a general debt jubilee means the poor will have even greater difficulty with
accessing credit to buy housing, durable goods, and things that allow them to build wealth." This is a
studiously complete missreading of the point of the article: centralized State action to relieve debtors
of financial burdens and social stigma, to restore their freedom because their freedom is the strength of
the State or civilization.
Finally, read the article, a few paragraphs, yes they include a few sentences too:
"Giving priority to creditor claims leads to widespread bankruptcy. At first glance, it seems to
violate our society's ideas of fairness and distributive justice to insist on payment of debt and rent
arrears, threatening to evict debtors from their homes and forfeit whatever property they have if they
cannot pay the rent arrears and other charges without revenue having come in. Bankruptcy proceedings
would force businesses and farms to forfeit what they have invested. It also would force U.S. cities and
states to cope with plunging sales- and income-tax revenue by slashing social services and depleting
their pension funds savings to pay bondholders.
But the West's pro-creditor legal and financial philosophy has long blocked debt relief to renters,
mortgagees and other debtors. Banks, landlords and insurance companies insist that writing down of debts
and rents owed to them by wage-earners and small business is unthinkable. So something has to give:
either the broad economic interest of most of the population, or the interest of the Finance, Insurance
and Real Estate (FIRE) sector. Banks claim that non-payment of rent would cause debt defaults and wipe
out bank capital. Insurance companies claim that to make their policy holders whole would bankrupt them.
So the insurance companies, banks, landlords and bondholders insist that labor, industry and the
government bear the cost of arrears that have built up during the economic slowdown, not themselves."
And iuris romana led directly to the serfdom and prolonged depression of the "dark ages", as the church
spread roman law throughout Europe. If Hayak had bothered to study history he would have found that the
"road to serfdom" is (to borrow a locution from one of Hayak's acolytes) always and everywhere a result of
extreme laissez faire, particularly heritable debts. For modern incarnations of serfdom, look at India,
Pakistan and Mali.
Dr. Hudson spends much time in China. It would be interesting if he were to comment upon how debt and
default were handled in China during its many different dynasties. For example, how did ancient Chinese
policies compare with those of the ancient Middle East?
Yes, that should tie him up for several lifetimes and ensure he does not assemble a following in the
world today. We can't have these loose cannon revealing a way out of unfairness and inequality, eh?
Debt looks like the solution to every problem when you use an economics that doesn't consider
debt.
The economics of globalisation has always had an Achilles' heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the
debt deflation of the Great Depression. No one realised the problems that were building up in the economy as
they used an economics that doesn't look at private debt, neoclassical economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
The neoliberal ideology was just a wrapper, hiding the dodgy, old 1920s neoclassical economics
lurking underneath.
The international elite swallowed it hook, line and sinker.
Neoclassical economics, probably the worst economics in the world.
(I bet they drink Karlsburg. – UK joke)
The economics of globalisation has always had an Achilles' heel.
In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the
debt deflation of the Great Depression. No one realised the problems that were building up in the economy
as they used an economics that doesn't look at private debt, neoclassical economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
Policymakers run the economy on debt until they get a financial crisis.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
Policymakers run the economy on debt until they get a financial crisis.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.
In the beginning it had nothing to do with god. It was unquestioned cooperation. I'll give you help and
you can help me later. It was unspoken. It was spontaneous. Ever notice how careful wild animals are? And,
by contrast, how foolish humans are? That's gotta be because god is our scapegoat. Just suppose that it's
because over the millennia of civilization helping each other was standardized, formalized and abstracted
into money. When money accumulated it became wealth itself, replacing the value of a good society. It
became money without social cooperation. It has even become a medium of exchange and trade. Contracts were
substituted for cooperation. Leaving morality and caution out entirely. There's really nothing moral about
turning debt into an "asset" which can be collected by law or bought and sold for a profit. An asset that
must be paid in full after a certain use, plus interest. Debt itself has become dissociated from society. So
now what have we got? We've got a planet being destroyed not by god, but by humans. From now on in it's
gonna be devastation by "act of man". Full tilt. And poetically, there will be few profits available to
"service" debt. It's time to legislate a few things, like good societies to meet the needs of people and
planet alike. No speculating and no profiteering. And no debt transmogrified into assets. Our debt is to the
planet now. And survival. End of sermon.
>> or creditors to become a wealthy class rivaling the power of palace rulers and seeking gains by
impoverishing their debtors.
Does this make the case that a benevolent individual ruler (i.e. a monarch, or dictator, or tyrant) would
have a natural interest in protecting balance between creditor-debtor so as not to have his power
threatened?
Is formal democracy then more vulnerable to allowing creditors to seize the power of state as there is no
counterbalancing interest? It seems to me that what Prof. Hudson is saying could certainly be interpreted
that way. I believe also originally the concept of a tyrant in ancient Greece was synonymous with just
government (cant provide references right now).
Debt and contract amnesties did not only exist in ancient times. See Terry Boughton's "Taming Democracy"
about how the American Revolutionaries understood currency. The early state of Pennsylvania regularly issued
relief, and the Federal Constitution limited states' abilities to break these contracts due to acts of god.
Boughton's book is eye-opening also in terms of how money works.
Notice that Hudson is discussing the kind of debt that was paid on the threshing floor. These were debts
of the working people. Commercial "silver" debts were not cancelled in a clean slate. Trying to write a
concise report above Hudson did not fully spell this out. Take a look at the very first section of his book,
beginning on page ix.
The Overview beginning on page 1 addresses the issue of how "American" all this is. He traces the history
of the Liberty Bell and the torch of the Statue of Liberty back to ancient clean slates. They ring and shine
with freedom from onerous debt. Yes, the huddled masses were yearning to be free; free from debt! On page 5
he quotes Hammurabi's law epilogue, " that the strong might not oppress the weak, that justice might be
dealt to the orphan and widow I write my precious words on my stele To give justice to the oppressed." And
Hudson was just getting warmed up on why a certain would-be king took a whip to the moneychangers in the
temple!
No new class, policy or ideology is going to fix economic degradation over generations destroying the
work ethic. It's a computer-controlled machine that systematically eliminates people from the economy and
pays its owners in ones and zeros, to consume natural resources ever more efficiently. China was just the
contract manufacturor. Nature is responding.
The economic bridge is all about the multiplier effects of operational leverage. Why would anyone
responsible for multiplier effects work for equal pay, and if an entire generation is pissed off at the
corporations catering to it, why would anyone expect anything other than negative multiplier effects. When
individual rights are removed, there are no rights, for anyone.
There's a reason why monetary expansion has been rotated geographically, to consume natural resources,
and why the globalists cling to electronic money in virtual space – fintech. A debt jubilee doesn't change
the inbred behavior of consumerism.
Me, being a cynic and all – I thought the way trade worked in the real world (not
the one described by well paid economists) was a multi step process
1) target developing country by undermining their core farming, self sustaining activity
and export industries through cheap importation of grains and crops and other goods –
thus making it impossible for locals to survive through their own industry
2) simultaneous loans (investment) to the country (economic aid) and corruption of
political leaders designed to enable step three
3) Whence said country is indebted – force country to export whatever (mineral)
wealth onto a glutted market to pay back its debts – this is easily done as the labor
component is ripe for the picking/ fleecing
4) crush the country into economic austerity for as long as it takes to enslave its
citizens and grab everything of value from the country
5) pretend that the IMF etc did such a great job – but the countries people
(victims) or government did not do enough and must take care of themselves better
I think that you covered the Standard Operation Procedure here in better detail than I
could. I would only add to point 2) that the bankers will go to these local leaders and show
them how to hide their money and help them set up accounts in a place like the Caymans as part
of the service.
And if that economist wants to find where all of Africa's wealth is going, he might want to
start in the City of London and New York first.
[Iraq] will have to borrow a lot of money most likely from the IMF. The money may come
with U.S. conditions.
BM: Hmm. Iraq has a big pile of problems on its hands, but the way the "answer" is worded
seems rather USA-flavoured, as though Iraq borrowing from the IMF is even remotely viable
politically, given that would automatically make its other political problems far more
intractible. Does not sound like a "Bernhard" statement to me. may come with U.S.
conditions.??? Is that what is commonly referred to as an "understatement"?
Piotr: Actually, this is a HUGE blunder in the article. I have only one data point:
Trump administration threatened to freeze 35 billions on Iraqi funds in American banks if
Iraq completes the expulsion of American forces. One f...d up thing in Iraq is the failure of
restoring electricity production, and the dependence on Iranian electricity and Iranian gas
for the power station. As we know, it is much cheaper to build power stations that run on
natural gas than on crude or coal, and the fuel costs are lower, so it seems that Americans
blocked the most economic solutions to the problem. And as a bonus (for Americans), the
failures in electricity supplies were a major motivation in riots that caused government
crisis.
This there is no problem with IMF borrowing money to Iraq or not, but the direct
dependency on USA that can give the access to Iraq's money or not. Extremely colonial
dependency, without using "international tools" like IMF.
"... Pretty near stopped reading right there. IMF and World Bank are primary tools of imposing empire on the rest of the world. There is no reason to pay the slightest attention to any of their predictions, except to keep up with what is this week's propaganda. ..."
"... with the neoliberal reforms of 1975-1997, the IMF quickly rose in importance. Mexico's bankruptcy of the mid-1980s was just the prelude. Then the USSR dissolved, and the IMF suddenly took the WB's place as the capitalist spearhead in the Third World. It's prestige spiked through the roof with the subjugation of Russia (Yeltsin Era), Latin America (specially Argentina and Brazil) and others. When the Asian Tigers crisis broke out (1997), the IMF gained police power, which only rose its importance as a capitalist instrument of hegemony. By 2001 - when the Asian Tigers crisis was essentially over - the IMF basically became sacrosanct, a fact of life of capitalism, a status it still enjoys in the present. ..."
"... IMF's accidental rise to power - coupled with the decline of the World Bank - is a very strong evidence and a poetic illustration of the metamorphosis of the American Empire from an industrial-financial superpower (i.e. a capitalist superpower) to a strictly financial superpower. ..."
"... YES to that. IMF is the imperialist tool of enslavement. It is the entry point for private capital hoarders to prise loose the fabric of social cohesion and turn the threads into rope to bind the people to repay national debt. What did Joe Biden do in Ukraine? He arranged US and IMF loans to the government, stole a larger chunk of the deposit through his son and other vectors via the Burisma board etc as he slinked off back home. Then tried the same in China where he was perhaps ensnared in a compromise sting. In all cases the public repays the debt to the IMF or USA. ..."
>Gita Gopinath, the super-smart Director of the IMF's Research Department,
Pretty near stopped reading right there. IMF and World Bank are primary tools of imposing
empire on the rest of the world. There is no reason to pay the slightest attention to any of
their predictions, except to keep up with what is this week's propaganda.
Posted by: Trailer Trash | May 9 2020 18:41 utc | 20
Same. Maybe the crazies are right, is b even here anymore?
@ Posted by: Trailer Trash | May 9 2020 18:41 utc | 20
The history of the IMF is a curious one. It was one of the many international post-war
institutions created in 1944-45, during the world peace hysteria that accompanied the Cold
War.
Initially, though, it was expected that the IMF would play, at best, a very peripheral
role. It should be, in theory, just a fund to be used in exceptional circumstances, for very
tiny problems. Maybe some basket case in Africa would need a couple billions to fix itself
someday, but nothing more than that. It was definitely not taken seriously, and was just a
footnote in the long list of newly founded international institutions.
The capitalist star of the show during the High Cold War (1945-1975) was the World Bank,
more specifically, its infrastructure investment branch, the IBRD.
However, with the neoliberal reforms of 1975-1997, the IMF quickly rose in importance.
Mexico's bankruptcy of the mid-1980s was just the prelude. Then the USSR dissolved, and the
IMF suddenly took the WB's place as the capitalist spearhead in the Third World. It's
prestige spiked through the roof with the subjugation of Russia (Yeltsin Era), Latin America
(specially Argentina and Brazil) and others. When the Asian Tigers crisis broke out (1997),
the IMF gained police power, which only rose its importance as a capitalist instrument of
hegemony. By 2001 - when the Asian Tigers crisis was essentially over - the IMF basically
became sacrosanct, a fact of life of capitalism, a status it still enjoys in the present.
IMF's accidental rise to power - coupled with the decline of the World Bank - is a very
strong evidence and a poetic illustration of the metamorphosis of the American Empire from an
industrial-financial superpower (i.e. a capitalist superpower) to a strictly financial
superpower.
YES to that. IMF is the imperialist tool of enslavement. It is the entry point for private
capital hoarders to prise loose the fabric of social cohesion and turn the threads into rope
to bind the people to repay national debt. What did Joe Biden do in Ukraine? He arranged US
and IMF loans to the government, stole a larger chunk of the deposit through his son and
other vectors via the Burisma board etc as he slinked off back home. Then tried the same in
China where he was perhaps ensnared in a compromise sting. In all cases the public repays the
debt to the IMF or USA.
The IMF employs connivers in the service of global private finance. Some might call them
super-smart but 'criminally smart' would be a better term.
The world's largest evangelist of neoliberalism, the International Monetary Fund, has
admitted that it's not all it's cracked up to be.
Neoliberalism refers to capitalism in its purest form. It is an economic philosophy espoused
by libertarians -- and repeated endlessly by many mainstream economists -- one that insists
that privatization, deregulation, the opening up of domestic markets to foreign competition,
the cutting of government spending, the shrinking of the state, and the "freeing of the market"
are the keys to a healthy and flourishing economy.
Yet now top researchers at the International Monetary Fund, or IMF, the economic institution
that has proselytized -- and often forcefully imposed -- neoliberal policies for decades, have
conceded that the "benefits of some policies that are an important part of the neoliberal
agenda appear to have been somewhat overplayed."
"There are aspects of the neoliberal agenda that have not delivered as expected," the
economists write in " Neoliberalism: Oversold? ", a
study published in the June volume of the IMF's quarterly magazine Finance &
Development.
In analyzing two of neoliberalism's most fundamental policies, austerity and the removing of
restrictions on the movement of capital, the IMF researchers say they reached "three
disquieting conclusions."
One, neoliberal policies result in "little benefit in growth."
Two, neoliberal policies increase inequality, which produces further economic harms in a
"trade-off" between growth and inequality.
And three, this "increased inequality in turn hurts the level and sustainability of
growth."
The top researchers conclude noting that the "evidence of the economic damage from
inequality suggests that policymakers should be more open to redistribution than they are."
In some cases, they add, the consequences "will have to be remedied after they occur by
using taxes and government spending to redistribute income."
"Fortunately, the fear that such policies will themselves necessarily hurt growth is
unfounded," the IMF economists stress -- that is to say, increasing taxes and boosting
government spending will not necessarily hurt growth.
The collapse of neoliberalism
These statements represent an enormous reversal for the IMF. It is somewhat like the Pope
declaring that there is no God; it is a volte-face on almost everything that the IMF has ever
stood for.
Since the 2008 financial collapse, widespread rebellions have been waged against these
failed neoliberal policies, with Occupy Wall Street in the U.S. and similar grassroots
movements around the world.
Before the 1970s, neoliberalism was relegated to the obscure margins of mainstream
economics, preached by free-market fundamentalists like Milton Friedman and Friedrich
Hayek.
In the last few decades, however, it became the hegemonic ideology. The IMF has been one of
the most crucial institutions, along with the World Bank, in the spread of neoliberalism.
By the end of the Cold War, socialist alternatives to capitalism had been brutally crushed
in a long series of wars. By the 1980s, with the rise of Prime Minister Margaret Thatcher in
the U.K. and President Ronald Reagan in the U.S., neoliberalism had come to dominate the new
world order.
Even before the Thatchers and the Reagans, however, there were the Pinochets. The policies
the IMF advocated for decades were rooted in extreme violence and repression.
Chile's
violent neoliberal dictatorship
Chile was the first country to implement neoliberal policies. Still today, neoliberal
ideologues quote Milton Friedman, speaking of the legacy of the reign of far-right, U.S.-backed
capitalist dictator Augusto Pinochet as Chile's "economic miracle." What they overlook is how
Pinochet used a bloodstained iron fist to implement these neoliberal policies.
A
bloody CIA-backed 1973 coup toppled Chile's popular democratically elected Marxist leader,
Salvador Allende, and replaced him with Pinochet. For millions of Chileans, his "economic
miracle" was a disaster.
Pinochet combined fascistic police state repression with extreme free-market policies,
killing, disappearing and torturing tens of thousands of Chilean leftists, labor organizers and
journalists, forcing hundreds of thousands more into exile.
"Chile's pioneering experience with neoliberalism received high praise from Nobel laureate
Friedman, but many economists have now come around to" more nuanced views, the IMF researchers
note in their article.
Boom and bust cycles 'are the main story'
The study was co-authored by three members of the IMF's research department -- Jonathan
Ostry, the deputy director, Prakash Loungani, a division chief, and Davide Furceri, an
economist.
The researchers don't throw neoliberalism out completely. "There is much to cheer in the
neoliberal agenda," they write. But it fails in some crucial regards.
For one, opening emerging economies up to some types of unrestricted foreign capital inflows
frequently leads to financial crises, the IMF researchers note, which in turn create large
declines in economic output and "appreciably" increase inequality.
These boom and bust cycles are not merely "a sideshow they are the main story," the
economists add.
"Capital controls are a viable, and sometimes the only, option," the IMF concludes. This is
a huge reversal. The researchers themselves point out that "the IMF's view has also changed --
from one that considered capital controls as almost always counterproductive to greater
acceptance of controls to deal with the volatility of capital flows."
Austerity can lead
to an 'adverse loop' of economic decline
Moreover, the study notes that it is often better for indebted governments to allow "the
debt ratio to decline organically through growth," rather than to impose austerity. This is
another reversal.
The IMF has for many years ordered countries to cut spending, gutting social services in
order to pay off debt. This has in turn led to a shrinking of the economy, trapping countries
in a spiral of debt.
Greece is a painful contemporary example , although there are many more.
"Austerity policies not only generate substantial welfare costs," the IMF researchers
continue, "they also hurt demand -- and thus worsen employment and unemployment."
Austerity results in "drops rather than by expansions in output." Studies show that, when
government deficits and debts are reduced with a fiscal consolidation of 1 percent of a
country's GDP, the long-term unemployment rate often increases by 0.6 percentage point and
income inequality grows by 1.5 percent within five years.
Taken in conjunction, these effects could lead to an "adverse loop," the IMF warns, where
austerity fuels inequality, which decreases growth that neoliberals insist must be cured with
more austerity.
"The increase in inequality engendered by financial openness and austerity might itself
undercut growth, the very thing that the neoliberal agenda is intent on boosting," the IMF
researchers write. "There is now strong evidence that inequality can significantly lower both
the level and the durability of growth."
The importance of this study is hard to overstate. The IMF is essentially admitted that many
of the policies that it demanded countries implement for decades only made things worse.
The International Monetary Fund appears to be inching toward a more Keynesian economic
position.
To be clear, just because IMF researchers acknowledge the economic reality billions of
working people in the world intimately understand does not mean the IMF as an institution will
act on their research and end these policies -- just as the U.S. government does not
necessarily act on the research of State Department, which has
acknowledged Israel's crimes .
But the IMF's recognition that neoliberalism is not the panacea that cures all economic ills
establishes an incredibly significant precedent, and is a huge victory in the fight for
economic justice -- and in the class war.
Ben Norton Ben Norton
is a journalist, writer, and filmmaker. He is the assistant editor of The Grayzone, and the
producer of the Moderate Rebels
podcast, which he co-hosts with editor Max Blumenthal. His website is BenNorton.com and he tweets at @ BenjaminNorton . bennorton.com
Jewish financists are no longer Jewish, much like a socialist who became minister is no
longer a socialist minister. Unregulated finance promotes a set of destructive behaviors which
has nothing to do with nationality or ethnicity.
Of course that Joyce is peddling his own obsessions, but I have to admit that Singer &
comp. are detestable. I know that what they're doing is not illegal, but it should be (in my
opinion), and those who are involved in such affairs are somehow odious. The same goes for Icahn,
Soros etc. Still Ethnic angle is evident, too: how come Singer works exclusively with his
co-ethnics in this multi-ethnic USA? Non-Jewish & most Jewish entrepreneurs don't behave that
way.
It was very gratifying to see Tucker Carlson's
recent attack on the activities of Paul Singer's vulture fund, Elliot Associates, a group I
first
profiled four years ago. In many respects, it is truly remarkable that vulture funds like
Singer's escaped major media attention prior to this, especially when one considers how
extraordinarily harmful and exploitative they are. Many countries are now in very significant
debt to groups like Elliot Associates and, as Tucker's segment very starkly illustrated, their
reach has now extended into the very heart of small-town America. Shining a spotlight on the
spread of this virus is definitely welcome. I strongly believe, however, that the problem
presented by these cabals of exploitative financiers will only be solved if their true nature
is fully discerned. Thus far, the descriptive terminology employed in discussing their
activities has revolved only around the scavenging and parasitic nature of their activities.
Elliot Associates have therefore been described as a quintessential example of a "vulture fund"
practicing "vulture capitalism." But these funds aren't run by carrion birds. They are operated
almost exclusively by Jews. In the following essay, I want us to examine the largest and most
influential "vulture funds," to assess their leadership, ethos, financial practices, and how
they disseminate their dubiously acquired wealth. I want us to set aside colorful metaphors. I
want us to strike through the mask.
It is commonly agreed that the most significant global vulture funds are Elliot Management,
Cerberus, FG Hemisphere, Autonomy Capital, Baupost Group, Canyon Capital Advisors, Monarch
Alternative Capital, GoldenTree Asset Management, Aurelius Capital Management, OakTree Capital,
Fundamental Advisors, and Tilden Park Investment Master Fund LP. The names of these groups are
very interesting, being either blankly nondescript or evoking vague inklings of Anglo-Saxon or
rural/pastoral origins (note the prevalence of oak, trees, parks, canyons, monarchs, or the use
of names like Aurelius and Elliot). This is the same tactic employed by the Jew Jordan Belfort,
the "Wolf of Wall Street," who operated multiple major frauds under the business name Stratton
Oakmont.
These names are masks. They are designed to cultivate trust and obscure the real background
of the various groupings of financiers. None of these groups have Anglo-Saxon or venerable
origins. None are based in rural idylls. All of the vulture funds named above were founded by,
and continue to be operated by, ethnocentric, globalist, urban-dwelling Jews. A quick review of
each of their websites reveals their founders and central figures to be:
Elliot Management
-- Paul Singer, Zion Shohet, Jesse Cohn, Stephen Taub, Elliot Greenberg and Richard Zabel
Cerberus -- Stephen Feinberg, Lee Millstein, Jeffrey Lomasky, Seth Plattus, Joshua Weintraub,
Daniel Wolf, David Teitelbaum FG Hemisphere -- Peter Grossman Autonomy Capital -- Derek Goodman
Baupost Group -- Seth Klarman, Jordan Baruch, Isaac Auerbach Canyon Capital Advisors -- Joshua
Friedman, Mitchell Julis Monarch Alternative Capital -- Andrew Herenstein, Michael Weinstock
GoldenTree Asset Management -- Steven Tananbaum, Steven Shapiro Aurelius Capital Management --
Mark Brodsky, Samuel Rubin, Eleazer Klein, Jason Kaplan OakTree Capital -- Howard Marks, Bruce
Karsh, Jay Wintrob, John Frank, Sheldon Stone Fundamental Advisors -- Laurence Gottlieb,
Jonathan Stern Tilden Park Investment Master Fund LP -- Josh Birnbaum, Sam Alcoff
The fact that all of these vulture funds, widely acknowledged as the most influential and
predatory, are owned and operated by Jews is remarkable in itself, especially in a contemporary
context in which we are constantly bombarded with the suggestion that Jews don't have a special
relationship with money or usury, and that any such idea is an example of ignorant prejudice.
Equally remarkable, however, is the fact that Jewish representation saturates the board level
of these companies also, suggesting that their beginnings and methods of internal promotion and
operation rely heavily on ethnic-communal origins, and religious and social cohesion more
generally. As such, these Jewish funds provide an excellent opportunity to examine their
financial and political activities as expressions of Jewishness, and can thus be placed in the
broader framework of the Jewish group evolutionary strategy and the long historical trajectory
of Jewish-European relations.
How They Feed
In May 2018, Puerto Rico declared a form of municipal bankruptcy after falling into more
than
$74.8 billion in debt, of which more than $34 billion is interest and fees. The debt was
owed to
all of the Jewish capitalists named above, with the exception of Stephen Feinberg's
Cerberus group. In order to commence payments, the government had instituted a policy of fiscal
austerity, closing schools and raising utility bills, but when Hurricane Maria hit the island
in September 2017, Puerto Rico was forced to stop transfers to their Jewish creditors. This
provoked an aggressive attempt by the Jewish funds to seize assets from an island suffering
from an 80% power outage, with the addition of further interest and fees. Protests broke out in
several US cities calling for the debt to be forgiven. After a quick stop in Puerto Rico in
late 2018, Donald Trump pandered to this sentiment when he told Fox News, "They owe a lot of
money to your friends on Wall Street, and we're going to have to wipe that out." But Trump's
statement, like all of Trump's statements, had no substance. The following day, the director of
the White House budget office, Mick Mulvaney, told reporters: "I think what you heard the
president say is that Puerto Rico is going to have to figure out a way to solve its debt
problem." In other words, Puerto Rico is going to have to figure out a way to pay its Jews.
Trump's reversal is hardly surprising, given that the President is considered extremely
friendly to Jewish financial power. When he referred to "your friends on Wall Street" he really
meant his friends on Wall Street. One of his closest allies is Stephen Feinberg, founder
and CEO of Cerberus, a war-profiteering vulture fund that has now accumulated
more than $1.5 billion in Irish debt , leaving the country prone to a "
wave of home repossessions " on a scale not seen since the Jewish mortgage traders behind
Quicken Loans (Daniel Gilbert) and Ameriquest (Roland Arnall)
made thousands of Americans homeless . Feinberg has also been associated with mass
evictions in Spain, causing a collective of Barcelona anarchists to
label him a "Jewish mega parasite" in charge of the "world's vilest vulture fund." In May
2018, Trump made Feinberg
chair of his Intelligence Advisory Board , and one of the reasons for Trump's sluggish
retreat from Afghanistan has been the fact Feinberg's DynCorp has enjoyed years of lucrative government
defense contracts training Afghan police and providing ancillary services to the military.
But Trump's association with Jewish vultures goes far beyond Feinberg. A recent piece
in the New York Post declared "Orthodox Jews are opening up their wallets for Trump in
2020." This is a predictable outcome of the period 2016 to 2020, an era that could be neatly
characterised as How Jews learned to stop worrying and love the Don. Jewish financiers
are opening their wallets for Trump because it is now clear he utterly failed to fulfil
promises on mass immigration to White America, while pledging his commitment to Zionism and to
socially destructive Jewish side projects like the promotion of homosexuality. These actions,
coupled with his commuting
of Hasidic meatpacking boss Sholom Rubashkin 's 27-year-sentence for bank fraud and money
laundering in 2017, have sent a message to Jewish finance that Trump is someone they can do
business with. Since these globalist exploiters are essentially politically amorphous, knowing
no loyalty but that to their own tribe and its interests, there is significant drift of Jewish
mega-money between the Democratic and Republican parties. The New York Post reports, for
example, that when Trump attended a $25,000-per-couple luncheon in November at a Midtown hotel,
where 400 moneyed Jews raised at least $4 million for the America First [!] SuperPAC, the
luncheon organiser Kelly Sadler, told reporters, "We screened all of the people in attendance,
and we were surprised to see how many have given before to Democrats, but never a Republican.
People were standing up on their chairs chanting eight more years." The reality, of course, is
that these people are not Democrats or Republicans, but Jews, willing to push their money in
whatever direction the wind of Jewish interests is blowing.
The collapse of Puerto Rico under Jewish debt and elite courting of Jewish financial
predators is certainly nothing new. Congo , Zambia , Liberia ,
Argentina , Peru ,
Panama , Ecuador ,
Vietnam , Poland , and
Ireland are just some of the countries that have slipped fatefully into the hands of the
Jews listed above, and these same people are now closely watching
Greece and
India . The methodology used to acquire such leverage is as simple as it is ruthless. On
its most basic level, "vulture capitalism" is really just a combination of the
continued intense relationship between Jews and usury and Jewish involvement in medieval
tax farming. On the older practice, Salo Baron writes in Economic History of the Jews
that Jewish speculators would pay a lump sum to the treasury before mercilessly turning on the
peasantry to obtain "considerable surpluses if need be, by ruthless methods." [1] S. Baron
(ed) Economic History of the Jews (New York, 1976), 46-7. The activities of the
Jewish vulture funds are essentially the same speculation in debt, except here the trade in
usury is carried out on a global scale with the feudal peasants of old now replaced with entire
nations. Wealthy Jews pool resources, purchase debts, add astronomical fees and interests, and
when the inevitable default occurs they engage in aggressive legal activity to seize assets,
bringing waves of jobs losses and home repossessions.
This type of predation is so pernicious and morally perverse that both the
Belgian and
UK governments have taken steps to ban these Jewish firms from using their court systems to
sue for distressed debt owed by poor nations. Tucker Carlson, commenting on Paul Singer's
predation and the ruin of the town of Sidney, Nebraska, has said:
It couldn't be uglier or more destructive. So why is it still allowed in the United
States? The short answer: Because people like Paul Singer have tremendous influence over our
political process. Singer himself was the second largest donor to the Republican Party in
2016. He's given millions to a super-PAC that supports Republican senators. You may never
have heard of Paul Singer -- which tells you a lot in itself -- but in Washington, he's
rock-star famous. And that is why he is almost certainly paying a lower effective tax rate
than your average fireman, just in case you were still wondering if our system is rigged. Oh
yeah, it is.
Aside from direct political donations, these Jewish financiers also escape scrutiny by
hiding behind a mask of simplistic anti-socialist rhetoric that is common in the American
Right, especially the older, Christian, and pro-Zionist demographic. Rod Dreher, in a
commentary on Carlson's
piece at the American Conservative , points out that Singer gave a speech in May
2019 attacking the "rising threat of socialism within the Democratic Party." Singer continued,
"They call it socialism, but it is more accurately described as left-wing statism lubricated by
showers of free stuff promised by politicians who believe that money comes from a printing
press rather than the productive efforts of businesspeople and workers." Dreher comments: "The
productive efforts of businesspeople and workers"? The gall of that man, after what he did to
the people of Sidney."
What Singer and the other Jewish vultures engage in is not productive, and isn't even any
recognisable form of work or business. It is greed-motivated parasitism carried out on a
perversely extravagant and highly nepotistic scale. In truth, it is Singer and his co-ethnics
who believe that money can be printed on the backs of productive workers, and who ultimately
believe they have a right to be "showered by free stuff promised by politicians." Singer places
himself in an infantile paradigm meant to entertain the goyim, that of Free Enterprise vs
Socialism, but, as Carlson points out, "this is not the free enterprise that we all learned
about." That's because it's Jewish enterprise -- exploitative, inorganic, and attached to
socio-political goals that have nothing to do with individual freedom and private property.
This might not be the free enterprise Carlson learned about, but it's clearly the free
enterprise Jews learn about -- as illustrated in their extraordinary
over-representation in all forms of financial exploitation and white collar crime. The
Talmud, whether actively studied or culturally absorbed, is their code of ethics and their
curriculum in regards to fraud, fraudulent bankruptcy, embezzlement, usury, and financial
exploitation. Vulture capitalism is Jewish capitalism.
Whom They Feed
Singer's duplicity is a perfect example of the way in which Jewish finance postures as
conservative while conserving nothing. Indeed, Jewish capitalism may be regarded as the root
cause of the rise of Conservative Inc., a form or shadow of right wing politics reduced solely
to fiscal concerns that are ultimately, in themselves, harmful to the interests of the majority
of those who stupidly support them. The spirit of Jewish capitalism, ultimately, can be
discerned not in insincere bleating about socialism and business, intended merely to entertain
semi-educated Zio-patriots, but in the manner in which the Jewish vulture funds disseminate the
proceeds of their parasitism. Real vultures are weak, so will gorge at a carcass and
regurgitate food to feed their young. So then, who sits in the nests of the vulture funds,
awaiting the regurgitated remains of troubled nations?
Boston-based Seth Klarman (net worth $1.5 billion), who like Paul Singer has
declared "free enterprise has been good for me," is a rapacious debt exploiter who was
integral to the financial collapse of Puerto Rico, where he hid much of activities behind a
series of shell companies. Investigative journalists eventually discovered that Klarman's
Baupost group was behind much of the aggressive legal action intended to squeeze the decimated
island for bond payments. It's clear that the Jews involved in these companies are very much
aware that what they are doing is wrong, and they are careful to avoid too much reputational
damage, whether to themselves individually or to their ethnic group. Puerto Rican journalists,
investigating the debt trail to Klarman, recall trying to follow one of the shell companies
(Decagon) to Baupost via a shell company lawyer (and yet another Jew) named Jeffrey Katz:
Returning to the Ropes & Gray thread, we identified several attorneys who had worked
with the Baupost Group, and one, Jeffrey Katz, who -- in addition to having worked directly
with Baupost -- seemed to describe a particularly close and longstanding relationship with a
firm fitting Baupost's profile on his experience page. I called
Katz and he picked up, to my surprise. I identified myself, as well as my affiliation with
the Public Accountability Initiative, and asked if he was the right person to talk to about
Decagon Holdings and Baupost. He paused, started to respond, and then evidently thought
better of it and said that he was actually in a meeting, and that I would need to call back
(apparently, this high-powered lawyer picks up calls from strange numbers when he is in
important meetings). As he was telling me to call back, I asked him again if he was the right
person to talk to about Decagon, and that I wouldn't call back if he wasn't, and he seemed to
get even more flustered. At that point he started talking too much, about how he was a lawyer
and has clients, how I must think I'm onto some kind of big scoop, and how there was a person
standing right in front of him -- literally, standing right in front of him -- while I rudely
insisted on keeping him on the line.
One of the reasons for such secrecy is the intensive Jewish philanthropy engaged in by
Klarman under his Klarman Family
Foundation . While Puerto Rican schools are being closed, and pensions and health
provisions slashed, Klarman is regurgitating the proceeds of massive debt speculation to his "
areas of
focus " which prominently includes " Supporting the global Jewish community
and Israel ." While plundering the treasuries of the crippled nations of the goyim, Klarman
and his co-ethnic associates have committed themselves to "improving the quality of life and
access to opportunities for all Israeli citizens so that they may benefit from the country's
prosperity." Among those in Klarman's nest, their beaks agape for Puerto Rican debt interest,
are the American Jewish Committee, Boston's Combined Jewish Philanthropies, the Holocaust
Memorial Museum, the Honeymoon Israel Foundation, Israel-America Academic Exchange, and the
Israel Project. Klarman, like Singer, has also been an enthusiastic proponent of liberalising
attitudes to homosexuality, donating $1 million to a Republican super PAC aimed at supporting
pro-gay marriage GOP candidates in 2014 (Singer donated $1.75 million). Klarman, who also
contributes to candidates
who support immigration reform, including a path to citizenship for undocumented immigrants,
has said "The right to gay marriage is the largest remaining civil rights issue of our time. I
work one-on-one with individual Republicans to try to get them to realize they are being
Neanderthals on this issue."
Steven Tananbaum's GoldenTree Asset Management has also fed well on Puerto Rico, owning $2.5
billion of the island's debt. The Centre for Economic and Policy Research has
commented :
Steven Tananbaum, GoldenTree's chief investment officer, told a business conference in
September (after Hurricane Irma, but before Hurricane Maria) that he continued to view Puerto
Rican bonds as an attractive investment. GoldenTree is spearheading a group of COFINA
bondholders that collectively holds about $3.3 billion in bonds. But with Puerto Rico facing
an unprecedented humanitarian crisis, and lacking enough funds to even begin to pay back its
massive debt load, these vulture funds are relying on their ability to convince politicians
and the courts to make them whole. The COFINA bondholder group has spent
$610,000 to lobby Congress over the last two years, while GoldenTree itself
made $64,000 in political contributions to federal candidates in the 2016 cycle. For
vulture funds like GoldenTree, the destruction of Puerto Rico is yet another opportunity for
exorbitant profits.
Whom does Tananbaum feed with these profits? A brief glance at the spending of the
Lisa and Steven Tananbaum Charitable Trust reveals a relatively short list of beneficiaries
including United Jewish Appeal Foundation, American Friends of Israel Museum, Jewish Community
Center, to be among the most generously funded, with sizeable donations also going to museums
specialising in the display of degenerate and demoralising art.
Following the collapse in Irish asset values in 2008, Jewish vulture funds including OakTree
Capital swooped on mortgagee debt to seize tens of thousands of Irish homes, shopping malls,
and utilities (Steve Feinberg's Cerberus took control of public waste disposal). In 2011,
Ireland emerged as a hotspot for distressed property assets, after its bad banks began selling
loans that had once been held by struggling financial institutions. These loans were quickly
purchased at knockdown prices by Jewish fund managers, who then aggressively sought the
eviction of residents in order to sell them for a fast profit. Michael Byrne, a researcher at
the School of Social Policy at University College Dublin, Ireland's largest university,
comments : "The
aggressive strategies used by vulture funds lead to human tragedies." One homeowner, Anna Flynn
recalls how her mortgage fell into the hands of Mars Capital, an affiliate of Oaktree Capital,
owned and operated by the Los Angeles-based Jews Howard Marks and Bruce Karsh. They were "very,
very difficult to deal with," said Flynn, a mother of four. "All [Mars] wanted was for me to
leave the house; they didn't want a solution [to ensure I could retain my home]."
When Bruce Karsh isn't making Irish people homeless, whom does he feed with his profits? A
brief glance at the spending of the
Karsh Family Foundation reveals millions of dollars of donations to the Jewish Federation,
Jewish Community Center, and the United Jewish Fund.
Paul Singer, his son Gordin, and their Elliot Associates colleagues Zion Shohet, Jesse Cohn,
Stephen Taub, Elliot Greenberg and Richard Zabel, have a foothold in almost every country, and
have a stake in every company you're likely to be familiar with, from book stores to dollar
stores. With the profits of exploitation, they
fund campaigns for homosexuality and mass migration , boost Zionist politics,
invest millions in security for Jews , and promote wars for Israel. Singer is a Republican,
and is on the Board of the Republican Jewish Coalition. He is a former board member of the
Jewish Institute for National Security Affairs, has funded neoconservative research groups like
the Middle East Media Research Institute and the Center for Security Policy, and is among the
largest funders of the neoconservative Foundation for Defense of Democracies. He was also
connected to the pro-Iraq War advocacy group Freedom's Watch. Another key Singer project was
the Foreign Policy Initiative (FPI), a Washington D.C.-based advocacy group that was founded in
2009 by several high-profile Jewish neoconservative figures to promote militaristic U.S.
policies in the Middle East on behalf of Israel and which received its seed money from
Singer.
Although Singer was initially anti-Trump, and although Trump once
attacked Singer for his pro-immigration politics ("Paul Singer represents amnesty and he
represents illegal immigration pouring into the country"), Trump is now essentially funded by
three Jews -- Singer, Bernard Marcus, and Sheldon Adelson, together accounting for over $250
million in pro-Trump political money . In return, they want war with Iran. Employees of
Elliott Management were one of the main sources of funding for the 2014 candidacy of the
Senate's most outspoken Iran hawk, Sen. Tom Cotton (R-AR), who urged Trump to conduct a
"retaliatory strike" against Iran for purportedly attacking two commercial tankers. These
exploitative Jewish financiers have been clear that they expect a war with Iran, and they are
lobbying hard and preparing to call in their pound of flesh. As one political commentator put
it, "These donors have made their policy preferences on Iran plainly known. They surely expect
a return on their investment in Trump's GOP."
The same pattern is witnessed again and again, illustrating the stark reality that the
prosperity and influence of Zionist globalism rests to an overwhelming degree on the predations
of the most successful and ruthless Jewish financial parasites. This is not conjecture,
exaggeration, or hyperbole. This is simply a matter of striking through the mask, looking at
the heads of the world's most predatory financial funds, and following the direction of
regurgitated profits.
Make no mistake, these cabals are everywhere and growing. They could be ignored when they
preyed on distant small nations, but their intention was always to come for you too. They are
now on your doorstep. The working people of Sidney, Nebraska probably had no idea what a
vulture fund was until their factories closed and their homes were taken. These funds will move
onto the next town. And the next. And another after that. They won't be stopped through blunt
support of "free enterprise," and they won't be stopped by simply calling them "vulture
capitalists."
Strike through the mask!
Notes
[1] S.
Baron (ed) Economic History of the Jews (New York, 1976), 46-7.
To what extent is Jewish success a product of Jewish intellect and industry versus being a
result of a willingness to use low, dirty, honorless and anti-social tactics which, while
maybe not in violation of the word of the law, certainly violate its spirit?
An application of "chutzpah" to business, if you will -- the gall to break social
conventions to get what you want, while making other people feel uncomfortable; to wheedle
your way in at the joints of social norms and conventions -- not illegal, but selfish and
rude.
Krav Maga applies the same concept to the martial arts: You're taught to go after the
things that every other martial art forbids you to target: the eyes, the testicles, etc. In
other sports this is considered "low" and "cheap." In Krav Maga, as perhaps a metaphor for
Jewish behavior in general, nothing is too low because it's all about winning .
There's a rather good article on the New Yorker discussing the Sacklers and the
Oxycontin epidemic. It focusses on the dichotomy between the family's ruthless promotion of
the drug and their lavish philanthropy. 'Leave the world a better place for your presence'
and similar pieties and Oxycontin.
The article lightly touches on the extent of their giving to Hebrew University of
Jerusalem -- but in general, treads lightly when it comes to their Judaism.
understandably. The New Yorker isn't exactly alt-right country, after all. But can
Joyce or anyone else provide a more exact breakdown on the Sacklers' giving? Are they genuine
philanthropists, or is it mostly for the Cause?
@anon'To what extent is Jewish success a product of Jewish intellect and industry versus being
a result of a willingness to use low, dirty, honorless and anti-social tactics which, while
maybe not in violation of the word of the law, certainly violate its spirit? '
It's important not to get carried away with this. Figures such as Andrew Carnegie, while
impeccably gentile, were hardly paragons of scrupulous ethics and disinterested virtue.
I won't defend high finance because I don't like it either. But this is a retarded and highly
uninformed attack on it.
1. The article bounces back and forth between two completely different fields: private
equity and distressed debt funds. The latter is completely defensible. A lot of bondholders,
probably the majority, cannot hold distressed or defaulted debt. Insurance companies often
can't by law. Bond mutual funds set out in their prospectuses they don't invest in anything
rated lower than A, AA, or whatever. Even those allowed to hold distressed debt don't want
the extra costs involved with doing so, such as carefully following bankruptcy proceedings
and dealing with delayed and irregular payments.
As a result, it is natural that normal investors sell off such debt at a discount to funds
that specialize in it.
2. Joyce defends large borrowers that default on their debt. Maybe the laws protecting
bankrupts and insolvents should be stronger. But you do that, and lenders become more
conservative, investment declines, and worthy businesses can't get investments. I think
myself the laws in the US are too favorable to lenders, but there's definitely a tradeoff,
and the question is where the happy middle ground is. In Florida a creditor can't force the
sale of a primary residence, even if it is worth $20 million. That's going too far in the
other direction.
3. " either blankly nondescript or evoking vague inklings of Anglo-Saxon or rural/pastoral
origins "
More retardation. Cerberus is a greek dog monster guarding the gates of hell. Aurelius is
from the Latin word for gold. "Hemisphere" isn't an Anglosaxon word nor does in invoke rural
origins.
Besides being retardedly wrong, the broader point is likewise retarded: when
English-speaking Jews name their businesses they shouldn't use English words. Naming a
company "Oaktree" should be limited to those of purely English blood! Jews must name their
companies "Cosmopolitan Capital" or RosenMoses Chutzpah Advisors."
4. The final and most general point: it's trivially easy to attack particular excesses of
capitalism. Fixing the excesses without creating bigger problem is the hard part. Two ideas I
favor are usury laws and Tobin taxes.
Jewishness aside, maximizing shareholder is the holy grail of all capitalist enterprises. The
capitalist rush to abandon the American working class when tariff barriers evaporated is just
another case of vulturism. Tax corporations based on the domestic content of their products
and ban usury and vulturism will evaporate.
Someone with the username kikz posted a link to this article in the occidental observer. I
read it and thought it was a great article. I'm glad it's featured here.
The article goes straight for the jugular and pulls no punches. It hits hard. I like
that:
1. It shines a light on the some of the scummiest of the scummiest Wall Street
players.
2. It names names. From the actual vulture funds to the rollcall of Jewish actors running
each. It's astounding how ethnically uniform it is.
3. It proves Trump's ties with the most successful Vulture kingpin, Singer.
4. It shows how money flows from the fund owners to Zionist and Jewish causes.
This thing reads like a court indictment. It puts real world examples to many of the
theories that are represents on this site. Excellent article.
Elliott Management is perhaps most notorious for its 15-year battle with the government
of Argentina, whose bonds were owned by the hedge fund. When Argentine president Cristina
Kirchner attempted to restructure the debt, Elliott -- unlike most of the bonds' owners --
refused to accept a large loss on its investment. It successfully sued in US courts, and in
pursuit of Argentine assets, convinced a court in Ghana to detain an Argentine naval
training vessel, then docked outside Accra with a crew of 22o. After a change of its
government, Argentina eventually settled and Singer's fund received $2.4 billion, almost
four times its initial investment. Kirchner, meanwhile, has been indicted for
corruption.
@Lot
You give partial information which seem misleading and use arguments which are also weak and
not enlightening.
1- Even if its natural that unsafe bonds are sold, this doesn't justify the practices and
methods of those vulture fonds which buy those fonds which are socially damaging. I'm not
certain of the details because it's an old case and people should seek more information. Very
broadly, in the case of Argentina most funds accepted to make an agreement with the country
and reduce their demands. Investors have to accept risks and losses. Paul Singer bought some
financial papers for nothing at that time and forced Argentina to pay the whole price. For
years Argentina refused to pay, but with the help of New York courts and the new Argentinian
president they were forced to pay Singer. This was not conservative capitalism but
imperialism. You can only act like Singer if you have the backing of courts, of a government
which you control and of an army like the US army. A fast internet search for titles of
articles: "Hedge fund billionaire Paul Singer's ruthless strategies include bullying CEOs,
suing governments and seizing their navy's ships". "How one hedge fund made $2 billion from
Argentina's economic colapse".
Andrew Sayer, professor in an English university, says in his book "Why we can't afford
the rich" that finances as they are practiced now may cost more than bring any value to a
society. It's a problem if some sectors of finances make outsized profits and use methods
which are more than questionable.
2- You say that if borrowers become more protected "lenders become more conservative,
investment declines, and worthy businesses can't get investments." I doubt this is true. In
the first place, risk investments by vulture fonds probably don't create any social value.
The original lenders who sold their bonds to such vulture fonds have anyway big or near total
losses in some cases and in spite of that they keep doing business. Why should we support
vulture fonds, what for? What positive function they play in society? In Germany, capitalism
was much more social in old days before a neoliberal wave forced Germany to change Rhine
capitalism. Local banks lended money to local business which they knew and which they had an
interest that they prosper. Larger banks lended money to big firms. Speculation like in
neoliberal capitalism wasn't needed.
3- The point which you didn't grasp is that there is a component of those business which
isn't publicly clear, the fact that they funcion along ethnic lines.
4- It would be easy to fix excesses of capitalism. The problem is that the people who
profit the most from the system also have the power to prevent any change.
@Robjil
This is an example of what I was saying. Less Euro whites in the world is not going to be a
good world for Big Js. Non-Euros believe in freedom of speech.
Jewish Bigwigs can't get control of businesses in East Asia. They have been trying. Paul
Singer tried and failed. In Argentina he got lots of "success". Why? Lots of descendants of
Europeans there went along with "decisions" laid out by New York Jews.
Little Paulie tried to get control of Samsung. No such luck for him in Korea. In Korea
there are many family monopolies, chaebols. A Korean chaebol stopped him. Jewish Daniel Loeb
tried to get a board seat on Sony. He was rebuffed.
I was moved to reflect on the universality of this theme recently when surveying media
coverage on Korean and Argentinian responses to the activities of Paul Singer and his
co-ethnic shareholders at Elliott Associates, an arm of Singer's Elliott Management hedge
fund. The Korean story has its origins in the efforts of Samsung's holding company, Cheil
Industries, to buy Samsung C&T, the engineering and construction arm of the wider
Samsung family of businesses. The move can be seen as part of an effort to reinforce
control of the conglomerate by the founding Lee family and its heir apparent, Lee Jae-yong.
Trouble emerged when Singer's company, which holds a 7.12% stake in Samsung C&T and is
itself attempting to expand its influence and control over Far East tech companies,
objected to the move. The story is fairly typical of Jewish difficulties in penetrating
business cultures in the Far East, where impenetrable family monopolies, known in Korea as
chaebols, are common. This new story reminded me very strongly of last year's efforts by
Jewish financier Daniel Loeb to obtain a board seat at Sony. Loeb was repeatedly rebuffed
by COO Kazuo Hirai, eventually selling his stake in Sony Corp. in frustration.
Here is how the Koreans fought off Paul Singer.
The predominantly Jewish-owned and operated Elliott Associates has a wealth of
self-interest in preventing the Lee family from consolidating its control over the Samsung
conglomerate. As racial outsiders, however, Singer's firm were forced into several tactical
measures in their 52-day attempt to thwart the merger. First came lawsuits. When those
failed, Singer and his associates then postured themselves as defending Korean interests,
starting a Korean-language website and arguing that their position was really just in aid
of helping domestic Korean shareholders. This variation on the familiar theme of Jewish
crypsis was quite unsuccessful. The Lee family went on the offensive immediately and,
unlike many Westerners, were not shy in drawing attention to the Jewish nature of Singer's
interference and the sordid and intensely parasitic nature of his fund's other
ventures.
Cartoons were drawn of Singer being a vulture.
Other cartoons appearing at the same time represented Elliott, literally, as humanoid
vultures, with captions referring to the well-known history of the fund. In the above
cartoon, the vulture offers assistance to a needy and destitute figure, but conceals an axe
with which to later bludgeon the unsuspecting pauper.
ADL got all worked about this. The Koreans did not care. It is reality. Freedom of speech
works on these vultures. The west should try some real freedom of speech.
After the cartoons appeared, Singer and other influential Jews, including Abraham
Foxman, cried anti-Semitism. This was despite the fact the cartoons contain no reference
whatsoever to Judaism – unless of course one defines savage economic predation as a
Jewish trait. Samsung denied the cartoons were anti-Semitic and took them off the website,
but the uproar over the cartoons only seemed to spur on even more discussion about Jewish
influence in South Korea than was previously the case. In a piece published a fortnight
ago, Media Pen columnist Kim Ji-ho claimed "Jewish money has long been known to be ruthless
and merciless." Last week, the former South Korean ambassador to Morocco, Park Jae-seon,
expressed his concern about the influence of Jews in finance when he said, "The scary thing
about Jews is they are grabbing the currency markets and financial investment companies.
Their network is tight-knit beyond one's imagination." The next day, cable news channel YTN
aired similar comments by local journalist Park Seong-ho, who stated on air that "it is a
fact that Jews use financial networks and have influence wherever they are born." It goes
without saying that comments like these are unambiguously similar to complaints about
Jewish economic practices in Europe over the course of centuries. The only common
denominator between the context of fourteenth-century France and the context of
twenty-first-century South Korea is, you guessed it, Jewish economic practices.
The Koreans won. Paulie lost. Good win for humanity. The Argentines were not so lucky.
They don't have freedom speech like the Koreans and East Asians have.
In the end, the Lee strategy, based on drawing attention to the alien and exploitative
nature of Elliott Associates, was overwhelmingly effective. Before a crucial shareholder
vote on the Lee's planned merger, Samsung Securities CEO Yoon Yong-am said: "We should
score a victory by a big margin in the first battle, in order to take the upper hand in a
looming war against Elliott, and keep other speculative hedge funds from taking short-term
gains in the domestic market." When the vote finally took place a few days ago, a
conclusive 69.5% of Samsung shareholders voted in favor of the Lee proposal, leaving
Elliott licking its wounds and complaining about the "patriotic marketing" of those behind
the merger.
What our Jewish friends have done to Argentina, through maneuvering the elections, killing
dissidents, and marking territory, is a cautionary tale to anybody woke enough to see with
their own eyes.
Zion had the opportunity to go to Uganda and Ugandans were willing, but NO Zion had to
have Palestine, and they got it through war, deception, and murder. It was funded by usury,
as stolen purchasing power from the Goyim.
The fake country of Israel, is not the biblical Israel, and it came into being by
maneuverings of satanic men determined to get their way no matter what, and is supported by
continuous deception. Even today's Hebrew is resurrected from a dead language, and is fake.
Many fake Jews (who have no blood lineage to Abraham), a fake country, and fake language.
These fakers, usurers, and thieves do indeed have their eyes set on Patagonia, what they call
the practical country.
@Anon
"If debts can simply be repudiated at will, capitalism cannot function."
Is this children's capitalist theory class time? throwing around some simple slogans for a
susceptible congregation of future believers?
Should be quite obvious that people, groups of people, if not whole nations , can be
forced and or seduced into depths by means of certain practices. There are a thousand ways of
such trickery and thievery, these are not in the theory books though. In these books things
all match and work out wonderfully rationally
Then capitalism cannot function? Unfortunately it has become already dysfunctional, if not
a big rotten cancer.
Lobelog ran some articles in Singer, Argentina, Iran Israel and the attorney from Argentina
who died mysteriously . Singer is a loan shark. Argentinian paid dearly .
Google search –
NYT's Argentina Op-Ed Fails to Disclose Authors – LobeLog
https://lobelog.com/tag/paul-singer/
Paul Singer NYT's Argentina Op-Ed Fails to Disclose Authors' Financial Conflict of Interest
by Eli Clifton On Tuesday, Mark Dubowitz and Toby Dershowitz, two executives at the hawkish
Foundation for Defense of Democracies (FDD), took
The Right-Wing Americans Who Made a Doc About Argentina
https://lobelog.com/the-right-wing-americans-who-made-a-doc-about-argentina/
Oct 7, 2015 One might wonder why a movie about Argentina, in Spanish and . of Nisman's and
thought highly of the prosecutor's work, told LobeLog, FDD, for its part, has been an
outspoken critic of Kirchner but has From 2008 to 2011, Paul Singer was the group's
second-largest donor, contributing $3.6 million.
NYT Failed to Note Op-Ed Authors' Funder Has $2 Billion
What our Jewish friends have done to Argentina, through maneuvering the elections,
killing dissidents, and marking territory, is a cautionary tale to anybody woke enough to
see with their own eyes.
http://www.unz.com/mhudson/the-saker-interviews-michael-hudson/
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Introduction: I recently spoke to a
relative of mine who, due to her constant and voluntary exposure to the legacy AngloZionist media, sincerely
believed that the three Baltic states and Poland had undergone some kind of wonderful and quasi-miraculous
economic and cultural renaissance thanks to their resolute break with the putatively horrible Soviet past
and their total submission to the Empire since. Listening to her, I figured that this kind of delusion was
probably common amongst those who still pay attention and even believe the official propaganda. So I asked
Michael Hudson, whom I consider to be the best US economists and who studied the Baltics in great detail, to
reply to a few very basic questions, which he very kindly did in spite of being very pressed on time. Once
again, I want to sincerely thank him for his kind time, support and expertise.
* * *
The Saker:
The US
propaganda often claims that the three Baltic states are a true success, just like Poland is also supposed
to be. Does this notion have a factual basis? Initially it did appear that these states were experiencing
growth, but was that not mostly/entirely due to EU/IMF/US subsidies? Looking specifically at the three
Baltic states, and especially Latvia, these were the "showcase" Soviet republics, with a high standard of
living (at least compared to the other Soviet republics) and a lot of high-tech industries (including
defense contracts). Could you please outline for us what truly happened to these economies following
independence? How did they "reform" their economies going from an ex-Soviet one to the modern "liberal" one?
Michael Hudson:
This is
a trick question, because it all depends on what you mean by "success."
The post-Soviet neoliberalism has been a
great success for kleptocrats at the top. They gave themselves the public domain, from key industries to
prime real estate. But the Balts largely let their Soviet industries collapse, making no effort to salvage
or reorganize them.
Much of the problem, of course, was that all the linkages to Soviet-era
industry were torn apart as the Soviet Union was disbanded. With their supplier and final markets closed
down from Russia to Central Asia, the Baltic economies had to start afresh – with a very right-wing tax
policy and no government help whatsoever, as the government itself had become privatized in the hands of
former officials and grabitizers.
Lithuania was marginally better in having some industrial policy. EU and
NATO accession in 2004, along with easy credit, kicked off property bubbles in the Baltics, largely inflated
by Swedish banks that made a bonanza off these countries that lacked their own banks or public credit
creation. The resulting 2008 crashes were the largest in the world as a percent of GDP, with Latvia
suffering the world's biggest contraction.
The neoliberal western advisors who took
control of these economies – as if this was the only alternative to Soviet bureaucracy – imposed crushing
austerity programs to restore macroeconomic "stability" meaning security of their land and infrastructure
grabs. This was applauded by Europe's bankers, who thought the Balts had discovered a workable recipe
allowing austerity governments to retain power in a seeming democracy. These policies would have collapsed
governments anywhere else, but the ability to emigrate, plus ethnic divisions against Russian speakers,
allowed these governments to survive.
It's a historically specific situation,
but Europe's bankers promote it as a generalized model. George Soros's INET and his associated front
institutions have been leaders in subsidizing this financialization-cum-grabitization. The result has been a
massive exodus of prime working age people from Lithuania and Latvia. (Estonians simply commute to Finland.)
Meanwhile, their economies are buoyed by foreign bank lending, which sends profits back to home countries
and can be reversed at any time.
Politically, the neoliberal revolution also has been a success for U.S.
Cold Warriors, who sent over native Balts from Georgetown and other universities to impose "free market"
doctrine – that is, a market "free" of domestic regulation against theft of the public domain, against
monopolies, against land taxes and other income taxes. The Baltic states, like most of the rest of the
former Soviet Union, became the Wild East.
What was left to the Baltic countries
was land and real estate. Their forests are being cut down to sell wood abroad. I describe all this in my
book
Killing the Host
.
The Saker:
After
independence, the Baltic states had tried to cut as many ties with Russia as possible. This included
building (rather silly looking) fences, to forcing the Russians to develop their ports on the Baltic, to
shutting down large (or selling to foreign interests which then shut them down) and profitable factories
(including a large nuclear plant I believe), etc. What has been the impact of this policy of "economic
de-Sovietization" on the local economies?
Michael Hudson:
Dissolution of the Soviet Union meant
that Baltic countries lost their traditional markets, and had to shift their focus to Western Europe and, to
some extent, Asia.
Latvia and Estonia had been assigned computer and information technology,
and they have found this to be much in demand. When I was in Japan, for instance, CEOs told me that they
were looking to Latvia above all to outsource computer work.
Banking also was a surviving sector.
Gregory Lautchansky, former vice-rector at the University of Riga had been a major player already in the
1980s for moving out Russian oil and KGB money. (His company, Nordex, was sold to Mark Rich.) Many banks
continued to shepherd Russian flight capital via offshore banking centers into the United States, Britain
and other countries. Cyprus of course was another big player in this.
The Saker:
Russians are still considered "non-citizens"
in the Baltic republics; what has been the economic impact of this policy, if any, of anti-Russian
discrimination in the Baltic states?
ORDER IT NOW
Michael Hudson:
Russian-speakers, who do not acquire citizenship (which requires passing local language and history tests),
are blocked from political office and administrative work. While most Russian speakers below retirement age
have now acquired that citizenship, the means by which citizenship must be acquired has caused divisions.
Early on in independence, many Russians
were blocked from government, and they went into business, which was avoided by many native Balts during the
Soviet era because it was not as remunerative as going into government and profiting from corruption. For
instance, real estate was a burden to administer. Russian-speakers, especially Jewish ones, have wisely
focused on real estate.
The largest political party is Harmony
Center, whose members and leadership are mainly Russian-speaking. But the various neoliberal and nationalist
parties have jointed to block its ability to influence law in Parliament.
Since Russian speakers are only able to
"vote with their feet," many have joined in the vast outflow of emigration, either back to Russia or to
other EU countries. Moreover, the poor quality of social benefits has led to few children being born.
The Saker:
I often hear that a huge number of locals
(including non-Russians) have emigrated from the Baltic states. What has caused this and what has been the
impact of this emigration for the Baltic states?
Michael Hudson:
The Baltic states, especially Latvia,
have lost about 30 percent of their population since the 1990s, especially those of working age. In Latvia,
about 10 percent of the loss were Russians who exited shortly after independence. The other 20 percent have
subsequently emigrated.
The European Commission forecasts that Latvia's working-age population
will decline by 1.6% annually for the next 20 years, while the birth rate remains as stagnant as it was in
the late 1980s. The retired population (over age 65) will rise to half a million people by 2030, more than a
quarter of today's population, and perhaps about a third of what remains. This is not a domestic market that
will attract foreign or local investment.
And in any case, the European Union has
viewed the post-Soviet economies simply as markets for their own industrial and agricultural exports, not as
economies to be built up by public subsidy as the European countries themselves, the U.S. and Chinee
economies have done. The European motto is, "Give a man a fish, and he will be fed all day with your surplus
fish and consumer goods – but give him a fishing rod and we will lose a customer."
Readers who are interested might want to
look at the following books and articles. I think the leading work has been done by Jeffrey Sommers and
Charles Woolfson.
The Contradictions of Austerity: The Socio-Economic Costs of the Baltic Model
(London:
Routledge Press, 2014). Editors, J. Sommers & C. Woolfson. Foreword, J. Galbraith. ISBN:
978-0-415-82003-5.
Jeffrey Sommers, "No People, Big Problem': Democracy And Its Discontents In Latvia's National
Elections,"
Social Europe,
October 17, 2018.
Jeffrey Sommers, "Decline of the Demos: Latvia, the Face of New Europe and Austerity's Return," in F.
Jaitner, T. Olteanu and T. Spöri, eds.,
Crises in the Post-Soviet Space: From the dissolution of the
Soviet Union to the conflict in Ukraine
(Routledge Press, 2018) pp. 195-209. ISBN 9780815377245.
Jeffrey Sommers,
"
Austerity as a global prescription and lessons from the neoliberal
Baltic experiment."
Economic & Labour Relations Review.
Keynote article, 25:3 (fall 2014) pp.
1-20. DOI 10.1177/1035304614544091. Co-authored with C. Woolfson and A. Juskaa.
The Saker:
Finally,
what do you believe is the most likely future for these states? Will the succeed in becoming a "tiny
anti-Russia" on Russia's doorstep? The Russians appear to have been very successful in their
import-substitution program, at least when trying to replace the Baltic states: does that mean that the
economic ties between Russia and these states is now gone forever? Is it now too late, or are there still
measures these countries could take to reverse the current trends?
Michael Hudson:
Trump's
trade sanctions against Russia hurt the Baltic countries especially. One of their strong sectors was
agriculture. Lithuania, for instance, was known for its cheese, even in Latvia. The sanctions led Russian
dairy farming to develop their own cheese-making, and agriculture has become one of Russia's strongest
performing sectors.
This is a market that looks like it will
be permanently lost to the Baltic states. In effect, Trump is helping Russia follow precisely the policy
that made American agriculture rich: agricultural isolation has forced domestic replacement for hitherto
foreign food. I expect that this will lead to consumer goods and other products as well.
I am in Tallinn, Estonia right now. Just how good an economy is performing is often hard to determine by
talking to people, because like economists, many people have different perceptions. I was just talking to a
Russian-Estonian who was telling me how much better Lithuanians and Latvians are then Estonians at doing
things and how much cheaper things are there. It is true that things are much cheaper in the other Baltic
countries because Estonia (a tiny country of just over 1 million people) has taken off. Since the 2008
econmic collapse housing prices have shot up and in Tallinn there is building going on all over the city.
But, my acquaintance is wrong about other things. Estonians do things very well and Tallinn is a very nice
city, with beautiful cafes, clean and well kept streets and crime is very low. It is a very good city,
except it is now very expensive, especially considering how much people make here. The weather is not nice,
except for in the summer and there are friendly Estonians but they don't have a reputation for being
particularly friendly, even among themselves. I have not been back to Latvia yet, but when I was in Riga
years ago, it was a gorgeous city, bigger than Tallinn too. I think they do things very well there too. The
Russians I speak to here are often friendly and based on what I have been told, relations between Russians
and Estonians are much better than when I was here in the early 2000's.
No offense is intended to
Russians, but the Baltic countries had large German populations that played a key role in the development of
the cultures and peoples of these countries. There were also many Jews here prior to WW II. By the time WW
II had begun the German populations were much smaller than they had been and at the end of the war the
Jewish populations were much smaller. Jews were targeted in Latvia and Lithuania and many Latvians,
Lithuanians and Estonians were shipped off to far off places in the USSR during the war. I believe the Jews
were largely pro communist and welcomed the Soviet takeover of these countries in 1940, while the Latvian
and Estonian peoples were pro German, thus explaining the hard feelings between Balts and Jews.. They wanted
independence and formed legions to fight alongside the German army during WW II.
These countries were very advanced before WW II, having engineering industries and the Russian Empire's
first auto company was formed in Riga before WW I. While engineering may have been restarted after WW II,
these countries populations were decimated and they never returned to their former heights. Perhaps they
still can.
I'm assuming that these 3 East European countries are being bombarded with the same propaganda as the Ukies
are, so Russian speakers and those intelligent enough to see the game being played will be belittled and
isolated. But the Russian folks living in Russia have a birds eye view of what is going on in the west and
their puppet countries. Russia TV and debate programs, just have to show the delinquencies that are daily
happenings in the States, and Europe, in order to make the Ru people say – No Thanks to that way of life. As
far as the new Russian cheeses that are now in the markets -lol – they make a lightly smoked gouda that is
really good and is about 120-140 roubles a kilo. And, they are making more cheddar that is a white medium
taste as well. No scarcity of good natural food in Russia and No POlice state. Spacibo Unz Rev.
The trade volume between Russia and the Baltic states has actually risen, despite the sanctions. The Baltics
send food products and booze to Russia (and another 150 countries, food exports to Russia actually grew in
2016-2018). As well as chemical products and pharmaceuticals. Meldonium, btw, is made in Latvia and is still
being sent to Russia (as well as 20 other countries), not for athletes, but for regular folks. Work is being
carried out on a new generation Meldonium pill (the biggest market will be Russia).
Growth in the Baltic states has been 3-4% in the last few years. GDP per capita, as well as HDI, is
higher than in Russia. Foreign investment, including from Russia, has been growing (Russia was the second
largest investor in Latvia in 2018). Savings rates are growing, too. After a relative quiet period after
2010, the number of Russian (and other tourists) has grown again.
Estonia's population stopped shrinking in 2016 and is now growing in fact. They've seen immigration from
Finland, Ukraine, Belarus and Russia, as well as returning Estonians.
Emigration is a problem, of course, but this is partly because the Baltic states are the only former USSR
republics whose citizens were even given work permits in the West, imagine what would happen if these
permits were given to Russians from the regions.
Neo-liberal policies are of course bad and certain types of investment should be controlled, but to say
that there are no social services in the Baltic states is complete nonsense. Due to generous parental
payments, birthrates have risen significantly since the 1990s – in fact, birthrates in the Baltics are now
slightly higher than the EU average. Life expectancy is also growing. Latvia covers IVF treatments in full.
There are free school lunches.
Yes, it is true that some of the Soviet era factories should've been salvaged but the problem was they
were not competitive globally at that time (and there was no capital to remodel them). The Soviet market was
a closed one. However, some businesses were salvaged. There is local manufacturing (electronics,
pharmaceuticals, etc).
Not everything is ideal, but it is also not the kind of gloom and doom as you paint.
Saker says:
"Initially it did appear that these states were experiencing growth, but was that not
mostly/entirely due to EU/IMF/US subsidies?"
"Foreign Aid Makes Corrupt Countries More Corrupt":
"Any time a government hands out money, not just foreign aid, it breeds corruption And there are few
better examples than Ukraine – just don't tell the House impeachment hearings. Counting on foreign aid to
reduce corruption is like expecting whiskey to cure alcoholism .If U.S. aid was effective, Ukraine would
have become a rule of law paradise long ago . The surest way to reduce foreign corruption is to end
foreign aid."
@onebornfree
The EU gives every year about 2,500 million euros to the 3 Baltic countries ( 6 million people the three of
them ) , and 9000 million euros to Poland ( 38 million people ) , plus more billions to other eastern
members .
Older members of the EU , spetially the UK which is going out , Greece witch was tortured ( again )
economically by Germany , and south Europe in general are not very happy about admitting so many ex-soviets
countries en the EU and subsidizing them .
Recovery and self-sufficiency since Yeltsin show the brilliance of the Russian people
It's not so much brilliance as sheer necessity to survive under sanctions. But some results were better
than anyone expected. Say, food before sanctions used to be so-so in the provinces and downright bad in
Moscow because of abundance of imported crap. Now the food is exclusively domestic, fresh and tasty. Russia
never had traditions of making fancy cheeses. Now, to bypass sanctions, quite a few Italian and French
cheese-makers started production in Russia, so in the last 2-3 years domestically made excellent fancy
cheeses appeared in supermarkets. Arguably, Russian agriculture benefited by sanctions more than any other
sector, but there are success stories virtually in every industry. Sanctions and Ukrainian stupidity served
as a timely wake up call for Russian elites, who earlier wanted to sell oil and natural gas and buy
everything else. Replacing imports after the sanctions were imposed had a significant cost in the short run,
but in the long run it made Russia much stronger, economically and militarily. Speak of unintended
consequences.
My mom is from Lithuania and I've been there several times. We have second cousins our age.
Her father was
a surveyor for the Republic in the 20s and 30s, charged with breaking up the manors and estates and the
state distributing the land to the peasantry. It was near-feudalism. There was very little
industrialization; that which existed were in a few urban centers. One interesting comment from her was that
the "Jews were communists". From what I've read they were the urban working class, but perhaps part of the
socialist/Jewish Bund?
There is no doubt that the Soviet period unleashed considerable industrialization and modernization.
Lithuania had some of the best infrastructure in the USSR. Its traditional culture was really celebrated.
When I first visited, not long after the fall of the USSR, there were enormous, vacant industrial plants.
The collective farms were in the process of being sold off the western European agribusiness firms. One
relative through marriage was from the Ukraine, with a PhD in Physics and had been employed in the military
industries -- she was cleaning houses thereafter.
Any usable industrial enterprises were quickly sold off. The utilities are all foreign owned. Part of EU
mandates are "open" electricity "markets", which resulting in DC interconnections costing hundreds of
millions with the west to import very high priced electricity. The EU has paid for "Via Baltica", a highway
running from Poland to Estonia; it is choked with trucks carrying imports and there are huge distribution
and fulfillment centers along the highway. Such progress, huh?
There had been good public transport in the earlier years of independence, but that has been replaced
with personal automobiles -- usually western European used cars that pollute a lot. Trakai is a commuter town
to Vilnius with a medieval castle (restored in Soviet times). First time I went it was very pleasant. Second
time in 2018 the place was choked with cars and not very nice at all.
The impact of emigration cannot be over-stated. College educated young people leave by the hundreds of
thousands. Those that remain are paid very low wages (e.g., 1000 euros for a veterinarian or dentist), but
pay west European prices for many essentials. Housing is cheaper than the west.
Last time in Kazlu Ruda there were huge NATO exercises in progress and even bigger ones planned for 2020.
German units were billeted at an airbase nearby, rumored to have been a CIA black site. How fitting, as the
Germans with the Lithuanian Riflemens Union exterminated a quarter of a million Jews in a matter of months
(see Jager Report on Wikipedia). There is a Red Army graveyard in the town that has the remains of perhaps
350 soldiers killed in the area driving out the Nazis. I was frankly surprised it was still there.
Lithuania hasn't been independent since the days of the Pagans and Vytautas. It surely isn't independent
today.
Anecdotal -- yes. But based on personal observation.
@wendy
davis that takes them out. However, for the oligarchs and right wing politicians of
those countries, they pay off. Lots of income from corruption, privatization, etc.
they backfire, indeed. but just now in the global IMF austerity resets, the citizenries
are raising such a ruckus against them that some oligarchical leaders are having to rescind
the 'austeries' put on them. time will tell how it plays out even for ecuador, but for now
the indigenous seem to be winning. wish i had a link at hand.
but this is the brilliant bruce cockburn's ode to the IMF ; ):
The IMF loan seems designed to get Macri past the election. It has been used to support
capital flight: to support the peso, the Central Bank sells dollars to "importers" that then
stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking the
other way. It has been granted unprecedented authority to oversee and overrule the Central Bank,
so its failure to act is really suspicious, and reeks of political pressure to crush the left in
Latin America.
Notable quotes:
"... The government also wasted more than $16 billion in unsuccessful attempts to keep the peso from falling, and greatly increased the more problematic foreign component of the public debt. The result has been near-constant recession and high inflation, enormous interest rates, peso depreciation, financial instability, and the huge run-up in public debt. The debt increase is particularly noteworthy because Mr. Macri inherited a low level of public debt. ..."
"... Ironically, the IMF is well-known in Argentina for promoting similarly unworkable policies during the deep depression of 1998 to 2002 -- comparable to America's Great Depression of the 1930s. Yes, history is repeating itself, although in this case the IMF has a stronger partnership with the government than it had 20 years ago. ..."
"... Millions of Argentines remember the last depression and the role the IMF played. Many also remember the rapid improvement in people's lives over the ensuing decade. This collective memory and consciousness may now determine the outcome of this recurring debate over the economy, and with it, the October election, and possibly much of Argentina's future. ..."
"... The IMF loan seems designed to get Macri past the election. It has been used to support capital flight: to support the peso, the Central Bank sells dollars to "importers" that then stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking the other way. It has been granted unprecedented authority to oversee and overrule the Central Bank, so its failure to act is really suspicious, and reeks of political pressure to crush the left in Latin America. ..."
Who is to Blame for Argentina's Economic Crisis?
By Mark Weisbrot - New York Times
What are we to make of Argentina's surprise election results on Monday, which jolted
pollsters and analysts alike, and roiled the country's financial markets? In the presidential
primary for the country's October election, the opposition ticket of Alberto Fernández
trounced the incumbent president Mauricio Macri by an unexpected margin of 47.7 to 32.1
percent.
The Fernández coalition attributes their victory to Mr. Macri's failed economic
policies, blaming him for the current economic crisis, recession, and high inflation. Mr.
Macri, by contrast, blames the fear of a future government of Kirchnerism -- his label for
the opposition -- for both the postelection financial turbulence and also the problems of the
economy since he took office more than three and a half years ago. He argues that both the
markets and the people have everything to fear from such an outcome.
This disagreement is not just an academic argument, nor one specific to Argentina. It is a
recurring, almost archetypical debate during economic crises that spill over into political
contests. In recent years -- in the UK, Spain, France, Greece, and other countries where
failed economic policies faced left-of-center challengers -- Macri's refrain was a frequent
line of attack by incumbents.
Financial markets can move for many reasons, which can be unclear or even based on
misperceptions of reality. In the case of this week's news, we have electoral losses by a
government whose economic policies have clearly failed; and gains by challengers who hail
from a period of strong and widely shared economic growth. This is not something that is
inherently bad for the economy.
With Kirchnerism, Mr. Macri refers to the policies, followers, and presidential
administrations of the Kirchner family, which held office from 2003 to 2015 -- first
Néstor Kirchner, and then Cristina Fernández de Kirchner. The latter is running
as vice-presidential candidate of Alberto Fernández, and is a prominent leader of the
opposition coalition -- although this coalition is much larger and broader than the
"kirchnerista" base.
From the point of view of an economist or social scientist, it's not clear why Kirchnerism
should inspire fear. Looking at the most important economic and social indicators, the
government of the Kirchner presidencies was one of the most successful in the Western
Hemisphere during this period.
Independent estimates show a decline of 71 percent in poverty, and an 81 percent decline
in extreme poverty. The government instituted one of the biggest conditional cash transfer
programs for the poor in Latin America. According to the International Monetary Fund, gross
domestic product per person grew by 42 percent, almost three times the rate of Mexico.
Unemployment fell by more than half, and inequality also fell considerably.
Although economic growth waned in the last few years, and the government made some
mistakes, the result of these two administrations delivered large increases in living
standards for the vast majority of Argentines, by any reasonable comparison.
Economic growth waned in the last few years of her presidency and her government was dealt
an external economic blow. A 2012 ruling of a federal appeals court in New York, widely
regarded dubious and political, took more than 90 percent of Argentina's creditors hostage in
order to force payment to a small group of "vulture funds," who refused to join the debt
restructuring of the early 2000s. The United States government blocked loans from
international lenders such as the Inter-American Development Bank, at a time when the economy
needed the foreign exchange.
By comparison, poverty has increased significantly, income per person has fallen, and
unemployment has increased during Mr. Macri's term, which began in December 2015. Short-term
interest rates, have shot up from 32 percent to 75 percent today; inflation has risen from 18
percent to 56 percent. The public debt has grown from 53 percent of GDP to more than 86
percent last year.
How much of this economic crisis and poor performance is his predecessor's fault?
In 2018 Mr. Macri signed an agreement for a $57 billion loan -- the largest bailout in
history. The loan agreement, along with the reviews since, spell out the government's
economic goals, strategy, and implementation. There is a lot of information publicly
available that details what went wrong.
The main strategy of the program was to restore investor confidence through tighter fiscal
and monetary policy. But, as has often happened, these measures slowed the economy and
undermined investor confidence. By October, the results were vastly worse than the IMF had
projected. The government and IMF doubled down by increasing both fiscal and monetary
tightening, but this did not help.
The government also wasted more than $16 billion in unsuccessful attempts to keep the peso
from falling, and greatly increased the more problematic foreign component of the public
debt. The result has been near-constant recession and high inflation, enormous interest
rates, peso depreciation, financial instability, and the huge run-up in public debt. The debt
increase is particularly noteworthy because Mr. Macri inherited a low level of public
debt.
Ironically, the IMF is well-known in Argentina for promoting similarly unworkable policies
during the deep depression of 1998 to 2002 -- comparable to America's Great Depression of the
1930s. Yes, history is repeating itself, although in this case the IMF has a stronger
partnership with the government than it had 20 years ago.
The Fernández candidates will have to outline how they would get out of this mess.
They can explain how Argentina exited from a much more severe economic crisis, with an
unemployment more than twice as high, and millions of previously middle class people having
fallen into poverty. They can assure creditors that there is no need for default on the
public debt today, as there was then, because it was completely unpayable. But, as in 2003,
the economy cannot recover under the conditions agreed upon with the IMF, and these will have
to be renegotiated.
Millions of Argentines remember the last depression and the role the IMF played. Many also
remember the rapid improvement in people's lives over the ensuing decade. This collective
memory and consciousness may now determine the outcome of this recurring debate over the
economy, and with it, the October election, and possibly much of Argentina's future.
The IMF has learned nothing since the Washington Consensus started being implemented in the
1980s but at least Argentines are quickly repudiating the neoliberals and their savage
policies, until they forget again in a generation.
The IMF loan seems designed to get Macri past the election. It has been used to support
capital flight: to support the peso, the Central Bank sells dollars to "importers" that then
stash the money abroad. This is illegal according to IMF loan terms but the IMF is looking
the other way. It has been granted unprecedented authority to oversee and overrule the
Central Bank, so its failure to act is really suspicious, and reeks of political pressure to
crush the left in Latin America.
Fernandez has already stated that under current terms the loan is unpayable and the terms
will have to be renegotiated.
The situation is similar to Greece and shows that, absent capital controls and decreased
dependency on imports, having your own currency is not enough protection against bondage to
multinational banks.
The situation is similar to Greece and shows that, absent capital controls and decreased
dependency on imports, having your own currency is not enough protection against bondage to
multinational banks....
[ This was the lesson taught and learned by a few countries in the wake of the Asian
currency crises that developed from 1996-1997. These were really Asian, Latin American
currency crises, but the lesson was indelibly learned in Asia.
There is a reason China and Japan and Korea increased foreign currency reserves from
1997-1998.
"... The trojan horse for the return of neoliberalism in Venezuela, Juan Guaidó, stated that he's going to borrow money from the IMF to fund his government, which would make all Venezuelans indebted to this predatory institution. Guaidó spends the money, the poor and working people work to pay taxes that pay off the principal and the interest. ..."
"... The IMF was created in New Hampshire in 1945 to internationalize and standardize capitalism and its rules in an increasingly globalized and U.S.-dominated world. ..."
"... Its primary function is acting as an international lender-of-last-resort to indebted countries. IMF member states decide which countries will receive loans, but the member states with the largest say are the ones that own the largest share of the IMF's funds, which have always been the United States and its allies. ..."
"... This is why the IMF's standard "structural adjustment program" is based on the so-called Washington Consensus, a set of 10 economic policies entirely concocted by U.S. think tanks, the IMF, the World Bank and the Treasury Department. The Washington Consensus is as follows: ..."
Think about who gets rich off of the Venezuela regime-change agenda. It's the same people
that said we had to invade Iraq in order to prevent nuclear apocalypse. It's the same people
who said the world would stop turning on its axis if we didn't carpet bomb Libya and
Syria.
Transcript -- This video was produced as part of a MintPress News and Grayzone collaboration -- Of all the reasons to
plot an elaborate and risky coup, there's one reason that always stands out: profit. Money
makes the world go around and in far more ways than we might think. Here are the top five
special interest groups and institutions that seek to benefit from the U.S. backed coup in
Venezuela.
Number 1: The International Monetary Fund (IMF), which wants to saddle the
Venezuelan people with enormous debt to the IMF
The trojan horse for the return of neoliberalism in Venezuela, Juan Guaidó, stated
that he's going to borrow money from the IMF to fund his government, which would make all
Venezuelans indebted to this predatory institution. Guaidó spends the money, the poor
and working people work to pay taxes that pay off the principal and the interest.
The IMF was created in New Hampshire in 1945 to internationalize and standardize capitalism
and its rules in an increasingly globalized and U.S.-dominated world.
Its primary function is acting as an international lender-of-last-resort to indebted
countries. IMF member states decide which countries will receive loans, but the member states
with the largest say are the ones that own the largest share of the IMF's funds, which have
always been the United States and its allies.
This is why the IMF's standard "structural adjustment program" is based on the so-called
Washington Consensus, a set of 10 economic policies entirely concocted by U.S. think tanks, the
IMF, the World Bank and the Treasury Department. The Washington Consensus is as follows:
In exchange for a loan, often with a high-interest rate that many would call predatory, the
IMF overhauls the protective and redistributive policies of a country for neoliberal policies,
making the target country ripe for finance capital investment and profit-making.
Number
2: The Oil Industry, out to control the oil reserves
There's little doubt that the oil industry is pushing the U.S. to overthrow the Maduro
government, especially when National Security Advisor John Bolton openly states this on
national television.
Bolton was himself once part of the oil industry, serving as the director of Diamond
Offshore Drilling, Inc. in 2007. He's no stranger to advocating for the interests of the
fossil-fuel industry.
Venezuela has the world's largest oil reserves by far and Washington won't let that wealth
go unexploited, or worse, be shared among its enemies like the Maduro government, Russia,
China, or Iran.
And with so many politicians, Republican and Democratic, bought off by industry players --
companies like ExxonMobil, Koch Industries, and Chevron -- it's impossible to imagine anyone in
Washington successfully advocating for Venezuela maintaining ownership over its own sovereign
natural resources.
Number 3: The Military-Industrial Complex, working to military
dominance and arm another U.S. puppet
One of the most bizarre things about America is that we've created one of the world's
largest private industries around arms dealing. And like any industry, whether it be JDAM bombs
or beef, private businesses often resort to lobbying Congress to squeeze political favors out
of the government in the form of subsidies -- or in the case of the military industrial
complex, a foreign policy of endless war, one based on elusive ideas like combating terrorism
or defending democracy.
You can see that wherever the U.S. goes, expensive construction projects follow. Behind
every multi-billion dollar base construction, some private contractor is there reaping the
profits.
Once our military presence is firmly established, the weapons sales begin. And we all know
no U.S. ally or puppet state is complete without a full fleet of Lockheed Martin F-16s -- then
they'll be able to fend off all of those pesky leftist rebels with freedom missiles.
With Venezuela's neighbors, Colombia and Brazil, growing closer to NATO and accepting U.S.
military presence in their countries, we can only assume Venezuela is Washington's next
target.
As the strategic approach of regime change evolves, new industries arise to meet these
needs.
After the massive anti-war protests following the invasion of Iraq, outright invasion and
occupation are no longer viable strategies, owing to negative public opinion. So Washington
sought to disguise war propaganda using humanitarian rhetoric.
Number 4: "Humanitarian"
NGOs to create and implement the alibi
Privately owned NGOs dedicated to human rights and promoting "American style" democracy have
played a much larger role in regime-change operations in recent years. They serve as soft-power
institutions that attempt to subtly sway a population against its own government through
propaganda laced with words like freedom, democracy, and human rights.
These NGOs are given the full blessing of the U.S. government and the two often work in
tandem. Don't believe me? Take it from former CIA case officer Phillip Agee.
The US Agency for International Development's (USAID) regime-change arm, the National
Endowment for Democracy (NED), funded opposition groups in Nicaragua, Venezuela (during the
2002 coup), Haiti, Ukraine, and most recently China and North Korea. And whenever U.S. foreign
policy sets its sights on a certain target, private industries usually develop to help meet
that goal as well as make a quick buck along the way.
For example, Thor Halvorssen -- the first cousin of Leopoldo Lopez, the founder of Juan
Guaidó's party, Popular Will -- calls himself a human-rights activist. He founded the
notorious Human Rights Foundation (HRF) and makes a living giving speeches and TV appearances
talking about why the governments of Venezuela or North Korea are not legitimate and need to be
overthrown.
Unsurprisingly, HRF is funded by the conservative Sarah Scaife Foundation, which is itself
funded by think tanks like the top neoconservative think tank, the American Enterprise
Institute, as well as the Heritage Foundation. HRF is also funded by the Donors Capital Fund
and the Diana Davis Spencer Foundation, which are also funded by the American Enterprise
Institute. It's one big web of moving money that all leads back to the same cast of
characters.
The crisis in Venezuela has been a huge gift for people like Halvorssen, who use the U.S.'s
war on Venezuela to promote themselves and their organizations.
Number 5: Think Tanks
selling reports that tell the MIC what it wants to hear
Like NGOs, think tanks also play an important role in giving regime change a sense of
legitimacy -- in their case, intellectual legitimacy. Think tanks rely on donations to operate
and many find willing donors among the capitalist class. These fat cats pay for fancy looking
reports meant to justify their desired goal, the delegitimization of socialist governments and
the legitimization of coup governments that uphold the Washington Consensus.
The Cato Institute has been deeply involved in overthrowing the Venezuelan government. In
2008, Cato awarded Venezuelan opposition leader, Yon Goicoechea, the Milton Friedman Prize for
Advancing Liberty and $500,000 for his role in disrupting a constitutional referendum in
Venezuela. That money was used to finance the political rise of Juan Guaidó, and his
clique known as Generation 2007.
These seemingly independent research groups have intimate networks that they leverage to
amplify the message their donors have given them. Here's an article in the Washington
Post written by a fellow at the American Enterprise Institute saying the U.S.'s failure to
intervene in Venezuela has caused the Maduro government to destabilize the region.
Whether it was the bank bailouts following the 2008 crisis, or the lack of action on climate
disaster, in America it seems the government always puts the interests of the rich ahead of the
poor and working class, and the situation in Venezuela is no exception.
As the U.S. continues to attack the Maduro government, keep these special interests in mind.
Think about who gets rich off of the regime-change agenda. It's the same people that said we
had to invade Iraq in order to prevent nuclear apocalypse. It's the same people who said the
world would stop turning on its axis if we didn't carpet bomb Libya and Syria.
Now they're trying to get us to support war in Venezuela. You won't be any freer or more
prosperous after the Maduro government is toppled. It's just war propaganda.
Top photo | A worker counts Venezuelan bolivar notes at a parking lot in Caracas, Venezuela
May 29, 2018. Marco Bello | Reuters
Kei Pritsker is a journalist and activist located in Washington DC. Kei focuses on
international politics and economics. He previously worked as a producer at RT America.
Application of IMF policy in Argentina has brought what is in effect an economic collapse and
astonishing poverty. While this was happening over the months, business news writers were
applauding Argentinian austerity reforms. The data (as I repeatedly showed on Economist's
View) were bad to grim, but business reporting found no problem.
Is this the end of the neoliberal counterrevolution in Argentina ? Moor did its duty moor has
to go -- Macri converted Argentina into the Debt slave again and now to get out of this situation
is nest to impossible.
Argentine president suffers crushing defeat in key primaries ahead of general election
Argentina's President Mauricio Macri suffered a crushing defeat as people voted in party
primaries on Sunday ahead of October's general election.
Given that all of the recession-hit South American country's major parties have already
chosen their presidential candidates, the primaries effectively served as a nationwide
pre-election opinion poll.
Center-left nominee Alberto Fernandez led by around 15 points after partial results were
revealed. Center-right Pro-business Macri admitted it had been "a bad election."
The first round of the presidential election will be held on October 27, with a run-off
– if needed – set for November 24.
With 87 percent of polling station results counted, Fernandez had polled 47.5 percent with
Macri on a little more than 32 percent and centrist former finance minister Roberto Lavagna a
distant third on just 8.3 percent.
Macri had been hoping to earn a second mandate, but his chances appear all but over.
If Fernandez was to register the same result in October, he would be president as
Argentina's electoral law requires a candidate to gain 45 percent for outright victory, or 40
percent and a lead of at least 10 points over the nearest challenger.
Inflation and poverty
"We've had a bad election and that forces us to redouble our efforts from tomorrow," said
Macri, whose popularity has plunged since last year's currency crisis and the much-criticized
56 billion U.S.-dollar bail-out loan he secured from the International Monetary Fund.
"It hurts that we haven't had the support we'd hoped for," he added.
Argentina is currently in a recession and posted 22 percent inflation for the first
half of the year – one of the highest rates in the world. Poverty now affects 32
percent of the population.
Backed by the IMF, Macri has initiated an austerity plan that is deeply unpopular among
ordinary Argentines, who have seen their spending power plummet.
The peso lost half of its value against the dollar last year. The Buenos Aires stock
exchange actually shot up eight percent on Friday amid expectation that Macri would do well
in Sunday's vote.
An important task now is to understand why the IMF assistance to Argentina proved damaging to
the economy from the beginning; the data showed the damage being done. However, there was
almost no mention of the problems that developed outside Argentina and there was surprise
when the failure of the economy was reflected in the serious vote against the current
president.
Of course, Joseph Stiglitz watched the same sort of problems unfold in Argentina almost 20
years ago and was severely criticized for discussing them. How did the problems recur so
readily now? Why is IMF national assistance seemingly so dangerous economically?
"... Wall Street bankers funded all those 'anti colonial movements' in the first place. They wanted to deal with some corrupt brown black politician over an honest White/Japanese colonial officer. ..."
"... What many people do not know is that the after the damage done by the Great Depression (the total Wall Street take over of the US Economy and the looting of independent of American business with the help of the private 'Federal' reserve ), The British Government put restrictions on trade in between the British Empire and USA to protect the economies of Britain and all of her colonies from the Wall Street pigs. ..."
http://www.unz.com/audio/gunsbutter_the-imf-and-world-bank-partners-in-backwardness-407/
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Michael Hudson discusses his seminal work of 1972, Super Imperialism: The Economic Strategy of American Empire,
a critique of how the US exploits foreign economies through IMF and World bank debt; difference between the IMF
and World Bank; World Bank dysfunctional from the outset; loans made in foreign currency only; policy to
provide loans for countries to devote their land to export plantation crops; US food and monetary imperialism;
U.S. agricultural protectionism built into the postwar global system; promotion of dependency on the US as food
supplier; food blackmail; perpetration of world poverty preferred; no encouragement of land reform;
privatization of the public domain; America aided, not foreign economies; exploitation of mineral deposits;
bribery; foreign nations politically controlled at the top; veto power for US only.
This was planned decades ago. That is why Wall Street bankers funded all those 'anti colonial movements' in the
first place. They wanted to deal with some corrupt brown black politician over an honest White/Japanese
colonial officer.
"As far as is known "America's" anti-British policy was first given concrete expression in the brief that
General Marshall took with him to the Quebec Conference in 1943.
This was to the effect that the greatest single obstacle to the expansion of America's export-capitalism after
the war would be not the Soviet Union but the British Empire. What this meant, in practical terms, was that as
soon as the enemies in the field had been disposed of would come the turn of the British Empire to be
progressively destroyed and that means to this end would be shaped even while hostilities raged. The moment
they were over the campaign could begin in real earnest, the signal for which was to be Truman's abrupt
dropping of Lend-Lease to an ally whose economy had been so closely geared to war production that many markets
for her goods had been systematically referred to U.S producers.
The British Empire was not the only ally marked down for liquidation. The Dutch Empire in the East Indies and
the French Empire in Indo-China and Africa were also high on the list "
What many people do not know is that the after the damage done by the Great Depression (the total Wall
Street take over of the US Economy and the looting of independent of American business with the help of the
private 'Federal' reserve ), The British Government put restrictions on trade in between the British Empire and
USA to protect the economies of Britain and all of her colonies from the Wall Street pigs.
In Page 22 of the book we read
"However, as has happened time and again throughout history, the money-lenders had tended to overplay their
hand. The six million German unemployed who were the victims of the "Great Depression" resulted in a formidable
revolt against the Money Power -- the revolt of Adolf Hitler. There was also a rebellion, although of a much
milder kind, in Great Britain and the British nations overseas, whose representatives met in Ottawa in 1932 to
hammer out a system of Imperial Preferences calculated to insulate the British world against Wall St.
amok-runs. These Preferences, as we shall see, incurred the unrelenting hostility of the New York Money Power
and the only reason why a show-down was not forced was the far more serious threat to the international
financial system implicit in the economic doctrines of the Third Reich."
In other words, the Wall street greedy pigs after devouring American industry came to the conclusion that
they faced a major threat from Third Reich Germany (the barter system used by the regime) as well as to a
lesser extent from the British Empire (and other Empires). Hence the war to destroy Third Reich Germany,
Japanese Empire and Italy and then after the war the eventual slow destruction of the European Empires,
especially the British Empire. And hence we suddenly see 'independence movements' sprouting all over the world
and succeeding. Even before the war we had 'independence movements' and 'communist movements' all around the
world thanks to their pet 'Soviet Russia's' agents going all around and 'radicalisng the masses', all with the
blessings of Wall Street Banker pigs.
I'm curious do you live in Britain? I would bet you do because of your relentless protection of the
British Empire. The British Empire has been working on Economic World Domination since Cecil Rhodes established
the Round Table groups. I agree with a comment you made about British citizens not being responsible for their
government's tretment of countries in the colonial era. The same can be said about the American citizen if you
place all the blame on the political class and Wall Street. But then we have to take into consideration the
benefits that the English and American citizen receive from their government's crimminal dealings. As long as
they live better than anyone else in the world, they will not protest against the hand that feed them.
This artilce (audio) uncovers the reason why America and Britian along with their Anglo Saxon partners
Canada and Australia control other country's economies. Creating poverty in other countries keeps the Anglo
Saxon countries ecomomically superiour at the expense of the poor throughout the world. If American and British
citizens stopped their government's continued assault on third world countries the immigration crisis would
end.
America and England have been dominant over other countries with the help of their Jewish partners for a
long time Malla. As you commented to me, they have married into prominent British Society. I'm sorry Malla, but
there is a Mexican saying "Tanta culpa tiene el que mata la vaca que el que detiene la pata". Translation: "The
person that holds the cows feet is as guilty as the one that kills it". Meaning when you unknowingly
participate in a crime you are just as responsible as the one commiting it.
It's hard for decent Americans and British people to see themselves as perpitrators of such horrible
injustices because most of them are very warm and loving Christian people I'm sure. But so are the people of
the countries their government target. Until people stop looking at the problems we are all facing as a
Christian/Muslim – White/Black – High IQ/Low IQ problem, things will only get worse. The real problem as I see
it is a Social Class problem as we can see by this article. The Elites have no problem helping Blacks and other
races as long as they are the Rich Elites. The lower class people can starve white, black, brown, etc. it
doesn't matter just another day in the life of a parasite.
The problem as I see it, can only be solved by the "White" people that are socially below the Elites in
power and take it away from them. The reason why I say that is because history tells us that when the Social
underclass revolts against the oppressor government as so many have in Latin America, the U.S. send their
military to help the crimminal leaders and the people are murdered. The problem needs to be stopped at the
source or else nothing can change. We can talk about the Jews till we're bloe in face, but it is clear as to
who is responsible
@Malla
I am so surprised there are only 2 comments on this article! This is the most important information on this
site I like your comments Malla, you're a very smart Lady me I'm just a Rebel that hates bullies with a
passion! Some of my comments are very rough around the edges depending on the level of racism and ignorance the
commentator writes. But, always respectful to the opposite sex. Thanks for engaging Have a nice day.
Very impressive interview. Indeed, it is shocking when all piracy strategies are put together the brilliante
way Professor Hudson does. A lecture for everybody.
We can talk about the Jews till we're bloe in face, but it is clear as to who is responsible
Who do you think is behind British and American Imperialism? As per Ron Unz's findings, who was behind
Bolshevism? Regarding social and political control, there is always a Zionist element. Look at the World Bank,
the CFR, the Chabad Lubavitch presence behind Netanyahu, Putin and Trump. Look at media, music and education.
What about the Warburgs both in the United States and in Nazi Germany.
https://www.onjewishmatters.com/archives/18428
John Ruskin was the mentor of Cecil Rhodes at Oxford University. Cecil Rhodes was a member of the "Society
of the Elect" along with Rothschild. ( See pg. 311
http://www.carrollquigley.net/pdf/The_Anglo-American_Establishment.pdf
) Rothschild proud founder of the
state of israel. Below are photos of John Ruskin's grave. Why is there a Swastika placed between 1819 and 1900?
Also, why is there a Menorah on his headstone? "The seven branch menorah was used in the ancient temple of
Jerusalem The menorah is part of the coat of arms of the modern State of Israel." –
https://www.judaicawebstore.com/7-branched-menorahs-C918.aspx
Creating poverty in other countries keeps the Anglo Saxon countries ecomomically superiour at the expense
of the poor throughout the world. If American and British citizens stopped their government's continued
assault on third world countries the immigration crisis would end.
I disagree completely. In most brown black countries, the people themselves exploit each other and cause all
the screw ups. Most people here in India (poor or rich) cheat, swindle and ruthlessly exploit others. Of course
you have the IMF gang hovering around for their loot but they are not the main factor in many third world
countries.
Thank you Bonnie for asking the perfect questions and thank you Michael for your ever
incisive and brilliantly clear answers. Together this interview is the perfect Predatory Economics 101 for
ordinary people, i.e. the Bonnie & Michael course
I write this from Athens Greece in 2019, 3 days after our US educated (Harvard & Stanford) oligarchical
class has just been voted back into power with a parliamentary majority in bone-headed but fully deserved
reaction to Tsipras the fake left traitor. Very sad and very silly since Greece is a 100% captive colony of EU
/ Washington. The only upside is that with the Trotskyists out Greeks will be able to keep our icons and our
Orthodoxy, something we shall need more than ever.
"... Kolomoisky is the man who controls the recently elected Jewish president Zelensky -- a comedian. ..."
"... Let's not forget that Theresa May is the one who has worked assiduously on trying to overcome the results of the British referendum. She does not believe in democracy. ..."
"... This man most certainly made a substantial offshore payment to Largarde or her companies or her lawyers. That is how it works everywhere. ..."
She robbed the French taxpayer of some 404 billion Euros. The fact that she is not in
prison while protesters are being injured weekly by the French police tells you a lot about
why these people are protesting.
Since then, she has continued with her corrupt behaviour by greatly enriching the
Ukrainian/Israeli oligarch Kolomoisky -- who robbed his own bank.
How Christine Lagarde, Clinton and Nuland Funded a Massive Ukrainian Ponzi
Scheme
Kolomoisky is the man who controls the recently elected Jewish president Zelensky -- a
comedian.
I think the writer pays too much to the attire of May and Lagarde -- The pearls, the tweed
and gingham suits -- when their corruption is totally 21st century. Let's not forget that
Theresa May is the one who has worked assiduously on trying to overcome the results of the
British referendum. She does not believe in democracy. Replies: @Logan
, @George F.
Held
One of the functions of the International Monetary Fund (IMF) is imposing austerity
measures on the people of poor countries seeking bailouts, so perhaps choosing a corporate
lawyer to run it is fitting.
@Logan
ness tampering. After a high-profile case against public prosecutor Éric de
Montgolfier, he was sentenced in 1995 by the Court of Appeals of Douai to 2 years in prison,
including 8 months non-suspended and 3 years of deprivation of his civic rights.
"... The purpose of a military conquest is to take control of foreign economies, to take control of their land and impose tribute. The genius of the World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute, or to take over its industry, agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries play an artificial economic game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing and loss of life by soldiers ..."
"... It was set up basically by the United States in 1944, along with its sister institution, the International Monetary Fund (IMF). Their purpose was to create an international order like a funnel to make other countries economically dependent on the United States ..."
"... American diplomats insisted on the ability to veto any action by the World Bank or IMF. The aim of this veto power was to make sure that any policy was, in Donald Trump's words, to put America first. "We've got to win and they've got to lose." ..."
"... The World Bank was set up from the outset as a branch of the military, of the Defense Department. John J. McCloy (Assistant Secretary of War, 1941-45), was the first full-time president ..."
"... Many countries had two rates: one for goods and services, which was set normally by the market, and then a different exchange rate that was managed for capital movements. That was because countries were trying to prevent capital flight. They didn't want their wealthy classes or foreign investors to make a run on their own currency – an ever-present threat in Latin America. ..."
"... The IMF and the World Bank backed the cosmopolitan classes, the wealthy. Instead of letting countries control their capital outflows and prevent capital flight, the IMF's job is to protect the richest One Percent and foreign investors from balance-of-payments problems ..."
"... The IMF enables its wealthy constituency to move their money out of the country without taking a foreign-exchange loss ..."
"... Wall Street speculators have sold the local currency short to make a killing, George-Soros style. ..."
"... When the debtor-country currency collapses, the debts that these Latin American countries owe are in dollars, and now have to pay much more in their own currency to carry and pay off these debts. ..."
"... Local currency is thrown onto the foreign-exchange market for dollars, lowering the exchange rate. That increases import prices, raising a price umbrella for domestic products. ..."
"... Instead, the IMF says just the opposite: It acts to prevent any move by other countries to bring the debt volume within the ability to be paid. It uses debt leverage as a way to control the monetary lifeline of financially defeated debtor countries. ..."
"... This control by the U.S. financial system and its diplomacy has been built into the world system by the IMF and the World Bank claiming to be international instead of an expression of specifically U.S. New Cold War nationalism. ..."
"... The same thing happened in Greece a few years ago, when almost all of Greece's foreign debt was owed to Greek millionaires holding their money in Switzerland ..."
"... The IMF could have seized this money to pay off the bondholders. Instead, it made the Greek economy pay. It found that it was worth wrecking the Greek economy, forcing emigration and wiping out Greek industry so that French and German bondholding banks would not have to take a loss. That is what makes the IMF so vicious an institution. ..."
"... America was able to grab all of Iran's foreign exchange just by the banks interfering. The CIA has bragged that it can do the same thing with Russia. If Russia does something that U.S. diplomats don't like, the U.S. can use the SWIFT bank payment system to exclude Russia from it, so the Russian banks and the Russian people and industry won't be able to make payments to each other. ..."
"... You can't create the money, especially if you're running a balance of payments deficit and if U.S. foreign policy forces you into deficit by having someone like George Soros make a run on your currency. Look at the Asia crisis in 1997. Wall Street funds bet against foreign currencies, driving them way down, and then used the money to pick up industry cheap in Korea and other Asian countries. ..."
"... This was also done to Russia's ruble. The only country that avoided this was Malaysia, under Mohamed Mahathir, by using capital controls. Malaysia is an object lesson in how to prevent a currency flight. ..."
"... Client kleptocracies take their money and run, moving it abroad to hard currency areas such as the United States, or at least keeping it in dollars in offshore banking centers instead of reinvesting it to help the country catch up by becoming independent agriculturally, in energy, finance and other sectors. ..."
"... But in shaping the World Trade Organization's rules, the United States said that all countries had to promote free trade and could not have government support, except for countries that already had it. We're the only country that had it. That's what's called "grandfathering". ..."
"The purpose of a military conquest is to take control of foreign economies, to take control of their land and impose
tribute. The genius of the World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute,
or to take over its industry, agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries
play an artificial economic game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing
and loss of life by soldiers."
I'm Bonnie Faulkner. Today on Guns and Butter: Dr. Michael Hudson. Today's show: The IMF and World Bank: Partners In Backwardness
. Dr. Hudson is a financial economist and historian. He is President of the Institute for the Study of Long-Term Economic Trend,
a Wall Street Financial Analyst, and Distinguished Research Professor of Economics at the University of Missouri, Kansas City.
His most recent books include " and Forgive them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance
to the Jubilee Year "; Killing the Host: How Financial Parasites and Debt Destroy the Global Economy , and J Is for
Junk Economics: A Guide to Reality in an Age of Deception . He is also author of Trade, Development and Foreign Debt
, among many other books.
We return today to a discussion of Dr. Hudson's seminal 1972 book, Super Imperialism: The Economic Strategy of American Empire
, a critique of how the United States exploited foreign economies through the IMF and World Bank, with a special emphasis on
food imperialism.
... ... ...
Bonnie Faulkner : In your seminal work form 1972, Super-Imperialism: The Economic Strategy of American Empire ,
you write: "The development lending of the World Bank has been dysfunctional from the outset." When was the World Bank set up and
by whom?
Michael Hudson : It was set up basically by the United States in 1944, along with its sister institution, the International
Monetary Fund (IMF). Their purpose was to create an international order like a funnel to make other countries economically dependent
on the United States. To make sure that no other country or group of countries – even all the rest of the world – could not
dictate U.S. policy. American diplomats insisted on the ability to veto any action by the World Bank or IMF. The aim of this
veto power was to make sure that any policy was, in Donald Trump's words, to put America first. "We've got to win and they've got
to lose."
The World Bank was set up from the outset as a branch of the military, of the Defense Department. John J. McCloy (Assistant
Secretary of War, 1941-45), was the first full-time president. He later became Chairman of Chase Manhattan Bank (1953-60).
McNamara was Secretary of Defense (1961-68), Paul Wolfowitz was Deputy and Under Secretary of Defense (1989-2005), and Robert Zoellick
was Deputy Secretary of State. So I think you can look at the World Bank as the soft shoe of American diplomacy.
Bonnie Faulkner : What is the difference between the World Bank and the International Monetary Fund, the IMF? Is
there a difference?
Michael Hudson : Yes, there is. The World Bank was supposed to make loans for what they call international development.
"Development" was their euphemism for dependency on U.S. exports and finance. This dependency entailed agricultural backwardness
– opposing land reform, family farming to produce domestic food crops, and also monetary backwardness in basing their monetary system
on the dollar.
The World Bank was supposed to provide infrastructure loans that other countries would go into debt to pay American engineering
firms, to build up their export sectors and their plantation sectors by public investment roads and port development for imports
and exports. Essentially, the Bank financed long- investments in the foreign trade sector, in a way that was a natural continuation
of European colonialism.
In 1941, for example, C. L. R. James wrote an article on "Imperialism in Africa" pointing out the fiasco of European railroad
investment in Africa: "Railways must serve flourishing industrial areas, or densely populated agricult5ural regions, or they must
open up new land along which a thriving population develops and provides the railways with traffic. Except in the mining regions
of South Africa, all these conditions are absent. Yet railways were needed, for the benefit of European investors and heavy industry."
That is why, James explained "only governments can afford to operate them," while being burdened with heavy interest obligations.
[1] What was "developed" was Africa's
mining and plantation export sector, not its domestic economies. The World Bank followed this pattern of "development" lending without
apology.
The IMF was in charge of short-term foreign currency loans. Its aim was to prevent countries from imposing capital controls to
protect their balance of payments. Many countries had a dual exchange rate: one for trade in goods and services, the other rate
for capital movements. The function of the IMF and World Bank was essentially to make other countries borrow in dollars, not in
their own currencies, and to make sure that if they could not pay their dollar-denominated debts, they had to impose austerity on
the domestic economy – while subsidizing their import and export sectors and protecting foreign investors, creditors and client
oligarchies from loss.
The IMF developed a junk-economics model pretending that any country can pay any amount of debt to the creditors if it just impoverishes
its labor enough. So when countries were unable to pay their debt service, the IMF tells them to raise their interest rates to bring
on a depression – austerity – and break up the labor unions. That is euphemized as "rationalizing labor markets." The rationalizing
is essentially to disable labor unions and the public sector. The aim – and effect – is to prevent countries from essentially following
the line of development that had made the United States rich – by public subsidy and protection of domestic agriculture, public
subsidy and protection of industry and an active government sector promoting a New Deal democracy. The IMF was essentially promoting
and forcing other countries to balance their trade deficits by letting American and other investors buy control of their commanding
heights, mainly their infrastructure monopolies, and to subsidize their capital flight.
BONNIE FAULKNER : Now, Michael, when you began speaking about the IMF and monetary controls, you mentioned that there
were two exchange rates of currency in countries. What were you referring to?
MICHAEL HUDSON : When I went to work on Wall Street in the '60s, I was balance-of-payments economist for Chase Manhattan,
and we used the IMF's monthly International Financial Statistics every month. At the top of each country's statistics would
be the exchange-rate figures. Many countries had two rates: one for goods and services, which was set normally by the market,
and then a different exchange rate that was managed for capital movements. That was because countries were trying to prevent capital
flight. They didn't want their wealthy classes or foreign investors to make a run on their own currency – an ever-present threat
in Latin America.
The IMF and the World Bank backed the cosmopolitan classes, the wealthy. Instead of letting countries control their capital
outflows and prevent capital flight, the IMF's job is to protect the richest One Percent and foreign investors from balance-of-payments
problems.
The World Bank and American diplomacy have steered them into a chronic currency crisis. The IMF enables its wealthy constituency
to move their money out of the country without taking a foreign-exchange loss. It makes loans to support capital flight out
of domestic currencies into the dollar or other hard currencies. The IMF calls this a "stabilization" program. It is never effective
in helping the debtor economy pay foreign debts out of growth. Instead, the IMF uses currency depreciation and sell-offs of public
infrastructure and other assets to foreign investors after the flight capital has left and currency collapses. Wall Street speculators
have sold the local currency short to make a killing, George-Soros style.
When the debtor-country currency collapses, the debts that these Latin American countries owe are in dollars, and now have
to pay much more in their own currency to carry and pay off these debts. We're talking about enormous penalty rates in domestic
currency for these countries to pay foreign-currency debts – basically taking on to finance a non-development policy and to subsidize
capital flight when that policy "fails" to achieve its pretended objective of growth.
All hyperinflations of Latin America – Chile early on, like Germany after World War I – come from trying to pay foreign debts
beyond the ability to be paid. Local currency is thrown onto the foreign-exchange market for dollars, lowering the exchange
rate. That increases import prices, raising a price umbrella for domestic products.
A really functional and progressive international monetary fund that would try to help countries develop would say: "Okay, banks
and we (the IMF) have made bad loans that the country can't pay. And the World Bank has given it bad advice, distorting its domestic
development to serve foreign customers rather than its own growth. So we're going to write down the loans to the ability to be paid."
That's what happened in 1931, when the world finally stopped German reparations payments and Inter-Ally debts to the United States
stemming from World War I.
Instead, the IMF says just the opposite: It acts to prevent any move by other countries to bring the debt volume within
the ability to be paid. It uses debt leverage as a way to control the monetary lifeline of financially defeated debtor countries.
So if they do something that U.S. diplomats don't approve of, it can pull the plug financially, encouraging a run on their currency
if they act independently of the United States instead of falling in line. This control by the U.S. financial system and its
diplomacy has been built into the world system by the IMF and the World Bank claiming to be international instead of an expression
of specifically U.S. New Cold War nationalism.
BONNIE FAULKNER : How do exchange rates contribute to capital flight?
MICHAEL HUDSON : It's not the exchange rate that contributes. Suppose that you're a millionaire, and you see that your
country is unable to balance its trade under existing production patterns. The money that the government has under control is pesos,
escudos, cruzeiros or some other currency, not dollars or euros. You see that your currency is going to go down relative to the
dollar, so you want to get our money out of the country to preserve your purchasing power.
This has long been institutionalized. By 1990, for instance, Latin American countries had defaulted so much in the wake of the
Mexico defaults in 1982 that I was hired by Scudder Stevens, to help start a Third World Bond Fund (called a "sovereign high-yield
fund"). At the time, Argentina and Brazil were running such serious balance-of-payments deficits that they were having to pay 45
percent per year interest, in dollars, on their dollar debt. Mexico, was paying 22.5 percent on its tesobonos .
Scudders' salesmen went around to the United States and tried to sell shares in the proposed fund, but no Americans would buy
it, despite the enormous yields. They sent their salesmen to Europe and got a similar reaction. They had lost their shirts on Third
World bonds and couldn't see how these countries could pay.
Merrill Lynch was the fund's underwriter. Its office in Brazil and in Argentina proved much more successful in selling investments
in Scudder's these offshore fund established in the Dutch West Indies. It was an offshore fund, so Americans were not able to buy
it. But Brazilian and Argentinian rich families close to the central bank and the president became the major buyers. We realized
that they were buying these funds because they knew that their government was indeed going to pay their stipulated interest charges.
In effect, the bonds were owed ultimately to themselves. So these Yankee dollar bonds were being bought by Brazilians and other
Latin Americans as a vehicle to move their money out of their soft local currency (which was going down), to buy bonds denominated
in hard dollars.
BONNIE FAULKNER : If wealthy families from these countries bought these bonds denominated in dollars, knowing that they
were going to be paid off, who was going to pay them off? The country that was going broke?
MICHAEL HUDSON : Well, countries don't pay; the taxpayers pay, and in the end, labor pays. The IMF certainly doesn't want
to make its wealthy client oligarchies pay. It wants to squeeze ore economic surplus out of the labor force. So countries are told
that the way they can afford to pay their enormously growing dollar-denominated debt is to lower wages even more.
Currency depreciation is an effective way to do this, because what is devalued is basically labor's wages. Other elements of
exports have a common world price: energy, raw materials, capital goods, and credit under the dollar-centered international monetary
system that the IMF seeks to maintain as a financial strait jacket.
According to the IMF's ideological models, there's no limit to how far you can lower wages by enough to make labor competitive
in producing exports. The IMF and World Bank thus use junk economics to pretend that the way to pay debts owed to the wealthiest
creditors and investors is to lower wages and impose regressive excise taxes, to impose special taxes on necessities that labor
needs, from food to energy and basic services supplied by public infrastructure.
BONNIE FAULKNER: So you're saying that labor ultimately has to pay off these junk bonds?
MICHAEL HUDSON: That is the basic aim of IMF. I discuss its fallacies in my Trade Development and Foreign Debt
, which is the academic sister volume to Super Imperialism . These two books show that the World Bank and IMF were viciously
anti-labor from the very outset, working with domestic elites whose fortunes are tied to and loyal to the United States.
BONNIE FAULKNER : With regard to these junk bonds, who was it or what entity
MICHAEL HUDSON : They weren't junk bonds. They were called that because they were high-interest bonds, but they weren't
really junk because they actually were paid. Everybody thought they were junk because no American would have paid 45 percent interest.
Any country that really was self-reliant and was promoting its own economic interest would have said, "You banks and the IMF have
made bad loans, and you've made them under false pretenses – a trade theory that imposes austerity instead of leading to prosperity.
We're not going to pay." They would have seized the capital flight of their comprador elites and said that these dollar bonds were
a rip-off by the corrupt ruling class.
The same thing happened in Greece a few years ago, when almost all of Greece's foreign debt was owed to Greek millionaires
holding their money in Switzerland. The details were published in the "Legarde List." But the IMF said, in effect that its
loyalty was to the Greek millionaires who ha their money in Switzerland. The IMF could have seized this money to pay off the
bondholders. Instead, it made the Greek economy pay. It found that it was worth wrecking the Greek economy, forcing emigration and
wiping out Greek industry so that French and German bondholding banks would not have to take a loss. That is what makes the IMF
so vicious an institution.
BONNIE FAULKNER : So these loans to foreign countries that were regarded as junk bonds really weren't junk, because
they were going to be paid. What group was it that jacked up these interest rates to 45 percent?
MICHAEL HUDSON : The market did. American banks, stock brokers and other investors looked at the balance of payments of
these countries and could not see any reasonable way that they could pay their debts, so they were not going to buy their bonds.
No country subject to democratic politics would have paid debts under these conditions. But the IMF, U.S. and Eurozone diplomacy
overrode democratic choice.
Investors didn't believe that the IMF and the World Bank had such a strangle hold over Latin American, Asian, and African countries
that they could make the countries act in the interest of the United States and the cosmopolitan finance capital, instead of in
their own national interest. They didn't believe that countries would commit financial suicide just to pay their wealthy One Percent.
They were wrong, of course. Countries were quite willing to commit economic suicide if their governments were dictatorships propped
up by the United States. That's why the CIA has assassination teams and actively supports these countries to prevent any party coming
to power that would act in their national interest instead of in the interest of a world division of labor and production along
the lines that the U.S. planners want for the world. Under the banner of what they call a free market, you have the World Bank and
the IMF engage in central planning of a distinctly anti-labor policy. Instead of calling them Third World bonds or junk bonds, you
should call them anti-labor bonds, because they have become a lever to impose austerity throughout the world.
BONNIE FAULKNER : Well, that makes a lot of sense, Michael, and answers a lot of the questions I've put together to ask
you. What about Puerto Rico writing down debt? I thought such debts couldn't be written down.
MICHAEL HUDSON : That's what they all said, but the bonds were trading at about 45 cents on the dollar, the risk of their
not being paid. The Wall Street Journal on June 17, reported that unsecured suppliers and creditors of Puerto Rico, would
only get nine cents on the dollar. The secured bond holders would get maybe 65 cents on the dollar.
The terms are being written down because it's obvious that Puerto Rico can't pay, and that trying to do so is driving the population
to move out of Puerto Rico to the United States. If you don't want Puerto Ricans to act the same way Greeks did and leave Greece
when their industry and economy was shut down, then you're going to have to provide stability or else you're going to have half
of Puerto Rico living in Florida.
BONNIE FAULKNER : Who wrote down the Puerto Rican debt?
MICHAEL HUDSON : A committee was appointed, and it calculated how much Puerto Rico can afford to pay out of its taxes.
Puerto Rico is a U.S. dependency, that is, an economic colony of the United States. It does not have domestic self-reliance. It's
the antithesis of democracy, so it's never been in charge of its own economic policy and essentially has to do whatever the United
States tells it to do. There was a reaction after the hurricane and insufficient U.S. support to protect the island and the enormous
waste and corruption involved in the U.S. aid. The U.S. response was simply: "We won you fair and square in the Spanish-American
war and you're an occupied country, and we're going to keep you that way." Obviously this is causing a political resentment.
BONNIE FAULKNER : You've already touched on this, but why has the World Bank traditionally been headed by a U.S. secretary
of defense?
MICHAEL HUDSON : Its job is to do in the financial sphere what, in the past, was done by military force. The purpose of
a military conquest is to take control of foreign economies, to take control of their land and impose tribute. The genius of the
World Bank was to recognize that it's not necessary to occupy a country in order to impose tribute, or to take over its industry,
agriculture and land. Instead of bullets, it uses financial maneuvering. As long as other countries play an artificial economic
game that U.S. diplomacy can control, finance is able to achieve today what used to require bombing and loss of life by soldiers.
In this case the loss of life occurs in the debtor countries. Population growth shrinks, suicides go up. The World Bank engages
in economic warfare that is just as destructive as military warfare. At the end of the Yeltsin period Russia's President Putin said
that American neoliberalism destroyed more of Russia's population than did World War II. Such neoliberalism, which basically is
the doctrine of American supremacy and foreign dependency, is the policy of the World Bank and IMF.
BONNIE FAULKNER : Why has World Bank policy since its inception been to provide loans for countries to devote their land
to export crops instead of giving priority to feeding themselves? And if this is the case, why do countries want these loans?
MICHAEL HUDSON : One constant of American foreign policy is to make other countries dependent on American grain exports
and food exports. The aim is to buttress America's agricultural trade surplus. So the first thing that the World Bank has done is
not to make any domestic currency loans to help food producers. Its lending has steered client countries to produce tropical export
crops, mainly plantation crops that cannot be grown in the United States. Focusing on export crops leads client countries to become
dependent on American farmers – and political sanctions.
In the 1950s, right after the Chinese revolution, the United States tried to prevent China from succeeding by imposing grain
export controls to starve China into submission by putting sanctions on exports. Canada was the country that broke these export
controls and helped feed China.
The idea is that if you can make other countries export plantation crops, the oversupply will drive down prices for cocoa and
other tropical products, and they won't feed themselves. So instead of backing family farms like the American agricultural policy
does, the World Bank backed plantation agriculture. In Chile, which has the highest natural supply of fertilizer in the world from
its guano deposits, exports guano instead of using it domestically. It also has the most unequal land distribution, blocking it
from growing its own grain or food crops. It's completely dependent on the United States for this, and it pays by exporting copper,
guano and other natural resources.
The idea is to create interdependency – one-sided dependency on the U.S. economy. The United States has always aimed at being
self-sufficient in its own essentials, so that no other country can pull the plug on our economy and say, "We're going to starve
you by not feeding you." Americans can feed themselves. Other countries can't say, "We're going to let you freeze in the dark by
not sending you oil," because America's independent in energy. But America can use the oil control to make other countries freeze
in the dark, and it can starve other countries by food-export sanctions.
So the idea is to give the United States control of the key interconnections of other economies, without letting any country
control something that is vital to the working of the American economy.
There's a double standard here. The United States tells other countries: "Don't do as we do. Do as we say." The only way it can
enforce this is by interfering in the politics of these countries, as it has interfered in Latin America, always pushing the right
wing. For instance, when Hillary's State Department overthrew the Honduras reformer who wanted to undertake land reform and feed
the Hondurans, she said: "This person has to go." That's why there are so many Hondurans trying to get into the United States now,
because they can't live in their own country.
The effect of American coups is the same in Syria and Iraq. They force an exodus of people who no longer can make a living under
the brutal dictatorships supported by the United States to enforce this international dependency system.
BONNIE FAULKNER : So when I asked you why countries would want these loans, I guess you're saying that they wouldn't,
and that's why the U.S. finds it necessary to control them politically.
MICHAEL HUDSON : That's a concise way of putting it Bonnie.
BONNIE FAULKNER : Why are World Bank loans only in foreign currency, not in the domestic currency of the country to which
it is lending?
MICHAEL HUDSON : That's a good point. A basic principle should be to avoid borrowing in a foreign currency. A country
can always pay the loans in its own currency, but there's no way that it can print dollars or euros to pay loans denominated in
these foreign currencies.
Making the dollar central forces other countries to interface with the U.S. banking system. So if a country decides to go its
own way, as Iran did in 1953 when it wanted to take over its oil from British Petroleum (or Anglo Iranian Oil, as it was called
back then), the United States can interfere and overthrow it. The idea is to be able to use the banking system's interconnections
to stop payments from being made.
After America installed the Shah's dictatorship, they were overthrown by Khomeini, and Iran had run up a U.S. dollar debt under
the Shah. It had plenty of dollars. I think Chase Manhattan was its paying agent. So when its quarterly or annual debt payment came
due, Iran told Chase to draw on its accounts and pay the bondholders. But Chase took orders from the State Department or the Defense
Department, I don't know which, and refused to pay. When the payment was not made, America and its allies claimed that Iran was
in default. They demanded the entire debt to be paid, as per the agreement that the Shah's puppet government had signed. America
simply grabbed the deposits that Iran had in the United States. This is the money that was finally returned to Iran without interest
under the agreement of 2016.
America was able to grab all of Iran's foreign exchange just by the banks interfering. The CIA has bragged that it can do
the same thing with Russia. If Russia does something that U.S. diplomats don't like, the U.S. can use the SWIFT bank payment system
to exclude Russia from it, so the Russian banks and the Russian people and industry won't be able to make payments to each other.
This prompted Russia to create its own bank-transfer system, and is leading China, Russia, India and Pakistan to draft plans
to de-dollarize.
BONNIE FAULKNER : I was going to ask you, why would loans in a country's domestic currency be preferable to the country
taking out a loan in a foreign currency? I guess you've explained that if they took out a loan in a domestic currency, they would
be able to repay it.
MICHAEL HUDSON : Yes.
BONNIE FAULKNER : Whereas a loan in a foreign currency would cripple them.
MICHAEL HUDSON : Yes. You can't create the money, especially if you're running a balance of payments deficit and if
U.S. foreign policy forces you into deficit by having someone like George Soros make a run on your currency. Look at the Asia crisis
in 1997. Wall Street funds bet against foreign currencies, driving them way down, and then used the money to pick up industry cheap
in Korea and other Asian countries.
This was also done to Russia's ruble. The only country that avoided this was Malaysia, under Mohamed Mahathir, by using capital
controls. Malaysia is an object lesson in how to prevent a currency flight.
But for Latin America and other countries, much of their foreign debt is held by their own ruling class. Even though it's denominated
in dollars, Americans don't own most of this debt. It's their own ruling class. The IMF and World Bank dictate tax policy to Latin
America – to un-tax wealth and shift the burden onto labor. Client kleptocracies take their money and run, moving it abroad
to hard currency areas such as the United States, or at least keeping it in dollars in offshore banking centers instead of reinvesting
it to help the country catch up by becoming independent agriculturally, in energy, finance and other sectors.
BONNIE FAULKNER : You say that: "While U.S. agricultural protectionism has been built into the postwar global system at
its inception, foreign protectionism is to be nipped in the bud." How has U.S. agricultural protectionism been built into the postwar
global system?
MICHAEL HUDSON : Under Franklin Roosevelt the Agricultural Adjustment Act of 1933 called for price supports for crops
so that farmers could earn enough to invest in equipment and seeds. The Agriculture Department was a wonderful department in spurring
new seed varieties, agricultural extension services, marketing and banking services. It provided public support so that productivity
in American agriculture from the 1930s to '50s was higher over a prolonged period than that of any other sector in history.
But in shaping the World Trade Organization's rules, the United States said that all countries had to promote free trade
and could not have government support, except for countries that already had it. We're the only country that had it. That's what's
called "grandfathering". The Americans said: "We already have this program on the books, so we can keep it. But no other country
can succeed in agriculture in the way that we have done. You must keep your agriculture backward, except for the plantation crops
and growing crops that we can't grow in the United States." That's what's so evil about the World Bank's development plan.
BONNIE FAULKNER : According to your book: "Domestic currency is needed to provide price supports and agricultural extension
services such as have made U.S. agriculture so productive." Why can't infrastructure costs be subsidized to keep down the economy's
overall cost structure if IMF loans are made in foreign currency?
MICHAEL HUDSON : If you're a farmer in Brazil, Argentina or Chile, you're doing business in domestic currency. It doesn't
help if somebody gives you dollars, because your expenses are in domestic currency. So if the World Bank and the IMF can prevent
countries from providing domestic currency support, that means they're not able to give price supports or provide government marketing
services for their agriculture.
America is a mixed economy. Our government has always subsidized capital formation in agriculture and industry, but it insists
that other countries are socialist or communist if they do what the United States is doing and use their government to support the
economy. So it's a double standard. Nobody calls America a socialist country for supporting its farmers, but other countries are
called socialist and are overthrown if they attempt land reform or attempt to feed themselves.
This is what the Catholic Church's Liberation Theology was all about. They backed land reform and agricultural self-sufficiency
in food, realizing that if you're going to support population growth, you have to support the means to feed it. That's why the United
States focused its assassination teams on priests and nuns in Guatemala and Central America for trying to promote domestic self-sufficiency.
BONNIE FAULKNER : If a country takes out an IMF loan, they're obviously going to take it out in dollars. Why can't they
take the dollars and convert them into domestic currency to support local infrastructure costs?
MICHAEL HUDSON : You don't need a dollar loan to do that. Now were getting in to MMT. Any country can create its own currency.
There's no reason to borrow in dollars to create your own currency. You can print it yourself or create it on your computers.
BONNIE FAULKNER: Well, exactly. So why don't these countries simply print up their own domestic currency?
MICHAEL HUDSON : Their leaders don't want to be assassinated. More immediately, if you look at the people in charge of
foreign central banks, almost all have been educated in the United States and essentially brainwashed. It's the mentality of foreign
central bankers. The people who are promoted are those who feel personally loyal to the United States, because they that that's
how to get ahead. Essentially, they're opportunists working against the interests of their own country. You won't have socialist
central bankers as long as central banks are dominated by the International Monetary Fund and the Bank for International Settlements.
BONNIE FAULKNER : So we're back to the main point: The control is by political means, and they control the politics and
the power structure in these countries so that they don't rebel.
MICHAEL HUDSON : That's right. When you have a dysfunctional economic theory that is destructive instead of productive,
this is never an accident. It is always a result of junk economics and dependency economics being sponsored. I've talked to people
at the U.S. Treasury and asked why they all end up following the United States. Treasury officials have told me: "We simply buy
them off. They do it for the money." So you don't need to kill them. All you need to do is find people corrupt enough and opportunist
enough to see where the money is, and you buy them off.
BONNIE FAULKNER : You write that "by following U.S. advice, countries have left themselves open to food blackmail." What
is food blackmail?
MICHAEL HUDSON : If you pursue a foreign policy that we don't like -- for instance, if you trade with Iran, which we're
trying to smash up to grab its oil -- we'll impose financial sanctions against you. We won't sell you food, and you can starve.
And because you've followed World Bank advice and not grown your own food, you will starve, because you're dependent on us, the
United States and our Free World Ó allies. Canada will no longer follow its own policy independently of the United States,
as it did with China in the 1950s when it sold it grain. Europe also is falling in line with U.S. policy.
BONNIE FAULKNER : You write that: "World Bank administrators demand that loan recipients pursue a policy of economic dependency
above all on the United States as food supplier." Was this done to support U.S. agriculture? Obviously it is, but were there other
reasons as well?
MICHAEL HUDSON : Certainly the agricultural lobby was critical in all of this, and I'm not sure at what point this became
thoroughly conscious. I knew some of the World Bank planners, and they had no anticipation that this dependency would be the result.
They believed the free-trade junk economics that's taught in the schools' economics departments and for which Nobel prizes are awarded.
When we're dealing with economic planners, we're dealing with tunnel-visioned people. They stayed in the discipline despite its
unreality because they sort of think that abstractly it makes sense. There's something autistic about most economists, which is
why the French had their non-autistic economic site for many years. The mentality at work is that every country should produce what
it's best at – not realizing that nations also need to be self-sufficient in essentials, because we're in a real world of economic
and military warfare.
BONNIE FAULKNER : Why does the World Bank prefer to perpetrate world poverty instead of adequate overseas capacity to
feed the peoples of developing countries?
MICHAEL HUDSON : World poverty is viewed as solution , not a problem. The World Bank thinks of poverty as low-priced
labor, creating a competitive advantage for countries that produce labor-intensive goods. So poverty and austerity for the World
Bank and IMF is an economic solution that's built into their models. I discuss these in my Trade, Development and Foreign Debt
book. Poverty is to them the solution, because it means low-priced labor, and that means higher profits for the companies bought
out by U.S., British, and European investors. So poverty is part of the class war: profits versus poverty.
BONNIE FAULKNER : In general, what is U.S. food imperialism? How would you characterize it?
MICHAEL HUDSON : Its aim is to make America the producer of essential foods and other countries producing inessential
plantation crops, while remaining dependent on the United States for grain, soy beans and basic food crops.
BONNIE FAULKNER : Does World Bank lending encourage land reform in former colonies?
MICHAEL HUDSON : No. If there is land reform, the CIA sends its assassination teams in and you have mass murder, as you
had in Guatemala, Ecuador, Central America and Columbia. The World Bank is absolutely committed against land reform. When the Forgash
Plan for a World Bank for Economic Acceleration was proposed in the 1950s to emphasize land reform and local-currency loans, a Chase
Manhattan economist to whom the plan was submitted warned that every country that had land reform turned out to be anti-American.
That killed any alternative to the World Bank.
BONNIE FAULKNER : Does the World Bank insist on client governments privatizing their public domain? If so, why, and what
is the effect?
MICHAEL HUDSON : It does indeed insist on privatization, pretending that this is efficient. But what it privatizes are
natural monopolies – the electrical system, the water system and other basic needs. Foreigners take over, essentially finance them
with foreign debt, build the foreign debt that they build into the cost structure, and raise the cost of living and doing business
in these countries, thereby crippling them economically. The effect is to prevent them from competing with the United States and
its European allies.
BONNIE FAULKNER : Would you say then that it is mainly America that has been aided, not foreign economies that borrow
from the World Bank?
MICHAEL HUDSON : That's why the United States is the only country with veto power in the IMF and World Bank – to make
sure that what you just described is exactly what happens.
BONNIE FAULKNER : Why do World Bank programs accelerate the exploitation of mineral deposits for use by other nations?
MICHAEL HUDSON : Most World Bank loans are for transportation, roads, harbor development and other infrastructure needed
to export minerals and plantation crops. The World Bank doesn't make loans for projects that help the country develop in its own
currency. By making only foreign currency loans, in dollars or maybe euros now, the World Bank says that its clients have to repay
by generating foreign currency. The only way they can repay the dollars spent on American engineering firms that have built their
infrastructure is to export – to earn enough dollars to pay back for the money that the World Bank or IMF have lent.
This is what John Perkins' book about being an economic hit man for the World Bank is all about. He realized that his job was
to get countries to borrow dollars to build huge projects that could only be paid for by the country exporting more – which required
breaking its labor unions and lowering wages so that it could be competitive in the race to the bottom that the World Bank and IMF
encourage.
BONNIE FAULKNER : You also point out in Super Imperialism that mineral resources represent diminishing assets,
so these countries that are exporting mineral resources are being depleted while the importing countries aren't.
MICHAEL HUDSON : That's right. They'll end up like Canada. The end result is going to be a big hole in the ground. You've
dug up all your minerals, and in the end you have a hole in the ground and a lot of the refuse and pollution – the mining slag and
what Marx called the excrements of production.
This is not a sustainable development. The World Bank only promotes the U.S. pursuit of sustainable development. So naturally,
they call their "Development," but their focus is on the United States, not the World Bank's client countries.
BONNIE FAULKNER : When Super Imperialism: The Economic Strategy of American Empire was originally published in
1972, how was it received?
MICHAEL HUDSON : Very positively. It enabled my career to take off. I received a phone call a month later by someone from
the Bank of Montreal saying they had just made $240 million on the last paragraph of my book. They asked what it would cost to have
me come up and give a lecture. I began lecturing once a month at $3,500 a day, moving up to $6,500 a day, and became the highest-paid
per diem economist on Wall Street for a few years.
I was immediately hired by the Hudson Institute to explain Super Imperialism to the Defense Department. Herman Kahn said
I showed how U.S. imperialism ran rings around European imperialism. They gave the Institute an $85,000 grant to have me go to the
White House in Washington to explain how American imperialism worked. The Americans used it as a how-to-do-it book.
The socialists, whom I expected to have a response, decided to talk about other than economic topics. So, much to my surprise,
it became a how-to-do-it book for imperialists. It was translated by, I think, the nephew of the Emperor of Japan into Japanese.
He then wrote me that the United States opposed the book being translated into Japanese. It later was translated. It was
received very positively in China, where I think it has sold more copies than in any other country. It was translated into Spanish,
and most recently it was translated into German, and German officials have asked me to come and discuss it with them. So the book
has been accepted all over the world as an explanation of how the system works.
BONNIE FAULKNER : In closing, do you really think that the U.S. government officials and others didn't understand how
their own system worked?
MICHAEL HUDSON : Many might not have understood in 1944 that this would be the consequence. But by the time 50 years went
by, you had an organization called "Fifty Years Is Enough." And by that time everybody should have understood. By the time Joe Stiglitz
became the World Bank's chief economist, there was no excuse for not understanding how the system worked. He was amazed to find
that indeed it didn't work as advertised, and resigned. But he should have known at the very beginning what it was all about. If
he didn't understand how it was until he actually went to work there, you can understand how hard it is for most academics to get
through the vocabulary of junk economics, the patter-talk of free trade and free markets to understand how exploitative and destructive
the system is.
BONNIE FAULKNER : Michael Hudson, thank you very much.
MICHAEL HUDSON : It's always good to be here, Bonnie. I'm glad you ask questions like these.
I've been speaking with Dr. Michael Hudson. Today's show has been: The IMF and World Bank: Partners in Backwardness. Dr.
Hudson is a financial economist and historian. He is president of the Institute for the Study of Long-Term Economic Trend, a Wall
Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972
book, Super Imperialism : The Economic Strategy of American Empire , a critique of how the United States exploited foreign economies
through the IMF and World Bank, the subject of today's broadcast, is posted in PDF format on his website at michael-hudson.com.
He is also author of Trade, Development and Foreign Debt , which is the academic sister volume to Super Imperialism. Dr. Hudson
acts as an economic advisor to governments worldwide on finance and tax law. Visit his website at michael-hudson.com.
Guns and Butter is produced by Bonnie Faulkner, Yarrow Mahko and Tony Rango. Visit us at
gunsandbutter.org to listen to past programs, comment on shows, or join
our email list to receive our newsletter that includes recent shows and updates. Email us at
[email protected]. Follow us
on Twitter at #gandbradio.
@Sonofrex
For starters, try reading David Graeber's 'Debt: The first 5000 years' for a comprehensive
account on concepts of money, property, debt and obligation from an anthropological
perspective which soundly buries your cherished assumptions and beliefs about the primacy of
private property and it's conflation with freedom. Perhaps one of the most compelling book
I've read in recent times.
"... Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the power lines that run along the rutted dirt streets. ..."
"... "It's a neoliberal government," she says. "It's a government that does not favor the people." ..."
"... The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow the pain. ..."
"... But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress. Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and joblessness is stuck above 9 percent ..."
"... Poverty afflicts a third of the population, and the figure is climbing. ..."
"... Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered by social programs. ..."
"... In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country has merely slipped back into the rut that has framed national life for as long as most people can remember. ..."
"... "We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'" ..."
"... "When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us. Poor people feel abandoned." ..."
On the ragged streets of the shantytown across the road, where stinking outhouses sit alongside shacks fashioned from rusted sheets
of tin, families have surrendered hopes that sewage lines will ever reach them.
They do not struggle to fashion an explanation for their declining fortunes: Since taking office more than three years ago, President
Mauricio Macri has broken with the budget-busting populism that has dominated Argentina for much of the past century, embracing the
grim arithmetic of economic orthodoxy.
Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting
Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the
power lines that run along the rutted dirt streets.
"It's a neoliberal government," she says. "It's a government that does not favor the people."
The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away
from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble
is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow
the pain.
Mr. Macri's supporters heralded his 2015 election as a miraculous outbreak of normalcy in a country with a well-earned reputation
for histrionics. He would cease the reckless spending that had brought Argentina infamy for defaulting on its debts eight times.
Sober-minded austerity would win the trust of international financiers, bringing investment that would yield jobs and fresh opportunities.
But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress.
Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the
same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and
joblessness is stuck above 9 percent.
Poverty afflicts a third of the population, and the figure is climbing.
Far beyond this country of 44 million people, Mr. Macri's tenure is testing ideas that will shape economic policy in an age of
recrimination over widening inequality. His presidency was supposed to offer an escape from the wreckage of profligate spending while
laying down an alternative path for countries grappling with the worldwide rise of populism. Now, his presidency threatens to become
a gateway back to populism. The Argentine economy is contracting. Inflation is running above 50 percent, and joblessness is stuck
above 9 percent. Poverty afflicts a third of the population. Credit Sarah Pabst for The New York Times
Image
The Argentine economy is contracting. Inflation is running above 50 percent, and joblessness is stuck above 9 percent. Poverty afflicts
a third of the population. Credit Sarah Pabst for The New York Times
As the October election approaches, Mr. Macri is contending with the growing prospect of a challenge from the president he succeeded,
Cristina Fernández de Kirchner, who faces a
series of criminal indictments for corruption . Her unbridled spending helped deliver the crisis that Mr. Macri inherited. Her
return would resonate as a rebuke of his market-oriented reforms while potentially yanking Argentina back to its accustomed preserve:
left-wing populism, in uncomfortable proximity to insolvency.
The Argentine peso lost half of its value against the dollar last year, prompting the central bank to lift interest rates to a
commerce-suffocating level above 60 percent. Argentina was forced to secure a $57 billion
rescue from the International
Monetary Fund , a profound indignity given that the fund is widely despised here for the austerity it imposed in the late 1990s,
turning an economic downturn into a depression.
For Mr. Macri, time does not appear to be in abundant supply. The spending cuts he delivered hit the populace immediately. The
promised benefits of his reforms -- a stable currency, tamer inflation, fresh investment and jobs -- could take years to materialize,
leaving Argentines angry and yearning for the past.
In much of South America, left-wing governments have taken power in recent decades as an angry corrective to dogmatic prescriptions
from Washington, where the Treasury and the I.M.F. have focused on the confidence of global investors as the key to development.
Left-wing populism has aimed to redistribute the gains from the wealthy to everyone else. It has aided the poor, while generating
its own woes --
corruption and depression in
Brazil , runaway inflation and financial ruin in Argentina. In Venezuela, uninhibited spending has turned the country with the
world's largest proven oil reserves into a land where
children starve .
Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered
by social programs.
In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country
has merely slipped back into the rut that has framed national life for as long as most people can remember.
"We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We
never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'"
Cultivating wealth
... ... ...
In the beginning, there was Juan Domingo Perón, the charismatic Army general who was president from 1946 to 1955, and then again
from 1973 to 1974. He employed an authoritarian hand and muscular state power to champion the poor. He and his wife, Eva Duarte --
widely known by her nickname, Evita -- would dominate political life long after they died, inspiring politicians across the ideological
spectrum to claim their mantle.
Among the most ardent Peronists were Néstor Kirchner, the president from 2003 to 2007, and his wife, Cristina Fernández de Kirchner,
who took office in 2007, remaining until Mr. Macri was elected in 2015.
Their version of Peronism -- what became known as Kirchnerism -- was decidedly left-wing, disdaining global trade as a malevolent
force. They expanded cash grants to the poor and imposed taxes on farm exports in a bid to keep Argentine food prices low.
As the country's farmers tell it, Kirchnerism is just a fancy term for the confiscation of their wealth and the scattering of
the spoils to the unproductive masses. They point to Ms. Kirchner's 35 percent tax on soybean exports.
"We had a saying," Mr. Tropini says. "'For every three trucks that went to the port, one was for Cristina Kirchner.'"
reduction in export taxes.
"You could breathe finally," Mr. Tropini, the farmer, says.
He was free of the Kirchners, yet stuck with nature. Floods in 2016 wiped out more than half of his crops. A drought last year
wreaked even more havoc.
"This harvest, this year," he says, "is a gift from God."
But if the heavens are now cooperating, and if the people running Buenos Aires represent change, Mr. Tropini is critical of Mr.
Macri's failure to overcome the economic crisis.
A weaker currency makes Argentine soybeans more competitive, but it also increases the cost of the diesel fuel Mr. Tropini needs
to run his machinery. High interest rates make it impossible for him to buy another combine, which would allow him to expand his
farm.
In the first years of Mr. Macri's administration, the government lifted controls on the value of the peso while relaxing export
taxes. The masters of international finance delivered a surge of investment. The economy expanded by nearly 3 percent in 2017, and
then accelerated in the first months of last year.
But as investors grew wary of Argentina's deficits, they fled, sending the peso plunging and inflation soaring. As the rout continued
last year, the central bank mounted a futile effort to support the currency, selling its stash of dollars to try to halt the peso's
descent. As the reserves dwindled, investors absorbed the spectacle of a government failing to restore order. The exodus of money
intensified, and another potential default loomed, leading a chastened Mr. Macri to accept a rescue from the dreaded IMF.
Administration officials described the unraveling as akin to a natural disaster: unforeseeable and unavoidable. The drought hurt
agriculture.
Money was flowing out of developing countries as the Federal Reserve continued to lift interest rates in the United States, making
the American dollar a more attractive investment.
But the impact of the Fed's tightening had been widely anticipated. Economists fault the government for mishaps and complacency
that left the country especially vulnerable.
.... ... ...
Among the most consequential errors was the government's decision to include Argentina's central bank in a December 2017 announcement
that it was raising its inflation target. The markets took that as a signal that the government was surrendering its war on inflation
while opting for a traditional gambit: printing money rather than cutting spending.
... ... ...
The government insists that better days are ahead. The spending cuts have dropped the budget deficit to a manageable 3 percent
of annual economic output. Argentina is again integrated into the global economy.
"We haven't improved, but the foundations of the economy and society are much healthier," said Miguel Braun, secretary of economic
policy at the Treasury Ministry. "Argentina is in a better place to generate a couple of decades of growth."
... ... ...
Their television flashes dire warnings, like "Danger of Hyper Inflation." Throughout the neighborhood, people decry the sense
that they have been forsaken by the government.
Trucks used to come to castrate male dogs to control the packs of feral animals running loose. Not anymore. Health programs for
children are less accessible than they were before, they said.
Daisy Quiroz, 71, a retired maid, lives in a house that regularly floods in the rainy season.
"When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us.
Poor people feel abandoned."
... ... ...
Daniel Politi contributed reporting from Buenos Aires. Peter S. Goodman is a London-based European economics correspondent.
He was previously a national economic correspondent in New York. He has also worked at The Washington Post as a China correspondent,
and was global editor in chief of the International Business Times. @
petersgoodman
"... Neoliberalism is an integral part of this foreign policy agenda. It constitutes an all encompassing mechanism of economic destabilization. Since the 1997 Asian crisis, the IMF-World Bank structural adjustment program (SAP) has evolved towards a broader framework which consists in ultimately undermining national governments' ability to formulate and implement national economic and social policies. ..."
The world is at a dangerous crossroads. The United States and its allies have launched a military adventure which threatens
the future of humanity. Major military and covert intelligence operations are being undertaken simultaneously in the Middle East,
Eastern Europe, sub-Saharan Africa, Central Asia and the Far East. The US-NATO military agenda combines both major theater operations
as well as covert actions geared towards destabilizing sovereign states.
America's hegemonic project is to destabilize and destroy countries through acts of war, covert operations in support of terrorist
organizations, regime change and economic warfare. The latter includes the imposition of deadly macro-economic reforms on indebted
countries as well the manipulation of financial markets, the engineered collapse of national currencies, the privatization of State
property, the imposition of economic sanctions, the triggering of inflation and black markets.
The economic dimensions of this military agenda must be clearly understood. War and Globalization are intimately related. These
military and intelligence operations are implemented alongside a process of economic and political destabilization targeting specific
countries in all major regions of World.
Neoliberalism is an integral part of this foreign policy agenda. It constitutes an all encompassing mechanism of economic destabilization.
Since the 1997 Asian crisis, the IMF-World Bank structural adjustment program (SAP) has evolved towards a broader framework which
consists in ultimately undermining national governments' ability to formulate and implement national economic and social policies.
In turn, the demise of national sovereignty was also facilitated by the instatement of the World Trade Organization (WTO) in 1995,
evolving towards the global trading agreements (TTIP and TPP) which (if adopted) would essentially transfer state policy entirely
into the hands of corporations. In recent years, neoliberalism has extend its grip from the so-called developing countries to the
developed countries of both Eastern and Western Europe. Bankruptcy programs have been set in motion. Island, Portugal, Greece, Ireland,
etc, have been the target of sweeping austerity measures coupled with the privatization of key sectors of the national economy.
The global economic crisis is intimately related to America's hegemonic agenda. In the US and the EU, a spiralling defense budget
backlashes on the civilian sectors of economic activity. "War is Good for Business": the powerful financial groups which routinely
manipulate stock markets, currency and commodity markets, are also promoting the continuation and escalation of the Middle East war.
A worldwide process of impoverishment is an integral part of the New World Order agenda.
Beyond the Globalization of Poverty
Historically, impoverishment of large sectors of the World population has been engineered through the imposition of IMF-style macro-economic
reforms. Yet, in the course of the last 15 years, a new destructive phase has been set in motion. The World has moved beyond the
"globalization of poverty": countries are transformed in open territories,
State institutions collapse, schools and hospitals are closed down, the legal system disintegrates, borders are redefined, broad
sectors of economic activity including agriculture and manufacturing are precipitated into bankruptcy, all of which ultimately leads
to a process of social collapse, exclusion and destruction of human life including the outbreak of famines, the displacement of entire
populations (refugee crisis).
This "second stage" goes beyond the process of impoverishment instigated in the early 1980s by creditors and international financial
institutions. In this regard, mass poverty resulting from macro-economic reform sets the stage of a process of outright destruction
of human life.
In turn, under conditions of widespread unemployment, the costs of labor in developing countries has plummeted. The driving force
of the global economy is luxury consumption and the weapons industry.
The New World Order
Broadly speaking, the main corporate actors of the New World Order are
Wall Street and the Western banking conglomerates including its offshore money laundering facilities, tax havens, hedge funds
and secret accounts,
the Military Industrial Complex regrouping major "defense contractors", security and mercenary companies, intelligence outfits,
on contract to the Pentagon;
the Anglo-American Oil and Energy Giants,
The Biotech Conglomerates, which increasingly control agriculture and the food chain;
Big Pharma,
The Communication Giants and Media conglomerates, which constitute the propaganda arm of the New World Order.
There is of course overlap, between Big Pharma and the Weapons industry, the oil conglomerates and Wall Street, etc.
These various corporate entities interact with government bodies, international financial institutions, US intelligence. The state
structure has evolved towards what Peter Dale Scott calls the "Deep State", integrated by covert intelligence bodies, think tanks,
secret councils and consultative bodies, where important New World Order decisions are ultimately reached on behalf of powerful corporate
interests.
In turn, intelligence operatives increasingly permeate the United Nations including its specialized agencies, nongovernmental
organizations, trade unions, political parties.
What this means is that the executive and legislature constitute a smokescreen, a mechanism for providing political legitimacy
to decisions taken by the corporate establishment behind closed doors.
Media Propaganda
The corporate media, which constitutes the propaganda arm of the New World Order, has a long history whereby intelligence ops
oversee the news chain. In turn, the corporate media serves the useful purpose of obfuscating war crimes, of presenting a humanitarian
narrative which upholds the legitimacy of politicians in high office.
Acts of war and economic destabilization are granted legitimacy. War is presented as a peace-keeping undertaking.
Both the global economy as well as the political fabric of Western capitalism have become criminalized. The judicial apparatus
at a national level as well the various international human rights tribunals and criminal courts serve the useful function of upholding
the legitimacy of US-NATO led wars and human rights violations.
Destabilizing Competing Poles of Capitalist Development
There are of course significant divisions and capitalist rivalry within the corporate establishment. In the post Cold War era,
the US hegemonic project consists in destabilizing competing poles of capitalist development including China, Russia and Iran as
well as countries such as India, Brazil and Argentina.
In recent developments, the US has also exerted pressure on the capitalist structures of the member states of the European Union.
Washington exerts influence in the election of heads of State including Germany and France, which are increasingly aligned with Washington.
The monetary dimensions are crucial. The international financial system established under Bretton Woods prevails. The global financial
apparatus is dollarized. The powers of money creation are used as a mechanism to appropriate real economy assets. Speculative financial
trade has become an instrument of enrichment at the expense of the real economy. Excess corporate profits and multibillion dollar
speculative earnings (deposited in tax free corporate charities) are also recycled towards the corporate control of politicians,
civil society organizations, not to mention scientists and intellectuals. It's called corruption, co-optation, fraud.
Latin America: The Transition towards a "Democratic Dictatorship"
In Latin America, the military dictatorships of the 1960s and 1970s have in large part been replaced by US proxy regimes, i.e.
a democratic dictatorship has been installed which ensures continuity. At the same time the ruling elites in Latin America have remoulded.
They have become increasingly integrated into the logic of global capitalism, requiring an acceptance of the US hegemonic project.
Macro-economic reform has been conducive to the impoverishment of the entire Latin America region.
In the course of the last 40 years, impoverishment has been triggered by hyperinflation, starting with the 1973 military coup
in Chile and the devastating reforms of the 1980s and early 1990s.
The implementation of these deadly economic reforms including sweeping privatization, trade deregulation, etc. is coordinated
in liaison with US intelligence ops, including the "Dirty war" and Operation Condor, the Contra insurrection in Nicaragua, etc.
The development of a new and privileged elite integrated into the structures of Western investment and consumerism has emerged.
Regime change has been launched against a number of Latin American countries.
Any attempt to introduce reforms which departs from the neoliberal consensus is the object of "dirty tricks" including acts of
infiltration, smear campaigns, political assassinations, interference in national elections and covert operations to foment social
divisions. This process inevitably requires corruption and cooptation at the highest levels of government as well as within the corporate
and financial establishment. In some countries of the region it hinges on the criminalization of the state, the legitimacy of money
laundering and the protection of the drug trade.
The above text is an English summary of Prof. Michel Chossudovsky's Presentation, National Autonomous University of Nicaragua,
May 17, 2016. This presentation took place following the granting of a Doctor Honoris Causa in Humanities to Professor Chossudovsky
by the National Autonomous University of Nicaragua (UNAN)
While Brexit and Trump have been making
the headlines, the Italian economy has been sliding into a technical recession (again). Both the OECD and
the European Central Bank (ECB) have lowered the growth forecasts for Italy to negative numbers, and in what
analysts see as a precautionary move, the ECB is reviving its sovereign bond buying programme, which it had
started to unwind just five months earlier.
"Don't underestimate the impact of the Italian recession," is what French Economy Minister Bruno Le Maire
told Bloomberg News (Horobin 2019). "We talk a lot about Brexit, but we don't talk much about an Italian
recession that will have a significant impact on growth in Europe and can impact France, because it's one of
our most important trading partners." More important than trade, however, and what Le Maire is not stating,
is that French banks are holding around €385 billion of Italian debt, derivatives, credit commitments and
guarantees on their balance sheets, while German banks are holding €126 billion of Italian debt (as of the
third quarter of 2018, according to the Bank for International Settlements).
In light of these exposures to Italian debt, it is no wonder that Le Maire, along with the European
Commission, is worried by Italy's third recession in a decade -- as well as by the growing anti-euro rhetoric
and posturing of Italy's coalition government, comprised by the Five-Star Movement (M5S) and the Lega. The
knowledge that Italy is too big to fail is fuelling the audacity of Italy's coalition government in its
attempt to reclaim fiscal policy space by openly flouting the budgetary rules of the E.U.'s Economic and
Monetary Union (EMU).
The result is a catch-22. The more the European Commission tries to bring the Italian government into
line, the more it will feed the anti-establishment and anti-euro forces in Italy. On the other hand, the
more the European Commission gives in to the demands of the Italian government, the more it will fritter
away its credibility as the guardian of the EMU's Stability and Growth Pact. This stalemate is not going
away as long as Italy's economy remains paralyzed.
A Crisis of the Post-Maastricht Treaty Order of Italian Capitalism
It is therefore vital to understand the true origins of Italy's economic crisis in order to find pathways
out of Italy's permanent stagnation. In a
new paper
, I provide an evidence-based pathology of Italy's recession -- which, I argue, must be regarded
as a crisis of the post-Maastricht Treaty order of Italian capitalism, as Thomas Fazi (2018) calls it. Until
the early 1990s, Italy enjoyed decades of relatively robust economic growth, during which it managed to
catch up with other Eurozone nations in income (per person) (Figure 1). In 1960, Italy's per capita GDP (at
constant 2010 prices) was 85% of French per capita GDP and 74% of (weighted average) per capita GDP in
Belgium, France, Germany and the Netherlands (the Euro-4 economies). By the mid-1990s, Italy had almost
caught up with France (Italian GDP per person equalled 97% of French per capita income) and also with the
Euro-4 (Italian GDP per capita was 94% of per capita GDP in the Euro-4).
Figure 1
Three decades of catching up, 25 years of falling behind: real GDP per person in Italy relative to
France/Euro-4, 1960-2018
Source
: author's calculation based on AMECO data.
But then a very steady decline began (see Figure 1), erasing decades of (income) convergence. The income
gap between Italy and France is now (as of 2018) 18 percentage points, which is more than what it was in
1960; Italian GDP per capita is 76% of per capita GDP in the Euro-4 economies. Beginning in the early to
mid-1990s, Italy's economy began to stumble and then fall behind, as all major indicators -- income per person,
labour productivity, investment, export market shares, etc. -- began a very steady decline.
It is not a coincidence that the sudden reversal of Italy's economic fortunes occurred after Italy's
adoption of the "legal and policy superstructure" imposed by the Maastricht Treaty of 1992, which cleared
the road for the establishment of the EMU in 1999 and the introduction of the common currency in 2002.
Italy, as I show in the paper, has been the star pupil in the Eurozone class -- the one economy that committed
itself most strongly and consistently to the fiscal austerity and structural reforms that form the essence
of the EMU macroeconomic rulebook (Costantini 2017, 2018). Italy kept closer to the rules than France and
Germany and paid heavily for this: The permanent fiscal consolidation, the persistent wage restraint and the
overvalued exchange rate killed Italian aggregate demand -- and the demand shortage asphyxiated the growth of
output, productivity, jobs and incomes. Italy's stasis is an object lesson for all Eurozone economies,
but -- paraphrasing G.B. Shaw -- as a warning, not as an example.
Perpetual Fiscal Austerity
Italy did more than most other Eurozone members in terms of self-imposed austerity and structural reform
in order to satisfy the conditions of EMU (Halevi 2019). This is clear when comparing Italy's fiscal policy
post-1992 to that of France and Germany. Various Italian governments ran continuous primary budget surpluses
(defined as public expenditure excluding interest payments on public debt, minus public revenue), averaging
3% of GDP per year during 1995-2008. French governments, in contrast, ran primary
deficits
of 0.1%
of GDP each year on average during the same period, while German governments managed to generate a primary
surplus of 0.7% on average per year during those same 14 years. Italy's permanent primary surpluses during
1995-2008 would have reduced its public debt-to-GDP ratio by around 40 percentage points -- from 117% in 1994
to 77% in 2008 (while keeping all other factors constant). But slow (nominal) growth relative to high
(nominal) interest rates pushed up the debt ratio by 23 percentage points and washed away more than half of
the public debt-to-GDP reductions of 40 percentage points achieved by austerity. Could it be true that
Italy's permanent austerity, intended to lower the debt ratio by running permanent primary surpluses,
backfired because it slowed down economic growth?
Italy's governments (including the left-of-centre Renzi coalition) continued to run significant primary
budget surpluses (of more than 1.3% of GDP on average per year) during the crisis period of 2008-2018.
Showing permanent fiscal discipline was a top priority, as Prime Minister Mario Monti admitted in a 2012
interview with CNN, even if that meant "destroying domestic demand" and pushing the economy into decline.
Italy's almost "Swabian" commitment to fiscal discipline stands in some contrast to the French ("
laissez
aller
") attitudes: The French government ran primary deficits at an average of 2% of GDP during
2008-2018 and allowed its public debt-to-GDP ratio to rise to almost 100% in 2018. The cumulative fiscal
stimulus thus provided by the French state amounted to €461 billion (in constant 2010 prices), whereas the
cumulative fiscal drain on Italian domestic demand was €227 billion. The Italian budget cuts show up in
non-trivial declines in its public expenditure on social expenditure per person, which is now (as of 2018)
around 70% of public social spending per capita in Germany and France. One doesn't dare speculate what the
"Gilets Jaunes" (yellow vest) protests in France would have looked like if France had put through an
Italian-style fiscal consolidation post-2008.
Permanent Real Wage Restraint
When Italy signed the Maastricht Treaty, its high rates of inflation and unemployment were regarded as
major problems. Inflation was blamed on the "excessive" power of labour unions and an "excessively"
centralized wage bargaining system, which resulted in strong wage-push inflation and a profit squeeze -- as
wage growth tended to exceed labour productivity growth, which lowered the profit share. Seen this way, the
blame for Italy's high unemployment could be shifted onto its "rigid" labour markets and too strongly
protected "worker aristocracy." Bringing down inflation and restoring profitability required wage
moderation, which in turn could only be achieved by a radical deregulation of labour markets, or what is
euphemistically called, "structural reforms."
Italy does not have a statutory minimum wage (unlike France) and also does not have a generous
unemployment benefit system (in terms of unemployment insurance replacement rates and duration, and
entitlement conditions) compared with the E.U. average. Employment protection for regular employees in Italy
is roughly at the same level as job protection in France and Germany. Italy's structural labour market
reforms involved drastically reducing employment protection for temporary workers, and as a result, the
share of temporary workers in total Italian employment increased from 10% during 1991-1993 to 18.5% in 2017.
Between 1992 and 2008, total (net) employment in Italy increased by 2.4 million new jobs, of which almost
three-quarters (73%) were fixed-term jobs. In France, by comparison, (net) employment grew by 3.6 million
jobs during 1992-2008, of which 84% were regular (permanent) jobs and only 16% were temporary positions.
In addition, the bargaining power of unions was reduced by the abandoning of the target of full
employment in favour of public debt reduction (Costantini 2017) and by a much more restrictive
(anti-inflation) central bank policy and the fixed exchange rate. As a result, real wage growth per
employee, which averaged 3.2% per year during 1960-1992, was lowered to a mere 0.1% per year during the
period 1992-1999 and to 0.6% per annum during 1999-2008. Within the E.U., Italy's turnaround was remarkable:
From 1992 through 2008, the growth of Italian real wages per worker (0.35% per year) was only half the real
wage growth in the Euro-4 (0.7% per annum) and it was even lower compared to real wage growth in France
(0.9% per year). Interestingly, from 1992 through2008, Italian real wage growth per employee was slightly
lower than (already stingy) German real wage growth (0.4% per year). To see the long-run picture, Figure 2
plots the ratio of the real wage of an Italian worker to the real wage of the average French, German and
Euro-4 worker from 1960 through2018. In the early 1960s, the average wage of Italian workers was about 85%
of the French wage, and this ratio increased to 92% in 1990-1991. Starting in 1992, the Italian real wage
began a steady decline in terms of the average French wage -- and in 2018, the average Italian employee earned
only 75% of the wage earned by her/his French comrade. The wage gap between Italy and France is bigger today
than it was in the 1960s. The same pattern holds when one compares Italian wages to German and/or Euro-4
wages.
Figure 2
Three decades of catching up, 25 years of falling behind: real wage per employee in Italy relative to
France / Germany / Euro-4, 1960-2018
Source
: author's calculation based on AMECO data.
Italy's wage moderation proved an effective strategy to kill three (not just two) birds with only one
stone. First, wage restraint helped to bring down inflation -- to 3.4% on average per year from 1992 through
1999 (from 9.6% on average per annum from 1960-1992) and further down to 2.5% per year from 1999 through
2008 and 1.1% from 2008 through 2018. Italy is no longer prone, in a structural sense, to high and
accelerating inflation. Second, wage restraint increased the labour intensity of Italy's GDP growth -- and thus
reduced unemployment. Italy's unemployment rate peaked in the mid-1990s at more than 11%, but labour market
deregulation and wage restraint successfully brought down unemployment to 6.1% in 2007 and 6.7% in
2008 -- which was lower than the unemployment rates of France (which equaled 8% in 2007 and 7.4% in 2008) and
Germany (where unemployment was 8.5% in 2007 and 7.4% in 2008). Finally, as intended, wage moderation led to
a substantial increase in the profit share of Italy's GDP: The profit share rose by more than 5.5 percentage
points, from 36% in 1991 to about 41.5% from 2000 through 2002, after which it stabilized around 40% until
2008. During the 1990s, the recovery of the profit share was considerably stronger in Italy than in France,
and comparable to what happened in Germany -- notwithstanding the fact that Italy's profit share was already
relatively high to begin with.
Italy's structural reforms of the 1990s paid off handsomely in terms of a higher profit share, in other
words, and Italy's profit share remained substantially higher than that of France and Germany. With lowered
inflation, effective wage restraint, declining unemployment, public indebtedness on the decline and the
profit share considerably raised, Italy appeared to be set for a long period of strong growth. It did not
happen. The operation was carried out successfully, but the patient died. According to the coroner's
post-mortem, the cause of death was a structural lack of aggregate demand.
The Suffocation of Italian Aggregate Demand after 1992
By keeping close to the EMU rulebook, Italian economic policy created a chronic shortage of (domestic)
demand. Domestic demand growth per Italian averaged 0.25% per year from 1992 through2018 -- a sharp decline
compared to the domestic demand growth (of 3.3% per year) recorded from 1960 through1992 and also much below
domestic demand growth (of 1.1% per person per year) in the Euro-4 countries. Italy's real export growth
(per person) also declined, from 6.6% on average per year from 1960 through 1992 to 3% per year from 1992
through 2018. Average annual export growth (per person) was 4.4% in the Euro-4 countries from 1992 through
2018. Italy's chronic demand shortage reduced capacity utilization (especially in manufacturing) and this,
in turn, lowered the profit rate. According to my estimates, capacity utilization in Italian manufacturing
declined by a staggering 30 percentage points relative to capacity utilization in French manufacturing
between 1992 and 2015.
The utilization rate of Italian manufacturing relative to German manufacturing declined from 110% in 1995
to 76% in 2008, and sunk further to 63% in 2015 -- a decline by a stunning 47 percentage points. Lower capacity
utilization reduced the rate of profit in Italian manufacturing by 3 to 4 percentage points relative to
French and German profit rates. This must have considerably depressed Italian manufacturing investment and
growth. Let me emphasize the fact that Italy's profit rate declined even when the share of profits in income
increased. This means that Italy's strategy of fiscal austerity and wage restraint proved to be
counterproductive, because it failed to improve the profit rate: The drop in demand and capacity utilization
had a bigger (negative) impact on firm profitability than the increase in the profit share.
As I argue in the paper, this condition of chronic demand shortage was created, in particular, by (
a
)
perpetual fiscal austerity, (
b
) permanent real wage restraint, and (
c
) a lack of
technological competitiveness which, in combination with an unfavourable (euro) exchange rate, reduces the
ability of Italian firms to maintain their export market shares in the face of increasing competition of
low-wage countries (China in particular). These three factors are depressing demand; reducing capacity
utilization and lowering firm profitability; and hurting investment, innovation, and productivity growth.
They are hence locking the country into a state of permanent decline, characterized by the impoverishment of
the productive matrix of the Italian economy and the quality composition of its trade flows (Simonazzi et
al. 2013).
Italy's manufacturing sector is not "technology intensive" and suffers from stagnating productivity. As
Figures 3 and 4 illustrate, the cost competitiveness of Italian manufacturers vis-à-vis the Euro-4 countries
depends on low wages and not on superior productivity performance. Whereas industrial workers in France and
Germany were earning €35 per hour (in constant 2010 prices) in 2015, and their colleagues in Belgium and the
Netherlands earned even more, Italian workers in manufacturing were bringing home only €23 per hour (in
constant 2010 prices) -- or one-third less (see Figure 3). But at the same time, industrial labour productivity
per hour of work is considerably higher in France and Germany (at €53 per hour in constant 2010 prices) than
in Italy, where it is around €33 per hour (Figure 4). Italian manufacturers are thus taking the low road,
while firms in the Euro-4 countries are travelling on the high road. Or in other words, compared with German
and French manufacturers, Italian firms suffer from a lack of technological strength, which in Germany is
based on high productivity, innovative efforts and high product quality. True, Italian firms do stand out
for their high relative quality in more traditional, lower-tech export products such as footwear, textiles,
and other non-metallic mineral products. But they have been steadily losing ground in export markets of more
dynamic products characterized by higher levels of R&D and technology intensity, such as chemicals,
pharmaceuticals and communications equipment (Bugamelli
et al.
2018).
Locked into a Position of Structural Weakness
For two reasons, this specialization in low- and low-medium technology activities locks the country into
a quasi-permanent position of structural weakness. The first is that the exchange-rate elasticity of export
demand is larger for traditional exports than for medium- and high-tech exports. As a result, the
appreciation of the euro did hurt Italian exporters of traditional products harder than German and French
firms exporting more "dynamic" goods and services. Thus, the overvalued euro penalizes Italian export growth
more than it damages export growth in the Euro-4 economies.
The second factor is that Italian firms are operating in global markets which are more strongly exposed
to the growing competition of low-wage countries and China in particular. In 1999, 67% of Italy's exports
consisted of (traditional) products exposed to medium to high competition from Chinese firms -- compared to a
similar exposure to Chinese competition of 45% of exports in France and 50% of exports in Germany (Bugamelli
et al
. 2018). The share of Italy's exports in world imports declined from 4.5% in 1999 to 2.9% in
2016 -- and the market share loss was heavily concentrated in more traditional market segments characterized by
high exposure to Chinese competition (Bugamelli
et al.
2018). As Chinese and other developing
economy firms continue to expand their production capabilities and to upscale, competitive pressures will
mount in medium- and medium-high tech segments as well. Italian firms have difficulties facing competition
from low-wage countries: They are generally too small to wield any pricing power, too often single-product
producers unable to diversify market risks, and too dependent on foreign markets, because their home market
is in the doldrums.
Figure 3
Real wage per hour of work in manufacturing: Italy versus the Euro-4 countries, 1970-2015 (euro's,
constant 2010 prices)
Source
: author's calculation based on EU-KLEMS (Jäger 2017).
Figure 4
Manufacturing labour productivity per hour of work: Italy versus the Euro-4
countries, 1970-2015 (euro's, constant 2010 prices)
Source
: author's calculation based on EU-KLEMS (Jäger 2017).
Italy's Permanent Crisis Is a Warning for the Eurozone
There are rational ways to get the Italian economy out of the current paralysis -- none of them easy, and
all of them founded on a long-term strategy of "walking on two legs": (a) reviving domestic (and export)
demand, and (b) diversifying and upgrading the productive structure and innovative capabilities and
strengthening the technological competitiveness of Italy's exports (to get away from direct wage-cost
competition with China). This means that both austerity and real wage growth suppression must stop. Instead,
the Italian government should gear up for providing unambiguous directional thrust to the economy by means
of higher public investment (in public infrastructure and "greening" and decarbonizing energy and
transportation systems) and novel industrial policies to promote innovation, entrepreneurship and stronger
technological competitiveness.
There is no dearth of constructive proposals by Italian economists to help their economy out of the
current mess -- including Guarascio and Simonazzi (2016), Lucchese et al. (2016), Pianta et al. (2016),
Mazzucato (2013), Dosi (2016), and Celi et al. (2018). These proposals all centre on creating a
self-reinforcing process of investment-led and innovation-driven growth, orchestrated by an "entrepreneurial
state" and founded on relatively regulated and co-ordinated firm-worker relationships, rather than on
deregulated labour markets and hyper-flexible employment relations. These proposals might work well.
The same cannot be said, however, of the "one-leg" fiscal stimulus proposed by the M5S-Lega coalition
government, the aim of which is a short-run revival of domestic demand by means of higher public
(consumption) spending. None of the proposed spending will help solving Italy's structural problems. What is
completely lacking is any longer-term directional thrust, or the second leg of a viable strategy -- which the
neoliberal Lega will be unwilling to provide and the "progressive-in-name-only" M5S seems incapable of
devising (Fazio 2018). Plus ça change, plus c'est la même chose.
More importantly, any rational "two-leg" developmental strategy will be incompatible with sticking to the
EMU macroeconomic rulebook and keeping financial markets calm, which are supposed to act as the
disciplinarian of Eurozone sovereigns (Costantini 2018; Halevi 2019). This is clear from what happened when
the M5S-Lega government came up with an expansionary Draft Budgetary Plan (DBP) for 2019. The total impact
of the one-leg fiscal stimulus initially proposed in the 2019 DBP amounted to an estimated 1.2% of GDP in
2019, 1.4% in 2020 and 1.3% in 2021 -- and even this minute budgetary expansion triggered strong negative
responses from the European Commission and increases in Italian bond yields.
Blanchard
et al.
(2018, p. 2) formalize this status quo in a mechanical debt-dynamics model and
conclude that the 2019 DBP risks triggering "unmanageable spreads and serious crisis, including involuntary
exit from the Eurozone." Blanchard
et al
. (2018, p. 16) argue for a fiscally neutral budget, which
they think would lead to lower interest rates and "probably" (in their words) to higher growth and
employment. Equations, graphs and technocratic econospeak are competently used to turn what in fact
constitutes a very modest transgression of the EMU rulebook into a low-probability- catastrophic event -- which
everyone would want to avoid (see Costantini 2018). What is tragic is that the 2019 DBP does not come close
to what would be needed for a rational strategy. All the sound and fury is for nothing.
Worse still is the fact that maintaining Italy's status quo, which is what a fiscally neutral budget
would mean, carries a real, but unrecognized low-probability, high-impact risk: a breakdown of political and
social stability in the country. Continued stagnation will feed the resentment and anti-establishment,
anti-euro forces in Italy. This will destabilize not just Italy, but the entire Eurozone. Italy's crisis
thus constitutes a warning to the Eurozone as a whole: Continued austerity and real wage restraint, in
combination with the de-democratization of macroeconomic policymaking, make for a "dangerous game" (Costantini
2018) -- a game which risks further empowering anti-establishment forces elsewhere in the Eurozone as well.
This is like opening Pandora's box. No one can tell where this will end. Economists (including Italians)
carry an enormous responsibility in all this, both because they are much to blame for the chaos and because
they fail to continue to unite behind rational strategic solutions to resolve the Italian crisis. "Perhaps,"
John Maynard Keynes wrote, "it is historically true that no order of society ever perishes save by its own
hand" (Keynes 1919). Rational economists have to prove Keynes' verdict wrong, starting in Italy -- if only
because the Brexit mess appears to be beyond redemption.
Article seems to ignore why Germany is holding so much Italian Debt, which to my reading is Germany wanted
to create a captured market and kill off export competition with the foundation of a currency union at the
exchange rates set and provision of easy credit for German goods, with the long term goal of creating a 4th
Reich by means of capital slavery. Like climate change, many Italian intellectual elite knew this was going to
happen, but that it would enrich them at the cost to both the old capital elite and working classes, with the
bill falling due long after they had passed away.
When people talk about Italy being unstable: From the post, which describes the stability of austerity >
Italy kept closer to the rules than France and Germany and paid heavily for this: The permanent fiscal
consolidation, the persistent wage restraint and the overvalued exchange rate killed Italian aggregate
demand -- and the demand shortage asphyxiated the growth of output, productivity, jobs and incomes. Italy's
stasis is an object lesson for all Eurozone economies, but -- paraphrasing G.B. Shaw -- as a warning, not as an
example.
And people wonder why the Movimento Cinque Stelle arose? Or why Matteo Salvini, Trump imitator, now has so
much influence?
All of the graphs show that the average person in Italy has been made poorer because of EU policies and the
euro. The remarkable thing is that Italians still want to remain in the EU and in the euro because these
supranational structures keep the Italian state in line. Yet job creation is stalled. There is a considerable
brain drain. The Mezzogiorno is gradually losing population–emptying out because the economic prospects are so
dire.
And the left is in collapse because of years of Renzi's Blairism / Clintonism.
"... "They're only up in arms if they believe that there is an alternative." ..."
"... "Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel vision, distracting attention from understanding how economic society actually works in destructive ways." ..."
"... MH: It's becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free market -- that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly rent and financial extraction. ..."
"... JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring. It certainly wasn't in Paul Samuelson's textbook that we were given. ..."
"... Neoliberalism actually started with Carter in the late 1970's, and it was Volcker's monetary assault that helped lose him the election (and of course the Iran hostage crisis). ..."
"... The outcomes were not so predetermined and could have been Carter-Callaghan rather than the Reagan-Thatcher duo that did so much to force the world along the neoliberal path, and bring us "New" Neoliberal Labour (that Thatcher actually stated was her greatest achievement) ..."
"... I think evil takes on a life of its own. Over the course of civilization it gets standardized. But what I see happening right now is a bunch of apoplectic, frantic "oligarchs" with egg on their face begging us all to help them change. ..."
"... I don't wish to mount a defense of the Republican Elite; the system did pressure towards money-love. However, there were counter balancing features. Money was vital, but so was virtue. Honour, courage, dignity were ..."
"... A Roman aristocrat had to perform the minimum set required military campaigns. Only intellectual freaks such as Cicero could climb the hierarchy without making somekind of significant military achievement. ..."
"... Caesar won the Laural crown (?) through genuine acts of bravery. Roman aristocrats risked their lives & died in war. And their troops knew it. ..."
"... Systems of Survival ..."
"... Money addiction -- I have trouble reconciling that concept with the short-term biases of the wealthy and their seeming lack of interest in economic growth. They aren't happy with a bigger slice of pie from a bigger pie. They want grow their slice from the pie relative to everyone else -- even if the pie grows smaller. Money as power, and an insatiable lust for power is more consistent with the actions of the oligarchs. ..."
"... "That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome?" -- I'm not sure this post really answered that opening question. I believe the American oligarchy, while continuing in the long tradition of oligarchic depredation, is much more rapacious than that of Rome and much more dangerous as the world rushes toward collapse. After the fossil fuels are gone there are no more. The Climate is already lurching into chaos and may have already crossed a point of no near-term return to the relatively mild and stable climate immediately preceding the Anthropocene. ..."
Money-love [φιλοχρηματία, philochrêmatia] has always been extreme because wealth is addictive
From what I've been able to glean regarding Roman society, wealth acquisition was strongly driven by the demands of a political
order that was relatively unstructured and unstable, depending on imperial whims, favoritism, influence purchasing. In the eyes
of a pleb it might look like elites were just whooping it up -- and that was certainly true -- but their fun had a systemic driver
to it. To be sure you're in favor, or that your coalition is holding up, you need sesterces.
That's what the Romans told their provinces. Everything they did was always to preserve "good order," meaning open opportunities
for their own wealth grabbing. They never said they were out to destroy and loot other societies.
This is largely true, but I was gobsmacked to find Caesar, in his Commentary on the Gallic Wars, serving up an extended quote
of a Gallic "state" leader exhorting his followers to fight Caesar in order to escape slavery. Caesar even allows the guy to distinguish
between earlier conflicts, in which another state would invade, plunder, and then leave, from conflicts with the Romans, in which
the state would be occupied forever and its people enslaved. Brunt cites Caesar as boasting the wars gained 1,000,000 slaves,
a figure he regards as inflated, but he also notes that other writers of the time didn't strongly dispute it.
I've got it on Kindle, so why not let Caesar report Critognatus' speech:
The Cimbri, after laying Gaul waste, and inflicting great calamities, at length departed from our country, and sought other
lands; they left us our rights, laws, lands, and liberty.
But what other motive or wish have the Romans, than, induced by envy, to settle in the lands and states of those whom they
have learned by fame to be noble and powerful in war, and impose on them perpetual slavery?
For they never have carried on wars on any other terms.
There's little logic for neoliberalism beyond a faith that short-term greed is the best way to optimize long-term
growth.
Or as George H.W. Bush said: Voodoo economics. But he didn't stick to that position very long once Reagan took him on
board.
Thanks again to NC for the great series. However this non economics person will very humbly repeat my objection that while
money equals power, power doesn't necessarily have to be about money. I recently read a book about the history of the Plains indians
and for them power was represented by horses–a kind of wealth to be sure–but also by bravery and skill at violence. So perhaps
what we are really talking about is not economic systems and theories but this will to dominate that causes power to corrupt and
creates the mindset that "too much is never enough." In other words the problem is really all about psychology with economics
as a subbranch. A future era of better psychologists may produce better economists. Or here's hoping.
"They're only up in arms if they believe that there is an alternative."
"Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody
would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel
vision, distracting attention from understanding how economic society actually works in destructive ways."
"If we don't go for it then somebody will and we'll lose out" was the frustrating bottom line for an iron worker I was speaking
with about the proposal to drop a new NFL tax payer subsidized practice facility into our already development gridlocked area.
Every point I made to him circled right back to this justification.
He just couldn't conceive of an alternative and I wasn't prepared enough to offer him others.
Because nowadays we must consider the economic tradeoff on everything–just like we are told.
which brings up that sweet definition of evil by MH–within the context of JS's question about enabling Climate Change
As soon as that guy becomes more concerned about feeding his kids, and less concerned about football stadiums, it's possible
he'll be much more focused, more understanding, and willing to listen to your opinion.
MH: It's becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and
Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free
market -- that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly
rent and financial extraction.
JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my
economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring.
It certainly wasn't in Paul Samuelson's textbook that we were given.
This interview with Mr. Hudson has been a fascinating education. Thank you, Yves.
That said, there is a tendency, at least in the tone of the interview, to ascribe a kind of insuperable power to top-down manipulation
and control by the oligarchies of which Hudson speaks. My sense is that, instead, sometimes the mass of people want to be so free
of one perceived set of problems that they support stepping into another -- as in the early 1980s.
MMT and "intelligent jubilee" (i.e., the opposite of what Geithner/Obama/Benanke did) supporters -- of which I am one -- might
do well to consider what preceded the so-called Reagan revolution:
Rising inflation and unemployment in the 1970s were perceived to becoming inescapable in the US political landscape of the
time.
The bad news about life in the Soviet Union was leaking out faster and faster in the late 1970s, once the American media lionized
the cause of refuseniks like Natan Sharansky during the Carter years. (Remember Peter Jennings covering the trials and persecution
of sweet, innocent, Natan Sharansky -- the wolf who dropped his sheep's clothing once he arrived in Israel?) Sometimes bad guys
provoke important news about other, more powerful, bad guys.
Thousands of American workers came home from Moscow after Carter cancelled US participation in the 1980 Olympics -- with shocking
tales of just how crappy the Russians had it.
Reagan beat Carter and Anderson 51-41-7 in 1980, and Reagan then whooped Mondale 59-41 in the 1984 popular vote. Job growth
had picked up, the American media was generally happy to lead cheers for the US while pummeling the nasty Soviets. It felt like
the Bear that is misfortune had been satisfied with catching the Russkis.
The old joke points out that we humans instinctively know we can't outrun the Bear; the natural tendency is to therefore sometimes
focus on outrunning our neighbors, so the Bear is satisfied to get them. Our ancestors were selected for that feature.
As 'hemeantwell' noted, the fact that Caesar brought home lots of slaves casts a broader light (than Mr. Hudson's interview)
on for whom Caesar's revolution was intended. How might MMT advocates wrestle with the push and pull of similar 'social identity'
competitions when the Bear is seen to be coming?
The bear was frightened, I can tell you, I lived behind the Iron Curtain.
But there was a lot of talk about peace. A lot. Like – everywhere. And it was not fake. People looked on Americans with genuine
interest and a bit of trepidation, and of course (what proved unhealthful) desire to emulate. And they wanted to be friends and
learn from them. Look at C-SPAN videos of 1989, 1990 – for example one of Soviet banking officials at a seminar with US bankers
– and you will see genuine, practically childlike belief that what the US experts and and banking practitioners were saying was
gospel.
Btw I don't know whether the same talk of peace was present in the US at the time. What continually strikes me is how talk
of peace is utterly absent in MSM now, has been for the last 20 years that I have observed.
It's so beneficial to have Mr. Hudson and others who have studied ancient history from the point of view of how money and indebtedness
works to share all this learning with us. How little is the difference between ancient oligarchs and modern ones! We think our
civilization is so wonderful and enlightened when it is just another part of the old system of inequality playing itself out over
and over again. I too wonder how long the wheel of fortune will take to complete this particular circuit, but with climate change
skulking so near, it may not be long.
Neoliberalism actually started with Carter in the late 1970's, and it was Volcker's monetary assault that helped lose him
the election (and of course the Iran hostage crisis). The same in the UK, with the Labour government bringing in the IMF
and fighting with the unions in the later 1970s to cause the "winter of discontent" that brought in Thatcher (and without the
Falklands War Thatcher would have been out after one term). Labour could have called an earlier election and probably won, but
decided not to in a huge tactical mistake.
The outcomes were not so predetermined and could have been Carter-Callaghan rather than the Reagan-Thatcher duo that did
so much to force the world along the neoliberal path, and bring us "New" Neoliberal Labour (that Thatcher actually stated was
her greatest achievement)
My only quibble would be to point out that you are referring to the neoliberal implementation -- it's tenets are rather older,
dating back at least to the 1938 Walter Lippmann Colloquium.
And well before that, as demonstrated clearly in Quinn Slobodian's recent "Globalists".
This stimulating book considers the historical development of the nexus of ideas and policy initiatives that fall under the
umbrella term 'neoliberalism' -- the political-economic structures and processes that have given us expanding 'globalizing financialization',
legal trade agreements that constrain national sovereignty, massively increasing asset and income disparities, and the consequent
precariousness and stress -- even misery -- afflicting most of us.
Though neoliberalism's origin is commonly associated with the Mont Pèlerin Society, founded in 1947, and prominently with the
figures of Ludwig von Mises, Friedrich von Hayek, and more recently with Milton Friedman and the "Chicago Boys", Slobodian demonstrates
that neoliberalism's roots reach much deeper -- into the collapse of the Austro-Hungarian Empire -- indeed of all traditional
off-shore empires -- following WW1, and in subsequent decolonization and the rise of new nations with aspirations of their own.
In large part, neoliberal order, with its international trade deals, was a response to the "problem" posed by the demands of these
diverse new nations to join the 'developed' world on an equal footing with their erstwhile colonial overlords, and to take sovereign
control of their own resources.
So, contrary to conventional understanding, neoliberalism did not spring fully-formed, post-WW2, from the foreheads of Walter
Lippman, von Mises, or Hayek; indeed, the cast of characters playing their parts in this developing drama is a rather large one,
and their origins, interconnections, and contributions are many and diverse, and often surprising.
Mankind survived the collapse of Rome. Barbarism was ascendent in the West. Civilization rose again. This time the collapse
will result in barbarism at the best.
The world problem is Climate Change. Climate change is a product of overpopulation & portable energy as that which creates
Climate change.
The US Treasury creates currency when Congress Votes a Bill that requires it. What is required is an MMT principled Fund that
pays for renewables, energy capture, nuclear power and those new machines that suck CO2 out of the air & turn it into clean hydrocarbon
fuels. The machine has been invented by Carbon Engineering. Takes up 30 acres. Hundreds of thousands are needed to stabilize CO2
levels in the atmosphere.
Methane was never factored in very well into the 1970s understanding of what was then called Ecology. Now we know that the
Methane being released by fracking and permafrost melting is already happening and will keep happening and accelerating so that
there will be a Methane Bubble Melt. 10 to 15 years and all the Methane will melt.
I see what was expected to happen to earth with a population of 9 billion as happening at 7.5 billon or exactly where we are
now. The expectation was that 9 billion was sustainable. 13 billion was said to be sustainable for 3 weeks.
Coral reefs are dying. Insects are dying. Diatoms are the bottom of the food chain in the oceans. They are dependent on coral
reefs. Birds depend on insects and their populations are dwindling.
I consider MMT, the work of conceptual art that allows currency to be generated by bills passed by governments, or a World
government, as a Last Chance Concept.
"The civilized work for what they want, while the barbarians steal what they want." In my civilization I am paid to do work.
Concepts are made real as money is given out for what is not yet real. The young want to have families and the old want the world
they helped build and make safe survive. Such compulsions are innate and often ethical. It is simply unethical to leave the world
worse than you found it.
Idea to idea to real & Ideal is ideal. The American philosophy is ethical eclectic pragmatism. Climate Change is not just to
be fought because it will get hotter but because the food chain will collapse. Other than from the MMT Funding for what it will
take to possibly protect the food chain, what have we?
I think evil takes on a life of its own. Over the course of civilization it gets standardized. But what I see happening
right now is a bunch of apoplectic, frantic "oligarchs" with egg on their face begging us all to help them change.
And none of us feel much warmth toward them. Somehow in the late 70s we the people, the laborers, small farmers, and mom &
pops and small business got blamed for everything that went wrong. And austerity was force-fed to us. What went wrong was actually
military hubris. Now there's an example of non-productive interest inflating away the empire. If the money had been used rationally
we'd have created an equal, balanced society and encouraged others by our example. Humans have always chosen the things that work
best. Somewhere, mid-century we freaked out and decided that we needed to control oil and growth but we were literally overtaken
by our own successes – big agriculture, population growth and ponzi economics. The thing we have to do now is bring this mess
back down to Earth. Requiring a fundamental change.
To change everything and turn it around. No more little tweaks of denial. Instead of the once successful "industrial" capitalism,
what we must have now is environmental capitalism. Value and share the gains of preserving the planet. It sounds like a full reversion
to a time before money, which is the symbol of material exploitation.
And it just so happens we still have the instinct for cooperation. The gains can be distributed to everyone. We just must find
ways that preserve rather than destroy the planet. Same idea, different god. There are plenty of jobs to go around. We have good
science and technology. We're not total idiots, yet. It only takes a minority of people to see the light and everything will change.
I do think we are already there, except for the shouting, as they say.
But those holding and near the levers of power are really sick and deluded individuals. And we have to understand this about
the nukes (post 1945): They exist in case the USA loses a big war or doesn't get its way. Yes, that is the level of depravity
that has developed.
Thanks so much for this series of posts on the ancient world and its comparison to today. I once read Seneca's "Letters from
a Stoic" and was surprised to see/realize the considerable apparent overlap between stoicism – which was itself the continuation
of an earlier tradition – and the early Christian church.
A great article this with lots to chew on. What he says rings true from what I have read. After the second Punic war, Roman
veterans found that the wealthy had seized their small farm holdings while they were gone and incorporated them into their own
estates. These were to become the great Latifundium. Meanwhile, the dispossessed Romans veterans made their way to Rome and joined
the plebs there. Over time, as the Roman army could not recruit these same type of landed men as the smaller holdings were being
eliminated, the Romans had to resort to a professional standing body which no longer owed their allegiance to Rome but to whatever
Roman general paid them – with disastrous results. Caesar was not the first here and the name Sulla also comes to mind. By the
end of the empire the Romans were resorting to paying barbarian tribes to fight for them which worked, until it didn't. So in
short, the greed of the wealthy in Rome destroyed the very thing that had made Rome so successful and resilient.
I don't wish to mount a defense of the Republican Elite; the system did pressure towards money-love. However, there were
counter balancing features. Money was vital, but so was virtue. Honour, courage, dignity were required.
A Roman aristocrat had to perform the minimum set required military campaigns. Only intellectual freaks such as Cicero
could climb the hierarchy without making somekind of significant military achievement.
Caesar won the Laural crown (?) through genuine acts of bravery. Roman aristocrats risked their lives & died in war. And
their troops knew it.
Other factors also tended to mitigate against the oligarchic instinct. For instance, Senators were legally barred from trade
or money lending (& yes, they often got around such bans. ) Sumptuary laws were tried (& failed).
It should also be remembered that for all the economic polarisation, Roman citizenship was highly valued. The Roman's won the
2nd Punic , essentially because Hannibal fundamentally miscalculated -- Roman allies, Latins etc did not go over to Hannibal in
hordes. They stayed loyal.
In Systems of Survival , Jane Jacobs meditated on different power structures. Some required virtus , steadfastness,
etc., others, notably money power didn't.
Somebody, somewhere, wrote about alchemy's response to money, in seeking the Philosopher's Stone. That would be a chemical
that could be transformed into anything in a chemical reaction, rather as money could in the market. I thought it was in Graeber's
Debt , but it's not showing up there.
Philosopher's Stone= the Replicator Tech in Star Trek. costless production of basic needs. add in warp drive(=unlimited expansion,
limited time-cost), and the inherent human traits that cause all the problems(ie: greed, etc) are overcome without having to fix/eliminate
them just give them somewhere to go.(this is why i'm all for asteroid mining)
Several things trouble me about this post. People believe there is no alternative -- I disagree with that view. I'd restate
the assertion as great efforts are and have been made to convince people there is no alternative. You don't need to be my age
to learn a little about tax rates in the Eisenhower years. The economy did all right then. My impression talking with young people
isn't that they believe there is no alternative, instead they have no idea how to make things change for the better, and neither
do us old farts. Our democracy is broken. It no longer cares for the public good.
Money addiction -- I have trouble reconciling that concept with the short-term biases of the wealthy and their seeming
lack of interest in economic growth. They aren't happy with a bigger slice of pie from a bigger pie. They want grow their slice
from the pie relative to everyone else -- even if the pie grows smaller. Money as power, and an insatiable lust for power is more
consistent with the actions of the oligarchs.
I think the concept of growth which shows up in several parts of the post needs some adjustment. Growth is tied to the consumption
of fossil fuels as is increased CO2 in the atmosphere. Fossil fuels are nearing points of declining and unstable production. Unless
growth can be decoupled from fossil fuels all the imperial control of what fossil fuels remain will do little but extend our time
at the expense of others as we all race toward a point of collapse.
Some of the discussion of Neoliberalism confuses me. -- Neoliberalism is not the same as laissez-faire or neoclassical economics.
"That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome?" -- I'm not
sure this post really answered that opening question. I believe the American oligarchy, while continuing in the long tradition
of oligarchic depredation, is much more rapacious than that of Rome and much more dangerous as the world rushes toward collapse.
After the fossil fuels are gone there are no more. The Climate is already lurching into chaos and may have already crossed a point
of no near-term return to the relatively mild and stable climate immediately preceding the Anthropocene.
Thermonuclear weapons scattered in many hands adds existential danger to the threats posed by the American oligarchy and Power
Elite structures and their insane lust for power.
Other than these quibbles, this is a remarkable series of posts presenting what to me is a very new view of the ancient world.
It offers a much better understanding of the ancient world and some of its key literature and early writings. Time to order some
books [I still haven't ordered a copy of "Forgive Them Their Debts" and now have to add a copy of this most recent book.]
Had lunch with one of the "Chicago Boys" that Hudson describes as the source of economics current woes.
After that lunch, which was a discussion of many of Michael's themes, I completely agree with his assessment of what they have
wrought. While the Chicago Boys may profess to have Mill and Ricardo as hero's, as Hudson does, Mills and Ricardo's theories are
obliterated by the way the Chicago Boys have completely fallen in love with Ayn Rand's philosophy. Everyone is on their own. The
rich are rich because they are naturally better at stuff than those who are not. They hate government regulation, they view government
as the creator of problems, they have no compunction for watching the population sink into debt and penury. After all "it's their
own look out".
Funny, when you read things abstractly on a wonderful site like Naked Capitalism, but then witness this terrible philosophy
first hand, suddenly things are not so abstract. Michael's right.
Note: Michael Hudson published and forgive them their debts: Lending, Foreclosure, and
Redemption From Bronze Age Finance to the Jubilee Year in November of last year. It is the
first volume in what will be a trilogy on the long history of the tyranny of debt. I have
interviewed him extensively as he writes the second volume, The Collapse of
Antiquity.
John Siman : Michael, in the first volume of your history of debt -- "
ORDER IT NOW
and forgive them their debts , dealing with the Bronze Age Near East, Judaism and
early Christianity -- you showed how over thousands of years, going back to the invention of
interest-bearing loans in Mesopotamia in the third millennium BC, many kings from a variety of
Mesopotamian civilizations proclaimed Clean Slate debt cancellations on a more or less regular
basis. And you showed that these royal proclamations of debt amnesty rescued the lower classes
from debt bondage, maintaining a workable economic balance over many centuries. Because these
kings were so powerful -- and, let's say, enlightened -- they were able to prevent the social
and economic polarization that is inevitable when there is no check on an oligarchic creditor
class extracting exponentially increasing interest from debtors.
But now, as you write the second volume, your theme gets turned upside down. You are showing
how the Greeks and the Romans learned about interest-bearing debt from their contacts with
Middle Eastern civilizations, but tragically failed to institute programs of Clean Slate debt
amnesty. Their failure has been a kind of albatross around the neck of Western economies ever
since.
So I'd like to start this conversation in the late 500s BC, because we can see at that time
the beginnings of both the Athenian democracy and the Roman Republic, plus of two more
important civilizations. First was the Athens of Cleisthenes, who had led the overthrow the
"tyrant" Hippias and became the father of Athenian democracy. Second, there was the Roman
Republic of Lucius Junius Brutus, who overthrew the last of Rome's legendary kings, the
"tyrant" Tarquinius Superbus.Third was the Persian civilization of Cyrus the Great. He was a
"divine king," in many ways in the ancient tradition of Hammurabi. Fourth were the post-exilic
Jews of Ezra and Nehemiah, who returned to Jerusalem, rebuilt the Temple and redacted the
Bible. They were the inventors of the Jubilee years of Clean Slate debt forgiveness, even
though they depicted the teaching as coming from Moses.
So, beginning with the late 500s BC, to what extent was the notion of Clean Slate debt
amnesty remembered, and to what extent was it rejected?
Michael Hudson : Every kind of reform, from Mesopotamia to Greece, was put forth as
if it simply restored the way things were in the beginning. There was no concept of linear
progress in Antiquity. They thought that there was only one way to do things, so any reform
must be the way the world was meant to be in the very beginning. All reformers would say that
in the beginning everybody must have been equal. Their reform was aimed at restoring this state
of affairs.
That's why, when Plutarch and even the Spartan kings in the third century BC talked about
canceling debts and promoting equality, they said that they were simply restoring the original
system that Lycurgus had created. But there was no sign that Lycurgus had really done these
things. It was made up. Lycurgus was a legendary figure. So was Moses in the Jewish tradition.
When the Bible was redacted and put together after the return from Babylon, they put debt
cancellation and land redistribution -- the Jubilee Year -- right in the center of Mosaic Law.
So it seemed that this was not an innovation, but what Moses said in the beginning. They
created a Moses figure much like the Greeks created a Lycurgus figure. They said that this is
how things were meant to be. This is how it was in the beginning -- and it just happened to be
their own program.
This was a projection backwards: a retrojection. Felix Jacoby wrote that Athenian history
was that way, basically party pamphleteering projecting their ideal program back to Solon or to
whomever one might choose as a good guy to model. Writers would then say that this original
good guy supported the program that they were proposing in their epoch. This was the ancient
analogy to "Constitutional Originalism" in the United States as a frame for right-wing
policies.
JS : So, ever since the 500s BC, the surefire way to critique the status quo has been
to say you are trying to go back to the Garden of Eden or to some other pristine Saturnian
Golden Age.
MH : Yes, you want to say that the unfair world around you isn't what was meant, so
this couldn't have been the original plan, because the past had to be a successful takeoff. So
the program that reformers always turned out to be what the Founding Fathers meant.
JS : That's veryinspirational!
MH : The key is to appear as a conservative, not a radical. You accuse the existing
status quo as being the beneficiaries of the radicals who have distorted the original Fair Plan
that you're trying to restore.
JS : So in the 500s BC we have Cyrus -- and his inscription on the Cyrus Cylinder --
boasting that he freed the Babylonians from their tax debt and bonds, and we have the
post-exilic Jews proclaiming d'ror
[דְּרֹ֛ור] in Leviticus 25, proclaiming
"liberty throughout the land." We also have the reforms of Cleisthenes in Athens,
isonomia [ἰσονομία, literally, equality
under the law], a genuine attempt at democracy. But let's start with Rome. What do you want to
say about the nova libertas , the "new liberty" proclaimed in Rome after the last king
was expelled and the Republic was founded? Didn't Brutus and his wellborn friends boast that
they were the institutors of true liberty?
MH : Liberty for them was the liberty to destroy that of the population at large.
Instead of cancelling debts and restoring land tenure to the population, the oligarchy created
the Senate that protected the right of creditors to enslave labor and seize public as well as
private lands (just as had occurred in Athens before Solon). Instead of restoring a status
quo ante of free cultivators -- free of debt and tax obligations, as Sumerian amargi
and Babylonian misharum and andurarum meant -- the Roman oligarchy accused anyone
of supporting debtor rights and opposing its land grabs of "seeking kingship." Such men were
murdered, century after century.
Rome was turned into an oligarchy, an autocracy of the senatorial families. Their "liberty"
was an early example of Orwellian Doublethink. It was to destroy everybody else's
liberty so they could grab whatever they could, enslave the debtors and create the polarized
society that Rome became.
JS : OK, but this program worked. The Republic grew and grew and conquered everyone
else for century after century. Then the Principate became the supreme power in the Western
world for several more centuries.
MH : It worked by looting and stripping other societies. That can only continue as
long as there is some society to loot and destroy. Once there were no more kingdoms for Rome to
destroy, it collapsed from within. It was basically a looting economy. And it didn't do more
than the British colonialists did: It only scratched the surface. It didn't put in place the
means of production that would create enough money for them to grow productively. Essentially,
Rome was a financial rentier state .
Rentiers don't create production. They live off existing production, they don't
create it. That's why the classical economists said they were supporting industrial
capitalists, not British landlords, not monopolists and not predatory banks.
JS : This has all been forgotten, both in the United States and in England --
MH : Let's say, expurgated from the curriculum.
JS : Worse than forgotten!
MH : That's why you don't have any history of economic thought taught anymore in the
United States. Because then you'd see that Adam Smith, John Stuart Mill and the "Ricardian
socialists" and indeed most of the 19th century had a completely opposite idea of what
constituted a free market.
JS : Opposite? How so?
MH : Opposite from the neoliberal idea that freedom means freedom for the wealthy to
indebt and destroy the economy. Opposite from the liberty of Brutus to overthrow the Roman
kings and establish an autocratic oligarchy.
JS : So do we want to see the Roman kings as defenders of the people -- defending
them from predatory oligarchs?
MH : Yes, especially Servius Tullius. There was a great flowering of Rome, making it
attractive to immigrants by making the city livable for newcomers. They did this because at
that time, in the 6th century BC, all societies had a shortage of labor. Labor was the factor
of production in short supply, not land. Not even in Athens was land in short supply in the 6th
and 5th centuries. You needed labor, and so you had to make it attractive for immigrants to
join your society instead of having your people run away, as they would in a society run by
creditors reducing clients to bondage.
JS : So you are writing about how Roman liberty was actually the liberty of
oligarchic creditors from populist pressures for debt forgiveness. What of the
d'ror of Leviticus 25 -- the liberty of the postexilic Jews? Did they actually proclaim
years of Jubilee in which debts were forgiven and bondservants were returned to their
families?
MH : After the Babylonian Jews returned to Jerusalem, I'm sure that they said that it
was time for the land to be returned to its original owners -- and their families, by the way,
were the original owners who were exiled in the Babylonian Captivity. I rely largely on Baruch
Levine for this idea of the ge'ullah
[גְּאֻלָּה], saying give us back our
ancestral lands. [See thecolloquium Levine and Hudson co-edited on Land and Urbanization in
the Ancient Near East , and their preceding volume on ancient privatization.] There must
have been some kind of settlement along those lines. Unfortunately, the Judaic lands did not
keep their records on on clay tablets that could be thrown out and recovered thousands of years
later. We don't have any record of their economic history after the Return.
JS : Now I've brought along the transcriptions of several Egyptian papyri for you to
look at. I also want to show you a papyrus in Aramaic from Judæa. It's not direct
evidence that the post-exilic Jews were having Jubilee years, but it's indirect evidence,
because it says that a particular debt has to be paid, even during a time of general debt
amnesty, even if it falls due in a shmita [שמיטה], a
sabbath year. So it sounds like the Jews were finding loopholes --
MH : It certainly sounds like it! Babylonian creditors tried a similar ploy, but this
was disallowed. (We have court records confirming the realm's misharum acts.)
JS : In the Mosaic commandments to forgive debt, can we infer that there was some
sort of program of debt forgiveness in place already in place in postexilic Jerusalem?
MH : Yes, but it ended with Rabbi Hillel and the Prozbul clause. Debtors had to sign
this clause at the end of their debt contracts saying that they waived their rights under the
Jubilee year in order to get a loan. That was why Jesus fought against the Pharisees and the
rabbinical leadership. That's what Luke 4 is all about [ And there was delivered unto him
the book of the prophet Isaiah. And when he had opened the book, he found the place where it
was written, "The Spirit of the Lord is upon me, because he hath anointed me to preach the
gospel to the poor; he hath sent me to heal the brokenhearted, to preach deliverance to the
captives, and recovering of sight to the blind, to set at liberty them that are bruised, to
preach the acceptable year of the Lord" = the Jubilee year.] Luke also pointed out that the
Pharisees loved money!
JS : Let me ask you about Egypt here. Unfortunately, as you said, the postexilic Jews
did not leave us any clay tablets and almost no papyri, but we do have loads of papyri
concerning the Ptolemaic kings of Egypt. So from, say, 300 B.C. to the death of Cleopatra, we
have official evidence that the Egyptian kings proclaimed debt amnesties. Maybe one of the
reasons, or perhaps the main reason for this, is because they were so powerful, like the
Mesopotamian kings. So even though the Ptolemaic kings were biologically and genetically
Macedonian Greek -- married to their sisters, too -- they aspired to rule in the ancient
Egyptian pharaonic tradition of We Are God-Kings and We Own Everything in the Kingdom.
MH : Certainly the Hellenistic kings had the ancient pharaonic Sed festivals, which
go back thousands of years and were a kind of jubilee. The Egyptians had regular debt
cancellations, because under the pharaohs the debts that would have been cancelled were
basically tax debts. They were owed to the crown, so he was cancelling debts owed to himself
ultimately. And we see this thousands of years later in the trilingual stone, the Rosetta
Stone, which the priests wrote for that young boy who was Ptolemy V. They explained to him that
this is how Egypt always had done it, and to act as a pharaoh, he had to do the same.
JS : And I think it is worth pointing out here that the same verb-plus-noun
combination for forgiving debts that the priests used in Greek on the Rosetta Stone is also
used by Matthew in the Lord's Prayer
[ἀφῆκεν/ἄφες
ὀφειλήματα, aphēken/aphes
opheilēmata]. It shows up in lots of papyri. The same Greek verb and noun, again and again
and again.
But let's go back to the Greeks of the 500s BC. They are a couple of hundred years out of
their Dark Age, so their society has been reconstituted after the demographic wipeout. It's
been reconstituted, but without Near Eastern-style "divine kingship" and its Clean Slate
proclamations. Just the opposite. Socrates had conversations with the rhapsodes who had
memorized and recited the Iliad . Even in their great epic, the Greeks' legendary king
of kings Agamemnon comes across as a kind of narcissistic loser. How would you describe Greek
kingship, especially the so-called tyrants?
MH : There never really were Greek kings of the type found throughout the Bronze Age
Near East and surviving into the first millennium in Assyria and even in Persia. The Greek
polities that emerged from their Dark Age were run by what shrewd Classicists call
mafiosi , something like the post-Soviet kleptocrats. They formed closed political
monopolies reducing local populations to clientage and dependency. In one polity after another
they were overthrown and exiled, mainly by aristocratic reformers from the elite families
(often secondary branches, as was Solon). Later oligarchic writers called them "tyrants" as an
invective, much as the word rex -- king -- became an invective in oligarchic Rome.
These tyrant-reformers consolidated their power by redistributing land from the leading
families (or in Sparta, land conquered from Messenia, along with its population reduced to
helotage) to the citizen-army at large all over Greece – except in Athens. That was one
of the most reactionary cities in the 7th century, as shown by what is known about the laws of
Draco. After some abortive coups in the seventh century, Solon was appointed in 594 to avoid
the kind of revolution that had led reformer "tyrants" to overthrow narrow aristocracies in
neighboring Megara and Corinth. Solon decreed a half-way reform, abolishing debt slavery (but
not the debtor's obligation to work off debts with his own labor), and did not redistribute
Athenian land from the city's elites.
Athens was one of the last to reform but then because it was such a badly polarized
autocratic society, it swung -- like Newton's Third Law of Motion: every action has an equal
and opposite reaction -- it swung to become the most democratic of all the Greek polities.
Some historians in the past speculated that Solon might somehow have been influenced by
Judaic law or other Near Eastern practice, but this is not realistic. I think Solon was simply
a pragmatist responding to widespread demands that he do what the reformers -- the so-called
tyrants -- were doing throughout Greece. He didn't redistribute the land like they did, but he
at least ended outright debt slavery. Free debtors (mainly cultivators on the land) were being
seized and sold outside of Athens to slave dealers. Solon also tried to recover some of the
land that wealthy families had grabbed. At least, that's what he wrote in his poems describing
his actions.
So to answer your question, I think debt cancellations were not a diffusionist policy from
the East, but a spontaneous pragmatic response such as was being widely advocated as far west
as Rome with its Secession of the Plebs a century later -- followed by much of Greece in the
4th century BC, and Sparta's kings in the late 3rd century BC.
Poorer Athenians were so angry with Solon for being not revolutionary enough that he went
into exile for 10 years. The real creators of Athenian democracy were Peisistratos [died 528/7
BC], his sons, also called tyrants, and then Cleisthenes in 507. He was a member of the wealthy
but outcast family, the Alcmaeonidae, who had been expelled in the 7th century. Solon had
allowed them to return, and they were backed by Delphi (to which the family contributed
heavily). Cleisthenes fought against the other oligarchic families and restructured Athenian
politics on the basis of locality instead of clan membership. Servius Tullius is credited for
enacting much the same reform in Rome. Lewis Henry Morgan's Ancient Society [1877]
described this restructuring of voting districts as the great watershed creation of
western-style democracy.
JS : Let me go back now to the way Athens and the other poleis emerged from
the Dark Age.
MH : Judging from the art and pottery, Greece didn't begin to recover until the 8th
century BC.
JS : So we're talking about the 700s BC. As Greece was learning from the Near Eastern
civilizations, everything from mythology to the alphabet to weights and measures --
MH : And commercial practices, credit practices.
JS : Yes, all this came from the Near East, including the practice of charging
interest. But what about Clean Slate debt amnesty? I want to argue logically here -- not from
any hard historical evidence, but only deductively -- that the Greeks would have wanted the
concept of Clean Slate debt forgiveness, they would have wanted to learn this too from the Near
East, but they could not do it because they were always going to lack a Hammurabi-style "divine
king."
MH : I think you miss the whole point of how Western civilization evolved here. First
of all, who "wanted" Near Eastern kingship? Certainly not the emerging oligarchies. The ruling
elites wanted to use interest-bearing debt to enrich themselves – by obtaining control
over the labor power of debtors.
Second, I don't think the Greeks and Italians knew about Near Eastern royal proclamations,
except as an alien practice much further East than Asia Minor. Falling into debt was a disaster
for the poor, but a means for their Western patrons to gain power, land and wealth. There is no
record of anyone suggesting that they should be in the Near East. The connection between the
Near East and Greece or Italy was via traders. If you're a Phoenician or Syrian merchant with
the Aegean or Italy, you're going to set up a temple as an intermediary, typically on an
island. Such temples became the cosmopolitan meeting places where you had the oligarchs of the
leading families of Greek cities visiting each other as part of a Pan-Hellenic group. You could
say that Delphi was the "Davos" of its day.
It was through these trading centers that culture diffused – via the wealthiest
families who travelled and established relationships with other leading families. Finance and
trade have always been cosmopolitan. These families learned about debt obligations and
contracts from the Near East, and ended up reducing much of their local populations to
clientage, without kings to overrule them. That would have been the last thing they wanted.
JS : So absent Hammurabi-style "divine kingship," is debt bondage and brutal
polarization almost inevitably going to happen in any society that adopts interest-bearing
debt?
MH : We see a balance of forces in the ancient Near East, thanks to the fact that its
rulers had authority to cancel debt and restore land that wealthy individuals had taken from
smallholders. These kings were powerful enough to prevent the rise of oligarchies that would
reduce the population to debt peonage and bondage (and in the process, deprive the palace of
revenue and corvée labor, and even the military service of debtors owing their labor to
their private creditors). We don't have any similar protection in today's Western Civilization.
That's what separates Western Civilization from the earlier Near Eastern stage. Modern
financialized civilization has stripped away the power to prevent a land-grabbing creditor
oligarchy from controlling society and its laws.
So you could characterize Western Civilization is being decadent. It's reducing populations
to austerity on a road to debt peonage. Today's new oligarchy calls this a "free market," but
it is the opposite of freedom. You can think of the Greek and Roman decontextualization of Near
Eastern economic regulations as if the IMF had been put in charge of Greece and Rome, poisoning
its legal and political philosophy at the outset. So Western Civilization may be just a vast
detour. That's what my forthcoming book, The Collapse of Antiquity, is all about. That
will be the second volume in my trilogy on the history of debt.
JS : So are we just a vast detour?
MH : We have to restore a balanced economy where the oligarchy is controlled, so as
to prevent the financial sector from impoverishing society, imposing austerity and reducing the
population to clientage and debt serfdom.
JS : How do you do that without a Hammurabi-style "divine kingship"?
MH : You need civil law to do what Near Eastern kings once did. You need a body of
civil law with a strong democratic government acting to shape markets in society's overall
long-term interest, not that of the One Percent obtaining wealth by impoverishing the 99
Percent. You need civil law that protects the population from an oligarchy whose business plan
is to accumulate wealth in ways that impoverish the economy at large. This requires a body of
civil law that would cancel debts when they grow too large for the population to pay. That
probably requires public banking and credit – in other words, deprivatization of banking
that has become dysfunctional.
All this requires a mixed economy, such as the Bronze Age Near Eastern economies were. The
palace, temples, private sector and entrepreneurs acted as checks and balances on each other.
Western Civilization isn't a mixed economy. Socialism was an attempt to create a mixed economy,
but the oligarchs fought back. What they call a "free market" is an unmixed monolithic,
centrally planned financialized economy with freedom for the oligarchy to impoverish the rest
of society. That was achieved by landlordism monopolizing the land in feudal Europe, and it is
done by finance today.
John Siman : Could you define what you mean by a mixed economy ?
Michael Hudson : There are many degrees of how "mixed" an economy will be -- meaning
in practice, how active its government sector will be in regulating markets, prices and credit,
and investing in public infrastructure.
In the 20 th century's Progressive Era a century ago, a "mixed economy" meant
keeping natural monopolies in the public sector: transportation, the post office, education,
health care, and so forth. The aim was to save the economy from monopoly rent by a either
direct public ownership or government regulation to prevent price gouging by monopolies.
The kind of "mixed economy" envisioned by Adam Smith, John Stuart Mill and other classical
19 th century free market economists aimed at saving the economy from land rent paid
to Europe's hereditary landlord class. Either the government would tax away the land's rent, or
would nationalize it by taking land out of the hands of landlords. The idea was to free markets
from economic rent ("unearned income") in general, including monopoly rents, and also to
subsidize basic needs to create a price-competitive national economy.
Long before that, in the Bronze Age -- which I describe in and forgive them their
debts -- the palace reversed the buildup of personal and agrarian debts by annulling them
on a more or less regular basis. This freed the economy from the overgrowth of debt that tended
to build up chronically from the mathematical dynamics of compound interest, and from crop
failures or other normal "market" phenomenon.
In all these cases a mixed economy was designed to maintain stability and avoid exploitation
that otherwise would lead to economic polarization.
JS: So a mixed economy is still a market economy?
MH : Yes. All these degrees of "mixed economy" were market economies. But their
markets were regulated and subordinated to broad social and political objectives rather than to
personal rent-seeking or creditor gains. Their economic philosophy was long-term, not
short-term, and aimed at preventing economic imbalance from debt and land monopoly.
Today's "mixed economy" usually means an active public sector undertaking investment in
infrastructure and controlling money and credit, and shaping the context of laws within which
the economy operates. This is best understood by contrasting it to what neoliberals call a
"pure" or "market" economy – including what the Trump administration accuses China of
when it proposes countervailing tariffs to shape the U.S. and international market in a way
that favors American corporations and banks.
So it is necessary to clear the terminological slate before going into more detail. Every
economy is a "market economy" of some sort or another. What is at issue is how large a role
governments will play -- specifically, how much it will regulate, how much it will tax, how
much it will invest directly into the economy's infrastructure and other means of production or
act as a creditor and regulator of the monetary and banking system.
JS: What can we learn from the mixed economies of the Ancient Near East? Why were
they so prosperous and also stable for so long?
MH : The Bronze Age mixed economies of Sumer, Babylonia, Egypt and their Near Eastern
neighbors were subject to "divine kingship," that is, the ability of kings to intervene to keep
restoring an economy free of personal and rural debt, so as to maintain a situation where the
citizenry on the land was able to serve in the military, provide corvée labor to create
basic infrastructure, and pay fees or taxes to the palace and temples.
Mesopotamian rulers proclaimed Clean Slates to keep restoring an idealized status quo
ante of free labor (free from debt bondage). Babylonian rulers had a more realistic view of
the economy than today's mainstream economists. They recognized that economies tended to
polarize between wealthy creditors and debtors if what today are called "market forces" are not
overridden -- especially the "market forces" of debt, personal liberty or bondage, and land
rent. The task of Bronze Age rulers in their kind of mixed economy was to act from
"above" the market so as to prevent creditors from reducing the king's subjects (who were their
military defense force) to bondage from appropriating their land tenure rights. By protecting
debtors, strong rulers also prevented creditors from becoming an oligarchic power in opposition
to themselves.
JS: What kind of economic theories and economic models are the critics of mixed
economies trying to advance?
MH : Opponents of a mixed economy have developed an "equilibrium theory" claiming to
show that markets come to a natural, fair and stable balance without any government
"interference." Their promise is that if governments will refrain from regulating prices and
credit, from investing and from providing public services, economies will settle naturally at a
highly efficient level. This level will be stable, unless "destabilized" by government
"interference." Instead of viewing public investment as saving the economy from monopoly rent
and debt peonage, the government itself is described as a "rent seeker" exploiting and
impoverishing the economy.
JS: But is this sort of economic theory legitimate, or just a libertarian-sounding
camouflage for neoliberal pillage?
MH : It's Orwellian Doublethink. Today's neoliberal theory justifies oligarchies
breaking free of public control to appropriate the economic surplus by indebting economies to
skim off the economic surplus as interest and then foreclose on personal landholdings and
public property, overthrowing "mixed economies" to create a "pure oligarchy." Their idea of a
free market is one free for creditors and monopolists to deny economic freedom to the rest of
the population. The political extension of this approach in antiquity was to unseat kings and
civic regimes, to concentrate power in the hands of an increasingly predatory class reducing
the economy to bondage, impoverishing it, and ultimately leaving it to be conquered by
outsiders. That is what happened to Rome in Late Antiquity.
Advocates of strong government have a diametrically opposite mathematical model. Ever since
the Bronze Age, they recognized that the "natural" tendency of economies is to polarize between
a wealthy creditor and land-owning class and the rest of society. Bronze Age rulers recognized
that debts tend to grow faster than the ability to pay (that is, faster than the economy).
Babylonian rulers recognized that if rulers did not intervene to cancel personal debts (mainly
agrarian debts by cultivators) when crops failed, when military action interfered, or simply
when debts built up over time, then creditors would end up taking the crop surplus and even the
labor services of debtors as interest, and finally foreclosing on the land. This would have
deprived the palatial economy of land and labor contributions. And by enriching an independent
class of creditors (on their way to becoming large landowners) outside of the palace, financial
wealth would express itself in economic and even military power. An incipient financial and
landholding oligarchy would mount its own military and political campaign to unseat rulers and
dismantle the mixed palatial/private economy to create one that was owned and controlled by
oligarchies.
The result in Classical Antiquity was economic polarization leading to austerity and
bondage, grinding the economy to a halt. That is the tendency of economies in "unmixed"
economies where the public sector is privatized and economic regulation is dismantled. Land and
credit was monopolized and smallholders became dependent clients and ultimately were replaced
by slaves.
Mixed economies by the late 19 th century aimed at minimizing market prices for
real estate and monopoly goods, and for credit. The economic aim was to minimize the cost of
living and doing business so as to make economies more productive. This was called "socialism"
as the natural outgrowth of industrial capitalism protecting itself from the most burdensome
legacies of feudalism: an absentee landlord class, and a banking class whose money-lending was
not productive but predatory.
JS: So mixed economies require strong and ultimately good governments.
MH : Any "mixed" economy has some basic economic theory of what the proper role of
government is. At the very least, as in the 20 th century, this included the
limitation of monopoly rents. The neoclassical (that is, anti-classical) reaction was to
formulate a euphemistic theory of consumer "demand" -- as if American consumers "demand" to pay
high prices for pharmaceuticals and health care. Likewise in the case of housing prices for
renters or, for owner-occupied housing, mortgage charges: Do renters and home buyers really
"demand" to pay higher and higher rents and larger and larger mortgages? Or are they compelled
to pay out of need, paying whatever their suppliers demand ( e.g ., as in "Your money or
your life/health").
So to answer your question, a mixed economy is one in which governments and society at large
realize that economies need to be regulated and monopolies (headed by credit and land
ownership) kept out of the hands of private rent-seekers in order to keep the economy free and
efficient.
JS : Has there ever been a civil society that effectively implemented a mixed economy
since, say, 500 BC?
MH : All successful economies have been mixed economies. And the more "mixed" they
are, the more successful, stable and long-lasting they have been as a result of their mutual
public/private checks and balances.
America was a mixed economy in the late 19th century. It became the world's most successful
industrial economy because it didn't have an absentee landlord class like Europe did (except
for the railroad octopus), and it enacted protective tariffs to endow a domestic manufacturing
class to catch up with and overtake England.
JS : Other countries?
MH : Germany began to be a mixed economy in the decades leading up to World War I.
But it had a mentally retarded king whom they didn't know how to restrain, given their cultural
faith in royalty. China is of course the most successful recent mixed economy.
JS : Isn't it pretty brutal in China for most of the population?
MH : Most of the population does not find it brutal there. It was brutal under
colonialism and later still, under Mao's Cultural Revolution. But now, most people in China
seem to want to get rich. That's why you're having a consolidation period of trying to get rid
of the local corruption, especially in the rural areas. You're seeing a consolidation period
that requires clamping down on a lot of people who became successful through shady
operations.
JS : So how would you describe an ideal society without a Hammurabi-style "divine
kingship"? An ideal mixed economy?
MH : The credit system would be public. That way, public banks could create credit
for socially productive purposes -- and could cancel the occasional overgrowth of debts without
causing private creditors to lose and protest. The public sector also would own and operate the
natural infrastructure monopolies. That was the basic principle of classical economics from
Adam Smith to Marx, even for erstwhile libertarians such as Henry George. Everybody in the 19th
century expected a mixed economy with governments playing a growing role, replacing absentee
landlords, bankers and monopolists with public collection of economic rent, public control of
the credit system and provider of basic needs.
JS : How extensive should the public sector be?
MH : A classical public sector would include the natural monopolies that otherwise
would engage in price gouging, especially the credit and banking system. These sectors should
be public in character. For one thing, only a public bank can write down the debts -- like
student debts today -- without hurting an independent oligarchic financial class. If student
debts and mortgage debts were owed to public banks, they could be written down in keeping with
the reasonable ability to be paid. Also, public banks wouldn't make junk mortgage loans to
NINJA borrowers, as did Citibank and the other crooked banks. A public bank wouldn't make
predatory corporate raiding and takeover loans, or finance and speculate in derivative
gambles.
Most of all, when the debt overhead becomes too large -- when a large corporation that is
essential to the economy can't pay its debts -- public banks can write down the debt so that
the company isn't forced into bankruptcy and sold to an American vulture fund or other vulture
fund. It can keep operating. In China the government provides this essential service of public
banks.
The key public concern throughout history has been to prevent debt from crippling society.
That aim is what Babylonian and other third-millennium and second-millennium Near Eastern
rulers recognized clearly enough, with their mathematical models. To make an ideal society you
need the government to control the basic utilities -- land, finance, mineral wealth, natural
resources and infrastructure monopolies (including the Internet today), pharmaceuticals and
health care so their basic services can be supplied at the lowest price.
All this was spelled out in the 19 th century by business school analysts in the
United States. Simon Patten [1852-1922] who said that public investment is the "fourth factor
of production." But its aim isn't to make a profit for itself. Rather, it's to lower the cost
of living and of doing business, by providing basic needs either on a subsidized basis or for
free. The aim was to create a low-cost society without a rentier class siphoning off
unearned income and making this economic rent a hereditary burden on the economy at large. You
want to prevent unearned income.
To do that, you need a concept to define economic rent as unearned and hence unnecessary
income. A well-managed economy would do what Adam Smith, David Ricardo, John Stuart Mill, Marx
and Veblen recommended: It would prevent a hereditary rentier class living off unearned
income and increasing society's economic overhead. It's okay to make a profit, but not to make
extractive monopoly rent, land rent or financial usury rent.
JS : Will human beings ever create such a society?
MH : If they don't, we're going to have a new Dark Age.
JS : That's one thing that especially surprises me about the United States. Is it not
clear to educated people here that our ruling class is fundamentally extractive and
exploitative?
MH : A lot of these educated people are part of the ruling class, and simply taking
their money and running. They are disinvesting, not investing in industry. They're saying, "The
financial rentier game is ending, so let's sell everything and maybe buy a farm in New
Zealand to go to when there is a big war." So the financial elite is quite aware that they are
getting rich by running the economy into the ground, and that this must end at the point where
they've taken everything and left a debt-ridden shell behind.
JS : I guess this gets back to what you were saying: The history of economics has
been expurgated from the curriculum.
MH : Once you strip away economic history and the history of economic thought, you
wipe out memory of the vocabulary that people have used to criticize rent seeking and other
unproductive activity. You then are in a position to redefine words and ideals along the lines
that euphemize predatory and parasitic activities as if they are productive and desirable, even
natural. You can rewrite history to suppress the idea that all this is the opposite of what
Adam Smith and the classicaleconomists down through Marx advocated.
Today's neoliberal wasteland is basically a reaction against the 19 th century
reformers, against the logic of classical British political economy. The hatred of Marx is
ultimately the hatred of Adam Smith and John Stuart Mill, because neoliberals realize that
Smith and Mill and Ricardo were all leading to Marx. He was the culmination of their free
market views -- a market free from rentiers and monopolists.
That was the immediate aim of socialism in the late 19 th century. The logic of
classical political economy was leading to a socialist mixed economy. In order to fight
Marxism, you have to fight classical economics and erase memory of how civilization has dealt
with (or failed to deal with) the debt and rent-extracting problems through the ages. The
history of economic thought and the original free-market economics has to be suppressed.
Today's choice is therefore between socialism or barbarism, as Rosa Luxemburg said.
JS : Let's consider barbarism: When I observe the neoliberal ruling class -- the
people who control the finance sector and the managerial class on Wall Street -- I often wonder
if they're historically exceptional because they've gone beyond simple greed and lust for
wealth. They now seek above all some barbaric and sadistic pleasure in the financial
destruction and humiliation of other people. Or is this historically normal?
MH : The financial class has always lived in the short run, and you can make
short-term money much quicker by asset stripping and being predatory can by being productive.
Moses Finley wrote that there was not a single productive loan in all of Antiquity. That was
quite an overstatement, but he was making the point that there were no productive financial
markets in Antiquity. Almost all manufacturing, industry, and agriculture was self-financed. So
the reader of Finley likely infers that we modern people have progressed in a fundamental way
beyond Antiquity. They were characterized by the homo politicus , greedy for status. We
have evolved into homo œconomicus , savvy enough to live in stable safety and
comfort.
We are supposedly the beneficiaries of the revolution of industrial capitalism, as if all
the predatory, polarizing, usurious lending that you had from feudal times (and before that,
from Antiquity), was replaced by productive lending that finances means of production and
actual economic growth.
But in reality, modern banks don't lend money for production. They say, "That's the job of
the stock market." Banks only lend if there's collateral to grab. They lend against assets in
place. So the result of more bank lending is to increase the price of the assets that banks
lend against -- on credit! This way of "wealth creation" via asset-price inflation is the
opposite of real substantive progress. It enriches the narrow class of asset holders at the top
of the economic pyramid.
JS : What about the stock market?
MH : The stock market no longer primarily provides money for capital investment. It
has become a vehicle for bondholders and corporate raiders to borrow from banks and private
funds to buy corporate stockholders, take the companies private, downsize them, break them up
or strip their assets, and borrow more to buy back their stocks to create asset-price gains
without increasing the economy's tangible real asset base. So the financial sector, except for
a brief period in the late 19th century, especially in Germany, has rarely financed productive
growth. Financial engineering has replaced industrial engineering, just as in Antiquity
creditors were asset strippers.
The one productive activity that the financial sector engaged in from the Bronze Age onward
was to finance foreign trade. The original interest-bearing debt was owed by merchants to
reimburse their silent partners, typically the palace or the temples, and in time wealthy
individuals. But apart from financing trade – in products that were already produced
– you've rarely had finance increase the means of production or economic growth. It's
almost always been to extract income. The income that finance extracts is at the expense of the
rest of society. So the richer the financial sector is, the more austerity is imposed on the
non-financial sector.
JS : That's pretty depressing.
MH : When I did the show with Jimmy Dore [ https://www.youtube.com/watch?v=PSvcB55R8jM
], he saw that the most important dynamic to understand is that debts grow more rapidly than
the economy at large. The rate of interest is higher than the rate of growth. It may not be
higher than the profit rate, but it's higher than the rate of growth. So every society that has
interest-bearing debt is going to end up deeper and deeper in debt. At a certain point the
creditors are paid at the expense of production and investment -- and soon enough they
foreclose.
JS : And then?
MH : Then you have debt deflation. That is the norm. Austerity. It is not an anomaly,
but the essence. The Babylonians knew this, and they tried to avoid debt deflation by wiping
out the predatory personal debts, not the business debts that were commercial and productive.
Only the non-commercial debts were wiped out.
JS : How could Modern Monetary Theory be used now, effectively?
MH : The main way is to say that governments don't have to borrow at interest from
existing financial "savers," mainly the One Percent. The government can do what America did
during the Civil War: print greenbacks. (The MMT version is the Trillion-dollar platinum coin.)
The Treasury can provide the money needed by the economy. It does that by running a budget
deficit and spending money into the economy. If you don't do that, if you do what Bill
Clinton did in the last years of his presidency and run a budget surplus, then you force the
economy to depend on banks for credit.
The problem is that bank credit is essentially predatory and extractive. The same thing
happens in Europe. The Eurozone governments cannot run a budget deficit of more than 3 percent,
so the government is unable to spend enough money to invest in public infrastructure or
anything else. As a result, the Eurozone economy is subject to debt deflation, which is
exacerbated by people having to borrow from the banks at high interest rates that far exceeds
the rate of growth. So Europe is suffering an even more serious debt deflation than the United
States.
JS : Is any of this going to change, either in Europe or here?
MH : Not until there's a crash. Not until it gets serious enough that people realize
that there has to be an alternative. Right now Margaret Thatcher and the neoliberals have won.
She said there was no alternative, and as long as people believe There Is No Alternative,
they're not going to realize that it doesn't have to be this way, and that you don't need a
private banking sector. A public banking sector would be much more efficient.
JS : How would you sum up Wall Street right now? Is it entirely predatory? Entirely
parasitical? What are Wall Street's essential functions now?
MH : Number one, to run a casino. By far the largest volume at stake is betting on
whether interest rates, foreign exchange rates or stock prices will go up or down. So the
financial system has turned into a gambling casino. Its second aim is to load the economy down
with as much debt as possible. Debt is the banking system's "product," and the GDP counts its
"carried interest" penalties and late fees, its short-term trading gains as "financial
services" counted as part of Gross Domestic Product (GDP).
The aim is to get as much of these financial returns as possible, and finally to foreclose
on as much property of defaulting debtors as possible. The business plan -- as I learned at
Chase Manhattan years ago -- is to transfer all economic growth into the hands of financial
investors, the One Percent. The financial business plan is to create a set of laws and mount a
campaign of regulatory capture so that all the growth in the economy accrues to the One
Percent, not the 99 Percent. That means that as the One Percent's rentier income grows,
the 99 Percent gets less and less each year, until finally it emigrates or dies off, or is put
into a for-profit prison, which looks like a growth industry today.
JS : Is there a single good thing that Wall Street does? Is there anything good that
comes out of Wall Street?
MH: You have to look at it as a system. You can't segregate a particular action from
the overall economy. If the overall system aims at making money in predatory ways at somebody
else's expense, then it is a zero-sum game. That is essentially a short-run business model. And
politically, it involves opposing a mixed economy. At least, the "old fashioned" socialist
mixed economy in which governments subordinate short-term gain-seeking to long-term objectives
uplifting the entire economy.
As the Greek philosophers recognized, wealthy people define their power by their ability to
injure the rest of society, so as to lord it over them. That was the Greek philosophy of
money-lust [πλεονεξία, pleonexia ]
and hubris [ὕβρις] -- not merely arrogance, but behavior that was
injurious to others.
Rentier income is injurious to society at large. Rentiers define a "free
market" as one in which they are free to deny economic freedom to their customers,
employees and other victims. The rentier model is to enrich the oligarchy to a point
where it is able to capture the government.
John Siman : It seems that unless there's a Hammurabi-style "divine king" or some
elected civic regulatory authority, oligarchies will arise and exploit their societies as much
as they can, while trying to prevent the victimized economy from defending itself.
Michael Hudson : Near Eastern rulers kept credit and land ownership subordinate to
the aim of maintaining overall growth and balance. They prevented creditors from turning
citizens into indebted clients obliged to work off their debts instead of serving in the
military, providing corvée labor and paying crop rents or other fees to the palatial
sector.
JS : So looking at history going back to 2000 or 3000 BC, once we no longer have the
powerful Near Eastern "divine kings," there seems not to have been a stable and free economy.
Debts kept mounting up to cause political revolts. In Rome, this started with the Secession of
the Plebs in 494 BC, a century after Solon's debt cancellation resolved a similar Athenian
crisis.
MH : Near Eastern debt cancellations continued into the Neo-Assyrian and
Neo-Babylonian Empires in the first millennium BC, and also into the Persian Empire. Debt
amnesties and laws protecting debtors prevented the debt slavery that is found in Greece and
Rome. What modern language would call the Near Eastern "economic model" recognized that
economies tended to become unbalanced, largely as a result of buildup of debt and various
arrears on payments. Economic survival in fact required an ethic of growth and rights for the
citizenry (who manned the army) to be self-supporting without running into debt and losing
their economic liberty and personal freedom. Instead of the West's ultimate drastic solution of
banning interest, rulers cancelled the buildup of personal debts to restore an idealized order
"as it was in the beginning."
This ideology has always needed to be sanctified by religion or at least by democratic
ideology in order to prevent the predatory privatization of land, credit, and ultimately the
government. Greek philosophy warned against monetary greed
[πλεονεξία, pleonexia ] and
money-love [φιλοχρηματία,
philochrêmatia ] from Sparta's mythical lawgiver Lycurgus to Solon's poems
describing his debt cancellation in 594 and the subsequent philosophy of Plato and Socrates, as
well as the plays of Aristophanes. The Delphic Oracle warned that money-love was the only thing
that could destroy Sparta [Diodorus Siculus 7.5]. That indeed happened after 404 BC when the
war with Athens ended and foreign tribute poured into Sparta's almost un-monetized regulated
economy.
The problem, as famously described in The Republic and handed down in Stoic
philosophy, was how to prevent a wealthy class from becoming wealth-addicted, hubristic and
injurious to society. The 7 th -century "tyrants" were followed by Solon in Athens
in banning luxuries and public shows of wealth, most notoriously at funerals for one's
ancestors. Socrates went barefoot
[ἀνυπόδητος, anupodêtos ] to
show his contempt for wealth, and hence his freedom from its inherent personality defects. Yet
despite this universal ideal of avoiding extremes, oligarchic rule became economically
polarizing and destructive, writing laws to make its creditor claims and the loss of land by
smallholders irreversible. That was the opposite of Near Eastern Clean Slates and their
offshoot, Judaism's Jubilee Year.
JS : So despite the ideals of their philosophy, Greek political systems had no
function like that of Hammurabi-like kings -- or philosopher-kings for that matter -- empowered
to hold financial oligarchies in check. This state of affairs led philosophers to develop an
economic tradition of lamentation instead. Socrates, Plato and Aristotle, Livy and Plutarch
bemoaned the behavior of the money-loving oligarchy. But they did not develop a program to
rectify matters. The best they could do was to inspire and educate individuals -- most of whom
were their wealthy students and readers. As you said, they bequeathed a legacy of Stoicism.
Seeing that the problem was not going to be solved in their lifetimes, they produced a
beautiful body of literature praising philosophical virtue.
MH : The University of Chicago, where I was an undergraduate in the 1950s, focused on
Greek philosophy. We read Plato's Republic , but they skipped over the discussion of
wealth-addiction. They talked about philosopher-kings without explaining that Socrates' point
was that rulers must not own land and other wealth, so as not to have the egotistical tunnel
vision that characterized creditors monopolizing control over land and labor.
JS : In Book 8 of the Republic , Socrates condemns oligarchies as being
characterized by an insatiable greed [ἀπληστία,
aplêstia ] for money and specifically criticizes them for allowing polarization
between the super-rich
[ὑπέρπλουτοι, hyper-ploutoi
] and the poor [πένητες, penêtes ], who are made
utterly resourceless [ἄποροι, aporoi ].
MH : One needs to know the context of Greek economic history in order to understand
The Republic 's main concern. Popular demands for land redistribution and debt
cancellation were resisted with increasing violence. Yet few histories of Classical Antiquity
focus on this financial dimension of the distribution of land, money and wealth.
Socrates said that if you let the wealthiest landowners and creditors become the government,
they're probably going to be wealth-addicted and turn the government into a vehicle to help
them exploit the rest of society. There was no idea at Chicago of this central argument made by
Socrates about rulers falling subject to wealth-addiction. The word "oligarchy" never came up
in my undergraduate training, and the "free market" business school's Ayn Rand philosophy of
selfishness is as opposite from Greek philosophy as it is from Judeo-Christian religion.
JS : The word "oligarchy" comes up a lot in book 8 of Plato's Republic . Here
are 3 passages:
1. At Stephanus page 550c "And what kind of a regime," said he, "do you understand by
oligarchy [ὀλιγαρχία]?" "That based on a
property qualification," said I, "wherein the rich
[πλούσιοι] hold office [550d] and the poor man
[πένης, penês ] is excluded.
2. at 552a "Consider now whether this polity [ i.e . oligarchy] is not the first that
admits that which is the greatest of all such evils." "What?" "The allowing a man to sell all
his possessions, which another is permitted to acquire, and after selling them to go on living
in the city, but as no part of it, neither a money-maker, nor a craftsman, nor a knight, nor a
foot-soldier, but classified only as a pauper [πένης, penês
] and a dependent [ἄπορος, aporos ]." [552b] "This
is the first," he said. "There certainly is no prohibition of that sort of thing in
oligarchical states. Otherwise some of their citizens would not be excessively rich
[ὑπέρπλουτοι, hyper-ploutoi
], and others out and out paupers [πένητες,
penêtes ]."
3 at 555b: "Then," said I, "is not the transition from oligarchy to democracy effected in
some such way as this -- by the insatiate greed
[ἀπληστία, aplêstia ] for that which
oligarchy set before itself as the good, the attainment of the greatest possible wealth?"
MH : By contrast, look where Antiquity ended up by the 2 nd century BC.
Rome physically devastated Athens, Sparta, Corinth and the rest of Greece. By the Mithridatic
Wars (88-63 BC) their temples were looted and their cities driven into unpayably high debt to
Roman tax collectors and Italian moneylenders. Subsequent Western civilization developed not
from the democracy in Athens but from oligarchies supported by Rome. Democratic states were
physically destroyed, blocking civic regulatory power and imposing pro-creditor legal
principles making foreclosures and forced land sales irreversible.
JS: It seems that Greek and Roman Antiquity could not solve the problem of economic
polarization. That makes me want to ask about our own country: To what extent does America
resemble Rome under the emperors?
MH: Wealthy families have always tried to break "free" from central political power
-- free to destroy the freedom of people they get into debt and take their land and property.
Successful societies maintain balance. That requires public power to check and reverse the
excesses of personal wealth seeking, especially debt secured by the debtor's labor and land or
other means of self-support. Balanced societies need the power to reverse the tendency of debts
to grow faster than the ability to be paid. That tendency runs like a red thread through Greek
and Roman history.
This overgrowth of debt is also destabilizing today's U.S. and other financialized
economies. Banking and financial interests have broken free of tax liability since 1980, and
are enriching themselves not by helping the overall economy grow and raising living standards,
but just the opposite: by getting the bulk of society into debt to themselves.
This financial class is also indebting governments and taking payment in the form of
privatizing the public domain. (Greece is a conspicuous recent example.) This road to
privatization, deregulation and un-taxing of wealth really took off with Margaret Thatcher and
Ronald Reagan cheerleading the anti-classical philosophy of Frederick von Hayek and the
anti-classical economics of Milton Friedman and the Chicago Boys.
Something much like this happened in Rome. Arnold Toynbee described its oligarchic land grab
that endowed its ruling aristocracy with unprecedented wealth as Hannibal's Revenge. That was
the main legacy of Rome's Punic Wars with Carthage ending around 200 BC. Rome's wealthy
families who had contributed their jewelry and money to the war effort, made their power grab
and said that what originally appeared to be patriotic contributions should be viewed as having
been a loan. The Roman treasury was bare, so the government (controlled by these wealthy
families) gave them public land, the ager publicus that otherwise would have been used
to settle war veterans and other needy.
Once you inherit wealth, you tend to think that it's naturally yours, not part of society's
patrimony for mutual aid. You see society in terms of yourself, not yourself as part of
society. You become selfish and increasingly predatory as the economy shrinks as a result of
your indebting it and monopolizing its land and property. You see yourself as exceptional, and
justify this by thinking of yourself as what Donald Trump would call "a winner," not subject to
the rules of "losers," that is, the rest of society. That's a major theme in Greek philosophy
from Socrates andPlato and Aristotle through the Stoics. They saw an inherent danger posed by
an increasingly wealthy landholding and creditor ruling class atop an indebted population at
large. If you let such a class emerge independently of social regulation and checks on personal
egotism and hubris, the economic and political system becomes predatory. Yet that has been the
history of Western civilization.
Lacking a tradition of subordinating debt and land foreclosure from smallholders, the Greek
and Italian states that emerged in the 7 th century BC took a different political
course from the Near East. Subsequent Western civilization lacked a regime of oversight to
alleviate debt problems and keep the means of self-support broadly distributed.
The social democratic movements that flowered from the late 19 th century until
the 1980s sought to re-create such regulatory mechanisms, as in Teddy Roosevelt's trust
busting, the income tax, Franklin Roosevelt's New Deal, postwar British social democracy. But
these moves to reverse economic inequality and polarization are now being rolled back, causing
austerity, debt deflation and the concentration of wealth at the top of the economic pyramid.
As oligarchies take over government, they lorded it over the rest of society much like feudal
lords who emerged from the wreckage of the Roman Empire in the West.
The tendency is for political power to reflect wealth. Rome's constitution weighted voting
power in proportion to one's landholdings, minimizing the voting power of the non-wealthy.
Today's private funding of political campaigns in the United States is more indirect in
shifting political power to the Donor Class, away from the Voting Class. The effect is to turn
governments to serve a financial and property-owning class instead of prosperity for the
economy at large. We thus are in a position much like that of Rome in 509 BC, when the kings
were overthrown by an oligarchy claiming to "free" their society from any power able to control
the wealthy. The call for "free markets" today is for deregulation of rentier wealth,
turning the economy into a free-for-all.
Classical Greece and Italy had a fatal flaw: From their inception they had no tradition of a
mixed public/private economy such as characterized in the Near East, whose palatial economy and
temples produced the main economic surplus and infrastructure. Lacking royal overrides, the
West never developed policies to prevent a creditor oligarchy from reducing the indebted
population to debt bondage, and foreclosing on the land of smallholders. Advocates of debt
amnesties were accused of "seeking kingship" in Rome, or aspiring to "tyranny"(in Greece).
JS: It seems to me that you're saying this economic failure is Antiquity's original
sin as well as fatal flaw. We have inherited a great philosophic and literary tradition from
them analyzing and lamenting this failure, but without a viable program to set it right.
MH: That insight unfortunately has been stripped out of the curriculum of classical
studies, just as the economics discipline sidesteps the phenomenon of wealth addiction. If you
take an economics course, the first thing you're taught in price theory is diminishing marginal
utility: The more of anything you have, the less you need it or enjoy it. You can't enjoy
consuming it beyond a point. But Socrates and Aristophanes emphasized, accumulating money is
not like eating bananas, chocolate or any other consumable commodity. Money is different
because, as Socrates said, it is addictive, and soon becomes an insatiable desire
[ἀπληστία, aplêstia ].
JS: Yes, I understand! Bananas are fundamentally different from money because you can
get sick of bananas, but you can never have too much money! In your forthcoming book, The
Collapse of Antiquity , you quote what Aristophanes says in his play Plutus (the god
of wealth and money). The old man Chremylus -- his name is based on the Greek word for money,
chrêmata [χρήματα] -- Chremylus and his slave
perform a duet in praise of Plutus as the prime cause of everything in the world, reciting a
long list. The point is that money is a singular special thing: "O Money-god, people never get
sick of your gifts. They get tired of everything else; they get tired of love and bread, of
music and honors, of treats and military advancement, of lentil soup, etc., etc. But they never
get tired of money. If a man has thirteen talents of silver -- 13 million dollars, say -- he
wants sixteen; and if he gets sixteen, he will want forty, and so forth, and he will complain
of being short of cash the whole time."
MH: Socrates's problem was to figure out a way to have government that did not serve
the wealthy acting in socially destructive ways. Given that his student Platowas an aristocrat
and that Plato's students in the Academy werearistocratsas well, how can you have a government
run by philosopher-kings? Socrates's solution was not practical at that time: Rulers should not
have money or property. But all governments were based on the property qualification, so his
proposal for philosopher-kings lacking wealth was utopian. And like Plato and other Greek
aristocrats, they disapproved of debt cancellations, accusing these of being promoted by
populist leaders seeking to become tyrants.
JS: Looking over the broad sweep of Roman history, your book describes how, century
after century, oligarchs were whacking every energetic popular advocate whose policies
threatened their monopoly of political power, and their economic power as creditors and
privatizers of the public domain, Rome's ager publicus , for themselves.
I brought with me on the train Cæsar's Gallic War . What do you think of
Cæsar and how historians have interpreted his role?
MH: The late 1 st century BC was a bloodbath for two generations before
Cæsar was killed by oligarchic senators. I think his career exemplifies what Aristotle
said of aristocracies turning into democracies: He sought to take the majority of citizens into
their own camp to oppose the aristocratic monopolies of landholding, the courts and political
power.
Cæsar sought to ameliorate the oligarchic Senate's worst abuses that were stifling
Rome's economy and even much of the aristocracy. Mommsen is the most famous historian
describing how rigidly and unyieldingly the Senate opposed democratic attempts to achieve a
role in policy-making for the population at large, or to defend the debtors losing their land
to creditors, who were running the government for their own personal benefit. He described how
Sulla strengthened the oligarchy against Marius, and Pompey backed the Senate against Caesar.
But competition for the consulship and other offices was basically just a personal struggle
among rival individuals, not rival concrete political programs. Roman politics was autocratic
from the very start of the Republic when the aristocracy overthrew the kings in 509 BC. Roman
politics during the entire Republic was a fight by the oligarchy against democracy and the
populace as a whole.
The patricians used violence to "free" themselves from any public authority able to check
their own monopoly of power, money and land acquisition by expropriating smallholders and
grabbing the public domain being captured from neighboring peoples. Roman history from one
century to the next is a narrative of killing advocates of redistributing public land to the
people instead of letting it be grabbed by the patricians, or who called for a debt
cancellation or even just an amelioration of the cruel debts laws.
On the one hand, Mommsen idolized Cæsar as if he were a kind of revolutionary
democrat. But given the oligarchy's total monopoly on political power and force, Mommsen
recognized that under these conditions there could not be any political solution to Rome's
economic polarization and impoverishment. There could only be anarchy or a dictatorship. So
Caesar's role was that of a Dictator -- vastly outnumbered by his opposition.
A generation before Caesar, Sulla seized power militarily, bringing his army to conquer Rome
and making himself Dictator in 82 BC. He drew up a list of his populist opponents to be
murdered and their estates confiscated by their killers. He was followed by Pompey, who could
have become a dictator but didn't have much political sense, so Caesar emerged victorious.
Unlike Sulla or Pompey, he sought a more reformist policy to check the senatorial corruption
and self-dealing.
The oligarchic Senate's only "political program" was opposition to "kingship" or any such
power able to check its land grabbing and corruption. The oligarchs assassinated him, as they
had killed Tiberius and Gaius Gracchus in 133 and 121, the praetor Asellio who sought to
alleviate the population's debt burden in 88 by trying to enforce pro-creditor laws, and of
course the populist advocates of debt cancellation such as Catiline and his supporters.
Would-be reformers were assassinated from the very start of the Republic after the aristocracy
overthrew Rome's kings.
JS: If Caesar had been successful, what kind of ruler might he have been?
MH: In many ways he was like the reformer-tyrants of the 7 th and 6
th centuries in Corinth, Megara and other Greek cities. They all were members of the
ruling elite. He tried to check the oligarchy's worst excesses and land grabs, and like
Catiline, Marius and the Gracchi brothers before him, to ameliorate the problems faced by
debtors. But by his time the poorer Romans already had lost their land, so the major debts were
owed by wealthier landowners. His bankruptcy law only benefited the well-to-do who had bought
land on credit and could not pay their moneylenders as Rome's long Civil War disrupted the
economy. The poor already had been ground down. They supported him mainly for his moves toward
democratizing politics at the expense of the Senate.
JS: After his assassination we get Caesar's heir Octavian, who becomes Augustus. So
we have the official end of the Republic and the beginning of a long line of emperors, the
Principate. Yet despite the Senate's authority being permanently diminished, there is continued
widening of economic polarization. Why couldn't the Emperors save Rome?
MH: Here's an analogy for you: Just as nineteenth-century industrial reformers
thought that capitalism's political role was to reform the economy by stripping away the legacy
of feudalism -- a hereditary landed aristocracy and predatory financial system based mainly on
usury -- what occurred was not an evolution of industrial capitalism into socialism. Instead,
industrial capitalism turned into finance capitalism. In Rome you had the end of the senatorial
oligarchy followed not by a powerful, debt-forgiving central authority (as Mommsen believed
that Caesar was moving toward, and as many Romans hoped that he was moving towards), but to an
even more polarized imperial garrison state.
JS: That's indeed what happened. The emperors who ruled in the centuries after
Cæsar insisted on being deified -- they were officially "divine," according to their own
propaganda. Didn't any of them have the potential power to reverse the Roman economy's
ever-widening polarization of the, like the Near Eastern "divine kings" from the third
millennium BC into the Neo-Assyrian, Neo-Babylonian and even the Persian Empire in the first
millennium?
MH: The inertia of Rome's status quo and vested interests among patrician nobility
was so strong that emperors didn't have that much power. Most of all, they didn't have a
conceptual intellectual framework for changing the economy's basic structure as economic life
became de-urbanized and shifted to self-sufficient quasi-feudal manor estates. Debt amnesties
and protection of small self-sufficient tax-paying landholders as the military base was
achieved only in the Eastern Roman Empire, in Byzantium under the 9 th – and
10 th -century emperors (as I've described in my history of debt cancellations in
and forgive them their debts ).
The Byzantine emperors were able to do what Western Roman emperors could not. They reversed
the expropriation of smallholders and annulled their debts in order to keep a free tax-paying
citizenry able to serve in the army and provide public labor duties. But by the 11
th and 12 th centuries, Byzantium's prosperity enabled its oligarchy to
create private armies of their own to fight against centralized authority able to prevent their
grabbing of land and labor.
It seems that Rome's late kings did something like this. That is what attracted immigrants
to Rome and fueled its takeoff. But with prosperity came rising power of patrician families,
who moved to unseat the kings. Their rule was followed by a depression and walkouts by the bulk
of the population to try and force better policy. But that could no be achieved without
democratic voting power, so faith was put in personal leader -- subject to patrician violence
to abort any real economic democracy.
In Byzantium's case, the tax-avoiding oligarchy weakened the imperial economy to the point
where the Crusaders were able to loot and destroy Constantinople. Islamic invaders were then
able to pick up the pieces.
The most relevant point of studying history today should be how the economic conflict
between creditors and debtors affected the distribution of land and money. Indeed, the tendency
of a wealthy overclass to pursue self-destructive policies that impoverish society should be
what economic theory is all about. We'll discuss this in Part 4.
John Siman: I want to spell out the implications of the points that Socrates brought
up, and with which you and I agree. That leaves the question facing us today: Is the American
oligarchy and state as rapacious as that of Rome? Or is it universally the nature of oligarchy
in any historical setting to be rapacious? And if so, where is it all leading?
Michael Hudson : If Antiquity had followed the "free market" policies of modern
neoliberal economics, the Near East, Greece and Rome would never have gained momentum. Any such
"free market" avoiding mutual aid and permitting a wealthy class to emerge and enslave the bulk
of the population by getting it into debt and taking its land would have shrunk, or been
conquered from without or by revolution from within. That's why the revolutions of the 7
th century BC, led to reformers subsequently called "tyrants" in Greece (and "kings"
in Rome) were necessary to attract populations rather than reduce them to bondage.
So of course it is hard for mainstream economists to acknowledge that Classical Antiquity
fell because it failed to regulate and tax the wealthy financial and landowning classes, and
failed to respond to popular demands to cancel personal debts and redistribute the land that
had been monopolized by the wealthy.
The wealth of the Greek and Roman oligarchies was the ancient counterpart to today's
Finance, Insurance and Real Estate (FIRE) sector, and their extractive and predatory behavior
is what destroyed Antiquity. The perpetuation of this problem even today, two thousand years
later, should establish that the debt/credit dynamic and polarization of wealth is a central
problem of Western civilization.
JS : So what were -- and are -- the political and social dynamic at work?
MH : The key is the concept of wealth addiction and how it leads to hubris --
arrogance that seeks to increase power in ways that hurt other people. Hubris is not merely
over-reaching; it is socially injurious. The wealthy or power injure other people knowingly, to
establish their power and status.
That is what Aristophanes meant when his characters say that wealth is not like bananas or
lentil soup. Wealth has no object but itself . Wealth is status -- and also political
control. The creditor's wealth is the debtor's liability. The key to its dynamic is not
production and consumption, but assets and liabilities -- the economy's balance sheet. Wealth
and status in the sense of who/whom. It seeks to increase without limit, and Socrates and
Aristotle found the major example to be creditors charging interest for lending "barren" money.
Interest had to be paid out of the debtor's own product, income or finally, forfeiture of
property; creditors did not provide means of making interest to pay off the loan.
This is the opposite of Austrian School theories that interest is a bargain to share the
gains to be made from the loan "fairly" between creditor and debtor. It also is the opposite of
neoclassical price theory. The economics taught in universities today is based on a price
theory that does not even touch on this point. The liberty that oligarchs claim is the right to
indebt the rest of society and then demand full payment or forfeiture of the debtor's
collateral. This leads to massive expropriations, as did the Junk Mortgage foreclosures after
2008 when President Obama failed to write down debts to realistic market values for real estate
financed on loans far beyond the buyer's ability to pay. The result was 10 million
foreclosures.
Yet today's mainstream economics treats the normal tendency to polarize between creditors
and debtors, the wealthy and the have-nots, as an anomaly. It has been the norm for the last
five thousand years, but economics sidesteps actual empirical history as if it is an anomaly in
the fictional parallel universe created by the mainstream's unrealistic assumptions. Instead of
being a science, such economics is science fiction.It trains students in cognitive dissonance
that distracts them from understanding Classical Antiquity and the driving dynamics of Western
civilization.
JS: This gets us back to the question of whether universities should just be shut
down and started up all over again.
MH: You don't shut them down, you create a new group of universities with a different
curriculum. The path of least resistance is to house this more functional curriculum in new
institutions. That's what America's Republican and pro-industrial leaders recognized after the
Civil War ended in 1865. They didn't shut down Harvard and Yale and Princeton and the Christian
free-trade Anglophile colleges. They created state colleges funded by land grants, such as
Cornell in upstate New York, and business schools such as the Wharton School at the University
of Pennsylvania, endowed by industrialists to providing an economic logic for the state's
steel-making and related industrial protectionism. The result was an alternative economics to
describe how America should develop as what they saw as a new civilization, free of the
vestiges of Europe's feudal privileges, absentee ownership and colonialist mentality.
The Republicans and industrialists saw that America's prestige colleges had been founded
long before the Civil War, basically as religious colleges to train the clergy. They taught
British free trade theory, serving the New England commercial and banking interests and
Southern plantation owners. But free trade kept the United States dependent on England. My book
America's Protectionist Takeoff describes how the American School of Political Economy,
led by Henry Carey and E. Peshine Smith (William Seward's law partner), developed an
alternative to what was being taught in the religious colleges.
This led to a new view of the history of Western civilization and America's role in fighting
against entrenched privilege. William Draper's Intellectual Development of Europe , and
Andrew Dixon White's History of the Warfare of Science with Theology saw the United
States as breaking free from the feudal aristocracies that were a product of the way in which
antiquity collapsed, economically and culturally.
JS : So business schools were originally progressive!
MH : Surprising as it may seem, the answer is Yes, to the extent that they described
the global economy as tending to polarize under free trade and an absence of government
protectionism, not to become more equal. They incorporated technology, energy-use and the
environmental consequences of trade patterns into economic theory, such as soil depletion
resulting from plantation monocultures. Mainstream economics fought against such analysis
because it advocated markets "free" for polluters, "free" for nations to pursue policies that
made them poorer and dependent on foreign credit.
JS : So this is how the Wharton School's first professor of economics, Simon Patten,
one of the founders of American sociology, fits into this anti- rentier tradition! That
is such a revelation to me! They developed an analysis of technology's effects on the economy,
of monopoly pricing and economic rent as unearned income that increases the cost of living and
cost of production. They explained the benefits of public infrastructure investment. Today that
is called "socialism," but it was industrial capitalists who took the lead in urging such
public investment, so as to lower their cost of doing business.
MH : The first U.S. business schools in the late 19 th century described
rentiers as unproductive. That is why today's neoliberals are trying to rewrite the
history of Institutionalism in a way that expurgates the Americans who wanted the government to
provide public infrastructure to make America a low-cost economy, undersell England and other
countries, and evolve into the industrial giant it became by the 1920s.
JS : That was Simon Patten's teaching at the Wharton School -- government-subsidized
public infrastructure as the fourth factor of production.
MH : Yes. America's ruling political class tried to make the United States a dominant
economy instead of a rentier economy of landlords and financial manipulators.
JS : How did the robber barons fit into this story?
MH : Not as industrialists or manufacturers, but as monopolists opposed by the
industrial interests. It was Teddy Roosevelt's trust-busting and the Republicans that enacted
the Sherman antitrust act. Its spirit was continued by Franklin Roosevelt.
JS :Is today's economy a second age of robber barons?
MH : It's becoming a second Gilded Age. An abrupt change of direction in economic
trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result
has been to invert what the 19 th -century economists understood to be a free market
-- that is, a market free from a privileged hereditary class living on unearned income in the
form of land rent, monopoly rent and financial extraction.
JS : I was in my first few years of college when Thatcher came in in 1979, and when
Reagan was elected in 1980. I asked my economics professors what was going on, but I could not
find a single professor to coherently describe the U-turn that was occurring. It certainly
wasn't in Paul Samuelson's textbook that we were given.
MH : There's little logic for neoliberalism beyond a faith that short-term greed is
the best way to optimize long-term growth. It is natural for the wealthiest classes to have
this faith. Neoliberalism doesn't look at the economy as a social system, and it excludes as
"externalities" concerns with the environment, debt dependency and economic polarization. It
only asks how to make a short-term hit-and-run gain, regardless of whether this is done in a
way that has a positive or negative overall social effect. Realistic economic logic is social
in scope, and distinguishes between earned and unearned income. That is why economists such as
Simon Patten and Thorstein Veblen decided to start afresh and create the discipline of
sociology, to go beyond narrow individualistic economics being taught.
Today's mathematical economics is based on circular reasoning that treats all that has
happened as having been inevitable. It is all survival of the fittest, so it seems that there
is no alternative. This policy conclusion is built into economic methodology. If we weren't the
fittest, we wouldn't have survived, so by definition (that is, circular reasoning), any
alternative is less than fit.
Regarding the fact that you had to read Samuelson when you were in college, he was famous
for his Factor Price Equalization Theorem claiming to prove mathematically that everybody and
every nation tends naturally to become more and more equal (if government stands aside). He
denied that the tendency of the global economy is to polarize, not equalize. The political
essence of this equilibrium theory is its claim that economies tend to settle in a stable
balance. In reality they polarize and then collapse if they do not reverse their polarizing
financial and productivity and wealth dynamics are.
The starting point of economic theorizing should explain the dynamic that lead economics to
polarize and collapse. That is the lesson of studying antiquity that we have discussed in our
earlier talks. Writers in classical antiquity, like Bronze Age Near Eastern rulers before them
and the Biblical prophets, recognized that a rentier economy tends to destroy the
economy's productivity and widespread prosperity, and ultimately its survival. In today's world
the Finance, Insurance,and Real Estate [FIRE] sector and monopolies are destroying the rest of
the economy, using financial wealth to take over the government and disable its ability to
prevent their operating in corrosive and predatory ways.
JS : Why aren't more people up in arms?
MH : They're only up in arms if they believe that there is an alternative. As long as
the vested interests can suppress any idea that there is an alternative, that matters
don't have to be this way, people just get depressed. In our third interview you spoke about
Socrates and the Stoics producing a philosophy of lamentation and resignation. By his day there
seemed no solution except to denounce wealth. When matters got much worse in the Roman Empire,
wealth was abhorred. That became the message of Christianity.
What is needed is to define the scope of the alternative that you want. How can the economy
grow when households, business, and government have to pay more and more of their revenue to
the financial sector, which then turns around and lends its interest and related income out to
indebt the economy even more? The effect is to extract even more income. Rising government debt
and tax cuts for the rentiers lead to the privatization of public infrastructure and
natural monopolies. Higher prices are charged for tolls to pay for public healthcare,
education, roads and other services that were expected to be provided for free a century ago.
Financialized privatization thus creates a high-rent, high-cost economy -- the opposite of
industrial capitalism evolving into socialism to finally free society from rentier
income.
JS: Wouldn't that be based on the insatiable desire
[ἀπληστία, aplêstia ] for money and the
super-rich [ὑπέρπλουτοι,
hyper-ploutoi ] oligarchs in Book 8 of Plato's Republic ? So we get back to my
question: Is the behavior of the super-rich a constant in human nature?
MH: Money-love
[φιλοχρηματία,
philochrêmatia ] has always been extreme because wealth is addictive. But their
dynamic of credit -- other peoples' debts -- increasing at compound interest is mathematized
and the economy is put on automatic pilot to self-destruct. Its business plan to "create
wealth" by making financial gains at somebody else's expense, without limit. This kind of
financial wealth is a zero-sum activity. The wealth of the creditor class, the One Percent, is
achieved by indebting the 99 Percent.
JS: Why is it a zero-sum activity?
MH: A zero-sum activity is when one party's gain is another's loss. Instead of income
paid to creditors being reinvested in means of production to help the economy grow, it's spent
on buying more assets. The most wasteful examples are corporate stock buyback programs and
financial raids. And the largest effect of financialization occurs as loans and Quantitative
Easing simply bid up the price of real estate, stocks, bonds and other assets. The effect is to
put housing and a retirement income further out of range of people who have to live by working
for wages and salaries instead of living off absentee ownership, interest and financial
asset-price gains.
JS: Why is this being done instead of investing in the economy to help the population
live a better and more prosperous life?
MH: The tax and regulatory system is set up to make financial gains or create
monopoly privileges. That is quicker and more certain, especially in an economy shrinking as a
result of financialization and the austerity it imposes. It's hard to make profits by investing
in a shrinking economy suffering from debt deflation and a squeeze on family budgets to pay for
health care, education and other basic needs.
JS: So it becomes more about extraction. Let's come back to Global Climate Change and
rising sea levels as a foundation of American foreign policy.
MH: Since the 19th century, American policy has been based on the recognition that
GDP growth reflects rising energy use per capita. Rising productivity is almost identical with
the curve of energy use per worker. That was the basic premise of E. Peshine Smith in 1853, and
subsequent writers, whom I describe in America's Protectionist Takeoff: 1918-1914 . The
policy conclusion is that if you can control the source of energy -- which remains mainly oil
and coal -- then you can control global GDP growth. That is why Dick Cheney invaded Iraq: to
grab its oil. It is why Trump announced his intention to topple Venezuela and take its oil.
If other nations are obliged to buy their oil from the United States or its companies, then
it's in a monopoly position to turn off their electricity (like the United States did to
Venezuela) and hurt their economies if they don't acquiesce in a world system that lets
American financial firms come in and buy out their most productive monopolies and privatize
theirpublic domain. That's why America's foreign policy is to monopolize the world's oil, gas
and coal in order to have a stranglehold on the rate of growth of other countries by being able
to deny them energy. It's like denying countries food in order to starve them out. The aim isto
exploit Europe, Asia, Africa and Latin America what Rome exploited its Empire.
JS: Would you be comfortable using words like evil to describe what's going on
now?
MH : Evil essentially is predatory and destructive behavior. Socrates said that it
ultimately is ignorance, because nobody would set out intentionally to do it. But in that case,
evil would be an educational system that imposes ignorance and tunnel vision, distracting
attention from understanding how economic society actually works in destructive ways. On that
logic, post-classical neoliberal economics and the Chicago Boys are evil because their ideology
breeds ignorance and leads its believers to act in ways that are injurious to society,
preventing personal fulfillment through economic growth. Evil is a policy that makes most of
society poorer, simply in order to enrich an increasingly wealth-addictive rentier layer
at the top. Werner Sombart described the bourgeoisie as floating like a globules of fat on top
of a soup.
JS: This is now happening on a path that follows an exponential extreme. I guess
global warming makes it particularly evil. We're not simply talking about taking advantage of
other people within a society, we're talking about destruction of the planet and its
environment.
MH: Economists dismiss this as an "externality," that is, outside the scope of their
models. So these models are deliberately ignorant. You could say that this makes them evil.
JS: That is what I've suspected since we started the Iraq War in 2003.
MH: America's military buildup, its anti-environmental policy and global wars are
part of the same symbiotic strategy. The reason why America will not be part of a real effort
to mitigate global warming is that its policy is still based on grabbing the oil resources of
the Near East, Venezuela, and everywhere else that it can. Also, the oil industry is the most
tax-exempt and politically powerful sector. If it also happens to be the primary cause of
global warming, that is viewed as just collateral damage to America's attempt to control the
world by controlling the oil supply. In that sense the environmental impasse is a byproduct of
American imperialism.
JS: What's hopeful in the United States right now? What is a possible good
outcome?
MH: T he precondition would be for people to realize that there is an
alternative. Starting with wiping out of student debts, they can realize that the overall debt
overhead can be wiped out without hurting the economy -- and indeed, rescuing it from the
financial rentier class inasmuch as all debts on the liabilities side of the balance
sheet have their counterpart on the asset side as the savings of today's financial oligarchy,
which is doing to the U.S. economy what Rome's Senate did to the ancient world.
JS: How can people proceed from here?
MH: Understanding must come first. Once you have to have a sense of history, you
realize that there is an alternative. You also see what happens when a creditor
oligarchy gets strong enough to prevent any public power from writing down debts and to prevent
attempts to tax it.
You have to do to America today what the Republicans did after the Civil War: You have to
have a new university curriculum dealing with economic history, the history of economic thought
and the real world's long-term development.
JS: And what would be the premise for such economic history?
MH: T he starting point is to realize that civilization began in the ancient Near
East, and made a turn to oppose a strong public regulatory sector in Classical Greece and Rome.
The long-term tension is the eternal fight by the oligarchy of creditors and large land owners
to reduce the rest of society to serfdom, and to oppose strong rulers empowered to act in the
economy's long-term interest by creating checks against this polarization.
JS : So how much longer does this go on -- for months, for years, for decades?
MH : It always goes on longer than you think it will. Inertia has a great elastic
self-reinforcing power. Polarization will widen until people believe that there is an
alternative and decide to fight for it. Two things are required for this to happen: First, a
large proportion of people need to see that the economy is impoverishing them, and that the
existing picture of what is happening is misleading. Instead of wealth trickling down, it is
defying gravity and sucking income up from the base of the economic pyramid. People are having
to work harder just to stay in place, until their life style breaks down.
Second, people must realize that it doesn't have to be this way. There is an
alternative
JS : Right now most people think that government regulation and progressive taxation
will make things worse, and that the wealthy are job creators, not job destroyers. They think
that the system needs to be bolstered, not replaced, because the alternative is "socialism" --
that is, what the Soviets did, not what Franklin Roosevelt was doing. But today bailing out the
banks and giving subsidies to new employers is said to be for our own good.
MH : That's what the Romans told their provinces. Everything they did was always to
preserve "good order," meaning open opportunities for their own wealth grabbing. They never
said they were out to destroy and loot other societies. Madeline Albright followed this
rhetorical pattern in describing as being, like the Romans and France's brutal mission
civilisatrice , a program to uplift the world free-market efficiency. For performing this
service, the imperial power takes all the money that its colonies, provinces and allies can
generate. That's why the U.S. meddles in foreign politics, as we have just seen in Ukraine,
Libya and Syria.
JS : You've described the greatest meddling as distorting the narrative of history to
depict creditor and rentier drives toward oligarchy as being democratic and helping to raise
living standards and culture. Your books show just the opposite.
MH : Thank you. (Republished from
Naked Capitalism by permission of author or representative)
Questions for Dr. Hudson: Why should a public banking system charge interest at all on loans?
Could they not merely charge a one-time service fee to cover the cost of loan administration
and a one-time insurance fee to cover the costs of defaulting on the loan? After all, they
are not actually loaning money – they are creating money at minimal risk to the bank.
Charging interest to create money strikes me as mere theft.
Charging interest to create money strikes me as mere theft.
The school of Salamanca is where this idea of interest on money was codified, where the
Jesuit priests proclaimed it as a loss of wants. That is, since people loaned out their
money, they didn't get use of it, so they should be paid for their loss.
If you examine how banking works, banks hypothecate new money the moment you sign a debt
instrument. Both the new bank credit and debt instrument pop into being simultaneously.
To ask for compounding interest on this simple legerdemain is an outrageous abuse, so you
are right it is theft.
There are situations where it is not usurious. For example, Schacht's MefoBills scheme,
the interest fluxed outward from Reichsbank to the bill holder. A bill would be
presented to industry, and said industry would then start work making goods. Bill would then
be presented for discount, which is fancy way of saying paid for, or paid off. Upon discount,
bill would be examined to see if goods were produced. Then the bill would be paid its full
face value AND the interest it accrued.
Reichsmarks flowed from Reichsbank to the bill holder, who was paid interest. The bill
holder then spent his new Reichsmarks into the money supply.
Benjamin Franklin's public bank spent into the commons the extra money necessary
for debtors to pay interest on their loans. The commons were improved, so one could view this
as non usurious, even though it was positive interest. For the most part, FEES are all that
should accompany new loans, not compounding interest.
Canada had a quasi sovereign economy 1938 to 1974 and spent debt free into the
commons and on public infrastructure, their economy did not polarize toward creditors. The
Ministry of Finance owned all the common shares of Bank of Canada. BOC was a crown bank.
Note in all the "good" examples, interest flowed outward from an exogenous creator toward
the population. In bad examples of interest, it drains purchasing power from the
population.
By the way, a MEFOBILL scheme today could be used to release debts. The bill is created
exogenously by Treasury or even a shell company. The bill has a drawer, payee and drawee. It
is like a check. It channels toward a specific goal. For example, if you wanted to pay off
student debts, then the bill would aim at the student, who then presents bill to bank holding
student's debt instrument. Bill would eventually make its way to the FED through bank reserve
loops, and FED would expand their ledger. FED would use their keyboard to make new dollars,
which flow back into private bank system to pay off the students debt instrument. So double
entry mechanic laws are not abrogated. Student's debt disappeared, and Mefobill stays on FED
ledger forever, not accruing interest. Or, you could specify a small amount of interest to
the bank as a fee for their operations.
U.S. could use Mefobill scheme to lure industry back to the U.S. as it specifically
channels toward a goal.
The money system is something we humans created, it can be used for good or ill. To
paraphrase Michael, we need good civil law that codes for morality.
That was a soul-transforming read. It put into words what I could never put into words, but
on an instinctive level I have always felt these things. I have always had this irrational
hatred of bankers, landlords, capitalists, and any one else who dances to that faggy Gordon
Gekko tune. But I could never figure out why, let alone explain it clearly. This article has
done that for me right here and right now today. I am so grateful. This one is a keeper, now
I finally understand my hate. And I am proud of it. This is why Hitler was a good person, he
made these little bitch finance fags squeal and screech like the untermenschen they really
are.
It is interesting to note that the facts explored in this article corroborate and
synchronize with the facts explored in an amateur work titled "The Sumerian Swindle: How the
Jews Betrayed Mankind." If you look you can print the book free off the internet
somewhere.
From now on I only see humans in two distinct groups: productive people who work for a
living, and parasitic leeches who exploit the former. Twas ever thus. Let us successfully
genocide the latter in the near future.
The book sounds extremely interesting. I will probably get it, but that thing about the
Kaiser is a bad mistake. The German nation had been subjected to France and its proxies
marching across it for centuries. As always happens it unified in the face of threat, but
financially the structure was still harking back to the Holy Roman Empire. Being
decentralised as far as raising revenues was concerned, the Kaiser was unable to exert the
full strength of Germany. The Weimar government instituted reforms were intended to remedy
that for defensive purposes, but unfortunately Hitler inherited those reforms and that extra
wherewithal was a major reason for the early military successes in WW2 that set the world
agog.
Germany began to be a mixed economy in the decades leading up to World War I. But it had
a mentally retarded king whom they didn't know how to restrain, given their cultural faith
in royalty. China is of course the most successful recent mixed economy.
Dubious.France had financed massive military preparation by Russia, and Poincaire (cousin
of the brilliant physicist) was fixated with recovering Alsace and Lorraine (where he was
born). The military situation was gravely deteriorating for Germany partly because Germany.
The Kaiser did not attack France in 1905 when Britain had a tiny army and Russia was in
chaos. That was the craziest thing he did as leader.
Mr. Hudson thinks we can get the desirable results of Divine Kingship without having Divine
Kings, simply by enacting "laws" that promote a broad distribution of wealth. But he also
says that the oligarchy makes the laws and appoints the "elected" lawmakers. So he's engaged
in an exercise in wishful thinking. There is no democratic path to his desired result.
An excellent tour de force completely relevant to the major problems we face today, so
thank you , Ron Unz!
and turn the government into a vehicle to help them exploit the rest of society.
It's extremely obvious that's is exactly what our "constitution" was designed to do.
Hudson's insistence that debt must be government controlled runs into the problem
consistently, which both he and the interviewer discuss.
Essentially, the problem is that whoever gets the power will abuse it. "The government" is
no more a disinterested group of parties than the oligarchs or the plutocrats. The best
answer is to have a noble ruling class, but good luck with that; it will never happen at
least on a permanent basis.
So what's the answer? I wish I knew
The best [the Greek philosophers] could do was to inspire and educate individuals
I highly doubt anyone can do much more, but the last thing to do is to hope for some
Messiah, especially a rich one. Are you tRumpeteers listening?
PS: I liked the mention of Aristophanes. All of his plays are as instructive as they are
amusing and should be read by all. Same with Lucian of Samosata and Juvenal to mention just a
few.
JS said: "Right now most people think that government regulation and progressive taxation
will make things worse,"
Er, no, most people do not "think" that [ if they "think" at all].
They mostly "think" the exact opposite.
Due to their public [ie government funded] er,"education" [ie brainwashing], they are
actually dumb enough to believe that more government, and more regulations will make things
better for them, despite the fact that more than any other factor, it is the size and scope
of government that has directly caused the financial problems most of them are now
experiencing. "Stupid is a stupid does".
In fact, more, bigger government and more regulations will only further increase poverty
and make things even worse for them all than they are today.
This just in:
"Because they are all ultimately funded via both direct and indirect theft [taxes], and
counterfeiting [central bank monopolies], all governments are essentially, at their very
cores, 100% corrupt criminal scams which cannot be "reformed","improved", nor "limited" in
scope, simply because of their innate criminal nature." onebornfree
Government doesn't work" Harry Browne
"Taking the State wherever found, striking into its history at any point, one sees no way
to differentiate the activities of its founders, administrators and beneficiaries from those
of a professional-criminal class." Albert J. Nock
"Everything government touches turns to crap" Ringo Starr
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
There was no concept of linear progress in Antiquity. They thought that there was only
one way to do things, so any reform must be the way the world was meant to be in the very
beginning.
The Hebrews had their liberation from captivity, Hesiod had his three prior ages "before
there was iron," Odysseus travels the world observing the various ways of men, Plato
envisions a radical transformation of human society, Aristotle compares the constitutions of
various Greek city-states, Thucydides resorts to archaeology to show that the Athenians were
not the original inhabitants of the Attic Peninsula.
It's not difficult to come up with what seem to be counter examples to Hudson's assertion
that there was no "linear progress" and no vision of other ways of doing things in Antiquity.
Ancient Mediterranean societies did see humanity as moving in a direction, evolving by
discovery and by making new institutions to address novel problems.
I found that peculiar as well. Another thing that was out of place was the "deification"
of Teddy Roosevelt and his so called trust busting as well as FDR's continuously "evolving"
New Deals. Both Roosevelts and their programs were tRump-like frauds whose main interest was
self aggrandizement at whatever cost.
Like tRump, the rhetoric was grand but the motive and execution left much to be desired.
While I get what Hudson is saying when he sez "there oughta be a law," I think history has
proven, repeatedly, that while there's a possibility that there ought to be one, it's not
likely it'll do much good, and certainly no permanent good.
The greatest debt creator in the history of America is the zionists privately owned FED and
the zionist owned central banks in every country in the world that create money out of thin
air and charge the goyim/proles for the use of this zionist created charade, which started in
1913 here in the zio/US with the diabolical draconian demonic FED.
Free America, abolish the FED and return to government created , debt free money as was
the case prior to December 23, 1913!
@G.
Poulin G. Poulin says: "Mr. Hudson thinks we can get the desirable results of Divine
Kingship without having Divine Kings, simply by enacting "laws" that promote a broad
distribution of wealth. "
Yup. The whole, as per usual, "benevolent dictator" fantasy writ large, yet once again. It
never stops.
You'd think that by now, this late in the game, and given history, that most people would
have finally figured out that government "solutions" never worked , and never can, or
will.
But no, luckily for governments, there's always a plentiful supply of new, brainwashed
dreamer/fantasists [or "suckers" as P.T Barnum reportedly called them], who are ever more
eager for a government that does what they think it should do, and who "think" that it/they
actually will, despite all the historical evidence directly contradicting their inane
fantasies.
"Sometimes it is said that man cannot be trusted with the
government of himself. Can he, then, be trusted with the
government of others? Or have we found angels in the form of
kings to govern him? Let history answer this question."
–Thomas Jefferson: 1st Inaugural, 1801.
" idealists and realists begin to get on each other's nerves. But the real difference is
in the capacity for appreciating the immense gap of blue inane which separates earth from
heaven, and in the realist's unwillingness to assume that men have angels' wings. "
@onebornfree
oneborn free, your screed is you projecting fears about abusive government.
Hudson just explained in historical terms that it is only properly constructed government
that can reign in Oligarchy. It is clear that society WILL polarize toward creditors if
certain safeguards are not put in place.
So, you will have to come to grips with your cognitive dissonance.
Hudson also sets the framework for governments "proper role." Anything outside of that
role is government overstepping its bounds.
By providing the framework, Hudson is doing the world a tremendous service, and as such he
will go down as one of the great men of history.
New glasses are being put on your nose, but you prefer to wear your old glasses that make
you see improperly?
It reminds me of all the wishful thinking about China, how their ghost cities are going to
do them in, and their economy cannot keep doing so well, and so on. It is people not
believing what is right in front of their eyes, or their inability to see outside of their
brainwashed mentality.
Hudson says that public banks are an option for erasing debts.
China does this now with their state banks, which is one of their secret weapons.
In the mid 90's China swept all of their old communist era debt into the trash can. This
then made their "books" look good to Western Finance standards, and China was essentially
given MFN status.
Then it was game on! Wall Street soon greenmailed American industry to leave for China, to
then get some of that wage arbitrage. We are living in the aftermath of this civilization
destroying decision making by our ruling finance class.
China has helped the wall street finance class loot America, as China creates new Yuans
from their state banks to match their countries growth rate. These new Yuans have to be there
in order to swap for dollars won in trade. The dollars end up in China's state banks, and are
recycled back to the U.S. to buy TBills instead of buying goods from mainstreet.
Today and reality is staring you in the face. Look at it. America's finance class did
indeed export jobs and our patrimony, and china did indeed use their public banking system.
China is working for their people's benefit, while a traitor class of finance oligarchy is
working against the public interest in America.
Those of you who are against Public banks need to get real and look at actual data. For
example, the bank of North Dakota is a public bank and has a good track record. Please, use
data and think for yourself rather than being a brainwashed dupe.
Another way is to continue to use PRIVATE BANKS, and have public money. The money supply
is nationalized, not the bank. All new money comes into being from a monetary authority or
Treasury as per the constitution. Banks then become gyro, which is a fancy word for
inter-mediation. Banks stop making money with a new debt instrument, but instead only match
up new creditors and debtors with existing money.
Within each private bank are two piles of numbers: 1) Pile A is people's savings, which
preferably was debt free at inception 2) Pile B is government credit, or national credit.
National Credit can be channeled toward specific goals that the country has agreed is in
its interests.
You as a debtor can borrow from either pile. The national credit creates a debt instrument
that can be easily jubileed in the same easy way as could a debt instrument hypothecated at a
public bank.
Public banks to my mind are a little too close to government even though they have a good
history. Nationalizing the money supply instead is better. Why? A good percentage of supply
becomes floating money (debt free) and this component becomes a permanent inheritance to the
people, giving them freedom to do commerce. An economically free people are also politically
free.
@onebornfreeSavior? Nothing can stop what has been set in motion, namely, Earth's Sixth Mass
Extinction, as the climate shifts rapidly to a
New Cretaceous "hothouse" climate. Neither voting nor your anarchism can invalidate
scientific evidence. Apparently, you can't read, because McPherson's Paradox
explains humanity's conundrum in plain terms: (a) continuing to evaporate Earth's coal beds
and oil fields into the atmosphere ensures our quick extinction from global warming, and (b)
stopping fossil fuel use only hastens our demise, because of "global masking effect" or "
global dimming
." Do you really think that evaporating coal beds and oil fields into the atmosphere has no
consequences?
"[T]heir complete extinction (in the co-extinction scenario) was abrupt, and
happened far from their tolerance limits, and close to global diversity collapse (
around 5 °C of heating )"
Co-extinctions annihilate planetary life during extreme environmental change
(Scientific Reports volume 8, Article number: 16724, published 13 November 2018) http://www.nature.com/articles/s41598-018-35068-1
Remember, Trump has already promised 4 °C of heating is baked into the cake,
and stopping fossil fuel use would remove the "global dimming" effect of air pollution and
lead to a near instantaneous rise of 2°C. A true paradox has no solution.
1. Please use your commenting privilege to address the substance of the articles. The
sentence that you first quote is ancillary to this one, but you've plucked it out as a wedge
for your umpteenth anarchic strut.
2. Why so frequently insulting? I happen to share your general perspective, but if you're
prosletyzing your style stinks.
3. If nothing else, please realize that you only need to piss once on each hydrant to
leave your mark.
@Dutch
Boy Unfortunately, Dr. Hudson never attacks the "Elephant in the Room -- –The
Control of Economies by the Magic Jews." The Jews control all pathways including media,
social and economic which they will never relinquish because with the money they make they
control the world's politicians by using the greed of mankind against them.
The Jews use the Holocaust to intimidate stupid whites in Western Civilization with guilt
and control everything including our foreign policy to immigration. Civilization will not
survive as long as the power of the Jews continue to rule mankind.
@Dutch
Boy Consider that a 10 year loan at 4% now would then have a fee (simple, not even
compound interest) of 40% of the principle.
It defeats the purpose of a loan paying over time. Even the 20% down is for equity, not
prepayment of interest.
Or you could simply roll the fees in. There is a House for sale for $200,000. The bank
buys it but then to get ownership with lein, and you have to pay the bank $300,000 to cover
everything (do you get any equity before going positive?).
How about just saving money including gold in your mattress until you can afford
something?
@MEFOBILLS
Federal Reserve, TARP, and QE – the debts of the banksters were erased and they paid
themselves bonuses, and it took more cash that would pay off every mortgage of those who lost
their homes
Unfortunately, Dr. Hudson never attacks the "Elephant in the Room -- –The Control
of Economies by the Magic Jews."
Hudson does but in a peripheral way. See below. Our (((friends))) like to use their
capital rather than labor. They use usury as a weapon, and tend to be among the Oligarch
class. Why? Because their religion gives cover and sanction for predatory behavior. Note that
our friends adore Hillel. Jewish religion went off the rails after Hillel, and is now an
apologist for the creditor class, and hence against a balanced logos type world.
Hudson cannot go after the Jews, but I can and so can you. It is ok to point out where
Jewish ideology becomes "Crime Inc." In fact, I find the most moral people to be
anti-semites, so Hudson who obviously has a strong moral basis, is smart enough to NOT touch
the Jewish third rail, or he would become persona non-grata.
There is no question Hudson possesses a first class mind, and by not touching the third
rail he is preserving his career. It is up to us to decode what he is saying and we can be
more blunt about things.
You don't have to be Jewish to be a predator, and by association most of us can decode
what he is saying.
MH: Yes, but it ended with Rabbi Hillel and the Prozbul clause. Debtors had to sign this
clause at the end of their debt contracts saying that they waived their rights under the
Jubilee year in order to get a loan. That was why Jesus fought against the Pharisees and
the rabbinical leadership. That's what Luke 4 is all about
@jacques
sheete He also seems very keen on China's policy. From what I can make out this is
because the government loans the money and can cancel the debt. So China being locked into
growth by massively Keynesian policies that cannot be haltet for fear of global economic
collapse is a good thing it seems. Hmmm.
@tz1
Federal Reserve, TARP, and QE – the debts of the banksters were erased and they paid
themselves bonuses, and it took more cash that would pay off every mortgage of those who lost
their homes
Yes of course. It would have been much better to take over the banks and give the "bond
holders" a haircut.
What the haircut means is that the debt instrument cannot make claims on the future. The
amount it can claim is written down to what the real economy can pay.
Our financial oligarchy did not want to take a haircut, and since they own the government,
they made their politician puppets dance.
We cannot see what is in the bill till we pass the bill.
Some here have pointed out that democracy is a joke. Yes it is. Universal Suffrage
democracy, where any rube can vote is especially bad.
You do need a ruling class which looks like the people it rules over. This ruling class
also has to be servants of their people.
China's ruling class is constantly polling their people to get data on how they are doing.
If a politician is found to be corrupt, they are killed or ejected. Think of it like your
body, bad elements and parasites are attacked by the immune system, otherwise you (the host)
will die.
@Biff
"You're a broken record that needs to be tossed up in the air in front of a twelve gauge."
Seem like a lot of trouble to go to – especially as I might be carrying a 12 gauge,
or similar, myself
This just in: there's an "ignore" button – I suggest you learn how to use it.
But regardless of whether the "commniunist" label is completely accurate or not, he's just
yet another in a long line of naive intellectuals who thinks that the government can solve
problems, problems it alone created.
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
@tz1
Fee's on a loan should cover the bank's cost, which is a tiny fraction of what they take now
in the form of usury.
Think closely on this, the bank makes a loan, and it is only a matter of typing of a debt
instrument. Today with computers that amounts to a few minutes of work. They then on-sale the
debt instrument to another, usually TBTF bank, and get rid of any risk.
The better way is for people to pool their savings, and the bank is gyro. Debtor then buys
a house borrowing your savings. The old savings and loan system worked like this.
In Canada, when they had a sovereign banking system (1938 to 1974) they used trusts. Banks
were not allowed to hypothecate new housing loans. Trusts and savings and loans both pool
existing money and loan it out.
It was a beneficial cycle where the young borrowed from the old, and the old benefited
from some interest income, to then buy goods and services produced by the young.
Interest isn't always bad, but you have to look at it in context. About 70% of debt
instruments resident at banks are hypothecated against land. This is so finance oligarchy can
GRAB THE LAND in a depression via swaps or other schemes. Depressions are inevitable when M2
is always draining to pay debts at interest.
In the case of Canada's trust system, the interest was cycling back to the young (interest
was pointing outward to the population) to buy goods and services they produced.
@MEFOBILLS
MEFOBILLS says: "Hudson just explained in historical terms that it is only properly
constructed government that can reign in Oligarchy. It is clear that society WILL polarize
toward creditors if certain safeguards are not put in place.So, you will have to come to
grips with your cognitive dissonance. Hudson also sets the framework for governments "proper
role." Anything outside of that role is government overstepping its bounds."
Short answer: "The kind of man who wants the government to adopt and enforce his ideas is
always the kind of man whose ideas are idiotic" H.L.Mencken
MEFOBILLS says: "Hudson also sets the framework for governments "proper role.""
This just in: it's "proper role" [ in the US] was already [supposedly ]"set" via
the Declaration of Independence, the Articles of Confederation, and more famously via a coup
d'etat which resulted in the scam called "The Constitution and Bill of Rights" .
Although the Constitution remains a scam to this day, a return to its supposed limits
would, at least temporarily, drastically downsize the federal government, which would be step
in the right direction.
For government is the problem, never the solution.
But of course, yourself [and most others here] remain too brainwashed [by the government,
and with your money] to ever understand that
Ya gotta watch out when someone takes Marx's economic observations (which were impressive) as
an automatic pass for his social prescriptions (which were a gateway to hell on earth).
@Dutch
Boy As a matter of logic aren't those creators of money reducing the value of the money
held by those who have saved to get it? So doesn't fairness require that they use interest
rates to maimtain the stability of the currency's value?
@Max So
you advocate euthanasia (when you are feeling nice rather than cruel and vengeful) of the
rapidly increasing retired population? Understood that you need to support the infant
generation but Hitler had the answer for that one didn't he: euthanasia of those who wouldn't
be able to contribute. How long do we indulge people with an unemployment benefit?
@jacques
sheete Which US subsidy programs might be regarded as proleptic jubilees? And writeoffs
like that massive solar energy disaster under Obama are surely equivalent to the jubilees.
And welfare payments are surely jubilees in advance.
@Sollipsist
Sollipsist says: "Ya gotta watch out when someone takes Marx's economic observations
(which were impressive) as an automatic pass for his social prescriptions (which were a
gateway to hell on earth)."
Wrongo. Marx's economic theories were as as idiotic as his social prescriptions- in fact,
his "social prescriptions" were directly derived from his idiotic economic theories, which is
exactly why such "social prescriptions" are, as you say, "a gateway to hell on earth".
As for the author of this article , pure Marxist or not, his own "social prescriptions"
are, like Marx's , the mere pontifications of a pseudo-intellectual statist, fantasizing
about solving social problems via that which he worships and adores , that is , yet more
government [of the "right" kind, mind you, and despite its obvious failure to do any such
thing to date].
Another case of "the blind leading the blind", I'm afraid, just more of the same old
hackneyed "government should do this- government can solve this " claptrap .
Hudson spent half the article talking about mixed economies being the best and only type
to work.
Also, it was the JEWISH CREDITOR CLASS, that funded Bolshevism. Wall Street Jews and some
London money funded the Bolsheviks.
Bolshevism in turn was not what Marx had intended.
Marx thought that industrial capitalism, especially that of the type he witnessed in
Germany, would evolve into an advanced form of socialism mixed economy. It would evolve after
industrial capitalism failed, or industrial capitalism would have evolved.
Instead, finance capitalism, that of the rentier credit class won out .
When Marx died, he said "I am a most unhappy man."
Instead of getting caught up in labels, look at the data or what they actually believe in.
It takes a little bit more energy and effort, rather than falling for simple platitudes.
Hudson's childhood background was Bolshevik, but he didn't pick his parents. If you look
at his actual body of work, he is analyzing where all economic systems fail.
Russian and Chinese communism failed because markets are not purely inelastic. You cannot
pretend that every market type needs government control, especially when pricing signals will
work. Systems that are predicated on lies, will not survive in the long term.
For government is the problem, never the solution.
Simple minded platitudes.
ALL COMPLEX SYSTEMS HAVE HIERARCHY!
All advanced civilizations have hierarchy.
There has to be a "brain" for any complex organization, it will not self organize.
This whole market is your god, or gold is your god is the rentier class duping you with
hypnosis.
Funny thing about Libertarian-tards and their junk economics, the very thing they want
they cannot have because their ideology brings about what they don't want – economic
slavery.
Free markets are free for the rentier to take his gains on your life energy and turn you
into his debt slave.
• This is the "anarchy" of the future stateless society which Marx and Engels had
accepted in 1872. Man becomes "his own master – free". The first condition for this
full-fledged freedom is: freedom from the state, not of the state, nor merely in the state.
As far as Marx's eye could see, the state is not the guarantor of freedom http://www.marxists.org/archive/draper/1970/xx/state.html
This is one the most brilliant things I've ever read here. I've read a great deal about the
various facts and events Mr. Hudson talks about but I've never been able to put them together
like Mr. Hudson. He's provided a framework for realizing how all these seemingly disparate
events fit together. I'm very grateful.
@Wizard of
Oz Retirees weren't regarded as parasites by National Socialism, Schlomo. Your
parasitic ilk, however, were.
"The Nazi social welfare provisions included old age insurance , rent
supplements, unemployment and disability benefits, old-age homes the NSV often
refused to provide aid to Jews " – National Socialist
People's Welfare
This is fake history. Mythology becoming history. A Jewish speciality.
1- The Jews were never in Ancient Egypt – or the Egyptians would have documented
it.
2- There is absolutely no archeological artifact from the Palestine region that show that
they were there before their exile. Plenty of proof that the Egyptians had been there earlier
on.
3- Palestine was desert at that time and had been abandoned by the Egyptians as it was
infertile – not a land of milk and honey. Yemen was agricultural and prosperous.
4- The Jews were exiled from Yemen – because they and non-Jewish Arabs (the Jews and
Arabs were the same people at that time), continued to raid the caravans bringing goods from
Yemen to Petra. The Babylonians punished them by taking them back to Babylon. After the
Persians liberated them, some went back to Yemen and some went to Palestine.
5- Locations in the Old Testament correspond to places in Yemen and Hejaz. Even their
names.
The best counter to Robert Michels's iron law of oligarchy (whatever the ostensible form of
government, it turns out in practice to be oligarchic rule by the group that has the real
power) was devised by Cleisthenes in Athens shortly before 500 B.C.: give power to average
citizens by appointing to offices ordinary citizens randomly chosen. It worked, as is shown
by how deeply resented it was by oligarchs like Plato.
Is a U.S. Presidential Executive Order signed on April 5, 1933 , by President
Franklin D. Roosevelt forbidding the hoarding of gold within the continental United
States .
It required all persons to deliver on or before May 1, 1933, all but a small amount
of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve
, in exchange for $20.67 (consumer price index, adjusted value of $400 today) per troy
ounce. Under the Trading with the Enemy Act of 1917, as amended by the recently passed
Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up
to $10,000 (equivalent to $193,548 today) or up to ten years in prison, or both .
Order 6102 specifically exempted "customary use in industry, profession or art", a
provision that covered artists, jewelers, dentists, and sign makers among others. The order
further permitted any person to own up to $100 in gold coins (a face value equivalent to 5
troy ounces (160 g) of gold valued at about $6,339 in 2016).
@MEFOBILLS
MEFOBILLS says: "All advanced civilizations have hierarchy.There has to be a "brain" for
any complex organization, it will not self organize. "
So presumably, a half wit such as yourself knows exactly what that hierarchy should be,
who the "brain" "should" be and exactly what and where everyone's "correct" place within it
"should" be, because people cannot self organize.
Sieg Heil, mein fuhrer! You're an even dumber sheep than I had initially suspected!
"Because they are all ultimately funded via both direct and indirect theft [taxes], and
counterfeiting [central bank monopolies], all governments are essentially, at their very
cores, 100% corrupt criminal scams which cannot be "reformed","improved", nor "limited" in
scope, simply because of their innate criminal nature." onebornfree
"Taking the State wherever found, striking into its history at any point, one sees no way
to differentiate the activities of its founders, administrators and beneficiaries from those
of a professional-criminal class." Albert J. Nock
"Everything government touches turns to crap" Ringo Starr
"The kind of man who wants the government to adopt and enforce his ideas is always the
kind of man whose ideas are idiotic" H.L.Mencken
There are several problems with Dr. Hudson's views here. Some have referenced some. I would
point out that we already have laws and practices to restrict the use of wealth from
impoverishing the population. But you have to have a leadership willing to enforce or apply
them. We have had no less than three major financial bailouts of the financial class in the
US. And at no time was the bailout extended to the industries consumers. I am unclear what
the prescription is to divorce the political class from the financial class.
The only new law that would make sense are laws that bar legislators from owning, stocks,
sitting on the boards of stocks or any financial institution they manage. And that would have
to extend to all immediate family members. Further, one has to completely cut off funds from
lobbyists, activists and the corporate class entities.
The economy is already comprised of mixed practices: private ownership and wealth
creation, government employment, non-profit entities and taxation and other programs that
assist citizens, i.e. welfare
The one over riding observation I would make about the economy is that we continue to have a
trade imbalance, which according to an old rule of thumb suggests that economy is not really
growing.
@G.
Poulin Mr. Hudson makes his contribution towards the greater good by educating the
populace. What's your problem? -- He is not a fairy. He is a knowledgeable and honest person;
the former requires a lot of willpower, the second requires courage.
@MEFOBILLS
Libertarians were invented and constructed on purpose to serve as the useful idiots of
oligarchs whom they worship and do everything to protect their right to be oligarchs while at
the same time being sodomized by them.
I am very happy to read this interview, because for me, this is the first time that I have
completely understood Michael Hudson's work. And I say this after watching countless of his
interviews over the past 8 years.
Before this interview here, I had always wanted to ask him if the Clean Slate policies
disappeared over 3000 years ago, then what was he saying in his books and lectures? If the
entirety of Western Civilization is based on oligarchy, rentiers, then what hope is there for
anything? I mean the Romans lasted a thousand years doing this rentier stuff. That's a long
time for misery.
Now, with this interview I understand more fully the period after the Civil War and into
the FDR Presidency as a partially-successful attempt to make things in the country different,
more egalitarian, more correct. And after this interview, I understand Hudson's main point:
the road to change lies in understanding the failures of antiquity.
Looking at things through the rentier oligarchy lens has been the revelation in my life in
the past 10 years. I never undeststood Chile & Allende until then. Likewise with
antiquity and likewise with the history of the United States. But those of us who do
understand these things, thanks in great part to Michael Hudson, are few.
As part of a very late stage college degree I earned 4 years ago, I took an Econ class in
my last semester. The class featured certain films as it related to economics and that was
indeed very interesting (I had never seen Coppola's "Tucker: The Man And His Dream" before so
that was "entertaining"), but the text book for the class was Friedman. I read it and could
not believe how dunderheaded, how wrong it was. And I realized from communication with the
professor that he believed all of it. His attitude seemed to be: who are you to question
economics orthodoxy, you uppity undergrad.
This interview above was both enlightening and depressing. How many decades longer do we
have to go before things change?
I would say that the opioid addition epidemics reveals not only greed of Big Pharma, but also strongly resembles the epidemics
of alcoholism in the USSR in late 70th and 1980th.
It probably might be viewed as yet another sign of the despair of people with the current economic and social conditions. And
also sign of crisis of neoliberalism as an ideology much like Marxism before it
Only a complete idiot now believe in "shareholder value" mantra, or "free market" hype ( "free" for whom, why" free" and nor
"fair" ), or the USA "democracy promotion" policies abroad (which for some reason always accompanied by looting of the target
country)
A large percentage of students at universities laugh about the content of their "neo-classical" economics courses behind the
professor back and view them as just an exercise in hypocrisy necessary to get the diploma.
Milton Friedman now is viewed not as a respectable scholar but as a criminal who supported Pinochet and despicable intellectual
prostitute of the financial oligarchy.
What is interesting is that the current economic conditions as dismal as they are still much better in the USA than in other
societies in which people were converted into debt slaves and country are mercilessly looted by the local neoliberal oligarchy
and international financial institutions.
So it might be that not the absolute level that matters, but the level of and the speed of deterioration of the standard of
living and social security. As well as the general understanding that "the train left the station" and the situation will only
deteriorate.
A couple of relevant quotes from Pope Francis Evangelii Gaudium (2013):
55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves
and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis:
the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35)
has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly
human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack
of real concern for human beings; man is reduced to one of his needs alone: consumption.
And another:
Human beings are themselves considered consumer goods to be used and then discarded. We have created a "disposable" culture
which is now spreading. It is no longer simply about exploitation and oppression, but something new.
Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer
society's underside or its fringes or it's disenfranchised – they are no longer even a part of it.
The excluded are not the "exploited" but the outcast, the "leftovers".
In any case, it is indisputable that in the USA under neoliberalism in 40 years or so the standard of living of middle class
deteriorated and good job disappeared. In this sense, the opioids epidemics is just the tip of the iceberg.
Trump election is another manifestation of the same -- rejection by people of the neoliberal establishment -- the middle finger
to the ruling elite.
The USA is not an exception. In most countries, far-right is gaining strength politically, like in 1920th. And that's a dangerous
development which in the USA is strengthened by imperial thinking of the elite (aka "Full Spectrum Dominance") that decimates
the standard of living of the middle class due to the current level of military expenditures needed to maintain absolute military
superiority and the cost of permanent neo-colonial wars.
So the "Full Spectrum Dominance" might be a mousetrap from which the USA can't escape without major damage.
Still, as corrupt and despicable as the current neoliberal elite is (Biden, Hillary, Pelosi, Trump, and so on and forth), they are preferable
to neo-fascists.
" Second, Venezuela's central bankers were persuaded to pledge their oil reserves and all
assets of the state oil sector (including Citgo) as collateral for its foreign debt. This
meant that if Venezuela defaulted (or was forced into default by U.S. banks refusing to make
timely payment on its foreign debt), bondholders and U.S. oil majors would be in a legal
position to take possession of Venezuelan oil assets."
Solid proof that it was the empire who invented the practice of "debt trap" and is still
flourishing with it.
hunor, February 7, 2019 at 6:24 am GMT
Thank you ! Made it very clear. Perfect reflection of the " Values of Western Civilization ".
Reaching to grab the whole universe, with no holds barred . And never show of any interest for the " truth". They are not
even pretending anymore , awakening will be very painful for some.
Reuben Kaspate, February 7, 2019 at 2:38 pm GMT • 100 Words
Why would the U. S. based White-Protestant aristocracy care a hoot about the Brown-Catholic elites in the far off land?
They don't! The comprador aristocracy in question isn't what it seems It's the same group that plagues the Americans.
The rootless louts, whose only raison d'ê·tre is to milk everything in sight and then retire to coastal cities, i.e. San
Francisco, if you are a homosexual or New York City and State, if you are somewhat religious.
Poor Venezuelans don't stand a chance against the shysters!
While the US Midwest suffers with Arctic temperatures, winter tightens its icy stranglehold
on Europe, where a considerable number of people are struggling to keep their homes warm.
Statista's Niall McCarthy reports that, according to new data released by Eurostat ,
eight percent of the EU population couldn't afford to adequately heat
their homes in 2017. That still represents an improvement on recent years, particularly 2012
when it peaked at 11 percent.
Among member
states , the largest share of people who could not afford to properly heat their home was
recorded in Bulgaria at 36.5 percent. It was followed by Lithuania (28.9 percent) and Greece
(25.7 percent). The lowest figures were recorded in Luxembourg (1.9 percent), Finland (2.0
percent) and Sweden (2.1 percent).
López Obrador comes to the presidency as a man of the left, but the space for
maneuvering that he has for a left agenda is minimal. Mexico's economy, through geography and
trade agreements, is fused with that of the United States. More than 80 percent of Mexico's
exports go to its neighbor to the north, while Mexico's financial sector is almost entirely at
the mercy of Northern banks.
Already, López Obrador has had to deal with the leash from Northern banks that
sits tightly around Mexico's throat. On October 28, after the election, López
Obrador canceled the project to build a new airport for Mexico City. This new airport -- at a
cost of US$13.4 billion -- is seen as far too expensive (Istanbul has just inaugurated a new
airport, far bigger, for almost US$2 billion less). The peso fell, the Mexican stock market
fell, Fitch downgraded Mexico to "negative," and international investors frowned.
Then, in early November, legislators from López Obrador's party -- Morena --
proposed laws to limit bank fees. Mexico's stock market collapsed. It was the worst single-day
loss of the BMV stock index in seven years. The bankers sent López Obrador a
message: don't rock the boat.
Hastily, López Obrador's choice for the finance ministry -- Carlos
Urzúa -- scolded the legislators and winked to the banks. Urzúa, an
economist, has spent years consulting for the World Bank and other such agencies. It is hard to
find an economist these days who has not put his fingers into a consultancy for either the
World Bank or the International Monetary Fund (IMF). The economics profession has slid almost
wholesale into the pocket of international agencies that are committed to a very asphyxiating
version of public policy -- one that goes by the name of neoliberalism. It is a policy
framework that favors multinational corporations over workers, one that seeks to control
inflation rather than find ways to improve the livelihood of people. Finance is the religion,
while Money is God.
López Obrador and Urzúa do not have the political power to
challenge the order of things.
IMF Comes to Mexico City
Just a month before López Obrador takes office, the IMF sent a team to Mexico.
This team came to do a study based on the IMF charter's Article IV. Its
report set limits on what López Obrador's government can do. There is the
usual verbal concern expressed for inequality and poverty, but this is just window-dressing.
Nothing in the IMF staff statement indicated a policy that would tackle Mexico's grave problems
of poverty and inequality.
What the report details instead is a caution that López Obrador must not try to
invest funds in infrastructure that benefits the Mexican people -- investment, for instance, in
the sclerotic oil industry (Pemex). Mexico, an oil exporting state, imports oil because it has
limited refining capacity. López Obrador has said he wants Mexico to properly
develop the state-run oil firm Pemex. But the IMF staff statement says that "further
improvements of Pemex's financial situation are a prerequisite before new investments in
refining can be contemplated." López Obrador will be forced to make drastic cuts
in Pemex and to continue to drain the exchequer to import oil. No structural change is going to
be possible here without a negative IMF report, which would further encourage an investment
strike into Mexico.
Someone should encourage the IMF to stop sending staff teams into countries like Mexico.
Each report is identical to the previous one. Nothing seems to be learned by these teams. Years
ago, a senior IMF economist told me that when he arrived in a Central Asian country he knew
nothing of that country, he got to see nothing of it when he was there and he knew virtually
nothing when he drafted the Article IV review. All he did in the country was sit in one
air-conditioned room after another, listen to canned reports from nervous finance ministry
officials and then develop the report based on the IMF's same old recipe -- make cuts, target
welfare, privatize and make sure that the banks are happy.
Latitude for creative policy making is simply not available. The IMF comes to town to tell
new governments to behave. López Obrador and his cabinet will have to listen. Any
deviation from the IMF recipe will make investors flee and foreign investment dry up. It is so
easy these days to suffocate a country.
IMF Comes to Buenos Aires
For the past two decades, the IMF had found it difficult to dictate terms in Latin America.
From 2002 to 2007, left-leaning governments governed most of the region, where economic
activity was helped along by high commodity prices (including oil prices) and high remittance
payments.
Even Mexico's conservative President Felipe Calderón (2006-2012) had to lean
into the prevailing winds of Bolivarianism. In 2011, at the Community of Latin American and
Caribbean States, Calderón championed integration of Latin America -- something
that is least to be expected from a Mexican head of government, because Mexico is firmly
integrated into the United States.
The world financial crisis from 2007 hit Latin America hard. Calderón went to
Davos the next year and said that Latin America would be insulated from the crisis. Far from
it, Mexico had already begun to suffer job loss as the economy of its main trade partner -- the
United States -- contracted. An IMF
study found that Latin America lost 40 percent of its wealth in 2008. Public finances
contracted, and public investments declined. Inflation led to higher poverty rates and to
social instability.
A quick summary: Why did Latin America's economies suffer a crisis after 2007? It was not
because of the left-leaning governments and their policies. It was because of the
over-leveraged financial system, only one of whose asset bubbles -- U.S. housing prices --
collapsed. Deep integration into and reliance upon the U.S.-dominated financial system, and
poor diversification of their economies from the U.S. market, meant that as the U.S. banks
contracted, Latin America felt the pain. Over 80 percent of Argentina's private debt was in
dollars in 2002, while only a quarter of Argentina's economy was geared toward exports. This
was the fuel that was fated to burst into flame. It is this dollar reliance that could not be
corrected.
The exported economic problem had a political impact. It weakened the left-leaning
governments, even as these governments tried to ameliorate the crisis. Many of these
governments -- from Argentina to Brazil -- lost elections, while social turmoil struck others
-- from Venezuela to Nicaragua. It is in this context that the International Monetary Fund
returned to Latin America with a vengeance.
After two decades of relative absence, the IMF has now returned to Argentina (on which
please see this dossier from
Tricontinental: Institute for Social Research). Its Article IV staff
statement from December last year pointed to the problems of high borrowing in foreign
currency, a problem that was recognized in 2001-2002. But the power of international finance --
centered at Wall Street and the City of London -- prevented any easy pivot out of this problem.
It was easier to demand cuts from the already meager incomes of ordinary people.
In 1994, Mexico suffered from what became known as the "tequila crisis," as the peso
collapsed when international capital fled the country. The government would not place capital
controls to protect the peso against currency speculators. The "tequila effect" then spread to
South America. No one was prepared to stand up to the dollar and the speculators. From the
forests of Chiapas, Subcomandante Marcos of the Zapatistas spoke out in favor of the pockets of
the forgotten, the people who did not cause the crisis but who would bear the cost of these
financial shenanigans. Once more, with help from the IMF, the pockets of the forgotten from
Argentina to Mexico will suffer so that finance is left intact.
This article was produced by Globetrotter , a project of the
Independent Media Institute.
Naomi Klein's book "Shock Doctrine", encapsulated by this post as "global elites used periods of crisis around the world to force
damaging neoliberal policies derived from the Chicago School and Washington Consensus upon unhappy populations that suffered greatly
as a result."
Notable quotes:
"... Eventually, Poland emerged as the major US agent of influence within the EU (along with GB) with the adamant anti-Russian stance. Which taking into account the real state of Polish manufacturing deprived of the major market is very questionable. Later by joining sanctions, they lost Russian agricultural market (including all apple market in which they have a prominent position). ..."
"... Gowan's book, Global Gamble, is also good on the details of shock therapy in the former Warsaw Pact nations. One key problem was that shock therapy partly rested on he assumption that western European buyers would want to invest in modernizing plant and equipment in industries they acquired, but it quickly turned out that the German and other western buyers were really interested only in acquiring new MARKETS for their own products. ..."
"... I remember a couple of paragraphs about Poland in my Economics 101 course, some 20 years ago. Was it in in Mankiw's book? or Lipsey-Chrystal? I do not remember anymore. One of those vicious neoliberal propaganda mouthpieces, anyway. The textbook pitched Poland's success story against Russia's abject failure, claiming that the former had dismantled and shut down all its inefficient state-run companies, while the latter still kept its unprofitable heavy industry on life support. ..."
"... Somehow neoclassical economists always distort history into a cartoonish parody that confirms their models. ..."
"... If you looked carefully, you could still find older books, barely touched, that touted Albania as a neoliberal success story along the same lines as Poland. Albania almost collapsed in civil war in 1998. ..."
"... The author's criticism doesn't really address Klein's central points at all, which would be that the crisis was used as leverage to ram through otherwise politically unpalatable change, and that a great deal of the constraint forcing that was provided by actors both undemocratic and external. He seems to be of the school that regards such niceties as beside the point, as long as various macroaggregates eventually rose. ..."
"... Any discussion of the Polish economy that completely ignores this massive level of economic outmigration, and it's continued rise among the young, misses a great deal. In a vibrant economy, it seems unlikely that so many educated Poles would find, for example, lower tier jobs in Britain to be their best path forward. ..."
"... Out-migration is a huge factor in eastern and central Europe and without it, the picture would look entirely different. The Baltics, Bulgaria and Romania are even more affected. ..."
"... Inter-war Poland is celebrated a lot in Poland these days, conveniently ignoring the facts it was really a totalitarian state – when Czechoslovakia was Muniched in 1938, Poles (and Hugarians) were quick to grab bits of territory right after that. ..."
"... Poland has taken around a million Ukrainians over the past ten years so while many Poles are emigrating to Europe, they are being replaced by Ukrainians, who are ethnically and linguistically fairly similar to Poles. ..."
The argument largely seems to hold for the original poster boy example in Chile with the Pinochet coup against the socialist Allende
regime. A military coup replaced a democratically government. Whiole Chlle was experiencing a serious inflation, it was not in a
full-blown economic collapse. The coup was supported by US leaders Nixon and Kissinger, who saw themselves preventing the emergence
of pro-Soviet regime resembling Castro's Cuba. Thousands were killed, and a sweeping set of laisssez faire policies were imposed
with the active participation of "Chicago Boys" associated with Milton Friedman. In fact, aside from bringing down inflation these
rreforms did not initially improve economic performance, even as foreign capital flowed in, especially into the copper industry,
although the core of that industry remained nationalized. After several years the Chicago Boys were sent away and more moderate policies,
including a reimposition of controls on foreign capital flows, the economy did grow quite rapidly. But this left a deeply unequal
income distribution in place, which would largely remain the case even after Pinochet was removed from power and parliamentary democracy
returned.
This scenario was argued to happen in many other narions, especially those in the former Sovit bloc as the soviet Union disintegrated
and its successor states and the former members of the Soviet bloc in the CMEA and Warsaw Pact also moved to some sort of market
capitalism imposed from outside with policies funded by the IMF and following the Washington Consensus. Although he has since expressed
regret for this role in this, a key player linking what was done in several Latin American nations and what went down after 1989
in Eastern and Central Europe was Jeffrey Sachs. Klein's discussion especially of what went down in Russia also looks pretty sound
by and large, wtthout dragging through the details, although in these cases the political shift was from dictatorships run by Communist
parties dominated out of Moscow to at least somewhat more democratic governments, although not in all of the former Soviet republics
such as in Central Asia and with many of these later backsliding towards more authoritarian governments later. In Russia and in many
oothers large numbers of people were thrown into poverty from which they have not recovered. Klein has also extended this argument
to other nations, including South Africa after the end of apartheid.
likbez
The level of the naivety of Barkley Rosser is astounding.
Poland was a political project, the showcase for the neoliberal project in Eastern Europe and the USSR. EU was pressed to provide
large subsidies, and that marionette complied. The commenter ilpalazzo (above) is right that there has been " a tremendous development
in real estate and infrastructure mostly funded by the EU that has been a serious engine of growth." Like in Baltics and Ukraine,
German, French, Swedish and other Western buyers were most interested in opening market for their products and getting rid of
local and xUSSR competitors (and this supported and promoted Russophobia). With very few exceptions. University education system
also was partially destroyed, but still fared better than most manufacturing industries.
I remember talking to one of the Polish professors of economics when I was in Poland around 1992. He said that no matter how
things will develop, the Polish economy will never be allowed to fail as the USA is interested in propelling it at all costs.
That means that there was no CIA activity to undermine the financial system, deindustrialize the country, and possibly to partition
the county like it was in Russia with Harvard mafia (Summers, Shleifer, etc.)
Still, they lost quite a bit of manufacturing: for example all shipbuilding, which is ironic as Lech Wałęsa and Solidarity
emerged in this industry.
Eventually, Poland emerged as the major US agent of influence within the EU (along with GB) with the adamant anti-Russian
stance. Which taking into account the real state of Polish manufacturing deprived of the major market is very questionable. Later
by joining sanctions, they lost Russian agricultural market (including all apple market in which they have a prominent position).
But they have a large gas pipeline on their territory, so I suspect that like Ukraine they make a lot of money via transit
fees simply due to geographic. So they parochially live off rent -- that why they bark so much at North Stream 2.
Polish elite is a real horror show, almost beyond redemption, and not only in economics. I do not remember, but I think it
was Churchill who said " Poland is a greedy hyena of Europe." This is as true now as it was before WWII.
Now they are propelled by cheap labor from Ukraine, which they helped to destroy (along with Sweden and Germany)
My post seem to have vanished into oblivion so I'm pasting from the clipboard.
I am a Pole and have been a daily reader here since 2008. I hope a better versed compatriot will come out of the closet and
give a better picture (I know there are a few).
Let's just say the shock was pretty bad. In terms of amount of human suffering the worst was dissolving state owned farms.
Hundreds of thousands of people were just let go without any help, although many farms were profitable and others could be restructured
or converted into collectives etc. I live in a small town where there was a huge state farm and I can see former employees started
to recover and get by just recently judging by the looks of their dwellings.
Most of the manufacturing and heavy industry was sold off and extinguished. We used to have pretty decent capital producing
capabilities like tooling etc. Not a trace of that now. There is a lot being manufactured now here but mostly simple components
for german industry to assemble.
Pension system was thoroughly looted by you know who and is a ticking time bomb. Most of it was quasi privatized – that is
managed by western companies but still part of the state system. There were supposed to be individual saving accounts managed
by sophisticated investment specialists but the money ended up invested in state bonds, issued to subsidize it. Managing fee 7
– 10 percent charge on every payment into the system, regardless of performance, anyone? It was a heist of the century.
The ticking time bomb is because a large part of young people working now are working on non – permanent contracts that don't
pay benefits. These people won't have any pension at all and there are a lot of them.
Healthcare is single payer fund but heavily underfunded. Private practice and hospitals are allowed and skim most profitable
procedures leaving the rest to public fund. There are unrealistic limits on number of procedures so if you need to see a specialist
in July or later prepare to pay cash or wait till January.
Municipal service companies, at least the most lucrative ones have ben sold off to foreign investment funds. A few of our cities'
municipal companies, like central heating or energy have been sold off to german municipal companies (!). State telecom has been
sold off to french state telecom (and one of the biggest and most famous fortunes made).
Local printed press is 90% german corps owned.
This is a map of state rail company railways in 1988 and 2009 . It
has been a meme here for some time. It is true. Cancelled lines are the subsidized ones workers relied on to get to job. I closely
know a thousand years old town that had rail built in 1860 by germans and liquidated right in 1990. The populace is now halved,
all young emigrated, businesses dead. There have been a huge investment in freeways and other kind of roads so every one has to
own a car to get to her job. Most cars are used 10+ year old german imports. Polish car mechanic and body shops are the best in
the world specialists of german automotive produce.
I live in a small contry town that was a home to a wealthy aristocrat. There is a beautiful baroque palace and huge park, the
complex is literally a third part of town. After the war it was nationalized, there were sporting facilities built in the park
for locals and school pupils to use. The palace was re-purposed as medical facility and office complex for state farm management.
In the nineties the whole thing was given back to aristocrat descendants – a shady bunch hiding in Argentina AFAIR. They couldn't
afford to keep it so they sold it to a nouveau – riche real estate developer. He fenced the whole thing off and refurbished into
a sort of conference complex – it is underway and still not clear what's gonna happen with it. The effect is that a third of my
town that used to be public space is fenced off and off limits now.
To conclude, there has been a tremendous development in real estate and infrastructure mostly funded by the EU that has been
a serious engine of growth. Lot of people got mortgage and financed homes or flats and there has been a whole industry created
around it. A few crown jewel companies (copper mining, petroleum and other chemistry) are state owned. But most of the sophisticated
furnishings used in real estate are german made (there is german made nat gas furnace in 95% of newly built homes) etc. Two million
young people emigrated to work mostly to UK and Ireland. I'd lived in Dublin for a year in 2003 and there were Chinese people
as salespersons in groceries and seven – elevens everywhere, now there are Poles instead.
Recommended reading about the transformation years dealing is this book:
Thanks for this. Gowan's book, Global Gamble, is also good on the details of shock therapy in the former Warsaw Pact nations.
One key problem was that shock therapy partly rested on he assumption that western European buyers would want to invest in modernizing
plant and equipment in industries they acquired, but it quickly turned out that the German and other western buyers were really
interested only in acquiring new MARKETS for their own products.
And in agriculture, they both insisted on the elimination of subsidies within the eastern nations, and proceeded to use the
area as a dumping ground for their own (often subsidized) agricultural surpluses.
All this gets back, in my minuscule view, to failure to have a decent answer to one little question:
What kind of political economy do "we, the mopes" want to live within?
And related to that, what steps can and must "we, the mopes" take to get to that hopefully wiser, more decent, more homeostatic
and sustainable, political economy?
And it likely doesn't matter for us old folks (obligatory blast at Boomers as cause of all problems and distresses, dismissing
the roots and branches of "civilization," current patterns of consumption, and millennia of Progress), given what is "baked in"
and the current distribution of weatlhandpower. But maybe "we, the mopes" can at least go down fighting. Gilets Jaunes, 150 million
Indians, all that
But without an answer to the first question, though, not much chance of "better," is there? Except maybe locally, for the tiny
set of us mopes who know how to do community and commensalism and some other "C" words
"We, the mopes" could make some important and effective changes. Enough of us, and soon enough, to avoid or mitigate the Jackpot?
Thanks very much for this. Very graphic. So, if you would, could you explain who the Law and Justice Party is, and why they
won the election, and what exactly are they doing to make themselves popular? Are they in fact enacting certain social programs
that we can read about or are they primarily relying on something else, like mainly Catholic traditionalism, for their political
power?
I remember a couple of paragraphs about Poland in my Economics 101 course, some 20 years ago. Was it in in Mankiw's book?
or Lipsey-Chrystal? I do not remember anymore. One of those vicious neoliberal propaganda mouthpieces, anyway. The textbook pitched
Poland's success story against Russia's abject failure, claiming that the former had dismantled and shut down all its inefficient
state-run companies, while the latter still kept its unprofitable heavy industry on life support.
It is unsurprising to read that Poland followed a more nuanced approach. Somehow neoclassical economists always distort
history into a cartoonish parody that confirms their models.
That was in the early 2000s. The university was then brand new and was still filling the shelves of the library. If you
looked carefully, you could still find older books, barely touched, that touted Albania as a neoliberal success story along the
same lines as Poland. Albania almost collapsed in civil war in 1998.
Klein at least provided footnotes, and sources for her claims. Which are conspicuously absent from this piece.
The World Bank, (World Development Indicators, 2006), one of Klein's sources, has a nationwide poverty rate only for 1993,
and has it at 23% at that point, or between 2.3 times and more than 4 time the most common estimate he cites under the ancient
regime.
The same source has unemployment averaging 19.9% in 1990-92, and 19% in 2000-2004.
As to the later poverty rate, Klein's source is Przemyslaw Wielgosz, then editor of the Polish edition of le Monde Diplomatique,
who gives this: " Poles living below the 'social minimum' (defined as a living standard of £130 (192,4 EUR) per person and £297
(440,4 EUR) for a three person family per month) affecting 15% of the population in 1989 to 47% in 1996, and 59% in 2003." but
whence he obtains these figures he does not say. Given that it falls in a period when unemployment was pushing 20% for a prolonged
period, and that both the EU's subsidies and outmigration to the EU as an escape valve only start to kick in in 2003, the figure
seems not wildly implausible.
The author's criticism doesn't really address Klein's central points at all, which would be that the crisis was used as
leverage to ram through otherwise politically unpalatable change, and that a great deal of the constraint forcing that was provided
by actors both undemocratic and external. He seems to be of the school that regards such niceties as beside the point, as long
as various macroaggregates eventually rose.
The contrast between what was done, and what Solidarnosc had claimed to be all about when in opposition is incredibly striking,
basically the difference between libertarian Communism and uber Dirigisme style capitalism.
Any discussion of the Polish economy that completely ignores this massive level of economic outmigration, and it's continued
rise among the young, misses a great deal. In a vibrant economy, it seems unlikely that so many educated Poles would find, for
example, lower tier jobs in Britain to be their best path forward.
Yes, your unemployment and poverty rates are lower if a significant fraction of the population works elsewhere in the EU, and
reatriates the money. Though the pattern may cause a few other problems. (while many nations like to export their unemployment,
not everybody wants to import it.)
Out-migration is a huge factor in eastern and central Europe and without it, the picture would look entirely different.
The Baltics, Bulgaria and Romania are even more affected.
The migration from Poland does not have only economic reasons. A lot of Poles migrate because they find the polish society
(especially small towns and rural) very stiffling.
A friend of mine left Poland the moment she got her MSc – literally, the same day she was on a bus to Germany. She's now a
sucessfull woman, director level at a large consultancy. Yet her father calls her "old spinster" (this is the polite version),
as she wasn't maried by 30, and she basically avoids going to Poland.
She says she could never be as sucessfull in Poland, being a woman, and not being keen on marrying. I've heard similar stories
from young Poles, not just women.
Inter-war Poland is celebrated a lot in Poland these days, conveniently ignoring the facts it was really a totalitarian
state – when Czechoslovakia was Muniched in 1938, Poles (and Hugarians) were quick to grab bits of territory right after that.
Kasia, January 10, 2019 at 5:17 pm
Poland has taken around a million Ukrainians over the past ten years so while many Poles are emigrating to Europe, they
are being replaced by Ukrainians, who are ethnically and linguistically fairly similar to Poles.
So Poland is proof that nationalist, populist policies can indeed work. Poland has had to taken rough measures with our judicial
system and media to ensure globalist forces do not undermine our successes. No one, I mean no one, in Poland mouths the words,
"diversity is our strength". Internationalist, liberal minded people who are so susceptible to globalist propaganda, are generally
the ones leaving the nation. Indigenous Western Europeans who are suffering the joys of cultural enrichment and vibrant diversity
are starting to buy property in Eastern Europe - more Hungary than Poland - but as the globalists push even more multiculturalism
and continue to impoverish indigenous Europeans, Eastern Europe will become a shining beacon on the hill free of many of the evils
of globalisation.
CIA democrats of which Obama is a prominent example (and Hillary is another one) are are Werewolfs, very dangerous political beasts,
probably more dangerous to the world then Republicans like George W Bush. But in case of Ukraine, it was easily pushed into Baltic orbit,
because it has all the preconditions for that. So Nuland has an relatively easy, albeit dirty task. Also all this
probably that "in five years we will be living like French" was pretty effective. Now the population faces
consequences of its own stupidity. This is just neoliberal business as usual or neocolonialism.
Notable quotes:
"... populists on the right ..."
"... hired members of Ukraine's two racist-fascist, or nazi, political parties ..."
"... Disclaimer: No Russian, living or dead, had anything to do with the posting of this proudly home-grown comment ..."
Let's recap what Obama's coup
in Ukraine has led to shall we? Maybe installing and blatantly backing Neo Nazis in Ukraine might have something to do with the
rise of " populists on the right " that is spreading through Europe and this country, Hillary.
America's criminal 'news' media never even reported the coup, nor that in 2011 the Obama regime began
planning for
a coup in Ukraine . And that by 1 March 2013 they started organizing it
inside the
U.S. Embassy there . And that they hired members of Ukraine's two racist-fascist, or nazi, political parties , Right
Sector and Svoboda (which latter had been called the Social Nationalist Party of Ukraine until the CIA advised them to change
it to Freedom Party, or "Svoboda" instead). And that in February 2014 they did it (and here's the
4 February 2014 phone call instructing the U.S. Ambassador
whom to place in charge of the new regime when the coup will be completed), under the cover of authentic anti-corruption demonstrations
that the Embassy organized on the Maidan Square in Kiev, demonstrations that the criminal U.S. 'news' media misrepresented as
'democracy demonstrations ,' though Ukraine already had democracy (but still lots of corruption, even more than today's U.S. does,
and the pontificating Obama said he was trying to end Ukraine's corruption -- which instead actually soared after his coup there).
But wait there's more .... Remember
that caravan of refugees making their way through Mexico? Guess where a number of them came from? Honduras. Yep. Another coup that
happened during Obama's and Hillary's tenure.
In a recent op-ed in The Washington Post, former Secretary of State Hillary Clinton
used a review of Henry Kissinger's latest book, "World Order ," to lay out her vision for "sustaining America's leadership
in the world." In the midst of numerous global crises, she called for return to a foreign policy with purpose, strategy and pragmatism.
She also highlighted some of these policy choices in her memoir "Hard Choices" and how they contributed to the challenges that
Barack Obama's administration now faces.
**
The chapter on Latin America, particularly the section on Honduras, a major source of the child migrants currently pouring into
the United States, has gone largely unnoticed. In letters to Clinton and her successor, John Kerry, more than 100 members of Congress
have repeatedly warned about the deteriorating security situation in Honduras, especially since the 2009 military coup that ousted
the country's democratically elected President Manuel Zelaya. As Honduran scholar Dana Frank points out in Foreign Affairs, the
U.S.-backed post-coup government "rewarded coup loyalists with top ministries," opening the door for further "violence and anarchy."
The homicide rate in Honduras, already the highest in the world, increased by 50 percent from 2008 to 2011; political repression,
the murder of opposition political candidates, peasant organizers and LGBT activists increased and continue to this day. Femicides
skyrocketed. The violence and insecurity were exacerbated by a generalized institutional collapse. Drug-related violence has worsened
amid allegations of rampant corruption in Honduras' police and government. While the gangs are responsible for much of the violence,
Honduran security forces have engaged in a wave of killings and other human rights crimes with impunity.
Despite this, however, both under Clinton and Kerry, the State Department's response to the violence and military and police
impunity has largely been silence, along with continued U.S. aid to Honduran security forces. In "Hard Choices," Clinton describes
her role in the aftermath of the coup that brought about this dire situation. Her firsthand account is significant both for the
confession of an important truth and for a crucial false testimony.
First, the confession: Clinton admits that she used the power of her office to make sure that Zelaya would not return to office.
"In the subsequent days [after the coup] I spoke with my counterparts around the hemisphere, including Secretary [Patricia] Espinosa
in Mexico," Clinton writes. "We strategized on a plan to restore order in Honduras and ensure that free and fair elections could
be held quickly and legitimately, which would render the question of Zelaya moot."
Clinton's position on Latin America in her bid for the presidency is another example of how the far right exerts disproportionate
influence on US foreign policy in the hemisphere. up 24 users have voted. --
Disclaimer: No Russian, living or dead, had anything to do with the posting of this proudly home-grown comment
@snoopydawg@snoopydawg
Obama, Hillary and the rest of that administration knew it was a coup because that was the goal.
"..4. (C) In our view, none of the above arguments has any substantive validity under the Honduran constitution. Some are outright
false. Others are mere supposition or ex-post rationalizations of a patently illegal act. Essentially: --
the military had no authority to remove Zelaya from the country;
-- Congress has no constitutional authority to remove a Honduran president;
-- Congress and the judiciary removed Zelaya on the basis of a hasty, ad-hoc, extralegal, secret, 48-hour process;
-- the purported "resignation" letter was a fabrication and was not even the basis for Congress's action of June 28; and
-- Zelaya's arrest and forced removal from the country violated multiple constitutional guarantees, including the prohibition
on expatriation, presumption of innocence and right to due process. " https://www.wikileaks.org/plusd/cables/09TEGUCIGALPA645_a.html
That evil woman thinks she has the right to preach to others about how to handle the very fallout from the horrific disasters
that she HERself created? Hillary, look in the mirror, you evil woman.
Clinton said rightwing populists in the west met "a psychological as much as political yearning to be told what to do, and
where to go, and how to live and have their press basically stifled and so be given one version of reality.
" The whole American system was designed so that you would eliminate the threat from a strong, authoritarian king or
other leader and maybe people are just tired of it. They don't want that much responsibility and freedom. They want to be told
what to do and where to go and how to live and only given one version of reality.
"I don't know why at this moment that is so attractive to people, but it's a serious threat to our freedom and our democratic
institutions, and it goes very deep and very far and we've got to do a better job of shining a light on it and trying to combat
it."
This arrogance of looking down on the populace is very part and parcel of the neoliberal attitude of the ruling class takes
to the rest of us peons. They created this unreality for the American people and have suppressed our right to know what is really
happening in the world. Obama destroyed the Occupy Movement with violent police attacks and kettling. And then disgustingly, Clinton
comes out with her hubristic victim blaming.
The Clintons are nearly single handedly responsible for much of the destruction of the American middle class and the repression
of poor and black people under Bill and the violent destruction of many countries under Hillary. And yet neither Clinton is willing
to own up for all the human misery that they have caused wherever they go. Unfortunately, the one place they refuse to go is just
away forever.
The belief that HRC & her circle are principled & progressive is just as fictitious as the belief that they lost to a reality
TV host because of stolen emails, social media trolls, & a (fictitious) conspiracy between the reality TV host & the Kremlin:
https://t.co/iyTC1M6uws
Clinton says Europe should make clear that "we are not going to be able to continue provide refuge & support." Isn't this
the attitude we denounce Trump for? Speaking of irony, Clinton's regime wars in Libya & Syria (& Iraq, indirectly) fueled the
migration she wants to stop. https://t.co/CIkkGRRKNd
This ego-maniac sees the world's problems - which she had a huge hand in creating - only through the lens of her electability.
Apparently, the only problems the world has are the one's that keep her from sitting in the Oval Office. Everything else is
fine. She is deplorable.
That evil woman thinks she has the right to preach to others about how to handle the very fallout from the horrific disasters
that she HERself created? Hillary, look in the mirror, you evil woman.
Clinton said rightwing populists in the west met "a psychological as much as political yearning to be told what to do,
and where to go, and how to live and have their press basically stifled and so be given one version of reality.
" The whole American system was designed so that you would eliminate the threat from a strong, authoritarian king
or other leader and maybe people are just tired of it. They don't want that much responsibility and freedom. They want to
be told what to do and where to go and how to live and only given one version of reality.
"I don't know why at this moment that is so attractive to people, but it's a serious threat to our freedom and our democratic
institutions, and it goes very deep and very far and we've got to do a better job of shining a light on it and trying to
combat it."
This arrogance of looking down on the populace is very part and parcel of the neoliberal attitude of the ruling class takes
to the rest of us peons. They created this unreality for the American people and have suppressed our right to know what is
really happening in the world. Obama destroyed the Occupy Movement with violent police attacks and kettling. And then disgustingly,
Clinton comes out with her hubristic victim blaming.
The Clintons are nearly single handedly responsible for much of the destruction of the American middle class and the repression
of poor and black people under Bill and the violent destruction of many countries under Hillary. And yet neither Clinton is
willing to own up for all the human misery that they have caused wherever they go. Unfortunately, the one place they refuse
to go is just away forever.
@gulfgal98 Because they just HAVE to get a rich, far-right, patriarchal white woman elected at any cost for the sake
of 'making history'. If these idiots really wanted to make history, they'd work like hell to put someone in charge who actually
had the balls to hang the pigs and their collaborators for their crimes.
The belief that HRC & her circle are principled & progressive is just as fictitious as the belief that they lost to a
reality TV host because of stolen emails, social media trolls, & a (fictitious) conspiracy between the reality TV host &
the Kremlin: https://t.co/iyTC1M6uws
Clinton says Europe should make clear that "we are not going to be able to continue provide refuge & support." Isn't
this the attitude we denounce Trump for? Speaking of irony, Clinton's regime wars in Libya & Syria (& Iraq, indirectly)
fueled the migration she wants to stop. https://t.co/CIkkGRRKNd
This ego-maniac sees the world's problems - which she had a huge hand in creating - only through the lens of her electability.
Apparently, the only problems the world has are the one's that keep her from sitting in the Oval Office. Everything else
is fine. She is deplorable.
A new collection of essays, edited by former Congresswoman Cynthia McKinney, clearly shows
that it is the U.S. that is largely responsible for the poverty and suffering in these very
nations, says Robert Fantina.
By Robert Fantina
In two years, the world has become
accustomed to being shocked by the words and actions of United States President Donald Trump.
In January of this year, he again showed his lack of diplomacy, tack and common decency, when
he referred to many poorer countries as "sh*ithole countries", asking, "Why do we want all
these people from sh*thole countries coming here?" Former member of the House of
Representatives Cynthia McKinney, in the new book she has edited, How the US Creates 'Sh*thole' Countries ,
(Clarity Press) has gathered a collection of essays, including one of her own, that clearly
shows that it is the U.S. that is largely responsible for the poverty and suffering in these
very nations.
The first series of essays describes U.S. foreign policy, and its true motives. In the
essay, The End of Washington's 'Wars on the Cheap' , The Saker sums up U.S. foreign
policy as follows: "Here's the template for typical Empire action: find some weak country,
subvert it, accuse it of human right violations, slap economic sanctions, trigger riots and
intervene militarily in 'defense' of 'democracy', 'freedom' and 'self-determination' (or some
other combo of equally pious and meaningless concepts)." The hypocrisy of such a policy is
obvious. A weak and vulnerable nation is victimized by a far more powerful one. The U.S. has
done this countless times in its history, and there appears to be no appetite in the government
to change.
This introduction and explanation of U.S. foreign policy is followed by essays on some, but
certainly not all, of the countries that have been victimized by the United States, usually
following this template. As McKinney says in her essay, Somalia: Is Somalia the U.S.
Template for All of Africa , " while mouthing freedom, democracy, and liberty, the United
States has denied these very aspirations to others, especially when it inconvenienced the US or
its allies. In Mozambique and Angola, the US stood with Portugal until it was the Portuguese
people, themselves, who threw off their government and voted in a socialist government that
vowed to free Portugal of its colonies."
In the essay, How the U.S. Perpetuates the Palestinian Tragedy', Sami Al-Arian
writes:
" It might be understandable, if detestable, for Israel and its Zionist defenders to
circulate false characterizations of history and myths to advance their political agenda. But
it is incomprehensible, indeed reprehensible, for those who claim to advocate the rule of
law, believe in the principle of self-determination, and call for freedom and justice to fall
for this propaganda or to become its willing accomplices. In following much of American
political leaders' rhetoric or media coverage of the conflict, one is struck by the lack of
historical context, the deliberate disregard of empirical facts, and the contempt for
established legal constructs and precedents."
The U.S. leads in these distortions, with its
officials proclaiming, each time that Israel bombs Gaza, that "Israel has a right to defend
itself". There is hardly mention of the brutal, illegal occupation and blockade; never a
discussion of the fact that Palestine has no army, navy or air force, and Israel's military is
one of the world's most powerful thanks to the U.S. It is never stated that international law
allows an occupied people to resist the occupation in any way possible, including armed
struggle. The countless United Nations resolutions condemning Israeli actions in Palestine are
ignored by U.S. officials.
Once again, U.S. hypocrisy is on very public display.
The third section of this informative book describes the United States' mostly-successful
efforts to camouflage its vile intentions and international crimes. Christopher Black, in his
essay Western Imperialism and the Use of Propaganda", clearly articulates how this is
done:
" The primary concern they [U.S. government officials] have, in order to preserve their
control, is for the preservation of the new feudal mythology that they have created: that the
world is a dangerous place, that they are the protectors, that the danger is omnipresent,
eternal, and omnidirectional, comes from without, and comes from within. The mythology is
constructed and presented through all media; journals, films, television, radio, music,
advertising, books, the internet in all its variety. All available information systems are used
to create and maintain scenarios and dramas to convince the people that they, the protectors,
are the good and all others are the bad. We are bombarded with this message incessantly."
Our memories are short, indeed, if we have forgotten both President George W. Bush and his
Secretary of State, Colin Powell, telling the world from the United Nations the blatant lie
that Iraq had weapons of mass destruction, threatening civilization. We are not paying
attention if we are unaware of the many innuendos given of the 'dangers' of all Muslims. Yes,
the government fosters fear, proclaiming subtly and not so subtly that there is danger
everywhere, and it is the role of the mighty United States to protect the world, whether or not
such protection is wanted or needed.
Lastly, the U.S. Itself can be described as a 'sh*thole' country. Its many violations of
international law, and crimes against humanity, are summarized by Richard Falk, in his essay
The Sh*thole Phenomenon at Home and Abroad:
" This kind of nationalist pride covered up and blindsided crimes of the greatest severity
that were being committed from the time of the earliest settlements: genocide against native
Americans, reliance on the barbarism of slavery to facilitate profitable cotton production
and the supposedly genteel life style of the Southern plantations. This unflattering national
picture should be enlarged to include the exploitation of the resources and good will of
peoples throughout Latin America, who, once freed from Spanish colonial rule, quickly found
themselves victimized by American gunboat diplomacy that paved the way for American investors
or joined in crushing those bold and brave enough to engage in national resistance against
the abuse of their homelands."
The final essay is the Report of the Special Rapporteur on Extreme Poverty and Human
Rights on his Mission to the United States of America, authored by Philip Alston. While
Trump decries "sh*thole" countries, the conditions that the U.S. put those countries in are not
unknown in the U.S. A few facts from Alston's report will suffice:
The U.S.'s " immense
wealth and expertise stand in shocking contrast with the conditions in which vast numbers of
its citizens live. About 40 million live in poverty, 18.5 million in extreme poverty, and 5.3
million live in Third World conditions of absolute poverty. It has the highest youth poverty
rate in the Organization for Economic Cooperation and Development (OECD), and the highest
infant mortality rates among comparable OECD States. Its citizens live shorter and sicker lives
compared to those living in all other rich democracies, eradicable tropical diseases are
increasingly prevalent, and it has the world's highest incarceration rate, one of the lowest
levels of voter registrations in among OECD countries and the highest obesity levels in the
developed world." " The United States has the highest rate of income inequality among Western
countries. The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy
and worsened inequality." " For almost five decades the overall policy response has been
neglectful at best, but the policies pursued over the past year seem deliberately designed to
remove basic protections from the poorest, punish those who are not in employment and make even
basic health care into a privilege to be earned rather than a right of citizenship."
The information in these essays is all rigorously documented with extensive footnotes. The
writing is clear and the facts are presented in a concise manner that is highly beneficial for
the average reader or academic.
For anyone who questions U.S. policies, at home or abroad, and who has perhaps become more
aware of such issues since Trump's election,
"... Alberto Nisman and Argentina's History of Assassinations and Suspicious Suicides ..."
"... Whether the crusading prosecutor's death is found to be a suicide or homicide, many Argentines probably won't believe it. The past has taught them to always look for the sinister explanation. ..."
"... Decades after the military murdered thousands, Mothers of Plaza de Mayo warn that the current era of alternative facts poses a new threat ..."
"... They'll gain the world but lose their souls They'll gain the world but lose their souls ..."
"... Don't believe politicians and thieves They want our people on their bended knees Pirates and robbers, liars and thieves You come like the wolf but dressed like the sheep ..."
"... If you go to Lagos what you find, vampires If you go to Kinshasa what you find, vampires If you go to Darfur what you find, vampires If you go to Malabo what you find, vampires ..."
"... Lies and theft Guns and debt Life and death IMF ..."
"... When the bank man comes to your door Better know you'll always be poor Bank loans and policies They can't make our people free ..."
"... You live on the blood of my people Everyone knows you've come to steal You come like the thieves in the night The whole world is ready to fight ..."
SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries, coming to you from
Baltimore.
For several months now. Argentines have been taking to the streets to protest against
neoliberal austerity measures of President Mauricio Macri. The most recent such protest took
place on July 9 on Argentine's Independence Day. There has also been three general strikes thus
far. In the two years since he took office, President Macri has laid off as many as 76,000
public sector workers, and slashed gas and water and electricity subsidies, leading to a
tenfold increase in prices, in some cases.
Now, the government argues that all of this is necessary in order to stem inflation, and the
decline of the currency's value. Last month, Macri received the backing of the International
Monetary Fund. The IMF agreed to provide Argentina with a $50 billion loan, one of the largest
in IMF history. In exchange, the Macri government will deepen the austerity measures already in
place.
Joining me now to analyze Argentina's economic situation and its new IMF loan is Michael
Hudson. Michael is a distinguished research professor of economics at the University of
Missouri Kansas City. Welcome back, Michael.
MICHAEL HUDSON: Good to be back, Sharmini.
SHARMINI PERIES: Michael, why is it that Argentina needs such a huge credit line from the
IMF?
MICHAEL HUDSON: For precisely the reason that you explained. The neoliberal policy has its
aim rolling back any of the wage increases in employment that Mrs. Kirschner, the former
president, implied, as part of the class war. So in order to shrink the economy, you have to
basically cut back business, cut back employment. And so the purpose of the IMF loan was to
enable the wealthy Argentinians, the oligarchy that's run the country for a century, to get all
its money out and run. So like almost all IMF loans, the purpose is to subsidize capital flight
out of Argentina so that the wealthy Argentinians can take their money and run before the
currency collapses.
The aim of the loan is to indebt Argentina so much that its currency will continue to go
down and down and down, essentially wrecking the economy. That's what the IMF does. That's its
business plan. It makes a loan to subsidize capital flight, emptying out the economy of cash,
leading the currency to collapse, as it is recently collapsed. As soon as the $50 billion was
expended, or wasted, in letting wealthy Argentinians take their pesos, convert them into
dollars, move them offshore to the United States, to England, to the Dutch West Indies, and
offshore banking centers. Then they let the currency collapse so that the IMF model, which it's
announced for the last 50 years, the model is if you can depreciate a currency what you're
really lowering is the price of labor. Because raw materials and capital have an international
price. But when a currency goes down it makes imports much more expensive, and that causes a
price umbrella over the cost of living; that labor has to pay the equivalent international
price for grain, for food, for oil and gas, for everything else.
And so what Macri has done is they agree with the IMF to wage class war with a vengeance,
devaluation, leaving Argentina so hopelessly indebted that it can't possibly repay the IMF
loan. So what we're seeing is a replay of what happened in 2001.
SHARMINI PERIES: Exactly. I was going to ask you, now, that was only 17 years ago, Michael.
Argentinians do have memory here. They know what happened. They experienced it as well. Now,
that was back in 2001 during the economic crisis when unemployment had increased so
dramatically. That country went through a series of presidents and went through a series of
crises. And we saw images of, you know, very similar to what we had seen in, in Greece not too
long ago. Now, tell us more about that history. What exactly happened during that crisis, and
then eventually how did Nestor Kirschner relieve the economy and come out of that crisis?
MICHAEL HUDSON: Well, the IMF staff said, don't make the loan. There's no possible way
Argentina can pay the loan. It's all going to be made to the oligarchy for capital flight.
You're giving the IMF money for crooks, and you're expecting the Argentine people to have to
pay. So Argentina very quickly was left totally broke, as the IMF intended it to be. And so
although it was 17 years ago, for the last 17 years the IMF has had a slogan: No more
Argentinas. In other words, they said, we're never going to make the loan that is only given to
oligarchs for capital flight to steal. It's as if you make a loan to the Ukraine, or to the
Russian kleptocrats, or to the Greek banks to move offshore.
And yet here, here again, we're having a replay of what happened was, after Mrs. Kirschner
came in, it was obvious to the [inaudible] to everybody, as it had been to the IMF staff, many
of whom had resigned, that Argentina couldn't pay. So about 80 percent of Argentines'
bondholders agreed to write down the debt to something that could be paid. They said, OK, you
know, either it's a total default because they can't pay anything, or we'll write it down very
substantially to what could be paid. Because the IMF really made a completely incompetent- not
incompetent, directly corrupt insider deal. Well, unfortunately, the oligarchy had a fatal
clause put in the original bond issue, saying they would agree to U.S. arbitration and to U.S.
law if there was any dispute.
Well, after the old Argentine bonds depreciated in price, the bonds that were not
renegotiated as part of the 80 percent, you had vulture funds buy them out. Especially Paul
Singer, the Republican campaign donor who tends to buy politicians, along with foreign
government bonds. And sued, and said, we want 100 percent on the dollar, not, you know, the 40
cents on the dollar or whatever they'd settled. And the case went to a senile, dying judge,
Griesa in New York City, who said, well, there was something that's about a clause that said
investors have to be treated separately. And Argentina said, well, that's fine, we'll pay the
other 20 percent [inaudible] the 80 percent of all agreed to. The majority rules. And Griesa
said, no, no, you have to pay the 80 percent all the money that the 20 percent demands. That's
symmetry, because only if you let the hedge funds win can you go bankrupt again, wreck the
government, and bring in oligarchy.
And so that ruling caused absolute turmoil. The United States State Department set out to
support the oligarchy by doing everything it could to destabilize Argentina. And the Argentine
people said, well, we'd better vote in a government that's supported by the United States.
Maybe it will be nice to us. I don't know why foreign countries think that way, but they
thought maybe if they voted the neoliberal that the United States would agree to forgive some
of its debt. Well, that's not what neoliberals do. The neoliberal did just what you said at the
beginning of the program; announced that he was going to cut employment, lower, stop inflation
by making the working class bail, bear all of the costs, and would borrow- actually, it was the
largest loan in IMF history, the $50 billion to enable the Argentine wealthy class to move its
money offshore, leaving the economy a bankrupt shell. That's what the IMF does.
SHARMINI PERIES: Right. So let's imagine you are given the opportunity to resolve this
issue. How would you be advising the Argentine government in terms of what can they do to
stabilize the economy, given the circumstances they're facing right now?
MICHAEL HUDSON: Very simple. I'd say this debt is an odious debt. There is no way that
Argentina can pay. The clause that bankrupted us was put in as a result of tens of thousands of
professors, labor leaders, [land] people being assassinated. The United States financed an
assassination team throughout Latin America after Pinochet in Chile to have basically a proxy
government, and the Argentine loan that said we will, we will follow U.S. rules, not Argentine
rules, basically should disqualify that debt from having to be paid. And it should say the IMF
debt is an odious debt. It was given under fraudulent purposes solely for purposes of capital
flight. We will not pay.
SHARMINI PERIES: Now, Michael, just one last question. Did you want to add something to what
you were saying?
MICHAEL HUDSON: Well, once it doesn't pay the foreign debt, its balance of payments will be,
will be there. The problem is that the creditors have always used violence in order to get
their way. I don't see how the Argentina situation can be solved without violence, because the
creditors are using police force, covert assassination. They're just as bad as the dirty war
that had that mass assassination period in the late, into the early '90s. There's obviously
going to be not only the demonstrations that you showed, but an outright war, because it's
broken out in Argentina more drastically than anywhere else right now in Latin America, except
in Venezuela.
SHARMINI PERIES: Michael, at the moment, the Fed is gradually increasing interest rates and
the dollar is gaining in value. This is sucking the financial capital not only in Argentina but
in many places around the world. Also, you know, they're going to be soon in crisis as well.
What is, what can the developing economies do?
MICHAEL HUDSON: Here's the problem. When the United States raises interest rates, that
causes foreign money to flow, flow into the dollar, because the rest of the world, Europe and
other areas, are keeping low interest rates. So as money goes into the dollar, to take
advantage of the rising interest rates, the dollar rises. Now, that makes it necessary for
Argentina or any other country, third world country, to pay more and more pesos in order to buy
the dollars to pay that foreign debt. Because Argentina and third world countries have violated
the prime rule of credit. And that is never to denominate a debt in another currency that you
can't pay. And all of a sudden, the dollar debts become much more expensive in peso terms, and
as a result, all throughout the world right now you're having a collapse of bond prices of
third world debt. Argentine bonds, Chilean bonds, African bonds, near Eastern bonds. Third
world debt bonds are plunging, because the investors realize that the countries can't pay. The
game looks like it may be over.
The good side of this is that Argentina now can join with other third world countries and
say we are going to redenominate the debts in our own currency, or we just won't pay, or we
will do what the world did in 1931 and announce a moratorium on intergovernmental debts. Now,
that was done on German reparations and the World War I inter-ally debts. Something like that.
Some international conference to declare a moratorium and say, what is the amount that actually
can be paid? And to write down third world debts to the amount that should be paid.
Because the principle that countries have to say is that no country should be obliged to
sacrifice its own economy, its own employment, and its own independence to pay foreign
creditors. Every country has a right to put its own citizens first and its own economy first
before foreign creditors, especially when the loans are made under false pretenses, as the IMF
has made pretending to stabilize the currency instead of subsidizing capital flight to
destabilize the currency.
SHARMINI PERIES: All right, Michael. I thank you so much. And we'll continue this
conversation. There's so much more to discuss, and so many countries here in this situation for
that discussion as well. I thank you so much for joining us today.
MICHAEL HUDSON: Thanks. I think it's going to get worse, so we'll have a lot to discuss.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.
Why does the IMF have a US dollar credit line at the US FED, and Argentina does not;
countries like Canada do, as do companies like Harley Davidson. Why the discrimination?
"The IMF was originally laid out as a part of the Bretton Woods system exchange agreement
in 1944. During the Great Depression, countries sharply raised barriers to trade in an
attempt to improve their failing economies. This led to the devaluation of national
currencies and a decline in world trade."
IMF is an anachronism, a perpetual organization seeking new reasons for its continued
existence.
And like all Western post WW II institutions, is part of the Cold War. Of course any
actions by US connected entities in Latin America/Caribbean are part of the Monroe Doctrine
;-(
Gas prices in Egypt have just been raised by 75% as part of the austerity measures
attached to the $12bn loan granted by the IMF. Regular folk barely have two pennies to rub
together and have been battered by this and other measures ostensibly designed to "lift the
economy and lure back investors (as per the IMF rationale behind these crushing loan
conditions). I wonder if the same sleight of hand outlined by Prof Hudson applies here (I.e.
whether this is an IMF subsidised capital flight scheme designed to aid the Egyptian
oligarchy in repatriating its loot) and whether we should cast a suspicious eye towards the
oligarchs in any country the IMF extends a loan to.
This puts me in mind of a blog that I came across sometime ago at http://ferfal.blogspot.com/ which has relevance here.
Yeah, he tries to flog a lot of survival gear and the like but this site came out of his
experiences in the first crash in Argentina in 2001. If you are prepared to dig deep into his
files you will find all sorts of stories about what life was like in Argentina and it was
awful and desperate. Probably the best place to start is at http://ferfal.blogspot.com/search/label/Argentine%20Collapse
From your link, this jumped out, as agnotological apologetics:
" Right now with President Mauricio Macri there's hope, but the change the country needs
will take decades "
He didn't make much of an effort to clarify, who holds this "hope" nor what "change the
country needs". OTOH Michael Hudson, in his last two interviews on NC, did. He (Feral) also
seems oblivious to the neoliberal projects role in Latin America, and in Argentina's 2001
crises.
And this:
"Anyway, that's what happened in Argentina and this is why in spite of the good president
we now have we need another 10 or 20 years for an entire generation of people to know
something other than populism and corruption as a way of life."
Again, oblivious to the neoliberal projects role in Latin America, and in Argentina's 2001
crises. Who benefits from austerity, and how?
"As soon as the $50 billion was expended, or wasted, in letting wealthy Argentinians take
their pesos, convert them into dollars, move them offshore to the United States, to England,
to the Dutch West Indies, and offshore banking centers"
Not sure I understand this. Who is converting the Oligarch pesos to dollars? Crooks in the
Argentine government?
As I understand it, it's the Oligarchs' butlers and footmen in the Argentine government
that do it. If the Argentine government has a policy of pegging the peso at some set number
of pesos per dollar, then the government is obliged to hand over this many dollars in
exchange for that many pesos. That's what a peg is. One way to get the dollars would be
through a loan which the IMF would "reluctantly" give them, conditional on a few crushing
social policies.
Like I said before, this so much resembles a leveraged buy-out.
Could someone please explain the mechanisms by which the $50B loan leaves the country.
Exactly how do the elites get their hands on this money and then get it out of the
country?
If you haven't already read it, check
Prof. Hudson's previous article . It describes more about the methods.
Of course, if you have, then I'm not helping.
They convert their liquid cash into Dollars.
Then wire it to Banks outside the Argentine, and invest, (typically buy property). In addition, they take out loans against their Argentinian assets or property,
and convert those pesos into dollars,
and export those dollars as well.
All legal and above board.
When the peso collapses, they repatriate some of their dollars, and pay of the now
deflated loans.
'The Argentine loan that said we will, we will follow U.S. rules, not Argentine rules,
basically should disqualify that debt from having to be paid.'
Most foreign currency bonds floated by developing economies specify New York or London
legal jurisdiction because of (1) well-developed case law; (2) creditors don't trust the
objectivity of courts in borrower countries.
If all developing country debt were considered "odious" merely because of New York or
English legal jurisdiction, lending to developing countries would stop cold.
'I don't see how the Argentina situation can be solved without violence, because the
creditors are using police force, covert assassination.'
Cite one -- just one -- link showing "covert assassination" occurring in Argentina. The
Dirty War of the 1970s and early 1980s doesn't count. You can't keep waving the bloody shirt
of military dictatorship in South America more than thirty years after it ended.
I'm sure there is a nice polite clear unassailable explanation for what happened in this
instance:
" Alberto Nisman and Argentina's History of Assassinations and Suspicious
Suicides
Whether the crusading prosecutor's death is found to be a suicide or homicide, many
Argentines probably won't believe it. The past has taught them to always look for the
sinister explanation. "
And maybe creditors like to have their loan docs choose US/NY courts and law as the basis
for dispute resolution because both are stacked in favor of creditors? Home court "white shoe
lawyer" advantage? No history of support for the great creditor scams of the past? the word
"jackal" has no meaning? There was no reason for that guy to write a sequel to "Confessions
of an Economic Hit Man"?
Really, there's no need for the "bloody shirt," now is there, given current right-wing
dictators supported by "us," what the Empire and Banksters and the rest are doing in and to
central and South America, now is there? But it's a great distraction, I'll grant, and might
even work as impeachment for some folks
"No country should be obliged to pay its bondholders if the price of paying means austerity,
unemployment, shrinking population, emigration, rising suicide rates, abolition of public
health standards, and selloffs of the public domain to monopolists."
These sorts of rules would put a dead stop to foreign loans.
Something always bothers me about the "bondholder" sanctity meme. Bonds are "investments,"
right? And there are RISKS associated with investments, right? And there's supposed to be a
"risk premium" built into the "price" of the bond, right?
At least Investopedia and other sources say so, basically that these are NOT God-sanctioned
absolute-right deals where the bondholder takes priority over everyone else in the world,
right? https://www.investopedia.com/ask/answers/05/bondrisks.asp
And bonds are sort of contracts, subject to the rules and defenses that apply in contract
disputes, albeit specialized rules, right? Impossibility and stuff? Fraud?
So why are the rest of us, like where "the government" is dumb or corrupt (CalPERS?)enough
to "obligate" the wealth and future of a country by "selling bonds" to "investors," as
security for "loans" that get siphoned off by corruption and stupidity, dumb enough to
usually just roll over and accept that we have to live like serfs to "pay off the bonds?"
Especially when the same scam has been pulled by the same set of Banksters over and over?
And yes, in the financialized westernized world, we mopes are tied to the "paying for
progress [some definition of same] by borrowing," aren't we?
Interesting that the hated Sharia Law, the banking and investment part of it, kind of
makes those allegedly risk-free kinds of fee- and profit- and reacketeer-generating "deals"
not only unlawful, but against the will of G_D? https://shariabanking.com/
How telling. Was only 7 years ago that the torture-murderer of mothers and nuns, the
Blonde Angel of Death himself, Alfredo Ignacio Astiz, was sentenced to life in prison. Per
Wikipedia:
Astiz, a specialist in the infiltration of human rights organizations, was implicated in
the December 1977 kidnapping of twelve human rights activists, including Azucena Villaflor
and two other founders of the Mothers of the Plaza de Mayo, and two French nationals,
Léonie Duquet and Alice Domon, who were Catholic nuns. None of the twelve was seen
alive again outside detention and all were believed killed, rumored to be among the bodies
washed up on beaches south of Buenos Aires in late 1977.
To this day, torturers and murderers hold public offices. But I'm sure that's all in the
past. Anyone who still talks about the US-sponsored 16 years of Dirty War, from 1967-1983, is
a bloody shirt-waving fool, amirite Jim?
BUENOS
AIRES, Argentina (CNN) [2 March 1998] -- Argentina's "dirty war" ended 15 years ago,
but it is an ugly episode that cannot be buried and refuses to be silenced.
Aging mothers and grandmothers march each week as the Mothers of Plaza de Mayo, carrying
banners and chanting, "We will not be stopped. We will not be broken. We have held on for
20 years."
They demand to know the whereabouts of sons and daughters and husbands and wives who
were detained by the ruling military junta between 1976 and 1983, and then disappeared.
The junta seized power in Argentina in March 1976 and began a systematic campaign to
wipe out left-wing terrorism. But the terror it spread exceeded anything the leftists ever
dreamed of, claiming the lives of dissidents as well as innocent civilians.
More than 9,000 people disappeared during the dirty war, and some human rights groups
say as many as 30,000 may have been tortured and killed.
"We only want to know where our sons and daughters are -- alive or dead," says one
woman. "We are anguished because we don't know whether they are sick or hungry or cold. We
don't know anything. We are desperate, desperate because we don't know who to turn to.
"Consulates, embassies, government ministries, churches. Every place is closed to us.
Everywhere they shut us out. We beg you to help us. We beg you."
Decades after the military murdered thousands, Mothers of Plaza de Mayo warn that
the current era of alternative facts poses a new threat
Torturers and murderers hold public office, thanks to an amnesty. But I'm sure no one
today, in the whole of Argentina, would ever consider what well, actually has long been
standard operating procedure in Argentina.
While not precisely on point, reminds me of a monologue to music titled "FMI", the
Portuguese abbreviation for IMF, by Portuguese poet Mario Branco. Salient lyrics (English
translation) of IMF:
"It's 'Monetary Internationalism' The IMF doesn't exist The IMF is a mask."
"There can't exist a reason for so much suffering."
Thievery Corporation were far more brutal in their Fela-Kuti-inspired "Vampires"
Lyrics (abridged):
They'll gain the world but lose their souls
They'll gain the world but lose their souls
Don't believe politicians and thieves
They want our people on their bended knees
Pirates and robbers, liars and thieves
You come like the wolf but dressed like the sheep
If you go to Lagos what you find, vampires
If you go to Kinshasa what you find, vampires
If you go to Darfur what you find, vampires
If you go to Malabo what you find, vampires
Lies and theft
Guns and debt
Life and death
IMF
When the bank man comes to your door
Better know you'll always be poor
Bank loans and policies
They can't make our people free
You live on the blood of my people
Everyone knows you've come to steal
You come like the thieves in the night
The whole world is ready to fight
The clause that bankrupted us was put in as a result of tens of thousands of professors,
labor leaders, [land] people being assassinated. The United States financed an
assassination team throughout Latin America after Pinochet in Chile to have basically a
proxy government, and the Argentine loan that said we will, we will follow U.S. rules, not
Argentine rules, basically should disqualify that debt from having to be paid. And it
should say the IMF debt is an odious debt. It was given under fraudulent purposes solely
for purposes of capital flight. We will not pay.
And this:
The problem is that the creditors have always used violence in order to get their
way.
Are why I so love Michael Hudson. There's the blood so studiously avoided in the
desanguinated language of "economics." Its absence is the tell-tale of the kind of
disembodiment described by Nancy Krieger
(h/t
Lambert ).
Embodiment, in other words, is literal. The
ecosocial premise is that clues to current and
changing population patterns of health, includ-
ing social disparities in health, are to be found
chiefly in the dynamic social, material, and
ecological contexts into which we are born,
develop, interact, and endeavour to live mean-
ingful lives. The contrast is to pervasive aetiolo-
gical hypotheses concerned mainly with
decontextualised and disembodied ''behaviours''
and ''exposures'' interacting with equally decon-
textualised and disembodied ''genes.'' The dis-
tinction is more than simply between
''determinants'' and ''mechanisms.'' Consider,
for example, contending -- and longstanding --
claims about racism compared with ''race'' as
causes of racial/ethnic disparities in health.
An embodied approach promotes testing hypoth-
eses to ascertain if the observed disparities are a
biological expression of racial discrimination,
past and present; by contrast, a disembodied
and decontextualised approach promulgates
research focused on detrimental genes and/or
''lifestyles.'' The vastly different implications
of these approaches for generating epidemiolo-
gical knowledge and informing policy underscore
the utility of clarifying the significance of
''embodiment'' for epidemiological inquiry.
[Footnotes omitted, emphasis added.]
Ah yes, but talking about our ideas about the problem, or talking about the talking about
the problem, is so much better for catapulting the propaganda.
Also, if it looks, walks, and bankrupts Argentina over and over exactly like an Economic
Hit Job aka mass murder and looting under the color of law by the Suits in broad g.d.
daylight, then yes. Yes it is.
In the '70s at the best universities Ecology Classes were instituted and the young well
off students were told first, that the climate was being altered as a result of human
activities.
Nixon was told by the CIA that overpopulation was the main treat to future US Security.
The Vatican quashed that way of looking at it. Gopsay policies are all the same as Vatican
policies.
Loyalty to the nation of their birth for a rich person & their wealthy families was
thrown out the window.
The jetsetter class now buys the best deal far as taxes and protections.
Their goal is to eliminate any harm to them or their families from "Forces beyond their
control." If the leaders of the world are going to co-operate with them, those leaders will
be paid. For the majority who are born to labor and become labor those things done by bankers
and their leaders become for them "Forces beyond their control."
The rich know that overpopulation is already the fact at 7.5 billion. They will bond
together on the tarmacs hanging around their jets for little talks as took place between Bill
Clinton and Lauretta Lynch.
"All those people that don't like how we get rich, who are taking up space we want, well, let
them starve. The science says there are too many of them anyway."
(Wasn't a discussion of how to engineer revolts wonderful to crush, but is used as
illustrative of how jet setters get around to meetings that lead to this or that policy of
the day.)
This is the essence of "Scientific Socialism". Current Trump Administration policies will
cause the withdrawal of US lands devoted to agriculture. What was for Stalin destruction of
the Kulaks and collectivization starvation of Armenians, or Peasants, or the Intellogemtsia,
or all those ambivalent about who is in power and are therefore Counter-Revolutionaries,
starving them all leaves only the ignorant, cowed, or lucky alive.
Creating the conditions for civil wars is a great thing for the banks and their loyal
patrons, the war materiel`s industries. The people rebel and oligarchs at the top have them
killed.
Trotsky made the point that the weapons in the arsenals are the peoples. Somehow soldiers
and police in nation after nation don't see it that way. In the US the police are made
soldiers in the drug war. Keeping the peace is not their primary job. No pot smoking
peaceniks are to be hired so the ranks are securely filled by thugs and incompetents made
special by law. They shoot Black people at the drop of a hat. They shoot the poor driven
crazy pretty often as well.
Somebody wondered why in the US Blues & Reds or Democrats, the Leftists silo and don't
talk civilly to each other. Trump supporters show and shoot guns or as in Charlottesville
Virginia run as many people as possible over and are obviously willing to kill other
Americans. In Weimar Germany the "Scientific Socialists" had their uniformed enforcers.
Dictators have their own organizations exultant at the opportunity to be rewarded for
beating and killing the people who object to the destruction of civilization. Spectaculars in
stadiums, like Trump's to come Military Parade become more common as if such is civilization
when it is more indicative of a break down of civilization itself.
I have no means to remove myself and my wife from the roiling clouds of more murder in the
streets. I'll be "collapsing in place" as described by Lambert Strether. These things and the
ideologies behind them happening are not accidental of "Forces Beyond My Control".
The true purposes of the IMF loan are questionable to me.
1.) Over the past few years, we have seen market rigging by large transnational banks in
both the LIBOR and foreign exchange markets. This raises the question of whether there was
covert market manipulation to rapidly drop the Argentine peso and coerce the Argentine
government to borrow funds from the IMF to defend the peso in order to assure that nation was
able to pay for necessary imports?
2.) Was this debt undertaken to facilitate capital flight for a small, wealthy segment of
the Argentine population without the consent of or benefit to the people of Argentina, or for
some other unstated reason?
If either of these is true, this debt can legitimately be considered as "odious debt" by
the people of Argentina and potentially repudiated.
It also appears to me that there is a high probability that the austerity measures likely
to be imposed under this $50 billion loan to Argentina by the IMF could violate the
International Covenant on Economic, Social and Cultural Rights.
Not an attorney, nor knowledgeable about international law. Just my opinion as an ordinary
citizen based on my reading of the post and Wikipedia.
"... This financial dynamic has hijacked industrial capitalism. It is leading economies to polarize and ultimately collapse under the weight of their debt burden. That is the inherent dynamic of finance capitalism. The debt overhead leads to a financial crisis that becomes an opportunity to impose emergency rule to replace democratic lawmaking. So contrary to Hayek's anti-government "free enterprise" warnings, "slippery slope" to totalitarianism is not by socialist reforms limiting the rentier class's extraction of economic rent and interest, but just the opposite: the failure of society to check the rentier extraction of income vesting a hereditary autocracy whose financial and rent-seeking business plan impoverishes the economy at large. ..."
Text of Michael Hudson's speech on debt and the world economy, presented at Peking
University's School of Marxist Studies, May 5-6, 2018.
Volumes II and III of Marx's Capital describe how debt grows exponentially, burdening the
economy with carrying charges. This overhead is subjecting today's Western finance-capitalist
economies to austerity, shrinking living standards and capital investment while increasing
their cost of living and doing business. That is the main reason why they are losing their
export markets and becoming de-industrialized.
What policies are best suited for China to avoid this neo-rentier disease while raising
living standards in a fair and efficient low-cost economy? The most pressing policy challenge
is to keep down the cost of housing. Rising housing prices mean larger and larger debts
extracting interest out of the economy. The strongest way to prevent this is to tax away the
rise in land prices, collecting the rental value for the government instead of letting it be
pledged to the banks as mortgage interest.
The same logic applies to public collection of natural resource and monopoly rents. Failure
to tax them away will enable banks to create debt against these rents, building financial and
other rentier charges into the pricing of basic needs.
U.S. and European business schools are part of the problem, not part of the solution. They
teach the tactics of asset stripping and how to replace industrial engineering with financial
engineering, as if financialization creates wealth faster than the debt burden. Having rapidly
pulled ahead over the past three decades, China must remain free of rentier ideology that
imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset
prices.
Western capitalism has not turned out the way that Marx expected. He was optimistic in
forecasting that industrial capitalists would gain control of government to free economies from
unnecessary costs of production in the form of rent and interest that increase the cost of
living (and hence, the break-even wage level). Along with most other economists of his day, he
expected rentier income and the ownership of land, natural resources and banking to be taken
out of the hands of the hereditary aristocracies that had held them since Europe's feudal
epoch. Socialism was seen as the logical extension of classical political economy, whose main
policy was to abolish rent paid to landlords and interest paid to banks and bondholders.
A century ago there was an almost universal belief in mixed economies. Governments were
expected to tax away land rent and natural resource rent, regulate monopolies to bring prices
in line with actual cost value, and create basic infrastructure with money created by their own
treasury or central bank. Socializing land rent was the core of Physiocracy and the economics
of Adam Smith, whose logic was refined by Alfred Marshall, Simon Patten and other bourgeois
economists of the late 19th century. That was the path that European and American capitalism
seemed to be following in the decades leading up to World War I. That logic sought to use the
government to support industry instead of the landlord and financial classes.
China is progressing along this "mixed economy" road to socialism, but Western economies are
suffering from a resurgence of the pre-capitalist rentier classes. Their slogan of "small
government" means a shift in planning to finance, real estate and monopolies. This economic
philosophy is reversing the logic of industrial capitalism, replacing public investment and
subsidy with privatization and rent extraction. The Western economies' tax shift favoring
finance and real estate is a case in point. It reverses John Stuart Mill's "Ricardian
socialism" based on public collection of the land's rental value and the "unearned increment"
of rising land prices.
Defining economic rent as the unnecessary margin of prices over intrinsic cost value,
classical economists through Marx described rentiers as being economically parasitic, not
productive. Rentiers do not "earn" their land rent, interest or monopoly rent, because it has
no basis in real cost-value (ultimately reducible to labor costs). The political, fiscal and
regulatory reforms that followed from this value and rent theory were an important factor
leading to Marx's value theory and historical materialism. The political thrust of this theory
explains why it is no longer being taught.
By the late 19th century the rentiers fought back, sponsoring reaction against the socialist
implications of classical value and rent theory. In America, John Bates Clark denied that
economic rent was unearned. He redefined it as payment for the landlords' labor and enterprise,
not as accruing "in their sleep," as J. S. Mill had characterized it. Interest was depicted as
payment for the "service" of lending productively, not as exploitation. Everyone's income and
wealth was held to represent payment for their contribution to production. The thrust of this
approach was epitomized by Milton Friedman's Chicago School claim that "there is no such thing
as a free lunch" – in contrast to classical economics saying that feudalism's legacy of
privatized land ownership, bank credit and monopolies was all about how to get a free lunch, by
exploitation.
The other major reaction against classical and Marxist theory was English and Austrian
"utility" theory. Focusing on consumer psychology instead of production costs, it claimed that
there is no difference between value and price. A price is whatever consumers "choose" to pay
for commodities, based on the "utility" that these provide – defined by circular
reasoning as being equal to the price they pay. Producers are assumed to invest and produce
goods to "satisfy consumer demand," as if consumers are the driving force of economies, not
capitalists, property owners or financial managers.
Using junk-psychology, interest was portrayed as what bankers or bondholders "abstain" from
consuming, lending their self-denial of spending to "impatient" consumers and "credit-worthy"
entrepreneurs. This view opposed the idea of interest as a predatory charge levied by
hereditary wealth and the privatized monopoly right to create bank credit. Marx quipped that in
this view, the Rothschilds must be Europe's most self-depriving and abstaining family, not as
suffering from wealth-addiction.
These theories that all income is earned and that consumers (the bourgeois term for
wage-earners) instead of capitalists determine economic policy were a reaction against the
classical value and rent theory that paved the way for Marx's analysis. After analyzing
industrial business cycles in terms of under-consumption or over-production in Volume I of
Capital, Volume III dealt with the precapitalist financial problem inherited from feudalism and
the earlier "ancient" mode of production: the tendency of an economy's debts to grow by the
"purely mathematical law" of compound interest.
Any rate of interest may be thought of as a doubling time. What doubles is not real growth,
but the parasitic financial burden on this growth. The more the debt burden grows, the less
income is left for spending on goods and services. More than any of his contemporaries, Marx
emphasized the tendency for debt to grow exponentially, at compound interest, extracting more
and more income from the economy at large as debts double and redouble, beyond the ability of
debtors to pay. This slows investment in new means of production, because it shrinks domestic
markets for output.
Marx explained that the credit system is external to the means of production. It existed in
ancient times, feudal Europe, and has survived industrial capitalism to exist even in socialist
economies. At issue in all these economic systems is how to prevent the growth of debt and its
interest charge from shrinking economies. Marx believed that the natural thrust of industrial
capitalism was to replace private banking and money creation with public money and credit. He
distinguished interest-bearing debt under industrial capitalism as, for the first time, a means
of financing capital investment. It thus was potentially productive by funding capital to
produce a profit that was sufficient to pay off the debt.
Industrial banking was expected to finance industrial capital formation, as was occurring in
Germany in Marx's day. Marx's examples of industrial balance sheets accordingly assumed debt.
In contrast to Ricardo's analysis of capitalism's Armageddon resulting from rising land-rent,
Marx expected capitalism to free itself from political dominance by the landlord class, as well
as from the precapitalist legacy of usury.
This kind of classical free market viewed capitalism's historical role as being to free the
economy from the overhead of unproductive "usury" debt, along with the problem of absentee
landownership and private ownership of monopolies – what Lenin called the economy's
"commanding heights" in the form of basic infrastructure. Governments would make industries
competitive by providing basic needs freely or at least at much lower public prices than
privatized economies could match.
This reform program of industrial capitalism was beginning to occur in Germany and the
United States, but Marx recognized that such evolution would not be smooth and automatic.
Managing economies in the interest of the wage earners who formed the majority of the
population would require revolution where reactionary interests fought to prevent society from
going beyond the "bourgeois socialism" that stopped short of nationalizing the land, monopolies
and banking.
World War I untracked even this path of "bourgeois socialism." Rentier forces fought to
prevent reform, and banks focused on lending against collateral already in place, not on
financing new means of production. The result of this return to pre-industrial bank credit is
that some 80 percent of bank lending in the United States and Britain now takes the form of
real estate mortgages. The effect is to turn the land's rental yield into interest.
That rent-into-interest transformation gives bankers a strong motive to oppose taxing land
rent, knowing that they will end up with whatever the tax collector relinquishes. Most of the
remaining bank lending is concentrated in loans for corporate takeovers, mergers and
acquisitions, and consumer loans. Corporate capital investment in today's West is not financed
by bank credit, but almost entirely out of retained corporate earnings, and secondarily out of
stock issues.
The stock market itself has become extractive. Corporate earnings are used for stock
buybacks and higher dividend payouts, not for new tangible investment. This financial strategy
was made explicit by Harvard Business School Professor Michael Jensen, who advocated that
salaries and bonuses for corporate managers should be based on how much they can increase the
price of their companies' stock, not on how much they increased or production and/or business
size. Some 92 percent of corporate profits in recent years have been spent on stock buyback
programs and dividend payouts. That leaves only about 8 percent available to be re-invested in
new means of production and hiring. Corporate America's financial managers are turning
financialized companies into debt-ridden corporate shells.
A major advantage of a government as chief banker and credit creator is that when debts come
to outstrip the means to pay, the government can write down the debt. That is how China's banks
have operated. It is a prerequisite for saving companies from bankruptcy and preventing their
ownership from being transferred to foreigners, raiders or vultures.
Classical tax and banking policies were expected to streamline industrial economies,
lowering their cost structures as governments replaced landlords as owner of the land and
natural resources (as in China today) and creating their own money and credit. But despite
Marx's understanding that this would have been the most logical way for industrial capitalism
to evolve, finance capitalism has failed to fund capital formation. Finance capitalism has
hijacked industrial capitalism, and neoliberalism is its anti-classical ideology.
The result of today's alliance of the Finance, Insurance and Real Estate (FIRE) sector with
natural resource and infrastructure monopolies has been to reverse that the 20th century's
reforms promoting progressive taxation of wealth and income. Industrial capitalism in the West
has been detoured along the road to rent-extracting privatization, austerity and debt
serfdom.
The result is a double-crisis: austerity stemming from debt deflation, while public health,
communications, information technology, transportation and other basic infrastructure are
privatized by corporate monopolies that raise prices charged to labor and industry. The debt
crisis spans government debt (state and local as well as national), corporate debt, real estate
mortgage debt and personal debt, causing austerity that shrinks the "real" economy as its
assets and income are stripped away to service the exponentially growing debt overhead. The
economy polarizes as income and wealth ownership are shifted to the neo-rentier alliance headed
by the financial sector.
This veritable counter-revolution has inverted the classical concept of free markets.
Instead of advocating a public role to lower the cost structure of business and labor, the
neoliberal ideal excludes public infrastructure and government ownership of natural monopolies,
not to speak of industrial production. Led by bank lobbyists, neoliberalism even opposes public
regulation of finance and monopolies to keep their prices in line with socially necessary cost
of production.
To defend this economic counter-revolution, the National Income and Product Accounts (NIPA)
and Gross Domestic Product (GDP) measures now used throughout the world were inspired by
opposition to progressive taxation and public ownership of land and banks. These statistical
measures depicting finance, insurance and real estate as the leaders of wealth creation, not
the creators merely of debt and rentier overhead.
What is China's "Real" GDP and "real wealth creation"?
Rejection of classical value theory's focus on economic rent – the excess of market
price over intrinsic labor cost – underlies the post-classical concept of GDP. Classical
rent theory warned against the FIRE sector siphoning off nominal growth in wealth and income.
The economics of Adam Smith, David Ricardo, J.S. Mill and Marx share in common the view that
this rentier revenue should be treated as an overhead charge and, as such, subtracted from
national income and product because it is not production-related. Being extraneous to the
production process, this rentier overhead is responsible for today's debt deflation and
economically extractive privatization that is imposing austerity and shrinking markets from
North America to Europe.
The West's debt crisis is aggravated by privatizing monopolies (on credit) that historically
have belonged to the public sector. Instead of recognizing the virtues of a mixed economy,
Frederick Hayek and his followers from Ayn Rand to Margaret Thatcher, Ronald Reagan, the
Chicago School and libertarian Republicans have claimed that any public ownership or regulation
is, ipso facto, a step toward totalitarian politics.
Following this ideology, Alan Greenspan aborted economic regulation and decriminalized
financial fraud. He believed that in principle, the massive bank fraud, junk-mortgage lending
and corporate raiding that led up to the 2008 crisis was more efficient than regulating such
activities or prosecuting fraudsters.
This is the neoliberal ideology taught in U.S. and European business schools. It assumes
that whatever increases financial wealth most quickly is the most efficient for society as a
whole. It also assumes that bankers will find honest dealing to be more in their economic
self-interest than fraud, because customers would shun fraudulent bankers. But along with the
mathematics of compound interest, the inherent dynamic of finance capitalism is to establish a
monopoly and capture government regulatory agencies, the justice system, central bank and
Treasury to prevent any alternative policy and the prosecution of fraud.
The aim is to get rich by purely financial means – by increasing stock-market prices,
not by tangible capital formation. That is the opposite of the industrial logic of expanding
the economy and its markets. Instead of creating a more productive economy and raising living
standards, finance capitalism is imposing austerity by diverting wage income and also corporate
income to pay rising debt service, health insurance and payments to privatized monopolies.
Progressive income and wealth taxation has been reversed, siphoning off wages to subsidize
privatization by the rentier class.
This combination of debt overgrowth and regressive fiscal policy has produced two results.
First, combining debt deflation with fiscal deflation leaves only about a third of wage income
available to be spent on the products of labor. Paying interest, rents and taxes – and
monopoly prices – shrinks the domestic market for goods and services.
Second, adding debt service, monopoly prices and a tax shift to the cost of living and doing
business renders neo-rentier economies high-cost. That is why the U.S. economy has been
deindustrialized and its Midwest turned into a Rust Belt.
How Marx's economic schema explains the West's neo-rentier problem
In Volume I of Capital, Marx described the dynamics and "law of motion" of industrial
capitalism and its periodic crises. The basic internal contradiction that capitalism has to
solve is the inability of wage earners to be paid enough to buy the commodities they produce.
This has been called overproduction or underconsumption, but Marx believed that the problem was
in principle only temporary, not permanent.
Volumes II and III of Marx's Capital described a pre-capitalist form of crisis, independent
of the industrial economy: Debt grows exponentially, burdening the economy and finally bringing
its expansion to an end with a financial crash. That descent into bankruptcy, foreclosure and
the transfer of property from debtors to creditors is the dynamic of Western finance
capitalism. Subjecting economies to austerity, economic shrinkage, emigration, shorter life
spans and hence depopulation, it is at the root of the 2008 debt legacy and the fate of the
Baltic states, Ireland, Greece and the rest of southern Europe, as it was earlier the financial
dynamic of Third World countries in the 1960s through 1990s under IMF austerity programs. When
public policy is turned over to creditors, they use their power for is asset stripping,
insisting that all debts must be paid without regard for how this destroys the economy at
large.
China has managed to avoid this dynamic. But to the extent that it sends its students to
study in U.S. and European business schools, they are taught the tactics of asset stripping
instead of capital formation – how to be extractive, not productive. They are taught that
privatization is more desirable than public ownership, and that financialization creates wealth
faster than it creates a debt burden. The product of such education therefore is not knowledge
but ignorance and a distortion of good policy analysis. Baltic austerity is applauded as the
"Baltic Miracle," not as demographic collapse and economic shrinkage.
The experience of post-Soviet economies when neoliberals were given a free hand after 1991
provides an object lesson. Much the same fate has befallen Greece, along with the rising
indebtedness of other economies to foreign bondholders and to their own rentier class operating
out of capital-flight centers. Economies are obliged to suspend democratic government policy in
favor of emergency creditor control.
The slow economic crash and debt deflation of these economies is depicted as a result of
"market choice." It turns out to be a "choice" for economic stagnation. All this is
rationalized by the economic theory taught in Western economics departments and business
schools. Such education is an indoctrination in stupidity – the kind of tunnel vision
that Thorstein Veblen called the "trained incapacity" to understand how economies really
work.
Most private fortunes in the West have stemmed from housing and other real estate financed
by debt. Until the 2008 crisis the magnitude of this property wealth was expanded largely by
asset-price inflation, aggravated by the reluctance of governments to do what Adams Smith, John
Stuart Mill, Alfred Marshall and nearly all 19th-century classical economists recommended: to
keep land rent out of private hands, and to make the rise in land's rental value serve as the
tax base.
Failure to tax the land leaves its rental value "free" to be pledged as interest to banks
– which make larger and larger loans by lending against rising debt ratios. This "easy
credit" raises the price of obtaining home ownership. Sellers celebrate the result as "wealth
creation," and the mainstream media depict the middle class as growing richer by higher prices
for the homes its members have bought. But the debt-financed rise in housing prices ultimately
creates wealth mainly for banks and their bondholders.
Americans now have to pay up to 43 percent of their income for mortgage debt service,
federally guaranteed. This imposes such high costs for home ownership that it is pricing the
products of U.S. labor out of world markets. The pretense is that using bank credit (that is,
homebuyers' mortgage debt) to inflate the price of housing makes U.S. workers and the middle
class prosperous by enabling them to sell their homes to a new generation of buyers at higher
and higher prices each generation. This certainly does not make the buyers more prosperous. It
diverts their income away from buying the products of labor to pay interest to banks for
housing prices inflated on bank credit.
Consumer spending throughout most of the world aims above all at achieving status. In the
West this status rests largely on one's home and neighborhood, its schools, transportation and
other public investment. Land-price gains resulting from public investment in transportation,
parks and schools, other urban amenities and infrastructure, and from re-zoning land use. In
the West this rising rental value is turned into a cost, falling on homebuyers, who must borrow
more from the banks. The result is that public spending ultimately enriches the banks –
at the tax collector's expense.
Debt is the great threat to modern China's development. Burdening economies with a rentier
overhead imposes the quasi-feudal charges from which classical 19th-century economists hoped to
free industrial capitalism. The best protection against this rentier burden is simple: first,
tax away the land's rising rental valuation to prevent it from being paid out for bank loans;
and second, keep control of banks in public hands. Credit is necessary, but should be directed
productively and debts written down when paying them threatens to create financial
Armageddon.
Marx's views on the broad dynamics of economic history
Plato and Aristotle described a grand pattern of history. In their minds, this pattern was
eternally recurrent. Looking over three centuries of Greek experience, Aristotle found a
perpetual triangular sequence of democracy turning into oligarchy, whose members made
themselves into a hereditary aristocracy – and then some families sought to take the
demos into their own camp by sponsoring democracy, which in turn led to wealthy families
replacing it with an oligarchy, and so on.
The medieval Islamic philosopher Ibn Khaldun saw history as a rise and fall. Societies rose
to prosperity and power when leaders mobilized the ethic of mutual aid to gain broad support as
a communal spirit raised all members. But prosperity tended to breed selfishness, especially in
ruling dynasties, which Ibn Khaldun thought had a life cycle of only about 120 years. By the
19th century, Scottish Enlightenment philosophers elaborated this rise-and-fall theory,
applying it to regimes whose success bred arrogance and oligarchy.
Marx saw the long sweep of history as following a steady upward secular trend, from the
ancient slavery-and-usury mode of production through feudalism to industrial capitalism. And
not only Marx but nearly all 19th-century classical economists assumed that socialism in one
form or another would be the stage following industrial capitalism in this upward technological
and economic trajectory.
Instead, Western industrial capitalism turned into finance capitalism. In Aristotelian terms
the shift was from proto-democracy to oligarchy. Instead of freeing industrial capitalism from
landlords, natural resource owners and monopolists, Western banks and bondholders joined forces
with them, seeing them as major customers for as much interest-bearing credit as would absorb
the economic rent that governments would refrain from taxing. Their success has enabled banks
and bondholders to replace landlords as the major rentier class. Antithetical to socialism,
this retrogression towards feudal rentier privilege let real estate, financial interests and
monopolists exploit the economy by creating an expanding debt wedge.
Marx's Theories of Surplus Value (German Mehrwert), his history of classical political
economy, poked fun at David Ricardo's warning of economic Armageddon if economies let landlords
siphon off of all industrial profits to pay land rent. Profits and hence capital investment
would grind to a halt. But as matters have turned out, Ricardo's rentier Armageddon is being
created by his own banking class. Corporate profits are being devoured by interest payments for
corporate takeover debts and related financial charges to reward bondholders and raiders, and
by financial engineering using stock buybacks and higher dividend payouts to create "capital"
gains at the expense of tangible capital formation. Profits also are reduced by firms having to
pay higher wages to cover the cost of debt-financed housing, education and other basic expenses
for workers.
This financial dynamic has hijacked industrial capitalism. It is leading economies to
polarize and ultimately collapse under the weight of their debt burden. That is the inherent
dynamic of finance capitalism. The debt overhead leads to a financial crisis that becomes an
opportunity to impose emergency rule to replace democratic lawmaking. So contrary to Hayek's
anti-government "free enterprise" warnings, "slippery slope" to totalitarianism is not by
socialist reforms limiting the rentier class's extraction of economic rent and interest, but
just the opposite: the failure of society to check the rentier extraction of income vesting a
hereditary autocracy whose financial and rent-seeking business plan impoverishes the economy at
large.
Greece's debt crisis has all but abolished its democracy as foreign creditors have taken
control, superseding the authority of elected officials. From New York City's bankruptcy to
Puerto Rico's insolvency and Third World debtors subjected to IMF "austerity programs,"
national bankruptcies shift control to centralized financial planners in what Naomi Klein has
called Crisis Capitalism. Planning ends up centralized not in the hands of elected government
but in financial centers, which become the de facto government.
England and America set their economic path on this road under Margaret Thatcher and Ronald
Reagan by 1980. They were followed by even more pro-financial privatization leaders in Tony
Blair's New Labour Party and Bill Clinton's New Democrats seeking to roll back a century of
classical reforms and policies that gradually were moving capitalism toward socialism. Instead,
these countries are suffering a rollback to neofeudalism, whose neo-rentiereconomic and
political ideology has become mainstream throughout the West. Despite seeing that this policy
has led to North America and Europe losing their former economic lead, the financial power
elite is simply taking its money and running.
So we are brought back to the question of what this means for China's educational policy and
also how it depicts economic statistics to distinguish between wealth and overhead. The great
advantage of such a distinction is to help steer economic growth along productive lines
favoring tangible capital formation instead of policies to get rich by taking on more and more
debt and by prying property away from the public domain.
If China's main social objective is to increase real output to raise living standards for
its population – while minimizing unproductive overhead and economic inequality –
then it is time to consider developing its own accounting format to trace its progress (or
shortcomings) along these lines. Measuring how its income and wealth are being obtained would
track how the economy is moving closer toward what Marx called socialism.
Of special importance, such an accounting format would revive Marx's classical distinction
between earned and unearned income. Its statistics would show how much of the rise in wealth
(and expenditure) in China – or any other nation – is a result of new tangible
capital formation as compared to higher rents, lending and interest, or the stock market.
These statistics would isolate income and fortunes obtained by zero-sum transfer payments
such as the rising rental value of land sites, natural resources and basic infrastructure
monopolies. National accounts also would trace overhead charges for interest and related
financial charges, as well as the economy's evolving credit and debt structure. That would
enable China to measure the economic effects of the banking privileges and other property
rights given to some people.
That is not the aim of Western national income statistics. In fact, applying the accounting
structure described above would track how Western economies are polarizing as a result of their
higher economic rent and interest payments crowding out spending on actual goods and services.
This kind of contrast would help explain global trends in pricing and competitiveness.
Distinguishing the FIRE sector from the rest of the economy would enable China to compare its
economic cost trends and overhead relative to those of other nations. I believe that these
statistics would show that its progress toward socialism also will explain the remarkable
economic advantage it has obtained. If China does indeed make this change, it will help people
both in and out of China see even more clearly what your government is doing on behalf of the
majority of its people. This may help other governments – including my own – learn
from your example and praise it instead of fearing it.
"... Turkey fell into the same deep state bankers financial trap, that Spain Greece Italy fell for. Bail out a vunrable country then pull the rug out ! You own them ! So I would slightly disagree with it being entirely of there own making. I blame the Rothchild family. ..."
At the beginning of the year one U.S. dollar cost 3.5 lira. At the beginning of August it
cost 4.80 lira. It then went up to 7.00 lira/$ and at Friday's closing it was down again at
6.00 TL/$. But Monday morning lira will again
lose more of its value:
Turkey's credit rating was cut further into junk Friday by S&P Global Ratings and Moody's
Investors Service, which said the volatile lira and wide current-account deficit may
undermine the Middle East's largest economy.
S&P reduced Turkey's foreign-currency rating to four notches below investment grade at
B+ from BB-, on par with Argentina, Greece and Fiji. Moody's lowered its grade to Ba3 from
Ba2, three notches below investment grade. The ratings companies said the weak currency,
runaway inflation and current-account deficit are Turkey's key vulnerabilities .
Turkey's crisis is
homemade . The current spat with the United States only exaggerates it. For years Turkey
borrowed large amounts of money from abroad and invested it into local infrastructure instead
of producing exportable products. Its current account deficit this year will again be some $50
to $60 billion. International banks and other foreign lenders now demand interests rates above
20% from Turkish lenders because the chance of losing the lent money is high.
After the 17% crash on August 13 down to 7 TL/$ the Turkish Central Bank used some one-time
measures to support the currency without raising its interest rate. The Turkish president
Erdogan is ideologically adverse to interests and keeps the bank from doing what it must do to
cool the Turkish economy and to stabilize the currency.
Erdogan asked Russia for help but received nothing but good advice. He also called in
favors. When in June 2017 Saudi Arabia's clown prince Mohammed bin Salman (MbS) tried to take
over Qatar and to steal its juicy $350 billion sovereign wealth fund, the emir of Qatar called
on Turkey for help. Erdogan sent the Turkish army and air force. His troops protected Qatar
from a Saudi invasion.
With the lira in trouble the emir flew to Ankara and promised a new $15 billion investment
into Turkey. Additionally some mysterious cargo was unloaded from his plane. That
saved the lira for a few days. But Turkey's structural problems are unsolved. Erdogan is no
longer trusted and his son in law, who he made finance minister, lacks the necessary
qualification for the job.
Thus :
"We forecast a recession next year," S&P said. "Inflation will peak at 22 percent over
the next four months, before subsiding to below 20 percent by mid-2019."
The Qatari move came a few days before its arch enemy Saudi Arabia also moved into the area.
On Friday the U.S. announced that Saudi Arabia would support the U.S. occupied north-east Syria
with 100 million
dollar . The Wahhabi Saudis are now financing the secular Kurdish terror organization
PKK/YPG, the local U.S. proxy in north-east Syria.
If the Saudi clown prince MbS wants to take revenge on Turkey's Erdogan for messing up his
plans for Qatar, he now has his chance.
Posted by b on August 18, 2018 at 03:56 PM |
Permalink
One refinement to add to 'b's outstanding post (how the hell does he do it, miraculous !) as
far as I can see Turkey fell into the same deep state bankers financial trap, that Spain
Greece Italy fell for. Bail out a vunrable country then pull the rug out ! You own them ! So
I would slightly disagree with it being entirely of there own making. I blame the Rothchild
family.
Moody's and S&P ratings agencies are fraudulent institutions. For having AAA rated
billions worth of junk mortgages, they should have been indicted and prosecuted.
Excellent analysis again, b. You surpass yourself. There is something you talk about that has
always intrigued me
"For years Turkey borrowed large amounts of money from abroad and invested it into local
infrastructure instead of producing exportable products."
There is a parallel here with Spain. From entry into the Euro in 1999 the floodgates of
credit opened. Bankers, politicians and builders were involved in creating vast swathes of
speculative urbanization; two airports were built which now stand empty, a formula 1 track
hosted five races before closing, a phantom theme park; huge, almost empty accommodation
complexes, and the list goes on. The ghost airport in Ciudad Real, which cost £1.2
million euros, was sold off to Chinese buyers for a mere 10,000 euros. The "Cajas", the
regional banks, were all bailed out by the government.
Apart from local corruption, which is nothing new, I think there must have been a
deliberate strategy on the part of EU elites not to finance industrial projects that would
generate export currency, and hence compete with EU industrial powers such as Germany (I once
read Spanish academic paper arguing this but have not managed to track it down). When the
same happens in Turkey, obviously not an EU country, you have to wonder whether is it part of
a transatlantic banker strategy: corrupt national elites finance corrupt local elites to
build ghost infrastructures as cheap and shoddy as you can get, the banks that financed it
get bailed out if it all crashes. What's not to like?
Turks can't avoid Greek-style crisis now. The solution calls for a violent swing in trade
balance from huge deficit to sizable surplus, somewhere in a range of $100B. That can't
happen unless people of Turkey are warehoused in slave-labor-condition factories that can be
competitive enough to displace Asian players. That entails bone-crushing fall in living
standards.
All in all, 20 percent decline in GDP is now all but certainty. The longer Erdogan tries to
avoid the harsh medicine, the deeper this cancer goes. He should either bow to IMF, or to
exit NATO, join BRICS and ask for loans from that grouping.
Of course, Turkish military can say bye-bye to its present size. It's unsustainable.
Financial crunch will reduce Turkish armed forces to less than half of their present
size.
And if Erdogan wants to keep his soldiers well-equipped for half the price - which he should
- he'll have to switch to much more reasonably priced Russian weaponry. Once he does that,
even Russia may contribute $10B to his bailout kitty.
Otherwise, Erdogan is a dead man. The economic hurricane barreling his way is only gathering
strength with every passing day. And all he is doing is unfurling umbrellas and increasing
the volume of music.
That list of infrastructure @ Lochern mentions looks geared toward the holiday industry which
in the past has been a major income for Turkey ! Worth at the time perhaps investing in. Very
popular with Eurapians but very popular with Russians. My wild guess would be---- some dodgey
ploy by the west to drive a wedge between Russia and Turky, devideding and ruling both! By
meens of conflict and bank debt .The gains would be numerous long term and short term. But as
already mentioned may back fire and bring Russia and Turkey closer. I hope so.
Much of Turkeys external debt is private and not government . Their BIS controlled central
bank kept interest rates high. This forced Turkish banks to take out loans in USD or Euro
which had lower interest rates to meet loan demands in the private corporate sector , which
they made at higher interest rates after exchanging for Lira. More profitable. The assumption
was there would be a relatively stable exchange rate. So there was risk.
That risk made them vulnerable fx attack by the globalist banking cartel. When Erdogan
took over more control from the TCB last month to reduce interest rates and reduce demand for
foreign loans this was seen as an act of war. The independence of the central bank must be
defended. Trumps additional tarrif increases, mild as they were were simply a symbolic
barking of orders to take Turkey down
Looking at the broader picture. Since the 2008 financial blowout there has been "carry
trade" fueled by zero-cost liquidity pumped into the global system by quantitative easing,
which was then shipped to high-interest emerging markets such as Brazil, Turkey and other
countries.
With the beginning of the Fed's "tapering" of QE and rising interest rates since 2015, the
whole financial system has triggered a "reverse carry trade" where dollars flow out of
emerging markets back to safer havens. This is what you are seeing in Turkey, Argentina,
Russia, Brazil, etc.
The last 10 years are a replay of the decade running up to the 1997/1998 crisis. While the
1985 'Plaza Accord' dollar devaluation was not exactly QE, it had the same intent and results
– a flood of cheap money and dollar debt, and therefore growing global dependence on
the dollar and vulnerability to US monetary and economic policy
Some say countries like Turkey should know better, but countries have little control over
their monetary policy under the global and independent central banking system forced on them.
Go against this system and you will be hit with sanctions , subject to regime change or will
be invaded
So call it a homegrown crisis if thats the reality you choose to live in. Who am I to say
otherwise?
These rating agencies are the same ones that rated junk mortgage bonds AA. They are for sale
to highest bidder or since they haven't been prosecuted for their criminal behavior,
vulnerable to threats from the same political machine that turned a blind eye in 2008.
Turkey may have homegrown economic problems as you have pointed out but they certainly have
even more problems with a vindictive and extremely corrupt Uncle Sam who ruthlessly punish
any and all independent actions.
Another excellent blog B. I agree with many of the above commenters that the breadth and
depth of the analysis on MOA is truly amazing.
Pft@13. Good analysis as well.
However, I would expect that Turkey will not be another Greece. Rather I expect Turkey to
get help from its friends to stabilize its economic position, resist U.S. sanctions and avoid
an IMF bail-out.
With the support of Qatar, and I would expect China as well, I would expect Turkey to
protect its banks. However, it is also possible that they will let some private Turkish
companies, with dollar denominated debts, default. Such defaults, combined with the pressure
that declining dollar liquidity is already putting on other emerging markets and Italy, would
be destabilizing for the Western financial system. Sooner or later, and I suspect sooner, the
FED will be required to start printing money again, which will reverse the dollar's recent
strength and relieve the pressure on Turkey.
At the end of the day, however, I expect that this episode will be another step in the
direction of de-dollarization and will further reduce the ability of the U.S. to use economic
sanctions to bully its adversaries.
A strange paradox of life !
Owe your bank 1000 the bank manager will make you bankrupt, owe the bank a million and he'll
invite you home for dinner ! More to lose !
By this token I'd like to think, the more country's that refuse there debt, the less power
the west will have ! The less credibility and the less fear and influence they can inflict
.
If the west wants to weaponise banking so be it ! Bring it on. Let's pull the rug out from
under the banks/Rothchilds.
Feet ! Natural justice !
Pft @ 13 said:"Some say countries like Turkey should know better, but countries have little
control over their monetary policy under the global and independent central banking system
forced on them. Go against this system and you will be hit with sanctions , subject to regime
change or will be invaded."
CDWaller @ 15 said:"These rating agencies are the same ones that rated junk mortgage bonds
AA. They are for sale to highest bidder or since they haven't been prosecuted for their
criminal behavior, vulnerable to threats from the same political machine that turned a blind
eye in 2008."
"... So why should you care? Why does that matter to you or me? Well, like most emerging market financial crisis there is the danger of contagion . ..."
"... Turkey's economy is four times the size of Greece, and roughly equal in size to Lehman Brothers circa 2008. ..."
"... Turkey's other borders face six nations: Georgia, Iran, Iraq, Syria, Armenia, and Nakhchivan, a territory affiliated with Azerbaijan. Five of those are involved in ongoing armed conflicts or outright war. ..."
"... NATO has long outlived its' usefulness. Cancel its' stipend and bring our soldiers, marines, sailors and airmen and women home! Put them to work here. Fighting fires. ..."
"... NATO only seems to be useful to the hegemony that supports it. Peace is not it's mission. ..."
By now you've probably heard that Turkey is having a financial crisis, and Trump appears to be pouring gasoline on it.
But you may not understand what is happening, or you may not know why it's important.
So let's do a quick recap
.
Turkey's currency fell to a new record low today. Year to date it's lost almost half its value, leading some investors and
lenders inside and outside of Turkey to lose confidence in the Turkish economy.
...
"Ninety percent of external public and private sector debt is denominated in foreign currencies," he said.
Here's the problem. Because of the country's falling currency, that debt just got a lot more expensive.
A Turkish business now effectively owes twice as much as it did at the beginning of the year. "You are indebted in the U.S.
dollar or euro, but your revenue is in your local currency," explained Lale Akoner, a market strategist with Bank of New York
Mellon's Asset Management business. She said Turkey's private sector currently owes around $240 billion in foreign debt.
This is all about hot money that has been washing around in a world of artificially low interest rates, and now, finally, an
external shock happened. As it
always happens .
The bid-ask spread, or the difference between the price dealers are willing to buy and sell the lira at, has widened beyond
the gap seen at the depth of the global financial crisis in 2008, following Lehman Brothers Holdings Inc.'s collapse.
So why should you care? Why does that matter to you or me? Well, like most emerging market financial crisis there is the
danger of contagion
.
The turmoil follows a similar currency crash in Argentina that led to a rescue by the International Monetary Fund. In recent
days, the Russian ruble, Indian rupee and South African rand have also tumbled dramatically.
Investors are waiting for the next domino to fall. They're on the lookout for signs of a repeat of the 1997-1998 Asian financial
crisis that began when the Thai baht imploded.
A minor currency devaluation of the Thai baht in 1997 eventually led to 20% of the world's population being thrust into poverty.
It led to Russia defaulting in 1998, LTCM requiring a Federal Reserve bailout, and eventually Argentina defaulting in 2001.
Turkey's economy is four times the size of Greece, and roughly equal in size to Lehman Brothers circa 2008.
The markets want Turkey to run to the IMF for a loan, but that would require a huge interest rate hike and austerity measures
that would thrust Turkey into a long depression. However, that isn't the
biggest obstacle .
The second is that Erdogan would have to bury his hatchet with the United States, which remains the IMF's largest shareholder.
Without U.S. support, Turkey has no chance of securing an IMF bailout program.
There is another danger, a political one and not so much an economic one, that could have dramatic implications.
If Erdogan isn't overthrown, or humbled, then there is an ironclad certainty that Turkey will
leave NATO and
the West.
Turkey, unlike Argentina, does not seem poised to turn to the International Monetary Fund in order to stave off financial collapse,
nor to mend relations with Washington.
If anything, the Turkish President looks to be doubling down in challenging the US and the global financial markets -- two
formidable opponents.
...
Turkey would probably no longer view the US as a reliable partner and strategic ally.
Whoever ends up leading the country, a wounded Turkey would most likely seek to shift the center of gravity away from the West
and toward Russia, Iran and Eurasia.
It would make Turkey less in tune with US and European objectives in the Middle East, meaning Turkey would seek to assert a
more independent security and defense policy.
Erdogan has warned Trump that Turkey would
"seek new friends" , although Russia and China haven't yet stepped up to the plate to bat for him.
Russia, Iran and China do have a common interest when in comes to undermining the
petrodollar . Pulling Turkey into their sphere of influence would be a coup.
Turkey lies at a historic, strategic crossroad. The
bridge between the peaceful West and the war-ridden dictatorships of the East that the West likes to bomb.
On its Western flank, Turkey borders Greece and Bulgaria, Western-facing members of the European Union. A few years ago, Turkey
-- a member of NATO -- was preparing the join Europe as a full member.
Turkey's other borders face six nations: Georgia, Iran, Iraq, Syria, Armenia, and Nakhchivan, a territory affiliated with
Azerbaijan. Five of those are involved in ongoing armed conflicts or outright war.
Losing Turkey would be a huge setback for NATO, the MIC, and the permanent war machine.
more struggling economies are starting to get it. Trade wealth for the rulers (IMF supporters) to be paid by the rest of us.
Fight back. Squeeze the bankers balls. Can't have our resources, now way, no how, without a fight.
in a flailing Turkey? Weren't there some outside potential takers encouraging China when it floated its currency proposal?
Nastarana on Tue, 08/14/2018 - 8:41pm
NATO has long outlived its' usefulness. Cancel its' stipend and bring our soldiers, marines, sailors and airmen and women home! Put them to work here. Fighting fires.
Patrolling our shores for drug running and toxic dumping. Teaching school, 10 kids per class maximum. Refurbishing buildings and
housing stock. Post Cold War, an military alliance with Turkey makes no sense.
So most folks never heard of a guy named Hillel. He was a Baghdad Jew who moved to Judea
about 60 years before Christ was born.
His great influence on Judaism was a novel invention to get around the Jubilee which many
civilizations employed snd was part of Judaism Mosaic Law. Basically every 7 years debts were
cancelled to prevent the elites from accumulating all the land and wealth and enslaving the
bottom 99% and causing rebellion. Much of the debt forgiven was owed to the state in the form
of taxes but individuals and business also were indebted to money lenders . Debt of
individuals acquired to pay taxes, farm, etc was forgiven by the Jubilee. Business /Merchant
debts had to be repaid
The rabbiis of the Pharisees under the suggestion of Hillel the Elder, created a loophole
in Jewish law, in which a legal document would accompany the interest-free loans (charging
interest to fellow Jews was forbidden in the Torah) issued by individuals that stated that
the loans were to be transferred to the courts as the law of remission does not apply In this
case.
It was called a Prosbul.
This led to great unrest among Jews and non Jews alike. This unrest led to a Jewish
activist named Jesus leading a protest against the Pharisees and the money lenders. Michael
Hudson has a theory backed up by historical documents in the original Aramaic,Hebrew and
Greek that Mosaic Law is mostly about the prohibitions of the sins related to debt and the
sinful practices of creditors to secure repayment. Translations into English and other
languages have obscured this.
Christianity was formed after Jesus was executed to protect the money lenders .
Unfortunately the Romans were pro creditor and then Constantine hijacked the religion a
couple of centuries later , and aside from a prohibition on usury by the Roman Church the
Jubilee was no more. When the Roman Empire fell the Byzantine Emperor reinstated the Jubilee
from 7th-10th Century and abandoned this . I imagine this wad due to the Islamic Wars that
required external loans to finance at interest.
Judaism still use the prosbul today , at least in Orthodox , to escape the Jubilee called
for in Mosaic Law . That applied only for loans to Jews in any event. Prohibitions of usury
in the Christian world ended pretty much with the Reformation and Calvinism. Even so in the
US their were limits on usury in many US states until early 1980's when neoliberalism crushed
that. Now the poor get charged as much as 30% on credit card debt while earning 2% on savings
and they cant even declare bankruptcy like Trump did 6 times
Islamic banking is interest free though under Sharia Law. "Loans are equity-based,
asset-backed. In lieu of interest the banks rely on cost-plus financing (murabaha),
profit-sharing (mudaraba), leasing (ijara), partnership (musharaka) and forward sale
(bay'salam).
"This prohibition is based on arguments of social justice, equality, and property rights.
Islam encourages the earning of profits but forbids the charging of interest because profits,
determined ex post, symbolize successful entrepreneurship and creation of additional wealth
whereas interest, determined ex ante, is a cost that is accrued irrespective of the outcome
of business operations and may not create wealth if there are business losses. Social justice
demands that borrowers and lenders share rewards as well as losses in an equitable fashion
and that the process of wealth accumulation and distribution in the economy be fair and
representative of true productivity.
"Risk sharing. Because interest is prohibited, suppliers of funds become investors instead of
creditors. The provider of financial capital and the entrepreneur share business risks in
return for shares of the profits."
"Money as "potential" capital. Money is treated as "potential" capital -- that is, it
becomes actual capital only when it joins hands with other resources to undertake a
productive activity. Islam recognizes the time value of money, but only when it acts as
capital, not when it is "potential" capital."
"Prohibition of speculative behavior. An Islamic financial system discourages hoarding and
prohibits transactions featuring extreme uncertainties, gambling, and risks."
So maybe the war against Islam has another component?
Getting back to Jesus. Hudson says the Pharisees decided that Jesus' growing popularity
was a threat to their authority and wealth.
"They said 'we've got to get rid of this guy and rewrite Judaism and make it about sex
instead of a class war', which is really what the whole Old Testament is about,"
"That was that was where Christianity got perverted. Christianity turned so
anti-Jesus, it was the equivalent of the American Tea Party, applauding wealth and even
greed, Ayn-Rand style."
"Over the last 1000 years the Catholic Church has been saying it's noble to be
poor. But Jesus never said it was good to be poor. What he said was that rich people are
greedy and corrupt. That's what Socrates was saying, as well as Aristotle and the Stoic Roman
philosophers, the biblical prophets in Isaiah."
"Neither did Jesus say that it was good to be poor because it made you noble.
"What Jesus did say is that say if you have money, you should share it with other
people."
"American Fundamentalist Christians say don't share a penny. King Jesus is
going to make you rich. Don't tax millionaires. Jesus may help me win the lottery. Tax poor
people whom the Lord has left behind – no doubt for their sins. There's nothing about
the Jubilee Year here."
Hudson has a book coming out next week on the subject
The second neoliberalization of Argentina turned into second financial crash. Brazil is probably next. And Argentina and Brazil
were two contires in which neoliberal staged a counterrevolution after financial crisi of 2008.
The IMF is back in Argentina: "an economic and social crisis, even more serious than the present one, looms large on the horizon"
1. The vicious circle of illegitimate debt grapples the Argentine people once again
2. IMF's $ 50 billion loan surpasses Greece's previous record
Sergio Ferrari from Berne, Switzerland interviewed Eric Toussaint, international debt specialist
After more than a decade of Argentina's official "distance" from the International Monetary Fund (IMF), Mauricio Macri's government
has just knocked on the doors of the world's financial police. The $ 50 billion credit granted by the organization during the first
week of June sets an international record and will directly impact the economic and social situation of this South American country.
Eric Toussaint, Belgian historian and economist, an eminent specialist in this field and spokesperson for the Committee for the Abolition
of Illegitimate Debt (CADTM), based in Brussels, pointed this out. Interview follows. Q: Why did the Argentine government turn
to the IMF , in full view of Argentina's
relations with this international organization in the late 1990s and their dire political consequences? Is the financial top brass
of the Macri team despairing?
Eric Toussaint (ET): Since the Mauricio Macri government assumed office in December 2015, its policies have led to a critical
situation. Sharp reduction in export taxes have brought down tax revenues, the debt servicing expenditure has been significantly
increased (100% higher in 2018 than in 2017). The country is running out of dollars. Currency reserves fell by $ 8 billion earlier
this year. Macri needs this IMF loan to continue debt servicing. Private international lenders require such a loan as a prerequisite
for continued credit to Argentina. A very large chunk of the IMF loan will be used directly to repay foreign creditors in dollars.
Q: If we look at the Argentine history of the 1990s, this seems to be a scheme of playing with fire
ET: Yes, of course. But I would like to further explore the background of this appeal to the IMF
Q- Please go ahead!
ET: This shows that the government's policy is an abject failure: with a peso that devalued fast; with the
interest rate set at a high 40% by the Argentine Republic's
Central Bank ; with the $ 8 billion reduction in international reserves
that keep declining. And with a debt service that has increased by
100% compared to 2017. Faced with a balance sheet of such a nature,
undoubtedly it is a total failure. Macri claimed that a high growth level and a viable debt would be ensured by paying the debt –
between end-2015 and early-2016 – and by compensating the
vulture funds , in keeping with Judge Thomas Griesa's
verdict. He knelt before the vulture funds (see:
http://www.cadtm.org/Reject-the-Imminent-Agreement-with
). But the facts confirm that this plan did not work. Debt rose at a whirling pace and it's startling to see how fast it snowballed.
As a result, it became impossible to convince the creditors that Argentina could repay its debt in the future. That's why Macri is
asking for this $ 50 billion credit. We must remember that when Greece received $ 30 billion from the IMF in 2010 in the backdrop
of a dramatic situation, it was a record amount!
Q: Some analysts say that President Macri is trying to breathe in some fresh air with the help of this loan, before commanding
a comfortable position in the October 2019 elections.
ET: I would not like to engage in farfetched political speculations. I prefer facts. I have read the contents of the agreement
signed with the IMF and it has imposed a severe reduction in general social benefits and wages of the public servants. Public investment
will be almost wiped out and it will lead to an economic depression. Debt repayment will increase and the IMF charges high
interest rates . The government will impose taxes with elevated
rates on the public to repay the debt, while continuing to hand out fiscal perks to the capitalists. The government will encourage
the export of the maximum number of agricultural products and raw materials to the global market by reinforcing the extractivist-exporting
model. IMF's policy will lead the country to an economic and social crisis even more serious than what it suffered before this loan
was sanctioned. Let's go back to your question. It is very likely that, politically, Macri will claim that what he is doing is not
his project, but what the IMF demands from him.
Q: This brings us back to a not-so-distant past and I would like to highlight that: the decade of indebtedness and the IMF's
role in the 1990s that eventually led to the social outburst of 2001. Can history repeat itself without tragedy?
ET: History is repeating itself in a country that is a serial debt payer. It started with the illegitimate and odious debt inherited
from the military dictatorship of the 1970s. IMF's support was crucial for this dictatorship to continue until the early 1980s. The
vicious circle of illegitimate debts persisted during the 1990s with President Carlos Menem followed by Fernando De la Rúa. Their
allegiance to the IMF's recommendations led to the great social crisis of late 2001. President Rodríguez Saá, in his few days or
Presidency at end-2001, announced the suspension of debt repayment to allay popular anger. The debt was restructured in 2005, then
re-negotiated with creditors who had not participated before. It caused a crisis in the government and evoked sharp criticism from
the people (see the section on Argentina here
http://www.cadtm.org/Restructuration-Audit-Suspension,11723
). Former minister Roberto Lavagna, who had negotiated the 2005 restructuring, objected to negotiations with outsider creditors.
The Argentine authorities never wanted to do what Ecuador did in 2007-2008: to carry out a debt audit with citizens' participation,
which could have defined the odious and illegitimate part of the debt (see:
http://www.cadtm.org/Video-The-Ecuador-debt-audit-a
and http://www.cadtm.org/Vulture-funds-are-the-vanguard
). This, along with the inconsistency of the Cristina Fernandez government's national sovereignty discourse, frustrated people. This
partly explains Macri's electoral victory in 2015.
Q: A course over several decades where illegitimate debts condition government policies without ever finding structural solutions
ET: Yes. And that led today to this new mega-loan from the IMF. From now on, it can be included in the category of odious and
illegitimate debts. An odious debt is a debt contracted against the people's interests, and the creditors know that it is illegitimate.
Evidently a new illegitimate and odious debt is taking shape.
Q: What about future prospects?
ET: I have already spoken about the deteriorating economic and social crisis. I hope for a strong popular reaction in the coming
months. I also hope that the popular forces will not take too long to consolidate their strength to oppose even more vigorously the
Macri government and the pressures of the IMF and other international creditors.
Part I:
Commercial Paper Market Seizure turns Banks into their
own Vulture Investors
This article appeared in
AToL
on November 27, 2007
Vulture restructuring is a purging cure for a
malignant debt cancer. The reckoning of systemic debt presents regulators with a choice of facing the cancer
frontally and honestly by excising the invasive malignancy immediately or let it metastasize over the entire
financial system over the painful course of several quarters or even years and decades by feeding it with more
dilapidating debt.
But the strategy of being your own vulture started
with Goldman Sachs, the star Wall Street firm known for its prowess in alternative asset management, producing
spectacular profits by manipulating debt coming and going amid unfathomable market anomalies and contradictions
during years of liquidity boom. The alternative asset management industry deals with active, dynamic
investments in derivative asset classes other than standard equity or fixed income products. Alternative
investments can include hedge funds, private equity, special purpose vehicles, managed futures, currency
arbitrage and other structured finance products. Counterbalancing opposite risks in mutually canceling paired
speculative positions to achieve gains from neutralized risk exposure is the basic logic for hedged fund
investments.
Hedge Funds
The wide spread in return on investment
between hedge funds and mutual funds is primarily due to differences in trading strategies. One fundamental
difference is that hedge funds deploy dynamic trading strategies to profit from arbitraging price anomalies
caused by market inefficiencies independent of market movements whereas mutual funds employ a static
buy-and-hold strategy to profit from economic growth. An important operational difference is the use of
leverage. Hedge funds typically leverage their informed stakes by margining their positions and hedging their
risk exposure through the use of short sales, or counter-positions in convergence or divergent pairs. In
contrast, the use of leverage is often limited if not entirely restricted for mutual funds.
The classic model of hedge funds
developed by Alfred Winslow Jones (1910-1989) takes long and short positions in equities simultaneously to
limit exposures to volatility in the stock market. Jones, Australian-born, Harvard and Columbia educated
sociologist turned financial journalist, came upon a key insight that one could combine two opposing investment
positions: buying stocks and selling short paired stocks, each position by itself being risky and speculative,
but when properly combined would result in a conservative portfolio that could yield market-neutral outsized
gains with leverage. The realization that one could couple opposing speculative plays to achieve conservative
ends was the most important step in the development of hedged funds.
The
Credit Guns of August
Yet the credit guns of August 2007 did
not spare Goldman's high-flying hedge funds. Goldman, the biggest
US
investment bank by market value, saw its Global Equity Opportunities Fund suffer a 28% decline with assets
dropping by $1.4 billion to $3.6 billion in the first week of August as the fund's computerized quantitative
investment strategies fumbled over sudden sharp declines in stock prices worldwide.
The Standard & Poor's 500 Index, a
measure of large-capitalization stocks, fell 44.4 points or 2.96% on August 9. On August 14, the S&P 500 fell
another 26.38 points or 1.83%, followed by another fall of 19.84 points to 1,370.50 or 1.39% on August 15,
totaling 9.4% from its record high reached on July 19, but still substantially higher than its low of 801
reached on
March 11, 2003
.
Goldman explained the setback in Global
Equity Opportunities in a statement: "Across most sectors, there has been an increase in overlapping trades, a
surge in volatility and an increase in correlations. These factors have combined to challenge many of the
trading algorithms used in quantitative strategies. We believe the current values that the market is assigning
to the assets underlying various funds represent a discount that is not supported by the fundamentals." The
statement is a conceptual stretch of the meaning of "fundamentals" which Goldman defines as value marked to
model based on a liquidity boom rather than marked to market, even as the model has been rendered dysfunctional
by the reality of a liquidity bust.
The market value in mid August of two
other Goldman funds: Global Alpha and North American Equity Opportunities also suffered big losses. Global
Alpha fell 27% in the year-to-date period, with half of the decline occurring in the first week of August.
North American Equity Opportunities, which started the year with about $767 million in assets, was down more
than 15% through July 27. The losses had been magnified by high leverage employed by the funds' trading
strategies. Goldman said both risk-taking and leverage in these two funds had since been reduced by 75% to cut
future losses. Similarly, leverage employed by Global Equity Opportunities had been reduced to 3.5 times equity
from 6 times. The three funds together normally managed about $10 billion of assets.
Feeding
on One's Own Death Flesh
Facing pending losses, Goldman Chairman
Lloyd Blankfein was reported to have posed a question to his distraught fund managers: if a similar distress
opportunity such as Goldman's own Global Equity Opportunities presented itself in the open market outside of
Goldman, would Goldman invest in it as a vulture deal. The answer was a resounding yes. Thus the strategy of
feeding on one's own dead flesh to survive, if not to profit, took form.
Goldman would moderate its pending
losses by profiting as vulture investor in its own distressed funds. The loss from one pocket would flow into
another pocket as gains that, with a bit of luck, could produce spectacular net profit in the long run if the
abnormally high valuations could be manipulated to hold, or the staying power from new capital injection could
allow the fund to ride out the temporary sharp fall in market value. It was the ultimate hedge: profiting from
one's own distress. The success of the strategy depends on whether the losses are in fact caused by temporary
anomalies rather than fundamental adjustment. Otherwise, it would be throwing good money after bad.
The Fed
Held Firm on Inflation Bias
The Fed, in its Tuesday, August 7 Fed
Open Market Committee (FOMC) meeting, defied market expectation and decided against lowering interest rates
with a bias against growth and focused instead on inflation threats. In response, the S&P 500 index, with
profit margin at 9% against a historical average of 6%, fell 44.4 points or 2.96% to 1,427 on August 9. The Dow
Jones Industrial Average (DJIA) dropped 387 points to 13,504 on the same day, even as the Federal Reserve
pumped $62 billion of new liquidity into the banking system to help relieve seizure in the debt market.
On the following Monday, August 13,
Goldman announced it would injected $2 billion of new equity from its own funds into its floundering Global
Equity Opportunities fund, along with another $1 billion from big-ticket investors, including CV Starr & Co.,
controlled by former American International Group (AIG) chairman Maurice "Hank" Greenberg, California real
estate developer Eli Broad who helped found SunAmerica and later sold it to AIG, and hedge fund Perry Capital
LLC, which is run by Richard Perry, a former Goldman Sachs equity trader.
The new equity injection was intended
to help shore up the long/short equity fund, which was down almost 30% in the previous week, to keep the fund
from forced sales of assets at drastic discount long enough for markets to stabilize and for the fund to get
out of the tricky leveraged bets it took before the credit markets went haywire in mid August. Global Equity
"suffered significantly" as global markets sold off on worries about debt defaults credit draught, dragging the
perceived value of its assets down to $3.6 billion, from about $5 billion.
Goldman chief financial officer David
Viniair on a conference call with analysts was emphatic that the move was not a rescue but to capture "a good
opportunity". After more than a week of panic over the disorderly state of global capital markets, Goldman
Sachs pulled a kicking live rabbit magically out of its distressed asset hat.
On a conference call to discuss the
additional equity investment in the $3.6 billion Global Equity Opportunities fund, Goldman executives insisted
the move would not add to moral hazard (encouraging expectations that lead investors to take more risk than
they otherwise might because they expect to be bailed out), but would merely reflect the firm's belief that the
value of the fund's underlying assets was out of whack with "fundamentals" and that sooner or later the losses
would be recouped when an orderly market returns.
"We believe the current values that the
market is assigning to the assets underlying various funds represent a discount that is not supported by the
fundamentals," Goldman explained in a statement. A day later, on August 14, the S&P 500 fell another 26.38
points or 1.83%, followed by another fall of 19.84 points or 1.39% on August 15, notwithstanding that a chorus
of respected voices were assuring the public that the sub-prime mortgage crisis had been contained and would
not spread to the entire financial system.
But Goldman did not inject more equity
into two of its other funds: Global Alpha and North American Equity Opportunities that had also suffered sharp
losses. Goldman said it was reducing leverage in the funds, a process that was mostly complete, but added that
it was not unwinding Global Alpha, down 27% this year through August 13, about half of that in the previous
week alone. Unlike Global Equity Opportunities, Goldman did not bolster its Global Alpha quantitative fund.
Investors had reportedly asked to withdraw $1.6 billion, leaving Global Alpha with about $6.8 billion in assets
after forced liquidation to pay the withdrawals.
Ireland
registered Global Alpha, originally seeded in 1995 with just $10 million and returned 140% in its first full
year of operation, was started by Mark Carhart and Raymond Iwanowski, young students of finance professor
Eugene Fama of the
University
of
Chicago
.
Fama's concept of efficient markets is based on his portfolio theory which states that rational investors will
use diversification to optimize their portfolios based on precise pricing of risky assets.
Global Alpha soon became the Rolls
Royce of a fleet of alternative investment vehicles that returned over 48% before fees annually. Hedge funds
usually charge management fees of up to 2% of assets under management and 20% of investment gains as incentive
fees. Global Alpha fees soared to $739 million in first quarter of 2006, from $131 million just a year earlier
and boosted earnings rise at the blue-chip Goldman Sachs by 64% to $2.48 billion, the biggest 2006
first-quarter gain of any major Wall Street firm. Goldman is one of the world's largest hedge fund managers,
with $29.5 billion in assets under management in an industry that oversees $2.7 trillion globally. Goldman
reported in October 2006 that its asset management and securities services division produced $485 million, or
21% of its $2.36 billion in pretax profit for the fiscal third quarter.
For 2006, Global Alpha dropped 11.6%
through the end of November and end up dropping 9% for the year yet still generating over $700 million in fees
from earlier quarters. That was the first annual decline in seven years and followed an almost 40% gain for all
of 2005. The fund took a hit misjudging the direction of global stock and currency markets, specifically that
the Norwegian krone and Japanese yen would decline against the dollar. Global Alpha lost money partly on
wrong-way bets that equities in
Japan
would
rise, stocks in the rest of
Asia
and the
US
would fall and the dollar would strengthen. Before August 2007, the fund had lost almost 10% on wrong bet in
global bond markets.
Goldman's smaller $600 million North
American Equity Opportunities fund had also hit rough waters, losing 15% this year. There was real danger of a
rush of redemptions from nervous investors that would force the funds to sell securities in a market that had
all but seized up, forcing down asset prices to fire sale levels. Global Equity Opportunities investors were
entitled to pull their money monthly with a 15-day warning, meaning notices for Aug. 31 were due on August 16.
Global Alpha investors could redeem quarterly, and certain share classes also must notify the fund by the week
of August 13.
Hedge funds are private, largely
unregulated pools of capital whose managers command largely unrestricted authority to buy or sell any assets
within the bounds of their disclosed strategies and participate in gains but not losses from investment. The
industry has been growing over 20% annually due to its above-market performance. Still, Carhart and Iwanowski,
both in their early forties, had not been able to take any of their 20% incentive fees since Global Alpha fell
from its 2006 peak. They would have to make good about 60% of their previous incentive fees from profit, if
any, in future quarters before they could resume taking a cut of the fund's future gains.
The Fed
Wavered
By August 16, the DJIA fell way below
13,000 to an intraday low of 12,445, losing 1,212 points from its 13,657 close on August 8. The next day,
August 17, the Fed while keeping the Fed Funds rate target unchanged at 5.25%, lowered the Discount Rate by 50
basis points to 5.75%, reducing the gap from the conventional 100 basis points by half to 50 basis points and
changed the rules for access by banks to the Fed discount window.
In an accompanying statement, the Fed
said: "To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board
approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point
reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and
the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing
a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days,
renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market
liquidity has improved materially. These changes are designed to provide depositories with greater assurance
about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of
collateral for discount window loans, including home mortgages and related assets. Existing collateral margins
will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors
of the Federal Reserve Banks of New York and
San Francisco
."
The Fed
Panicked
A month later, on September 18,
brushing aside a DJIA closing at a respectable 13,403 the day before even in the face of poor employment data
for August, the Fed panicked over the unemployment data and lowered both the Fed Funds rate target and the
Discount Rate each by 50 basis points to 4.75% and 5.25% respectively. The rate cuts gave the DJIA a continuous
rally for 9 consecutive days that ended on October 1 at 14,087. Obviously, the Fed knew something ominous about
the credit market that was not reflected in the DJIA index.
The Global Equity Opportunities fund,
now with about $6.6 billion in asset value, was using six times leverage before the capital infusion. Like many
other managers, Goldman was experiencing the same problems with its so-called quantitative funds. Quant funds
use computerized models to make opportunistic investment decisions on minute statistic disparities in asset
prices caused by market inefficiency. When the short-term credit market seized up, the quant models turned
dysfunctional.
Funds caught with significant losses in
credit and bond investments had to sell stock holdings to lower the risks profile of their overall portfolios,
and the herd selling in the stock market magnified the price shift in a downward spiral. Stocks that were held
long fell in price, and stocks that were held short rose, exacerbating losses.
Opacity
Fueled Market Rumors
As required, quant fund managers have
been disclosing losses to investors but they are not required to disclose to the market. The opacity fueled the
rumor mill. Renaissance Technology's $26 billion institutional equities fund was reportedly down 7% for the
year. Some of the funds Applied Quantitative Research (AQR) managed were down as well, as were quant funds at
Tykhe Capital, Highbridge Capital and D.E. Shaw (of which Lehman now owns 20%).
Vulture
Opportunities in Distressed Funds
At Goldman, quant funds made up half of
the $151 billion of alternative investments under management, and half of which was the sort of long-short
equity quant funds that had been having trouble. But Goldman executives began to see opportunities in
distressed funds. The highly respected AQR was raking in new funds to invest in distressed situations, as were
other astute fund managers. AQR is an investment management firm employing a disciplined multi-asset, global
research process, with investment products provided through a limited set of collective investment vehicles and
separate accounts that deploy all or a subset of AQR's investment strategies. These investment products span
from aggressive high volatility market-neutral hedge funds, to low volatility benchmark-driven traditional
products. AQR's founder is
Clifford S. Asness, a
Goldman alumni where he was Director of Quantitative Research for the Asset Management Division responsible for
building quantitative models to add value in global equity, fixed income and currency markets.
H
e
was another of Fama's students at the
University
of
Chicago
.
Goldman was putting its own money down
alongside that of select outside investors, an expression of its faith in the fund's ability to recoup. The
situation differed from that of Bear Stearns which had to loan $1.6 billion to bail out one of two internal
hedge funds that had big problems with exposure to mortgage-related securities.
The
First Wave of Warnings
Goldman, one of the world's premiere
financial companies, had joined Bear Stearns and
France
's
BNP Paribas in revealing that its hedge funds had been hit by the credit market crisis. Bear Stearns earlier in
the summer disclosed that two of its multibillion dollar hedge funds were wiped out because of wrong bets on
mortgage-backed securities. BNP Paribas announced a few weeks later it would freeze three funds invested in US
asset-backed securities.
The assets of the two troubled Bear
Stearns hedge funds had been battered by turmoil in the credit market linked to sub-prime mortgage securities.
On
Jun 20, 2007
, $850 million of the funds' assets held as
collateral was sold at greatly discounted prices by their creditor, Merrill Lynch & Co. The assets sold
included mortgage-backed securities (MBS), collateralized debt obligations (CDO) and credit default swaps
(CDS). JP Morgan, another Bear Stearns creditor, had also planned an auction for some of the collateralized
assets of the Bear Stearns funds, but cancelled the auction to negotiate directly with the Bear Stearns funds
to unwind positions via private transactions to avoid setting a market price occasioned by market seizure.
The two Bear Stearns funds: High-Grade
Structured Credit Strategies Enhanced Leverage Fund and High-Grade Structured Credit Strategies Fund, run by
mortgage veteran Ralph Cioffi, were facing shut-down as the rescue plans fell apart. The funds had slumped in
the first four months of 2007 as the subprime mortgage market went against their positions and investors began
asking for their money back. The High-Grade Structured Credit Strategies Enhanced Leverage Fund sold roughly
$4 billion of subprime mortgage-backed securities in mid June, selling its highest-rated and most heavily
traded securities first to raise cash to meet redemption requests from investors and margin calls from
creditors, leaving the riskier, lower-rated assets in its portfolio that had difficulty finding buyers.
Collateral Debt Obligation Crisis
CDOs are illiquid assets that normally
trade only infrequently as institutional investor had not intended to trade such securities. Demand for them
is not strong even in normal times. In a credit crunch, demand became extremely weak. Sellers typically give
investors one or two days to price the assets and bid in order to get the best price. Bid lists were now sent
out for execution within roughly an hour, which was unusual and suggested that sellers were keen to sell the
assets quickly at any price.
Bear Stearns' High-Grade Structured
Credit Strategies Enhanced Leverage Fund sold close to $4 billion worth of AAA and AA rated securities. The
fund was started less than a year ago with $600 million in assets, but used leverage to expand its holdings to
more than $6 billion. But subprime mortgage trades that went wrong left the fund down 23% in the first four
months of 2007. The fund was selling its highest-rated and most tradable securities first to raise cash to meet
expected redemption requests and margin calls. Buyers were found for the bonds but the fund still had to retain
lower-rated subprime mortgage-based securities which had triggered its losses earlier in the year.
Bear Stearns was highly leveraged in an
illiquid market and was faced with the prospect that its funds were going to start getting margin calls so it
tried to sell ahead of being in the worst spot possible. Subprime mortgages were offered at low initial rates
to home buyers with blemished credit ratings who could not carry the adjusted payments if and when rates rise.
This was not a problem as long as prices for houses continued to rise, allowing the lenders to shift loan
repayment assurance from the borrower's income to the rising value of the collateral. Thus subprime mortgages
lenders were not particularly concerned about borrower income for they were merely using home buyers as needed
intermediaries to profit from the debt–driven housing boom. This strategy worked until the debt balloon burst.
Rising delinquencies and defaults in this once-booming part of the mortgage market had triggered a credit
crunch earlier in the year that left several lenders bankrupt. Many hedge funds had generated big gains for
several years on this unstainable liquidity boom. The premature bears who shorted the market repeated lost
money as the Fed continued to feed the debt balloon to sustain the unsustainable.
As delinquencies and foreclosures rose
finally, losses first hit the riskiest tranches of subprime mortgage-backed securities (MBS). The losses were
subsequently transmitted to collateralized debt obligations (CDOs) which invested in the higher-rated tranches
of subprime MBS that did not have an active market since they were bought by institutions with the intention to
hold until maturity. Such securities were super safe as long as their ratings remain high.
Hedge funds have become big
credit-market players in recent years, and many firms trade the riskiest tranches of subprime MBS and
higher-rated CDOs tranches to profit from the return spread. While some funds, such those managed by Cheyne
Capital and Cambridge Place Investment Management, had suffered sudden losses, some hedge funds made handsome
gains in February 2007 betting that a subprime mortgage crisis would hit.
As the number of market participants
increased and the packaging of the CDO became more exoteric over the liquidity boom years, it became impossible
to know who were holding the "toxic" tranches and how precisely the losses would spread, since the risk profile
of each tranche would be affected by the default rates of other tranches. The difficulty in identifying the
precise locations of risk exposure caused a sharp rise in perceived risk exposure system wide. This sudden risk
aversion led to rating downgrades of the high-rated tranches, forcing their holders to sell into a market with
few buyers.
The Federal Deposit Insurance
Corporation, which monitors risk in the banking system, tracks bank holdings of MBS, but not specific tranches
of CDOs. It has no information on which bank holds CDOs and how much, since such instruments are held by the
finance subsidiaries of bank holding companies, off the balance sheets of banks. Asian investors, particularly
those in
Japan
, had been eager to seek
off-shore assets yielding more than the near zero or even negative interest rates offered at home. Many
Japanese as well as foreign investors participated in currency "carry trade" to arbitrage interest rate spreads
between the Japanese yen and other higher interest rate currencies and assets denominated in dollars, fueling a
liquidity boom in US markets. The
US
trade
deficit fed the
US
capital account surplus as
the surplus trade partners found that they could not convert the dollars they earned from export to the
US
into local currencies without suffering undesirable rise in money supply.
The trade surplus dollars went into the
US
credit market.
The growth of CDOs has been explosive
during the past decade. In 1995
Ben Norton Ben Norton
is a journalist, writer, and filmmaker. He is the assistant editor of The Grayzone, and the
producer of the Moderate Rebels
podcast, which he co-hosts with editor Max Blumenthal. His website is BenNorton.com and he tweets at @ BenjaminNorton . bennorton.com