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Michael Hudson, the author of Killing the Host: How Financial Parasites and Debt Destroy Global Economy, says the stock market crash on Monday has very little to do with China and all to do with shortermism and buybacks of corporations inflating their own stocks - August 25, 2015
... ... ...
And this is what most of the commentators don't get, that all this market runoff we've seen in the last year or two has been by the Federal Reserve making credit available to banks at about one-tenth of 1 percent. The banks have lent out to brokers who have lent out to big institutional traders and speculators thinking, well gee, if we can borrow at 1 percent and buy stocks that yield maybe 5 or 6 percent, then we can make the arbitrage. So they've made a 5 percent arbitrage by buying, but they've also now lost 10 percent, maybe 20 percent on the capital.
What we're seeing is that short-term thinking really hasn't taken into account the long run. And that's why this is very much like the long-term capital market crash in 1997, when the two Nobel prize winners who said the whole economy lives in the short term found out that all of a sudden the short term has to come back to the long term.
Now, it's amazing how today's press doesn't get it. For instance, in the New York Times Paul Krugman, who you can almost always depend to be wrong, said the problem is there's a savings glut. People have too many savings. Well, we know that they don't in America have too many savings. We're in a debt deflation now. The 99 percent of the people are so busy paying off their debt that what is counted as savings here is just paying down the debt. That's why they don't have enough money to buy goods and services, and so sales are falling. That means that profits are falling. And people finally realize that wait a minute, with companies not making more profits they're not going to be able to pay the dividends.
Well, companies themselves have been causing this crisis as much as speculators, because companies like Amazon, like Google, or Apple, especially, have been borrowing money to buy their own stock. And corporate activists, stockholder activists, have told these companies, we want you to put us on the board because we want you to borrow at 1 percent to buy your stock yielding 5 percent. You'll get rich in no time. So all of these stock buybacks by Apple and by other companies at high prices, all of a sudden yes, they can make that money in the short term. But their net worth is all of a sudden plunging. And so we're in a classic debt deflation.
PERIES: Michael, explain how buybacks are actually causing this. I don't think ordinary people quite understand that.
HUDSON: Well, what they cause is the runup–companies are under pressure. The managers are paid according to how well they can make a stock price go up. And they think, why should we invest in long-term research and development or long-term developments when we can use the earnings we have just to buy our own stock, and that'll push them up even without investing, without hiring, without producing more. We can make the stock go up by financial engineering. By using our earnings to buy [their own] stock.
So what you have is empty earnings. You've had stock prices going up without really corporate earnings going up. Although if you buy back your stock and you retire the shares, then earning the shares go up. And all of a sudden the whole world realizes that this is all financial engineering, doing it with mirrors, and it's not real. There's been no real gain in industrial profitability. There's just been a diversion of corporate income into the financial markets instead of tangible new investment in hiring.
PERIES: Michael, Lawrence Summers is tweeting, he writes, as in August 1997, 1998, 2007 and 2008, we could be in the early stages of a very serious situation, which I think we can attribute some of the blame to him. What do you make of that comment, and is that so? Is this the beginnings of a bigger problem?
HUDSON: I wish he would have said what he means by 'situation'. What people don't realize usually, and especially what Lawrence Summers doesn't realize, is that there are two economies. When he means a bad situation, that means for his constituency. The 1 percent. The 1 percent, for them they think oh, we're going to be losing in the asset markets. But the 1 percent has been making money by getting the 99 percent into debt. By squeezing more work out of them. By keeping wages low and by starving the market so that there's nobody to buy the goods that they produce.
So the real situation is in the real economy, not the financial economy. But Lawrence Summers and the Federal Reserve all of a sudden say look, we're not really trying–we don't care about the real economy. We care about the stock market. And what you've seen in the last few years, two years I'd say, of the stock runup, is something unique. For the first time the stock, the central banks of America, even Switzerland and Europe, are talking about the role of the central bank is to inflate asset prices. Well, the traditional reason for central banks that they gave is to stop inflation. And yet now they don't want, they're trying to inflate the stock market. And the Federal Reserve has been trying to push up the stock market purely by financial reasons, by making this low interest rate and quantitative easing.
Now, the Wall Street Journal gets it wrong, too, on its editorial page. You have an op-ed by Gerald [incompr.], who used to be on the board of the Dallas Federal Reserve, saying gee, the problem with low interest rates is it encourages long-term investment because people can take their time. Well, that's crazy Austrian theory. The real problem is that low interest rates provide money to short-term speculators. And all of this credit has been used not for the long term, not for investment at all, but just speculation. And when you have speculation, a little bit of a drop in the market can wipe out all of the capital that's invested.
So what you had this morning in the stock market was a huge wipeout of borrowed money on which people thought the market would go up, and the Federal Reserve would be able to inflate prices. The job of the Federal Reserve is to increase the price of wealth and stocks and real estate relative to labor. The Federal Reserve is sort of waging class war. It wants to increase the assets of the 1 percent relative to the earnings of the 99 percent, and we're seeing the fact that this, the effect of this class war is so successful it's plunged the economy into debt, slowed the economy, and led to the crisis we have today.
PERIES: Michael, just one last question. Most ordinary people are sitting back saying well, it's a stock market crash. I don't have anything in the market. And so I don't have to really worry about it. What do you say to them, and how are they going to feel the impact of this?
HUDSON: It's not going to affect them all that much. The fact is that so much of the money in the market was speculative capital that it really isn't going to affect them much. And it certainly isn't going to affect China all that much. China is trying to develop an internal market. It has other problems, and the market is not going to affect either China's economy or this. But when the 1 percent lose money, they scream like anything, and they say it's the job of the 99 percent to bail them out.
PERIES: What about your retirement savings, and so on?
HUDSON: Well, if the savings are invested in the stock market in speculative hedge funds they'd lose, but very few savings are. The savings have already gone way, way up from the market. And the market is only down to what it was earlier this year. So the people have not really suffered very much at all. They've only not made as big of gains as they would have hoped for, but they're not affected.
... ... ...Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
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March 5, 2012 | Think Left
by syzygysue
There was precious little debate in the House of Commons, let alone in the country, prior to the Major government signing up to the 8th round of the GATT (General Agreement on Trade and Tariffs) treaty in Uruguay in 1994. This treaty extended the scope of the previous one beyond manufactured goods to cover services, agriculture and intellectual property, including services such as health, education and other public provision, and environmental ones such as GM foods, nuclear power and agribusiness.
Implicit in this treaty was the intention to dismantle the welfare state and privatise public services; the US arguing that it was unfair trade that their private providers of health, employment protection and education had no access to European markets because of the state provision.
However, it was recognized that such a process would have to be implemented slowly and by stealth because of the popularity of the welfare state. We are now seeing the end-game of that process being implemented by the Tory/LD government. The Welfare Reform bill, which will benefit private employment protection insurers, passed into legislation at the beginning of March. The Health and Social Care bill sets up the conditions which will eventually lead to further privatisation and a two tier US type of health provision; with private involvement intended at all levels from commissioning, insurance, private health providers, hospitals and financial devices for maximizing GPs budgets. A similar process is in place with the little discussed changes to state education. Nuclear energy is very much on the agenda in spite of the lack of economic or environmental case, and there are murmurings again about pushing for GM crops to be grown in the UK.
Ostensibly, the intention of the treaty was to protect and regulate free-trade between nations, but its impact was designed to elevate the rights of transnational corporations above that of the participating nations; thereby diminishing democracy, human rights, protection of the environment, and preserving the wealth of those who created the organisation… those who we now call the 1%.
The World Trade Organisation (WTO) was set up to arbitrate trade disputes. However, not only is that arbitration process secret and non-adversarial but inevitably the decisions are in favour of the corporations under the guise of protecting free-trade. Furthermore, it is not a level playing field. The US, as the most powerful of the participating nations could, and has, continued to protect its own industries/agriculture and 'dump' its goods on smaller nations, undermining their home markets. Retaliation by the smaller nation is limited to excluding the US which in many instances constitutes no great sanction. (1)
The WTO is an important part of the triumvirate of global players undermining democracy and national sovereignty, with the US as puppet master.
"For all the endless empty chatter about democracy, today, the world is run by three of the most secretive institutions in the world: the International Monetary Fund, the World Bank and the World Trade Organization. All three of which, in turn, are dominated by the U.S.'
http://escholarship.org/uc/item/56w0s261#page-5
ARUNDHATI ROY, THE ORDINARY PERSON'S GUIDE TO EMPIRE (2004).
Margaret Thatcher was instrumental in the setting up of the Uruguay round of the GATS treaty and the establishment WTO … but it was also the Thatcher government who was responsible for creating the UK roots of the current banking crisis and recession. In 1979 exchange controls were lifted; and in 1986, with 'Big Bang', all controls over consumer credit were abolished and housing finance was de-regulated. In concert with the Reagan administration in the US, globalization of the world's trade and financial sectors was effected.
With the advent of Globalization with its fundamentalist insistence upon open markets and free access for capital without restraints, there were suddenly no regulations to bind the Financial Class, no taxes they could not avoid and no political process they could not buy. It was a freedom from any notion of obligation, care or concern for anybody but themselves. It was a perversion of the very word freedom. They could vote wherever they chose, buy citizenship wherever they felt like it and pay only those taxes they found convenient and have no loyalty to anyone or anywhere. They were 'free'.
http://golemxiv-credo.blogspot.com/2011/04/free-market-and-globalization.html
Michael Meacher MP writes:
The charge sheet against the banks is that they have used these powers - particularly in the neoliberal era since 1980 - recklessly and in self-interest, which has done huge long-term harm to Britain's economy…This has been a significant cause of Britain's long-term decline… British manufacturing, the lifeblood of the economy, has been systematically hollowed out….
The City has relentlessly driven short-termism at the expense of market share. The UK banks have used their control of the money supply to regularly generate unsustainable asset bubbles which destabilise industry and, when they crash, beggar the taxpayer. They have engineered a massive mis-allocation of global capital into tax havens which, worldwide, now shelter over £11trn of global wealth. They have exacerbated inequalities between the super-rich and the rest, the growing disparities between regions, and the crowding out of manufacturing by finance…
So what should be done? Above all, control over the money supply must be brought back into the public domain.
http://www.newstatesman.com/blogs/the-staggers/2011/11/banking-banks-credit-financial
So the Thatcher government's policies are directly implicated in the genesis of the present situation… the intervening governments having done nothing to regulate the financial sector, and having continued the process of stealth privatisation of public services.
According to David Harvey, there was a tipping point in 1987, when even the US government realised that it was not sufficiently powerful to oppose the Bond markets. (2) The capacity of the financial markets to withdraw funds from any country and cause interest rates to rise, means that the financial elites are able to act as a 'virtual' parliament, able to coerce governments into abandoning legislation adverse to their interests.
It has taken only three decades of globalization, privatisation and de-regulation to bring the UK to the current parlous state:
The re-creation of the conditions of the Great depression; mass unemployment; the hollowing out of the UK manufacturing base; the north-south divide; the removal of an adequate safety net for the elderly, unemployed, sick or disabled; the recreation of a two tier provision of health and education; the lack of action on climate change or oil-dependency….and the re-accumulation of wealth back to the 1%.
Graph 1 shows clearly how the percentage of total pre-tax income for the top 1% of US wage earners is now back at 1920 level but the same graph could be drawn for the UK.
So how have the transnationals or 'giant' corporations not wasted a 'good crisis'?
Put simply, there has been a great lie which has been perpetuated and maintained by a collusion between right-wing politicians and the media .. the supposed 'mess' that New Labour left in 2010. (3)(4)
It is a verifiable lie to blame government spending on public services for the consequences of the global banking crisis. It is solely the size of the financial sector debt which pushes up the total UK debt to nearly 1000% of GDP. The debt did not result from government over-spending but from privatisation of banking profits and socialization of their losses (5).
However on the basis of that lie, the resolution of the banking crisis has been successfully redefined as a need to cut back once and for all, the welfare state and public spending. The means of imposing such austerity is by dramatically cutting benefits and the opening up of public services to privatisation… which makes no absolutely no sense in the stated policy of diminishing the structural deficit … but just happens to be the desired objective of the 1994 GATT treaty.
'Redefinition', secrecy and distraction are characteristic of current global politics, and it is notable that the interests of corporate power are hardly discussed in comparison to the focus on the financial markets.
Colin Crouch describes in his book 'The strange non-death of neoliberalism' (6) … 'The confrontation between the market and the state that seems to dominate political conflict … conceals the existence of this third force which is more potent than either and transforms the workings of both.'
'At the heart of the conundrum is the fact that …. neoliberalism is nothing like as devoted to free-markets as is claimed. It is rather devoted to the domination of public life by the giant corporation.'
Colin Crouch contends that neoliberalism is emerging from the financial collapse more powerful than ever, because of a 'comfortable accommodation' between the state, the market and the 'giant' corporation. Corporate power makes it its business to bind them all together in an essentially hidden market-state-corporation triad.
Colin Crouch further argues that several factors have determined the power of the 'giant' corporations:
The lobbying power of firms whose donations are of growing importance to cash-hungry politicians and parties;
The weakening of competitive forces by firms large enough to shape and dominate their markets;
The power over public policy exercised by corporations whose contracts for public services deliver special relationships with government;
The moral initiative grasped by enterprises that devise their own agendas of corporate social responsibility.
Democratic politics and 'the free-market' are both weakened by these processes.
The power over public policy exercised by corporations was explored by Think Left in the case of the employment protection insurer Unum's involvement with the Welfare Reform bill (7). This example evidences the likely similar conditions for the development of government policy in health, education, energy and agricultural policies, and indicates the vested interest of those corporations.
So, Unum warns people to get insured against the cuts in benefits … of which they, Unum, were major architects …. either directly as advisory consultants, or through their funding of psychiatrists who created the intellectual framework, the funding of think tanks and academics who in turn recommend policies to the DWP, and by offering 'jobs for the boys'.
http://think-left.org/2011/11/22/welfare-reform-and-the-us-insurance-giant-unum/
There has been many revelations of the 'revolving door' whereby politicians receive political donations, directorships, moving on into employment in think tanks funded by corporations and finally to be directly employed by the corporations themselves. Similar relationships may be observed for ex-civil servants. Corporations second employees into ministries as advisors and provide secondments for civil servants. Vast sums are spent on lobbying, and corporations are brought in to advise ministers directly. Specific mention should also be made of the global management consultancies like KPMG, Mckinseys and Boston Global, who advise government on how to privatise public services and who will profit enormously from providing training and commissioning for the GPs under the Health and Social Care bill. (8))
In this manner, corporations do not just exert pressure on the political process but have become major insider participants in framing the legislation according to their needs.
So why are the corporations so keen to be involved in providing health, education and public services?
Essentially, there is another lie. The UK's economic problems stem from lack of demand – not as we are constantly told by high tax rates, corporation tax, red tape or lack of investment:
The current shortfall of investment has nothing to do with high tax rates and everything to do with insufficient demand to meet potential supply. Cutting corporate taxes will simply make the situation worse as more wealth gushes upwards into the hands of the 1 per cent, and it goes to corporations that are letting it sit idle. As Shaxson points out, corporate tax cuts at this stage will be as effective as pushing on a piece of string….
British corporations are awash with cash. According to Deloitte, non-financial companies held £731.4 billion in the third quarter of 2011 – the highest ever….
"Corporations have all this cash because they are not investing: the opportunities are not there. They are hunkering down, spending less than they are earning, while the government is spending more than it is earning (and thus running deficits)."
This is shown by analagous US data in Graph 2.
As Richard Murphy writes in his book 'The Courageous State':
'.. (W)hy invest in businesses when something so much more attractive – the outsourced tax stream of a government as anxious as possible to give it away…. It is much easier to make profits from the certain commodities that people are always going to need, such as health, education, local government services, the utilities and so on that were once the preserve of government.' (9)
Worryingly in terms of the future of UK public services, Michael Hudson writes:
For today's financial planners the short run effectively has become the only aim. Running a corporation has become mainly a financial task whose objective is to raise the company's stock price by mergers and acquisitions, using earnings to buy one's own equity, arranging debt leveraging and orchestrating global intra-corporate "book" pricing so as to take profits into tax havens.
Financial managers are more likely to downsize operations and scale back research and development than to expand employment and production so as to leave more income to pay dividends and interest. The economy's debt burden is made heavier by deflationary policies that keep expansion on a short-term leash, and to encourage, rather than tax, rentier income and debt financing.
In conclusion, the aim of Thatcherism to reconstitute the economic and social relations of the post-war consensus is coming into fruition under the Tory-LD coalition.
"Democracy has been hollowed out. We have seen in the last 30 years or so, the total demise of those occupations for those in the U.K. population who had few or no qualifications. The mining industry, the shipyards and car factories, heavy and light engineering, the merchant navy, product assembly, and so on. We are seeing the dismantling of the welfare state … and all because the Government is controlled by what is good for big corporations and finance .. not what is good for the people."
Anon
Addendum:
To resist or reverse this situation, it is an imperative to cut through the misinformation and lack of information which is available. The hidden underlying agenda must be uncovered so that it can be confronted. The Spartacus movement opposing the Welfare Reform bill evidenced the power of twitter and online research by crowd sourcing. The virtual world can also facilitate international collaboration. In order to preserve and protect this vital resource all government/corporate attempts to control the internet must be resisted. http://aclj.org/free-speech-2/new-government-attempts-control-stifle-internet
(1) Noam Chomsky explains the World Trade Organization. http://video.google.com/videoplay?docid=5785830866015923087
(2) The End of Capitalism? – David Harvey (Penn Humanities Forum, 30 Nov 2011)
http://www.youtube.com/watch?v=EYzKsiev43Q
(3) Who pulls the strings at the BBC ? (Pam Field)
(4) Inadequacies of the BBC's coverage of the EU's financial crisis (Dr Sue Davies)
(5) Gordon Brown did not spend all the money-The Banks did (Dr Sue Davies)
(6) Colin Crouch (2011) 'The strange non-death of neoliberalism.' Polity Press, 65 Bridge Street Cambridge C2 1UR, UK
ISBN-13: 978-0-7456-5221-4(pb)
(7) Welfare reform and the US insurance firm Unum (Dr Sue Davies)
(8) http://www.guardian.co.uk/society/2012/feb/25/public-services-private-sector?INTCMP=SRCH
(9) Richard Murphy (2011) 'The Courageous State – Rethinking Economics, society and the Role of Government.' Searching Finance ltd., 8 Whitehall Road, London W7 2JE, UK
ISBN: 978-1-907720-28-4
Related articles:
Britain Under Siege (Dr. Tristan Learoyd)
The Pfink Tank: pharmaceutical industry (Dr. Tristan Learoyd)
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February 15, 2015 | nakedcapitalism.com
Yves here. Ukraine is going into an IMF program in even worse condition that Greece with its various loans from the Troika in 2010, and we can see how well borrowing more when you were already overindebted worked out for Greece. In addition, this interview with Michael Hudson makes clear that the loan to Ukraine is wildly out of line with IMF rules, making it painfully obvious that this "rescue" is all about propping up the government so it can continue to wage war rather than economic development.
https://www.youtube.com/watch?v=MptYEsV159sSHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Michael Hudson report on The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.
A ceasefire in Eastern Ukraine has been agreed to, following a marathon all-night, 17-hour negotiation between Russian President Vladimir Putin and Ukraine President Petro Poroshenko. They were flanked by other European leaders keeping vigil. Russia and Ukraine may have many differences, but what they have in common is a looming economic crisis, with oil prices taking a dive on the Russian side and a very expensive war they were not counting on on the Ukrainian side.
Joining us now to talk about all of this is Michael Hudson. He is a distinguished research professor of economics at the University of Missouri-Kansas City. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global Economy.
Michael, thank you, as always, for joining us.
MICHAEL HUDSON, ECONOMICS PROF., UNIV. OF MISSOURI, KANSAS CITY: Good to be here.
PERIES: So, Michael, in a recent interview published in The National Interest magazine, you said that most media covers Russia as if it is the greatest threat to Ukraine. History suggests the IMF may be far moredangerous. What did you mean by that?
HUDSON: First of all, the terms on which the IMF make loans require more austerity and a withdrawal of all the public subsidies. The Ukrainian population already is economically devastated. The conditions that the IMF's program is laying down for making loans to Ukraine is that it must repay the debts. But it doesn't have the ability to pay. So there's only one way to do it, and that's the way that the IMF has told Greece and other countries to do: It has to begin selling off whatever the nation has left of its public domain; or, to have your leading oligarchs take on partnerships with American or European investors, so that they can buy out into the monopolies in the Ukraine and indulge in rent-extraction.
This is the IMF's one-two punch. Punch number one is: here's the loan -- to pay your bondholders, so that you now owe us, the IMF, to whom you can't write down debts. The terms of this loan is to believe our Guiding Fiction: that you can pay foreign debt by running a domestic budgetary surplus, by cutting back public spending and causing an even deeper depression.
This idea that foreign debts can be paid by squeezing out domestic tax revenues was controverted by Keynes in the 1920s in his discussion of German reparations. (I devote a chapter to reviewing the controversy in my Trade, Development and Foreign Debt.) There is no excuse for making this error -- except that the error is deliberate, and is intended to lead to failure, so that the IMF can then say that to everyone's surprise and nobody's blame, their "stabilization program" destabilized rather than stabilized the economy.
The penalty for following this junk economics must be paid by the victim, not by the victimizer. This is part of the IMF's "blame the victim" strategy.
The IMF then throws its Number Two punch. It says, "Oh, you can't pay us? I'm sorry that our projections were so wrong. But you've got to find some way to pay -- by forfeiting whatever assets your economy may still have in domestic hands.
The IMF has been wrong on Ukraine year after year, almost as much as it's been wrong on Ireland and on Greece. Its prescriptions are the same as those that devastated Third World economies from the 1970s onward.
So now the problem becomes one of just what Ukraine is going to have to sell off to pay the foreign debts -- run up increasingly for waging the war that's devastated its economy.
One asset that foreign investors want is Ukrainian farmland. Monsanto has been buying into Ukraine -- or rather, leasing its land, because Ukraine has a law against alienating its farmland and agricultural land to foreigners. And a matter of fact, its law is very much the same as what the Financial Times reports Australia is wanting to do to block Chinese and American purchase of farmland.[1]
The IMF also insists that debtor countries dismantle public regulations againstforeign investment, as well as consumer protection and environmental protection regulations. This means that what is in store for Ukraine is a neoliberal policy that's guaranteed to actually make the situation even worse.
In that sense, finance is war. Finance is the new kind of warfare, using finance and forced sell-offs in a new kind of battlefield. This will not help Ukraine. It promises to lead to yet another crisis down the road very, very quickly.
PERIES: Michael, let's unpack the debt in this crisis. The war has led Ukraine into a deeper crisis. Talk about the devastation that has caused and what they have to manage in addition to what the IMF is trying to impose on it.
HUDSON: When Kiev went to war against Eastern Ukraine, it fought primarily the coal mining region and theexport region. Thirty-eight percent of Ukraine's exports are to Russia. Yet much of this export capacity has been bombed out of existence. Also, the electric companies that fuel the electricity to the coal mines been bombed out. So Ukraine can't even supply itself with coal.
What is so striking about all this is that just a few weeks ago, on January 28, Christine Lagarde, the head of the IMF, said that the IMF does not make loans to countries that are engaged in war. That would befunding one side or another. Yet Ukraine is involved in a civil war. The great question is thus when the IMF will even begin to release the loan it has been discussing.
Also, the IMF articles of agreement say that it cannot make loans to an insolvent country. So how on earth can it be part of a loan bailout for the Ukraine if, number one, it's at war (which has to stop totally), and number two, it's insolvent?
The only solution is that Ukraine will scale back its debts to private investors. And that means a lot of contrarian hedge funds investors. The Financial Times today has an article showing that one American investor alone, Michael Hasenstab, has $7 billion of Ukraine debts and wants to speculate in it, along with Templeton Global Bond Fund.[2] How is Ukraine going to treat the speculators? And then, finally, how is the IMF going to treat the fact that Russia's sovereign fund lent 3 billion euros to the Ukraine on harsh terms through the London agreement terms that can't be written down? Is the IMF going to insist that Russia take the same haircut that it's imposing on the hedge funds? All of this is going to be the kind of conflict that's going to take much more effort than even the solutions that we've seen over the last few days have taken on the military battlefront.
PERIES: And so how could Ukraine imagine getting out of this crisis?
HUDSON: It probably imagines a dream world in which it'll get out of the crisis by the West giving it $50 billion and saying, here's all the money you need, spend it as you want. That's the extent of its imagination. It is fantasy, of course. It's living in a dream world -- except that a few weeks ago, George Soros came out in The New York Review of Books and urged Congress and "the West" to give Ukraine $50 billion and look at it as a down payment on military or with Russia. Well, immediately Kiev said, yes, we will only spend them on defensive arms. We will defend Ukraine all the way up toSiberia as we wipe out the Russians.
Bit today a Financial Times editorial said, yes, give Ukraine the $50 billion that George Soros asked for.[3] We've got to enable it to have enough money to fight America's New Cold War against Russia. But the continental Europeans are saying, "Wait a minute. At the end of this, there'll be no more Ukrainians to fight. The war might even spread into Poland and into elsewhere, because if the money that's given to Ukraine is really for what the Obama administration and Hillary and Soros are all pressing for -- to go to war with Russia -- then Russia's going to say, 'Okay, if we're being attacked by foreign troops, we're going to have to not only bomb the troops, but the airports they are coming in through, and the railway stations they're coming in through. We're going to extend our own defense towards Europe.'"
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice.
PERIES: Michael, complex and interesting times in Ukraine, as well as at the IMF. Thank you so much for joining us.
HUDSON: It's good to be here, Sharmini.
PERIES: And thank you for joining us on The Real News Network.
Yanis Varoufakis: Greece is Finished Is a Great Grey Exodus from America Starting? The Rise of Bullshit Jobs Matt Taibbi: Obama's Big Sellout Yanis Varoufakis: What Europeans Should Know About the Current Situation in Greece The US' Suicidal Strategy On Ukraine America's "Banking" System (In 1 Cartoon) Ominous Tweet From Matt Drudge About Barack Obama Ilargi: Ukraine -- Trapped in Narrative cripes, February 15, 2015 at 4:20 am
participant-observer-observed, February 15, 2015 at 3:39 pmWell, Michael, don't sugarcoat it for us.
Of course, it's hard to argue with his perspective: the war state impoverishes everyone except the war profiteers, which now includes the western financial system in full flower.
Maybe my 401K has an emerging market fund so I can profit from Slavic misery?
That's about the extent of our democratic participation in this fiasco.
Disgusting.James Levy, February 15, 2015 at 6:41 amHudson's voice needs echoing, since the reality here is much worse than 401k investments gone evil
As FL Rep A Grayson pointed out in January (Fake Trade TPP), with 14 yeas of half-trillion trade deficits, USA has nothing left to export than death and destruction, and since no one wants to buy it, it can only be peddled through force or swindling.
That's one reason Hudson did not fail to mention Monsanto, which has found no one is interested in their sterile seeds. This is like dumping nuclear wastes in developing countries.
Procopius., February 15, 2015 at 7:39 amEvery army needs motivated and competent trigger-pullers. What this and other policies of Washington, Berlin, and Kiev are doing is making almost all potential Ukrainian trigger-pullers (except for the fanatical right-wing nationalist kind) disgruntled, demoralized, or already in flight from service. The more desperate measures the West and Kiev take to "win" this war the worse things get and the less likely they are to come out with even a respectable draw. The Donbas rebels and their Russian backers would be wise to just apply moderate pressure over time and let the Kiev government implode.
Pearl, February 15, 2015 at 8:39 amThis is why I've thought there was a Great Divide within the IMF.
After reading Prof. Hudson's comments here I'm thinking there isn't really a divide - the so-called research part of the IMF is actually a public relations exercise.
They come out and say, "Oh, our new research shows that we actually greatly underestimated the multiplier effect of austerity. So sorry, we won't make that mistake again."
Then the knuckledraggers* who actually implement IMF policy go out and demand exactly the same terms the next time. From what I've read the IMF research people are actually pretty good, and lots of stenographers and right-leaning economists praise them to the skies as creating good policy, but they don't actually affect policy at all.
*knuckledraggers - originally the operations division in the CIA, the guys who were actually out there conducting coups and killing people, so called in contrast to the analysts. I don't know what the operations people called the analysts, but I'll bet it's not fit for a family oriented publication.
sleepy, February 15, 2015 at 9:01 amI hate that I'm always the one here at N.C. who has to have things "dumbed down" for me.
But I have learned that when Michael Hudson speaks -- I want to be in the front row and listening intently to what he has to say -- because, where Professor Hudson leads, I ultimately always seem to follow. So, may I stop and regurgitate what I think Professor Hudson is saying -- and then let you smart people correct me and, hopefully (and helpfully) enable me to make sure that I have, at least, a rudimentary grasp on that which he has said? (And to correct me and to further elaborate, if anyone has the time or patience for it.)
Okay. So, if my pea-sized brain were asked to explain (in housewife-ese) what Professor Hudson is saying, would I be on the right track in asking the following questions and making the following assumptions?
1) Is Professor Hudson suggesting that Putin is suggesting one of two options -- that Russia, Germany, and Europe will either be allowed to play nice together (in the sandbox that we call the European Continent), making up a happy, well-balanced, partnership/playgroup, OR…… the U.S. will help fund the defense of Ukraine so that Ukraine will go to war defending itself against Russia (which Ukraine would, obviously and ultimately lose without U.S. boots on the ground)?
2) And is Professor Hudson suggesting that Putin is saying that if the latter scenario is chosen, and that once a military operation involving the U.S. is underway, Russia would just go ahead and undertake a more hostility-induced "insertion of itself" into said German/European sandbox?
3) Although not addressed directly in Professor's Hudson's commentary above, does Professor Hudson think that this is Putin's Russia trying to re-assert Russia's domination over the European continent or is this just Russia wanting to be taken as a serious and trustworthy playmate in the EU sandbox? (Is Russia having a little temper tantrum that is worth giving in to, or is this Russia being, ya know -- just a re-branded USSR?)
*******
Because the latter seems like a pretty significant threat, doesn't it?
And if (we think) that Putin's end-goal is "total bully-driven European sandbox domination," that sort of seems like not a very good situation for Europe or for the U.S. (I would think?)
And, furthermore, if "total bully-driven European sandbox domination," is what Putin has in mind, I think I could see my way clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more "visible" to Putin at this point in time. (I mean -- we gotta park our fleet of battleships somewhere, anyway.)
I don't want a war with Putin's Russia, but I think that I so much don't want a war that I would tend to want for Putin to get the message that he'll be given very little latitude in his behavior -- until we're absolutely certain that his intention is only to be allowed to make new friends and to flourish in the EU sandbox; not total sandbox domination.
(And, btw, he can start by leaving his shirt on and leaving his tiger at home. I mean -- we need to see that he is capable of confining himself to a few very basic social norms, right?) :-)
Nevertheless, I'm still not sure that I have understood the true underlying issues as Professor Hudson has tried to convey them -- and I have always looked to Professor Hudson as always being an authoritative commentator on "underlying issues."
So -- I would greatly appreciate any feedback, insight or clarification that anyone has to offer me. Thanks.
Pearl, February 15, 2015 at 12:22 pmReally? No need to dress up your Putin hate in rhetorical cuteness.
Left in Wisconsin, February 15, 2015 at 1:29 pm@ Sleepy.
May I call you "Grumpy," instead? :-)
I'm sorry if I prompted you to distill down my words into some organic form of "Putin-hatred."
On the other hand, thank you for referring to my rhetoric as "cute." (I must admit -- I'm quite flattered. Ya know -- I'm at that awkward age of 51 -- anything about me that may once have been considered "cute" is now sagging or drooping or expanding or wrinkling. And any promise of being "cute," as in the Justice Ruth Bader Ginsburg sense of the word, the "lovable Bubbe" sort of "cute" -- is still quite a few years off.) So I sorta feel like Rudolph the Red-Nosed Reindeer in the 1960s Rankin Bass classic of the same name when Clarice refers to Rudolf as "cute." Indeed -- all day long there's gonna be an extra little bounce in my step as I think to myself, "Sleepy" at Naked Capitalism thinks my rhetoric is CUTE!!!
I did not mean for my questions and/or comments to come off as sounding as though I hated Mr. Putin. Indeed, I have never met the man, and I do not know if I would like him or not. But my bar for hatred is a very high bar -- like Adolf Hitler high. So I doubt very much that I would hate Mr. Putin.
Perhaps, if I were a better writer, my view of Mr. Putin would have struck you as nothing more than a healthy respect for a well-armed and powerful leader of a large country that is largely run by a handful of powerful business oligarchs in whom I have no trust.
I made reference to the shirtless thing and the tiger thing (which, in retrospect, I probably shouldn't have done) only because my brain often frames world issues in terms of how I, a former preschool teacher, would deal with a playground of preschoolers.
Putin's behavior in seemingly insignificant forums (i.e. shirtless, tiger-hugging photo-ops) is something that I refuse to disregard as "quirkiness." Indeed, I personally regard such behavior as a "red flag" that this is a person who operates outside of social norms, and is, therefore less predictable, and is therefore, more worthy of keeping a closer eye on.
That's all.
Furthermore, as a preschool teacher -- I would be keeping my eyes on my whole class. Putin? I would probably recommend a one-on-one aide for his initial mainstreaming. (It would benefit him in that it might help him to not fail, and it would benefit the other children who might be harmed by any of the many ways in which he might fail.)
And, if Putin had been one of my preschoolers -- I most-certainly wouldn't have hated him; I've never hated a preschooler. I've never even disliked a preschooler.
The IMF? I view them as administrators of the preschool who have never had any hands-on preschool teaching experience, and therefore, usually walk a precarious tightrope of being either useless or harmful. (Some of whom are UNintentionally clueless, some of whom are idiots, and some of whom are decent -- yet exist in a bubble without realizing it. Which makes most of them ill-suited for their jobs.)
I don't exactly parade around N.C. as some sort of policy wonk. I am authentically what I claim to be. I'm literally just a housewife. And it just so happens that I used to teach preschool. And I am the first to admit that my "C.V." does not measure up to the C.V. of practically any of the other folks who occasionally comment here.
I cannot convey to you the extent to which I wish that I could bring to this forum the background and experience of one who was expert in international diplomacy or geo-politics or even basic economics and finance. But I realized a long time ago that Yves allows me to come to this forum with the only experience and background that I have -- which is, admittedly, no more than and no less than that of an average housewife. (And, truth be told -- I'm really not even any good at being a housewife.)
So, I'm grateful to have a forum such as Naked Capitalism to read and to sometimes even feel welcome enough to chime in, despite my lowly status. Indeed, I always look forward to having my questions answered and I look forward to gleaning insightful feedback to my occasional comments.
But now I know I can come here for compliments on my rhetorical style, too!
Now. How about you go pour yourself a cup of coffee, "Sleepy," and we'll call you "Happy," instead of "Sleepy" or "Grumpy?"
(Did I mention that I used to teach preschool?)
Ned Ludd, February 15, 2015 at 2:59 pmComplements on your sense of humor and good-natured-ness also.
craazyboy, February 15, 2015 at 3:10 pmExamples of Pearl's sense of humor and good-natured-ness:
- "Is Russia having a little temper tantrum that is worth giving in to, or is this Russia being, ya know -- just a re-branded USSR?… Because the latter seems like a pretty significant threat, doesn't it?"
- "And, furthermore, if 'total bully-driven European sandbox domination,' is what Putin has in mind, I think I could see my way clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more 'visible' to Putin at this point in time. (I mean -- we gotta park our fleet of battleships somewhere, anyway.)"
A "fleet of battleships" is an instrument of war and death. Rhetorical cuteness should not mask the implied threat of violence, when moving "a few of our militaristic capabilities a bit closer-in and a bit more 'visible' to Putin".
From Raúl Ilargi Meijer:
[O]ur media told us Putin is the bogeyman. And 'we' never asked for any proof. […]
But here we are: no proof and layer upon layer of sanctions. And nary a voice is raised in the west. If one is, it's to denounce the Russians as bloodthirsty barbarians. Even though there is no proof they did anything other than protecting what they see as their own people. Something we all would do too, no questions asked.
Ukraine defines 2014 as the year western propaganda came into its own. Not just fictional stories about an economic recovery anymore, no, we had our politico-media establishment ram an entire new cold war down our throats. And we swallowed it whole.
Pearl, February 15, 2015 at 6:16 pmI guess it's not surprising the Obots will be out in support of the New Cold War -- if they even plan on keeping it only a Cold War.
No Drama Obama???? Puleeze.
Besides -- I like seeing Putin having to pander to Russian voters. (all the macho leader stuff). Makes him seem like less of a "Mad Dictator".
OIFVet, February 15, 2015 at 6:50 pm@Ned Ludd
Perhaps I wasn't clear, or perhaps my original comment was not put in the context of Michael Hudson's interview.
Or perhaps most everyone on this thread had a really crappy Valentine's Day yesterday and they're taking out their frustrations on me today. I don't know.
But I know this.
I am the daughter of a Nazi Holocaust Camp Liberator. Here is a video clip of the day my father, an 18 year old Private from Sioux City Iowa, along with allied forces, liberated the Nazi camp at Ludwigslust.
http://www.ushmm.org/online/film/display/detail.php?file_num=1397
I was born into, raised in, and am a product of a family that is as about as "war-avoidant" as one could imagine. Nevertheless, I also understand and appreciate that there are times when it's nice to have a military force so that you can do stuff like helping to stop the extermination of entire race of humans.
I also appreciate that Russians were our allies in that effort, and I grieve for the (literally) millions of Russians who died as a result of that war.
So please do not misunderstand or mis-characterize any of my statements as being that of some sort of war monger.
Here is the part of Michael Hudson's interview to which I was referring and then asking for clarification about:
"[Bit] today a Financial Times editorial said, yes, give Ukraine the $50 billion that George Soros asked for.[3] We've got to enable it to have enough money to fight America's New Cold War against Russia. But the continental Europeans are saying, "Wait a minute. At the end of this, there'll be no more Ukrainians to fight. The war might even spread into Poland and into elsewhere, because if the money that's given to Ukraine is really for what the Obama administration and Hillary and Soros are all pressing for -- to go to war with Russia -- then Russia's going to say, 'Okay, if we're being attacked by foreign troops, we're going to have to not only bomb the troops, but the airports they are coming in through, and the railway stations they're coming in through. We're going to extend our own defense towards Europe.'"
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice."
So, my question/observation was just (if the question is should we arm Ukraine against the Russians) is that, no we shouldn't -- because there would (in all likelihood) be a greater loss of life if we did that. And, in alternate, I was asking -- couldn't we, instead, just park a few of our ships over there and hope that everyone will play nice (as nice as possible under the circumstances.)
I'm not saying that the parking of a few battleships over there is a good idea -- In fact, I'll gladly concede that it's quite possibly an entirely sucky idea. I was simply trying to come up with an alternative option to arming Ukraine with $50 billion of weaponry.
We have a bloated military industrial complex; I hate that we do, and I wish that it weren't the case.
I was just wondering if -- being that we already have this bloated military industrial complex -- couldn't we at least try to use it for something more innocuous -- like just some plumage-showing as opposed to arming a country that would lead ultimately to lot of death and destruction -- when, in the alternate, maybe just plumage-showing would do the trick.
So I know this thread has out-lived its time -- but I just couldn't leave it inferred and dangling out there an insinuation that I am some sort of war-monger.
Pearl, February 15, 2015 at 7:07 pm"Plumage-showing" should be reserved for mating rituals. In matters of war and peace, it leads to escalations.
Perhaps you missed this past year's attempts by the US to goad Russia into a war, and the Euro poodles willingness to submit to the US "leadership" even though that's ultimately not in their own best interests. That's what Putin would have been referring to when it came to the Euro's choices. This past week also saw the Euro's realization that the US is not interested in de-escalaton, and that any further escalation is only going to hurt Europe more. That's why Merkel and Hollande went to Moscow. They know that cornering Russia can only lead to Russia lashing out, Russia will never back out as it is not their way, and besides they have no place left to back out to, what with NATO's eastward march. . So please explain, if you can, how will "plumage showing" lead to de-escalation and enhanced Euro poodle security?
juliania, February 15, 2015 at 1:50 pm@Left in Wisconsin.
I like you.
You're my favorite.
:-)
Pearl, February 15, 2015 at 6:40 pmI believe sleepy's comment was justified. No need to pile on. You gave two alternative negative assessments of Putin's motives.
How about this one? A ceasefire in Ukraine, commencing now on an important Russian feast day and the 70th anniversary of the dreadful allied firebombing of Dresden, has components to it that are hugely humanitarian and devoutly to be wished for. You seem to be ignoring that fact in your rush to judgment.
I will leave it at that.
OIFVet, February 15, 2015 at 2:29 pm@Juliania
Who gave two alternative negative assessments of Putin's motives?
I did?
(I can't tell for sure if your comment was directed at me or not.)
Just in case it was aimed at me, please let me draw attention to the fact that I was quoting Michael Hudson when he said:
Apparently there are reports that Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in the world. Or, Choice two: You can go to war with us and you can be wiped out. Take your choice.
So those were NOT my assessments, and I don't even know that those were Michael Hudson's assessments. In fact I was trying to gain clarity on that point.
And of course I want a ceasefire. I'm always in the "let's stop shooting at each other" camp.
Hope that clears it up.
Geesh. Rough crowd today.
(You have a pretty name, btw. I was gonna name my son Juliana -- had he not been, you know -- a son. I like Juliania even more.) :-)
craazyboy, February 15, 2015 at 9:08 amWhose "mainstream" are you referring to? American? If so, that's rather blatant exceptionalism and "indispensable nation"-mongering. Which is the US political way of going shirtless on a horse while pledging to spread "freedum and democracy" everywhere there's oil and/or other strategic interests.
NotTimothyGeithner, February 15, 2015 at 9:13 amThe Pentagon has already revealed the Weird and Shocking Truth -- Putin is one of the Lizard People!
He has plans to subvert the IMF using alien mind control techniques and have the IMF loan Mexico 50 billion dollars so that Mexico may purchase arms (the defensive kind -- like the US DEFENSE DEPT has!) and defend itself from US and NATO Adventurism. But Inquiring minds ask, "Will It Stop There?! Will Mexico roll across our borders?". Of course they will. Central America basically sucks, so no reason to go that direction.
Clearly, the West must act preemptively towards this real threat and defend whatever allies we install -- anywhere in our free world!
Santi, February 15, 2015 at 9:48 amFrom Putin's perspective, NATO has been rapidly growing, the U.S. is a drunk child on the world stage, Russian peace keepers have already been attacked by an adviser to Poroshenko*, has faced economic sanctions (an act of war by most standards), sees old time Bandarists running Kiev, is compared in public to ISIS and Ebola by the U.S. President, was accused of downing a civilian airliner**, and even has American officials publishing fake evidence of Russian troops in the Ukraine.
War has been declared, and if the 500 million people in the EU can't handle a population of 150 million recovering from the Yeltsin years and predatory Western finance (Putin kicked them out; his real sin), it would probably be for the best if Russian troops returned to Berlin.
*Georgia hasn't come up in the propaganda for a reason.
**Obama and crew haven't brought it up, and the official dutch report mentions a plane crash.Also, Putin likely means Western Europe can stop being a U.S. vassal or be frozen out of the Shangai Cooperative which includes Russia, China, India, Iran, Pakistan, and non-EU members of the USSR. The U.S. isn't going to fuel Europe any time soon, and most of Europe's governments are weak with major employment problems.
As for Crimea, the old Ukraine ceased to exist after the coup, and every sane person in the world recognized that Russian defense depends on Crimea. They will never risk losing it.
OIFVet, February 15, 2015 at 2:16 pmThe next blog entry (Itargi's) is about being trapped in narrative. After reading it you might feel less so…
Regarding narratives, I am very much remembered of Cuban missile crisis and subsequent naval blockade by the USA.
I guess US people should not feel strange if Putin warns aggressively when they get too close to Russia. Negotiations between the IMF and Russia should ensue, I think Poroshenko, Merkel and Hollande are not really useful in the talks. (Tongue in cheek)
participant-observer-observed, February 15, 2015 at 3:56 pm" I think I could see my way clear to allowing a few of our militaristic capabilities a bit closer-in and a bit more "visible" to Putin at this point in time." So you would? I just want to ask, who will pick up the tab and the responsibility for the consequences of your cock-swinging contest with Putin? These policies do not do anything to undermine Putin but they do a lot to destabilize US colonies, or as we colloquially refer to them, "allies". I wrote about the latest such case a few days ago.
Chaos only benefits American imperial elites, thus chaos is our main export these days. So why in the world would you want to support such non-sense? I doubt that's where Michael Hudson will ever take you but you can bet your bottom dollar that's where the warmongers in DC want to take us.
Doug Terpstra, February 15, 2015 at 3:56 pmDid you watch the video or just read the transcript? Because my viewing didn't lead me to hear Michael's thesis to be about Putin and Russia at all.
Rather, Hudson is pointing out that once past military interventions, rape, pillage etc. of the brutish, arm-to-arm combat sort, we will still have the spectacle to observe of the economic rape & pillage to contend with. I.e., that the "solutions" on offer (Oligarchic tunnel vision as usual), from all directions, are just more of the same problem-creating dynamic.
He is essentially elaborating on German Chancellor's point of there being no military solution, and following it to the natural conclusion, which consequence remaining is absurdity showing economic solutions on offer are just a slower and more painful death and suffering than the brutish variety. (It is a logical argument form going back millennia "reduction to the absurd")
You point out an important issue: Hudson's message is quite subtle, and therefore may be hard for many people to grasp (let alone try like yourself), which is actually quite sad, because somewhere in Ukraine right now some babies are being born to parents who want their kid to live a life not dictated by death and destruction, of the slower or coarser varieties!
Vatch. February 15, 2015 at 4:39 pmFalse humility and self-deprecation hardly mask your russophobia. And to your purported honest inquiry with a clever twist of Hudson's arguments: yep, you've got it exactly bass-ackwards (but points scored for creativity in regurgitating all the standard agit-prop behind a mask of feigned curiosity).
One more time, the Ukrainian coup was US sponsored; the evidence, including recordings, is beyond dispute; all of the evidence of Russian aggression (including the now disappeared flight MH17) that you blithely presume has been demonstrably, repeatedly discredited; there is no evidence of Russian aggression, not in Crimea (peacefully re-admitted) nor anywhere else in Europe. And Hudson's representation of Putin's choice was not an ultimatum for one of two forms of domination as you disingenuisly paraphrased it, but one of mutually beneficial peace or war at only at their unilateral insistence.
If your inqiry is genuinely honest, start your preschool education at another of today's posts by Ilargi, and if you want to get to the beginning, visit his site.
OIFVet. February 15, 2015 at 4:59 pmOne more time, the Ukrainian uprising was not U.S. sponsored. The Ukrainian people were sick and tired of a succession of corrupt governments, and they wanted a change. Coups d'état are not characterized by massive crowds numbering in tens or hundreds of thousands. Coups d'état are carried out by small groups, often with the assistance of a country's military. What the U.S. sponsored were some of (or many of) the members of the post-uprising temporary government. This is what was recorded by eavesdropping.
The seizure of Crimea was mostly peaceful, but it was a military event, nonetheless. In February, 2014, Russian soldiers stationed in Crimean bases illegally left those bases and seized Ukrainian government installations. Of course, the Russians have plausible deniability, because the Russian soldiers were not wearing any insignia that might identify them as Russians; hence their nickname "the Little Green Men". The referendum in March, 2014, was a farce worthy of North Korea: more than 96% in favor of unification with Russia. An honest election would probably still have approved the referendum, but 96%? Give me a break!
Is Russia still paying for the use of the naval base in Crimea? They're obligated to do so under an international treaty with Ukraine, but of course Russia unilaterally abrogated that treaty:
The Agreement between Ukraine and Russia on the Black Sea Fleet in Ukraine, widely referred to as the Kharkiv Pact (Ukrainian: Харківський пакт)[1][2] or Kharkiv Accords (Russian: Харьковские соглашения),[3][4][5] was a treaty between Ukraine and Russia whereby the Russian lease on naval facilities in Crimea was extended beyond 2017 until 2042, with an additional five year renewal option in exchange for a multiyear discounted contract to provide Ukraine with Russian natural gas.[6] The agreement, signed on 21 April 2010 in Kharkiv, Ukraine, by Ukrainian President Viktor Yanukovych and Russian President Dimitry Medvedev and ratified by the parliaments of the two countries on 27 April 2010, aroused much controversy in Ukraine. The treaty was a continuation of a treaty signed in 1997 between the two nations. Shortly after the (disputed) March 2014 accession of Crimea to the Russian Federation,[7] Russia unilateral [sic] terminated the treaty on 31 March 2014.
Vatch. February 15, 2015 at 5:08 pm"Coups d'état are not characterized by massive crowds numbering in tens or hundreds of thousands." They were used as a cover. It's called "legitimizing the junta", giving it the appearance of "popular" support. Yes, the people were sick and tired of corruption. What they got was another set of corrupt flunkies, this time loyal to the US, who hijacked the Maidan. Your recurring desperate attempts to legitimize the junta by invoking the Maidan only delegitimizes the latter.
"What the U.S. sponsored were some of (or many of) the members of the post-uprising temporary government." LOL, funny how the US sponsorees and US citizens ended up taking the reigns, and not temporarily either. They must be exceedingly honest and democratic lovers of freedum.
"Is Russia still paying for the use of the naval base in Crimea?" Inanity, thy name is Vatch. I will play though, so tell me how much is the US paying Cuba for Guantanamo?
Crowds in coups d'état might be used as cover while the overthrow is occurring, or after it has already happened. They do not occur months before the overthrow, which is exactly what happened in Ukraine starting in November, 2013.
I have no argument with you about the people who have joined the government since the uprising. Obviously the U.S. retains a huge influence.
I think the U.S. does pay a trivial amount to Cuba for the Guantanamo naval Base under the terms of the treaty. This amount should be renegotiated. Even better, the U.S. should shut it down.
OIFVet. February 15, 2015 at 5:21 pm
"They do not occur months before the overthrow…" I know your reading comprehension couldn't possibly be this bad, even if you are a Chicago public school product. The US saw a great opportunity to throw a little coup d'etat and claim that it was the will of the crowds. Hence, my use of the term 'cover'. It really is not that hard to comprehend for anyone with an ounce of objectivity. And since you brought up the Nuland recording, is she some clairvoyant latter day Nostradamus that she foresaw that Yats will be the PM several weeks prior to the coup?
"I think the U.S. does pay a trivial amount to Cuba for the Guantanamo naval Base under the terms of the treaty." No, it doesn't. Cuba, unlike Ukraine, has a modicum of self-respect and refuses to accept the generous lease payment of $4,000. Also, since when is Russia supposed to pay a lease for anything located on its sovereign territory?
Ned Ludd. February 15, 2015 at 6:10 pm
They do not occur months before the overthrow, which is exactly what happened in Ukraine starting in November, 2013.
Chile, 1973.
Ned Ludd. February 15, 2015 at 7:28 pm
The words change, but the music stays the same.
Earlier this year, we broke the story about USAID co-investing with Omidyar Network in Ukraine NGOs that organized and led the Maidan revolution in Kiev, resulting in the overthrow of President Viktor Yanukovych. […]
The truth is, USAID's role in a covert ops and subversion should be common knowledge-it's not like the record is that hard to find. Either USAID has developed those Men In Black memory-zappers, or else-maybe we don't want to remember. […]
After populist left-wing candidate Jean-Bertrand Aristide won the first democratic elections in Haiti in 1990, USAID and the National Endowment for Democracy began pouring funds into opposition groups opposed to Aristide. Noam Chomsky writes:
"Aid for 'democracy promotion' sharply increased, directed to antigovernment, probusiness groups, mainly through the US Agency for International Development (USAID), also the National Endowment for Democracy and AIFLD (the AFL-CIO affiliate with a notorious antilabor record throughout the Third World). One of the closest observers of Haiti, Amy Wilentz, wrote that USAID's huge 'Democracy Enhancement' project was 'specifically designed to fund those sectors of the Haitian political spectrum where opposition to the Aristide government could be encouraged.'"
A few months later, in 1991, Aristide was overthrown in a coup.
Doug Terpstra. February 15, 2015 at 8:07 pm
Steve H.. February 15, 2015 at 9:17 amNot one but TWO Gallup polls tend to support the legitimacy of the election results in Crimea and there is little evidence of fraud or coercion… at the level suggested by your cogent "gimme a break" innuendo that Crimea is equivalent to North Korea.. This is further corroborated by the manifest peacefulness of the process itself and the year since - little or no unnrest or discontent. This was the overwhelming will of a people in the aftermath of an illegitimate coup, who had for generations prior always been Russian.
And yes, one more time, what don't you get about "f**k the EU" and "our man Yats", and. "five billion dollars" and the neo-Nazis militantscCain and Pyatt pal around with.
Steve H.. February 15, 2015 at 9:19 amRussia has far too much investment in corrupt European politicians to want a war with Europe (see Gerhard Schröder). The taking of Crimea at U.S. expense (see Nuland) was a strategic opportunity that would have been foolish to disregard. Russia is placing itself in the middleman position for the transport of commodities, the link between Asia and Europe, and has made the point in the past (during the Georgia uprising) that the infrastructure for European needs is tremendously vulnerable.
Russia without Putin would likely still pursue these goals. The steppes are like the huge big brother at their back, such that there is no existential threat to the existence of Russia. He is making the point that Europe has far more to lose, if necessary Russia can cut them off and turn to Asia.
Please review this article for insight into the internal processes of Russian governance:
http://20committee.com/2014/12/27/putins-orthodox-jihad/(Reply meant for Pearl.)
Pearl. February 15, 2015 at 12:42 pm
Thank you so very much, Steve H.!
I am only a few paragraphs into your link, but it is providing the background and texture for which I wanted and needed to overlay the information in the Michael Hudson interview.
(I didn't want you to have wait an hour or two for me to thank you -- so I'm going to get back to reading that which you sent. Thanks again, so much.)
Pearl. February 15, 2015 at 1:57 pm
Wow. That website to which you linked is amazingly thought-provoking. (Dare I say….addictive!) :-0 I'm hooked. The comments are really interesting, as well.
It's fascinating to me that we have these two great powers, Russia and the United States; one currently being led by a President who has been been nicknamed "No Drama Obama," and the other country being led by a seemingly 180-degree opposite personality -- an "all drama," or if you will, a "Tooten' Putin."
Indeed, this in itself would tend to set the stage for some very interesting and very complex geo-politics.
Have you read much about the (subset?) of Nash Equilibrium/Game Theory that is referred to as "Drama Theory?" I wonder how "Drama Theory" would fit into this conflict. It's older work, but interesting:
http://www.gametheory.net/News/Items/092.html ("Don't Get Even, Get Mad: When it looks like you just can't win, what's the most rational thing to do? Try going completely crazy," suggests Robert Matthews.)
Anyway, thanks again for the link.
OIFVet. February 15, 2015 at 2:06 pm
"Russia has far too much investment in corrupt European politicians…" Not nearly as much as the US. See all "liberul" Euro politicians both in the East and in the West, eagerly selling their countries' interests for a few silver dollars.
lolcar. February 15, 2015 at 9:18 am
NotTimothyGeithner. February 15, 2015 at 10:07 amRussia's military budget is exceeded by France and the UK alone, let alone the EU as a whole, let alone the entire NATO alliance. Not sure how you get to Russia being in any position to "bully" Europe. Parking a fleet of battleships in Russia's backyard or, more useful in this day and age, a fleet of ballistic missiles on Russia's border would of course in no way be "bullying" because we in the West are such special snowflakes who only engage in violence reluctantly and for the highest of moral purposes.
How much goes to the military and how much goes to hookers and blow is a huge deal. The U.S. has captive markets and can force F-35 contracts. The Russian planes need to work to be sold, and they don't have oceans protecting them.
NATO trained and equipped soldiers haven't been fairing too well without overwhelming air power. See Iraq and Georgia. In the case of Georgia, the ex-President currently hiding out from trial in the now NATO ally here in the U.S. started the hostilities.
lolcar. February 15, 2015 at 11:17 am
Actually meant as a reply to Pearl's interpretation of
"Putin told Europe, look, you have two choices before you. Choice one: Europe, Germany and Russia can be a very prosperous area. With Russia's raw materials and European technology, we can be one of the most prosperous areas in the world. Or, Choice two: You can go to war with us and you can be wiped out"
as some kind of Russian threat of complete domination of Europe. But of course, you're right -- the actual fighting power per dollar spent may well be a lot lower in the NATO alliance.
bob. February 15, 2015 at 2:23 pm
"Georgia, the ex-President currently hiding out from trial in the now NATO ally here in the U.S. started the hostilities."
The now williamsburg, brooklyn hipster?
http://news.yahoo.com/georgias-saakashvili-appointed-aide-ukraine-leader-095756606.html
Leading a line of tanks with his fixie.
bob. February 15, 2015 at 4:58 pm
He derives his power from his lime green shoes:
Pearl. February 15, 2015 at 2:51 pm
@lolcar regarding your reply to my comment:
"Not sure how you get to Russia being in any position to "bully" Europe."
I'm not sure that they are -- I guess I just assumed it was possible because of Russia's nuclear capability and because of Russia's sheer size? I dunno.
But I really was just trying to have clarified if that is how the two choices given by Putin (per Michael Hudson) were intended to be taken. I really wasn't sure -- and that's why I was asking.
Btw, and thank you for bringing to my attention, the following information -- which I did not know:
"Russia's military budget is exceeded by France and the UK alone, let alone the EU as a whole, let alone the entire NATO alliance."
I really didn't realize that.
And, btw, I agree that the U.S. is not a special snowflake that does not ever provoke war. Ironically (predictably) the Bush/Cheney/Rumsfeld misguided invasion of Iraq just made the United States more "hated," less respected, and less trusted. So in a way, it just seems like we have to be more "on guard" now because we're more hated/disrespected/distrusted (understandably) than we were before we (ever-so-thoughtfully) invaded a country that had nothing to do with 9/11 and helped to further destabilize an entire region of the world. It was the gift that keeps on giving, no?
Anyway, I appreciate your insight. It's difficult to keep up with geo-politics, and I was actually caught fairly off guard as to the Ukraine situation when it all exploded, and I'm trying to catch up in getting a grasp on it.
(Although, now I'm thinking of giving up on ever being able to grasp it, as my brain seems ready to explode just in scratching the surface here!) :-)
Pension60. February 15, 2015 at 9:53 am
MartyH. February 15, 2015 at 11:00 amThe EU is waging war on Russia for parts of eastern Europe that historically were Russian and have Russians living in them. And who cares about bits of the Ukraine, when the EU will starve to death the Ukrainians with the help of the IMF just as they did in Greece.
At least with Russia, Ukraine people would eat.
As Gandhi observed, People's Politics Are Their Daily Bread.
The UK has no EU debt, but starves its poor to such an extent that after the general election in May that the poor will not bother to come out and vote and leave a hung parliament of twiddledee and twiddledum parties, the UN will return to continue its investigation into early deaths and suicides caused by UK's welfare reform.
There is a way to get rid of the big neo-liberal parties altogether in this UK general election.
See how on: http://www.anastasia-england.me.uk
I belong to no political member. I am a voter suffering our political class stuck 1000 years into the past, educated in an ancient feudal mindset of past aristocracy in public schools (elite private schools) and Oxford and Cambridge universities.
susan the other. February 15, 2015 at 11:42 amMichael Hudson graced us at the last NY NC Meet-Up. He's as blunt and brilliant in person. While I am sure his analysis on this is as accurate as is usual for him, I just wonder how the IMF expects to plunder what has already been strip-mined by the oligarchs and the other vultures for the past decade or more. I guess their specialty is extracting blood from stones.
I think the objective is political control. It has worked quite well for decades. An impoverished country that is forced to privatize its most valuable resources is being reduced to a political non-entity. It's the sovereignty question all over again.
cassandra. February 15, 2015 at 1:13 pm
Au contraire, in some ways, a broken country is ideal for extraction. Privatised assets can be had on the cheap, and with declining living standards, labor costs plunge as well. True, birth rates fall and suicides rise, but managed correctly, the resulting social malaise ensures political docility, and drives those with the intelligence and energy to resist, to emigrate instead. What's not to like? And in Ukraine, there's even more to like. We have farmland (coveted by Cargill et al.), well-known iron ore and coal deposits, and less-frequently discussed strategic metals (guess who's been the worldwide exporter of titanium sponge?). One report on such connections can be found at https://consortiumnews.com/2014/03/16/corporate-interests-behind-ukraine-putsch/, but a targeted internet search uncovers a lot more roaches hiding under these stones. Imposing such an austerity package is, after all, what the IMF is for.
cassandra. February 15, 2015 at 2:01 pm
Au contraire, in some ways, a broken country is ideal for extraction. Privatised assets can be had on the cheap, and with declining living standards, labor costs plunge as well. True, birth rates fall and suicides rise, but managed correctly, the resulting social malaise ensures political docility, and drives those with the intelligence and energy to resist, to emigrate instead. What's not to like? And, in Ukraine specifically, there's even more to like: farmland (coveted by Cargill et al.), well-known iron ore and coal deposits, and less-frequently discussed strategic metals (guess who's been the worldwide exporter of titanium sponge?). Previously-resisted fracking becomes possible; check out Burisma Holdings, where Joe Biden's son Hunter plays footsie with Igor Kolomoisky. An excellent report can be found at Corporate Interests Behind Ukraine Putsch . IMF job creation in action.
bob. February 15, 2015 at 5:24 pm
That's also probably what pissed Putin off the most, re cargill. They were probably buying food from Ukraine with Roubles, not anymore? I haven't been able to find any numbers that I trust on either russian imports of food, or Ukrainian exports. Even less on the denomination of the trades.
It's been some time since I looked. Maybe worth another look now.
Food can really screw with the balance of payments. In this case, russia may now have to cough up dollars for food it might have been buying with roubles. Effectively, a double hit.
Big deal.
susan the other. February 15, 2015 at 11:31 am
NotTimothyGeithner. February 15, 2015 at 12:00 pmBack when Rummy was dismissing the EU as "Old Europe" and pushing all of eastern Europe to join NATO -- that was 2001 -- we were overwhelmed with news from Afghanistan and Iraq. Now that Middle East oil has been secured everything is fine. Oh wait. I must have missed something. As Bremmer cryptically informed us, Ukraine is part of the larger plan. Rummy wanted to call it a crusade -- since those guys fought each other for centuries. But it was tactless so he settled on "Odyssey Dawn." How poetic. Good thing he didn't call it the Siege of Troy. Because the Achilles heel of NATO is -- ta da! -- oil. It is all about oil and NATO doesn't have any. We shouldn't be distracted with idiotic news reports about ISIL. That is until ISIL decides to take the Caspian. Then we will start to see what is really going on. In the meantime we will worm and weasel our way into a position in Ukraine to attack from the north. Maybe.
The goal was never to attack Ukraine or Russia. The goal was to isolate Russia from both China and the EU and the International arms/tech market.
The U.S. shale and natural gas industry wants to export to Europe, but they aren't close to ready. If Russia develops, they will export, and between Russia and green energy, there goes that plan.
As far as arms, would a country rather have a pos F-22/35 or a much cheaper S-400. F-35s aren't needed to put down local thugs. They are a tool of shock and awe. Countries not interested in invasion don't need them when cheaper alternatives to air defense exist. The U.S. controls it's hemisphere. We don't invest in air defense, just supremacy. It's a market we just don't compete in.
Jack. February 15, 2015 at 7:02 pm
skippy. February 15, 2015 at 7:54 pmThe F-22 isn't a POS. It does exactly what it was designed to do. The problem is that what it was designed to do is largely superfluous, and it's too expensive. We aren't exporting it anyway, and since its chief selling point, the stealth, is almost certainly utterly worthless, potential buyers would be better off buying any of a number of other planes even if we were exporting it. Of course the constant slashing of military budgets as part of austerity means that most of Europe can't even afford their own natively developed alternative, the Eurofighter Typhoon. You're correct though that cheap and effective AA systems mean any air war isn't likely to last long. And Russia would be playing defensive in any conflict. They'd just sit back and snipe the skies clear.
susan the other. February 15, 2015 at 11:52 amStarwars all over again…
susan the other. February 15, 2015 at 11:57 amHudson's new book sounds great. "Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global Economy." Excerpts please, lots of them.
I hope there is a long chapter in it about the mind-boggling expenses of today's modern military.
Chief Bromden. February 15, 2015 at 12:55 pm
Jim Haygood. February 15, 2015 at 1:18 pm"Shock Doctrine" is alive and well… and I thought for sure Ukraine was another U.S. humanitarian exercise.
"By encouraging reforms such as the deregulation of seed and fertiliser markets, the country's agricultural sector is being forced open to foreign corporations such as Dupont and Monsanto.
The Bank's activities and its loan and reform programmes in Ukraine seem to be working toward the expansion of large industrial holdings in Ukrainian agriculture owned by foreign entities."http://www.ipsnews.net/2014/08/what-do-the-world-bank-and-imf-have-to-do-with-the-ukraine-conflict/
gordon. February 15, 2015 at 7:53 pmTime limitations may have precluded Michael Hudson from mentioning Ukraine's devaluation of the hyrvnia. WSJ, Aug. 2014:
'[In late April] the IMF said Ukraine might need to inject the equivalent of 5% of the country's gross domestic product, roughly $6 billion, into its banks to stabilize the financial sector if the exchange rate rose above 12.5 hryvnia to the dollar.'
http://blogs.wsj.com/economics/2014/08/12/ukraines-currency-drop-may-swell-emergency-bailout-needs/
Bloomberg, Feb. 2015:
'Ukraine's foreign-debt costs ballooned after the central bank let the hryvnia depreciate by 31 percent on Feb. 5 to bring the exchange rate closer to black-market levels [of around 24 hryvnia per dollar], a move backed by the IMF.'
Classically, IMF programs urged devaluation to boost export competitiveness. Last April the IMF said a hryvnia exchange rate below 12.5 would weaken the banks; now it's about 26.3 hryvnia per dollar.
Ukraine FinMin Natalie Jaresko seems to be 'letting the hryvnia slide' to get in the IMF's good graces for the next tranche, even as the prospects for defaulting on foreign currency debt rise. This suggests a modified version of Michael Hudson's IMF modus operandi:
'Don't pay your bondholders, so that you're now in selective default to them and owing us, the IMF, to whom you can't write down debts. '
There is a very simple solution to the problems of the Ukraine, one that should be familiar to any European statesperson: partition.
I'm thinking a 3-way division between Russia, Germany and the US (which would act as the representative of Monsanto, Cargill and the other agribusiness giants). I'm sure the OSCE could form the basis for a Partition Commission which could meet (maybe in Vienna, for historical reasons) to supervise the negotiations over boundaries and set up an agreed framework for investment in the ex-Ukrainian territories and the marketing of their products. A continuing Commission of the Partitioning Powers might be required to oversee and if necessary adjust the operation of such arrangements. Obviously, no Ukrainian representatives would be required for this work. I think the partition should be complete, ie. there should be no remaining independent "Ukrainian" territory, because this would only be a platform for tiresome and destabilising Ukrainian irredentism.
Such a solution along good old 18th Century lines would leave only the problem of outstanding Ukrainian debts. Perhaps the best solution here would be the formation of an international Sinking Fund to which workers in ex-Ukrainian territories would be required to contribute a proportion of their earnings. Setting up such a Fund could be another part of the work of the continuing Commission.
I'm sure there's much more to be said about partition arrangements once people get their heads around the basic idea and realise that moving Back To The Future in this way offers the best hope for a peaceful solution to the Ukrainian problem. After all, the problem is not new; it is a problem that has confronted European powers many times in the past and has often been solved in this way. Ask any Pole.
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Economist's View
This is from Joseph P. Joyce, the author of The IMF and Global Financial Crises; Phoenix Rising?, which was published last year by Cambridge University Press. The book examines the evolution of the policies and programs of the IMF with respect to the global financial markets and crises in these markets:
Among the many surprising features of the global financial crisis of 2008-09 was the emergence of the International Monetary Fund (IMF) as a leading player in the response to what has become known as the "Great Recession." The news that the IMF was "back in business" was remarkable in view of the deterioration of the IMF's reputation after the crises of the late 1990s and the decline in its lending activities in the succeeding decade. The IMF had been widely blamed for indirectly contributing to the earlier crises by advocating the premature removal of controls on capital flows, and then imposing harsh and inappropriate measures on the countries that were forced by capital outflows to borrow from it. Moreover, the IMF initially had no direct role in dealing with the crisis. The IMF was relegated to the sidelines as government officials in the advanced economies coordinated their responses to the crisis.All this changed in the fall of 2008, however, when the collapse of the financial system led to an economic contraction that spread outside the original group of crisis countries. World trade fell and capital flows slowed and in some cases reversed, as nervous banks, firms and investors sought to reallocate their money to safer venues. In response, the IMF provided loans to a range of countries, including the Ukraine, Hungary, Iceland, and Pakistan. In addition, the IMF restructured its lending programs, cutting back on the policy conditions attached to its loans and increasing the amount of credit a country could obtain. The Fund also introduced a new credit line without conditions for countries with records of stable policies and strong macroeconomic performance. Moreover, the IMF pledged to work with national governments and other international organizations after the crisis receded to continue the economic recovery and improve the regulation of global financial markets. Consequently, many commentators hailed the rejuvenated IMF as a "phoenix".The IMF's response to the Great Recession marked a significant break from its policies during previous global financial crises. These had taken place during an era when the IMF's membership was stratified by income and whether or not a country borrowed from the Fund. In addition, the IMF had actively encouraged the deepening and widening of global finance. The IMF's previous responses to financial crises, therefore, reflected the dominance of its upper-income members as well as an ideological consensus in favor of financial flows.The crisis hastened the end of those conditions. The shock to global financial markets and economies originated in the upper-income countries, and the recovery of many of these nations has been relatively sluggish. The emerging economies, on the other hand, rebounded from the global economic contraction more quickly, which in turn contributed to the recovery of the developing nations. Moreover, the crisis demonstrated that financial instability can be a systemic condition, confirming the need for prudent oversight and the regulation of financial markets and capital flows.But while the Great Recession provided the IMF with an opportunity to demonstrate that it has learned the lessons of its past mistakes, there are fundamental economic and political transformations underway which will affect the ability of the IMF to counter future financial instability. The replacement of the dominance of the G7/8 by the G20 should lead to a more equitable governance structure within the IMF, but inertia has slowed the pace of reform. Moreover, the European debt crises pose new challenges to the IMF. The Fund is caught in the crossfire among Eurozone governments and their citizenries over how to deal with insolvent sovereign members. New fiscal challenges will arise in other advanced economies with aging populations and mounting health care and public pension costs, and the IMF's response will be scrutinized by its emerging market members who are concerned about the scale of its lending.Peter K. said in reply to Min...
The IMF has gotten better, especially compared to the East Asian financial crisis. But, if they were a force for good they would have advised Greece to go the Argentine route (pace double D Dan Davies.)
Instead they enabled the devastation of Europe's periphery.
Reply Tuesday, June 25, 2013 at 01:17 PM
Lafayette said...
A TINY SPARK
{The replacement of the dominance of the G7/8 by the G20 should lead to a more equitable governance structure within the IMF, but inertia has slowed the pace of reform. Moreover, the European debt crises pose new challenges to the IMF. The Fund is caught in the crossfire among Eurozone governments and their citizenries over how to deal with insolvent sovereign members.}
There is no evident reason to believe that the G20 will bring any better governance to the IMF; after all, it is the "bank of last resort" – so to speak.
The fund is indeed in the crossfire, but it should not be thus. The problem of sovereign insolvency is of a political and not an economic or financial nature. Politicians were borrowing to maintain the debt, thus building a debt-mountain – for which Tax Revenues provided easily the means to maintain it. That debt-mountain is still there and still a drag on government revenues precluding any real Stimulus Spending.
An entire political class (in the EU) did not think for one moment that a Great Recession could happen until it happened. Now they do, but the lesson has been costly. They should have known better.
{New fiscal challenges will arise in other advanced economies with aging populations and mounting health care and public pension costs, and the IMF's response will be scrutinized by its emerging market members who are concerned about the scale of its lending.}
Frankly, I do not see the IMF coming to the rescue except in the most dire circumstances. There are many troublesome spots on the horizon that could blow into major proportions. Brazil is one and I think Russia is another. Most important, though few believe it, is China.
China should look at Brazil for a lesson. Brazil has known some very heady growth, but the recent violent demonstrations show evidently that not all have benefitted from it and especially the poorest. I suggest that China is in exactly the same condition; all it needs is a tiny spark to get it going. And the result will be very bloody indeed.
POST SCRIPTUM
Just think of it ... WalMart might be obliged to Buy American! ;^)
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The Lessons of the North Atlantic Crisis for Economic Theory and Policy
Joseph E. StiglitzMarkets are not stable, efficient, or self-correcting
Economies are not self-correcting.
More than deleveraging, more than a balance sheet crisis: the need for structural transformation
But even as the economy deleverages, there is every reason to believe that it will not return to full employment.
But the fact that things have often gone badly in the aftermath of a financial crisis doesn't mean they must go badly.
reforms undertaken so far have only tinkered at the edges.
the crisis has brought home the importance of financial regulation for macroeconomic stability.
But a focus on the provision of credit has neither been at the center of policy discourse nor of the standard macro-models. We have to shift our focus from money to credit.
Distribution matters as well-distribution among individuals, between households and firms, among households, and among firms. Traditionally, macroeconomics focused on certain aggregates, such as the average ratio of leverage to GDP. But that and other verage numbers often don't give a picture of the vulnerability of the economy. In the case of the financial crisis, such numbers didn't give us warning signs. Yet it was the fact that a large number of people at the bottom couldn't make their debt payments that should have tipped us off that something was wrong. Across the board, our models need to incorporate a greater understanding of heterogeneity and its implications for economic stability.
Should monetary policy focus just on short term interest rates? No!
There has to be coordination across all the issues and among all the instruments that are at our disposal. There needs to be close coordination between monetary and fiscal policy.
And as daunting as the economic problems we now face are, acknowledging this will allow us to take advantage of the one big opportunity this period of economic trauma has afforded: namely, the chance to revolutionize our flawed models, and perhaps even exit from an interminable cycle of crises.
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