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Richard Wolff & Michael Hudson: Trump Wants Venezuela — Here’s Why

Michael tells what most probably happened with the so-called announcement of action or war against Venezuela.  Michael and Richard also explains the National Security Strategy and how it really is intended to work.

Global South

Michael Hudson: The Ceasefire Charade

With Nima:

This is a little older but given the charade that we are watching in terms of a Ukraine plan, it is a perfect day.  This is why Russia thanks the US because the US is part of the charade and Russia just does not have to do it.   Reminder, these negotiations are being done and advertised and leaders are making statements and flying to and fro while discussing this with a sham president that has no authority to even speak, let alone carry out anything.

NIMA ALKHORSHID: Hi, everybody. Today is Wednesday, November 26, 2025, and our dear friend, Michael Hudson, is here with us. Welcome back, Michael.

⁣MICHAEL HUDSON: It’s good to be back.

⁣NIMA ALKHORSHID: Please subscribe and hit the like button to help us reach more people. And you can see Michael Hudson’s website (below his name): michael-hudson.com. You can go there and follow Michael.

⁣MICHAEL HUDSON: It’s michael, hyphen, hudson, dot, com (michael-hudson.com).

⁣⁣NIMA ALKHORSHID: Michael, let me start with the [28]-point plan on the part of the United States. They have proposed [28 points]. It seems that they have reduced it, after the meeting [Marco] Rubio had in Geneva with Europeans and Ukrainians. They have reduced it, as Donald Trump mentioned. We thought that it would be 19 points, but Donald Trump today said that it’s going to be 22 points.

But after all, looking at the document, what is your take on what’s going on, with the document?

⁣MICHAEL HUDSON: The important thing to realize is it’s not a peace proposal. It’s not a plan at all. It’s a bold attempt to shape the terms in which the public views the entire Ukrainian coup d’état at Maidan in February 2014, followed by the whole Ukrainian attack on the Russian-speaking population, and the last (almost three) years of war. It’s a fight to shape public opinion, and it’s (in that sense) a brilliant propaganda attack. President Putin and Foreign Minister [Sergey] Lavrov have given speech after speech explaining the whole history, explaining how the Russians intend to end the war when they win and they create a new government — free of the Nazis, free of the Russia-haters — and disarm Ukraine, and prevent it from joining NATO.

What NATO and the Americans have done is, instead of just giving a different speech and saying, okay, here’s your narrative, here’s ours, they’ve encapsulated their answer, and their counter-argument, and their counter-narrative, in the form of a point by point, listing by listing — as if it’s a proposed articles of agreement [document]. And, of course, these articles will never be agreed upon. There’s no way in which either Russia or NATO (Europe, and the United States) — not to mention Zelensky’s government in Ukraine — can accept them.

So, the purpose is not to get any agreement at all. It’s to make people think in terms of: How do we view what’s happening? What’s the war all about? Who’s responsible for it? And these points have been crafted by propagandists, to sort of win the hearts and minds of the people, in support of the Maidan coup.

The aim has been sort of leaked to the press, going all the way back — to reverse the way of, how World War II ended. What Europe wants to do is say: We want to refight the end of World War II. And already in 1944, Churchill was saying: As soon as the war is over, let’s attack the Soviet Union. Europe said: Well, let’s go back to that point — 1944 — okay? That’s 80 years ago. Let’s see whether we can refight, at that point. Now we can attack Russia.

That’s really what it’s about, and it’s an outrageous trick. It’s been carefully thought out and propagandized. So the peace proposal is not intended to bring peace. It’s just a propaganda charade at pretending to negotiate peace. And it’s really a propaganda effort. In a word, the aim is to essentially obfuscate what is really happening.

By the way, Foreign Minister Lavrov said yesterday at a French news conference that Europe’s “elites opted for war and have staked their entire political careers on the slogan of inflicting what they call a strategic defeat on Russia.” [Dialogue F-R YouTube channel, Nov. 21, 2025]

Well, that has failed; so NATO realizes it’s lost the war. It doesn’t have the arms to fight. You’ve seen the Russian advance, accelerating day after day. So NATO says: Well, okay, we’ll lose the war. How do we win the peace? And that’s going to be: How is history (and current voters) going to look at what’s been happening? What is all of this about? And if you look at the U.S. press (the New York Times and the Washington Post) and the British press, it’s which side of the fight is analogous to the Nazis and [Adolf] Hitler? In the New York Times yesterday, you have [Thomas] Friedman talking about, well, how can Trump appease Hitler? Trump is “Putin’s puppet.”

These agreements are really Russia’s demands. (Well, of course, they’re not Russia’s demands before. You can read the Russian demand, and what Putin and Lavrov have said.) So, I think we can [discuss], if this were really an agreement to discuss: Where do we go from here, and how do we think about solving this fighting in Ukraine?

Article 1 should be: Were there any war crimes committed? That’s what it’s all about. And a basic issue is, well, if they were, by whom, and against whom? And who are the victims? And what were these crimes? Well, Russia has already announced that when it conquers Ukraine and installs a non-Nazi government, it’s going to hold a modern Nuremberg trial. It’s going to convict parties that have committed war crimes. That is what terrifies the NATO leaders, not to mention the kleptocrats in Zelensky’s regime that have enriched themselves and been embezzling the loans — from Europe, the United States, and, especially, the International Monetary Fund — to buy properties offshore, and Bitcoin, and the things that kleptocrats do to hide or conceal the money they’ve taken.

Well, for the Russians, it’s vitally important to establish the historical record, because that’s the key to what is going to be the body of international law following  on from all of this.

Again and again, President Putin and Lavrov have said: We thought that the Nuremberg trials had established the international law of war crimes. We’ve been attacked. Russia is not the attacker. The Maidan [the coupists] was the attacker. The Ukrainian attack on the Russian-speaking population — the civilian population — was a war crime, breaking the rules of war. We came in to protect the Russian speakers. The populations of Luhansk and Donetsk have voted to become part of Russia, which were, in practice, [Russian] all the time during the Soviet Union, when there wasn’t any real separate Ukrainian nation.

The Russians are basing their actions, and their intentions, on international law. To do this, they have to have a Nuremberg trial — a war-crime trial — to reiterate: What is the appropriate international law to deal with the situation, such as we’ve been fighting, for more than two years, in Ukraine? And the West says: Well, it was Russia that’s the attacker. Russia has committed the war crime. That’s the travesty of what’s happening.

But it’s the aim of the U.S. and NATO narrative to turn the war into a new Cold War propaganda weapon against Russia, aimed at turning the world against Russia and supporting Western Europe. So, in practical terms, it’s to protect the Ukrainians and neo-Nazis, and the European backers; to whitewash all the corruption that’s been occurring during this.

And a major aim of the Ukrainian Nazis has been to avoid punishment. They want to leave Ukraine with the money that they’ve embezzled, and stored away, and go to their British mansions and Mediterranean castles.

So, the U.S.-NATO proposal calls for blanket amnesty. And if there, indeed, were a war crime, then there shouldn’t be an amnesty for everyone. If a criminal breaks the law, then the criminal must be arrested, and put away, not merely to punish them for what they’ve done in the past, but to protect the present population from having them continue to commit crimes.

Well, that (committing crimes) is exactly what the NATO-West wants to do against Russia, against China, against Venezuela, against Iran, and against any country that is resisting the U.S.-dominated world order. So, all of this jockeying, for how do we determine the terms of peace? Is it all, we’re just going to forget everything? Are we going to blame Russia, or are we going to blame the United States and NATO? All of this is what’s at stake, in all of this.

I can elaborate. The original proposal called for Ukraine to investigate corruption. The Wall Street Journal, a few days ago, reported that the Ukrainians insisted on changing the language to say that all countries will receive “full amnesty for their actions during the war.” Well, the actions are not only the war crimes — staging false flags, like the Bucha staged [war crime] — but the crimes of embezzlement. The World Bank, the Europeans, all have agreed that NATO [Ukraine] is the most corrupt country in the Northern Hemisphere, and it has been ever since 1991 —

⁣NIMA ALKHORSHID: You mean Ukraine is the most corrupt?

⁣MICHAEL HUDSON: Yes, what did I say?

⁣NIMA ALKHORSHID: You said NATO.

⁣MICHAEL HUDSON: I’m sorry. Well, Ukraine is the most corrupt, although its corruption has been with the full participation and support of Europe. And I would imagine that any trial is going to involve the actions of [Emmanuel] Macron, and [Friedrich] Merz, and [Keir] Starmer (and the British — in breaking up the agreement that the Ukrainians and Russians had made to end the war all the way back in 2022 — the agreements that were all broken, and turned out to want a ceasefire just to rearm Ukraine with more NATO arms to go on fighting against Russia). That’s something that Russia is never going to fall for again.

So, the whole idea of a ceasefire, as if that’s what these proposals are about, there never was a possibility of that. And so, if that was never a realistic possibility, why are they doing it? It doesn’t have anything to do with creating an actual peace, as I said. It’s a way to shape the categories of how people think about this whole conflict between NATO and Russia, the whole expansion of NATO since the Americans had promised NATO would not expand, if Russia ended its military occupation of Central Europe and agreed to dissolve the Soviet Union. All of that has already happened, and I don’t think Russia has any intention of trying to trust the West again.

So, the reality is that any real peace agreement, logically, has to be created after the fighting stops — not before it stops — and especially not when one side is defeating the other overwhelmingly. Trying to freeze a conflict when Russia is overwhelmingly winning is trying to solve the Ukrainian problem by just making the loser set the terms of the peace.

NATO and the United States have lost the war that they started in Ukraine — hoping that the war would drain Russia’s economy; would create an economic crisis; would persuade Russian voters that we need a regime change, we’ve got to replace Putin for having started this war, and put in a new group. The idea of a “new” group is the same neoliberal kleptocrats that they put in in the 1990s — privatize Russia, ideally break it into parts (the whole strategy against Russia) — and that’s just a fantasy.

So, how can they, at least, try to convince the population that this fantasy is a realistic probability, and even a moral probability?

Their solution is to say (well, the big picture): Who are the counterparts to World War II’s Nazis in this? And we’re seeing a replay of the ending of World War II. And since Russia is organizing the peace, it’s in a position to hold these (what I call the new) Nuremberg trials.

And the NATO aim is to make people take seriously the idea that Putin is a modern Neville Chamberlain making peace with the Nazis — (I’m sorry, not Putin) to make Donald Trump look like a Neville Chamberlain — just surrendering to Russia. That’s what Friedman had written in the New York Times. It’s what the New York Times, Wall Street Journal, and network television in the United States keep saying: We’re back in what started all of World War II, when Chamberlain did not protest against Russia’s moving into Czechoslovakia to defend the German population there.

Well, if trying to say that Trump is a Chamberlain means — you have the leaders of the Republicans in Congress, Mitch McConnell, especially, says there’s no way in which the U.S. Congress can possibly agree to even the proposal that Trump and his staff have put on the table. So Congress has already announced [that] any agreement is going to be a no-go. The Ukrainians have said: We absolutely will not cede any territory to Russia. Even though Russia has conquered it, even though we have no army to defend it, we’re not going to agree with that.

Well, the defeated party does not get the right to determine the terms of peace, and who won and who lost. That’s what war is about. As [Carl von] Clausewitz said, it’s a continuation of policy by other means — by military means. Russia has been obliged to use an enormous expenditure, and troops, to achieve this military policy of ending the NATO expansion towards trying to destroy the Russian economy, and hurt it in any way it can; especially by cutting off its trade with Europe in oil and gas, and other things; to seize Russia’s savings that it had kept in the West and [in] Euroclear (its foreign-exchange reserves that it was using).

That’s the first issue.

The second article up for discussion should not be put in terms of blaming one party or another. It should be: Who owes reparations to whom, and how are reparations going to be paid? Well, trying to frame the narrative, the current text says Russia owes reparations to Ukraine; but it’s Ukraine that should pay reparations; and Europe-NATO should pay reparations to Russia for initiating the war, for breaking the rules of war, for destroying enormous amounts of civilian property in the Russian-speaking portions of what was Ukraine.

And this is the cover story for the U.S. and Congress backing the NATO-Euroclear seizure of more than 200 billion euros (even more in dollars) of Russian assets. They say: Make these assets a loan to Ukraine. Well, Ukraine’s already broke. It’s unable to pay the IMF loans.

The IMF loans, in fact, were made — illegally — against the basic principles of the IMF, saying the International Monetary Fund will not make loans to a country at war, or to support a belligerent. The IMF said: This is not war. You know? This is … we’re defending ourselves. The war is … Russia, not Ukraine.

So the pretense that somehow [Russia] is liable? The hope [of the belligerents] is going to be that when Russia carves out its portions — of those Ukrainians that want to be part of Russia, and vote to become part of Russia — that the whole idea is to destabilize the next decade of legal argument, saying Russia owes money to the West. Well, if Russia would have thought of not giving speeches, but let us put a 28-point plan in, it would have said, how much does the West owe Russia? What’s going to be the cost?

There’s no question that Russia is going to spend more than 200 billion euros (and dollars), the equivalent in rebuilding all of the real estate that you’ve seen destroyed in the fighting that’s gone on so far — which is entirely on Russian-speaking land.

The way that the Trump administration shaped the agreement was: Well, alright, we’ll give 100 million of this (half of the money) to Donald Trump’s group, so American companies can come in, and they can rebuild Ukraine, and make enormous profits — Russia has no intention of letting American real-estate companies rip off profits, and emulate the Zelensky kleptocrats in just embezzling the money for themselves — and building the kind of shoddy building that Trump is known for, the shoddy Trump Tower, whose architects tell me he cut costs everywhere, and it’s just junk. The Russians build much stronger buildings, to last, and at less expense than Trump’s real-estate ripoffs that he made his career on building.

So, all of this, the phrasing of the peace agreement is designed to justify Trump’s, and the Americans’, and the Western Europeans’ attempt simply to grab what was Russia’s foreign-exchange reserves for themselves, and prevent Russia from having the resources to spend — the balance-of-payments drain — that it’s going to take to buy the raw materials, the equipment to rebuild the buildings with plumbing, all of the imported goods, the facilities that you need to make new apartment houses, houses — the vast amount of reconstruction that Russia is going to have to spend (and has promised to spend in Luhansk and Donetsk), and the other territories that it takes as it moves west, again, to those populations that want to remain part of Russia — leaving the Ukrainian West that does not want to be part of Russia isolated, demilitarized, denazified, and disarmed, not to ever again become a proxy battlefield for NATO, led by the United States and the neocons in their fight against Russia. It wants to prevent that permanently; not simply to have a short-term ripoff that is being proposed by the United States.

I’m amazed that the Russians have not been more vocal in calling a spade a spade in all of this.

You may have other points of the agreement that you’d want to bring up. And if you go over point by point, I’ll be glad to answer them.

But again, to me, the key is, Russia’s 200 billion in reserves is, the subject of this false narrative, of the premise: that Russia is the attacker — not NATO — and that Russia has attacked civilians — not Ukraine has attacked civilians.

Russia was very careful to focus on military targets, that extended to energy companies, to electrical systems. Russia had proposed a mutual agreement between it and NATO-Ukraine not to bomb each other’s energy; and President Trump said: No, no. We have to bomb Russia’s oil refineries because we want to block Russia’s ability to export oil. We want to create an oil crisis so that the United States can use oil as the key controller of American foreign policy. This is what you and I have discussed for the last few months on your show. So, of course, Trump said: No, no. Ukraine, don’t agree not to bomb energy systems.

So, Russia realizes that it’s energy that has been powering the NATO arms factories, that’s been powering the Ukrainian war machine, and that its basic military tactic is indeed to focus on destroying this military ability to fight; and energy is as much the key to military conquest as it is to Gross National Product. Energy is what makes the factories go; it’s what heats apartments; and it’s made life unlivable for much of Western Ukraine — and that was the choice of Trump’s foreign policy.

So, these are the two shaping narrative structures of the propaganda effort that’s been put in place. Do you have any questions you want to follow on to fill out this big picture?

⁣NIMA ALKHORSHID: Michael, one of the crucial points in the [28] points is the size of the Ukrainian army, which was supposed to be (in the document) about 600,000. Then the Europeans changed it to 800,000. And right now, it seems that there is no limitation for that.

Who’s going to pay for this army? You know, it’s a huge army, if they go in that direction — because this army should be supported by someone, you know, other countries, Europeans, together with the United States — which literally means that NATO is going to arm this Ukrainian army, again and again, to fight Russians. The same attitude.

Do you think that Russia would accept that?

⁣MICHAEL HUDSON: This is the opposite of demilitarizing the enemy.

Remember the end of World War II? The Morgenthau Plan in the United States was to say, make Germany never industrial again — make it an agricultural country, make it a theme park, but it won’t be an industrial country — so, that was [Henry] Morgenthau’s plan, and that was turned down by the United States. But the idea was for Germany, and also for Japan: Japan and Germany were to demilitarize and never be able to rearm, because they were incorrigible aggressors. And that is the principle (exactly the same principle) that Russia is trying to do [in Ukraine].

NATO says: We have to triple the size of what the Ukrainian army was when we began this war; and we have to leave the Nazis in control. There won’t be any war-crimes trial. We have to leave the Ukrainian government. It may not be [led by] Zelensky, it’ll be one of the [Stepan] Bandera followers. It will be the Nazi-led army so that, if we fail (so far), we can come again — and this time, we’re really going to hit you, with long-[range] missiles, and we’re still going to bring down the [Russian] government — until the Russian population says: It’s worth anything to surrender to the West and let them take over. We can’t fight anymore.

This is the evil fantasy that is being promoted.

Of course, Russia is going to say: We are the victors. We get to disarm the government. We get to put in place a post-war constitution of the restructured Ukraine (whatever is left of Ukraine), so that it will not have a standing army; it will not have Western weapons. And if the Western countries, if NATO or the United States provides weapons to [Ukraine], President Putin has already said: If a missile, or a weapon hurts the Russians, we will retaliate not simply against Ukraine; we’ll retaliate against the country that has supplied Ukraine with the weapons.

Well, Donald Trump has said, quite realistically: There’s no way Ukraine is going to win. It’s a black hole. We are not going to give weapons to Ukraine. It doesn’t pay —

We want to fight China. This is a race war. It’s the Anglo-Saxon West against the global majority; and China is the key, our long-term enemy. We want to do to China what we tried to do to Russia, and failed; so we’re not going to spend any money on arms on Russia, because we’ve depleted all of our arms, and NATO has depleted its arms. It doesn’t have any more —

We’ve got to prepare for the final conflict of civilization, the civilizational fight by the West, waged against the 85% global majority.

That’s Trump’s position; so Trump is not going to provide American arms to Ukraine. It’ll be the European countries. And it will be these countries, against which Russia will retaliate — and destroy not only their arms factories, but the political and military capitals, and ports, and power supply itself. The European NATO leaders, having agreed to fight to the last Ukrainian, are now saying: We’re going to fight to the last European, in an attempt to, somehow, hurt Russia, a little bit.

So, European history, essentially, is going to end, if this plan is put into operation — Russia has made that very clear. It says: There must be a better solution. Let’s just have nothing to do with Western Europe. Let it go its way. It can join the United States in some kind of political alliance — maybe France can become the 52nd state, Germany the 53rd state, you know, after Canada and Mexico. Right down the line. It doesn’t matter.

Russia wants to separate itself from the West and turn east. The West wants to move eastward, via Russia, towards its own fight against China. That is the long military dynamic — and it’s a crazy dynamic. It’s crazy because there’s no chance that the West has of winning. Its arms don’t work. The American ATACMS missiles that were just fired at Russia were all shot down by the Russian defenses. And then the Russians retaliated by a missile that killed the troops that were sending the missiles [their] way. I don’t know how you can get a clearer example of — this is a microcosm of what would happen if there are further NATO attempts to attack Russia.

But you can see that they don’t have the arms, they don’t have the money for the arms, and yet the  leaders — Macron, Starmer, Merz, the Dutch leaders — and the French general, last week, said France should be willing to sacrifice its youth of the future to fight Russia: We need an army to go into Ukraine towards Russia and invade it. Your children are going to die. It’s all worth it because we hate Russia, don’t you?

Well, how are they going to get the population, ever, to say: Okay, we’ll send our kids to war and they can fight to the last French infantryman, just like the Ukrainians are fighting to the last Ukrainian? Of course, we will agree that this is a moral fight against Russia?

I don’t see any way of convincing the French population of doing that. So far, you’ve had all of the yellow-vest protests against the Macron government. What more can they do? What do you do when a government is fighting a war in Ukraine, against Russia, that the populations of Germany, France, the rest of the European countries, do not support?

Their only outlet has been to support the nationalistic parties, such as the Alternativ für Deutschland, [Giorgia] Meloni in Italy, and similar parties in England and abroad. That’s not very effective in stopping this whole military plan of attack, and the whole rearmament, and the whole resumption of the new Cold War — which, really, is trying to refight the end of World War II. That’s, really, what it’s all about.

Well, Russia is going to be the winner. The winner gets to set the terms, and NATO will lose; but it can say: Well, if we can generate in the public mind enough resentment against the Russian victory, against the Russian denazification, against the Russian demilitarization of Ukraine; then we can fan these simmering embers of resentment into a new anti-Russian mentality.

It’s all about the narrative, once again. That’s what they’re trying to do in all of this; and that’s why they keep calling Trump Neville Chamberlain, and turning Trump into “Putin’s puppet.” It turns history inside out, and, with it, the whole idea of right and wrong, and good and evil, as described by the whole spirit of civilization for the last few hundred years of drawing up laws of warfare — laws to prevent armies from attacking civilians, false-flag operations. The whole behavior, and breakdown, of the system of international law that’s occurred over the last few decades — really since 1990 (quite a few decades now) — all of this is a breakdown.

That’s what we’re dealing with: the breakdown of the West, and the attempt by Russia, China, and Eurasia to create its own laws of civilization — on how they would define civilization — and these laws are pretty universal; and they’ll pick up what the West’s ideals used to be, but which the West has abandoned now.

⁣NIMA ALKHORSHID: Michael, how do you see the ability of Europe — because Ursula von der Leyen was talking about [how] Ukraine must be part of Europe (Ukraine, in today’s condition that they have, politically, economically, militarily)? Is Europe capable, or able to let Ukraine in?

⁣MICHAEL HUDSON: The question is: What will Ukraine be?

If Europe lets Ukraine in, is there going to be free migration within Ukraine? You’re going to have the Ukrainian males who are able to bribe their way, or otherwise escape from the suicidal service in the army, [and] have already gone into Poland, and Central Europe, and into Germany. From what I read in the newspapers, they’ve made themselves fairly unpopular there, by being very demanding, saying: You have to support us. We’re victims.

Can Europe afford this whole migration crisis?

Well, the whole spirit of the nationalist parties, and of the voters, is very much like the United States. It’s anti-immigration. They’re saying: Western Europe for the Western Europeans; or, at least, they’re saying: France for the Frenchmen, Germany for the Germans, Britain for the British; but not for these countries to support, first of all, the influx of populations from the Middle East (where the United States [has] destroyed), from North Africa, from the Islamic countries — and now from the Ukrainians.

In order to fund the war, you’ve had Chancellor Merz in Germany say: We’ve got to cut back social spending. We’ve got to end the subsidies that we have given to German families — so that they can afford the higher gas and oil prices to heat their homes, and to cook, and to drive their cars — that we’ve been giving, when we cut off the trade with Russia. We cannot afford that, if we are going to spend our money on creating arms to give, or sell, or otherwise provide Ukraine with.

Well, what do you think the Germans are going to say? It’s okay? We’re willing to freeze in the dark and eat cold cereal instead of cooking, as long as we’re hurting Russia?

Can they really be convinced to hate Russia that much?

The neocons find this believable because they hate Russia that much. They’re not willing to fight Russia — and the Banderites (the neo-Nazis in Ukraine) are not the armies, primarily, that are fighting. The Azov Battalion, and others, tend to stay in the back and send the Ukrainian farmboys to fight, not the Nazis themselves. They’re shooting their own soldiers in the back, if their soldiers seek to retreat, instead of moving forward and simply being killed by the Russian drones.

So, you’re having an internecine Ukrainian war, by the Nazis, against the non-Nazi Ukrainians.

And you’re going to have this kind of counterpart all throughout the European countries, between the neocon governments representing NATO (the EU union represents NATO, not the elected voters) and the voters in the European countries. All of that is breaking up the European Union itself. And that’s going to be one of the results of this war.

It will not be up to Russia to do what it’s doing in Ukraine, and rewrite the European constitution and restructure the European economies, like it intends to do in Ukraine.

But you can see that in this fight over how to depict the culmination of the Russian military victory and restructuring of Ukraine; and the loss of the war by NATO, by the United States, and the loss of its whole plans to destabilize Russia — to deplete its arms supply, in order to try to make Russia deplete its arms supply (which has not occurred) — the failure of all of its unrealistic forecasts.

And this is what’s at stake: Can it maintain the fictitious view of reality that led to all of this failure, in the first place, ever since the 2014 Maidan coup d’état?

That’s what is the big picture of destabilization that’s occurring. And at what point will the European countries say: We’ve been suckered into fighting on behalf of NATO (which is really the U.S. War Department, as Trump has renamed it) — really, in serving American neocon foreign policy —

And maybe we should have a European policy, and the aim of our policy should be to improve the productivity and living standards and self-reliance of our European countries themselves, for our self-interest — not the neocon and the Trumpian-American self-interest, that has led to the surrender of von der Leyen to Trump’s tariff rules a few months ago?

They’re going to put European interests before foreign interests; and that’s going to mean, at some point, the loss of Europe to the United States.

This has been discussed by Putin in some of his press conferences. And he said, I think, realistically: You know, it’s going to take about 30 years for there, really, to be a restoration of trust, and trade, and investment, mutually, between Western Europe and Russia. For the time being, we’re turning eastward, with countries whose values we share.

And this ending of the Ukraine war, like the beginning of the Ukraine war, has been all about values.

And I think Lavrov had a wonderful statement, a few days ago, in the meeting with Belarus that Russia has once a year. He said: If we talk about what was, and what they want to restore (meaning NATO), these are all exhausted Euro-Atlantic models. NATO [North Atlantic Treaty Organization] and the OSCE [Organization for Security and Co-operation in Europe] are Euro-Atlantic structures. The European Union has long ceased to be a European forum where the interests of Europeans are represented. It’s become an appendage to NATO. And what they call fighting for their values, is fighting for, what turns out to be, Nazi values.

That says it all, in a nutshell.

Again, yesterday, Lavrov said, in a French interview, that the whole drama began with the West’s attempt to have NATO absorb Ukraine, create a military threat to Russia right on our borders; and in breach of all the promises given to the Soviet Union, and contrary to all the understandings concluded then with the Russian Federation. As part of the OSCE framework on the indivisible nature of security, and the fact that no organization, no country in Europe will seek to strengthen its security at the expense of others, it was approved at the highest level — NATO acted in exactly the opposite way.

That’s the Russian position that’s going to shape how it restructures the domestic legal system and political system of Ukraine, and the value system in which it’s doing this. If you read what they’ve said, you realize the total disconnect between the so-called “peace proposal” propaganda effort, and what Russia intends to do. Russia has been sort of slow to raise the ante, and say: This isn’t simply about what military side is going to win; it’s a fight over the values of civilization. And Lavrov has said that Western Europe no longer has the values that shaped the Enlightenment, and shaped European Idealism at a point when Europe achieved world political and economic ascendancy in the 19th and 20th centuries.

⁣NIMA ALKHORSHID: Michael, before this live[stream] we were talking about Bloomberg’s leak of Steve Witkoff’s private call with Kremlin aide Yury Ushakov. What are they trying to do?

Looking at the social media, the way that they’re attacking Steve Witkoff, they’re calling [him] a KGB agent? He’s an agent of the Trump administration! He’s Russia’s puppet, “Putin’s puppet?” What’s going on with the case of Witkoff? It seems that the establishment is attacking him, and these people are getting in line with the establishment.

⁣MICHAEL HUDSON: Well, you mentioned the establishment. It’s obvious that the phone calls and the emails that Witkoff was handling were all copied by the National Security Agency. Essentially, they’re doing to Witkoff what they did to Donald Trump in his first administration, [when he] tried to appoint the general that was going to clean up the CIA, and clean out the bad actors. The NSA leaked it to the FBI saying, oh, look at what the general said. They pretty much falsified the charges against him.

I’m blocking out the general’s name, but you must remember who he is. At any rate, they’re trying to do the same with Witkoff. They’re trying to

Witkoff by saying, here is the reality that we recognize, when he was talking to [Kirill] Dmitriev and other Russians.

 

⁣NIMA ALKHORSHID: Michael, you mean that general that was in Russiagate, they said that he’s connected with Russia, General [Michael] Flynn?

⁣MICHAEL HUDSON: Yes, General Flynn. The one thing that the deep state wanted to do was to prevent General Flynn from being appointed to clean out the CIA, to clean out the neocons. That’s what Trump wanted to do. They framed him up, and they got Trump’s awful vice-president [Mike Pence] to say, and his idiot son-in-law [Jared Kushner] to say: No, you’ve got to get rid of General Flynn. The FBI doesn’t like him.

Well, of course the FBI and the deep state doesn’t like him because he wanted to clean out the neocons. And Trump was gullible enough to trust his idiot son-in-law and the vice president that was urging him. And he listened to the neocons who he wanted to get rid of for the advice: Don’t have anyone strong enough to get rid of us in power. He was suckered.

And I think he decided not to do that again. And that’s why he’s focused, in his second term, on appointing politically loyal cabinet members, and army members, and NSC members, and State Department members. The problem is that appointing political loyalists, they’re not (all) that savvy as to how to really conduct foreign relations and foreign policy, or even military policy. So that’s the trade-off that is sort of tearing his second term apart.

Well, they’re trying to say: Witkoff, by saying that Russia is winning, Witkoff is also “Putin’s puppet.” Well, any attempt at reality is defined [by neocons] as “pro-Russian,” because reality is the Russians have defeated Ukraine. They are marching towards victory, that they will probably conclude at the end of next spring, at the latest, in Ukraine. They will get rid of the Nazi government. They will replace it with a new government. They will write a new constitution.

All of that (obvious) military victory is a realistic expectation, and yet that’s called pro-Russian. Well, if reality is pro-Russian, then that means that NATO and America is the sphere of unreality. And the only way that you can ever get unreality to somehow dominate the electoral political process is by shaping a narrative in a way that distorts reality, that distorts the reality that recognizes Russia’s military victory in Ukraine; and, by the same token, [distorts the reality] that recognizes the futility of ever sending millions of Ukrainians to die, or to emigrate, or to suffer, to fight to the last Ukrainian.

What will the Ukrainian population think when the war is over? The voters — not the neo-Nazi leaders and the kleptocrats — what will they think? To say: How did we ever get our children, and our relatives, killed in this futile fight that we’ve lost, and had no chance of winning, because we were outgunned, outmanned? And all of this was just to, somehow, weaken Russia, not to help us? What interest did we have in fighting against the Russian language, in burning the library books that are written in Russian, in blaming, banning the Russian speakers, banning Russian music, and all of that?

Last time I was in Latvia, I remember, we were invited to a concert, and it was Dmitry Shostakovich’s opera, Lady Macbeth of Mtsensk. This was many years ago, when I was there performing Russian operas. All that, now, is swept away by the anti-Russian Baltic feeling, by banning the Russian-speaking population from voting and really having a voice in the electoral process. So that’s what all of this is about.

When they’re saying that Witkoff is pro-Russian, and that what he is saying — that Russia’s winning — is pro-Russian — it’s as if that’s a bad word. Instead of saying: Witkoff is recognizing economic reality. Thank God that we have Donald Trump appointing him, [who] is willing to face the reality that, as Trump has said (again and again), Ukraine is losing. And if Ukraine doesn’t agree to end the war now, on whatever terms it can, it’s going to be in an even worse position later. Well, Trump is right.

⁣NIMA ALKHORSHID: Yeah, exactly. Thank you so much, Michael, for being with us today. It was great to talk in detail [about] what’s going on in terms of Trump’s [28]-point peace plan, and what’s next, happening behind the scenes. Yeah, great pleasure, Michael.

⁣MICHAEL HUDSON: Thank you very much. I’m so glad we had this discussion.

Global South

Richard D. Wolff & Michael Hudson: EU–US Split? EU Moves as the UK Economy Collapses

The EU:  There is nothing left, besides hatred of Russia. That is the only political message that they have, and they will keep on working it.  The stakes now are so high and what is at stake is the physical, military and demographic survival of Europe itself.

What the EU is attempting is to inculcate a deep belief in the citizenry that their position over the past 500 years can be re-established and preserved against what looks to be the rise of China.  If the leadership cannot tell that story, then it is over for them.  The situation in Europe is dire.  The people know it is not going well.   That is why Kallas talks nonsense, as she has to rewrite world history to try and do this.  The United States couldn’t care about the Europeans.  The Europeans ‘ idea that the US could protect them is childishly silly.

We’re watching the death paroxysms of the European idea that they have something for the world.  It is a sad reality.

Prof Wolff continues to talk about the shooting of little boats in the Caribbean.

Michael Hudson covers the failure of the tariff policy and the real on the ground results, developing into what resembles a domestic class war.  “All we can see is the breakdown” …  “The march forward into decline.”

 

 

 

Global South

Richard D. Wolff & Michael Hudson: The West Is losing Control

Interviewer: Nima from Dialogue Works

Professor Wolff describes the slavery of Europe. He states that the psychological insight is that the demonization of Russia is the displacement of the rage and anger against the United States. This cannot be expressed so it conflates or becomes conflated in the rage against Russia. The real oppression of Europe is now being carried out by Mr.Trump. Because of the relationship they (Europe) cannot say so. They cannot face it but in reality, they act out the slavery. They have to heap onto Russia all of the hostility that is felt from Trump, but cannot be discussed. It is projection and an evasion of the problem.

Global South

Michael Hudson: Rare Earths Rush

Additional to Michael Hudson and Richard Wolff on this interview with Nima: https://sovereignista.com/2025/11/13/richard-d-wolff-michael-hudson-trump-is-blowing-it-up-dollar-is-on-the-edge-of-total-collapse/

My friend Balihar Sanghera has just sent me  an interesting background article that provides important insights on President Trump’s announcement of U.S. intention to work with Kazakhstan’ on developing its rare  earth and mineral deposits. He and his wife Elmira Satybnaldieva,wrote an important background book, Rentier Capitalism and its Discontents: Power, Morality and Resistance in Central Asia  (Palgrave McMillan, 2021), that I recommend to readers.

This article was very useful for my recent Nima discussion. Here is a note from Balihar’s co-author Elmira Satybnaldieva:

We are witnessing a neo-imperial competition for rare earth minerals. The new  US ambassador to Kazakhstan, Julie Stufft, stated that Kazakhstan is capable of meeting 50% of the US demand for rare earth resources.  She called for rapid extraction of resources and suggested the export of extracted resources via the Trans-Caspian route.

The  US is particularly interested in tungsten mining. The US based Cove Kaz Capital is planning developing large deposits of this strategically important metal in Kazakhstan (Verkhne-Kairatinskoye and North Katpar.)

The US views tungsten as a key resource for the defense industry, used in the production of shells, armor, and special equipment. The American side’s goal is to reduce dependence on China for this metal.

The negotiations are being led by US Secretary of Commerce Howard Lutnick, who previously participated in a successful deal between the American company Wabtec and Kazakhstan Railways.

A joint venture is proposed between Cove Kaz Capital and Kazakhstan’s Samruk-Kazyna Fund. The American company plans to not only mine but also process tungsten in Kazakhstan and then supply it to the US. Kazakhstan will receive a share of the profits, but control over the project will likely remain with the American side.

The United States is considering financial support for the project through government agencies, but does not plan to directly participate in the company’s capital.

This project is part of a broader U.S. strategy to reduce dependence on China for critical resource supplies. China is also showing interest in developing Kazakhstan’s deposits, offering more favorable terms.

A week ago, Kazakhstan’s Minister of Economy Serik Zhumangarin met with American businessmen in Washington, where he presented Kazakhstan’s investment potential. It appears that the United States has now seized another strategic mineral in Kazakhstan.

Global South

Richard D. Wolff & Michael Hudson: Trump Is Blowing It Up: Dollar Is on the Edge of total collapse!

Global South

Michael Hudson & Glenn Diesen: The Strange Case of Europe’s Decline

⁣MICHAEL HUDSON: Well, I guess it’s not too optimistic, unless you look at the prospect of a revolution as being optimistic.

GLENN DIESEN: Welcome back to the program. We are joined today by Professor Michael Hudson to discuss the very strange case of Europe’s economic decline, as well as some of its latest self-harm and questionable decisions. So thank you very much for coming back on.

⁣MICHAEL HUDSON: I’m glad you invited me, Glenn.

⁣GLENN DIESEN: So, I wanted to get into the Europeans joining in on America’s tech war, or economic war, against China. But first I wanted to ask a bit about this seizure the Europeans are engaging in. Because as we know they have frozen Russian assets, that is sovereign funds, and there is now growing pressure to seize these funds. That is, as various newspapers write, they’re looking for something to make it seem legal to essentially steal the Russian assets, sovereign funds, something that’s never been done before. And what makes this unique is the Americans do not want to participate in this because, of course, they would become financial pariahs. Japan doesn’t want to. But for some reasons, the Europeans seem quite determined that this is something they should do. What do you make of this decision? Because it is quite complex. They want to take the Russian assets and use it as collateral for a loan, which can’t be repaid back.

So, you know, either way, the Russians are not going to get their money back, more or less.

⁣MICHAEL HUDSON: Well, the question is: Who are the Europeans that we’re talking about? I’m not sure it’s the European population that seems to be against the war with Russia and Ukraine, and seems to want to simply have an industrial recovery. The Europeans are led by the EU Commission, Ursula von der Leyen, and the Estonian, her Estonian helper [Kaja Kallas], and by Friedrich Merz of Germany. And the neocons and the NATO groups, Mark Rutte, have all decided that they want to extend the war between Ukraine to Russia into a war between Europe and Russia, or at least to frighten Europe and make Europe think that there’s going to be an imminent war, in order to, basically, create a kind of military Keynesianism.

So, let me begin, I think where we’ve left off, or we’ve discussed earlier, about this $300 billion Russian deposits with Euroclear, which was the clearing organization centered in Brussels for dealings with Russia’s foreign exchange in Euros and dollars. Nobody knows where Euroclear has actually put this $300 billion, or Euros, in assets. It seems to have spread them over many countries, in many investments. There have been many attempts by journalists and by politicians to try to find out where [it is]. Nobody knows where it is. And the Belgian prime minister says, well, since Euroclear is in our country, we only have $10 to $20 billion of this money at stake, but we’re against Europe seizing Euroclear.

So, the Germans, and the French, and the other pro-war advocates in Europe, have sought to circumvent this by mobilizing public opinion, by frightening it into thinking that there’s an imminent problem.

Ultimately, what they’re conjuring up is, well, is Russia going to invade Europe? This is absurd. No country that’s developed and has an elected official at the head is going to invade any other country. Land invasions are over. Any fight with Russia is going to be fought by missiles, and only by missiles. It could be air missiles, it could be from submarines, it could be naval missiles, but it’s going to be a missile-type fight. The main missiles that people have spoken about so far are the drones.

I think the aim — what Merz and the Europeans, who are trying to set European interests against those of Russia, are trying to do — is [to] achieve this military Keynesianism, based on the ostensible need to fight Russia, or to “defend” itself against Russia, is an extension of this bombing of Ukraine. And that’s where the conflict is certainly leading.

Now, the plan of Merz and Germany is to give the money to Ukraine, from the Euroclear, that’ll be earmarked in Ukrainian account to buy weapons to fight Russia. Nobody trusts the Ukrainian kleptocracy enough to simply give the $300 billion to Ukraine. It would end up in the pockets of the kleptocrats. But they will create an account for Ukrainians to spend on European armaments. Good news for the European military-industrial complex, whose stocks have been going up, while the other industrial stocks have not followed suit because of the slowdown that was caused ever since the termination of trade for Russian oil and gas.

Well, the news exposed in the last few days is that Merz turns out to have staged alleged Russian drone appearances at airports in Germany in order to whoop up propaganda against Russia, as if it really had some intention of attacking Germany in some way or another. I mean, that’s what the drones are doing in Ukraine. And the fact that the drones are such a novel form of transforming the character of warfare in the last three years, you can see how this was the button to push on the German and the European population.

And you’ve already had the NATO head, Mark Rutte, calling on NATO to be prepared to fight a long-term confrontation with Russia. Well, a “confrontation” means, at some point, a war: that’s what NATO is all about. And he claims that the alliance has turned the tide on ammunition. He says NATO’s currently winning.

And if you read the European popular press, the mass media, they all say that Ukraine has a chance of beating Russia. It’s just fighting to a stalemate! This is completely different from the guests that you’ve had on your programs who are, like me, reading — What are the Chinese saying, What are the Russians saying? What are reporters throughout all the rest of the world saying? That the Ukrainian war is, basically, over. It’s lost, totally.

And the problem for Europe’s industrial economies, according to Merz, is, well, if the war in Ukraine has been lost, then what are we going to use all of our weapons for? Who’s going to buy our weapons? Not the United States. The United States is asking Europe to buy American weapons for NATO. NATO needs the threat of war in order to maintain the military-industrial production and employment that it seems to have been willing to base the economy on.

Four days ago, Germany’s Stern magazine published insider leaks, showing that the whole idea that Russian drones were being used against German airports to sort of sound them out, as if this was all a preparation for Russian bombing of the airports in Germany and Europe, just as it was bombing air transportation in Ukraine. All of this turns out to have been made up by Merz, and orchestrated as a scheme to sort of amplify public fear, and fast-track these lucrative military contracts for the domestic firms.

It turns out that [Merz]’s personal background is a corporate lawyer with deep connections to Germany’s arms sector. And from the very beginning in Germany, as the Christian Democratic leader, he’s been advocating more defense outlays — saying this is going to lead the German recovery — as if the German industry can recover given the break of relations with Russia, and now the imminent break of relations with China, as well.

So, if these leaks turn out to hold water — and Sahra Wagenknecht in Germany has been very outspoken in trying to get to the bottom of this, and insisting on a public investigation — then it’s going to be obvious that Europe has this deep state of NATO and anti-Russian neocons, that is just as serious as the U.S. deep state in pushing for confrontation and, ultimately, war with Russia.

And if you read what Merz has said, it’s as if this really isn’t about national security at all. It’s about securing gains for industrial investors and for a minority, that has hijacked European defense policy and industrial policy. I think the question is: Why are they doing it now? Now that the war is ending, it looks like there’s going to be, at some point (and it may take until Spring), a Ukrainian surrender. The Russians are going to take over and appoint a non-Nazi government — replace the whole government in Ukraine.

The intention of Russia is to block any attempt by Europe to send more missiles or arms attacking Russia itself. Russia’s aim is simply to isolate itself as much as possible from Europe because it no longer looks at Western Europe as offering an opportunity for mutual gain. It only sees Europe as representing a threat — and if it could make an iron wall isolating Europe? Basically, it’s “you leave us alone, we’ll leave you alone — but don’t get involved.”

I think, given the fact that (if and when) the war ends, Russia is now going to have to spend an enormous amount of money rebuilding the Russian-speaking Ukraine (former Ukraine), that is now part of Russia. Donetsk and Luhansk and Crimea have already voted, had a referendum, to rejoin Russia. And Russia is going to need a lot of money.

The opportunity of ending the war in Ukraine offered Russia the chance to say: Well, you are demanding reparations from Russia for the war in Ukraine that you, NATO, started, with the U.S.–British coup d’état of 2014 by the Nazis that overthrew the elected government. (It was NATO in Europe that backed the Ukrainians in an ethnic war against Russian-speaking Eastern provinces.) So, we’re the victims, not the attackers.

If there’s anyone who owes reparations, it’s Europe owing reparations to Russia; but, of course, that would take years and years to settle through the courts. But what Russia, I think, would be willing to agree on is: We’re going to use that $300 billion to spend largely in Europe, to start the reconstruction and rebuilding of the real estate, the industry, the economies of Luhansk (Donbass), and other parts of the former Ukraine that are now part of Russia.

And I think that what Merz and the anti-Russian cabal in the European leadership are trying to do is to prevent this opportunity. They don’t want Russia to spend its money on Europe to rebuild the Russian-speaking former provinces of Ukraine. They want the money to be spent, specifically, on Europe’s military-industrial complex. That’s what the whole problem is all about.

⁣GLENN DIESEN: Well, I think a key problem for Europe is also that the war now is, well, the work going on is more or less a condition for the survival of the political West, indeed, Europe itself; because the U.S. has already made its intentions clear, that it wants to reduce its presence, not just in Ukraine, but Europe. But the Americans have now taken this clear position that they will want to make a profit from the weapons. So, the Europeans have to pay for the weapons it sends.

But what was interesting (back in the end of August), it was reported in Reuters that the U.S. told the Europeans that they would begin to pull, a bit, out of the Baltic states. And that’s suddenly when you see all this reporting on the drones. So, suddenly, everyone, you know, if they think they saw a drone, but it hasn’t been confirmed; or actual drones were seen, but none of them were actually tied to Russia? Many of them were revealed — that there were people flying drones as a hobby — Germans in Germany, for example.

But the narrative remains. That is, not one piece of evidence; but if you put the 0 + 0 + 0, suddenly, you have at least a 1 (one) — in the European math.

But we also see now that the U.S. is gradually pulling some of its troops from Poland [and] Romania; and this is creating some panic. The only thing that can make the U.S., perhaps, change its mind is if there’s an actual conflict brewing up, some real threats towards Europe.

Otherwise, yes, I want to say, as well, Europe itself risks fragmenting because the EU’s main strength was collective-bargaining power: the ability to stand together; and this transfer of sovereignty towards Brussels would allow for the EU to deliver some tangible economic benefits for its member states. The EU doesn’t really do well economically anymore. So, at the moment, unity, to a large extent, depends on the war. Once the war is over, it’s very likely that the EU will begin to fragment.

So, I think a lot of this helps to explain why the political leadership in Europe seems so frightened, or desperate, to keep the war going.

⁣MICHAEL HUDSON: But Glenn, the war is creating disunity.

Look at what is happening with Hungary and the Czech Republic. The European Union now is saying, well, under the rules that we’ve had all along, Hungary is given the ability to block our military spending in support of Ukraine — Hungary has actually been attacked by Ukraine. Article 5 of the NATO [Charter] is dead. A NATO member (Hungary) has been attacked by a foreign power (Ukraine) to destroy its oil supplies that it was getting via Kazakhstan, via Russia. And both Hungary and the Czech Republic — and now there’s pressure in other countries, too — saying: We cannot afford the war of Russia. You, Germans, are willing to end your industrial growth and deindustrialize, and impoverish your economy for your ideological hatred of Russia; but we cannot afford your war. We’re going to block it.

And so, the European Union wants to change the rules to not permit member countries any longer to have the right to block.

So, what is Hungary to do? Is it to join the Shanghai Cooperation Organization? It’s being left out.

The war is, I think, not only dividing European countries against each other, it’s dividing the European right-wing NATO leadership from the voters, the population as a whole. The voters want secular recovery. They don’t want war, because war is going to impoverish them. War will enrich the military firms, that are represented by Merz and the other pro-war leaders. It’s not going to really help the economy at all. So, I think it’s being divisive.

⁣GLENN DIESEN: No, I think you’re very right. And in the long term, the war is just deepening the divisions within Europe. But in the short term, it’s seen as something to hold it together. Again, this is part of the problem now: I think there’s no strategic thinking where we’re actually going with this. But towards this end, though, the need to have the constant tensions with Russia, and keeping the war going with Ukraine, is becoming more difficult now that Ukraine is turning out to be in much worse shape than many European leaders would like to admit.

How do you see this moving forward? Do you think the European leaders have to step in? Because there’s a lot of talk now in Europe. You have the former NATO Secretary General arguing that the Europeans, or NATO, should start intercepting Russian missiles and drones from NATO territory. There’s more push now to do long-range strikes into Russia — we keep saying “helping Ukraine” — but at the end of the day, this will be our weapons, buttons pushed by our contractors. It will be our targeting, our satellites.

So it’s a NATO attack on Russia. And I think more or less this shouldn’t be controversial to say anymore.

⁣MICHAEL HUDSON: Well, it’s not controversial in Russia. Both President Putin and Foreign Minister Lavrov have said that if a missile hits Russia from a NATO country, and even if this missile is launched from Ukraine, if the missile itself is from a NATO country, or steered electronically from Wiesbaden, or any other European guidance center, Russia will retaliate against the countries that produced, or guided, the missile. And that means it’s going to do to Germany what it’s done to Ukraine. How much will it do it? Will it just begin hitting the military companies, the army bases, the electric-power utilities; or will it be more?

Russia’s response will be: You sent a missile against us? We’re going to send missiles against you. You, Europeans, have no defense against our new hypersonic missiles. They’re not going to be atomic — they don’t have to be — but they’re enough to disable your industry, certainly your military industry, to disable your ability to send missiles. We can disable not only your arms-makers, but your electronic [and] electrical facilities, your transportation facilities, your railroads, your airports, your ports.

They’ve been as clear as they can in saying this, to such a point that, given the feelings [of] the Russian voters themselves, saying: You can’t just ignore one red line after another, and let Europe escalate. You’ve got to respond.

We’re dealing with a step function here. Russia has tried to warn Europe again and again: here is what’s going to happen if you really do “that.”

Europe has decided that it wants “that.” Apparently, Merz, and Rutte of NATO, believe that Europe needs to be attacked by Russia in order to rebuild its industry. But the attack by Russia is going to prevent it from rebuilding its industry. That’s what we call an internal contradiction.

And how do you explain this? It’s a tunnel-visioned ideology of, literally, sharing the long-term British hatred of Russia. It has nothing to do with communism, because Russia is not the Soviet Union anymore. It’s almost a geopolitical confrontation that leads Europe to share the U.S. neocon view that, well, if only we could divide Russia into four or five small countries, then it wouldn’t have the power to, not only threaten us, but to play any positive role in the world at all. And that’ll enable us to play a positive role in the world, as America’s leading puppets, administering the rest of the world on America’s behalf.

I mean, that’s a pretty pitiful worldview, but that’s where it’s all moving towards.

I have other things that I want to talk about in your show. What the European Union has done is saying it’s not enough to fight Russia. As Rutte said, this is not only a fight against Russia, it’s a fight against Russia’s allies: China, Iran, North Korea. This is a war against us, against what almost seems to be the Global Majority. And the first arena in this war has been against China, and it’s been by the Dutch, who seem to be even more than Germany, extremists. They confiscated the Nexteria battery company that Chinese firms had bought and developed in Holland to provide a basic stage in transforming silicon wafers into batteries. This is not in itself a national security issue.

And in fact, because it’s not a national security issue, it’s such a common mundane technology, automobiles, Mercedes, all of the Volkswagen, all the big German car companies, but also industry in general, needs all of these batteries. And batteries are fairly simple, but the technology requires, I’d say, a couple of years to put in place. And so when Donald Trump and the Americans pressed the Dutch government to say, you have to seize any government that China owns 50% or more of, or Chinese investors own 50% or more of, you have to confiscate it as part of our war against China because we, Americans, are not going to join your fight against Russia, but we are going to end up fighting against China as our existential enemy — as the Americans like to put it.

So, the Dutch seized Nexperia and on the grounds that — well, number one, the United States told it to seize it, by designating hundreds of Chinese companies that are owned 50% or more, as free [for] Europeans to grab; and the Dutch grabbed it — and because it said, we worry that Nexperia, given the growing antagonism of the West towards China, is going to move some of its operations to China. And China might do something that we don’t like or that to interfere with our control of this bilateral battery trade.

And so we’re going to grab the company, take it over, and confiscate it — just like the European companies have confiscated Lukoil’s affiliates in Romania, and other European countries. So obviously, China denounced it. The anger in China is very, very clear. And it said, how can you do this? Europe’s manufacturing sector is dependent on Nexperia’s batteries. It has, I think, millions of its products are sold throughout Europe as not very expensive, but key inputs for automobiles and other basic machinery. And all of this is going to be blocked now. And China said, well, obviously, you know, we’re not going to keep selling producing all of this output for companies that have now been seized by the Dutch government in violation of all law, simply because the Americans tell them to. Well, the Dutch responded to say, well, Donald Trump has indeed said he’s no longer imposing the 50% rule against China’s designated companies.

But that’s not why we grabbed it. We were going to grab it anyway because we don’t want the Chinese to be in control of a company that so many of our other firms in Holland and throughout Europe actually are dependent on. So they’ve stopped production, and the Chinese have said, well, you know, we’re not going to give you stuff for free. First of all, all future trade with Holland and with other European industries is going to be in our own currency, the RMB, not in Euros. We cannot keep our savings and bill our products in Euros because you may do to us what you just did to Russia. It’s obvious we’re on the same trajectory there. Ruth has said we’re just as bad as Russia because we’re importing Russia’s oil and that’s supposed to help Russia defeat Ukraine and the whole fantasy of interconnections that the Europeans have drawn.

So the Nexperia incident is sort of to China become a whole barometer of Europe’s institutional credibility is what the Chinese spokesman have said. And it’s unilaterally halted the waiver supplies to Nexperia claiming its own national security for all of this. So I don’t see any chance of a resolution for this. The Dutch keep saying, we think the Chinese are going to be reasonable and surrender to us. Well, China’s not going to surrender. And in fact, it’s blocking key exports, not only raw material, not only rare earths, but other raw materials. There are so many key materials that China is supplying to the West that even if they’re alternative sources to Europe, these alternative sources are, first of all, going to be more expensive. And secondly, it’s going to take quite a while to put them in place. China has said, well, we are able, of course, to replicate at home what Nexperia was producing in Holland. And it has affiliates all over Europe. Of course, we can do it, but it’s going to take a while. And certainly, just to begin exporting these batteries again is going to take three or four months.

Well, the European industries that have been using these imports have all followed just-in-time accounting. They’ve minimized their keeping of inventories so that they can operate with a lower expense of doing business. So Europe doesn’t have inventories of these batteries. And it’s going to have to, it’s companies all throughout Europe within two months have announced, Mercedes and others, they’re going to have to close down their plants because you can’t make a car without these simple, basic batteries, raise and lower windows when they go up, you know, automatic control, internal control systems of cars, and they’re going to have to lay off the labor force. So, once again, this idea of Europe somehow regaining control of its economy by declaring a trade and investment and financial currency war, extending this war from Russia to China and other countries, is going to be as serious on a smaller scale as Europe’s decision not to import Russian oil and gas anymore. Europe is cutting itself off from all of the basic imports from raw materials to semi-manufacturers to other manufacturers, goods that it’s become dependent upon. And there’s no way that an economy can function without these products.

Well, you can be sure that China is quite aware of this. And when it says, well, it’s going to take a while, it’s completely Holland’s fault for doing this. Well, what it’s saying is that, well, let’s you European countries fight among themselves to see what the resolution is. And of course, when there’s a resolution, there’s going to have to be reparations, and China will protect its own national security from future seizure by saying the European leaders are really just like Donald Trump. They’re changing the rules at will for their military confrontation. In order for us to avoid our own interruption of our processing and manufacturing, we’re going to have to keep our control of our own manufacturing. Europe can, of course, do the same thing. Well, maybe in ten years, let’s say seven or eight years, Europe can do its own thing. Its population will fall in half. Mass poverty, the governments will be voted out of office. It’ll be a disaster. That is the clearly outlined plan that Merz and von der Leyen, the European Union, European Commission, NATO, the German government, the English government, the French government are pushing for. It’s unanimous that the future is for a European collapse, deindustrialization, and it’s going to result in a breakup of the European Union. And probably this kind of a breakup is what leads to actual military confrontation and war. And that’s where things seem to be leading. It seems crazy, but I don’t see when you read what other governments are saying, this is what they’re warning Europe about. And the Europeans said, well, that’s what we want.

⁣GLENN DIESEN: It’s very crazy we ended up in this situation. But the thing is, the Russian market was quite good for Europe. Indeed, it was a very important part of the entire development model. That is not just all the cheap energy which was being supplied by Russia, but also what the Russians were doing with all that money, because they were, to a large extent buying European-produced goods. And if there weren’t a special energy project, work in the Arctic, often under the hope of developing this Greater Europe, based on Gorbachev’s Common European home idea, often Europe was favored as partners, as well as with the United States, with the assumption that economic connectivity would somehow lead to Russia’s gradual integration.

It’s just crazy going down this path, because it was the Americans who were pushing very hard for NATO expansion to redivide the continent, remilitarize it. It was the Europeans who, for all these years, worried that we would recreate the Cold War logic, that we would impose these zero-sum civilizational choices on the countries, between NATO and Russia, which could make a choice, which would manifest itself in civil wars, and then proxy wars.

But yet, here we are, and the Europeans are now really doubling down. It’s very hard to have anyone actually explain where the national interest comes in here, how this is good for anyone, including Ukraine, for that sake. But no, the Chinese and others are definitely watching because if there would be some push tomorrow for Taiwan to secede, and China would take any actions. why wouldn’t the Europeans also take the Chinese funds? Why wouldn’t they seize Chinese companies? I mean, it’s even the fact that they’re discussing this is just, I think, a horrible mistake.

⁣MICHAEL HUDSON: There is a discussion of national interest, and Merz and Rutte and von der Leyen have said: Our national interest is in deindustrializing Europe. Our national interest is anti-labor. Our national interest is war.

That is their idea of national interest. So, it’s not what you mean by national interest. When you and I talk about national interests, we use it in the way that it used to be used 50 years ago. It’s the interest of the entire economy, if you were saying what is good for the economy, in terms of its material welfare and well-being for the population, the increase in output, and the more equal distribution of this output — that’s how you and I, and I think most of your listeners, have defined a national interest.

But the national interest as defined by the European leadership is: No, our interest is the same as in America — the 1%, mainly the 10%. Our interest is in the military-industrial complex. Our interest is the money in our personal pockets, that we get from the bribery from the U.S., from NATO, from the companies that we represent — against the interest of labor and the voters.

So, you have a divergence of national interest, from what used to be called a materialist approach to history: thinking that countries are going to act in their own economic and social and political self-interest, in a democratic way that represents what’s good for the population as a whole. This is no longer the meaning of national interest in today’s Western economies, from the United States to Europe.

⁣GLENN DIESEN: Well, it’s not as if — that will be my last question — it’s not as if there were some structural problems before this conflict. That is, if you look at the European economy 20 years ago, it was close to parity with the United States, the EU and the US. But since those days, the divisions between the Americans and Europeans have only increased.

I was wondering, how do you see the reasoning behind this? Is it about the energy cost? Is it about the technological sovereignty, financialization? Or is it just subordinating European interests to economic interests, primarily to U.S. geopolitical interests? Or how do you make sense of how that parity fell? Because that was quite important for the Europeans, the way the Europeans had envisioned the post-Cold War era. It would be a collective hegemony under the U.S. and EU as equal partners. And if you [fast] forward [to] today, as you said, the main objective of the Europeans appears to be to hope that America will accept Europe as a junior partner, if we subordinate ourselves enough — which is a far cry away from where we were 20 years ago.

⁣MICHAEL HUDSON: Well, Glenn, you know that I’m a financial economist primarily; and so it’s hardly a surprise that I trace the whole decline of Europe to its disastrous adoption of the Euro; and its German-backed rules that European governments, including the European Union as a whole central bank, should not create its own money. It has to basically borrow the money and it cannot run a budget deficit more than 5% of the population. Europe at the beginning said we will never, under the rules, be able to apply the same Keynesian policy for economic recovery that the United States, China, and every successful industrial company has. We are going to tie the hands of [the] Europeans’ banking and financial system to prevent the government from providing enough credit to enable the economy to grow, as more and more of its national income is spent on finance and economic rent-seeking activities.

The design came from University of Chicago extremists of the hard-money Milton Friedman School. And the United States knew just exactly that by imposing these self-destructive, tunnel-visioned rules on Europe, Europe could not use the modern monetary policy that the United States uses for right-wing purposes, but not for the purposes that Modern Monetary Theory was developed, to help the economy as a whole grow.

So, Europe tied its hands from the beginning, by not being able to have the government play a role. The United States backed politicians who said: Although Europe is joining now, it will be a Europe of corporations. We want the country to be led by [Giorgia] Meloni in Italy. We want exactly the corporatism that Mussolini advocated for Italy. We failed before in World War II. We’re not going to fail again.

And this is the craziness of it. Of course, the way in which every industrial economy, including Europe and Germany in particular, developed its industry in the 19th century was a mixed economy with government taking the lead in public infrastructure, and in supporting a central bank supplying credit to the economy, relying on government banking and government rules, steering finance into productive capital formation and tangible investment building factories and employing labor. That’s not what Europe is advocating anymore.

And, in fact, I don’t think that Europeans spend much attention looking at what made industrial Germany in the 19th century so productive, and enabled it to take the lead; and what made French industry also so productive. Why did it have such a great takeoff in the 19th century to be the economic center of the world? And now it’s shrinking onto the periphery? If you compare the difference, it’s very largely the role of the government in what was becoming industrial socialism. That it was called “social democracy,” which really meant socialism in Germany and the other leading industrial countries of Europe. And now? It turned into finance capitalism, where most European wealth is made financially, not industrially. And the financial sector realizes that it’s easier to make corporate and personal fortunes in a shrinking economy, than it is in a growing economy; because in a shrinking economy, you have grabitization. You have insolvency, bankruptcies, you have an enormous concentration of wealth ownership. And you’re going to be seeing that in Europe, just as you’re seeing that in the United States economy. And that polarization ends up impoverishing the economy as a whole, and also leading to a suspension in democratic freedom of expression, of voting. It neuters the role of voter election of national officials by this overpowering EU control system that turns out to be taken over by a unity of the neocons and the financial oligarchy, basing itself more and more on the military-industrial complex, and its links to the United States, and as a subsidy of these personal companies and personalities — the Tony Blairs of continental Europe and the Merzes — that have been able to take control.

⁣GLENN DIESEN: It is fascinating that the European project, which began after World War II under the Coal and Steel [European Coal and Steel Community], was intended to have transparency, to avoid militarization, and be an anti-war project. Now the EU, more and more, defines itself, in its own words, as a geopolitical Europe in which economic development will be done through military Keynesianism. Well, thank you, as always. Very much appreciate you taking the time. So, thank you.

⁣MICHAEL HUDSON: Well, I guess it’s not too optimistic, unless you look at the prospect of a revolution as being optimistic.

Global South

Richard D. Wolff & Michael Hudson: Trump’s Gamble Could Blow Up everything

Global South

Lend a hand to Michael Hudson to destroy the hoaxes

If you see anything like this, follow the procedure or simply let me know. Let’s give Michael some support for the sterling work that he gifts us, without holding anything back.

Michael’s webmaster writes:

Hoax Hudson XRP Vids – THIS IS A FAKE

Just a warning these are fakes. Michael speaks out against Bitcoin (and related coins) at every option. We also have people using his name on Substack. Have you seen fake accounts on any other platforms? There are over 50 videos on this one youtube account, some with 10,000 views.

If supporters could help:

1. Report the video
• Go to the video’s page.
• Click the three dots under the video (next to Save).
• Select Report → Impersonation → then Someone else.
• Enter the real Michael Hudson’s official links:

www.michael-hudson.com

https://www.youtube.com/channel/UCViN6ahZ04IvYJ3rH4c5qwA

2. File a dedicated impersonation complaint
YouTube’s direct form for this is here:
https://support.google.com/youtube/contact/impersonation

Suggested script

1. See 1st comment below.

3. • The fake video URL(s)
• A short explanation that it’s a deepfake or impersonation using Michael Hudson’s name/likeness without consent
• Links to official channels verifying the real Michael Hudson’s voice or likeness.

4. If it’s monetized or uses copyrighted material (e.g., re-edited footage, stolen interviews)
You can also file a copyright takedown request here:
https://support.google.com/youtube/answer/2807622

5. Optional escalation
If the impersonation continues, you can reach YouTube’s Creator Support (if you or Michael have a verified or partner account) or tag @TeamYouTube on X with the report number for visibility.

Thank you,

Karl

Global South

Richard D. Wolff & Michael Hudson: China Just REJECTED Trump’s ‘Surrender Plan’

Modest concessions from China that were not a sacrifice. Xi enabled Trump to get what he really wants, a public relations orchestration.

Global South

Richard D. Wolff & Michael Hudson: Trump FUMES as China, India & Russia Unite — The Shift Begins!

With Transcript

The money that America has given Ukraine isn’t to Ukraine — it’s not to the people — it’s to the kleptocrats that have said: We are willing to fight to the last Ukrainian. We are willing to try to drain Russia’s resources by sending Ukrainians there; and if the Ukrainian army tries to flee and retreat, we’re going to shoot them in the back — that’s what the Azov Battalion is for. So, all of this money has gone, not really to Ukraine, but to the Lvov group — the Azov Battalion — to, really, the neo-Nazis who are in charge of Ukraine. And the Ukrainians are hopeless to do anything.

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, October 23rd, 2025, and our dear friends, Michael Hudson and Richard Wolff, are back with us. Welcome back, Richard and Michael.

⁣MICHAEL HUDSON: Good to be here.

⁣RICHARD WOLFF: Hi, glad to be here.

⁣NIMA ALKHORSHID: Let me start with what’s going on in the European Union today. They’re talking about seizing Russian assets and sending them to Ukraine. The situation in Ukraine is getting critical in the minds of those countries who are trying to deal with the dominance of the United States, the U.S. dollar.

The question is this: If the United States and EU can freeze and seize Russia’s gold and dollar reserves, how safe is any country’s wealth under the Western financial system?

I’m going to start with you, Michael. Go ahead.

⁣MICHAEL HUDSON: Well, it’s obvious that other countries do not feel safe. That’s why they’re buying gold. I think the rise in gold prices and central bank gold holdings reflects the inability so far of the Global Majority — China, Russia, other countries — to create an alternative vehicle for keeping their international savings in London, or in New York — in central bank assets loaned to the central banks of England, and America by investing in U.S. Treasury securities under the dollar standard, investing in European currencies. When all of this can be grabbed, all of a sudden, there’s no safe holding for other countries to hold their international reserves.

In the past, they’ve held it in New York, partly — and their gold in London — because that’s where the foreign-exchange markets were. And the purpose of holding international reserves, since World War II, has been to manage the exchange rate, so you can stabilize the exchange rate by borrowing and lending. And other countries, under the rules that the United States set up in 1944, that created the International Monetary Fund and the World Bank, were linked — all of this intervention in world currency markets — to the dollar, because that was the market at that time. That was where they had to operate.

Well, all of a sudden, this vestigial survival, from 1945, has been rendered unsafe and, hence, obsolete. So, you could say that the whole surge in gold prices means that countries are trying to find some way to avoid holding them in [that] form.

And the risk is twofold. On the one hand, the EU is still discussing how to turn this $300 billion that it’s confiscated from Russia, how to give it to Ukraine’s kleptocrats, in payment for their selling their population as, in effect, the mercenary army to NATO.

The money that America has given Ukraine isn’t to Ukraine — it’s not to the people — it’s to the kleptocrats that have said: We are willing to fight to the last Ukrainian. We are willing to try to drain Russia’s resources by sending Ukrainians there; and if the Ukrainian army tries to flee and retreat, we’re going to shoot them in the back — that’s what the Azov Battalion is for. So, all of this money has gone, not really to Ukraine, but to the Lvov group — the Azov Battalion — to, really, the neo-Nazis who are in charge of Ukraine. And the Ukrainians are hopeless to do anything.

Well, the problem’s not only, therefore, with foreign countries dealing with the central banks and the government of the United States; it’s the whole international court system that is going to — according to the EU — we are going to make sure that we never have to pay this $300 billion, because we’re going to ask for trillions of dollars of reparations for Russia defending Ukraine’s Russian-speaking population — in Luhansk and Donetsk — and now Odessa, that said: We want to be part of Russia.

And their defense is really an attack: We, the West, are allowed to attack Ukraine, to announce that the Russian speakers are subhuman. We can break the rules of law, by attacking consumer areas, civilian areas; not focus on military at all, but just try to destroy whatever is left for Russia to have. But, then, we’re going to say that they are attacking us by fighting back.

It’s like Israel accusing Gaza of attacking Israel, by fighting back against the eighty-year war against the Palestinians.

As long as you’re having the Western financial system backed by a judicial court system that, like the International Monetary Fund and EU, acts as an arm of NATO, the rest of the world is trying to break away; and the line of least resistance, for now, is to buy gold.

Well, the problem with buying gold, of course, is — in the past, countries would invest their foreign reserves in gold — Venezuela invested its reserves of gold, and it kept its reserves (as we’ve discussed before) in the Bank of [England], so that it could use these reserves as collateral when it borrowed money to intervene in the foreign-exchange market to try to stabilize its currency. That’s why countries kept their gold in either London or New York, where the major international foreign-exchange markets were.

But now, they can’t do this anymore. The Bank of England grabbed Venezuela’s gold, and it looks like the United States has grabbed Germany’s gold — and Germany’s an ally! A few years ago, Germany asked for its gold reserves to be returned from New York — [from] the Fed in New York’s basement — to Germany, for its central bank to hold itself. The United States said: Well, you know, this gold is very heavy. We’re going to have to find airplanes for that — and that’s the last that (in public) we’ve heard.

German reporters and journalists have been calling me to say: Do you know anything about what’s ever happened to this? They tell me that they’ve asked the German politicians about it. The politicians will not answer. Nobody can find out whether Germany’s got any of its gold back. And the United States is still holding onto this gold, and the rest of Europe’s gold.

So, holding gold only makes sense if you hold it in your own central banks, where the only way that it can be grabbed is for NATO to invade your country, seize the government, empty out your gold reserves and take it away — like they did in Libya, and other Middle Eastern countries. The problem that they’re really dealing with — the gold problem — is, how are we going to move beyond “gold isn’t a [practical] alternative?”

Well, the other line of least resistance that they’ve talked about is currency swaps: We’ll hold each other’s currencies (among the Global Majority). The problem with holding your currencies is, the currencies go up and down. And if you’re a creditor nation, like the United States was to Europe and the world in 1945 — and like China is today to many of the Belt-and-Road-Initiative countries that it deals with — how are you going to deal with the fact that the currency you’re holding is declining?

Russia has accumulated enormous holdings of Indian rupees that have been declining in value. And the last few days have seen the Trump administration go to Argentina, and they say: We know that you have been dealing with China very heavily, and you have a currency swap, and you owe them a lot of money; but this $40 billion that we’re giving you to support the peso long enough to get [Javier] Milei re-elected next week? In exchange for this, and our not pulling the plug on you, we want you to break all your relations to China; to not honor the currency swap; just to say, well, we’re just not going to pay you, China — what are you going to do about it?

So, currency swaps themselves are not a solution. And the BRICS currency is no solution, because in order to create a common currency among BRICS countries, it has to be like the United States creating a central bank, in which all of the American states and politicians are connected. For the EU, all of the countries had to create a political union because, if you have your own currency, who is going to get this currency? How will it be distributed? And how will various countries pay?

Until you have a political union among all the BRICS countries — which is not on the horizon, by any stretch of the imagination — you’re going to have to go back, and have the solution that John Maynard Keynes came up with in 1944, as an alternative to the U.S. designs for an International Monetary Fund: You create a new central bank, a collective central bank, that will manage the credits and debts among its member countries, in order to denominate their foreign exchange and currency swaps, to denominate these currency credits and debts in a common denominator based, basically, on the prices of their collective exports and relationships with each other. That’s the only logical solution.

I described the long debate over this in my book Super Imperialism. It took a lot of political maneuvering just for Keynes to come up with that. And of course, the United States said: No, we don’t want other countries to make any means of settlement among themselves. Any country’s settlement with any other country has to go through Washington, and the U.S. dollar.

And other countries — first of all, you had Britain surrendering to this; and the result was the loss of the British Empire and its currency reserves. Its colonies and countries using the pound were all transferred to the United States by 1950, and the pound collapsed in value, and Britain began its long deindustrialization. The rest of the European countries, once Britain had surrendered — well, there was nothing they could do but go along with it.

For the first time now, the world has gone back to 1944-1945, to create a kind of mutual foreign-bank relation to handle relations among currencies that is not run by NATO, the United States, and the Cold War. And the more gold goes up, the more you realize the inability so far for the other countries of the world to address, and solve, this problem.

⁣NIMA ALKHORSHID: Richard, jump in.

⁣RICHARD WOLFF: Yeah, let me put this in a context, but also to scare you.

The same logic that leads the Europeans to look gleefully at the $300 billion as a way to make it appear to their own people that the horrible mistake they made in going into a war like this — the enormous damage the war has done to their economy — to make it look as though they’re making, now, somebody else pay — which is really what this is about. It’s not enough money to change the basic layout of what’s going on. It sounds like an awful lot, and it’s a big chunk of money, but it is not adequate to alter the basic situation.

Number two: Let me scare you. China has (last time I looked) $750 billion worth of U.S. Treasury bills. What’s to prevent the United States from telling them that these are now toilet paper? We are not going to pay you the interest, and we’re not going to pay you the principal, and we’re going to deal with the rest of the world, henceforth. When we have to borrow for the American government, we will borrow from the rest of the world — end of conversation. Or, we’ll do it for half of the $750 billion.

What’s to prevent them? You know, this is crazy.

Here’s what we are watching: we are watching the end of the empire. These are the kinds of things that happen when the empire can no longer function. The United States is facing a fundamental contradiction: It cannot keep the world arrangements of the post-45 period, and fight Russia and China; and be involved in a war in Ukraine; and be gearing up to take the oil away from Venezuela — it can’t do it. That’s the problem. It can’t do it. It doesn’t want to admit it can’t do it, so it’s coming up with crazy stuff, stuff that makes no sense, other than as the end of an empire.

So, one of them is, we’re going to take — by the way, if I understand correctly, they’ve already taken the interest income from the $300 billion, and used it for the Ukraine war. Clearly, that great move didn’t change anything. And so, now, they want to take the principal. Of course, they do. You know, this is the same game. And what does it do? Everything that Michael just said, and a dozen more things.

Everybody is wondering where to keep their money now, because the empire, the emperor, is not in a position to do it anymore. The United States had said to the world: You can keep your money here because we are the safest place for anyone to keep any kind of wealth. We are the ones who will tax it the least. We are the ones who will threaten it the least. We don’t even have a socialist, or communist, party worthy of the name, in terms of its political power; so you don’t have to worry about that. We have a docile, unorganized labor force. You know, we offer you wonderful conditions. So please take a good portion of your wealth and bring it here — which gives us yet more power of an empire to give you the guarantees. You are, in fact, by locating your wealth here, funding our ability to guarantee that wealth.

That’s what an empire is. That’s what an empire does. That’s what the British did in the previous century. And now it can’t do it anymore.

Let me give you, what you wouldn’t perhaps see as, another sign. We are now executing people in boats on either side of the Western Hemisphere. We did it for a while in the Caribbean with the Venezuelans and the Caribbean [peoples]. And, now, I learned in the last two days, we’ve gone on the Pacific Ocean side, and we’ve done it again. We don’t arrest these people — no trial, no jury, no lawyers, no nothing. Summary execution — in the name of what? Of a war on drugs?

Friends, the United States has had an official war on drugs for at least the last seventy-five years. It proves unable to stop them. You can get all of these drugs anywhere in the United States — urban, rural, east, west, north, and south. We are not able to stop it.

Killing people summarily is an absurd thing for the upholder of values of law and order and, if I dare say so, a rules-based international order. What rule exactly is it? Killing people in boats?

If you arrest a person for the drug trade inside the United States, you do not kill them. Even if they are found guilty, you don’t kill them. We haven’t killed anybody in the drug trade for that crime in anyone’s memory.

Okay, so these are signs of an empire that cannot function. Of course, people are running to gold. It’s one of those things which — and I don’t believe it’s correct, but that’s another matter — but it’s a thing that people think is safer than those other alternatives. Well, what I hope people focus on is not whether it’s safer or not — In my judgment, it isn’t — but that, we can disagree. The important thing is they are running away from what is now, clearly — even though they dare not say so — a break in the behavior of an empire.

For the Europeans — look, they’ve even had a debate among themselves about it. Their lawyers are telling them: You are taking an incredible step here. Are you sure that it will not hurt Europe to have been the one to do it? Because wherever you’re wealthy, if it’s the Europeans that are doing it, then it’s Europe you’re going to be sure not to keep your wealth in. And this is something the Europeans, at a time when everyone admits their economies are in serious trouble — above all, the British, the French, and the Germans, and those are the major three in that part of the world —

You really want to, now, damage your standing as a place to hold wealth, which is where wealth has been held disproportionately for the last 500 years? This is bizarre. This is the end of the Western Empire.

Last point, before you go back [to Michael]. Part of the reason the BRICS have not developed their own currency, their own ability — which, by the way, all of these developments will provoke them to do, and to return to do, sooner rather than later. Michael is right about that —

But one of the reasons they haven’t done it, we have to keep in mind, because these are important points going on in the debates inside China: The spectacular growth of China in the last thirty-five years was itself, in part, dependent on the empire of the dollar. It was within that context that the Chinese found a way to grow faster than the United States; to become the manufacturing core of the world economy.

So, they are rightly worried — don’t make the transition out, before you are pretty damn clear that the benefits of doing so will outweigh the inevitable costs of not having what worked so well for you. There’s a joke that goes around in China about, you know, not cutting off from the United States while it is doing very useful things for the Chinese: in having the SWIFT system, in having the dollar as the universal exchange, even to the diminished degree that is now the case.

In other words, it’s the old dialectic, and we should be careful not to get caught on either side. And let me explain very quickly, then I’ll stop.

On the side of the United States is the following argument: China is only a superpower because it brought in private capitalists thirty years ago. After Mao died, and the end of the Cultural Revolution, you had a change, and in come foreign private capitalists — Japanese, European, American — and then the allowance for the Chinese themselves.

So, that’s one side of the dialectic. That happened — no question — and that was very important to Chinese growth — no question — but, at the same time, the Chinese government held on to the absolute dominant position in the Chinese economy. The government did, and the Communist Party within the government kept its power. And that is just as important a part of the growth and success of the Chinese economy. Otherwise, you can’t explain why China did so much better than any other country in the global south under the regime of American empire.

Alright, so the dialectic is the interplay between the public and the private sector. The reason they outperform the United States, is the United States doesn’t understand the dialectic, and is so caught up in its own ideology that it holds back the government from doing all kinds of things it needs the government to do. [The] Chinese don’t have that problem, and the Americans can’t see it.

So, the dialectical process now has shifted. It’s costing the West, every day. The war in Ukraine is a wonderful metaphor, despite everything. Every escalation, including the new sanctions on oil companies announced over the last twenty-four hours — like the F-16, like the Abrams tank, like the various missiles (like the Patriot system, like the HIMARS) — all of them — they didn’t work. They didn’t work. That’s why you have the escalation, at every step.

And if I were a betting person (I’m not, but if I were), I’d bet that all of this stuff, with sanctioning the oil companies, these are just ways for Mr. Trump to cut his losses. Ukraine is going down, and there will be — there already is — an enormous blame-game going on between Europeans and Americans. Who’s at fault? And so, yeah, sure, let’s sanction that, sure. The United States did its part. It’s not us. We did our part. It’s you, Europeans.

And the Europeans will say exactly the opposite.

And this game of blame will be yet another sign of an empire dissolving.

⁣MICHAEL HUDSON: Nima, is it okay if I return to the monetary topic? International finance?

RICHARD WOLFF: Sure.

⁣NIMA ALKHORSHID: Go ahead, Michael.

⁣MICHAEL HUDSON: And yet, despite all of these things, the U.S. dollar has been going up. It’s certainly viewed as a safe haven for anybody. And why is it? How can the U.S. dollar be going up, while other central banks are moving out? Obviously, it’s private-sector money, and that means new credit creation. Private investors are moving their money into the dollar.

Well, this is exactly the strategy that the United States — way beyond Trump — has tried to put in place. It’s the strategy between Trump saying: Japan has to pay us $350 billion, or we will wreck their economy by blocking their trade with the United States; Korea has to pay us $350 billion, or we will block Korean exports of automobiles and computers and steel, other Korean exports, to the United States.

So, the United States has tried to make it a safe haven, despite the fact of all of the problems that we’ve been discussing — why it’s unsafe for central banks to hold their reserves here. The United States has the power of making it a safe haven, by the extent to which it can wreck other countries’ economies, by blocking them off for trade with the United States.

But there’s another reason. There’s a more positive reason. And this is what I think we really should be discussing in the time we have remaining.

Money has been coming into the United States because we’ve had an enormous real-estate bubble. A Ponzi scheme, virtually, has been financed, first of all, by the low interest rates — the Federal Reserve provides the banks with low interest, to lend to its customers for spending.

Well, what do central banks, and what do commercial banks, lend for? They don’t lend for goods and services. They don’t lend for people to buy consumer goods. And so, the effect of central bank credit isn’t on commodity prices. They lend for the purchase of assets already in place as collateral. That’s how banks have operated for the last thousand years. Eighty percent of the bank loans, as we’ve said before, are for real estate — and the effect of this bank-lending is to raise real estate prices.

More and more recently, you’ve had the banks lend an enormous amount of money, coupled with the Trump administration’s policies to create an enormous bubble in the stock market — well, Trump went to the Silicon Valley heads, and the biggest monopolies in America, and said: I want to build a billion-dollar East Wing of the White House. I want to make it bigger than the White House, and put in gold “Trump’s Ballroom,” so that people will look at me and my name, instead of at the White House. That’s going to cost maybe $250 billion. I want each of you to give me $25 billion. And in exchange, I promise I’m not going to impose anti-monopoly laws against Silicon Valley, or the oil industry, or all of the other monopolies. And I will promise to cut your taxes, so I’m only taxing labor, industry, agriculture — but not you financial guys.

And, of course, they went along with it. And so, Trump has been able, in order to get the money that he wants, to get other people to contribute to his political campaign, to buy his cryptocurrency, to make billions of dollars for himself — and, well, you can contribute to my campaign by buying my cryptocurrency, and that’ll push it up; you can contribute to my ballroom, to make my name immortal.

And the result is that he’s made the deal of making and permitting an enormous price inflation. He’s imposed tariffs on foreign imports so that this creates a price umbrella for American producers of similar goods, to say: Raise your domestic prices all you want, and blame it on the tariffs; and say, well, that’s pricing at the margin, and the margin is what we import.

So, you’ve had this enormous stock-market bubble. And it’s a Ponzi scheme, because a Ponzi scheme is where you have the economy borrowing so much money — to try to break even, if you’re a wage-earner — or to keep current on your debts, if you’re a corporate financial manager, that you lend the customers the money to pay —

There are a lot of homeowners that, all of a sudden, they’re finding, as a result of global warming and bad weather, that there’s massive flooding. And the insurance that they have to pay on their houses has gone up so much, that they cannot afford to pay their mortgage, and to pay their living costs, and pay this rising insurance. So, all of a sudden, their housing — in Miami and throughout Florida, and in the western states that are homes of hurricane and tornado areas — all of a sudden, this has become unavailable.

Well, the banks have gone to them [to] say: Well, we don’t want you to lose your home. Of course, you want to keep living there. Take out an equity loan — and the banks will lend the money — the equity loan — so that families can be able, instead of repaying their mortgage, they can simply keep on adding personal equity loans to the mortgage. They can pledge, and draw down, their retirement savings funds.

All of this money is going to increase asset prices. So, the real inflation that the United States has had, that has stabilized the dollar, is not the consumer price inflation that people are talking about — it’s the asset price inflation for stocks, bonds, and real estate.

And many of the banks today who have lent to automobile-buyers — you’re having default rates on auto loans go way up; default rates on real estate, way up. Well, the banks that are heavily exposed to these areas, that have said: Well, we make so much money in high-priced auto loans and high-risk loans, that we’ve decided to make loans to whomever will pay the highest interest — and the people who pay the highest interest are the most desperate.

And the result is that now these banks are insolvent — just like in 2009, most of the big Wall Street banks, and the systemically-important financial institutions, were insolvent. They were in negative equity: the debts that they owed to their depositors and their counterparties were higher than the value of their assets.

Well, that’s the danger that the United States is going to fall into today. And this is why so many of the professional investors — certainly the ones I know — that think, we can’t explain why the stock market is going up. There [are] higher profits — all of that’s true — but the whole economy is being hollowed out by debt.

All money creation is debt creation, because it’s credit creation. Money is a form of credit. And the question is: If the credit is used to either help people pay their debts, or to run into debt to buy stocks and bonds and real estate that they think will go up, then at some point, all of this debt becomes increasingly fragile, and has to collapse — and that’s what Hyman Minsky called the “Ponzi” phase of the financial instability cycle.

And the U.S. is coping with its financial instability and the dependency (that we’ve talked about for the last forty-five minutes), by essentially creating a Ponzi scheme that is also going to collapse.

So, the insecurity of central bank holdings, of their dollars in U.S. Treasury securities, is nothing compared to the insecurity of private investors — foreign investors, and also domestic investors — who have decided to try to participate in the stock market. Well, you don’t know when it’s going to stop. The only way you can know when a bubble is going to stop is when it begins to turn down.

And the market in U.S. stocks and bonds recently has been pushed, above all, by domestic American small investors, not big institutional investors — they’ve sold out, and are moving into long-term Treasuries, 10- to 30-year Treasuries, not short-term. They want to lock in the gains while they can.

It’s the small investors that have done this, because they somehow imagine that — they don’t believe that — there’s a boom, until it’s almost over. And also Canadian investors. I did a study to see foreign investment in the stock and bond markets. Canadian investors don’t like to buy stocks until they reach the top. They think, okay, now we see the trend, now we’ll buy. Then it goes way down, and, finally — when it gets near the bottom — they say, okay, we’ll sell, it looks like it’s a trend — and then it begins to go up again. Well, that’s what the small investors in America do.

So, the American economy is becoming just as exposed to all of this instability as foreign economies are. And so, the result is — I think we’ve used the word “desperation” before — that’s how the United States is flailing around. And it looks like, if there is a meeting between Trump and China, China is going to say: You know, maybe we should just go our own way. Yes, you’re going to prevent other countries, to ban any country’s exports to each other that do not use American computer language, American electronics, as the basis for it.

Well, this is going to drive other countries to say: Well, I guess we’ve lost the U.S. market. I guess we’ve lost the market of America’s satellites in Europe. I guess we’re going to have to have a new computer language, in order to trade with the world’s growing market — China and the rest of Asia. And so, these new sanctions that Trump’s team has been describing in the last day or two, are going to be driving other countries to a total break with the United States.

Well, if there’s a break in the United States, it’s not only a break in U.S. trade, it’s a break with their mutual investments, the loans and credits they have to each other. Each country will take whatever they have. It’ll be a clean slate. Nobody’s going to pay any of the debts to each other. It’s all grab — China will grab the American investments there; America will grab China’s, and Russia’s, investments here —

That’s where the Trump administration is leading, because it really believes that other countries can’t afford to lose the American market. And yet, if the American market is collapsing, because it’s all so debt-ridden and financialized, then why would other countries worry about losing the American market, if the price of holding it is to lose the Chinese, Asian, and Global-Majority market?

That’s the big choice that they’re having to make. And you can imagine that their choice is not that which the America-firsters imagine, in their collective narcissism, that other countries cannot survive without the United States’ leadership and control, at the price of absorbing all of their international surplus — for us, Americans — instead of for them. That’s the blind spot of this self-destructive American policy that, as Richard said at the end, is catalyzing other countries to create their own alternative, as an economic life and death issue.

⁣NIMA ALKHORSHID: Richard, breaking news here. The Wall Street Journal reports that President Trump has pardoned Changpeng Zhou, the convicted founder of the cryptocurrency exchange Binance. The decision follows months of efforts by this guy to support Trump’s family cryptocurrency company. And he was pardoned by Donald Trump.

⁣RICHARD WOLFF: Yeah, that part, there’s no end to — and for me, by the way, that’s another sign of a declining empire — its Emperor (you know, whoever it is) taking care of his cousin and his uncle; it’s the French leader famous for the phrase, “après moi, le déluge” — “after me comes the deluge:” it’s all over, and I’m going to grab as much as I can, before the flood comes and shakes it away.

But I want to pick up on the last point Michael makes. You know, he reminds us that Japan and South Korea have been told, you have to invest $350 billion. Ursula von der Leyen was told that the Europeans have to buy twice that much in U.S. energy in the years ahead; and invest $700 billion in the United States.

Well, I’ve got news. If the Europeans are willing to take the money from Europe, then I can assure you that before they go down, they will turn to the United States, whether Mr. Trump is president or not, and say: It’ll be a cold day in hell before you ever see any of that money. You made a demand on us, and we told you we’d give it to you. But the world has changed. You know, like we told the Russians it was safe to keep their money in London, or Western Europe, and, well, the conditions have changed.

That’s what we’re talking about. All bets are off.

There is a small correction. The dollar has not gone up. If you look at the dollar, from the time Mr. Trump becomes president (back in January) to today, it is significantly lower in value — at least, against the Euro, and a good bit of other currencies as well. I think Michael’s analysis stands. I think the reason it didn’t go much lower is not because wealth isn’t being withdrawn from the United States — it is, to gold, and to all many other things —

But I think the reason is the second part of what Michael said: You have a classic unsustainable inflation. And he’s quite right. It’s not the inflation of goods and services that they’ve kept under control; but the price of keeping that under control is an uncontrolled inflation in the asset markets and, above all, in real estate and the stock market.

People have done very well in the stock market. People are doing very well now in the stock market. That’s one of the reasons the ruling class in this country — even though it doesn’t like what Mr. Trump is doing — isn’t going to do anything about it because they’re the ones who own the shares, and their monthly statement is telling them he’s okay for them. He may be a disaster everywhere else, but he’s okay for them.

You know, the mass of people? No, the mass of people are going in a different direction. They’re about to elect a Muslim socialist mayor of New York City. They’re about to elect Catherine Connolly in Ireland as the new president of Ireland, whose perspective and whose positions are quite like those of Mr. [Zohran] Mamdani in New York — sometimes right down to the literal sameness. So, things are happening that are coming out of the movement from below — the absurdity of the French government, which Mr. [Emmanuel] Macron is no longer the real leader of; and Mr. [Keir] Starmer, likewise; and Mr. [Friedrich] Merz, soon. These are signs of diminution.

And the inflation in asset markets is nothing new. It is a very old business. That’s why we tell people a credit is good if it is used to be productive, so it produces the wealth that can justify, retroactively, the debt. You get that if you borrow to produce. You don’t get that if you borrow to bid up asset prices.

The joke then becomes — and we’ve had this in the United States, repeatedly, in the last hundred years: You have a borrowing binge. It bids up the price of real estate. As the price of real estate goes up, the owners of the real estate go back to the bank, and say: I have a much more valuable piece of land here. Let me borrow more money because you have the collateral. Oh, sure, here’s more money — which is then used to bid up the price. You understand? The loan bids up the collateral, which enables a bigger loan. There’s no end of this until, well, what?

Those two automobile loaning companies that collapsed over the last two or three weeks? And notice, not just that they collapsed, but the immediate news — extraordinary! Literally like what happened at the beginning of the collapse of the subprime mortgages back in 2007-2008. An immense debate between a small group who says: Uh-oh, this could be the beginning of the collapse — versus an army of responders saying: No, no, no, it’s different this time.

That’s exactly what we have each time. And, by the way, sometimes one of them is correct, sometimes the other one of them is correct.

The important thing is to see what we are seeing: Any one of a dozen phenomena could blow this out of the water.

If the Russians finish in Ukraine — the battle of the city of Pokrovsk, which is now in play, is the end, basically, of this war — Odessa and Kiev are all that’s left to be fought over, and it’s obvious where this is going.

Likewise, it’s obvious, to those who watch, that the sanctions on these two oil companies [Rosneft and Lukoil] is a symbolic act. It’s not a real, you know. It’s an irritant. If you look at the price of oil, which it’s supposed to drive down — the price of oil has been going down from the beginning of the war in Ukraine. If you look at the global oil price in the early part of 2022, and you look at it today, it’s a line that goes up and down; but it basically goes down, from roughly $120 a barrel, to roughly $60. That’s a tremendous cut — and that has not inhibited the Russians, at all. Right?

So, you have sanctions, and a global cut in the oil price — should have done Russia in, if you believed any of that story from the beginning — it never did. And this little addition isn’t going to do it either. The joke today — today — the price of oil went up two, three bucks a barrel, not down.

You know, it’s just extraordinary the way this is playing out, and the utter blindness of the West in terms of understanding its own position. No one knows how long it will take for the BRICS and the Chinese to develop their own equivalent. But I think, if I had to pick the most important thing that Michael told us, it’s his recognition — as he spun out the logic of his own argument just now — that the end result is the United States building a wall around itself. It is this self-isolation of the United States that’s underway.

We have seen tariffs imposed, but we have not yet seen retaliation. That’s coming. And no one knows how bad that will be. And all of it — Mr. Trump is busy, desperately trying to hold on, for example, to the Milei government in Argentina: giving them $20 to $40 (depending on how you count) billion dollars to keep their currency going; dropping the tariff against their beef, so that they can bring cheap meat into the country; freaking out the beef ranchers in several states, without which he can’t be president anymore.

He has to screw the cattle farmers in this country by bringing in the cheap beef. Why? To keep one of the few governments going that supports him. This is impossible.

And there’s a good chance — Mr. Milei, having gotten this total bribe — of the people of their country being told that they must vote for him or else they will lose all of these benefits —

So, talk about interfering in other people’s elections! Remember? That was Russiagate we were very upset about? That was nothing, compared to — you buy that entire country here, openly, publicly, with a threat: You don’t get the money, you don’t get the beef exports, unless we get a re-election of this particular candidate, who, the polls in Argentina show, is like Mr. Macron and Mr. Starmer: you know, hated; not loved, except by the extreme right wing there, which is too small to keep him going. So, for me, again, signs of a decrepit, desperate empire having a hard time holding on.

⁣MICHAEL HUDSON: I want to pick up on just two topics that Richard’s brought up: Argentina and oil.

Obviously, after the election, Argentina cannot pay, not only the $40 million, but all of the other debt that it’s taken on from the International Monetary Fund. Milei will probably be voted out of power, and the IMF is going to say: We only lend money to American-backed dictators. We don’t lend money to left-wing groups that want to increase living standards. We only lend to our client countries.

So, Argentina cannot pay the debts. And the problem, that I should have mentioned before, is neither can almost all of the global south countries today. They cannot afford to pay the debts. If there is the break that we’ve discussed, the global south countries cannot pay the foreign-dollar debts they owe — not only to the U.S. and the official institutions like the IMF, but to bondholders.

There are going to be a lot of banks that are very heavily exposed to this break that we’re talking about. And the break, of the scale that we’ve talked about, the break of international trade and payments between the West and the Global Majority, is going to lead to many bank failures, too.

Also, Richard pointed, quite rightly, about oil. I didn’t mention that the most heavily exposed countries of all are Saudi Arabia and the Middle Eastern oil exporters. The deal that they made back in 1974 and ‘75 — and I was at the White House sitting in on these deals — was that they can charge whatever they want for their oil, but they have to invest all their oil-export earnings in the U.S. stock and bond markets — not buying control of U.S. companies, but stocks and bonds.

Well, all of this money is just as exposed as other countries are. And I think this is the explanation for why the oil prices have been going down. The Americans have strong-armed OPEC countries: You must reduce oil prices because we want to squeeze Russia’s foreign-exchange earnings that come very largely from its exports of oil and gas.

The Americans think of Russia as a gas station with atom bombs, not realizing that Russia now exports agriculture, and all sorts of other goods, besides oil and gas. So, Russia’s been doing just fine. It’s growing much more rapidly than the West.

But the U.S. has strong-armed OPEC into providing such a heavy supply of Near Eastern oil that this has driven down the prices. This is done largely to support America’s control of the Near East.

All of that is going to be called into question also. The whole political division of the world between the Middle East countries — literally in the middle between the East and the West — is going to be all up for grabs — all instability, all up for diplomatic maneuvering between China, Russia, and the BRICS countries, on the one hand; and the United States and its European satellites, on the other.

All of that is going to be enough to supply your show with a lot of audience for the next year or two, Nima.

⁣NIMA ALKHORSHID: Yeah. Thank you so much. Richard, do you want to add something before wrapping up?

⁣RICHARD WOLFF: No. No, I want to apologize [to] people: I don’t mean to beat the proverbial dead horse, with this “desperation” and “declining empire;” but I also want to justify that I keep returning to it because it is the context that is often missing in the discussions — so we don’t get lost in the weeds. Important as the details are, we need to periodically remind ourselves, and our audience, of how to see the larger picture within which — otherwise, we will be whipsawed by each day’s evolution.

You know, you take the president seriously, when he tells you that by going after Lukoil and Rosneft, he’s done this major — this is all really what folks used to call “smoke and mirrors” — you know, a game, a performance — that has really only to do with the fact that the Europeans know that it’s over in Ukraine, and that their program of demonizing Putin as the (sort of) way to cope with this loss isn’t doing the job. It’s not reviving their popularity; it is not recouping their economy; it is not squeezing out of the United States more support — none of it. Absolutely none of it.

And so, they are desperate. They really don’t know where, quite, to turn. And believe me, there are people — there must be — maybe I’m wrong, Michael knows this stuff better than I do — but there must be people in the White House with enough economics history in their head to be able to tell Mr. Trump, and the people who advise him, what the risks are of a stock market —

Even the financial press is full of articles — today, yesterday, last week — wondering whether the overpriced stock market is going to blow at any second. It’s not just left wingers, like Michael and me. People should understand, this is a widespread anxiety. When we say people are rushing to gold for safety, that’s what’s happening: they’re leaving the stock market — not enough yet to offset the built-in rising of the borrowing, and the asset inflation.

And the inflation you don’t see at the supermarket is because you do see it in the stock market. And beware, if it stops in the stock market, it might really take off in the goods market. And then where will the mass of Americans be?

⁣NIMA ALKHORSHID: Since you’ve mentioned the situation with the White House, Richard, before wrapping up, here is the situation with Trump’s White House. Here is what he said about India:

⁣REPORTER (CLIP): And, you know, you even mentioned that in a recent phone call with Prime Minister [Narendra] Modi, and that Modi had said his country would stop purchasing the Russian oil. But India said that they were not aware.

⁣DONALD TRUMP (CLIP): Well, then they’re going to just keep paying a lot of tariffs. If they said that, but I don’t believe they said that. No, I spoke with Prime Minister Modi of India, and he said he’s not going to be doing the Russian oil thing.

⁣REPORTER (CLIP): Well, why would India say that they’re not going to do that?

⁣DONALD TRUMP (CLIP): I don’t know. But if they want to say that, then they’ll just continue to pay massive tariffs. And they don’t want to do that.

⁣NIMA ALKHORSHID: The guy makes things up. [Laughs] How can you imagine that?

⁣RICHARD WOLFF: Yeah, and he’s going to threaten the whole world with tariffs. It’s his answer, half the time, and with his assistants, it’s the answer all of the time. You know, this reminds me of a famous image. It’s the two guys in trench coats, entering the dry cleaner in some urban area of America, and explaining to the little owner of the dry-cleaning establishment: We’re here to pick up our weekly $200 protection fee. And the little owner turns to them and says: What are you talking about? What do I need protection from? And the two of them smile, and they say to him: You need it — from us. You have to pay so we don’t hurt you.

It’s really what Michael said a little bit earlier: You have to pay, or else we will hurt you.

Goldman Sachs released this last week their estimate of what the actual tariffs are that have been levied (so far) in the Trump regime, and what portion of them have been absorbed by the businesses, what portion passed on to consumers, and what portion hurting the original exporters. Here we go. Ready? The exporters have lost under 10% — that is, only 10% of the burden of the tariffs has actually fallen on the exporting country; 61% has fallen (if I remember the numbers) on American businesses; and the remainder on American consumers.

So, American businesses and American consumers have been whacked by the tariffs. The rest of the world, not so much. Not really anywhere near so much. And that’s before — as the Goldman people point out, correctly — that’s before we get the retaliation that is being planned, debated, and, hesitantly, brought forward in the rest of the world. At which point, the balance will shift.

And all they can discuss among themselves at Goldman is: Which is worse for the American economy? The damage to the business’s profits, or the damage to the consumer’s pocketbook? What a place to be, in looking at the effect of the “liberation,” as Mr. Trump called it.

⁣NIMA ALKHORSHID: Thank you so much, Richard and Michael. Great pleasure, as always.

⁣RICHARD WOLFF: Bye-bye.

⁣NIMA ALKHORSHID: See you.

Global South

(Transcript Added) Richard D. Wolff & Michael Hudson: Trump Is Blowing It All Up — Total Collapse Ahead!

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, October 16, 2025, and our friends, Richard Wolff and Michael Hudson, join us today. Welcome, Richard and Michael.

⁣MICHAEL HUDSON: Good to be here.

⁣RICHARD WOLFF: Hello.

⁣NIMA ALKHORSHID: Richard, let’s start with you, and with the reports we had in the New York Times that Donald Trump and his administration have authorized the CIA to do some sort of covert operation in Venezuela to overthrow [President Nicolás] Maduro. And here is what we’ve learned from Republican Senator Rick Scott on Fox News:

RICK SCOTT, U.S. Senator, R-FL, Senate Armed Services Committee (CLIP): I think if Maduro’s smart he’s going to go ahead and move to Russia, or China, some place like that, because his days are numbered. You know, the public of Venezuela don’t want him. They rejected him in the last election. He stole the election. He’s a dictator, a drug cartel leader. So, his days are numbered. However they do it, I look forward to the day that he is no longer in Venezuela. It’ll be great for the world.

⁣NIMA ALKHORSHID: What do you expect, Richard, from what’s going on?

⁣RICHARD WOLFF: Well, the only interesting thing about Rick Scott — and let me tell you, it takes a lot of work to find an interesting thing about Rick Scott — but the only interesting thing about his remark was that little remark at the end: whatever it takes. Because that’s where we are.

And also, I like the way the television station juxtaposed the camera on him making the statement and, likewise, on the boat, somewhere in the Caribbean, that is being targeted by the missile.

I want to say here for the record: The United States is, therefore, engaged, by the president, with the approval of people like Mr. Scott, in being the police, the army, the judge, the jury, and the lawyer, for people it is executing. Those people were not arrested. Those people never had a chance to have a lawyer explain who they were, what they are. By the way, it’s not just Venezuelans. Today’s newspaper indicates that Colombians have also been killed in boats. So, who knows how widespread this is? Who knows how much we’re being told?

I want to also stress to people that being in the drug trade is not treated as a capital crime inside the United States. People are arrested for the drug traffic in this country every day. They are not executed. Those that are found guilty are subject to various kinds of imprisonment and punishment, but they are not executed. So, we arrest people in this country; we give them a lawyer; they have their day in court; they get a judgment; and they are not killed.

What are we doing in the rest of the world? We are showing the rest of the world a little bit — a junior version — of what the Israelis have done in Gaza. We’re killing people. We’re killing people who are alleged to be involved in a crime that we don’t kill people for in our own country. You know, I’ve been around a while. I don’t recall anyone being executed in the United States for drug traffic, ever. I may be wrong, there may be somebody who once was, but it is hardly ever done. So, what are we doing here?

We’re showing the world that we’re a tough guy. You know, that’s what the tariffs were: a big piece of theater, but it didn’t cost anyone’s life. Now, we’re saying we’re prepared — and we’re not only prepared to kill people — with no judge, no jury, no lawyer, no due process, none of the guarantees that we say we revere as intrinsic to the Constitution and the values of the United States — all out the window — that is a remarkable statement to make. And we don’t like Mr. —

Everybody who studies the drug traffic knows that the major problem of drugs comes from the Pacific side of the continent, not the Atlantic side; that there are loads of people involved who seem to be able to continue, with very little interference. Nor has the United States ever acknowledged, or admitted, that the problem begins with the fact that the United States is the world’s richest market for the drugs — the endpoint of the trade is mostly here — and that we could do a lot more here without violating our Constitution to deal with it, if we were — we’re not.

It’s another message to the rest of the world that the United States is going it alone, that the United States is isolated, that the United States is relying on military power because its economic and political reach is now so weak. You know, we start — at this point, when you behave like this, then things have to be called by their proper name, not by their polite name.

The people, the immigrants, who came to this country for a chance to do what immigrants have always come to this country for a chance to do, are now being hounded by a special police force, and detained in concentration camps — that’s what they are.

Let’s be clear. Let’s stop playing these silly games. We are killing people. We’re promising to overthrow governments in the worst replay of the ancient activity of the United States in Latin America, which is as old as the Monroe Doctrine — and let me remind you, that’s from the 1830s. What in the world do you expect, now? What are the countries in the BRICS going to think, given what Mr. Trump has said about them? Are they being overthrown by the CIA? Are we really back in that world?

Well, if we are, if we are using the CIA to go after the serious enemies, you know, enemies who can do something to the United States — Venezuela can’t. It’s too far away. It’s too poor. It’s too small. You’re picking on somebody — you know, it’s a little bit like the British fighting in Grenada, or the Falkland Islands — it’s a joke. So, assumedly, they’re going to go after the big guns, you know, Russia, China. So, the message to them is, that’s what the United States is now reduced to. Get ready for that.

And let me make a message to my fellow Americans. You are messing with an enemy now that is much richer, and much stronger, than they have ever been. Be very careful because you will likely not prevail. Let me remind you: The CIA was busy in Vietnam, before that war — it failed. And the war that came after it, after the failure of the CIA? That failed too. Ditto for Afghanistan. Ditto for Iraq. Ditto, now, for the Ukraine. Wow. Be careful. Be very careful what you are doing.

There is an alternative — whether it’s in the drug war, or any other conflict — and that is, you sit down with whomever else is involved — other countries, other enterprises — and you work something out: a deal that allows you not to be engaged in killing people and overthrowing them, because that is a game everyone can play. And now, more than ever in the history of the United States, the enemies that you are making by this behavior are strong, very strong.

So, this is now more dangerous than it has ever been, and it was never a good policy in the first place.

⁣MICHAEL HUDSON: Well, Richard, if you try to work something out, then you’re treating other countries as equals. And the United States has rejected that very concept. The reason that it’s doing these assassinations and killings is for control. So, Trump has called Venezuela a narco-state, as if every Venezuelan is a drug dealer. And this is like [Benjamin] Netanyahu, as you pointed out, saying that every Gazan is a Hamas terrorist. So, the whole Caribbean belongs to the United States.

It’s not really about drugs at all. It’s about control. And I think — you’ve been describing — the United States has turned into a terrorist state. And it has been a terrorist state, since 1945, as a deliberate arm of foreign and domestic policy for what it calls “promoting democracy.” The former head of the CIA, [Mike] Pompeo, has said the CIA is like Murder, Inc.: He found out that they’ve been killing people all over the world, beginning with Patrice Lumumba in Africa; Aldo Moro in Italy, when Moro tried to achieve a rapprochement with Soviet Russia. You know what happened to Libya with [Muammar] Gaddafi. You know what happened in Chile with Salvador Allende, and the whole terrorist actions throughout Latin America that the CIA began.

So, this is already official U.S. policy — long before Trump. And I think that on a larger scale, the U.S. is backing terrorist groups, like ISIS and al-Qaeda, throughout the Middle East, in order to maintain control of Near Eastern oil; and at home, you have the FBI assassinating Martin Luther King [Jr.], Malcolm X, and many others. This is called “managed democracy.” You need assassinations to make sure that “democracy” works. That is, it works for the aim of enabling the United States to meddle, not only in foreign countries’ elections — to make sure that they don’t allow elections of leaders who follow policies adverse to those of the United States and its desire to control — but in the United States itself, the meddling [in] elections here.

These killings are merely the tip of the iceberg of America’s attempt to control foreign policy and politics, and domestic policy; and it does not accept the United Nations rules of non-interference in other nations’ affairs. That’s been the rule of international law ever since the 1648 Peace of Westphalia, saying you have to agree [that] every country and every state has its sovereign power. The United States rejects that.

The United States says: We alone have the sovereign power; and we use that sovereign power not only to control who will be the rulers and the ruling parties of these states, but what countries various states can deal with, and in what commodities they can deal with. We have the power, not only to impose sanctions on other countries, but to confiscate companies that are following trade policies that interfere with the United States demand for unipolar control.

This is being done under the slogan of “national security.” The United States government, the neocons specifically, feel insecure if they cannot control other governments, and international trade, and foreign investment, to make sure that the United States can decide who gets what, who trades what, and who owns what. It feels that if it doesn’t control this, it will no longer have the unipolar ability to decide what countries do. And that control is at the center of U.S. foreign policy.

I think you have to begin with that, and realize that these killings are simply — well, in the case of Venezuela, it’s killing the chickens to frighten the monkeys. What the United States is doing in shooting these Venezuelan fishermen (and also, I’m told, from Trinidad, fishermen), is saying: The Mediterranean is an American lake. We control the seas. We have no boundaries to what constitutes U.S. authority to control the world’s geography.

All of this is simply a reflection of a larger picture that the press, and many observers are just too embarrassed to come right out and say; but the neocons have already spelled it all out, that that’s the plan of U.S. diplomacy. You can use U.S. statements themselves for all of the evidence you need for that.

⁣NIMA ALKHORSHID: Two citizens were killed from Trinidad and Tobago, Richard, in addition to what the Colombians were talking about.

Let me play a clip of the former director of the CIA talking about meddling in the elections in other countries.

⁣LAURA INGRAHAM (CLIP): [Have we ever tried to] meddle in other countries’ elections?

⁣JAMES WOOLSEY (CLIP): Oh, probably. But it was for the good of the system, in order to avoid the communists from taking over. For example, in Europe in ‘47, ‘48, ‘49, the Greeks and the Italians, we — CIA —

LAURA INGRAHAM (CLIP): We don’t do that now, though? We don’t mess around in other people’s elections, Jim?

⁣JAMES WOOLSEY (CLIP): Well, [indeterminate vocalization]. Only for a very good cause.

⁣LAURA INGRAHAM (CLIP): [Laughing] Can you do that? Do a Vine video on this former CIA director [vocalizing] —

⁣JAMES WOOLSEY (CLIP): Only for a very good cause, in the interest of democracy.

LAURA INGRAHAM (CLIP): Alright. Thanks for being here.

⁣NIMA ALKHORSHID: “Only for a very good cause.” [Laughing]

⁣RICHARD WOLFF: Yeah, you know, it is very naive — and it’s no longer working. You know, the United States, when I was growing up here, going to the schools in the United States, where I’m born, and lived and worked all my life, we were told stories about what the United States stood for, and what it was. And all of that had to be kept secret — that’s why we have a secret CIA — because it clashes (what they do), with what we are told as a people. And that’s why it has to be kept secret.

But when things get difficult, it becomes harder and harder to keep a secret. Part of what we’re observing is that the secrets, you know, the word is out. Those fishermen who went out are now dead. They’re not coming home. And their widows and their children are talking. We’re in a connected world, and we hear about it. The world is different from what it was.

Let me give you another example. You don’t have a clip, perhaps, but the President of the United States, if I heard him correctly, has told one of the largest countries in Latin America — namely Argentina — that he will give their government $20 billion to stave off the collapse of their currency — if they vote for Mr. [Javier] Milei in the election coming up there. Okay. You know what that’s called? Interference in the election of another country. It’s literally — because the United States is wealthy and Argentina is not — it’s a bribe. It’s an attempt to say to the Argentinian voter: Look. If you vote for the one you don’t want, you’ll get all this money; and if you vote for someone else, because you prefer the other person, well, then I won’t give you this money. What? You know, legally, we don’t allow that in this country; although I understand Mr. [Elon] Musk was running around last November giving money to people in various states for voting, or something pretty close to it.

We are becoming desperate. It’s a word you hear me using on this program, elsewhere, when I talk. I believe you’re watching a government that is becoming desperate. These things that it is doing are not new. But what is new is that they’re being exposed almost — almost — as fast as they’re happening. More and more people around the world, more and more governments, are speaking up about it. Mr. Maduro isn’t the only one. There are plenty of others. If you talk to anyone from Cuba, you will hear a story of, I don’t know, I think twenty-five CIA efforts to either kill him [Fidel Castro] or overthrow his government, over the period of the Cuban Revolution, since 1959. You know, it’s all now more and more — and, given Latin America, it will circulate. This information, and all of this, will be known everywhere in Latin America, if it isn’t already.

⁣MICHAEL HUDSON: I want to interject here. Trump just doubled the $20 billion and said he’s trying to round up private capital at $20 billion. After he made the statement that you quoted, he said, quote, if he [Milei] loses, we are not going to be generous with Argentina. The $20 million was spent to support Argentina’s exchange rate, and this has two purposes. Number one: It helps the flight capitalists, the wealthiest Argentinians — it’s an oligarchy in Argentina. Supporting the exchange rate enables them to move their money out of Argentina into foreign currencies. And they’ve run up a huge debt.

And Trump says: If you do not vote for the oligarchic candidate to continue doing this, now we’re going to insist, with the International Monetary Fund, that you repay this $20 billion (or $40 billion), plus the few hundred billion that the IMF has lent. Well, suppose that a non-right-wing dictatorship comes into power in Argentina? That’s when the IMF will say: We’ll clamp down and withdraw all the support for the capital flight — and, of course, the currency will plunge. It could be a 50%, 60%. Enormous plunge. That’s what the IMF does.
[Number two:] And so, when what it calls a left-wing dictatorship, meaning a country that elects a government that is not backed by the United States, its currency plunges and the inflation goes up, unemployment spreads, and the United States and the United Nations and the West say: You see? Socialism doesn’t work. Only the right-wing works. They [Argentina’s oligarchs] get the loans; they [the working tax-paying population] get the debt.

And of course, this debt is simply to enable the United States and the IMF and Europe to pull the plug and make sure, financially, as much as on war, that other countries cannot survive — unless they are subordinate to the United States.

⁣RICHARD WOLFF: I also want to point out, just as a matter of history, that Argentina has an oligarchy that is among the greatest players of this game in the world. Argentina has borrowed money like almost no other country.

The last infusion that this extreme-right-wing government — which is the government of the oligarchs, who are in power, even when you had [Juan] Peron and you had [Néstor and Cristina] Kirchner, and the others — this government’s last infusion of cash to keep itself going — was $20 billion, in April of this year! So, we’re looking at, a few months later, another $20 billion, and yet another $20 —

The Argentinian oligarchs are laughing all the way to the bank, as America uses the taxpayer money of American citizens to enable them to convert their worthless (or about to be worthless) currency into dollars, to join the rest of the world in buying gold — because they haven’t the confidence in the dollar they used to have, either? So, they’re going to do a one-two jump: Get rid of the Argentinian [peso], get the dollar, use the dollar, buy the gold, and hold it somewhere in Europe — that’s what they’re going to do. It’s a farce, what we’re watching! An extreme-right-wing government, which has managed, in a very short number of months, to make itself hated — that’s why Mr. Trump is stepping in — because that right-wing government has shot itself in the foot and is about to be kicked out by the Argentinian people.

⁣MICHAEL HUDSON: This is all part of the broader fight that’s happening in the world economy, to isolate, not only Argentina, but China, Russia, and the other countries. It’s part of a much bigger picture.

⁣RICHARD WOLFF: But it shows you the level of desperation that is now governing all of this kind of behavior. I would like to believe (I mean that) that even the CIA director, giggling on the right-wing show that he appears on — that’s a right-wing woman, person, I forget her name right now, the clip that you just showed us — I’d like to believe that they, too, don’t really want to kill fishermen, or whatever those people were, in the boats. We obviously don’t know because there’s not a shred of evidence provided by the President who has now authorized at least five — if I’m keeping score correctly, five — such attacks. If they had some evidence — right? — they would show it because they don’t want to appear to be doing what they are clearly doing.

But when you’re desperate, you can’t afford it anymore. They have to have some “show.” They have to show how tough they are. That’s why we had the other bizarre (and maybe we can discuss it, the other bizarre) — the President of the United States tells us, yesterday, that India has agreed to stop buying Russian oil. He said that! And this morning, the Indian news reports coming out of India are that the government knows no such thing. There’s been no such conversation, and no such commitment.

I don’t know who to believe — and by the way, that’s what’s happening to most people: they don’t know who to believe anymore. It is so chaotic. But you’re not in good control. That’s not a sign that the United States — Michael is right: that’s what they want. But I’m right: it’s what they want, but don’t have anymore — and that makes you desperate.

⁣NIMA ALKHORSHID: Yeah. Michael, the other point that Donald Trump was talking about is the case of India. He said that India promised him not to buy Russian oil, which was rejected later on by Indian officials. And not only that, Scott Bessent said that the Congress and the administration is ready to impose 500% tariffs on China, in case they decide to import Russian oil, and gas. Where are we going with the case of Russia, in your opinion?

⁣MICHAEL HUDSON: Well, the real problem is not only isolating Russia, but isolating China. And that’s where all of the action has been recently. The United States is trying to decide just which countries are permitted to deal with other countries, and what they’re allowed to buy, and sell to these countries. And that’s an extension of the control that we’ve been talking about.

This is the neocon strategy. If you can’t have a U.S.-based “democracy” — a “democracy” means a country that has agreed to become a satellite of the United States (has nothing to do with the political system) — you can’t have a “democracy” (meaning a unipolar world), without the ability to make sure that you can control other countries’ elections and who they trade with.

Now, much more than the U.S. and Trump’s demands on India — that essentially means you’re going to try to block India’s foreign trade with the enormous 50% tariff that’s already put on — or the huge tariffs that you just mentioned on China (that means you block all trade with China) — this is going to essentially ensure, if it were applied, the most serious depression that you’ve had yet in the United States.

The kind of confrontation we’re talking about began a month ago with TikTok. Trump used the “national security” claim, that somehow TikTok is looking at what Americans like to watch; and if you discover that, then you can control the way they think, with the narrative.

And TikTok further violated the United States’ ban on free speech: it became a site for public discussion of politics.

So, you had many political people, views, treating it almost like X, or the other social media — and that included a criticism of genocide, and an insistence that the mass-killing was wrong. And that infuriated the United States. So Trump said: You have to sell TikTok to a group of billionaire Zionists — who will change the algorithm to prevent any discussion of the Middle East that is not in favor of Israel. There can be no use of the terms “Gaza” or the “Left Bank.” It’s “Judea and Samara” now. You have to control the dialogue and the discussion in order to shape what people think so that they will elect governments that are “democratic,” meaning governments that are controlled by the right-wing alliance between the neocons and the financial sector (the 1%, the deep state, the Americans).

So, you have that again: you have the neocons feeling insecure, if you could have TikTok permit personal opinions and analyses — and, especially, they were having photographs of the children that were killed in Gaza. They were having photographs — Israel has done [its] very best — targeted photographers and reporters for assassination — precisely to prevent this. They were targeting doctors for assassination, so that there would be no photographs of the destruction of the hospitals, the destruction of the babies.

Now, if the TikTok deal is permitted to go through, the United States will control all of the social media and prevent any discovery of this. That will enable the United States to shape “democratic” opinion to vote in the way that “managed democracies” are supposed to do.

I know you have a tape that is a wonderful tape that I want you to show, Nima, but I’d like to talk about what happened two days ago when Holland was the first country outside the United States to confiscate a Chinese company, on the grounds that China — it was producing computer chips for automobiles, in Holland, [in] what had been a subsidiary of Philips — and the United States said any company — passed a rule — any [company] with more than 50% Chinese ownership must be confiscated if it in any way affects “national security” — if it makes batteries, if it makes computer chips, if it does anything that we consider “national security.” I can go into that in detail if you want, but you probably want to shape the discussion first.

⁣NIMA ALKHORSHID: Yeah, let me play the clip, Richard, that Michael mentioned. Scott Bessent talking about China:

⁣SCOTT BESSENT (CLIP): No mistake. This is China versus the world. They have put these unacceptable export controls on the entire world. China is a command and control economy, and we and our allies will neither be commanded nor controlled. They are a state economy, and we are not going to let a group of bureaucrats in Beijing try to manage the global supply chain.

⁣MICHAEL HUDSON: This is wonderful. Well, Trump said that, for the first time in history, nothing like this has ever occurred. And of course, it has occurred! It’s what the United States —

What China has done is, [it] passed a series of rules that were almost word for word the same rules that the United States had imposed on other countries dealing with China — for “national security.” China is finally doing to the United States exactly what the United States did to China.

The difference is that China doesn’t really need the United States, in the sense it doesn’t need U.S. exports, because the United States isn’t exporting anything that China really needs. And if it does need something, like replacement parts for Boeing airlines, then it’s going to avoid the fact that the United States has weaponized its foreign trade — so that it can stop the export of replacement parts for Boeing airlines, in the hope that the Boeing planes won’t be able to fly anymore and [that] China will have a problem — because China has indeed developed its own commercial airliner.

But the United States has told foreign countries, and the international transportation licensing authority: Don’t approve China. Only approve airplanes made by the United States and its satellites, like Airbus. Do not let any Chinese-made airplane land, because it doesn’t have official U.S. approval. This matches with the United States intention that we must control all of the airplane, and other, essentials.

I want to talk about what happened last week in Holland, when the Dutch confiscated the Chinese ownership of a company called Nexperia. The Financial Times has been focusing on this by saying, for the first time, Europe has, and especially Holland has, moved away from the whole idea of open investment, free trade, free investment, to say: All domestic investment is now controlled by the United States. Any foreign-owned firm, specifically a Chinese-owned firm, should be confiscated; and any Chinese firm that uses American exports as part of its products, its trade must be banned.

Well, the company that China bought was a company specializing in making batteries for automobiles because China has become the world leader in making batteries. The United States wants to prevent China’s leadership in batteries so that the United States can supply batteries that cost approximately ten times as much. The intention is to prevent Europe from using low-priced batteries designed by China, so that it cannot compete with American cars using American batteries.

So, you have this semiconductor company and battery company — with 12,500 employees all over the world, not only in Holland — and all of that has just been confiscated. It was sold to a Chinese conglomerate in 2017, and it was bought by a Chinese group, Wingtech, in 2019. And everything has been going fine, until the last few months when the U.S. State Department told Holland: You have to close down this Chinese company. We want to make sure that China cannot make any money in Europe, or any other “democracy” which we control.

So, the words that were used in your wonderful clip — a [command and] control economy — that’s what the United States is: that’s “democracy.” If you do not centralize control (and, essentially, be a police state) then you are not assuring the U.S. unipolar control of the world. And China has fought back.

But if you go into the details, I mean, this is an escalation, this confiscation of Chinese companies. The Financial Times wrote that “Wingtech is a landmark moment in Europe’s evolution, from one of the world’s most open trading blocks to increasingly preoccupied with economic security.” And the “economic security” is dominated, is defined, by the United States.

And just as the United States forced TikTok to be sold — either you sell at a giveaway price to the Americans, or we’re just going to close you down — it’s now using the same policy towards Europe. And China [has] essentially decided to fight back against all this. The court documents in the case that the Financial Times have been quoting is that The Hague (the government in Holland) was acting under pressure from the U.S. to back the control.

Well, look at what’s happening. Lenin had made a quip once; that capitalist countries would sell [the U.S.S.R.] the rope from which to hang them [attributed to Lenin], metaphorically speaking — meaning the arms. Well, China has no intention of selling the United States the military materials — rare earth metals, and other metals, and other tools — to destroy it in missiles. The United States said: We expect war with China as our existential enemy in the next two or three years. We must destroy China. Again and again, from Biden to Trump, and to Congress, there is an announcement: We intend to go to war. We’re preparing the way.

Well, of course, China’s blocked what you need to make the missiles, the rare earth magnets to make the missiles. China blocked what you need to make the computers to guide the missiles, and to spread your control of the internet, control of the public media platforms, really, to control the direction that the world’s moving in.

And China has watched what the United States did to Japan, with the Plaza Accords and the Louvre Accords that insisted that Japan raise its exchange rates, and essentially [brought] on its depression. And it’s watched America’s demands that Japan pay tribute of $350 billion to the United States, in order to have access to the U.S. market, even subject to the high U.S. tariffs. And China [has] watched the demand on Korea to pay just as large a $350 billion “choice.”

China has no intention of surrendering on these terms, and it has no intention of letting the United States have, what it says is, the new equivalent of controlling the world’s oil reserves; controlling the world’s food; controlling the world’s information technology; controlling the world’s computer technology (computer chip technology, the programming technology, the engraving of computer chips — the blocking of Dutch companies from selling computer chip engraving machinery to China).

China has realized that if the United States has a monopoly on computers, on missiles, on automotives, on military technology, it’s going to use this to attack China. And it’s taking moves to stop it. And Trump has said he’s willing to create a depression that will be like the 1930s in America. His threat to impose these multi-hundred-percent tariffs on Chinese goods means we are blocking all trade with China — that means with China technology.

Well, China has what the United States needs for its military domination. The United States doesn’t have anything that China needs. China will grow. The United States will move into a crisis. And, as Richard said, this is an act of desperation; but it’s a desperation that’s worth following, because 90% of the Americans are going to be downgraded in their standard of living, their wages, what they can afford; but the 1% of Americans, the Silicon Valley billionaires and the financial banks, will make a profit.

And what’s so amazing is that [on] today’s New York Times first page: “U.S. Banks Score Big Helping China Firms Go Global” — Well, you can imagine what’s going to happen. Who is going to win? Will American foreign policy be what the banks want — which is usually what foreign policy is all about for the United States? Or will it be what the neocons want? [Neocons:] We want war. We cannot have another country being independent from the United States. We cannot have a country of equals.

So, we’re back at what we talked about with Venezuela: You cannot negotiate with other countries and make a reasonable deal because that would be to treat them as equals; that would be to treat them as sovereign countries. There is only one sovereign nation: the United States. All other nations are to be treated as, or turned into, satellites for the United States. And I think that’s why Richard brought up what was happening in Argentina — to make sure that it’s locked into a satellite controlled by a client oligarchy in Argentina; just as you could say the same thing is happening in Europe.

⁣RICHARD WOLFF: Let me comment a little bit about Scott Bessent (and I don’t mean to pick on him, although I’m not opposed to doing that either, but that’s not what I’m doing).

Watch the fuzziness of the way he speaks. So: We’re not going to allow bureaucrats in Beijing because they are a state economy —

This is a minister of finance whose boss just did the following: took a 10% ownership of the Intel Corporation; imposed a partnership of the U.S. government on AMD and NVIDIA; is busy taking other positions in American corporate governance — ownership. I mean, we are more of a state economy than we have ever been!

Tariffs are the biggest imposition of taxes any government of the United States has ever done. We are taxing everybody. The whole world is being affected by us because if you choose tariffs, it’s international. You’re taxing your own people, hugely. Look how proud Mr. Bessent was a few days ago, telling us that the tariffs have raised $60 billion already in their first x months. He’s proudly telling you what previous Republicans would have been horrified — they’re a party against taxes! No, now they’re a party for taxes.

Every government that has ever taken a bigger and bigger share of the economy has used “national security” as its rationale. That’s not new. That’s what Republicans used to make fun of. It’s really, it’s remarkable. He’s denouncing China for wanting to control the world. As Michael correctly says, China is demanding what the United States has always fought for, has acquired, and is now desperate because it’s losing it. It’s angry at China — for what? For wanting pretty much the same thing, if Mr. Bessent is right.

It used to be the argument, here in the United States, that a free-trade regime was the best protection against war, against hostility. People used to talk about the competing empires — British, French, German, Russian — before World War I, as the reason they destroyed each other. The League of Nations after World War I, and the United Nations after World War II, were created because countries that used “national security” to shape their economic policy ended up in war against each other. The whole point of these international organizations was to not have that happen again.

The United States’ withdrawal from the United Nations — which has been going on for twenty years — is also, as we should have seen before, a withdrawal from that whole project; and a return to being a national security state, in which the state and the leaders — the oligarchs of business — are becoming the same people. Remember who was sitting behind Mr. Trump when he was inaugurated? The ten billionaires from the leading few industries the country has. It was an advertisement for the merger of oligarchs and government, which is a hallmark of fascism — Italian fascism, German fascism, Japanese fascism, Spanish fascism — come on! We know these things.

The difference is that the United States is now not the dominant country. The G7 is not the dominant player in the world economy. And all the pretense, and all the fuzzy ideology of Mr. Bessent, who conveniently forgets that his government is now becoming more “statist” with each passing week, and therefore not different from “China,” but indeed rather more like “it” —

China is also not — because he should know better — it’s not a state economy. Half of it is private enterprise. People are critical of China’s claim that socialism has developed faster and further in the last forty years in China than any other system has developed; and they like to criticize that by saying, yes, yes, yes — but that’s because of the “private” sector.

Okay, if you want to make that argument (I think it’s stupid but, okay, if you want to make that argument), then you can’t turn around the next morning and refer to them as a “statist” economy. You’ve just explained that they are a “private” economy — and that’s why they’re so rich and big and powerful — richer than you are.

And let me remind you: In the contest before World War I of competing “national security” — economic nationalisms built around Europe and its colonies — nobody had an outstanding advantage of population.

But that’s not true, folks. The United States has 4.5% of the world’s people. China and the BRICS have 60% of the world’s people. What kind of a conflict are you imagining you’re going to be able to have? What are your chances? This is very stupid.

You ought to be working your rear-end off, trying to come up with a revived United Nations to work out a way for the G7 to function, and for the Chinese and their BRICS allies to function. The planet is big enough for both of them.

Or, are we going to descend into another world war, even knowing the disasters of the first two? And in case you’ve forgotten, World War I ended up with the Soviet Union. World War II ended up with the Soviet Union — plus China. You notice something? You know where World War III will likely end up? Yeah, yeah. It ought to make you stop, and think a little bit about what you are doing.

⁣NIMA ALKHORSHID: Michael, go ahead.

⁣MICHAEL HUDSON: Today’s international conflict between the NATO West and China is being fought over what kind of strategy the world will have. Given the inequality of population and size, the United States wants to be the only country that is able to wage war with the best armaments. It wants to be the only sovereign nation. All the other countries are to be turned into dependencies: trade dependencies, by weaponizing foreign trade; financial dependencies, by dollarization; and military dependencies. [It] is a precondition for their very survival. That’s the only way in which the United States can possibly achieve the strategy that you say can’t work.

Well, of course, it can’t work in the end because other countries are going to retaliate. But the essence of U.S. foreign policy is to cripple other countries’ ability to retaliate by things like controlling their oil supply, so they can’t survive, if they retaliate; by denying them ownership of and production of information technology — computer chips, basic electronic technology — and monopoly of the internet, if they don’t comply.

The United States says: Yes, of course, we know that there’s this inequality of population and productive power. We’ve deindustrialized, they have not deindustrialized, but we can win anyway — by the policies (that I’ve just developed) of total control, and the narrative that is needed to impose that control.

And I think the policy of targeted assassination, of killings — like you’ve seen, from Venezuela to Gaza — are all part of this demonstration of America’s willingness for total control, even to the point of preparing for the Near Eastern war against Iran, that many of Nima’s guests believe is imminent.

⁣NIMA ALKHORSHID: Richard, you mentioned G7 and compared it to BRICS. And once (we know, once), Donald Trump said that Spain is part of BRICS. He was trying to lecture the reporters in the room, and he said Spain is part of BRICS. Here is his latest comment on BRICS:

⁣TRUMP (CLIP): I told anybody who wants to be in BRICS, that’s fine, but we’re going to put tariffs on your nation. Everybody dropped out. They’re all dropping out of BRICS.

BRICS was an attack on the dollar. And I said, You want to play that game? I’m going to put tariffs on all of your product coming into the U.S. They said like I said, we’re dropping out of BRICS. And BRICS is, like, they don’t even talk about it anymore.

⁣NIMA ALKHORSHID: Dropping out of BRICS? [Laughs]

⁣RICHARD WOLFF: But, you know, it’s it is important to understand that if you have a leader who forever makes things up like this — everybody’s dropping out of BRICS —

You know, I pay a lot of attention to BRICS. I’d be very interested. Could that happen? Yes.

By the way, Argentina is the only example I know of. They did withdraw — with this fellow, Milei, who’s on his way out. He withdrew. They [Argentina] actually joined, and then they withdrew — because it happened in a very short period of time, between when they joined, and when Milei took them out — and that was an act of him, as an extreme-right-wing neoliberal person, which he proudly says of himself. It’s not a label I’m putting on him.

But when you have a president, like we do, who makes these casual comments — India has decided not to buy Russian oil — and turns out, no. And the BRICS are falling apart — no. Or I will put tariffs on them — as if that’s the end of the whole story. This is becoming pathological, sure, but it’s a pathology that has a place. It has an origin. It has a set of supports. It is to be taken seriously — he isn’t; but the fact that he has to talk like that is an interesting phenomenon, right? Most leaders don’t do that.

Why is it important for him to do it? It’s like asking the question that should have been asked when he first ran for office — and he descended the escalator in one of his buildings in New York City; and he made the famous comment that the Mexicans here are all rapists and killers, and which he had, of course — you have to ask: Why would a personality aspiring to be a politician say such crazy stuff? Because in our environment, there’s a need for it. He’s meeting a need. His instincts tell him — and he was right. Politically, there was a constituent out there that needed to beat up on immigrants. Mostly from Mexico, they come.

So, it was important. He’s meeting a need, and he discovered that there’s a whole community of people whose peculiar experience in the last thirty years has been to be — what? They are white male Christian union members who lost their jobs because corporations wanted to replace white Christian male union people — because they were the highest paid part of the working class. So they were the targets: Replace them, either with automation, or by moving your production to China. And so they were left to die in their cities across the Midwest and the South, to become MAGA, his support.

He understood without — you know, he doesn’t have the capacity, or the vocabulary, or the education, but he understood, instinctually, that there was a need out there to demonize Mexicans as immigrants. That’s why you now have this Christian fundamentalist community cheering on the concentration camps for immigrant children — which violates their Christian commitments. And somewhere they know that.

But they’re so needy — I want to get that across. Mr. Trump is needy for saying this. We should understand, because it’s important, what the need is, that this dismissal of the BRICS is about. And the need? The BRICS is overwhelming. The BRICS is the biggest danger he faces economically because it’s the option for China to behave in the way Michael has laid out.

Because they have the BRICS, and all that that means, they can now afford, finally, to be taking steps, like what they did in response to the action of Holland. If I were to make a guess about the decision to hold back the rare earths? Michael is right. The precipitate act was not the fees charged to the boats that are made in China, which the United States is doing, or the slippage here or there — it was that: that act of trying to literally organize the whole world economy to be focused against China; to take Chinese property, the way they took the $300 billion of Russian assets at the beginning of the Ukraine war.

Okay, now is the time. And my guess is it took a difficult, long debate inside China as to whether this was the moment to move. And it should be taken seriously because the Chinese are responding to a deep need they have in taking their action, just like Mr. Trump is responding to a deep need that comes out of the dilemmas of the United States.

⁣MICHAEL HUDSON: Well, what Richards brought up is the fact that this international trade war finds its counterpart in the U.S. and international class war. It’s a war, not only of the U.S. to dominate other countries; but for the rentier class — the elites — to dominate labor, as its policies — by making revenue and wealth for itself, in the form of creditor claims, monopoly claims, and the capture, the privatization of government to prevent public social spending — all of this is going to impoverish the population. All of that goes hand in hand with the international class war to promote Thatcherism, privatization, financialization, and the whole economic philosophy that we’ve discussed so much in earlier episodes.

⁣RICHARD WOLFF: And let me — a concluding thing: When you hear Mr. Trump and some of his lieutenants — as you are already hearing, and you will be hearing more — talk about how, even if it takes a depression, even if it takes mass suffering, this is a matter of the “national survival” and our “security” — you know what they’re gearing up for? It probably means they are getting the advice that the tariff game is leading us into a stagflationary situation, one way or another: a very troubling combination of 3% or more inflation, with a decline in our employment situation.

Jamie Dimon was quoted everywhere yesterday, talking about the collapse of two automobile companies, and saying, where there’s a few “cockroaches” — his word, not mine — there’s always lots more. What is that? That’s a statement that a credit crash is underway, or likely, or possible, with all that that has meant. Let me remind you of how the 2008 crisis got going. That, too, was a credit problem. That’s why it’s called the subprime mortgage crisis.

So, they’re getting ready to even carry their craziness to the point of a mass depressive recessionary onslaught, because they are convinced it’s the necessary price to pay — of course, always for the working class — to get them through the crisis they face, which is one of a world no longer willing to be the colonial territory; because that’s really what this is about: it’s a resurgence of colonialism.

It’s not an accident that Mr. Trump meanders about Greenland, or Canada, or Panama or, now, Venezuela. These are all imaginaries; but they’re logical, if the whole world is going to be controlled, because that’s the control that a metropolitan country used to have over its colonies. It’s the United States rehashing the end of the British Empire, hoping to reverse the flow of history.

Well, I am one of the masses of the world saying to the Americans: too little, too late, not available.

It’s like explaining to Israelis that settler colonialism was something that worked two centuries ago, but now? Doesn’t work anymore; puts you in an impossible situation.

⁣MICHAEL HUDSON: Well, Richard, unemployment and economic collapse is not a price to be paid by the ruling elite.

It’s easier to make money and get wealth in a crash, than it is in slow growth. The crash is going to lead, as I think you pointed out, to many mortgage foreclosures. People are going to lose their homes, as they did after [President Barack] Obama’s bailouts in 2009. All of this led to a huge asset grab by the 1%. While home ownership declined in the United States, and GDP and wage levels for the 90% remained pretty stable, all of this wealth grew for the [1%]. Same thing in the world.

Well, when Trump withdrew support for the Agency for International Development [USAID], withdrew support for the United Nations health agencies and cultural and social-spending agencies, the intention was to create mass starvation and famine in the rest of the world — just like Trump’s attack on global warming to maintain the oil supremacy is causing rising sea levels — it’s going to create mass destruction.

All of this is viewed [by] the United States as a collateral benefit, not a collateral [damage]. You have to realize that when something like this happens, not everybody loses.

It will be a negative-sum game for the economy of nations, and the world as a whole, but very positive as a wealth grab by the 1%. And the United States is trying to make that the American 1%, not foreign 1%.

⁣NIMA ALKHORSHID: Thank you so much, Richard and Michael. Bye-bye. Great pleasure, as always, talking to you.

⁣RICHARD WOLFF: Talk to you again next week.

⁣NIMA ALKHORSHID: Talk to you next week.

Global South

Michael Hudson and Richard Wolff: The Narrative Battlefield

For us, because this was recorded on the 9th, it is a look back on what happened in this last week. These conflicts (Palestine, Ukraine) are not simply military conflicts. The narrative (a culture war) is what made us horrified during the peace plan circus, because we knew were were dealing with narrative, and not with truth.

“Well, this is a much longer lasting fight, and it goes beyond the military battlefield, and it’s how the world frames the thinking about what’s happening to it. And this is the deepest, and it’s even the most threatening battlefield over control of the narrative — the narrative of how to frame the issue — and what’s being taught in the schools, in the universities, and spread to the internet platforms and the mass media — that is now already come under the control of extremist Zionist hardliners. ”

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, October 9th, 2025, and our dear friends, Michael Hudson and Richard Wolff, join us. Welcome back.

⁣RICHARD WOLFF & MICHAEL HUDSON: Glad to be here.

⁣NIMA ALKHORSHID: Since everybody’s talking about the Trump peace plan, I want to start with that. Michael, what’s your take on what is happening? You’ve sent me an email. You’ve mentioned that what has happened in Gaza is not Israel’s war, it’s NATO’s war. What’s your point in that?

⁣MICHAEL HUDSON: Well, Trump told Fox News last night: The important thing is for people to love Israel again. I told Bibi that Israel cannot fight against the whole world.

And Netanyahu has been saying that this war goes far beyond simply between Gaza and Israel.

It’s really a fight, a ninth front. And that ninth front is: Who is going to control how Americans view international relations, the geopolitics of what’s happening? And I think if the military confrontation stopped, at least temporarily, then this conflict has now shifted to the political and the cultural battlefield. And I think we have to look at that.

This is turning out to be a much deeper and long-lasting conflict, and it goes beyond Palestine and Israel. To answer your question, the war in Gaza and the West Bank isn’t simply a military conflict between Israel and the Palestinians. Just like Russia isn’t simply in a military conflict with Ukraine, the Palestinians are not in a war with Israel, but with NATO led by the United States, and Britain, and Germany. And Israel’s strategy is — well, how do we keep the loyalty of the U.S., now that the opinion polls show that younger people are taking the side of the Palestinians, not Israel? What does that bode for continued American support for Israel?

Well, this is a much longer lasting fight, and it goes beyond the military battlefield, and it’s how the world frames the thinking about what’s happening to it. And this is the deepest, and it’s even the most threatening battlefield over control of the narrative — the narrative of how to frame the issue — and what’s being taught in the schools, in the universities, and spread to the internet platforms and the mass media — that is now already come under the control of extremist Zionist hardliners.

And that’s what the whole fight, over the last week, has been over TikTok. President Netanyahu has explained that Israel is at war with what he calls this ninth front: to control the United States. That’s the real war that’s happening. And this control isn’t to be established militarily, but by controlling the U.S. public opinion through, essentially, extremist Zionist billionaires, the Silicon Valley billionaires, who control the mass media. You’ve seen them take control of automatic intelligence to buy out TikTok, and redesign the algorithms of TikTok to replace the pictures that TikTok was showing about murdered Palestinian babies, all sorts of horrendous genocidal attacks. All this is going to be out.

And the new algorithm is blocking any discussion or any exposé of what Israel has been doing to Gaza and to the West Bank. And just like Israel has concentrated — the army has concentrated — on killing two groups of people: journalists — they must destroy any attempt to let the world know what they are doing — and doctors — the doctors must not heal the injured, especially the children who can grow up — and growing up with a memory of what’s happening to them.

And Israel says, if these children live, it is a threat to Judaism, because Israel is a Judaic state — meaning, as Alistair Crooke says — meaning a theocracy; and a theocracy has no room for anyone who is not a member of the Judaic state.

So, you’re having this war extending to the churches. You know, what are the churches going to say? Are they going to say this war of Israel against the Palestinians is part of the Bible — of the Lord backing Israel, as America’s ambassador to Israel has claimed, that he has to follow the Bible?

There’s a whole attempt to create this, not only a false, narrative, but by using the algorithms for all the main internet platforms — Facebook, Google, even X — if you try to use these platforms — and you can now expurgate or censor any discussion that is not reflecting an Israeli opinion — then you’re shaping public opinion. And if you can take over the news, like CBS News was just taken over by an ardent Zionist —

You’re turning the universities, who are preventing any student demonstrations in favor of peace — they say: If you want peace, and not fighting, then you’re antisemitic, we are expelling you — and if you’re a professor, who describes this ‘we will expel you,’ as Columbia University has done, other universities are doing —

This is a cultural war, and that’s what is being overshadowed by all of this military discussion. And since neither Richard nor I are military specialists, I think that that’s really what needs to be discussed on your site, because you have enough military people who are explaining the brutality of what’s happening.

⁣NIMA ALKHORSHID: [muted, addressing Richard Wolff] … from a different angle, but you have your point. We talked about it before. Go ahead. Your take?

⁣RICHARD WOLFF: Let me frame it slightly differently, but, I think, in a way that is complementary to what Michael has just said. Here’s my interpretation of what — translation should be a better word — translation of what Trump said on Fox News, that Michael cited. Here’s my translation. This is not what the president said, but here’s what I think lies behind the words he said: that he has come to the conclusion, with his advisors, that the tide has changed in the world; that Israel is now losing the hearts-and-minds campaign that it launched, and that it did, in that area, too little, and too late; and that it could not overwhelm what the reality was, of what they were doing to the Palestinians in Gaza for the last two years.

Okay. It’s too late. Whether you want to give the credit to the global critical media, whether we pin another medal on Greta Thunberg, I don’t know — but he’s losing. And I don’t think President Trump cares about it anyway.

But what his advisors have told him is that the tide is turning inside the United States. It is becoming politically impossible for him to continue the policies of Biden and Trump, of being 100% pro-Israel — more than half the people of Israel are, in terms of the war policy. It’s becoming dangerous. AIPAC, for all the money it spends, and all the influence it has, has not prevailed.

And he is telling Bibi: Listen, Jack, I can’t keep supporting you if, in my country, the opinion is shifting away from you. I’ve done as much as I can do. I’m bailing. You’ve got to now do — and then he says something which is ridiculous: You’ve got to make the world love you.

Well, I know what he means. He means that AIPAC has to do something to change the direction of American political opinion. And there, again, I would remind everyone: We are now a very few weeks away from an election, which the polls suggest is going to bring an anti-Israeli Muslim socialist into being the mayor of the largest city in the country. This is an extremely powerful message being sent. Even if he were to lose the election — it doesn’t look like that, but even if he were — look how far he has already come!

And if you follow it — which I’ve been doing, from the beginning of his effort, long before he became well-known — one of his key supporters was an organization called the Jewish Voice for Peace, which is a pro-Palestinian, anti-Israeli war, Jewish organization — in the city that has more Jews than any other in the United States. I mean, wow! What?

And I think they’re learning, and they’re very worried. Marjorie Taylor Greene has announced she’s voting with the Democrats because she can’t go along with the policy of undercutting Medicaid for poor people. Mr. [Thomas] Massie is relentlessly trying to get the Epstein files opened up. There’s serious speculation that the real reason they shut the government down had nothing to do with Medicaid, or anything else: it had to do with postponing the denouement of the Epstein files.

Okay, I don’t know whether these things are true or not, but if you put them all together, they suggest that Michael is right; that there’s a turning point here; that this issue, even the Israelis and the Americans now understand that the military action in Gaza has to stop — because it’s counterproductive, it is damaging. The whole point was to give them more security, and as the critics have told them, for years now: that’s not going to work. You’re making your situation more difficult.

And you’re seeing around the world, even among comedians — Jon Stewart, explaining to his audience that Netanyahu is the one threatening a global wave of antisemitism. What did he mean? Because of what you’re doing in Gaza, you crazy people, you are, in the name of preserving yourself, you’re killing yourself. And that allows me to say — and bear with me: Nothing — nothing — is more typical of declining empires than having their leaders do things which everyone shouts at them: Don’t do that! That makes your decline worse.

But they can’t hear it. They’re stuck in these ways of doing things. And I don’t know whether Netanyahu can hear any of this (either), but that’s my suspicion. Mr. Trump is realizing he’s going to have to choose, and it’s very clear who’s going to be sacrificed.

You know, the Germans did a Holocaust — they did a genocide — and they are suffering, to this day, with the reputation they have around the world for that. How it has all played out in a million people’s minds — you know, you don’t undo this quickly. Hitler is dead in 1945: Here we are, eighty years later, and we can still see — Germany inside the European Union. I mean, my family is part-French and part-German. I have lived the lifelong effects of all of this all my life. Even though I’m born in the United States — I’m an American, and all of that — I’m fully aware that that is alive and, well, in a thousand ways, Israel will take a very long time, if ever, to crawl out from under what it has done.

And Mr. Trump is now telling them: You’re going to lose me too, because I’m not going to sacrifice my political life — because AIPAC is not able to buy and control the narrative, the way Michael laid out. It used to — it was very good at it. We all admired, in our way, how it did it. But we all knew — if you think about it — it wouldn’t last forever. Well, ironically, the most aggressive effort to hold on to it — the Gaza destruction — is also the end of it.

⁣MICHAEL HUDSON: Richard, a few months ago, Netanyahu said that the greatest enemy of Israel are the assimilationist Jews. This is relevant to [Zohran] Mamdani’s running for election. He said, because the assimilationist Jews want to be part of their own society, want to be part of their own economy, they don’t look to Israel — they don’t put Israel first. And if the American Jews will put America first, European Jews will put Europeans first — they are the enemy.

Well, one friend of mine the other day commented that it’s as if Netanyahu has read [George] Orwell’s 1984, and he took to heart his statement that those who control the present control the past, and those who control the past control the future. And so what Israel is trying to do is to reframe the whole past, and the whole history, of the settlement of Israel, from the very beginning — the Israeli Holocaust, the Nakba, the mass assassinations, the whole military history.

Well, as I mentioned: To establish all of this, you have to control the narrative. And it’s a historical narrative, it’s an ongoing news narrative — and it’s capped by what students are taught.

I want to discuss the economics of how this narrative came about — and I have some personal experience in this. Back in the 1970s, more than seven decades ago, I saw how the groundwork was being laid for the cultural war that was being prepared. I was a Wall Street economist, and some of my oldest friends were working for Drexel Burnham — that was the investment banking firm for corporate-raiding junk-bond takeovers.

I often met with them, and I addressed their board meetings sometimes, and a number of their managers told me that the most important thing to them in their life was Zionism. And Drexel [Burnham] was the investment banking firm that developed the junk bonds to take over companies, and turned them into financial vehicles to make capital gains. It was part of the whole transition from America’s industrial capitalism to predatory finance capitalism — by making buyout offers to take companies, to make them into financial vehicles.

And the main organizer, Michael Milken, went to jail for organizing insider-dealing with Drexel’s investors. And the important thing — it was spelled out to me — was that these investors were all Jewish, and they were more than Jewish — they were Zionists.

The financial details have been widely reported about all of this, but what is not recognized is that there was sort of a personal compact among all of these investors — that they were going to be made very rich by playing by new rules — that the “white-shoe” law firms, and investment companies, wouldn’t do — of making hostile takeovers, instead of friendly merger proposals. And the deal was, they were all expected to give a substantial portion of their earnings to the Zionist cause — and that went beyond AIPAC: it meant supporting the Zionist cause in many, many dimensions.

And a few decades later, I met with some of the former Drexel strategists who’d gone on to create firms of their own. And they applied this principle — that in order to join this corporate raiding — and we’re talking about these investors were the ones who took over Silicon Valley, and the internet stocks, and the information technology stocks — they focused on that from the beginning. They became multi-billionaires and, in the case of Larry Ellison, a trillionaire now — they were able to operate with a freedom of attacking the economy-at-large, that the traditional investment banks and companies, and law firms, didn’t.

Well, fast forward to the last decade or so: You have the largest investment firms, those of Silicon Valley — and these firms are all led by Zionists, working together with Israel and the Likud Party, as well as with AIPAC. They’re active in U.S. political campaigns. They’re using some of their billions of dollars to promote the Zionist cause.

And this attempt to shape American public opinion is centered in the financial sector, and, specifically, the financial control of the information technology sector, the main platforms for internet communication — everything that I was discussing earlier, where the information war is being fought, including the takeover of CBS News to promote Zionist positions; the takeover of networks here; the takeover of mass media publications; and the huge propaganda within the churches; especially the fundamentalist churches, to give this fake Christianity, based on the Scofield Bible and the idea that God told Israel: Kill all the non-Jews — so that you’ll have the end of history — and Jesus can come back and send all of us up to heaven, and everyone else to hell —

This is the craziness that has been sponsored, essentially, by the Israelis, pushing the gullible Christian churches to transform — you know, what people think of America as a Christian country is not something that either the traditional Catholics or most Protestant churches, as they existed before 1900, would even recognize today.

So, this is why Trump made the deal with China, forcing the sale of TikTok as part of this campaign — along with Facebook and X, and other platforms and media — to create the Zionist perspective.

And, you remember, Hitler created a fake history: As the world was wrecked by the debt problems of the 1920s and the 1930s, Hitler tried to blame it all on Jewish bankers. Well, the fact is that American banking and European banking was pretty antisemitic. And the origin of these international bankers — they were created by the Catholic Church, in the 13th century, to raise war loans to the kings who were loyal to the church and fighting religious wars and the crusades on its behalf — so there was this fake history.

And the fact is that the Jewish financial presence in the United States was not in banking. When I began to work for banks in the 1960s, there was a marked antisemitism there. They wouldn’t hire Jewish people. And one bank I worked for even hired a black employee before they would hire a Jew.

Well, how do you explain the Jewish presence? They were in the brokerage industry. They were in the stock industry, the investment banking industry — such as Drexel Burnham — not in banking at all. And it’s this reshaping of the investment banking industry that has cost billions, and I guess you could say trillions, of dollars. Part of this has been to make themselves tax-exempt, from paying anywhere near as high an income or wealth tax as 90% of the population has.

So, I think it’s appropriate to explain how the economic powerhouse of this propaganda attempt, that is not only shaping how Americans think of Israel, but [also] because the American internet companies and the associated Silicon Valley companies control the large firms that are active in Europe and Asia. What you’re having are these companies using algorithms and automatic intelligence to essentially act as a censorship that goes way beyond the United States, but over the entire world economy that uses Facebook and X, and all of these other internet — TikTok, now.

You’re having something that — it’s a fight, a global fight, to reshape history in a biased, extremist, Zionist way, a Cold War way, a neocon way, a right-wing, oligarchic way. You’re having the whole narrative become oligarchic, neocon, and Zionist. That’s really what is the context for the fight that we’re going to be seeing unfolding, probably for the next few years.

⁣RICHARD WOLFF: It’s very, very useful to have this kind of history. Michael is exceptional in that, and he has been for a long time. The books he writes, the articles he writes, the take-back, they answer the question. Other people notice something. Michael asked the question: Why is it like that? Why, for example, would Jewish people be prominent in a particular industry, not in another industry? And, then, how does that help you explain why Silicon Valley should be peopled by the people that are there now, rather than the conventional banking? And he explains: because Jews were excluded from the historical banking, so they went somewhere else — and that that becomes part of the history.

Well, I want to do the same thing. Jews have been split — for as long as I’ve heard about any of this — between those who thought that there ought to be a homeland, quote, for Jews — a Zion, a place for them — and we all know what part of the reason must have been: that they were excluded almost everywhere else. Antisemitism, one way or another, could lead people to have the fantastic idea: Gee! If we were in a country that we controlled, maybe, finally, we wouldn’t be vulnerable to what has happened to us — in Spain with the Inquisition, in Germany with the Holocaust, and on and on and on; or in America, with the more polite forms of antisemitism that have long been here, and still remain.

And I want to remind people: Why did Jewish people go into financial issues? It used to be a critique, that finance — [Friedrich] Engels once wrote: Socialism can take a stupid form — his word — “stupid.” That’s when you think that the problem isn’t the capitalist, but the Jew. Antisemitism is the stupid-person socialism, was the way he articulated it.

Well, Jews were not allowed to be part of feudal Europe. They were not acceptable — neither as serf, nor as vassal, nor as lord. So, how are they going to live? They can’t live on the land, the way everybody else did in what was a rural economic system. So, they became the go-between. They became the merchant who didn’t have a piece of land, who moved from one place to another, buying cheap and selling dear — because that’s how you live if you’re a tradesperson.

Okay, so they become tradespeople, but there’s no mystery here. You don’t need the Bible to understand any of this. You need a little economic history to know exactly how it evolves.

But that takes me to the point — and perhaps, here, Michael and I disagree. I think he’s right in laying it out, but I think one side is now clearly losing, and it’s the side that used to be winning. In other words, we’re at a point where the former winners, the people who made the deal, the Zionist wing of the Jewish community — which was, by the way, always a minority, but an important one, but they had a lot of resources — they got their little country, they built it up — with the help of Jews outside, of course, and with the help of allies like the United States and Britain.

But it’s over. It’s over — not because this one or that one failed — because they’re part of the losers in the world economy today. That’s their problem. That’s Mr. Trump’s problem. If he didn’t have six other crises crashing down on him, he could give Mr. Bibi more. He can’t do it anymore. He just can’t. It’s too costly. And it has now turned into being costly to him politically. And since that’s all he has —

He brought three hundred generals and admirals to Washington a couple of weeks ago. He insulted them. He had a numbnuts defense minister tell them that they were fat, and not up-to-snuff. It’s outrageous what he did. You know, he’s so tone-deaf to do such a thing — Trump, likewise. They’re in trouble. That’s why they did that crazy thing, and then messed it up.

You know, if you have too many of these, it’s no longer the failure of this or that plan, or the mistaken strategic — no, no, you have to put it together. What is happening here? And he’s telling Mr. Netanyahu: Look. You’ve got to change the position of Israel in the world —

That’s going to be very hard for Israel. Why would you ask that of a country? Right? You’re asking, I mean, the moon — you can’t. Why would you be in a position to do that?

And he’s clearly pointing out whose job it is, this impossible job: It’s them, not me — I’m back. It’s a little bit like what he’s been telling the Europeans: You know, I’m not in this war in Ukraine, the way I was. You can do it. You better do it. But I’m not going to help you do it anymore, except peripherally.

That’s what he’s telling everybody. It’s because the United States cannot play the role it did. We are in this — pardon me — ass-backwards way, trying to tell the world, and ourselves, the empire is over, and we have to figure out a whole new narrative, strategy, system of alliances, security framework — whatever language you want. It’s over, and we’re in a new place. And we can’t militarize our way out of it.

⁣MICHAEL HUDSON: Well, there goes Richard again. He’s being reasonable.

I don’t think Israel is reasonable. I’ve known these people. They are fanatics. I’ve worked with Netanyahu’s head of Mossad, his advisors — there is no way they will change. They are not going to be reasonable with the Palestinians. They are committed to exterminating them. The American Christians are committed to genocide. You’ve seen in the whole decision to get rid of Mr. [Charlie] Kirk, a month ago — he wanted to try to be a little more reasonable and reflect just exactly what Richard’s been saying — he was killed. Any refusal to go whole-hog with their program is met in the same way that Republican congressmen here in America are treated — expelled from the insider group, if they don’t go 100% with the extremism.

I think we’re dealing with an extremist ideology, with a religious fundamentalist conviction, that is not amenable to listening to reason. And Trump loves to make promises, and to say: Here’s a promise of peace.

Trump has no intention whatsoever of living up to his promise.

Just in today’s news, the Argentine peso is collapsing because Trump had promised $20 billion to [Javier] Milei in Argentina, and he hasn’t really done anything — just as he made promises to Russia to try to, at least, stabilize diplomacy. And in the last two days, you’ve had a Russian spokesman saying Trump has not followed through on a single promise he’s making. What you are seeing today is the euphoria of a promise that is going to be broken, just as soon as Israel goes to war with Iran. And you can imagine the aftermath of that.

But I want to continue the logic that I’m saying: What do you do if you’re an extremist? You have to be totalitarian when it comes to knowledge. And Trump has declared war in the universities in the United States, to treat student protesters opposing genocide — to expel them. And he’s following the example of the Zionist university donors who said they’re going to cut off all the funding, to Harvard and other prestige universities who don’t support a Zionist, specifically anti-Palestinian, position.

And I think the trauma that the Zionist strategists have in mind are the protests against the Vietnam War by American students — the Kent State killings, that killed the student protesters against the war. And that’s what led President Johnson to resign in 1968, and said he wasn’t going to run again because he couldn’t go anywhere in the United States without escaping through the service entrance of hotels, where nobody would yell: Hey, hey, LBJ, how many kids did you kill today?

All of this is in the mind when you think you don’t want the universities and the young people to take a position of supporting peace — because peace is assimilationism. To want peace is to deny that both the joint U.S. and Israeli control of Near Eastern oil and the whole Near/Middle East is at issue.

Well, last December, you had U.S. Senator Tom Cotton introduce a Senate bill that seeks to eliminate any federal use of the term “West Bank” — and instead substitute “Judea and Samaria.” And in Florida, you’ve had the governor try to insist that the textbooks used in the Florida schools rewrite history to use this different terminology. The terminology is sort of an identification as to whose/what language you’re going to use. And the House of Representatives has a bill saying that the government is going to remove all references to the West Bank from U.S. government discussions.

The fighting with Gaza may continue. So Israeli settlers are now redoubling their murder rampage against [Palestinians] on the West Bank. They’re burning their olive trees. They’re destroying their houses. They’re bombing all of their houses to drive them out. The war in the West Bank is now just as vicious as it was in Gaza, but there’s no military protection. And it is symptomatic of the control of the news that this has not been discussed anywhere, except on the internet.

Richard said at the beginning of the show that he doesn’t have the information, we don’t have access to the information. Richard, you and I have better information than President Trump has. We read the internet. We read the newspaper. We know what’s happening. Trump is surrounded by neocon Zionists, and despite the fact that he has the public relations perspective that you described, he has no understanding of the big picture that you and I, and I think most people who follow Nima’s channel, have. That’s what’s so striking in all of this.

⁣RICHARD WOLFF: I think time will tell us how this is going to play out. I could be wrong. I could be wrong that it’s shifting against Israel and that this is symptomatic of that. But let me give you some more evidence that it might be shifting.

The British political system is now in a state of collapse. I mean, almost all points of view about Britain, inside and outside Britain, would agree. The Labour Party has lost pretty much all of the momentum it got from winning the last election, and putting [Keir] Starmer in the position of prime minister. The Conservative Party that ran Britain for most of the last thirty years is in its final death throes. It may disappear, it is so weak at this point in its existence. The polls are against it. Its leadership is fighting each other. It’s really a shadow. And an extreme right-wing reform party is probably the best positioned right now, if there were to be an election. And it is a minority party, with very little of a history, and a very strange man at the head.

But what’s clear is that the program of getting rid of a very popular Labour leader, Jeremy Corbyn, which was accomplished by Mr. Starmer, the guy who’s now in office, by pillorying Corbyn — by blaming him for being insufficiently vigilant against antisemitism, where the evidence was support of Palestine — that’s over. That’s a game you can play once, but you can never play it twice. It’s like the threat to commit suicide. You can play it really well once, but by the second time, it doesn’t have the punch it did before.

I want to remind everyone that a week ago there was a general strike in Italy. The whole country stopped — because the whole country went out, stopped working in solidarity with the dock workers’ union there, which had refused to load, or offload, Israeli cargo from any ship docking in the ports of Italy.

And a few days before that, you had mass movements across France on the 18th of September, on the 2nd of October, on the 10th of September — those three dates — and among all the flags of the millions who went into the streets of France were the Palestinian flags, that were obvious everywhere. It’s not just Mamdani in New York. There is a global turning against —

Look. It’s remarkable that it took this long, given how long the Israelis have done what they’ve done in Gaza, and the West Bank; and given the way they treated the Arabs, who, let’s remember, are half the population roughly of the country of Israel — so you have this split in the country, and all of that — it’s taken a god-awful long time! But I do believe we now have signs. Britain has recognized Palestine as a state. So have most of the other Europeans. Ireland did it long ago, but Spain, Italy — Germany, I believe, is about to do it, — France has done it. I mean, Israel’s isolation is virtually total.

You know, you even have conservatives running around the United States trying to explain to the American people that we’re pretty soon going to have ten billion people as the population of the earth. Half of them — five billion — are Muslim. You’ve got a problem here. And it’s becoming impossible to pretend otherwise. And all the money of the billionaires in Silicon Valley, and all the expertise that AIPAC has shown, are not enough. You can’t go against a historical shift — when its time is here. Michael may be right — it may not be here yet. I may be seeing things which, even in their aggregate, are not enough.

But, I haven’t thought so before, but I think so now. The communications I got over the last month, from both France and Italy, and also a little bit from Germany, show the Israeli issue — which in Germany has been very important because of their collective guilt and all of that — it doesn’t work anymore. The Alternativ für Deutschland [AfD], which is the right-wing inheritor of the Nazi past, is able to be what it is now, which is the largest single party eclipsing the Christian Democrats in Germany for the first time — and their position is unmistakable. It’s not being held back, as it used to be, by the legacy of their Holocaust. For the Israelis, this is all unspeakably bad news.

⁣MICHAEL HUDSON: You’ve put your finger on the really important thing: What is the rest of the world going to do?

And some of my friends that are still associated with the Democratic Party have suggested imposing a litmus test–pledge on political candidates not to accept any campaign contributions from AIPAC, or other Zionist organization. And if they accept such funding, then the Democratic voters are called upon to reject them; and if they win the primaries, to refrain from voting for them — even if this perpetuates the Republican domination of Congress. You’ve got to get rid of the AIPAC-funded candidates reflecting Zionist interests.

And beyond electoral politics, you have the whole looming threat of the Supreme Court’s Citizens United ruling. And that is the modern travesty — this is as destructive as the Dred Scott ruling that led up to the Civil War. Congress has to pass an act prohibiting private contributions to political campaigns beyond some circumscribed limit, with penalties for bribery and corruption brought against such violators. That’s the only way that you can cut off the money that is supporting this rotten congressional neocon, pro-war, oligarchic, anti-labor position. And without such legislation, the United States and its political system are going to continue to be that of an oligarchy, not a democracy. And it’ll be an oligarchy controlled by an extremist minority of wealthy financial institutions, and the international neocons who are supported with them.

So ultimately, it’s going to be up to the U.S. And the same thing applies to Europe and other countries. It’s up to these other countries — outside of Israel — to lead the opposition to the genocide that’s occurring, and to the whole idea of ethnic nationalism and ethnic cleansing that you have in Ukraine against Russian speakers; in the Middle East by the American-supported al-Qaeda and ISIS head-chopper that is the head of it now; and by Israel itself in Gaza and the West Bank.

And if you recognize that Israel’s war against Gaza and Hamas is against the broadest principles of civilization, that have spent centuries developing the laws of war, the laws of international diplomacy, the laws of, basically, international relations, then you realize the travesty that’s occurring in overturning this whole century-long momentum of trying to establish basic civilized —

⁣RICHARD WOLFF: Michael seems to have frozen. Let me pick up while we wait for him to come back.

⁣NIMA ALKHORSHID: Richard. Since you’ve mentioned the case of Germany, here is the poll that they had in Germany. Three out of five voters believe that Israel’s action in Gaza can be called genocide. This is meaningful, as you’ve mentioned. Go ahead.

⁣RICHARD WOLFF: Yes. But I want to underscore the notion of seeing as a symptom of a larger decline, a rejection, an active rejection of what used to be — at least official — norms of acceptable behavior. I understand. Secretly, those norms are violated by the secret services of many countries, all the time — I understand that, I’m not questioning that. And that’s a serious problem.

But it is another step when you do that openly and publicly.

And I think I want to point to something which might even be an argument against what I’m saying. I have watched, and I’m sure you have all seen it, over the last month, on at least four occasions that I’m aware of, the United States has decided to bomb and destroy boats in the Caribbean that are moving in the water near Venezuela. Each time we were told by the president that these boats were involved in the drug traffic and that persons on these boats were killed — and thereby prevented from completing whatever they were doing with the drugs. Okay, so we killed eleven, in one case, four, in another, and I forget the number of people on the other two boats.

Alright, in this situation, the president, who announced and authorized these acts, is functioning as the police, he’s functioning as the jury, he’s functioning as the judge, and he’s functioning as the executioner. In the United States, participation in drug traffic is not a capital crime. You don’t get killed for that, if you’re found guilty. You have to have a chance to see the evidence presented against you. You have to have a lawyer. You have to be able to question and challenge the evidence. Then it goes to a jury, and only if the jury decides unanimously to find you guilty, will you then be punished with the punishment, 99% of the time, being some sort of imprisonment. We don’t kill those people.

We kill in America — it’s bad enough — but we kill people, usually, if they have killed somebody. And there is no evidence — not even offered by the president, who showed no evidence of anything, but he didn’t show any evidence — that these people had killed anyone. This is extra — and no one in the official positions of the United States government — to my knowledge, I’m no expert — but I haven’t heard any outcry — after he did it the first time, he did it a second, third, and fourth time. This is, I mean, this is unbelievable.

This the official murdering of people with no evidence required, no procedure, no due process, no presumption of innocence until proven guilty. Nothing. And the ultimate penalty, execution? Am I the only one here finding this bizarre? Why would you do this? Forget whether it’s correct or not that these people were involved in drugs — I don’t know — but whether or not they were, why would you do this? Why would it be important not to have your Navy, which is down there, arrest these people? Okay. Board them. Check out, you know, bring them back and subject them to — Why wouldn’t you do that? Why would you kill them first?

And here is my answer, again. I am seeing — and I would love [it] to be argued that I’m wrong — I am seeing desperation. I see people getting together in a room. They have to do something. They have that mentality: We are losing something, we must act in a way that will, hopefully, gather support —

And you know, going to war, at least for a few weeks and months, does that for you. It’s awful, then, how it falls away, after a few months — and that’s been the American experience in Vietnam, in Afghanistan. Those wars were lost, in part, because the American people no longer supported them, the way they had in the beginning. Same is true in Iraq. But for a short time, you get a boost.

And you are now behaving? Look. All the laws of the world don’t allow one country to kill people in the boats of another country, and claim that they were involved in some transaction we don’t like — which we don’t even punish by capital punishment. It is extraordinary behavior, on the end of an extraordinary-behaving regime. So, I see a level of desperation, and I bring it up because I think it should be factored into how we look at all these other questions — because that hysteria, that desperation, is operative across the board.

⁣NIMA ALKHORSHID: It seems that Michael has some sort of problem with his internet connection. Thank you so much, Richard, for being with us today. Great pleasure, as always.

⁣RICHARD WOLFF: As always, and I look forward to talking with you again next week.

⁣NIMA ALKHORSHID: See you. Bye-bye.

Global South

Michael Hudson: How A Nation Makes Money in Their Sleep

“Where are the profits. I don’t find them in any country.” This will explain why it is such a battle to change to a financial system that is fair. The US has lived and grew wealthy on the rest of the world for many years now. This is why the empire is scared as they will lose their exorbitant priviledge. Michael explains the basic fiction in the actual numbers. These studies are the ones that made him “the name that must not be spoken” in economic circles.

*** To understand the topic of this discussion, please read Michael’s Trade, Development and Foreign Debt.
2025.09.04

⁣KARL FITZGERALD: All right. Welcome everyone, to another Patreon Q&A gathering with Michael Hudson, the Hudson Roundtable, where we’re lucky to be joined by Professor Michael Hudson, the world’s leading critic of neoliberalism, debt, and the need for a better finance system. So, Michael, welcome to the chat and welcome to all our Patreon supporters.

⁣MICHAEL HUDSON: I like these meetings, and thank you for your support.

⁣KARL FITZGERALD: And when we look at economics, you’ve been very critical of the fact that the balance of payments theory is barely taught at university. Could you give us an overview on why the balance of payments and a strong understanding of it is so important and perhaps how it’s been corrupted?

⁣MICHAEL HUDSON: Well, I never said any such thing, Karl. There’s no balance of payments course that’s taught in any American university. And there hasn’t been since I taught in 1969. There’s no discussion of how the statistics are put to work. This discussion today will talk about how the trade statistics that you read about in the paper don’t have anything to do with the actual balance of trade as settled in money.

So, I want to tell you how I came to understand what’s wrong with the statistics and where it went wrong and why it went wrong. The first balance of payments study I did was with the Chase Manhattan Bank in 1965. And they asked me to look at the balance of payments of Argentina, Brazil, and Chile – and especially Chile – because that was where one of Chase’s clients, Anaconda, was nationalizing the copper mine that it had, Chuquicamata. And Citibank was the banker for Kennecott. They were turning their mines over to the Chilean government. And the question I was asked was, how does this affect the balance of payments?

The way to find out was to go to Chile’s National Bank and its balance of payments, the Balanzo reports in Spanish. And what I found was something wonderful. They had the nominal dollar volume of exports of copper to the United States. They then divided that into two categories: value retained abroad and what Chile got actually out of these exports. And I found out that what was retained abroad – Anaconda, Kennecott, and Cerro Copper was the third company – [they] would buy the copper from their mines owned and operated by the government, not by themselves. Chile would get the entire payment, presumably at the “producers price” for long-term contracts – the key was that the U.S. companies would be the designated buyers. Chile would not be in charge of WHO bought the copper.

But the [US companies] wouldn’t pay when they imported the copper. All of these transactions were held in dollars. And they did not reimburse Chile for the costs of production. These costs of production included the interest rate charges that they had, the exports of U.S. capital equipment to the mines to help them operate, the management fees that they had, and the cost of transportation. And I realized Chile only got a small proportion of the actual copper.

So the figure that was reported in the U.S. balance of payments of imports of copper didn’t actually mean that the United States paid in dollars for the copper.

Very shortly thereafter, I was asked to do a study of the balance of payments of the oil industry. I had to design an accounting format for all the major oil companies to send me their classified information about how they filled out the government statistics and to answer a couple of questions. What I found out was that, let’s say, for every $100 reported as U.S. oil imports, and this was one of the major features in the American trade deficit, only about 10 cents actually was paid abroad. That’s because the companies that were doing the importing, Exxon, Mobile, the usual companies, and all U.S. imports of oil were from U.S. affiliates.

So all of the accounting was done in the head office of these affiliates. And the treasurer for Standard Oil of New Jersey walked me through all of the statistics. He said when we import from Saudi Arabia or other countries, we subtract from the price that they get, our profits. We subtract all of the oil equipment that we send to Aramco, the local oil company. That oil equipment obviously is a charge against what they’re paid. We subtract the interest charges on this. We subtract the transportation charges. We subtract the management fees that we charge.

And after all of these fees are taken, including our profits, then there’s really not much that Saudi Arabia or the oil-exporting countries actually get because almost all of the oil that’s imported, 100%, is from foreign branches of the U.S. oil majors. And I say branches, not affiliates, because Aramco and the oil companies, branches abroad, were consolidated into the parent company’s balance sheet. They weren’t foreign affiliates. They were just literally consolidated, and it was all done in the accounting.

And I said I’ve got the statistics that all these companies supply for how much equipment they send abroad. What are their payments to American engineers – that they pay in dollars to the Americans that they send over there to supervise production. I see the interest payments. Where are the profits? And I don’t find them in any country. I looked in the Near East and they said the profits are at the very end. Here’s Europe, Asia, other countries, Africa. Here’s something called “International”. And I said, I thought everything is international? And they explained to me, international means it’s not really a country. It’s just a pretend state like Liberia or Panama. A real state has its own currency and its own taxation, but these are countries that use the dollar.

So we don’t have to worry at all about any exchange rate risk. I think, on my website, there’s a photocopy of the balance of payments of the U.S. oil industry in detail. And copies of this were put on the desk of every senator and every representative to get them exempt from President Johnson’s balance of payments controls that he imposed to help finance the Vietnam War.

Well, from that study, I turned to: let’s talk about the Vietnam War. And there were a number of things that I immediately saw in the balance of payments.

First of all, you think of the balance of payments as being the capital account and the trade account. Well, that’s not really the whole picture. Where is the government in all of this? I found that when you separated the government sector from the private sector, which you had to do, I was able to actually find out what are the balance of payments costs of military spending abroad and also of foreign aid. And the first study I did was the study of the statistics on foreign aid.

And in my book, Super Imperialism, you’ll find my chart on foreign aid. And you may have heard politicians talk about, I think Trump said, ‘we’re not going to send any more of our dollars abroad to foreign countries. We’re just going to cut that outflow. We’re going to stop foreign aid; it’s a drain’. And politicians have been saying that for 50 years.

What I found out was in the 1960s and early 70; not a single penny of foreign aid actually was paid in dollars abroad. Zero was paid abroad because Congress had passed a law saying that all foreign aid had to be spent in the United States. Foreign aid is not to aid foreign countries; it’s to aid the United States, but using foreign countries as a vehicle.

So there will be foreign aid in food, sending food exports. All of this grain is bought in the United States for dollars and then sent to the foreign countries. The government will make foreign aid to countries that owe dollar debts to the United States. It will lend them ostensibly the dollars to be credited to pay interest to the U.S. bankers and bondholders that these countries couldn’t otherwise afford. So foreign aid goes to the U.S. banks and the U.S. bondholders.

All of this remains in the United States, probably administered via the New York Federal Reserve. And I went right down the line. Every kind of subscription to the IMF and the World Bank, all of these items in foreign aid were all spent in the U.S. But it’s actually worse than that, because when the United States would give foreign aid to Egypt or other Middle Eastern countries, they would have to get a give back. It wasn’t Trump who invented this. And the give back was, we’ve given you dollar credits to meet payments to American suppliers, bankers and farmers.

But you have to give us an equal amount of your own domestic currency so that we can use it to support our spending locally in your country. We can use it for any nefarious purpose we want. And so the United States actually made money on its foreign aid.

Then finally I went to work for Arthur Anderson, and I said, I want to do what I’ve done for the U.S. oil industry and do a study for the whole U.S. economy. Let’s say how much of the U.S. trade and U.S. foreign investment actually involves payments and how much is simply imputed as if it were paid for. There’s a basic fiction underlying all of the U.S. balance of payments data and that of every other country and this fiction was to make it dovetail into the GDP statistics. It’s divided into the trade balance and the foreign investment balance.

So in the trade balance, you’ll have, for instance for oil, the entire cost of foreign nominal cost of the oil that the United States oil companies import from abroad as if this import money were paid to a foreign country. And then you go elsewhere in the balance sheet and you have the offsets for all of this. So the offsets that explain why there’s a zero net balance, which economists call a wash transaction. For instance, on the investment account, there will be disinvestment or investment of money in the oil industry.

On the export account, you’ll have the exports of machinery used in the mining of oil abroad. You’ll have payments to American labor that’s a service transaction, foreigners to the U.S. All of these payments that offset 100% of the oil imports are counted as if it was a cost. Same thing with foreign aid. Foreign aid is treated in the government’s account as if it were all going out.

And then the government used to publish something called Table 5 in the balance of payments reports that it did annually or quarterly in the survey of current business by the Commerce Department. And they would break out actual money paid abroad. And that’s where I got the statistics for how much money was actually spent abroad in foreign aid and how much money stayed in the United States, 100% of all of that.

It took me a year to separate the trade account, and I found out that America didn’t spend anywhere near the cost of its imports that it reported, but also the cost of its exports. Of course, most of its grain exports were paid in dollars, but a lot of its grain exports – other countries didn’t really pay dollars for them because there was a foreign aid outflow on the government account. That led me to say let’s separate the government account and foreign aid as opposed to military spending.

What I found out was on the actual payments involved in exports and imports, the U.S. balance of payments in terms of dollars and foreign currency back and forth was just exactly in balance from 1950 when I began the statistics right through 1964, or maybe could have been 68 when the statistics ended. The entire balance of payments deficit in terms of dollar outflows was on military accounts; not foreign aid, not trade account, not foreign investment abroad, as President Johnson had imagined erroneously.

So we were about to publish this. Arthur Anderson’s art department made very nice charts. And then my boss came to my office and he said we just got a very upsetting phone call. I’m afraid we’ve got to terminate your employment here. And I said, what happened? What did I do wrong?

Well, you didn’t do anything wrong, but Mr. McNamara – I think when he was head of the World Bank – he called the head of our company and said, if you publish this report, you will never get another contract from the U.S. government again. And we need the U.S. government contracts.

He said, I feel very bad about that. We’ll give you a present, you can take all of the slides, all of the pictures and the charts, and you can do whatever you want with them.

So, I took the chart to the NYU Business School, and they published a regular bulletin. It’s an academic publication, and they were overjoyed to get it. They published it as a triple issue of their bulletin, and it got quite a bit of notice in Wall Street financial circles; hardly any notice in the left-wing press or in the popular press, generally.

A few months later, the Federal Reserve Bulletin – there was a major review and I forget what publication it was – the Federal Reserve published a study of – I think it was in the American Economic Journal of American Economic Literature or something like that. It was saying, let’s look at all these publications by the NYU Business School. And it reviewed them all, and then it got to my report. It said the fact that Dr. Hudson finds that military spending is the root of the balance of payments deficit does not give confidence in his study.

And I thought, I’m using all the government figures. What happened? I talked to my class – one of my students worked for the Federal Reserve as one of their staff economists. He said let me give you a copy of an internal memo that we got. The internal memo said my figures were all right, but that we must not publicize it because that would spur the anti-war movement and that was against American foreign policy.

So that was yet another reason why I’m the name that must not be spoken in government statistics. It was against the U.S. interest to actually do a financial analysis of what are the actual effects on the dollar’s exchange rate in terms of the foreign exchange market, the demand for dollars versus the demand for foreign currencies to cover exports, foreign investment, trade, government transactions, and military.

The government did not want to highlight the fact that the weakness of the dollar and what had forced the dollar off gold, as I describe in Superimperialism, was because of military spending abroad. That was the only drain. There was no drain on the trade account, no drain on foreign investment account, and no drain on foreign aid. The entire downward pressure of the United States; the balance of payments deficit started with the Vietnam War – I’m sorry, with the Korean War – in 1950-1951, and got worse and worse and worse from there.

Later, one of the Wall Street firms asked me whether I could try to redo the study. And I thought, it took me an entire year of my life to do the study of the U.S. balance of payments. That’s how I ended up learning about the actual statistics. And if you wouldn’t actually do the actual statistics and see how they’re put together proverbially, how a sausage is made, you’ll see it’s not what you would expect. I wouldn’t have understood the difference between a financial analysis and an imputed analysis, something as if it were there.

And the idea of separating the trade account and investment account was to dovetail into the gross national product categories that were developed as part of the GDP that won the Nobel Prize. And I can understand the logic of the GDP, but they should have had two measures. Before the GDP, the government actually recorded the specific foreign exchange effect of U.S. exports and imports. All that was changed in order to fit into this hypothetical GDP account. And the problem with the GDP is not only wash transactions like this, there are all sorts of transactions in the national income account that don’t involve income at all.

For instance, one of the big contributors to GDP and national income in the United States is imputed homeowners’ rent. As many of you have seen rent charges going up and up and up very sharply in the United States, as you’ve had computerized advice to landlords as to how to raise prices – they all act as a monopoly to really squeeze the renters.

When the Bureau of Labor Statistics will go to the various households that it does as their test study – they’re in miniature to sort of blow up these statistics to a national level. And one of the questions they ask the household: if you’re a homeowner and if you had to pay rent to yourself, if you were the landlord and had to pay rent to yourself, how much would you rent out your home for? As you can imagine, more and more homeowners say we’re sure glad we bought our home, because if we wouldn’t have bought our home, we’d be paying this much more and this much more and this much more for rent every month.

The GDP says we’re counting rent as actual product. And so the GDP as a product has the increasing rental charge of paying for your home, or presumably a commercial property, as if it’s an actual product helping GDP grow instead of stifling GDP growth; deindustrializing the economy by charging so much that the homeowners and renters cannot afford to use their income to buy actual goods and services, as we’ve talked about before.

⁣KARL FITZGERALD: Let’s head back towards balance of payments theory. Maybe we can do a special on GDP sometime because I know you’ve got a lot to say there. But what you’re essentially saying is that it is crucial that developing nations understand the balance of payment theory, particularly when the IMF and World Bank use current account deficits as a pressure point.

⁣MICHAEL HUDSON: If they’re a raw materials exporter, then, of course, they understand this. And as I said, the model report that I found of all of the central banks that I looked at, and I’d walk the 50 feet to Chase Manhattan’s library, where they had the central bank reports of every country for every year, and, of course, Chile had to calculate for itself ‘what is our balance of payments actual situation?’ How much money do we actually get from our copper exports and our guano exports?

Gold exports were a result of copper refining; electrolytically, the gold falls to the bottom and you have the anode electrically collecting all of the copper. So countries that export raw materials have to make this calculation. They know about it. I don’t know whether the financial people who actually compile the balance of payments try to interact with the GDP people and say, wait a minute, how do we dovetail what we’re doing with a reality-based payments account for actual payments instead of imputed payments?

But they certainly know what they’re doing and they know that they don’t get all of the money from the raw materials that they make. So the problem is really in the industrialized nations, and especially the United States, which is on the opposite end of the spectrum, that doesn’t want to make it clear to foreign countries that you think that you’re getting rich exporting your copper and your cocoa and your oil and other raw materials.

But you’re not anywhere near as rich as you think you’re getting because you only get a little bit of this money for you, thanks to the fact that American companies own your natural resources, or English and Dutch and other European countries own your natural resources and you’re really not getting as rich as you think. If the United States actually published, or sponsored the publication, of a realistic financial analysis, this would show how many of the Global South countries are not developing.

The aim of the World Bank and the IMF is to prevent them from developing. You could say they’re malstructured or stifled, but certainly not developing. The purpose is to show that you can’t afford to pay your existing foreign debt to bondholders and bankers – unless you borrow the money to pay your debts.

In other words the foreign debt – Global south foreign debt scheme – is a Ponzi scheme. The United States and other governments, especially the IMF, will lend them the money. The International Monetary Fund just lent Argentina an enormous amount of money to pay its foreign bondholders because they said, you’re a Fascist country, you’re a Zionist country, of course, we’ll give you the money to pay the bondholders.

And by the way, tell your bondholders that we can’t do this forever. Let them use this money we’re lending you to get out of the Argentine economy and put their money in dollars or gold or hard currency. Our job is to subsidize capital flight by the client oligarchies in Argentina or other countries. To get their money out and to empty out their countries so that once Milei’s right-wing government is replaced by, presumably, a left-wing government, the left-wing government will be absolutely strapped for cash and will have to prevent devaluation by going to the IMF and say, if we devalue, then we’re going to have to lower the standard of living of our labor because our workers are going to have to pay much more for all of their imports, just like in the United States.

And the IMF will say if you, left-wing government, will act as a right-wing client dictatorship, of course we’ll lend you the money. That’s the international financial game. And that’s what you see if you do an actual financial analysis instead of the as-if hypothetical analysis. Wouldn’t it be nice if they actually earned all the money that they report on their export accounts?

⁣KARL FITZGERALD: Danny Wheel writes in the comments: ‘We see the same thing here in Ecuador. Rubio got here last night, but the mines are being subsidized by the state, while people have to bring their own medicines to filthy public hospitals left to rot for privatization between the IMF and export economy, meaning we have no industry except extraction. Poverty is beyond comprehension, and violence is the biggest in the world. This is real. The things Michael is talking about affect real people. It’s a casino scam backed by the military of the U.S., but this is predominant all around the world, isn’t it? And nations need to understand what is happening.’

⁣FRANK MOELLER: [I’ve been] listening [to] and read several books by Professor Hudson. He talked about surplus balance of payments in a recent podcast and I was wondering about surplus balance of payments and how they use that for housing, education, human capital development, healthcare. And if so, can we put a dollar value on that, per person or per capita, over there and how that’s distributed for those utilizations?

⁣MICHAEL HUDSON: Well, you wouldn’t get that material from the balance of payments accounts. If you talk about medicine, I guess there would be medical supplies to foreign countries as an outflow of government foreign aid. And on the export credit side, you’d have exports of U.S. pharmaceuticals and also on transfer payments, payments to U.S. doctors or U.S. embassy personnel, or State Department personnel, or other individuals doing all these payments that are defrayed in the United States.

But they certainly don’t give these other countries dollars to spend. They only give dollars to Ukraine or Argentina or client dictatorships. They have a very tight-fisted control to make sure that other countries don’t actually receive dollars from the United States, but only U.S. firms and suppliers and creditors get these dollars. You can do the per capita, but that’s something else. It’s not something I’ve got into. That’s all domestic statistics you’d have to use.

⁣KARL FITZGERALD: And Danny Wheel has a few questions coming through as well. Danny, do you want to come on screen and ask Michael some questions? It’s great to see some of our transcription team here; Ced and Kimberly do a great job for Michael.

⁣And they’re there, don’t you worry. So Danny’s microphone is down. He’s asking about Social Security payments here somewhere. During the 60s, Social Security funds, we were told could never be touched for anything but Social Security. These funds were used for the war, as far as I know, and want to know if Michael can verify.

⁣MICHAEL HUDSON: Of course, the fact is there are no funds there. As George W. Bush said, there’s no money there. All there is, is a promise by the United States government to pay for the Social Security contracts that they’ve signed. Social Security has run a surplus for many years.

The role of this surplus was to finance military spending and to finance the budget deficit. The budget deficit was financed not only by tax payments by the U.S., but by using Social Security as a tax. That money was paid to the government and the government used it for operations. And against this government’s use of it for operations, the government had a future liability, the liability to be paid to the Social Security recipients.

So, right now, the talk of the Republicans in Congress, which was really initiated by President Obama; Obama set out to work with the Republicans to mobilize the Democratic Party to abolish Social Security and have the Social Security funds available to be invested in the stock market. I think, in 2007, I wrote a cover story for Harper’s magazine tracing this. This was the plan that Obama had when he was trying to work with the Republicans to do just that. There’s zero money in the Social Security account. There is a liability of the U.S. government to pay Social Security.

But what the Republicans say was: if we pay Social Security, we can’t cut the taxes on the rich. Our economies run – industry and employment are just an overhead. The purpose of the U.S. economy is to generate money for the rentier 10%. It’s to generate money for the banks and the landlord. Forget the people. Let’s just take all the money away from them and give all to the 10%. Let’s just speed up where the whole economy is going over the long-term trend.

Obviously, I’m very annoyed at this, as you can tell, but the Republicans and Democrat leadership have agreed: let’s not pay American labor as much, this is the problem. Because the Americans are doing something that is very unpatriotic; they’re living longer. And the government says you’re living longer than we’d calculated. You’re supposed to die when you’re 75 years old, maybe 78 years old, and you’re not dying on schedule. And that means that we have to pay much more money. And if we pay you, we can’t pay our campaign contributors; the banks, the financial sector, the landlords, the monopolists, and the rentiers.

And that’s not good for the stock and bond market, which is really what the U.S. produces. You can see the hypocrisy here. And there’s so little discussion of the monetary and fiscal policy in this country, because once you look at it, you realize how totally biased and unfair the whole system is constructed to benefit the wealthiest; the creditors and rentier interests, not the actual wage earners. It’s terrible.

⁣KARL FITZGERALD: Is there such a thing as a good current account deficit, where it’s funding something productive?

⁣MICHAEL HUDSON: No, there’s no attempt at all to make any such calculation. I mean, what is productive? And even what is the current account? The current account surplus or deficit is, in principle, if you study trade theory, is supposed to be balanced by the capital account. So if you’re running an export surplus, that enables you to, on investment accounts and capital accounts, invest money abroad. Or if you invest money abroad, that provides dollars for foreign countries to run a trade deficit with you.

There’s this hypothetical balance between current and capital account. But where are the gunboats? Where does the military fit into all this? Is it a current account? Is it a capital account? This is fictitious to oversimplify and assume that the capital and the current accounts simply offset each other and the result is zero. It does work that way for the private sector, I found. That’s what my statistics showed. But the wildcard is the government military spending abroad.

⁣KARL FITZGERALD: Diana DiRienzo asks, ‘does social security add to the deficit? When government spends domestically, they get more back in tax revenue than originally spent within a short time, don’t they? Also, can we see the data on how Social Security is running out of money? Reagan doubled the FECA to cover the baby boom requirements. And why can’t the government just pay Social Security without requiring FECA payments?’

⁣MICHAEL HUDSON: Well, it’s not running out of money at all because there’s zero money there to begin with. There is no money there. And again, George W. Bush recognized that fact when he said it’s really just all hypothetical. When people say Social Security is running out of money, they say, we’re not able to give the tax cuts if we also pay social Security and health care to American workers.

Something has to give, and what’s going to give is Social Security so that we can cut the taxes. How are you going to use the government revenues compared to the government spending? And as we, MMTers have pointed out, and Stephanie Kelton has written about in a recent book, what’s left out of the account is not just government revenues and expenditure, it’s government money creation.

The Federal Reserve only creates money to give to banks to lend out to invest in stocks and bonds and real estate and gambling – such as derivatives. The Federal Reserve does not create money to be spent into the economy. That’s what the Treasury could do and what the Treasury did in the Civil War with greenbacks and other times. It’s how governments finance war.

But all of this is a pretense of seeming to come up with a plausible way of thinking to create a narrative that makes you think, according to that narrative, gee, the government doesn’t have enough money to pay Social Security if it cuts the taxes on the rich, if it goes to war and spends its money on the military. You’re seeing this very clearly in Europe right now. That’s what the whole political fight is with Merz and Germany and the others. They say we’re limited by the rules of the Euro and the European Union as to how much of a deficit we can run. The U.S. is not subject to any limit on the deficit; the Europeans can’t.

And so if the Europeans – the entire growth in European GDP is spent on military spending that’s now promised, as a contractual promise by the German and other European governments – if all of the equivalent of the growth of GDP is paid on the military, they say we’re going to have to cut back the subsidies we’re giving for consumers.

And this is what’s causing so many political problems in Britain for Starmer, for instance, saying, now the government says, since we’re spending so much money, giving to the Ukrainians to fight Russia, we’re not going to be able to give you the electricity subsidies that we were giving you before because we’re not any longer getting gas. We have to pay much more for our gas and oil than we had to before we broke off relations with Russia. You’re having Europe cut back social spending in order to become a militarized economy to sort of try to re-fight World War II, hoping for a different outcome this time around.

⁣KARL FITZGERALD: It seems that over the arc of time since we’ve moved into the dollar hegemony era, the post-gold standard, that balance of payment theory and understanding has become even less understood, less important. Would you like to describe how that has played out?

⁣MICHAEL HUDSON: Well, I think I just did.

The problem began with trying to dovetail it into GDP. Nobody really expected government military spending to play such a major role in the balance of payments and to create such a deficit. But certainly, I think, as I’ve mentioned many times before, including in this group, in the 1960s, every day around noon, we’d get together, the Federal Reserve would report on the Treasury’s holding of gold, and we’d watch how far the gold has gone down.

Every U.S. paper currency, the dollar bills you have in your pocket, and all the denominations had to be backed 25% by gold. And as the currency went up, as the economy expanded or inflated, the gold supply was going down. And we could see that, at some point, the government was going to run out of gold.

And the newspapers would be denouncing General de Gaulle for making a big thing about saying, we don’t like American military spending. We’re going to cash in all these dollars that America spends in Vietnam and Cambodia and Laos and Southeast Asia. These are French territories, and the French banks there send their dollars to Paris, and we cash them in for gold right away.

Well, Germany actually was cashing in even more dollars for gold than France was. If you talk about economic reality, it’s going to be different from the reality that people are told in the mainstream press. And it’s very difficult to maintain this fictitious narrative that people are being taught.

⁣KARL FITZGERALD: So what about the classic twin deficits periods in the 1980s and how that contributed to sustained deficits?

⁣MICHAEL HUDSON: What in the 1980s?

⁣KARL FITZGERALD: The twin deficits period, the large fiscal gaps plus the strong dollar. How did that influence U.S. fiscal policy?

⁣MICHAEL HUDSON: Well, once countries no longer could cash in the dollars that were being pumped into the economy for gold, the only choice that they had was to buy U.S. government securities. They had to; these were safe. This was before the government began to grab Russian money and Venezuelan money and any money of countries that it didn’t like.

It was the deficit spending from the military in the 1980s that pumped dollars into the economy that ended up in the hands of foreign central banks that invested this money in U.S. Treasury bonds and bills and notes to finance the budget deficit. So Americans didn’t have to – the government didn’t have to tax Americans. They just had to spend more military money abroad and let the foreign central banks buy the securities. Circular flow.

⁣KARL FITZGERALD: Goodness me, it makes it so simple when you say it like that.

⁣MICHAEL HUDSON: That’s why people don’t discuss it. It is simple. But how do you really make it so complicated that nobody’s going to discuss it? You get a whole different set of unrealistic categories. That’s what economics and the role of economists is for.

⁣KARL FITZGERALD: And so Bernanke’s global saving glut view was built on that play that occurred through the 90s. Is it the same thing there?

⁣MICHAEL HUDSON: Sure. The global savings glut was neoliberalism. They stopped regulating economies. They permitted monopolization. The savings, you could say it was a money creation glut. What were these savings? The banks would lend money to their major customers, homeowners and real estate sector, 80%. So the more money that the banks would create, it would push up real estate prices or corporate bond and stock prices.

You had the economy flooded with Federal Reserve money, and that created the biggest bond rally in history from the time of Paul Volcker in 1979 that brought down the Carter administration right down to just a few years ago with the zero interest rate policy. So it’s not a saving. The pretense, and this has gone back to the fictions of the late 19th century.

The idea that if you’re a billionaire, you’ve saved up your money. And the way that Böhm-Bawerk, Eugen von Bawerk, and the Austrian school said was, we have to realize that there’s a reason that interest charges are really a product, and the creditors play a very productive role in the economy. They make a sacrifice. Their sacrifice is abstinence. And by not spending their money on consumer goods and gratification, they defer their gratification to later. And that’s how you measure the interest rates.

And so all this money that the billionaires have is saved up by not consuming. Well, that led Marx to quip, gee, ‘I guess the Rothschilds must be the most abstinent family in Europe’. And do you think Donald Trump got his additional $5 billion that he made in the last few weeks through junk crypto currency? He didn’t save that money. That money was just sort of – it’s all created.

So the very idea of referring to savings, the vocabulary is all a euphemistic vocabulary to make it appear as if creditors and landlords and monopolists pay a productive role instead of the rent that they get being in the character of transfer payments, zero sum. What the landlords and bankers and monopolists get is a transfer of income from the consumers or the renters or the debtors to the creditors with no quid pro quo. And as John Stuart Mill said, and I’ve repeated often enough, landlords make their rent in their sleep. There’s nothing they do in providing a productive service.

So of course, you want to create an economic vocabulary that makes it appear as if the wealthy people get their fortunes by being productive instead of being parasitic. That’s what my book, J is for Junk Economics, is all about. Going over the vocabulary and that’s used, trying to demystify it.

⁣KARL FITZGERALD: What about the U.S.’s exorbitant privilege? It’s almost as if a nation state has set up a system to create money in their sleep. And over the decades, the U.S. has earned higher returns on its foreign assets than it pays on its liabilities, as you spelled out in Super Imperialism. So is that really what this whole balance of payments interplay is all about with the dollar exchange?

⁣MICHAEL HUDSON: Yes, in one word. You’ve expressed it very concisely, Karl.

⁣KARL FITZGERALD: Okay. Well, I thought you’d have a rant to go on that one for us.

⁣MICHAEL HUDSON: Well, you said it clearly; you don’t have to rant when it’s all so clear.

⁣KARL FITZGERALD: Okay, can we get anyone to come on screen and ask some questions? I know this is all complicated material, but often it helps as we are all trying to grasp it.

⁣MICHAEL HUDSON: Anything.

⁣MICHAEL HUDSON: You know, we have a half hour to go.

⁣MATT CONNORS: I have a question if no one else does.

⁣KARL FITZGERALD: Go on, come on through.

⁣MATT CONNORS: I’ll start by just expressing gratitude to Professor Hudson for his work. Immensely, immensely thankful. He has a way of pointing us in a direction that we’re not looking. I remember reading an essay shortly after the beginning of the recent Russia-Ukraine conflict, where he called it the third war against Germany by the U.S. And I thought I was so confused until I wasn’t. And you know, that’s extremely helpful.

Similarly, when people started getting so excited about the emergence of BRICS a couple years back, Professor Hudson was consistent in also sharing a little bit of enthusiasm, but pointing to the fact that they hadn’t come up with a system that really was going to let them leave the dollar behind. And I’d be interested in hearing his analysis of whether they’ve gotten better at that, whether that’s on the horizon. You know, it’s basically a specific question that’s within my bigger question of how much of this rigged system is still going to be standing after all the mistakes or missteps that current leaders in the West have been making.

⁣MICHAEL HUDSON: Well, I did two shows on this week. In today’s Naked Capitalism, and on my website, I have my discussion with Glenn Diesen on this. And I just did an 11 o’clock a.m. interview today with Nima on Dialogue Works on this very topic. They have not yet put together a system of how they’re going to restructure their economies to make it something different. All that the countries have been doing really since 1955 has been to complain ever since the Bandung Conference. Isn’t the world unfair? But you have to go beyond saying, yes, the world’s unfair. What are we going to do about it?

And the solution has to be to change the whole tax policy around. That’s really what they have to do. Number one, they’re unable to pay their foreign dollar debts and foreign currency debts, without sacrificing their own economic growth. Number two, the BRICS countries and the Global South are faced with a problem. Foreign investors from the United States, England, and Europe own their raw materials, their oil, their mining, their forests, their plantations, and they extract rent. And these foreign companies that own raw materials extract raw material rents from the Global South countries and other countries today.

They’re playing the same role that landlords played in Britain and France and Europe in the early 19th century, charging ground rent for everybody. It’s a deadweight charge. It’s a transfer payment that classical economics set out to free economies from, to create a market that there was no economic rent that ended up in private hands. And Ricardo described value and price and rent theory in chapter 2 of his principles of political economy. He said land rent includes natural resource rents. He didn’t say monopoly rents, and he didn’t say financial returns, but at least he said raw materials.

He said it’s price without cost value. And his labor theory of value was designed to say: what part of the price system that we pay is not value? What price is it that is not really a necessary cost of production? If all the costs ultimately are resolvable into labor; land is provided by nature, raw monopolies are created by legal systems, and bank extraction of interest and financial charges is also an institutional creation, not part of necessary labor.

The whole doctrine of classical rent theory, from the Physiocrats to Adam Smith to John Stuart Mill to Marx, to Thorstein Veblen, was all about how do we bring the actual price structure in line with the actual cost of production so we don’t have any zero-sum transactions, any more free lunches, any more payments to a rentier class that makes money in its sleep. That was what was so revolutionary about industrial capitalism. It was evolving into socialism by freeing economies from the rent-extracting classes.

Well, then there was a whole anti-classical reaction, early 20th century. By World War I, you had the rentiers fight back. The banks and real estate interests join hands, saying there’s no such thing as economic rent. Everybody earns whatever they make and they have earned whatever fortunes that they have been able to accumulate.

We’ll call it saved up. Even though it wasn’t saved up, it was made in their sleep without their playing any role in saving at all. So you had the whole economic vocabulary designed to create a fictitious narrative of how economies work, and that fictitious narrative required negating the whole century of classical value, price, and rent theory that was designed to minimize rent. That’s a long answer to your question, but I’ve tried to provide the context for it.

⁣MATT CONNORS: Thank you very much. I’m sorry. I have more questions, but I don’t want to hog air time here, so I’ll let other people go.

⁣MICHAEL HUDSON: The questions are all a good question. I’m always glad to have it. I’ll let Karl decide what to do.

⁣FRANK MOELLER: Okay. My question is: how does China subsidize education, healthcare, transportation, and communication so that they have competitive wages for their employees? Whereas in this country, we have exorbitant costs for insurance and education. There’s a $1.7 trillion student debt. It’s all financed through loans. How does China finance their education process and all these other attributes that society partakes in?

⁣MICHAEL HUDSON: They have taken finance, money creation, and debt creation out of the private sector and made it a public utility. And instead of banks creating money just on their computer keyboards, the People’s Bank of China, the central bank, creates money. It’s as if the U.S. Treasury were simply printing banknotes to spend into the economy. So if you’re creating your own money, then the government creates the money and decides, what are we going to spend our money on?

We want to spend it on providing free education. We don’t want people to have to pay so much. We want to make sure that we can lower the cost of production. And we want to do just what an industrial capitalist economy would want to do. We want to minimize the cost of production to make our economy more competitive with other economies. And we make it more competitive by minimizing the cost of living that employers have to pay their wage earners. And we don’t want the employers in China, whether they’re public sector or private sector employers, to have to pay their wage earners money to just pay for education.

So China provides education freely. We don’t want the employees to have to spend their money on Obamacare to pay the big medical insurance conglomerates and the pharmaceutical companies. So we’ll provide medical care. This was good conservative economic policy in Britain in the 19th century when Benjamin Disraeli said, “Health and health care are all.” And that was what the Conservative Party was all about, making British labor more competitive by having public health minimize the cost that labor had to pay.

Well, the same thing with housing. China has not really followed through treating housing like it’s treated education and health care. And that’s been a problem that it’s now coming to realize is a problem. But it’s trying to do it. China does not have a banking sector that lends money to Chinese companies to buy out other Chinese companies and then borrow more money, once they bought out the company, to buy the company and then pay it out as a capital dividend to the stockholders or to buy its own stocks.

None of these financial shenanigans that make money by purely financial engineering in the United States are done in China. Their economy is designed as if by engineers, and most of the Central Committee has either an engineering background or a public administration background so that they can avoid treating their economy in the financialized, privatized way that the United States economy works.

⁣MATT CONNORS: Thank you.

⁣MICHAEL HUDSON: Does that make it clear?

⁣FRANK MOELLER: Yes, it does. Thank you.

⁣MICHELLE ROMINE: I just want to ask him, if the BRICS countries can arrange another alternative system at some point in time, will they then declare odious debt and nationalize their own resources back?

⁣MICHAEL HUDSON: Well, they have to act together to do that. They can’t do it one by one because they could all be picked off and their foreign holdings could be grabbed just like Paul Singer tried to grab Argentina’s assets to pay bondholders. So it has to be done all together. And they have the perfect excuse to repudiate their debts now because Donald Trump’s tariffs have prevented them from earning the dollars to pay their bondholders. He’s closed the U.S. market to them. And if they can’t export to the U.S. market, there’s no way they can get the dollars to pay the foreign debts.

So they can join together and say, this is the Donald Trump debt holiday. This is it. He’s made it impossible. He’s destroyed the ability to pay the debts. We’re not going to sacrifice our growth and let the United States destroy it. Donald Trump’s policy is to say, we will create chaos for your economy, declare war on Russia and China and do to you what has happened in Ukraine.

They can say, we’ve chosen the path of civilization. And so you have a fight between civilization and what’s called, now, late stage barbarism.

⁣MATT CONNORS: I’m going to jump in with a quick question. Michael started out talking about Chile in 1965, if my memory is working for a one and a half hour stretch here. Any thoughts on Chile’s ability to come back to the question of getting out from under the Pinochet constitution that they tried to rewrite and it failed? Did they learn from that? Or did other countries watching them learn from it? The idea that a foreign country can own all their raw material, their mines, and all that kind of thing was my understanding of what they were trying to do. Was that a one and done? And now they’re in even a weaker position to try something like that?

⁣MICHAEL HUDSON: It’s a total mess down there. Pinochet introduced this rip-off system of pensions so that companies could simply invest – they’d pay pension money to the workers to be paid in their own stock, and then they’d organize the company that employed the workers as a subsidiary of the bank holding company. Companies were organized as what they called “grupos,” a holding company and the private company.

So that the Chilean company would go on and on, and then it would say, one day, we’ve just paid all the money in the treasury to ourselves. We’re broke. I’m sorry, we’ve wiped out all the pension debt. We have to go under. We’ve sent it all to our grupo, our bank head, and they’ve wiped out all the pensions. So I’ve been appalled at Chilean politics. I cannot understand why they’ve been so bad ever since I began to follow it in the 1960s. We were all watching President Frey and how he was mismanaging the economy.

Then Allende mismanaged the economy by this sort of vulgar Marxism that ignored the land question. Chile has the most serious land reform problem in Latin America. Vast plantations and the lowest farm productivity, yet it has the highest natural fertilizer resources in all of Latin America. Guano, that’s one of its major exports. It’s just an example as to how not to run an economy. And we’re all using that as, you know – Chile is the self-destructive, just utterly mishandled economy in Latin America. I don’t understand how they can flounder so badly. So, there’s no answer to half of your question. How do you explain why people are so incompetent?

⁣KARL FITZGERALD: Okay, thanks, Matthew. We’re going to move on to Wendell, who has put his hand up. So, Wendell, do you want to come in?

⁣WENDELL FITZGERALD: My favorite economist, which Michael knows about, is Henry George, who suggested that a full 100% tax be levied against unearned income from ownership of land and other monopolies.

⁣MICHAEL HUDSON: Why do you say Henry – why not say Adam Smith? Why not say John Stuart Mill? You could run down the line with the economists. They were all saying that.

⁣WENDELL FITZGERALD: Let’s have an actual free market. The way you get a free market in land is that you don’t let people keep the rent of land that they don’t actually create. The community creates that value. So let’s pay it to the people who actually create it. Marx, and I mean, Adam Smith and Ricardo, yeah, absolutely. Henry George.

⁣MICHAEL HUDSON: Here’s the problem: George was a journalist 150 years ago. And now, all this rent is privatized not to a hereditary landlord class anymore, not to the class that he described, that George described so well in the Irish land question. The rent is paid to the banks. And I don’t think neither George nor any other economist of his time anticipated that. Yes, you have the free market mentioned in housing and real estate.

Anybody can buy a home or building by themselves. But almost everybody, in order to buy this property, has to borrow from a bank. And they compete with other borrowers to get the mortgage loan, to buy the home or the commercial building. They agree to pay the interest to the bank. And so most of the interest and the land rent in the American economy is paid to the banking system.

There’s no successor to George that is saying these things today. It ended up, it turned out, that the bankers threw all of their weight behind the real estate interests, realizing that whatever the government cut in taxes against the land would be free to pay the economic rent as interest to the banks. So the real question in every economy today is not whether the landlords or homeowners or the government will get the land rent. It’s whether the banks or the private landlords will get the rent.

The government obviously has not taxed the rent, and whatever the government has failed to collect ends up being paid to the banks. That’s the problem. That’s what financialization is. And that’s why the finance capitalism that’s occurred in the last century is so different from the outlook for industrial capitalism, as it seemed to Adam Smith, John Stuart Mill, and Henry George in 1879.

⁣WENDELL FITZGERALD: So what’s the solution? I’m not disagreeing with you. What’s the solution that you propose? Is there a tax solution?

⁣MICHAEL HUDSON: Yes, of course you have to tax the land. But today, if you tried to tax the land, it’s much more difficult than it was in George’s day, because if you tax the land, the land’s rent, the rent is already pledged to the banks to pay mortgage interest. The banking system will go under. Well, I’m all for that, quite frankly.

Yes, the banking system has to go under. You have to, in order to have the land tax that Henry George and Adam Smith and John Stuart Mill and Karl Marx all supported, you have to deprivatize banking and you have to wipe out all of the banking and creditor claims that are already, for 30 years in advance, claims on this land rent to be paid to them, not paid to the tax collector.

⁣KARL FITZGERALD: Yeah. Can we, we’re trying to specialize on the balance of payments in this discussion. We often cover this topic. And we’ve only got a little bit of time. So Wendell, I hope you don’t mind if we move off our favorite topic. But yes, I’m interested, Michael, Frank’s question earlier about China. Is there a country anywhere where, in terms of trade theory, comparative advantage still rules? Where they do pursue…

⁣MICHAEL HUDSON: Trick question. It never held. It was always my whole theory of trade development and foreign debt. The whole theory of comparative advantage was, if you read my book, it was all fictitious. It never worked. It never held.

⁣KARL FITZGERALD: But China has had this huge trade surplus because they’ve had a comparative advantage in manufacturing. So, you know, how does trade policy work for them? They have this conundrum of having all these treasury bills, what are they going to actually do with them?

⁣MICHAEL HUDSON: It doesn’t have a comparative advantage at all. It has an absolute advantage. There are certain costs in America and the world economy that are common. Every country, except the United States now, has to pay the same price for its copper, steel, and oil, and this makes absolute cost structures the key.

Ricardo’s theory of comparative advantage, to make a long story short, was to show that Portugal was the winner in trading with England and that the solution was that other countries should provide raw materials and depend on English manufacturers and monopolies. This was garbage, garbage from the beginning. And I go over that in my trade theory book.

But China does – of course, it has an advantage because it’s followed the original plan of the classical economists. You minimize economic rent overhead and you streamline the economy.

So there’s no parasitic private financial sector, no parasitic rentier class. And at least President Xi has said that housing is to live in, not to treat as an investment good. And I think they’re beginning to try to move in that direction these days.

What China has done is follow the logic of industrial capitalism. They call it socialism with Chinese characteristics. They could call it industrial capitalism with Chinese characteristics because it’s exactly what they’re following; the same path by which Britain and Germany and the United States organized their industrial takeoff.

⁣KARL FITZGERALD: Well, until the last 10 or 15 years, where the FIRE sector, particularly the real estate sector, got power, got in control, and now we have all these ghost cities in China. So it’s sad to see that, even there, they’ve fallen victim to the rentier economy. We’re talking balance of payments, and I’m not sure we’ve talked about it today, but transfer pricing. What role does that play with multinationals using transfer pricing to write down their tax obligations in various nations?

⁣MICHAEL HUDSON: It’s fictitious pricing. They organized a series of multinational shells and they made sure that – here’s how the oil industry did transfer pricing: all of the oil that was produced in the Middle East and other countries would be sold to a corporation in Liberia or Panama that had zero taxation. The Liberian and Panamanian affiliate of Standard Oil or Saccone or any other oil company would then resell this oil at a very high price to the refineries in the United States or in Europe.

And the price of the affiliate in this offshore banking enclave, these sorts of fictitious corporations, all of the profits would be made there; there was no profit given [due to ] the price they charged at the downstream end in countries that had an income tax. There was no income tax in Liberia or Panama. And under the tax treaty, a corporation can basically follow the tax rules of the conglomerate and can follow the tax rules of wherever its big trading company is located.

That’s why, when I asked the treasurer of Standard Oil, where are the profits made? And he answered, they’re made right here in my office. And he said, and I declare them to be made in Liberia or Panama because there’s no tax there.

And so we get the entire profit – and he could have said economic rent but that’s not how he thought – from oil, it was all paid to the parent company in New Jersey. And because it was all made in a fictitious country using the dollar currency that had no income tax, an offshore banking enclave, then they didn’t owe any profit tax to the United States. So that’s what transfer pricing was. The price that the trading affiliate in the offshore banking center sold its oil for, was so high that there were no profits to be made downstream in the refining and gas station distribution sector. Does that answer your question?

⁣KARL FITZGERALD: It does. And it brings to mind, if there’s any one nation that has turned the balance of payments theory and understanding of economic rents to their advantage, it would be Singapore. Do you know much about Singapore and their Temasek holdings and how they use their capital account surplus to invest in other national utilities?

⁣MICHAEL HUDSON: I really haven’t followed it. I haven’t had an occasion to follow it.

⁣KARL FITZGERALD: So I must get you to look into it. Kimberly Mims, our friend, do you want to come on screen? We’re getting close to the end of today. Yes, she’s one of our backroom team here with the Michael Hudson crew. She’s asking about multinationals. Could you come on in, Kimberly.

⁣KIMBERLY MIMS: I was interested in that issue of how this kind of circulation of the benefits, let’s say, stay within the U.S. frame and never really go out in some sort of fair and equitable way, right?

That’s what you’re kind of talking about. And you also briefly mentioned private-public partnerships, and that’s just a thing I see in this country as being without regulation all over the place. I mean, I see this in Chicago all over. It’s just out of control. And I don’t know what they are, quite frankly. Sometimes they call themselves centers. You don’t even know what they are literally as business models.

So it seems to be this way of prying open a kind of non-regulated space that is domestic as well as potentially international. And I’m wondering, does that have any play or do you see any way of looking at that, that would be profitable and constructive in terms of talking about balance of payments?

⁣MICHAEL HUDSON: Well, the whole financial sector is highly exploitative. And as you point out, these private-public partnerships were really developed under Thatcher and even more so Tony Blair. And the idea is that all the profits go to the private owner and all the losses are absorbed by government. And the effect is to transfer money from the government.

The government subsidizes a company to ostensibly make losses and the losses take the form of high interest payments, managerial payments, and other largely fictitious financial charges and transfer payments to the financial managers. So again, we’re dealing with a fictitious economy. And most of the economy today, I guess you could say, is based on economic fictions with a fictitious cover story, a narrative to make it all appear as if all of this is earned and everybody has earned what they take and end up with by being productive or unproductive if you’re a laborer.

⁣KARL FITZGERALD: Well, I’m trying to think of a way to wrap this up, Michael, because it’s been a complex conversation and one that we all need to study in further detail. I suppose with BRICS coming through, where do you think the future of balance of payments theory is going? And are these nations actually picking up on what you’re teaching about, or are they going to fall down the same hole, do you think?

⁣MICHAEL HUDSON: There really isn’t any balance of payments theory because the whole discussion and the economic categories are as if all transactions involved actual monetary payments. And as I said, homeowners’ rent does not involve a payment. Imports of oil from American affiliates do not involve actual foreign exchange payments. So people really don’t discuss it.

The whole terminology and the categories that the economies use, such as GDP, I think, are not very helpful. What I’ve been writing about in the articles that I’ve done with Dirk Bezemer is recreating the GDP. Let’s net out of GDP. How much is the actual product and how much is the economic rent? Not a product, but a transfer payment. And you find that all the growth in America’s GDP is economic rent. It’s not a product. The product, the productive sector, is declining. That’s why America’s deindustrializing, that we’re in a rentier economy.

Well, you’re never going to have the Western economies lead in recreating the statistics for GDP in this way. They want to say, well, look at how powerful America is, look at our GDP. But that’s like you’re saying, look at how much this little kid weighs. He outweighs the others, but it’s all a tumor on his back. And so you could look at the GDP in America as a financial tumor.

The aim, I hope, that I would like to see in the BRICS countries is they avoid the financial tumor, the economic rent tumor, the landlord tumor, and the monopoly tumor. They avoid the whole thing, just as China said it was going to do at the very outset, and just as Adam Smith and the whole classical school of economists hoped that that would be what industrial capitalism would be.

But to do that, they have to go back to study the classical economists of the 19th century. I’m writing a book on that now, and it’s probably going to take another half year for me to finish it. But that’s exactly what I’m spending all of my efforts on at present.

⁣KARL FITZGERALD: Well, thank you, Michael. This work is invaluable, and it’s so good to have some of our Patreon supporters here. They make…

⁣MICHAEL HUDSON:

I’m really grateful to you all for joining. I mean, this is why I’m writing. The whole idea is not just to sit and write my own ideas, but to have them spread out. And I hope you can do everything you can to keep continuing the ideas and somehow radiating them. That’s the only way that you’re going to have these ideas spread because it’s not going to spread through the New York Times.

⁣MATT CONNORS: That’s for sure.

⁣KARL FITZGERALD: All right. Well, thank you, Michael. Thanks, everyone. We look forward to seeing you back here in three months’ time. We’ll see if anything at all has changed or whether these same trends of greed and rentierism continue. So let’s hope….

⁣MICHAEL HUDSON: Spoiler alert, it’s going to be the same trend.

There are always new twists and turns. And I guess we had to today take a step back. It’s good that Karl asked me to focus on the balance of payments because that brought up all of how important the categories and the structure and the accounting format is and, ultimately, the tax and fiscal policy format.

⁣KARL FITZGERALD: Well done, buddy. Excellent. All right. We’ll see you in a few months.

⁣MATT CONNORS: Thank you, everyone.

⁣MICHAEL HUDSON: Thank you.

⁣KARL FITZGERALD: There’s cheers all around. Well done, buddy. Okay. See you all. Bye.

Global South

Michael Hudson & Radhika Desai: Geopolitical Economy, New Season

Who Plans the Economy?

RADHIKA DESAI: Hello and welcome to a new season of Geopolitical Economy Hour, the show that explores the fast-changing political and geopolitical economy of our time. We are beginning this new season with our 50th episode. I’m Radhika Desai, and joining me today is one of our regulars and favorites, indeed, the person with whom I inaugurated this show, Professor Michael Hudson. Welcome again, Michael.

⁣MICHAEL HUDSON: Good to be back here.

⁣RADHIKA DESAI: Great. Now, as we record this, the Federal Open Markets Committee of the U.S. Federal Reserve, whose decision set interest rates, has just finished its six-weekly meeting. And as some of you may know, they have agreed to decrease interest rates, the first decrease this year, by 25 basis points.

Not a big move, but the fact is the Federal Reserve has been the focus of a lot of controversy recently. And much of the controversy comes from Donald Trump. Anyone paying the slightest attention to the news these days cannot have failed to notice that Trump has a thing about the Federal Reserve, an itch, shall we say, one that he can’t help scratching.

He’s called Powell a numbskull and too late – which is to say he’s, according to Trump, always too late to lower interest rates – while demanding that Powell reduce interest rates. He undertook a theatrical visit to the renovations of the Federal Reserve’s Marriner Eccles building, disputing a difference of $300 million in costs in front of TV cameras, as if this few million dollars were consequential in a country whose debt is shooting north of 150% and 37 trillion US dollars.

It’s long been clear that he’s not going to renew the tenure of the current chair Jerome Powell and has already used the early retirement of one governor to place a loyalist on the board. And while he has recently named four candidates that he is considering for the position of chair, speculation rages far wider.

So some people are talking about more than 10 candidates. In yet another salvo at the Federal Reserve, Trump has, of course, tried to fire one of its governors, Lisa Cook, for cause he says, but so far he’s been unsuccessful with the most recent legal ruling, leaving her in place for today’s critical Federal Open Markets Committee meeting. So many questions arise from this.

While economists loyal to Trump have been publishing papers and writing commentaries on the Federal Reserve’s problematic easy money policies, Trump actually demands that the Federal Reserve keep monetary policy easy. So is there a coherent Trump administration policy towards the Federal Reserve? Secondly, while Trump wants the dollar to remain the world’s currency, he also seems determined to undermine the much doubted independence of the Federal Reserve.

So even as the easy money he wants certainly ensures that the Federal Reserve will not be able to rein in inflation, a standing threat to the dollar system. Inflation raises yet another question. While general inflation remains high – and it has gone up ahead of this meeting despite low energy prices – driven by high food prices, undoubtedly a result of Trump’s own tariffs, and core inflation – that is inflation discounting volatile food and energy prices – also remains high, Trump, on the one hand, continues to insist that he has brought down living costs, meanwhile ensuring that nothing that the Federal Reserve does will reduce it.

And then there’s the matter of cryptocurrency. With the passage of the Genius Act, a whole new set of assets, very dodgy assets, namely cryptocurrency, which any sane analyst would consider highly volatile, risky, and inherently speculative, have been given the imprimatur of government regulation.

This means that one way or another, these assets will enter the financial system and become one more thing in the everything bubble, taking the fragility of the U.S. financial system, which is already at breaking points, even closer to it. Any crash that now occurs can only consign the dollar system to the dustbin of history, as we’ve discussed so many times, Michael. So Michael, what’s your favorite drive about this morass of contradictions in which Trump is only further muddying with his attacks on the Federal Reserve? Go with whatever is on the top of your head because there’s so much to discuss. We can start anywhere.

⁣MICHAEL HUDSON: Trump’s head is full of junk economics. He wants to depreciate the dollar. He wants the dollar’s exchange rate to go down because he imagines that this will make U.S. exports more competitive. As the dollar goes down, its price against European currencies and foreign currencies gets cheaper. The problem is America has been deindustrialized over the last 30 years, and there’s not that much to export.

And by lowering interest rates, what he’s actually doing is the exact opposite of what his Secretary Treasurer Scott Bessent, has done. It’s as if he wants to go back to the zero interest rate policy of making money by debt leveraging, by inflating the prices of stocks and bonds because you can borrow inexpensively from the banks and you can buy a stock whose dividends are higher or a bond whose rates are higher. He wants to make the economy safe for speculators again because they’re his constituency, after all.

Well, here’s the problem. The sane people on Wall Street, I guess the 1%, or people like you and me, are criticizing him from the point of view of what’s the independence of the Federal Reserve. If you have Donald Trump intervening in Federal Reserve policy, micromanaging under his imagination of how the Federal Reserve affects policy, or his pretense or cover story for serving his campaign contributors, then you’re going to have instability and probably inflation.

And of course, Trump pretends that he’s against inflation. But as you’ve just pointed out, tariffs are increasing inflation. And his vast, wonderful budget cuts (budget deficit), by slashing taxes on the wealthiest 10% and raising them on the bottom 90%, are going to inflate the economy. So he’s sort of overseeing instability.

And the question for many years – there’s been this mantra for the last century: the central bank has to be independent because central banks are responsible. And we all know that governments are irresponsible because they’re elected and they’re democratic and they want to spend money for welfare into the economy, and that’s inflationary. And they want full employment, and that’ll push up wages.

Instead the Fed’s job, ever since Paul Volcker, is to create enough unemployment to prevent wages from going up. What’s wrong with this picture, again, as you and I have discussed, is the Federal Reserve serves its member banks, the commercial banks. And if there’s any sector of the economy that’s more irresponsible, it’s the banking sector, because that’s what’s led to the financialization of the economy and the deindustrialization and the incredible debt overhead that we have today.

So there’s no reason to believe that the Federal Reserve is more responsible than the government. I’m not saying the government’s responsible because the same Wall Street billionaires that control the banks control the government itself. So you’re going to lose either way around. So the problem is: the Federal Reserve has taken over from Congress the management of the whole economy.

And as you and I have discussed, and I think you will today, trying to manage the economy just by affecting interest rates by buying and selling securities by open market operations is only one sliver of the economy and it misses the whole big picture, which is all about industrialization. how you organize what corporations are going to do with the revenue they get, are they going to buy the stock back their stock and push up stock prices and pay out dividends, or are they going to invest long term.

That’s really what it’s all about, and the Federal Reserve is not concerned with that at all. It’s just concerned about providing money to the banks and banks don’t lend money into the real economy, they lend money for stocks and bonds for financial speculation and you could look at the Federal Reserve as the implementer of the Ponzi scheme into which the United States economy has degenerated.

⁣RADHIKA DESAI: Well, you’ve made so many different points so let’s just take them by turn. First of all, let’s take the whole issue of the so-called independence of the Federal Reserve. Now you know, at one level, in the post-Second World War period for the first several decades, it was actually assumed that monetary policy was just one of the instruments in the hands of governments, elected governments, to keep the economy going, etc., so it was not assumed that that central banks would have to be independent.

The independence of the central banks has become a mantra and has become this rule of thumb, this principle that cannot be violated, only in the age of financialization. So when you said, Michael, a couple of things that already suggested this, which is that what the Federal Reserve has done over the last several decades is essentially inflate asset bubbles.

It has essentially lent money primarily to financial institutions, not so that the financial institutions will invest in the real economy. That possibility has already been thrown out of the window by the Federal Reserve in its role as the regulator of the financial sector, essentially because for decades, going back to certainly the early 80s, if not earlier, every time there has been any kind of a regulatory problem, the default position has always been to deregulate, not to re-regulate.

We can discuss that further, but there has been deregulation. The Federal Reserve essentially lends money to banks, which then use it for asset price inflation and so on. The easy money policy, particularly since the early part of this century, has been instrumental; first in blowing the housing and credit bubbles, which burst in 2008, and now in blowing up this everything bubble we are in.

So essentially the independence of the Federal Reserve, what it actually amounts to, the so-called independence of the Federal Reserve effectively means regulatory capture. That is to say, the regulator becomes captured by those it is supposed to regulate. It’s like essentially asking the fox to defend the chicken coop. It’s not going to happen. So, essentially, that’s why financial interests have been in the lead.

You said something else that’s really interesting, and that is that in recent decades there has not been any serious fiscal policy. What there has been is only monetary policy posing as the only form of management of the government. And in my own writing, in my geopolitical economy, where I track the financial policies and the monetary policies of the Federal Reserve, particularly in relation to the dollar system but also in relation to the management of the U.S. economy, what I discovered is that, certainly by the Clinton administration, if not earlier, there was basically no serious fiscal policy. The only fiscal policy was that Republican administrations would always reduce taxes on big corporations.

Then Democratic administrations would come in; they would not touch it but they would engage in fiscal consolidation, essentially by cutting social services and so on, which Republican administrations also did. And then the next Republican administration comes in and reduces taxes further. So, essentially, what this has also done, of course, is vastly increase the debt mountain of the United States. Because while you are cutting social services to some extent, it’s not nearly enough to account for the revenue you are foregoing by giving corporations big tax cuts.

So for the last many decades, what we have had in terms of economic management was simply monetary policy. And this really began with Alan Greenspan, and that’s why Alan Greenspan was himself called the maestro, as though he was, as a kind of superstar conductor, conducting the orchestra that was the U.S. economy with the slightest movements of his little baton.

But of course, in reality, what you had was essentially a situation in which they gave up trying to manage the U.S. economy. They gave up trying to preserve the productive character of the U.S. economy. They, in fact, encouraged things like outsourcing, financialization, etc. So they have essentially destroyed the U.S. economy, made it an economy based on consumption, etc. So, in all of these ways, what you’ve seen is that monetary policy has displaced any fiscal policy and thereby hangs many other threads.

⁣MICHAEL HUDSON: They’ve not only deregulated monetary policy, they’ve deregulated crime. President Obama appointed Eric Holder as Attorney General, and Holder said, it’s true that there was an enormous crime wave that’s led to the financial crisis; junk mortgage lending, the banks have falsified mortgage statements, the appraisers have falsified them, the brokers have falsified them, there have been billions of dollars, and we have a choice.

As a result of this financial fraud, the mortgages of about 8 million American families are way overpriced beyond the ability to pay. What are we going to do? Well, we have a choice: either we can write down the debts, as President Obama had promised, to the reasonable, realistic value of their houses and enable these families to be saved from the exploitation of the banks, or we can prosecute the bankers and throw them in jail.

But there’s a problem with that. These bankers, most of them, are married with children, and their children and wives are innocent. And it would be wrong to hurt their innocence because if you look at the value of the life and the family happiness of a multi-billionaire, 10 billionaires are worth the 8 million Hispanic and black and other families that we’re expropriating.

So we’re not going to punish anybody. In fact, what we’re going to do is turn to the Federal Reserve and say, make sure that, although the banks are insolvent because they’ve lent much more money than the debtors can pay, we’re going to create the largest financial boom in history, the largest bond market boom in history, by slashing interest rates from the current highs all the way down to less than 1%, which is going to enormously increase the capitalization of bonds and stocks.

And so Obama appointed Federal Reserve Chairman Ben Bernanke as Fed chairman, and then Janet Yellen. And their job was to prevent the banks from writing down the debt to what could be paid and, say, our job is to not to stabilize consumer prices, but to make sure that we stabilize and prevent asset prices for stocks and bonds and real estate from going down. Because if the economy is so highly leveraged and banks have lent out so much money relative to their capital reserves, if prices go down even a little bit, one or two percent, you’ve wiped out the equity of the largest bank customers, the largest speculators, and the banks themselves will go under.

And so the head of the Federal Reserve Deposit Insurance Corporation said, you know there’s one really crooked, incompetent bank; that’s Citibank. It’s so reckless that we’ve got to foreclose on it. And Obama’s Treasury Secretary, Tim Geithner, said, no, no, my job is to save Citibank. You know, they’re the people who put me in power. And hey, Mr. Obama, they have put you in power through Clinton’s Treasury Secretary. So you have the banks running the justice system and the prosecution system, as well as the financial system.

And the common aim of all of them is to make sure that the banks will not lose money by writing down the debt that you’ve just described as growing. If you don’t write down the debt and it accrues interest and is growing and growing and growing, then you have to create more and more and more money at lower and lower interest rates to carry this higher debt. That’s what a Ponzi scheme is.

You need new entrants into the scheme to provide the money to bail out the early investors, or the whole scheme fails. That’s what the United States economy has turned into, and that’s what the independence of the Federal Reserve means. Don’t let anyone, or the prosecution system, or laws against fraud, or even common sense, interfere with creating an economy that makes money by financial speculation, not by industrial investment. We’re not an industrial economy anymore.

⁣RADHIKA DESAI: Well, exactly. And you know what, Michael, Look at this. We’ve shown this chart before, but this is the chart of the Federal Reserve’s balance sheet. As you know, it went from under a trillion dollars to about $2 trillion in the aftermath of the 2008 financial crisis. And then, with a series of rounds of quantitative easing, it went up to above $4 trillion.

And then, with the pandemic, it went up to $9 trillion. So, what is all this? This is essentially the Federal Reserve itself entering the market of various speculative assets. The Federal Reserve itself has become essentially an agent to preserve the value of the speculative assets of the various bankers and what have you. And there’s another thing, what’s really interesting insofar as the stock market is supposed to be democratic and so on – allow everybody to make money.

Well, another thing that’s happening, in addition to what you were just saying, is that actually the number of publicly listed companies is shrinking. More and more companies are owned by private equity, which is essentially elite clubs of investors who have inside knowledge about what can turn a profit and what can’t turn a profit. Knowledge which they refuse to make public and so that they can privately, as members of this club, benefit from these lucrative investments and not allow the ordinary investor, the retail investor, to come in.

That’s another really fascinating thing that has been happening. And now, of course, the Trump administration is allowing even greater kinds of forms of club-like behavior. So, the few companies that remain publicly listed, Trump has recently suggested that their reporting responsibilities – they should no longer be held to quarterly reports. They can go down to semi-annual reports once in six months.

So this again restricts the amount of information that is available for the retail investor. In so many ways, the Ponzi character of this system, in which essentially there’s a pecking order in which the rich continue to get rich, while ordinary people have no purchase on the system. And as far as things like pension funds are concerned, they are typically the bodies whose enormous amounts of money that they have forms essential “throw weight” in the financial system. It is used as “throw weight.” But, of course, whenever there is any gain, they gain the least, and whenever there is any loss, they lose the most.

⁣MICHAEL HUDSON: Could you put that chart up again? I want to show it actually shows a radical unprecedented development of the Federal Reserve. You see at the very beginning of the chart that flat line. Yes, that flat line goes back a century, just as flat as it is then. And that flat line is how central banks all over the world have acted for a century. They intervene to buy and sell government bonds overnight in the short term, simply to affect interest rates up and down.

There is no long-term accumulation. What happened when you had the jump in 2008 that you show, and the jump that continued all the way through that period, is for the first time, the Federal Reserve began to be a huge investor itself. It bought enough stocks and bonds, not only government bonds, but corporate bonds, not only corporate bonds, but junk bonds, to push up their prices.

And so you have an enormous inflow of money not to be spent on goods and services, as you’re taught in school, but to buy stocks and bonds. The Fed creates money to inflate asset prices. It creates money for stocks and bonds and real estate purchases, not for consumer spending at all. This whole idea of Fed money creation that affects consumer prices is just a fiction. When you look at that chart, you realize what they really create money for. And that was revolutionary.

⁣RADHIKA DESAI: Absolutely. Michael, one of the things we want to discuss, is exactly what the Trump administration wants out of the Federal Reserve. Trump himself has said such contradictory things. On the one hand, he says that he wants the dollar to be strong and the dollar system to work, etc. And of course, it was expected early on when Trump started announcing his tariffs, that tariffs were going to increase the value of the dollar.

But what you’ve seen here, from the time Trump has taken office, the value of the dollar has gone down consistently. Some say that it has lost some 10% of its value, and this is one chart which shows the ups and downs. And here’s another one, which just shows essentially the broad dollar index, which again reaches a peak in January 2025 and since then has been in decline.

So the dollar has just continued to decline. And of course, everybody who doesn’t like Trump says that it is Trump’s fault. But I think that the situation is much more complicated. Part of the reason the dollar is declining is because of inflation. Now, mind you, tariffs have contributed to inflation, but inflation was going up even before Trump took office. And at the same time, the Federal Reserve finds it very difficult to deal with this inflation because the only way in which the Federal Reserve will permit itself to deal with inflation is by raising interest rates. But if it raises interest rates much more than it has already done, then it is in serious danger of pricking all the asset bubbles, the so-called everything bubble. Again, here is the chart of the federal funds rate going back to 1955. This is the Volcker peak.

But the Federal Reserve can’t do a Volcker anymore because, back then, when Volcker increased interest rates, he didn’t have to worry about asset bubbles, which would burst. Whereas what we see here, for example, is a series of interest rate increases, which were essentially forced on the Federal Reserve because the dollar was going down. So it had to restore the value of the dollar.

So they started increasing interest rates and the moment they went slightly beyond 5%, that triggered all those processes that led to the crash of the North Atlantic financial bubble, so to speak. So it led to the North Atlantic financial crisis. And similarly, we see again here today that we are already at that point of just a little over 5%, which is why, although inflation remains high, the Federal Reserve daren’t raise interest rates more.

Indeed, now what they are doing, in fact, is they are bringing it down. Now, Trump says that the Federal Reserve doesn’t want to decrease interest rates, and that Trump is advocating for decreasing interest rates. But you know what? The Federal Reserve, Jerome Powell, and most of the Federal Market Committee would like nothing more than to decrease interest rates because they want asset inflation to continue.

But they have been forced to at least keep interest rates as high as they are, at which they have come over the last two or three years, because inflation is not going away. The Federal Reserve is caught in a bind; that’s why they are keeping up this higher for longer. In a certain sense, I suppose what I’m trying to say is that Trump just wants to look like the person who caused interest rates to decrease and as though they care about the real economy. But, of course, what Jerome Powell, as well as Trump, what they all care about merely, is the continuing inflation of asset bubbles.

⁣MICHAEL HUDSON: That’s right.

⁣RADHIKA DESAI: And then the other thing that I would add to that is that; the independence of the Federal Reserve, which is allegedly in question – Scott Besant, the Treasury Secretary, recently published this article, in which he criticizes the easy money policies of the past. Now he may want to criticize it, but the fact of the matter is Trump wants the continuation of these easy-money policies.

I think that the real effect, whether it’s intended or otherwise, of interventions like Scott Besant’s – this article is being much talked about – will be essentially to establish that the Federal Reserve has never been truly independent. And if today the Trump administration appears as though it is infringing on the independence of the Federal Reserve, this is no different from what happened in the past. In one sense, that’s true, because all monetary policy is political, and the independence of the Federal Reserve, as we’ve already said, is only to leave the regulation of the financial sector in the hands of the financial sector. So, and that’s a silver political action [Please clarify]. The point is that he is basically establishing a new norm where Federal Reserve policy is political. And I think the only purpose of making it political is to give Trump the credit for keeping interest rates low.

⁣MICHAEL HUDSON: The article that Besson wrote is really – I’m very happy with it. It’s made wonderful, wonderful points, such as we’ve made for many years. And he called the title of the article: The Fed’s New Gain of Function Monetary Policy. Gain of function is the term that was used for the coronavirus that’s come out and a pandemic. And he’s treating Federal Reserve policy as a pandemic.

And the gain in function has been a mutation of Federal Reserve policy, which we’ve just discussed, in saving the financial debt overhead of the economy, not the economy itself. And he goes to a long discussion of how the effect of making money financially, as you pointed out earlier, the leading financial sector investors are multi-tens of billionaires, and their way of making money is to deindustrialize the economy, not to industrialize it. And I think we’ve shown before the growth of wealth in the economy.

Here’s the wealth of the bottom 50%. The bottom 20% has actually gone down. All of the growth in the wealth of the American economy, all this growth has been in the form of stock, bond, and real estate held by the 10%. It’s the 10% that hold the vast majority, over 75%, of the stock market and the bond market. The 90% people, except maybe via their retirement funds, don’t have bonds and stocks. Only a very minimum compared to the super wealthy. And the beneficiaries of this asset price inflation thus have been the very top of the economic pyramid. And they’ve used this increasing financial wealth to increase their control of the election process by contributing to campaigns.

Now that you’ve deregulated the political campaign contributions in America, as well as the banks, and they’ve essentially bought control. And so the Federal Reserve celebrates this as success. They said, we’ve created wealth, but almost all the wealth they’ve created, 90%, has been to the wealthiest 10%, not for the economy as a whole. And if most wealth takes the form of financial claims on debtors; mortgages, bank loans, corporate bonds, and government bonds, then the creation of wealth on the asset side of the balance sheet means the creation of debt on the liability side of the balance sheet.

And the wealthiest 10% have the assets; the 90% have the debt. And the effect has been to polarize the economy. And I think Besant deserves credit for pointing out that this has been the whole effect of the Federal Reserve asset price inflation. It’s been inequality and unemployment and deindustrialization, the exact opposite of what textbooks imagine; that the financial sector is only an intermediary, it doesn’t have any effect on the economy. It just reflects that it’s the driving shaper of the economy. And it’s been misshaping it all throughout the United States and Europe and the Western economies in general.

⁣RADHIKA DESAI: Let me say that all the truths that Scott Besant has spoken in his article are no different from the truths that Trump had to speak in order to get elected. Remember, it’s been my argument for a long time that Trump discovered one thing, which is that you can no longer win elections by telling people that their economy is doing very well.

He told them the truth; it’s not doing well. We agree with that, but, of course, Trump told them the truth only in order to get elected and, of course, he thenmixed that with lies, for example the fact that he said to them that the economy is not doing well because of trade and because of immigrants and so on. All of those things were, of course, lies, so Trump has just a different package of truth and lies.

In Scott Bessent’s new package of truth and lies, I think the key point you have to understand is that he is only telling the truth about the inequality generated by the Federal Reserve not so that this will put a stop to it, because of course he himself would favor, as his president would favor, lower interest rates. What is going to be the effect of lower interest rates? The effect of lower interest rates will be to further inflate asset bubbles and to postpone the moment of reckoning. Let me just share a really interesting chart that I found. This is a chart of the major asset markets in the United States. You can see here there are equities, residential real estate, treasury securities, commercial real estate, farmland, and so on.

Now, what you see here on this chart is the average annual growth from 1997 to 2004. They are not small but they are not huge. But then you look at the growth just between 2023 Q4 to 2024 Q4. Within just one year, these asset markets, some of them like the equity market and so on, have been growing massively. Whereas all the other asset markets have grown less. And the commercial real estate market has actually shrunk to some extent.

So what is really interesting here is that now, in a sense, a crash will be coming because all these markets are already slowing their growth. The equity market is going up without any support. It’s going up and up, but what is it climbing on? It’s getting high on something else because, as we know, the entire stock market is being taken up by the Magnificent 7 and a few other such stocks. And most of the Magnificent Seven inflation in the prices of the equities has been because of the hype around AI. And it is increasingly dawning on people that the astronomical investments being made in the name of AI are not going to be lucrative. They are already not yielding stuff.

So a crash will be coming. But the point is that, in the meantime, they want to continue to have low interest rates. So Besant might complain about the easy money policy. Maybe they will not engage in quantitative easing and so on. But they will keep interest rates low. The point is that he wants to say that Federal Reserve policy has always been political, and he wants to say, therefore, that we are going to politicize it. And once that happens, then Trump will do what has been done in the past, which is to justify low interest rates in the name of economic growth, when, in fact, he wants low interest rates in order to keep asset prices up.

⁣MICHAEL HUDSON: I agree. That’s exactly what’s been happening. People act as if the growth of wealth and the growth of the 10% are what the economy is all about. And for the Federal Reserve, that’s what the economy is all about, because that’s its constituency, because the wealthiest 10% are the customers for the bank loans. And the Federal Reserve is created to be managed and run by its member banks. So you have a closed circle.

And as long as Congress remains inactive and is unwilling to do anything except to cut taxes even more, to run an even larger budget deficit that adds to the effect, you can have Trump make the argument that if we don’t lower the interest rate, imagine how much of the government debt’s interest rate – the budget is going to have to be spent on interest to the bondholders.

And this is already almost as large as our military spending. This is going to create a crisis. We’re going to have to cut social security and cut Medicare, but there’s a solution to that because we can privatize social security and put it all into the stock and bond market to keep the Ponzi scheme going.

⁣RADHIKA DESAI: I’m just showing exactly what you’re talking about Michael, which is that the yield on treasuries both one year and 30 years, so very short term and very long term, has been going up and they are now at fairly high rates. This is really, also quite interesting and they are adding to the debt, the deficit, etc., which will continue to grow because the Trump administration is committed to cutting taxes for rich people, etc.

Another point that I just wanted to make, but essentially what is happening now is that the idea that the Federal Reserve should be independent is being buried and now we will have a new type of rhetoric, which will continue the same policies of inflating asset bubbles. They were not going to revive the American economy, just as the tariffs are not going to revive it, nor will low interest rates revive the American economy, as I’ve already said at the beginning.

The insertion of cryptocurrency has simply added a new asset whose value can be inflated, on the basis of which a small number of rich people can make money while the rest of the economy suffers. And this is going to continue.

⁣MICHAEL HUDSON: Well, the real point you’re making: it’s the government that needs to be made independent from the financial sector. That’s the real independence we’re talking about. And that’s the problem. Under America’s two-party system, you can only have two parties. There’s such a tangle of laws that there’s no way of having an alternative to the Republican-Democratic duopoly. And so Congress itself is no more independent than the Federal Reserve is from Wall Street.

And the result has been to shift economic policy, meaning economic planning, to the financial sector. Out of Washington into the financial sectors, Wall Street, and also the Chicago Mercantile Exchange. And so the result of all that is the financialization of the economy and a loss of what used to be the whole dynamic of industrial capitalism and the whole idea of industrial democracy.

If Wall Street’s in control, this means not a market free of government planning and centralization. Financial planning is more centralized than government planning. That’s why Trump’s been firing all of the government regulatory agencies. With no regulatory agencies, there’s nothing to prevent the financial sector from becoming the economy’s central planner. And that’s what’s happened in a nutshell to the US economy

⁣RADHIKA DESAI: So what you’re saying is that we will have a centrally planned economy, except that it will not be planned in the interests of ordinary people, it will be planned in the interests of a small number of very rich people, the Elon Musks of this world. And this is so true. I suppose what we’ve really said is that the rhetoric about the independence of the Federal Reserve has always been a way of keeping Federal Reserve policy away from democratic influence.

The idea being that, of course, as long as you have some kind of democracy then at least you can elect a government which can politically try to control the Federal Reserve, to bend its policy in the direction that will help ordinary people, that will create a productive economy, etc. But, of course, what you’re adding to this is that, of course, the existing democratically elected governments of the last many decades, and still today, are simply themselves in the pockets of the financial sector.

So there’s no way the elected government is going to control the Federal Reserve in a way that will benefit ordinary people. The point is not that the Federal Reserve is not independent, it’s not factually independent anyway. The problem is that it is under the control of the wrong interests. And if ordinary people in the United States want to take control over the destiny of their country, they are going to have to elect a government that is not part of this duopoly, that will actually represent the interests of ordinary people.

And then, yes, there will be no need for an independent Federal Reserve. The government will essentially bend monetary policy. A popularly elected government acting in the popular interest will bend monetary policy in the direction that it needs to go in order to create a productive, equal, socially just economy. And, of course, an ecologically sustainable economy.

⁣MICHAEL HUDSON: I think you’re quite right. A democracy, unlike an oligarchy, would centralize financial management in the hands of the Treasury, which is a public, elected political agency, not a central bank. The United States didn’t have a central bank until 1913. The problem is that the Treasury itself is mismanaging the economy because it was run by basically bullionists, by gold bugs. And whenever the Treasury would raise a surplus, like for tariffs, the tariffs had to be paid in bullion, gold and silver bullion, not by bank credit.

And there was such an antagonism towards banks in the United States from colonial times, from the beginning of the Republic to the 1880s, with the whole silver, gold crisis, crucified on a cross of gold, that Americans didn’t want the banks to create money. And there was such a shortage of actual credit that an economy needs that, in an act of desperation, the Republicans and Democrats got together and said, we need bank credit. We can’t have these libertarian nuts, bullionists, at the Treasury tie our hands. That was the story of how the Federal Reserve was created in the first place.

⁣RADHIKA DESAI: There was that, but I think there were also some other things. The fact of the matter is that the United States dollar was not acceptable around the world because it didn’t have a central bank, whose function it would be to stabilize the value of the dollar. And of course, in the recent years, in the post-Second World War period, partly because the United States government has been committed to keeping the dollar as the world’s money, what you’ve actually seen is a systematic overvaluation of the U.S. dollar, which has then been a disaster for American industry.

It has been central to the deindustrialization of the United States. But nevertheless, my point is that the Federal Reserve was also necessary because otherwise your currency would never be acceptable. Before the Federal Reserve was created, the international transactions of the American government and other corporations were being handled via JP Morgan and handled in pounds sterling, which was kind of interesting.

There was another thing, which is that when you had banking crises, and there was a big banking crisis in 1907, there was no lender of last resort. So they had to create one. So there were many reasons. But yes, the fact is that you had to create a Federal Reserve in order to perform these functions.

⁣MICHAEL HUDSON: Yes, but at least at that time, the lender of resort, when it did lend money to banks to avoid insolvency, it charged a penalty rate. That was the essence of management. And now the Federal Reserve gives a subsidized rate, just the opposite of what happened over a century ago.

⁣RADHIKA DESAI: Exactly. Well, Michael, it’s been a wonderful conversation. Unless you have any further things to add, maybe we should wind it up for now. Okay, great. Thanks. Bye.

Global South

Richard Wolff & Michael Hudson: The U.S. Cannot Survive this WAR

The US has already decided on nuclear war – Hudson.

Global South

Col. Wilkerson, Richard Wolff & Michael Hudson: Iran War Is Now IMMINENT: The Point of No Return

This is certainly not comfortable to listen to. The question today, is who is first? Iran or Venezuela? Col Wilkerson sees what is happening now clearly.

First objective: Preservation of Bibi Netanyahu’s coalition and Bibi Netanyahu.
Second objective: Keeping the United States from causing him to do something he does not want to do wrt Gaza, Syria, Lebanon and elsewhere.

We’re going to war Nima!

Nima cut in a discussion that he had with Michael Hudson and Richard Wolff (not posted yet as I am waiting for the transcript) where Michael says in no uncertain terms that a decision for nuclear war has been made.

Global South

Michael Hudson, Prof Wolff: Cascading Policy Failures Undermine Empire

NIMA ALKHORSHID: Hi everybody. Today is Thursday, September 18, 2025, and our friends Michael Hudson and Richard Wolff are back with us. Welcome back.

⁣RICHARD WOLFF: Glad to be here.

⁣NIMA ALKHORSHID: Michael, you told me that you watched my talk with Scott Ritter about the defense budget, and all of that. What’s your point on that?

⁣MICHAEL HUDSON: Well, he picked up on my point that I’ve been making fifty years ago, that there’s a great difference between the balance of payments effect of America’s military spending and other countries.

Ever since the Korean War broke out in 1950, the entire balance of payments deficit for the United States, from the 50s, 60s, and the 70s, has been military spending abroad. The private sector trade and investment are exactly in balance over all these years. I published all of these statistics first for Arthur Andersen and then in my book Super Imperialism. And immediately, when my book Super Imperialism came out, Herman Kahn hired me for the Hudson Institute and said the largest buyers of the book were the State Department and the military — the CIA and the military. Immediately, the military gave a contract to the Hudson Institute for me to explain how going off the gold standard essentially enabled the United States to fund its balance-of-payments deficit, meaning its military spending abroad, by pumping dollars into the global economy and having these dollars end up in foreign central banks and be recycled.

Well, what that means is that America’s whole military spending for the last fifty years depends upon the dollarization system in other countries, using dollars as their monetary reserves in place of gold, and instead of their own currencies. That means that, as they move away from the dollars, there’s no way that the United States can finance its eight hundred military bases abroad and its military spending. Russia doesn’t have this problem. The military generals don’t study the balance of payments. And many of them are right-wingers that have a sort of crude monetarist Chicago School neoliberal view of money, without understanding that money is debt. And, specifically, monetary reserves are not only America’s treasury debt, but the monetization of America’s military spending.

Now, what Scott pointed out is that Russia doesn’t have this problem. China doesn’t have this problem because they’re not trying to create a foreign empire. They’re not trying to put military bases in other countries where they have to somehow spend their domestic currency, and buying local currencies, to do whatever military operations do there. So they don’t have the constraints that the United States have. And that’s what’s essentially leading the United States to say: we’re not only at war with Russia and China militarily, we’re at war with them financially. We don’t want the BRICS — China, Russia, Iran, and their other countries — to have an alternative of not using the dollar so that the dollars that we spend abroad for all these military operations are going to be somehow recycled to the United States.

That’s why you’re having Trump try to browbeat India, Japan, Korea, and Europe into somehow promising to recycle all the dollars to the United States. Why is he doing this? It’s not simply to pay tariffs so that the Treasury will have more money and can cut taxes on the wealthy even more. It’s so that the dollar will not be forced down so that there will be a huge inflow to support the dollar, basically, despite Trump’s hope of devaluing the dollar slightly, slowly downwards — as if that’s going to make American exports more competitive. The whole fight over the dollar isn’t really about U.S. exports being more competitive because the United States doesn’t have much industry to export. It’s really about the balance of payments, which is primarily military in character — not the trade deficit, not the investment deficit.

The government used to realize that. But again, Trump and his team just think of sort of running a protection racket: Either you spend your money to the United States — $350 billion from you, Japan, you promise to send here to invest — another $350 billion from you, Korea — or we’re just going to raise tariffs and deny you the U.S. market. The American strategy — and it’s a military strategy as well as an economic strategy — imagines that other countries need the American market, and they don’t have a choice but to support the dollar, and by supporting the dollar, supporting America’s ability to wage war and have military operations abroad.

They don’t realize that this is the whole thing. And yet this protection racket has essentially overplayed its hand. And last week, Korea said: Wait a minute. You just told Japan to pay you $350 billion, and you get all the profits from what they spend in — you get 90% of the profits and give us 10% — if there are any profits at all, you know, from the way you arrange it with your Hollywood-Pentagon bookkeeping.

You need America’s market; we can deny it, and that’s chaos for you.

Well, it’s not really chaos. They tried the same thing with China last week, and China protested and said — I’m sorry, they tried it with Korea last week — Korea protested and they said: We’re not Japan. We don’t have $350 billion. We’re much smaller. And you’re blocking our automobile exports from the U.S. market. We just can’t pay.

And then, Howard Lutnick, the Commerce Secretary, said: The Koreans either accept the deal, or pay the tariffs. Black and white: pay the tariffs, or accept the deal.

Well, yesterday, Korea’s foreign minister went to China. And there’s not a word in the paper about what they’re discussing. But you can just imagine. Korea realizes that Trump is going to insist: We need your money to continue our military spending abroad and to finance our budget deficit. We’re going to close the market to you. And Korea finally is saying, well — for Hyundai and for Samsung, all of its computer industries — what if we don’t have the U.S. market? Do we have a Plan B? And I suspect they’re talking about China. And they’re talking to China. And they’re saying, well, you know, if we walk away from the U.S. market, we’ll walk away from that factory in Georgia. Obviously, there’s such a reaction in Korea that we can’t afford it. If we walk away, can you figure out a way that we can work our industrial capacity in partnership with you as part of your Chinese new prosperity sphere?

And by the way, if we do that, will you help back us up when we tell the Americans to leave their military bases here? We don’t want their military bases if they’re going to hold us up and essentially declare: We’re treating you like a defeated power. Like we defeated you in 1951. There’s never really been an end to the Korean War. We’re still fighting you, just like we’re still fighting World War II against Japan. You don’t have a choice.

If Korea and Japan, and India all make a choice to say, well, we cannot afford access to the U.S. market on these terms. We can use the $350 billion — or Japan can use the same amount — we can use that $350 billion to subsidize our own industry and keep our employment and support our workforce, while we transition radical change, from orienting our trade with the United States and Europe, to orienting it with our new Asian partners.

That’s what it all is. And that commercial balance-of-payments consideration is a fundamental military consideration at the root. And that’s what really frightens the United States. It was the Vietnam War that forced the United States off gold in 1971. Its spending in Vietnam depleted the gold stock by spending so many dollars abroad that General de Gaulle, in France, and Germany, just cashed them in for gold. And America finally just stopped the drain.

Well, now it’s other countries that are preventing the United States from solving this drain problem by saying we’re not going to accept any dollars that are just the monetization of your military spending to surround us with military bases. We’re going to stop the financial bloodstream that’s funding your whole new Cold War. And this goes beyond the investment in missiles and the investment in boats. Other countries are not going to fight a war by invading any other country. And America cannot control another country, not even Ukraine, without troops invading it. And the cost of a military invasion, an infantry invasion, is very different from the domestic cost of sending missiles. China and Russia, Iran have no intention or ability to mount an army to send into other countries. All they have is missiles, basically. And that’s what the next few years of war are going to be all about.

⁣NIMA ALKHORSHID: Yeah. Go ahead, Richard.

⁣RICHARD WOLFF: Okay, another way of saying this is that the United States cannot afford the empire. The problem is, it can’t do it. In the early decades after World War II, the balance of payments — correct me if I’m wrong, Michael — saw export surplus from the United States, generating the capital and the money with which then to finance the seven or eight hundred bases around the world. And so you had the rest of the world dependent on exports from the United States, having to pay for them in the money that was then used to subordinate them militarily to keep this game going.

By the 1970s, this game was over because the Germans, the Japanese, and the Europeans had recovered from the war, as we knew they would. That’s what they were doing in the decades from 1945 to 1975. In that thirty-year period, the United States lost its preeminent position in the world economy as an exporter. It would either have had to stop because it could no longer finance its military adventures abroad by its export surplus, or it would have had to do what Michael so nicely described. It would have to have found another way, another way, and the dollarization making all oil contracts denominated in dollars — and hyping the threat of the Soviet Union, which the Europeans are copying today because they don’t know any other politics — this enabled them to then create the deficit program. They would make the United States a net importer, switch its own production out of the country, no longer needing these exports, no longer being able to afford them (they weren’t profitable enough to produce in the United States), and you replaced all the workers, either with machinery and with automation, or by exporting the jobs.

So, your end result was the story Michael just told. You could continue to finance your global military adventures, but now you finance them by means of imposing, if you like, on the world the need to hold reserves for their currency because the agreed relationship among currencies was gone. That’s what we had coming out of the Bretton Woods, and that’s what we ended when Nixon took us off the gold standard in 1971. So then, you have Michael’s story.

But let me do something we don’t do enough of. Let me tell you a little bit on this program about the limits to all of this. In order to sustain, now, when you have no exports and when the ability of the United States to import is shrinking every day, because the mass of our people is simply too poor — I mean, the statistic came out this week that the top 10% (if I have it right), the top 10% of the income distribution accounts for 50% of the consumer demand in our society. Alright, that’s another way of saying that the bottom 90% are piss poor. They can’t afford anything. Right?

Well, given that we depend on imports, that’s not a good basis for the future. We’re not running; we’re not going to be able to run the kinds of deficits that we used to. That’s my guess, at this point. Alright, what then is going to sustain the story Michael told? How are we going to pay for all of those bases? We don’t have the exports to do it, and we’re not running the kinds of deficits, nor is the rest of the world eager to accumulate dollars in the way that they were before — and that was true before BRICS became important. The decline of the dollar as a reserve currency is at least thirty years old. The Chinese once had $1.2 trillion. They have $750 billion. I know these are big numbers, but that’s a big decline. It’s not surprising, but it’s a big decline.

So for me, I’m beginning to wonder, how long can you keep this up? And when you add the degree to which military payments in this country are a Keynesian support of aggregate demand in our society, then you see he can’t afford a military, but he can’t afford not to have the military. And I suspect that’s the reason why Mr. Trump, who comes into office promising to stop the endless wars, has neither stopped them, nor has he been able to avoid proliferating more war. He attacked Iran, and he’s busily now provoking Venezuela, and taking extraordinary steps to do it. And giving carte blanche to Mr. [Benjamin] Netanyahu is extraordinary.

You know, we wonder, why would the government do these extraordinary things? And in a way, Michael’s story gives the beginning of an answer: that there’s more going on here than macro-management. That’s important. And there’s more going on than the balance of payments. That’s important. There’s also managing the military — the budget and the activity — when you’re so badly out of whack, you can’t beat the Russians in Ukraine. That’s what’s obvious. It’s obvious to the whole world. They can’t let go. What’s the matter here? Even in Vietnam, they understood: we’ve been defeated. And the Americans withdrew, and the Communist Party of Vietnam took over, and has remained the government ever since. That’s thirty-five years ago, right? That is extraordinary. What is it now? Maybe more than that. Fifty years ago.

Then they were defeated in Afghanistan, and they withdrew. Mr. Biden, in the end, did what the previous presidents couldn’t dare do, which is to say: this is hopeless. And so they’re losing. You know, Harper’s Magazine just came out this last week, and on the front page is the lead story of the magazine, which — here’s the title: Why does the American Military Keep Losing All the Wars? Wow, you’re now even able to ask, in a public way, the forbidden question. And if the rest of the world is worried about the United States economically, we have to remember it was also worried about it militarily, and that danger is receding, as we see what’s going on in the world. The desperation inside the United States, the fascistic turn that we are assaulted with every day is a reflection of all of these dead ends confronting the people who run this system.

⁣MICHAEL HUDSON: Richard, there’s a common denominator that links the dynamics you’ve just meant, and that’s oil and foreign investment in oil. Much of the build-up of the reason that there was a gold inflow to the United States from 1945 to 1950 when the Korea War broke out was not simply U.S. exports, it was the sale of oil by the American oil industry that was in control of the world’s oil. And for the last hundred years — and I’ve made this point before on our show, Nima — the cornerstone of America’s control of money, and the balance of payments and military coercion, has been oil, along with food and agriculture, because if you have the ability to monopolize oil, you have the ability to cut off other countries’ industrial potential — just like depriving Germany and Europe of Russian oil and gas has ended Germany’s and Europe’s industrial potential.

Now, that explains a number of things that you’ve seen recently. Not only has America continued to do everything that it can to isolate foreign purchases of Russian oil — the same thing with Iranian oil, it’s tightened all of the sanctions against it. And the reason that Iran was overthrown in [1953] was largely because it wanted to nationalize the oil and the Americans and British together — it was a British-Iranian oil company at that time — felt they were losing control of the oil leverage.

Well, fast forward to today, you’re seeing in the nightly news, every night here has been taking off with Venezuela. Why Venezuela? It’s not really drugs. Just like Israel claims that all Palestinians are Hamas, the United States claims that all Venezuelans — their fishermen, their population — are drug dealers. Well, the reason that the news leads off with blowing up a fishing boat every night, or another boat that has no seeming connection to drug dealing at all, is the United States is trying to create a narrative that this fight against Venezuela is a fight against drugs.

It’s a fight not only to regain control of Venezuelan oil, but, more specifically, to prevent China’s recent negotiations with Venezuela to invest in developing Venezuela’s enormous oil reserves under Lake Maracaibo. And imagine what the United States is worried about. Not only is China making itself independent of America’s allies’ supply and control of the oil industry from Russia, but now China can get its oil from Venezuela itself; and the fight in the Middle East, using the alliance of Israel with the Wahhabi jihadists, to create a disaster, there is to prepare the war for controlling Iraqi, Syrian, and, most of all, Iranian oil.

The United States still dreams of reestablishing its diplomatic, economic, political, and military control of other countries by controlling oil and food — that’s the other basic means of control: that America can impose sanctions on its food exports to starve other countries into submission to its policy, as it tried to do against Mao after the 1945 revolution, until Canada broke the blockade.

Well, right now, you’re seeing China voluntarily shift its imports for soybeans away from the United States to Brazil, to buy its soybeans there. And China has, until this year, accounted for 50% of all soybean production in the United States — and it’s 70% of soybean production in the case of North Dakota. All of a sudden, there’s zero demand from China for soybeans. And yet you have a perfect storm for American agriculture. You have the corn and soybean crop — a bumper crop this year because of the extreme weather — all of this crop is piling up. There’s nowhere to sell it. They don’t have enough storage capacity to put the soybeans and corn in silos. There’s a huge market now in big plastic bags to begin storing them in. This is a disaster, and the farmers are pressuring Trump to say, you know, you’ve got to be able to reestablish our market next year. We’ve been dependent on soybeans, and what can we shift to? We can’t shift to corn. People are not buying our agricultural exports anymore.

So not only has America lost its ability to use food, like it’s used oil, to starve other countries, denying them American exports, but it’s lost its agricultural sector. And the result is that land prices are collapsing in North Dakota and other areas. They’re falling because the farmers are not able to meet their debts. For the last 150 years, all of the financial crises in America, Europe, and the Northern Hemisphere have occurred in the autumn, in September and October. And there’s a reason for that. It was called the autumnal drain. It’s when farmers would have to borrow the money to move the crops to sell them for markets. Well, right now, that autumnal drain threatened to lead to a break in the chain of payments. Insolvencies, arrears, bankruptcies, and foreclosures, that’s what they’re talking about now in the American Northwest and Midwest: foreclosures on agricultural land that doesn’t have a customer. And there’s nothing that Trump can do about this now because the shift is irreversible.

Now that China is making a deal with Brazil, saying we cannot rely on America’s soybean exports any longer because Trump has weaponized every element of foreign trade. He’s weaponized the oil trade. He’s weaponized the agricultural food trade to try to make other countries dependent enough to shake them down for his protection racket. Well, we don’t need the American market. Thank heavens we have you in Brazil! So, the Brazilian farmers are reorganizing, replanting their agriculture, to shift into soybeans. Once they do this, if Trump goes back and tells China, okay, you know, you can depend on us again for our soybean exports, China is going to say, well, wait a minute, we’re not going to double-cross Brazil, where we’ve just made an agreement to trade with them and to trade in our own currency, not trade in dollars, but trade in our currency. Once we’ve made this shift, and the whole national economy (Brazil) has been shifting to dependence on our market, we’re not going to turn on a dime, like you do in the United States, and just say, okay, we’re going to change and have a new market.

A change is irreversible. You can imagine how the threat of America losing the ability to use food — soybeans, grain, wheat — and oil because of the moves by China and other countries to become alternative suppliers to the United States means that America’s lost the two leading elements, not only of its exports, but of foreign investments in oil and farmland that American investors have controlled. They’ve lost the ability to support the dollar. And by not supporting the dollar, it means not providing the foreign exchange that the United States needs in order to maintain its military presence abroad, that remains as heavy a drain today as it was during the Vietnam War that forced the dollar off gold to begin with.

So, when you put the military strategy and imperial strategy in the context of the balance of payments, you find the great constraint that confronts the United States. And that’s what my book Super Imperialism was all about. And as I said, the major audience was not foreign readers wanting to fight against imperialism. It was the Defense Department, State Department, and CIA that used it as a how-to-do-it book: this is how you have to look at the context of America’s military and non-military diplomacy.

⁣NIMA ALKHORSHID: Richard, before going to your comment, one other aspect of what Michael said is Donald Trump imposing tariffs on steel and aluminum that raise industrial costs, destroy jobs, and weaken America’s manufacturing capabilities.

⁣RICHARD WOLFF: Yes, and that’s a perfect segue. I want to take us to a slightly different aspect of this problem. It has now become clear, with each passing day — and Michael has given us the context — what the purpose is, on the one hand, of raising tariffs and, on the other hand, of using them as bargaining chips to get other countries to agree to invest money in the United States.

For example, in the last two or three days, there has been a flurry of statements coming out of England because Trump is visiting England, Britain, and big boasting of huge amounts of money — hundreds of billions of dollars that the British are going to invest in the United States, and vice versa — okay, a very interesting story. But let’s take a look at what the reality is. Number one: The purpose of the tariffs was to do something that now the country is desperate to do. I want to underscore this because I don’t think it’s very well understood: We are watching a Republican president leading a Republican party that, for a hundred years, has been the carrier of the notion that taxing is bad and the government shouldn’t tax anybody, that we are in favor of private enterprise, not state enterprise, and the government should not — blah, blah, blah, blah. And what is he doing? Imposing an enormous tax on the American economy. That’s what tariffs are: they are a tax.

So, we should wonder what would make ideologically driven conservative business people who hate to pay taxes, who have been supporting the Republican Party for a century to keep their taxes down, and have had that work well for them — why would they suddenly reverse everything and impose an enormous tax? Answer: they’re desperate. They have no other way to go. Their borrowing is out of control — let’s remember, in 1970, the total debts of the United States were a few hundred billion dollars. Today, it’s $37 trillion. That’s an increase that dwarfs production and prices — nothing goes like that. We have borrowed crazy. Why? Because we had already reached difficulties, that meant the government, to finance itself, couldn’t tax the rich who controlled politics and wouldn’t permit it, and had pushed the tax burden onto the mass of people so much that by the 60s and 70s we had tax revolts: that’s what they were called — in California, all over the United States.

And then began the solution. When the politicians cannot dare tax their donors, and can no longer tax the people, what do they do? They borrow, as if it were a magic alternative. And who do they borrow from? The corporations and the rich who lend the government the money they did not have to pay in taxes. This is “Schweinerei,” the Germans would say. This is pure fakery.

But now we get to where we are today. We’ve borrowed so much playing this absurd game. We got the rest of the world to get in on this, holding their wealth in the form of U.S. treasuries, and so on, that we have gotten to the point which was already reached under the short tenure of Elizabeth Truss in England, where the capital markets say: We’re not lending to you anymore. You’re not a reliable borrower. You have gone so far in your borrowing that we can see you’re getting close to that political point where your own people will not allow their taxes to be used to pay interest on debt, rather than to feed their children. And in that game, it’s the creditor who loses. We don’t want to lose.

Alright, so what is the U.S. going to do? Tariff. It will, in fact, put a tax; it’ll put it on businesses — because most of the tariffs are paid by businesses that import into the United States — and they will say to those businesses: It’s your job, you have to pay for this. It’s your job to figure out whether you can squeeze the foreigners to lower their price to offset the tariff, or you squeeze the American consumer via inflation, and solve the problem that way. But we, the government, are no longer squeezing the masses. You (irony: you, the business community), are doing it through inflation. That’s the effort.

Now you understand why Mr. Trump is eager to do the tariffs, but because they are resisted and because they are not generating anywhere near enough money to deal with this problem, he has the second half of it: He’ll bargain away the tariff that wasn’t doing the job anyway if you promise to move capital into the United States. Hence, Michael is quite right. It’s a protection racket: You have to help us because we are a flailing, declining empire, and the only way we can continue to protect you — that’s what they say to the Europeans — you’ve got to help us. You’ve got to give us all this money.

Keir Starmer, yesterday, in a spectacle as pathetic as any I’ve ever seen, boasts that the United States has committed to investing [$]150, or maybe even [$]250 — it’s a little fuzzy, [the] numbers — of money over the next ten years in Britain. And he says with real pride: it’s going to produce, we hope, 7,900 jobs.

So, I looked at the statistics. What’s the job story in England between August of 2024 and August of this year? They lost 127,000 jobs. He’s boasting of something that can’t offset even 10% of the decline of the British Empire — and it’s coming over ten years! That’s an admission of failure that’s been dressed up as an achievement.

Last point. If the rest of the world — to quote Michael — is being charged an entrance fee to sell their stuff in the United States — and that’s what a tariff is, you got to pay this if you’re going to sell stuff in the United States — that’s hurting the exporters around the world because their market is going to shrink. That’s elementary. They’re screaming bloody murder to their governments, who are therefore desperate to give them something to support this craziness that’s hurting them. And what do they give them? They give them these announcements: The United States will invest, if we invest in the United States. And that’s the bigger story. Suppose that works? Suppose that these leaders in Europe and beyond do, in fact, deliver hundreds of billions of dollars of capital investment in the United States? Frankly, I don’t see it. I see the United States becoming less attractive as a place to make investments, with [the passing of] each day.

But let’s assume I’m wrong; the money comes. Then, in those countries, austerity is already being imposed on the people in every one of the European countries. Now, only the rate of doing that is different, not the phenomenon. In that country, it will be possible for the radical left opposition — and for that matter, perhaps also the right opposition — to say what we would say here: We have leaders who have arranged that the money that might have been invested to create jobs in our country has, instead, been shipped over to that other country. And why? Because it has been smacking us with tariffs.

This is impossible. You will not survive politically when that is the program that you are effectively running.

⁣MICHAEL HUDSON: Well, Richard, let me give a particular example of the point that you just made that ties that together. I think an example can sort of walk the audience through. Your first point was the tariffs are a tax on consumers. Quite right. Well, what does America import that affects the farmers? Let’s go back to the farm example, because that’s where everything converges, more or less. America imports an enormous amount of fertilizer, including from Russia, but it also imports farm machinery. And one of the problems is that the collapse of the soybean market means a collapse of the income and the ability to buy new farm machinery for companies, like John Deere and Company — that has just laid off, I think, over 1,000 or 2,000 workers because the farmers don’t have enough money to buy new harvesting equipment. They’re trying to buy old harvesting equipment.

Much of this harvesting equipment is not only produced here by John Deere, but it’s produced in Germany. And America also imports harvesting equipment from Deere’s rival companies, also in Germany. Well, all of a sudden, they find their costs are going way up, as a result of the inability to get energy and steel. So, they are exporting, trying to supply the market here with the products that they produce in Germany.

And imagine the surprise that these companies suddenly have, that are saying this is a threat to their making any profits at all this year on their imports, because not only is the United States charging the 15% tariff on imports from Europe, but it’s saying you are liable for the 50% tariffs because you’re making your machinery out of steel, and out of aluminum — and we’re trying to support the American steel industry, and the aluminum industry, because that’s the only labor union that I can get that actually is going along with my pretense that my policies for the wealthiest 10% are really the policies for labor. I need to make a narrative symbolic act. And so, my symbolic act is going to sacrifice an all-American industry that makes its products out of steel and aluminum.

Well, you can imagine what this crazy political ploy has done. It means that Deere and Company, and other German exporters, all of a sudden, find that when they’re trying to provide the harvesting equipment that American agriculture needs, all of a sudden, the price has gone way, way up. And you pointed out, well, can they get around this by investing in the United States? Well, if they invest in the United States, they’re still going to have to import many of the parts that they use from other countries, because America doesn’t have the supply chain that’s necessary for all of the different things that go into harvesting equipment, just like automobiles. All of that, these tariffs have stifled the profitability of imports by companies, by raising the price so high that, as you say, either the companies absorb the cost, in which case they don’t make profits, and yet having a corporation is all about making a profit.

So, there’s a limit to what you can do. They’ll just stop producing, as Deere has stopped producing in some of its plants; or they pass it on to consumers, and the consumers are squeezed. The farmers are squeezed because not only is farm income going way down, as a result of Trump’s crazy weaponization of agricultural exports — when there is an alternative now that did not exist in the 1940s — but they’re broke and they can’t afford to borrow from the banks because the banks say: Well, you know, what are you going to pledge as collateral? Your collateral is your farmland, and the farmland prices are going down, and you’re already fully mortgaged.

By the way, Treasury Secretary [Scott] Bessent earns $1 million a year in rent for one of his landed properties in North Dakota, that’s used largely for producing all of this. This was accused of being a conflict of interest by Congress, and he has to sell this land by mid-December into a collapsing market. Well, you can imagine how happy he is. At least the Federal Reserve cut its interest rates the other day.

And the newspapers all said: Gee, with interest rates going down half a percent, that’s going to lower the mortgage rates for housing and for equipment purchases. But that’s a fantasy. Short-term rates went down yesterday — yes, by a quarter percent — long-term rates went up, because they said this is going to be inflationary. For the short term, you could lower the interest rates, but we’re not going to buy long-term bonds because living in the short run is going to lead to a huge inflation, just as you described, Richard — the inflation from cutting taxes on the rich, and stifling the rest of the economy by tariffs, and all of the other things that Trump’s doing — ending government support of all of the social programs and the medical programs and the educational programs that it’s been doing. You’re finding the American economy is turning into something just like you’ve described in the German and European economies. It’s almost economic suicide, except they don’t know that it’s suicide. There’s a narrative that’s being created of junk economics that pretends that all of this is going to work out. And it’s a cover story, trying to cover up the actual dynamics at work, which we’ve been talking about for the last hour.

⁣RICHARD WOLFF: I also think — you know, I don’t want to over-push it, but I do think that there is a self-delusion going on here — that the top 10% of the people play the stock market, they own the most of the shares, they are the CEOs, they’re related to them, and all of that; and for them, they hold on to a lot of their wealth. It’s the other 90%. And that’s why you get more and more of that old notion of a split economy, you know, that 10% of us live in a world of fancy restaurants and plenty of food, and all the rest; and the rest of us are the ones that are traumatized every time we go to the grocery store by what we can no longer afford.

Here’s a statistic to think about. Compared to the year 2020 — so five years ago — the price of beef in the United States has risen by more than 50%. You know, hamburgers are like a basic part of an American diet, at least for those people who can afford meat. Think about what it means that the cost of the hamburger has gone up 50%, more or less, since the year 2020. You’re seeing a division, which explains our politics, but it’s a division that I don’t think is sustainable — neither by the ideology here, which keeps promising that this situation will continue, even though the foundation of it, as we’re trying to show, is harder and harder. And I see some of these policies as a kind of wild Trump-type — if I can use the football metaphor — of the Hail Mary pass. You’re going to attack Iran? Maybe you can win. Maybe Iran disappears. Maybe the West can snatch all of the oil in Iran — and blah, blah. Until the Russians point out, you know, we have a deal with the Iranians. If you really come here, we’re going to have to fight with you. And one thing we can assure you, you’ll never get that oil.

What do we do?

Well, we go and fight against Mr. [Nicolas] Maduro, who can’t defend himself, at least not in the conventional sense. And we keep provoking, you know. We become judge, jury, and executioner of the hapless Venezuelans who take a boat ride 1,000 miles from the United States and get incinerated, with the whole thing being handled by the President — with no evidence at all that these people were doing something illegal for which even the punishment isn’t execution, and yet they were executed for the crime for which that’s not the punishment that’s legally — I mean, okay, these are fairly desperate acts.

And hoping that the Israelis will somehow be able to pull the rabbit out of the hat of the Middle East and become an acceptable dominant power? Really, you have got to believe in lots of magic to line up your policies in that way.

⁣MICHAEL HUDSON: You mentioned how the American economy is being squeezed by these, and a desperate thing. Part of the desperation is when you cut your policies into segments and not look at the interactions. One of the big factors in rising prices that Americans have to pay, in addition to the food that you’ve just mentioned, and the hamburgers, is electricity. And that’s gone way up, largely because Trump is pandering to his MAGA crazies, who insist that there’s no such thing as global warming. So again, Trump said: If we’re going to put all of our faith in controlling the world of the oil industry, I’m going to support the oil industry, and my MAGA base, by saying, stop all of the investment that we’re doing in wind power and solar power. So, he’s withdrawn the American government support for wind power, which had been increasing it, and he’s also ending the support for solar power because China has a great scientific advantage in producing solar power.

And the result is that opposing — global warming is a big factor in disrupting the economy, but also Trump’s support for trying to increase the artificial intelligence monopoly is projected as being largely responsible for an enormous increase in electrical usage. This is going to raise electrical prices. And already, the electric utilities in this country are raising their prices because one of the Trump policies — to please his 1% constituents, which we didn’t mention — is the electric subsidies that he’s been giving. It costs basically ten years to go through all of the public filings that you have to do, in order to get a new electric utility built to supply the energy for not only the rising computer and artificial intelligence industry, but for just the normal growth in electric utility, that’s especially coming from air conditioning to cope with global warming that’s increasing because Trump has withdrawn from the Paris Agreement and all the other agreements to try to stop global warming. Everything he’s doing is to exacerbate the cost-squeeze and the shortfall of things we need.

Well, electricity doesn’t play much of a role in the Consumer Price Index. Neither does rent: that’s not much in the Consumer Price Index. Or health care. All these things that are squeezing the budgets of the Americans that you just described are excluded from the statistics that the government’s talking about — thinking if you just don’t describe them, maybe we can convince people of our cover story.

And it’s as much of a fantasy as the American hot war against Russia, saying, well, we’re really winning in Ukraine because Russia’s economy is falling apart. It’s not falling apart because it’s a self-sufficient economy. It produces all of its own needs, instead of becoming import-dependent, thanks largely to the American sanctions that it’s imposed. By imposing sanctions on the rest of the world, America has enabled other countries to respond out of the need to become independent of the U.S. market.

So Trump has essentially created a situation where the rest of the world is independent. And as Trump copes with this, by making even more demands that are unrealizable in practice, the more he’s isolating the American and European NATO countries and their allies from the whole rest of the world. So, we’re seeing all of the convergence of all of these bad policies to support special interests — to support the oil industry, to support Wall Street, to support the banking industry, to support labor unions that support Trump — all of this is basically falling apart. And it’s causing the American economy to fall apart, slowly — a slow crash, but a crash that cannot be reversed without a radical change, not only in the economy, but in the whole Constitution, and the whole way in which the legal system and political system are responsible for this mess.

⁣RICHARD WOLFF: And last irony: As you can no longer blame the immigrants — since you’ve effectively stopped the inflow and reversed it to an outflow — you must find a new comparable scapegoat. And if you watch the internal closing-down of criticism that extends even to late-night comedians, you can see that building up the domestic left becomes the new scapegoat to justify why all of those things done by ICE to the immigrants didn’t work. There’s no huge resurgence of investment here. Not at all. There’s no resurgence of manufacturing. Not at all. It’s all smoke and mirrors and scapegoating, because that’s the sum total of where his first eight months have gotten him.

⁣NIMA ALKHORSHID: Yeah. Thank you so much, Richard and Michael, for being with us today. Great pleasure, as always.

⁣RICHARD WOLFF: Talk to you again next week.

⁣NIMA ALKHORSHID: Yeah, thank you.

Global South

Michael Hudson: The Fascist Protection Racket: Tribute States

MICHAEL HUDSON: In our minds, there’s a different set of books. There’s one set of books for the majority of the world population. The German history books, the French history books, and the American, the English history books have all been rewritten in a more and more extreme distortion of what actually happened.

GLENN DIESEN: Hi everyone and welcome back. I’m very pleased today to be joined again by Michael Hudson, professor of political economy, to discuss US economic coercion against allies. So welcome back to the program.

⁣MICHAEL HUDSON: It’s good to be back Glenn.

⁣GLENN DIESEN: So there is this interesting development. I mean my thesis is that in the unipolar era, states that followed the US would be rewarded, and those who did not could be punished – because there were no alternatives. Now in the multipolar order, the game appears to change – at least the rules of the game. That is, opponents of the United States, and also neutral states who don’t want to ally too closely, have the option of diversifying their economic partnerships, and thus any effort to pressure them simply results in an incentive to diversify more – away from the United States.

In other words the US doesn’t really have that much advantage as we see vis-à-vis China or Russia. In contrast, I think we see allies of the US who are worried about the rise of other great powers and have hitched their wagons completely to the US. They seem more prepared to sacrifice even their own economic interests to preserve the US’s leading position, but also their own ties and connections with the US. This puts the US in a very favorable position. It can take advantage of this subordination of allies. The US can then also sever them from other centers of powers to extract – be it political security or economic concessions.

So, I guess my point is: it seems that the U.S. has an advantage in having an economic war against allies. And it’s through this that I found an article of yours I recently read very interesting. You compare some of the things the United States is doing today to the policies of Britain and France in the 19th century. I was wondering if you could flesh out your arguments.

⁣MICHAEL HUDSON: Well, I want to take issue from the start with your use of the word opponents of the United States. I guess you’re referring to the BRICS, China, Russia, Iran, and the other countries that are meeting. In all of their announcements that their presidents and representatives made at these meetings, there wasn’t a word about the United States as an opponent, or in fact, there was no mention of the United States at all. They look at themselves as being under attack by the United States, much as the United States is indeed treating Europe. They’re not trying to retaliate against the United States; they’re trying to defend themselves against Trump’s demands that he’s making on these countries.

And the demands he’s making are the same for the BRICS as they are for Britain, for the European countries, for Japan. And in fact, right now, in Korea, you have discussions. Even Korea, one of the U.S. allies that the United States would like to drain, is standing up. The United States threatened Korea, like Japan, saying, if you don’t lend $350 billion to the United States to be handled by me, President Trump, to decide how to spend it (and you’ll get 10% of the earnings, if there are any, and we get 90%) – If you don’t do that, we’re going to raise tariffs on you and create a crisis. And you’ll have unemployment, and that’ll lead voters to vote against you. And, you know, we’ll create a crisis.

Just the other day, the U.S. Commerce Secretary, Howard Lutnik, told the Koreans bluntly, quoted in yesterday’s Financial Times: “The Japanese signed a contract, $350 billion. The Koreans either accept the deal or pay the tariffs, black and white. Pay the tariffs or accept the deal.”

Well, that’s just what he’s told Europe. The question is, what makes Europe different from the BRICS countries that are trying to make an alternative, saying, “Well, all right; Trump is threatening to deprive our export industries of access to the United States market. If we agree to his demands, it’s going to cost us more money to just pay tribute to the United States in what’s really a protection racket. ‘Either pay us money and accept our import duties and our demands for you to dismantle your industry and invest here, or we’ll raise tariffs and cause a crisis for you.’” Same demand is made all over.

And you asked, why is the United States making, you know, this demand on Europe specifically? The demand’s exactly the same. Europe is giving up –  won’t say Europe, certainly not its voters, but the European leaders, basically NATO leaders. In the EU, foreign ministers have made a decision that they’d rather live in the short run, like politicians do, and not have destruction of their industry than live in the long run. They have a choice. The choice was made before 2022 when they essentially agreed to blow up the North Sea pipeline – or let the United States blow it up– and depend completely on the U.S. for oil. They said, “Well, at least we can depend on the United States”. That’s what Ursula von der Leyen said. “We can depend on the United States.”

And yet Trump has made it clear, most recently yesterday in Britain, when he said: If you do any move that is at the cost of American industry, for instance, in information technology, imposing minimum taxes against U.S. information technology companies, like Europe’s doing, I, we, will simply raise tariffs on you. Trump can raise tariffs, and of course, Europe has already tried to stand up  to this, but von der Leyen, who was doing the negotiation, never even tried to fight back. She said: Well, at least we can depend on Trump never to change his mind or change the deal. At least we have certainty.

Well, that’s crazy. There was no certainty at all. And so Europe doesn’t have it. Europe had two choices. The choice before 2022 was to have a balanced and basically independent economy as long as its industrial economy was symbiotic with Russia as a raw material supplier of oil, gas, fertilizer, and other basic materials. The advantage of this for Europe was that Europe, Russia, and China and the BRICS are the growing part of the world economy. The U.S. is a shrinking part of the EU economy. Trump’s policies are actually destroying U.S. agriculture, U.S. industry. It’s making the United States uninvestable. Companies are closing down now. The profits are going down because of the [cost of]  imports, especially on steel and aluminum. So you think, why on earth would Europe agree to tie its long-term fortunes to the United States and lose its domestic self-sufficiency and self-reliance (that it had as long as it had free access, open access, to Russian raw materials and energy) to energy that costs five or six times as much.

Once this independence is lost, it loses the option that the BRICS countries have taken by saying, “Well, we’re willing to lose the U.S. market because that’s a shrinking market over time. There will be a cost in the short term, but that cost is less than having to pay $350 billion in the shakedown fee to the United States just to keep our short-term market open. The U.S. market is not worth $350 billion, either to Japan or Korea. Each of these countries could have paid $350,000 to subsidize their own exporters so that they could afford to cope with the tariffs. They didn’t do it. Japan just surrendered.

Korea right now is refusing to surrender. And yesterday, its foreign minister team was in China trying to say: “Isn’t there some way that we could… Suppose we lose the American market. We’re  faced with a demand that we can’t possibly meet. We may walk away from them. What deal could we make with you and your Asian neighbors in order for us to have our own self-reliant, individual geographic system of self-sufficiency so that we’re immune from the kind of threats that the United States is making?

Well, Europe has not made itself immune from these threats. Part of this is military. Again and again, the leaders of Germany and France, as well as Britain, have said, well, we need America’s support in case Russia mounts a land invasion and is willing to sacrifice 20 million of its soldiers trying to march across Europe to the British Isles. Well, this is crazy. This is a parallel universe threat. It has no basis in reality because no country, no industrial country in today’s world, can afford a military infantry invasion of any other country. Because not only would masses of soldiers die, but such a country, if it tried to impose a draft, would be thrown out of office right away.

So you have Europe’s policymakers essentially acting on behalf of NATO, which is controlled by the United States instead of on behalf of their own voters. And you have the public relations polls showing that the voters don’t want war in Ukraine. The voters don’t want their social spending in Europe to be cut back in order to spend the limited budgets on military instead of on domestic things.

So it’s not a question of the United States focusing its demands on the BRICS. Its demands are across the board. They’re the same for every country. Either we’ll close off our markets or you have to pay us money not to disrupt your economy and cause at least temporary short-term chaos. Other countries are protecting themselves from chaos. Britain is not protecting itself from chaos. That’s the basic problem that I see.

⁣GLENN DIESEN: Well, I think a lot of it is tied, as you suggested, to the war in Ukraine, because when the Cold War came to an end, the Europeans became less dependent on the U.S. as a security provider (given that the Cold War was finished). We saw that the main objectives in Europe were that of autonomy. They were speaking of using collective bargaining power to have an economic position that would make them an equal to the United States. The Europeans, even immediately in 1992, as the Soviet Union had just collapsed a month or two thereafter, began to discuss how we can develop our own military. Obviously, there was no threat, but this was also an effort to have more autonomy. They wanted their own foreign policy and to pursue this as well; that is, a collective EU foreign policy. So this is what you can do when the dominant state can’t convert security dependence into economic loyalty.

But what you’ve seen since the Ukraine war, though, when the external threats appear and the security dependence becomes evident, it’s quite predictable that the dominant power, the security provider, will then seek to extract economic and political concessions from its vassals or protectorates. And so I don’t know, from my perspective, this has been a key argument of mine since NATO started the conflict in Ukraine with the coup in 2014: Europe is putting itself in a very vulnerable position because the US, you know, it keeps saying friends and allies, which is nice and well. I mean, we are close and we should be close, but states behave like states. And when you make yourself excessively dependent on another state, it will seek to have some material benefits from this. But you mentioned that the conquest of Europe as it is…

⁣MICHAEL HUDSON: Before you go on, you used the word security provider. That’s quite a euphemism. The United States is imposing unparalleled insecurity on Europe because you have Germany and France and Britain offering to provide long-range missiles to Ukraine in order to use against Russia and to launch against Russia, especially Moscow and St. (And the U.S., the European leaders, say, like Starmer yesterday, they want to bomb Russia) Petersburg – that are in range of these missiles that are to be sent. Well, both President Putin and Foreign Minister Lavrov have said: if a foreign missile is launched by Ukraine against Russia, we realize that our fight is not against Ukraine. Our fight is against NATO. This is a war between NATO and Russia. And if a bomb comes from a German manufactory, then we’re going to bomb the source. We’re going to bomb Germany, at least the factory in Germany, maybe the power plants that supply energy to this factory. Same thing in France, same thing in Britain.

Now, the question is: once you have intercontinental missiles flying from Russia, Russia doesn’t need atomic weapons. It has a much broader range of weapons than NATO countries have. And these weapons are not atomic. And the NATO countries themselves are pretty much out of weaponry. They’ve given them all to Ukraine and to Israel. And any thought of actually engaging in war, it is such a fantasy that it would be like Bambi meets Goliath. Russia would respond very quickly. And the result is because of the belligerence of von der Leyen and the Estonian assistant Kellas, this is putting Europe in insecurity and in great military danger.

There’s no danger at all from an armed military infantry invasion. And without a military invasion, you can’t control and gain control over another country. That’s what Russia is doing now in Ukraine. And you see the enormous problems that it has, even in Ukraine. What countries can do in the democratic form of war is by missiles, simply to destroy the other countries. Wars, the modern post-World War II, a modern type of war, is mutual destruction by missile, by air, whether it’s from submarines or land-based missiles. That’s the kind of war and hence insecurity that Europe is going to have.

So not only is Europe’s plan to sort of have a bastardized Keynesianism and military Keynesianism of, well, let’s spend our money on military industry, and that will maybe create the employment that we’ve lost in our civilian industry as a result of having to depend on American gas and oil instead of Russian gas and oil. But it’s going to threaten the actual existence of the European countries. Russia has made it clear that it has no interest in taking over Europe. It wants to be simply left alone. And Europe is obeying the United States, not simply in these tariff demands and the givebacks that Trump is making, but in a much deeper connection of following the U.S. Cold War, now increasingly hot war, leadership. That’s what’s essentially bankrupting Europe. It’s joined a new military axis that is in no way militarily capable of taking on Russia. And I think your military guests on your show have made this very clear over the last few months.

And the question is: why is it that Europe’s leaders, political leaders who are in charge of committing Europe, able to make this choice on behalf of their whole nations in the face of the public’s voters saying, you know, we want Europe to stand up for itself, to be more nationalistic. And if the social democratic and Christian parties are the pro-war military parties that are basically accepting our dependence on the United States and are giving up our hopes for growth by trade with Asia, Central Asia, South Asia, North Asia, East Asia, then we’re going to support a nationalistic opposition when there are elections.

Well, unfortunately, there are no full national elections coming up, either for Germany or for France shortly or for England. And so you see the problem that Europe is stuck with – a U.S. client leadership, not its own leadership. And this U.S.centered leadership is backed by a U.S. centered neoliberal mass media, the press, the television. The whole context, the whole narrative of economic development is twisted in Europe. They actually think that Ukraine has a chance to win, according to Starmer and Mertz and Macron. And there’s no chance of it winning. They think that the war is somehow leading to a Russian collapse. But Russia is self-sufficient. There’s no way that Russia can collapse from foreign sanctions any more than China or its allies can collapse from American sanctions because they’re self-sufficient.

Europe had this self-sufficiency before. It’s given it all up in exchange for dependency, not realizing that the cost of dependency, when you have an American leader such as Donald Trump acting on behalf of American large businesses and monopolies, and most of all, the military-industrial complex, is going to make demands that basically bankrupt Europe and reverse its GDP growth, reverse its living standards and impose austerity on it.

⁣GLENN DIESEN: Well, the problem though is that when political leadership doesn’t pursue its basic economic national interests and subordinates itself in the way the Europeans are, you would expect a vacuum to emerge that is being filled by actors who would actually pursue national interest. And this is the problem because if you have leaders subordinating themselves, they might actually end up killing democracy as well because they will want to seek to prevent that vacuum to be filled by people who actually respond to public interest.

So in Germany you have IFD, which is now the most popular political party, and they want to restore the peace with Russia. But they label them an extremist organization. They’re discussing banning it. In France, I guess the closest you would have would be Le Pen, but she was arrested. As everyone knows, the presidential election in Romania went the wrong way, so they just cancelled the result.

And I was reading Politico today, actually;  they’re having an election in the Czech Republic, and they might get a new prime minister. But Andrei Bavi is the one who is leading the polls. They might block him from being allowed to be prime minister because, and Politico cites one of the two major reasons is, he has an ambiguous relationship with NATO. He is not clearly supportive. But we did this to Ukraine too. When Zelensky won on that peace platform back in 2019, which 73% of Ukrainians voted for, many of the NATO countries’ financed NGOs drew a red line and essentially threatened Zelensky to abandon this idea. He wasn’t allowed to talk peace with Russia without having NATO in the room. So you have this when you have a political elite which doesn’t pursue national interest and they prevent anyone from filling the vacuum left behind by their incompetence. You’re going to kill democracy at some point, though.

⁣MICHAEL HUDSON: That’s what has happened not only regarding Russia, but regarding Israel. If you make the claim that you’re against Nazism; if you make the claim that you’re against treating any national ethnic religion as being physically subhuman and a different species; if you say that everybody’s a human being; we’re the same species, you can’t have genocide, that’s a crime in Germany because you’re saying that the Palestinians are human beings. That’s a crime in Germany because the Palestinians, well, I don’t have to explain that. If you say in Ukraine that the Slavs, the Russian speakers, are not subhumans, that’s a crime. You’re having a resurgence of Nazism sweeping across Europe, centered in Germany as it was before.

And the result is that all of Europe has joined with Germany to say, let’s refight World War II in the belief that they can win this time. And I think part of this illusion is a whole generation of Europeans has grown up not only on American movies, but on a false idea of who fought World War II. The two main fighters of World War II were Russia, which lost 22 million people, and China, which lost 18 million people. This is far more than the Westerners, the Europeans and Americans, lost. It was the Russians who broke the Wehrmacht strength, and it was China that broke Japan’s strength that began in 1931 with Japan’s takeover of Manchuria.

The Europeans imagine that somehow they, really the Americans won World War II. And all the Americans did was pretty much put them on rations. It charged for the effort. They came in at the end. They very quickly ended World War II in Japan by using the atom bomb in Japan before the Russians had a chance to drive the Japanese out and lead to a communist domination of Japan. The same thing happened in Western Europe. The Americans delayed and delayed and delayed. The Americans wanted the European war to continue as long as it could, as long as it was killing Russians and Japanese.

This is how the Russian historians see the war. It’s how Chinese historians see the war. That’s not how the Europeans see the war. They think, well, we beat Russia before with American help. We can do it again with American help. In this way, just as we carved up the Near East after World War II and Africa between France, Germany, France, England, and the United States, we can do it all again. There’s this myth that has somehow created a false narrative guiding how Europeans think about what they can achieve in the future. And it’s a false narrative that is almost suicidally self-deceptive.

⁣GLENN DIESEN: Well, on that fact, and it has to be stressed, is a fact that the Russians and the Chinese, or more correctly, the Soviets and the Chinese, were the ones who did the heavy burden, carried the heavy burden in terms of defeating fascism. But recently you have Kaja Kalas, the EU foreign policy chief, mocking it, saying, “Oh, these Chinese and Russians, they’re claiming that they defeated fascism. Oh, they don’t read books over there.” I’m not sure, I think she watches a lot of movies, perhaps, as well, thinking maybe World War II was won by Tom Hanks. I’m not sure where her information comes from, but she even mocked the idea in front of the camera that this was the case.

⁣MICHAEL HUDSON: In our minds, there’s a different set of books. There’s one set of books for the majority of the world population. The German history books, the French history books, and the American, the English history books have all been rewritten in a more and more extreme distortion of what actually happened.

⁣GLENN DIESEN: But there’s been polls over the decades since World War II from France and other countries where they ask, you know: who cared the greatest? Well, who more or less did the most to liberate France and save Europe from fascism? Immediately after World War II in France, I think it’s like 85, 90% who said, well, obviously it was the Soviets. Then you see through the decades of powerful propaganda, it ends up now, the most recent one, with a tiny minority. I think it’s like 18 or 21% who believed it’s the Soviet Union who did the most to defeat Nazi Germany.

So propaganda works. You just tell the same stories over and over again, and after a while, people buy it. And now we’re told that, well, World War II was actually caused by both the fascist and the Soviet Union. And it was the freedom and loving states of the West that beat fascism. I mean, it’s quite an extraordinary tale.

⁣MICHAEL HUDSON: Well, that’s a false way of framing it. Was Europe saved from fascism? If you look at Europe today, it was not saved from fascism. If Europe was saved; it was for Fascism. Fascism was rescued by the United States almost immediately. The United States immediately hired the main Nazi bureaucracy and put them to work fighting the left wing. You had Operation Galatio in Italy. You have the terrorism organized by the CIA and American foreign policy. And the United States hired the Ukrainian fascists, the Nazis, to organize a  Ukrainian nationalist movement. The United States saved fascism from being defeated by Europe.

Fascism was America’s response to socialism and a working class movement. Aldo Morrow was killed in Italy. European politicians were killed, just as Lumumba was killed in Africa, and Pinochet killed Allende in Chile. You had political assassination. You have a whole extension through America’s National Endowment for Democracy of creating non-governmental organizations that have acted as funding processes to bring what you can only call fascist leaders to Europe. Mertz is a fascist. There’s no other word for it. And you could say, the same as Kallas; you could say, the same as von der Leyen with her Nazi background family.

Was Europe saved for fascism? And if so, why is there a resurgence of fascism today – of supporting ethnic genocide in countries that the United States declares is necessary for its control of various regions of the world? This is really the fight. You’re quite right in pointing to the crackdown on civil rights, on free speech. That’s fascism. You’re seeing the same kind of takeover in the United States in the last week or so, just by Donald Trump – imposing a new epoch of McCarthyism, like the 1950s – attacking what he calls the left as if somehow the left was in charge of assassinating Charlie Kirk.

You’re having something political occur from Europe to the United States that I don’t think anyone at the end of World War II, in the whole optimism of that time, was believing – that because they defeated Germany and Italy, they defeated fascism. The fact is that this brought back the class war between American dominance and oligarchy – and socialism, to put labels on it. And that fight has gone on. There’s this ongoing fight against socialism and against democracy.

The movement of Europe has not been towards democracy. It’s been away from it. It’s been towards dependence on an increasingly undemocratic imperialism and even dictatorship by U.S. neocons and neoliberals that are trying to push for a refight of World War II – against Russia and China this time. And just as they (Russia and China) won, they were able to end up defeating fascism, whether it’s German or Japanese, in World War II. The same thing would happen today, but the fight is going to be much more violent and fought by missiles, not by infantry.

⁣GLENN DIESEN: Yeah, this idea that the U.S. wouldn’t have worked or supported fascists, that this was only an anti fascist alliance, is kind of interesting because – I just looked it up here– a quote by Harry Truman before he took the presidency said, “If we see that Germany is winning, we ought to help Russia. And if Russia is winning, we ought to help Germany.” In that way, let them kill as many as possible. And towards the end of the Second World War, we also had the British who then developed this plan called Operation Unthinkable, developed in May of 1945 when the war was coming to an end, which entailed not just the US and Britain, but also using what remained of the fascist army to attack, do a surprise attack on the Soviet Union immediately after the common victory. But you know, give this 80 years of Hollywood, and we have a very different story. I did want to shift a bit back towards the economic conquest, if you will, of allies, because we mentioned the Europeans, but the U.S. also has some, I guess, loyal allies in East Asia. I’m thinking of Korea, Japan, and Taiwan, each of them also have strong, well, let’s call it security dependence on the United States. How is the US trying to, I guess, put a squeeze on these, well, two countries and one island, let’s say?

⁣MICHAEL HUDSON: Well, again, the word “security dependence” is a euphemism. It’s Orwellian doublethink. Japan has talked about rearming, and it’s even talking about perhaps becoming an atomic power again. If Japan rearms, this is going to immediately lead China to defend itself. Japan’s already met a devastating loss in World War II. There’s no way in which Japan can be a real military threat to anyone. Certainly, the North Koreans, like the South Koreans, have no love for Japan at all because of its brutal occupation of Korea for so many generations. There’s almost a hatred of Japan there via the Liberal Democratic Party being installed by the United States as America’s compact with the Japanese Yakuzas, the criminals.

MacArthur in Japan and the U.S. State Department made deals with the criminals to go and beat up, attack the socialist demonstrations. There was a chance of socialism in Japan after World War II, a reaction by the Japanese. The American alternative was to make Japan basically a largely criminalized mafia-like oligarchy controlled by the LDP. Well, the recent elections now are for the first time threatening to dethrone the pro-U.S. Liberal Democratic Party and put in a more nationalist party. All nationalism means, it doesn’t mean the Japanese nationalism of the 1930s, military style. It means independence from the United States. The aim is not to put Japan at risk of any kind of war again.

Well, again, Japan is host of the U.S. military bases. A few weeks ago, you had China’s great military demonstration very explicitly showing missiles that they pointed out: This missile can hit Guam, America’s military outpost in the West, the Pacific. It can hit the other Japanese military outposts. So it’s not that Japan’s risking its security. The same thing with Taiwan. There’s a very heavy Taiwanese investment in mainland China. There already is a kind of economic symbiosis between the two countries, but the United States is trying to drive a wedge in that.

The Chinese have said, you know, if for any reason you’re able to co-opt the Taiwanese leaders in the way that you’ve co-opted, say, the European leaders, we’re going to hit down very hard. And it’ll be no contest. Your naval fleet are just sitting ducks. Your naval power that helped win World War II is no longer an active military tool because we can wipe them out in one day. The entire Navy. Navies are obsolete as the tool for control which they were for so many centuries when Britain had the greatest Navy in the world. The whole idea of navies for Britain was to deal with economic development around the seacoast. That was because Britain was promoting foreign trade and inter-commercial interdependence among countries.

Well, China has tried to counteract this whole McKinley type strategy of controlling the periphery of continents by trade. China is developing internal connections through the Belt and Road Initiative with railways, pipelines, highways, all sorts of interconnections. So the whole vehicles of foreign trade are now becoming more inland and domestic. What that does is create domestic regional spheres of influence and self-dependency to become independent.

The effects of the United States demands, that it’s made on everyone from Europe to Asia to Latin America, are so overreaching that they’ve created a reaction against the whole last two centuries of liberalism that saw foreign trade and interconnections as a, I won’t say a rules-based order, but an economic order of stability. You have these interconnections now being weaponized. Trump has weaponized foreign trade, both foreign access to the U.S. market for European and other exporters, and the ability to import basic needs that the United States controls, headed by oil and also agriculture, and now by high technology electronics, trying to create, trying to weaponize all this trade to create a form of dependency that the United States can use as a demand: We will destabilize your economy if you don’t give in to our demands.

The real reason, going back to your first question again – why is the United States treating Europe that way and trying to treat the BRICS countries the same way? That’s because the United States is no longer industrialized. It’s deindustrialized. It’s made all this growth of wealth since 2008, the junk mortgage crisis, the stock, bond, and real estate markets. It’s financial wealth. It’s not the wealth of real production. It’s not the wealth of living standards. Living standards have not risen for more than half of Americans since 2008. It’s all been so concentrated in the wealthiest 10% that the wealthiest 10% of Americans are responsible for 50% of all the growth in consumption goods.

But of course, the consumption goods of the wealthy, wealthiest 10%, are not the same kind of consumer goods that the bottom 90% buy– food and basic needs. They’re luxuries, they’re Andy Warhol etchings, and they’re trophies and Italian fashions. All of this was, way back in the 17th century, 18th century, was being debated and realizing that the financial sector does not really behave like an industrial sector.

We’re seeing a whole transformation in the dynamics of what capitalism is all about, what economies are all about. Well, you and I have talked about that before – all of that has a political dimension. The political dimension means that if America is to avoid an even deeper squeeze on its living standards today, it has to get support from other countries – to get from them the wealth and the imports and the money and the subsidies to keep its economy going that its domestic economy can no longer provide.

So the United States has lost its ability to be self-sufficient, and its response to Europe is to destroy Europe’s ability to be economically and commercially and financially self-sufficient. While the BRICS, Asia, now in conjunction with the Global South, Africa, parts of Latin America, are putting their own self-sufficiency as a chief economic aim so that they will not become subject to the U.S. browbeating and extortion and the threats of disrupting their economies. If you insulate your economy from the United States, there’s nothing it can do to you to impose sanctions or to raise tariffs or to weaponize its import and export trade and financial trade.

⁣GLENN DIESEN: Well, this is why the whole U.S. led alliance system has changed so fundamentally. Because after World War II, the United States actually had some extremely generous trade agreements with frontline states, be it Germany or all the Europeans for that sake, or South Korea, Taiwan, Japan. So it’s just in this era… All countries are now faced with a dilemma as the US is seeking to extract concessions. That is, either they fall into the demands, but by doing so, of course, they have to sever themselves off from other countries and then isolate themselves more, make themselves more dependent on the US, or they seek full autonomy by actually diversifying. But then they have to lean more into BRICS, SEA and similar institutions. But there’s not that many middle grounds anymore. I think that’s why the US overreach with India was so spectacular, because the assumption was they could make Europeans out of them in terms of their cutting themselves off from all other centers of power, subordinating themselves to the US and signing whatever they put in front of them. It turned out that they had to go the other way.

But the fact that Modi had to go to China kind of pointed out, from my perspective, this dilemma that there is no middle ground anymore. Either you have to subordinate yourself or you have to protect yourself by diversifying, but then you have to lean into the multipolar institutions. So it’s a fascinating time. It’s an interesting social experiment as well for that sake. I’m not sure if you have any final thoughts before we wrap up.

⁣MICHAEL HUDSON: Only the countries that America defeated in World War II have turned into surrender monkeys. Japan has become an abject victim of the Stockholm Syndrome. And of course, Germany. They’re the two countries that have given in. And the other great opponent of the United States in World War II was, of course, Britain. The British loan of 1944 and the trade agreements that you just mentioned that were favorable to other countries were aimed specifically at breaking up the British Empire. By opening international markets, they ended British imperial preference. That meant that all of the foreign exchange, the earnings made by India and Argentina and other global south raw materials exporters, were no longer required to be spent within the British Empire, but could be spent anywhere.

Well, Britain’s economy was destroyed, and so that meant free to be spent in the United States. Trade agreements were made, it’s true, with Germany, with European countries. Of course, the United States favored the trade there because the European companies were being bought out by American multinational firms. What was supported above all in Europe were the international firms. That’s exactly what the fight is this week, in the last month, by Trump against England and the EU. Today’s Financial Times has a whole wonderful article: Britain must stand up to U.S. pressure on tech rules. This is about the digital services tax of Europe.

Europe at least is trying to impose a digital services tax on American technology firms because they’ve been able to use Hollywood accounting to avoid having to pay income taxes there. And Trump has told England, Britain, if you try to stand up to us and impose your digital services tax on American companies or try to limit what my contributors in Silicon Valley want to do, we’re going to raise tariffs on you again, despite the agreement we made last spring.

Well, if he can say it to Britain, he can certainly say it to the EU. He made it very clear to the EU that if anything the EU does that is at the cost of American firms, as long as these multinationals contribute to Trump’s Republican campaign and his personal campaign and invest personally in his cryptocurrency scams and the other scams, he’ll just squeeze these, tighten the screws onbthese countries. So that’s basically what’s been happening there. I guess that’s my final thought.

Europe has succumbed to giving all of the diplomatic, trade, commercial, and financial initiative to U.S. planners who are not making open-ended trade and financial agreements that benefit all countries. But as Trump said, the United States has to be the winner in any deal that it’s making with foreign countries. And that’s why the United States is not making international deals anymore. Trump says, we’re going to make deals on a country-by-country basis. We’re going to divide and conquer. It worked for Britain for a couple of centuries. It’ll work for us. And as long as we can play different countries against each other, and it’s us, the U.S. economy versus much smaller individual economies, they’d rather hang separately. As long as we can make them willing to hang separately instead of hanging together, then we’ve won the diplomatic fight for control.

⁣GLENN DIESEN: Yeah, well, I think the fault of the Europeans is that they think they should just wait out Trump as if this is only about Trump. I mean, I think he’s quite extreme and radical in his approach in terms of recognizing a problem and seeking to solve it. But I think the alternatives, well, the Bidens of the world, wouldn’t necessarily go in a very different direction. Of course, it might be a bit milder, but the overarching problem isn’t, I mean, we tend to focus on personalities, but what is the end stage? I mean, how else is this ex-capitalist system, being so exhausted – what else is it going to do? I mean the U.S.– if it can’t compete anymore. It’s losing the technological lead; it’s drowning in debt; there are massive economic inequalities fueling social and political problems. I mean, one sees that this has reached the end of the line. There are no more ways to deal with the coming financial crisis. You can’t put the interest rate down or up. As either it’s going to collapse the dollar or it’s going to make the debt repayment unmanageable.

So, it is a brick wall, it seems. I think Trump deals with this in a, let’s say, a very authoritarian way. But the idea that we can just go back to the way things were, I think this is quite delusional. It’s wishful thinking.

⁣MICHAEL HUDSON: Well, that’s the whole problem, Glenn. You put your finger on it. The way things were, the way things are today is not how they were in 1945. There was still an active left wing in Europe. There was a chance of Europe going socialist in a mixed economy. And certainly, the British Labour Party in the 1940s was progressive like that. There were progressive movements throughout Europe. All of that was counteracted by the United States to prevent that.

And you had the old European moneyed aristocracy fighting against this, pushing essentially for neoliberalism, for a dismantling of government strong enough to regulate the financial oligarchies that were emerging and making fortunes on a mutual interdependency with American multinational firms and multinational investments. And the whole world economy was restructured in U.S.-centric lines that have led to this problem.

So in order for Europe to prosper again, it needs to rethink the whole direction of history. And of course, that’s what you and I have been talking about for the last few months. They have to reinvent the economic wheel to analyze: how do we create a mixed economy that’s going to promote growth, rising living standards, and industry instead of creating financial fortunes American style that’s leading to our deindustrialization, just as it’s led to America’s deindustrialization. How do we end up avoiding looking like the United States? What is China doing right in its takeoff that really is following the very policies that made Britain and Germany and the United States industrial powers in the late 19th century?

⁣GLENN DIESEN: Well, that’s an interesting part when they, the way that China’s capitalism is defined as managed capitalism, all these strange words, which, but if you look at it, it’s very, very similar to the industrial capitalism of the U.S. itself in the 19th century. But yes, Michael Hudson, as always, thank you so much for sharing your insights. And I will leave a link to your blog in the description as well. So thank you again.

⁣MICHAEL HUDSON: Thank you very much, Glenn, for the compliments.

Global South

Richard Wolff & Michael Hudson with Nima: Trump WRECKING the US economy

Excerpt from Michael’s short discussion on the modern history of balance of trade:
Other countries are preventing the US from solving its problem of draining money. They say; We will not accept any dollars that are just the monetization of your military spending to surround us with military bases. We’re going to stop the financial bloodstream that is funding your whole new cold war.

This goes beyond only investment in missiles and boats. Other countries are not going to fight a war by invading and America cannot control another country, not even Ukraine, without troops invading it. Missiles is what the next few years of war is going to be all about.

Global South

Michael Hudson & Glen Diesen: When Most of the World Says No

A big Picture Discussion. The big Moment is in. What’s happening is a geopolitical realignment … and the whole theme of this meeting of the Shanghai Cooperation Organization was global governance.

GLENN DIESEN: Hi everyone and welcome back. We are joined today by Michael Hudson, one of the world’s great political economists, to discuss the development of a multipolar international economic system indeed being built as we speak in China. So welcome back to the program.

⁣MICHAEL HUDSON: Well, thanks for having me. So many things are happening right now.

⁣GLENN DIESEN: Yeah, it’s incredible how fast the developments are coming. If you want to see how extraordinary this is in a relatively short period of time, look over the past three decades.

You remember, at the end of the Cold War, the main foreign policy objective of Russia was to integrate with the West to have a common European home or greater Europe. Then, of course, over the past few decades, NATO expansionism began to push Russia closer and closer to China instead. And after 2014, it really abandoned Greater Europe in favor of what it calls Greater Eurasia.

Trump, when he came to power, seemed to recognize this mistake. Almost paraphrasing Henry Kissinger, he said that this was a huge mistake to push Russia into the arms of China. However, then we’ve seen that colossal foreign policy mistake being done: all these threats, tariffs and secondary sanctions against India, now pushing India also towards not just China but Russia.

So we now see that we’re all meeting in the Shanghai Cooperation Organization meeting in China and forming new partnerships. So it’s really extraordinary. I was wondering how you read this whole situation.

⁣MICHAEL HUDSON: The interesting thing is that Trump has represented really the deep state in declaring war against the whole rest of the world. The only war that he’s really won is against his own allies, against Europe, Korea, and Japan. He’s driven the rest of the world together. It is this actual neocon warlike belligerence that has somehow unified the rest of the world to take the steps that they’re taking right now, just about a half year after Trump took power.

What’s happening is a geopolitical realignment, as you pointed out. And the whole theme of this meeting of the Shanghai Cooperation Organization was global governance. That is what President Xi was saying. And it’s not just the governance of the SCO countries. It’s for all of the countries that have been driven out of the U.S. orbit.

The catalyst for all this that set the stage was Trump’s tariffs against India. India’s Prime Minister Modi spent an hour riding in a limousine with President Trump and discussing relations between India and Russia. And Trump basically told India, we’re going to block off the American market for you, and that’s going to create chaos in your economy if you don’t stop importing oil and energy from Russia.

Well, what Modi said and explained to the audience was that India’s trade in oil is much more important for its economy than its trade with the United States. Getting oil to power its industry, its whole economy, and to make money in trading with the balance of payments is more important than producing low-wage textile labor and other labor. The labor that the United States companies had hoped to use India as a counterweight to China, whereby they say, we don’t need Chinese labor to make iPhones and other products; we can use Indian labor. All of that is ended.

Right after the SCO meetings, we’re going to be leading right into the bigger meetings of BRICS. And the Indian Prime Minister Modi is going to be the head of BRICS for the next year because it’s India’s turn to become the host of BRICS, and they’ll be meeting in India.

Just a month before these meetings, everybody was worrying that India was the weak part of, the weak link in, BRICS because it was, in a way, very much like Turkey. It was trying to play both the U.S. world and the China-BRICS world both ways.

Trump has closed off the option of siding with the United States, despite the fact that so many Indian billionaires or wealthy businesses are tied to the United States. Modi has realized that the future of India’s economy lies with Russia, China, Iran, and the rest of the BRICS region. All of that was sort of the setting for all of this.

And what was made clear, the whole theme of the speeches by Putin and Xi and the others is that we are now 80 years since World War II ended, and the United States had pretty much a free hand in designing the international economic order, the International Monetary Fund, the World Bank, the World Trade Organization, and the Cold War, all on its own terms. These terms promised to be multilateral, and they promised to be the terms that underlay the United Nations Charter. Above all, multipolarity, equal treatment of other countries, not selective tariffs, not sanctions against some countries being told who you can trade with, who you can invest with, and what you have to do. And all of this has been violated at an accelerating rate by the United States neocons in their Cold War.

President Xi was the host of these meetings, then they moved to Beijing for the big military parade, I guess, later today in China. This is them saying, we are now going to pick up where 1945 was supposed to lead to an alternative to fascism or Nazism or the militarism of Japan. President Xi was pointing to China’s role in defeating Japan, Russia’s role in defeating Germany and the Axis, and the great sacrifices they made.

Despite the fact that, in their [China’s etc.] narrative, they really won the war against the Axis powers, it was the United States that designed the post-war world. The United States, which hired as many Nazi scientists and Nazi politicians as they could in Operation Paperclip – hired them to fight communism in Latin America, in Europe, and other countries – hired their scientists, Wernher von Braun, et cetera, for the U.S. space program. It was the United States that somehow didn’t really end World War II.

Now you have in Germany, Chancellor Merz saying, we’re going to re-fight World War II. And this time, the German army is going to beat the Russian army. This is really the setting that has consolidated the BRICS countries.

The result is that there is a global fracture that’s occurring, but it’s different from all of the attempts to do that really for the last 70 years.

In 1954, the non-aligned nations got together in Bandung, Indonesia, and said: We need a fairer and more equitable order that lets us develop and doesn’t stifle our development with foreign debt, with free trade, with preventing us from protecting and subsidizing our own industry. But they really couldn’t do anything about it because they were too small acting by themselves. The non-aligned nations could not go it alone, even together, because they didn’t have the critical mass.

What’s changed all this since the 1990s, obviously, has been China. Now China can be the core of this critical mass, largely because of its financial policies, its foreign exchange reserves, its economic power, its export power, and its technological power. And this has enabled, for the first time, countries outside of the U.S. and European orbit – I think we’ve discussed this before – to create an alternative.

These meetings at the SCO that are going to be followed by the BRICS meetings in a week or so are all about spelling out exactly how they’re going to restructure this new economic order. And they’re powerful enough to do it this time.

It’s obvious that trade is going to be a key in this. The United States is trying to weaponize foreign trade by saying we can force you to follow our political directives, like isolating Russia and China and joining the U.S. Cold War against them by blocking off your access to the United States market. Well, that’s weaponizing it; it’s saying, we can cause chaos to you if you don’t follow our advice.

The alternative to this, as I think all of the speakers spelled out in Tianjin, was to trade among each other. If we don’t trade with the United States, we’ll give up the U.S. market. In fact, India has no choice but to give up the U.S. market if Trump’s tariffs are allowed to stand against India. They’ll trade with themselves.

That’s what’s become the underlying frame for discussing all of the economic and financial and related changes. It’s a civilizational fight to restructure the whole means of foreign trade and finance. It’s going to de-dollarize that.

President Putin pointed out how much more efficient China’s means of trading among themselves in their own domestic currency was than having Russia buy dollars to pay China, for China then to convert the dollars back into its own currency. All of this foreign exchange and the charges for it no longer have to be borne, quite apart from the fact that the United States has weaponized international finance by expelling Russia, China and other countries from SWIFT, the bank clearing operation.

Everything that Trump has done to isolate other countries financially, commercially, in trade, and militarily, has had just the opposite effect. It’s driven them together.

All that the SCO and BRICS countries and global majority had to do was: well, if we’re going to act together as a unit, how are we going to set the rules of trade, the rules of finance, so that it’s something that will be multilateral, a word that kept coming up, and fair? How do we de-dollarize so that the United States can’t grab our foreign exchange, as it grabbed Russia’s $300 billion, or gold, as the Bank of England grabbed Venezuela’s gold supply or others?

You’re having this global fracture spelled out in the way of saying, well, it’s not so much that we’re creating a new type of civilization. We’re picking up civilization, where it was interrupted by the United States Cold War that has transformed finance and trade, in violation of all of the United Nations principles that we were promised at the end of World War II would be subsidized and supported by the United States. That’s basically the framework that has occurred.

⁣GLENN DIESEN: I just read that this morning China and Russia signed an agreement finally on the Power of Siberia 2 massive gas pipeline. Now, it is not gas from the gas fields in the Asian parts of Russia which is being exported. This is from the Yamal Peninsula in the Russian Arctic. And this is a massive amount of gas which will go to China.

This was previously intended to be exported to Europe through primarily the Nord Stream and Nord Stream 2 pipelines to Germany. As we know, these pipelines were destroyed. They initially tried to blame the Russians, but then they had to walk this back. Now they’re trying to blame the Ukrainians. But I think most people would assume that the US had something to do with this.

But this is just a huge, huge development because it really cements Russia’s pivot from Europe, which it has dreamed of since Gorbachev’s concept of a common European home, all the way to 2014. And then, in 2022, it began to abandon it completely.

But now, all of this gas, which was supposed to fuel all these European industries for decades to come, will now instead go to China.

I’m just wondering what future historians will say, because the Europeans are still celebrating that they liberated themselves from Russian gas. They don’t have any alternatives, except much, much more, many times more expensive American gas, which might not even be available in the future. It is amazing to see what is happening.

⁣MICHAEL HUDSON: But anyway, there’s no really reversing this because it’s irreversible. Once you make a huge investment like this, you’re not going to say, oh, you know, we wanted at one point to be a European nation.

We thought of ourselves as European, but we’re not going to somehow tear down this pipeline and build a new one to Europe.

Putin has made it clear that the break with Europe and especially Germany is going to take many decades to be restored. Russia has come to terms with the fact that probably there’s not going to be a reopening of the Nord Stream pipeline to Europe. There could be, but it’s up to Europe. And Europe has really been locked into the U.S. orbit. It’s as if the whole effect of this [new] Cold War, the whole Trump strategy against Russia and China has been to lock Europe into dependence on the United States for liquefied natural gas and especially for one of the bases of its balance of payments, military arms sales.

Modi had complained that actually Trump had announced that he had brought pressure on India to buy more American arms. And he’d criticized India for buying Russian weapons. And I don’t think Modi came right out and said, well, our weapons work and your weapons don’t, as we’ve been watching the war in Ukraine unfold. He didn’t say anything, but it’s obvious the fact that the United States has lost India as a major purchaser of its very expensive aircraft and missiles and other military and industrial complex arms.

This is a blow to the United States, but it’s locked in Europe to American arms purchases. And the whole Trump tariff deals with Europe have just created such a surrender of the European economy to the United States, locking itself in, denying itself the choice of trading with the BRICS countries, that the Asian countries that are the most rapidly growing economies in the world. You’re having political revolution in Europe, saying, we’ve got to get rid of the ruling parties. We’ve got to have nationalist parties.

As you and I have discussed here before, it’s amazing that all of this is still occurring almost entirely on the right wing of the spectrum, not the left wing of the spectrum for nationalism. But at a certain point, Sahra Wagenknecht’s party in Germany and other parties in Britain are going to replace the neocon U.S. parties.

But as you said, the irreversible break has already occurred. There’s nothing really that can happen to Europe.

The whole identity and structure of how the world is going, most of the world is going to be following the rules decided by China, Russia, India, the BRICS, and the global majority. And they’re going to leave not only the United States isolated, but Europe isolated with it. And in view of the fact that, in the last few days, von der Leyen and Germany and the EU have announced their intent to supply missiles to Ukraine and attack Russia… This is just locking in the irreversibility of isolating Western Europe from the rest of Eurasia.

⁣GLENN DIESEN: I want to ask about the treatment of India because it just seems to be so out of place.

Just for context, for me, the critical point was a decade ago. Indeed, I wrote a book a decade ago called Russia’s Geoeconomic Strategy for Greater Eurasia, because 2014 was such a pivotal year. That is, we saw the same time as the West backed this coup in Ukraine, which killed Russia’s hope for a common Europe.

This happened around the same time as the Chinese were launching their Belt and Road Initiative by land and sea, the same time that the Chinese were launching this Asian Infrastructure Investment Bank, the same time they were launching China 2025 to develop leadership in key technologies. So you saw the format for new technologies, industries, transportation corridors, banks, and different currencies all coming out at the same time in China as they [the west] toppled this government in Ukraine.

For me, it was just amazing because for the first time you had a country like China, which had both the capabilities and the preparedness to challenge the US-centric economic system. And this was the time to kill Russia’s dream of being able to integrate with the West. I mean it was… it was kind of extraordinary. If you wanted to sabotage yourself, this is kind of what you would do. And which is why I think the past decade was kind of predictable in many ways.

We’ve seen Russia and China kind of leading this Eurasian front in order to develop an alternative economic system. But India was always the wild card because they have a bit of a difficult relationship with China. And of course, they can – not always, but it’s possible that they can – be used by the United States. Indeed, whenever there are some tensions between China and India, there’s a little bit of excitement in the media, that now maybe they will fall in line and join the anti-China bloc.

But these kinds of threats against India, I just can’t understand. And it doesn’t appear that Washington’s walking it back. Only today I was watching Navarro make some speeches telling India: you’re not allowed to buy Russian energy or you shouldn’t buy Russian arms. And, you know, we like Modi, but this is unacceptable.

I’ve been on several Indian TV shows about politics. And they’re all just amazed. Some think it’s hilarious; others are angry. It’s just, they can’t believe this is real. Why should Washington dictate to India whom it can trade with? It seems absurd, but when you listen to people like Navarro, it’s like the most natural thing.

How do you explain this treatment of India? Because this could have been America’s best friend. It’s quite extraordinary.

⁣MICHAEL HUDSON: Well, you use the word unacceptable, and that’s what’s so ironic. It shows that the United States didn’t have any accurate calculation of the costs and benefits of what it was doing.

Think of what the word unacceptable meant. (When the United States says, we won’t accept it.) George Bernard Shaw had a story that he was at a party, and some woman came up to him, who was, I think, a yogi. She returned from India and said to him very proudly, I accept the world. And George Bernard Shaw said to her, well, madame, you don’t really have a choice, do you? Well, that’s the situation with the United States. When it says it won’t accept the inevitable, this doesn’t have much effect on reality at all. It’s like King Canute trying to stop the ocean and stop the tides from coming in. It has no effect at all.

Most policymakers – in, I think, all of the statements from the beginning of NATO’s war in Ukraine to this week or even today – say that Trump’s strength and his power over the other countries that’s enabled him to announce his Liberation Day tariffs is that other countries need the American market because the disruption is going to be so great that the alternative to joining as allies with the United States is chaos.

Well, obviously, in Beijing and Moscow and now New Delhi, they’ve decided: it turns out that our ability to accept a disruption in trade is much better than America’s and Europe’s ability to accept it. That it’s not that hard to replace the American market for these countries.

China has already shifted its soybean demand away from the United States 100% to Brazil. The result is that soybean prices are now collapsing in the United States. The agricultural sector, which has been a key political sector in the United States ever since the 1930s, is really suffering as a result of the losing the Chinese market and now other countries that are allied with the BRICS.

China, Russia, India, and other countries of the global majority are able to restructure trade among themselves. There’s obviously going to be a short-term cost. There are going to be layoffs. I’m sure that there are many textile companies in India that all of a sudden have had to stop. It may be that today’s ruling by the Supreme Court that Trump’s tariffs are illegal may give hope that, gee, maybe these tariffs will have to be canceled. That’s not going to have any effect at all because you have both the Republicans and the Democrats in Congress completely supporting what Trump is doing. They’ve supported the war against China.

So this is not going to lead other countries to say, now we can open our factories again and begin exporting to the U.S. because it’ll all be over once there’s a vote in Congress. Does Congress support America’s war against China? They all do. Certainly, the politicians support it.

The American public doesn’t. The polls that are taken show the public wants the same things that President Xi wants and that President Putin wants. They want peace, they want normal trade and prosperity. That’s not what the senators and representatives in Congress of the U.S. want. They want the Cold War, they want poverty, they want inflation, they want a declining dollar. It’s the politicians that are destroying the economy, not either the voters or the business community that’s going to be losing from all this.

That’s what’s so amazing in all of this, that the United States is not really acting in its own self-interest. And, apparently, it’s because the CIA and the National Security Council and the Council of Economic Advisors and all of the economists in the government have miscalculated the costs and benefits that are at stake in restructuring this world order.

They cannot acknowledge for ideological reasons why China and its allied countries are pulling ahead. They can’t acknowledge that a socialist market economy works better than a financialized belligerent economy that’s running a chronic balance of payments deficit and a government debt as a result of its Cold War. They can’t acknowledge that.

⁣GLENN DIESEN: Well, a lot of the deals which are being made, are primarily economic.

I keep making the point that India wouldn’t want to join anything that would be seen as a group against America because their main idea is they want to be able to diversify their ties and trade with everyone. So it’s not a grouping against America, but it’s a grouping protecting themselves from America. That is, if Washington weren’t going against India, India would be much more cautious.

But now, what can they really do? I don’t think they would have ever subordinated themselves or capitulated to the demands of Washington. But even if they would, what would have been the rewards? We’ve seen the Europeans do it. They signed any deal Trump put in front of them. Even though the EU said it was a horrible trade deal, they signed it nonetheless.

They sat like good schoolboys in front of his desk. They did everything that was asked, hoping that obedience would be rewarded, but it wasn’t. All they did was cut themselves off from Russia, China, Iran, and now possibly India in the future, too. And it’s not actually rewarded. It just makes them more dependent on the U.S., which then weakens their hand even more.

So, you know, it would be a kind of foolish assumption to believe that the Indians will go down the same path.

⁣MICHAEL HUDSON: Well, neither President Xi nor President Putin in their speeches made any reference to the United States at all. There was no reference. They’re not expressly describing what they’re doing as opposing the United States in Europe. They’re simply ignoring it. They’re supporting each other.

What they’re talking about is: let’s revive the principles that underlay the United Nations: multipolarity, treatment of equals, and no interference in other countries’ affairs. Let’s decide what is an ideal world order that we can all join as part of a win-win situation and not permit any of our member countries to weaponize foreign trade, to weaponize international finance, and to settle our differences on the battlefield instead of by negotiation. They’ve simply ignored the United States.

So it’s not that India or any other country that’s joining it is aligning itself against the United States. They’re saying we’re following the basic principles that we think are the principles of civilization itself. And these principles of civilization that have not only been written into United Nations law, but the whole Treaty of Westphalia in 1648 of equality among nations, non-interference with other countries, internal affairs, no regime change or covert assassinations of heads of state, none of this.

All they’re talking about is what a wonderful world we’re trying to create. And if other countries don’t want to join it – obviously, the United States and Europe won’t want to join it – they’re just part of another world. They’re outside of civilization, outside of the rule of law. And again and again, President Xi and President Putin talked about an international law binding all against the U.S. rules-based order. They use that fairly often. And these rules that sort of capped the United States efforts in all this.

You can just see what the United States has become a model of what the global majority is going to avoid. This global confrontation: Trump’s demand that European companies, Japanese and Korean companies, relocate their automobiles and computers and other major industries to the United States, or they permit U.S. companies to control their leading emerging technologies without having to declare taxable income, without having to pay taxes, such as even the European countries were trying to prevent American companies from doing. The United States foreign policy is based on how we can cause chaos in other countries and hurt their economies so that they’ll have to side with us.

Normally, if you’re going to injure and fight against another country, that’s not a way to get them to depend upon you unless you’re ruling by fear and by compulsion. And the whole framing of the future of the SCO and BRICS, as their speakers have announced, is going to be that it’s voluntary because people want mutual gain, not the zero-sum game that Donald Trump sees. U.S. relations will have to be bilateral, country by country, and America has to be the winner, other countries have to be the loser. He said that in his speeches and writings on the internet again and again and again.

So, in a way, Trump has spelled out exactly everything that Asia and the global majority want to avoid. And this helps them write up the rules that are going to prevent any country who’s a member of them from being able to do again [what the US does].

In that sense, maybe he should win the Nobel Prize. He’s accelerated and catalyzed this creation of a fair and ideal peaceful world. It just doesn’t apply to the United States and Europe.

⁣GLENN DIESEN: Yeah, the same thought struck me, though, that there might be some peace prize, an unintentional one awarded for bringing together all these countries. For example, India and China, who have all these tensions, are now seeing the need to overcome some of these problems in order to create new economic alternatives.

What I find fascinating, though, is a lot of this could have been predicted. Indeed, it was predicted in good time. For example, in the scholarly work of people like John Ruggie, who wrote back in the 1980s how you would expect the international economic system to develop.

He was making the point back then that when there is a huge amount of economic power concentrated in the hegemon, such as the United States, it would have the ability to act as a benign hegemon because simply because it would be in its incentive to deliver a collective good for the international system, that is, to have the rest of the international system trusting its administrative control over the international economy.

So, the United States would be able to say, here is your access to key technologies and industries, which are reliable. You have access to transportation corridors under the US Navy’s control, which won’t be disrupted. You have access to the reserve currency, we can all trade with the dollar, your access to global finance, and all of this architecture is under US control. It’s an incentive for the US to keep this open and liberal so the rest of the world can access it. This kind of would be the foundation of an international economic system, which would be considered a benign hegemon. Other countries would trust it; they would be more or less comfortable under US leadership.

However, he also made the point then that when the hegemon is in decline, this would no longer work because then the hegemon would likely use its administrative control over the international economy to prevent the rise of rivals.

For example, China: the US cut off its access to technologies and industries. It stops Iranian access to transportation corridors and seizes its tankers. It confiscates gold, bans countries from accessing banks and currencies, and suddenly the whole economic system is weaponized and now trust is gone. This will only amplify the need for alternatives. This is where we now are.

The United States is apparently pursuing some tributary economy where others have to pay tribute or find a way of extracting industrial power or other wealth from other countries. It’s just very short-term and destructive, and so much trust is being lost. But what I want to get to is, a lot of these deals which are being signed now in China are economic in nature. It’s supposed to form a new international system. But what are the key principles and the way you see it in this system? Because it definitely will not be the rules-based international order, which is not international, not rules-based, and not orderly either.

So what are they actually going for?

⁣MICHAEL HUDSON: I’d written what you just described up already in my book, Global Fracture, in 1978. And I think these rules have been spelled out.

You mentioned transport. Russia’s Prime Minister Lavrov has described recently in a speech just last month the need “to establish foreign trade mechanisms that the West will be unable to control, such as transport corridors, alternative payment systems, and supply chains.” As an example, he cited how the United States has paralyzed the World Trade Organization by refusing to permit a third judge so that there can’t be a three-judge panel for all of this.

The United States only has an ability to block other countries from taking moves. For instance, the U.S. veto single-handedly has blocked the United Nations from denouncing Israel. And you can just follow the results of the U.S. veto power. The United States will not join any organization in which it does not have veto power because it says, that’s letting other countries control our economy.

Well, no country is going to have that kind of veto power in the global majority countries. That turns out to have been the Achilles heel of the United Nations, the ability of the U.S. to block things… and simply corruption, the way that it’s corrupted the International Atomic Energy Agency by having Rafael Grossi turn over all of Iran’s atomic energy sites and scientists’ names to Israel to assassinate and to bomb. I mean, Lavrov mentioned a whole bunch of it.

As you just pointed out, the world is not to be governed any longer by the unilateral U.S. rules that are subject to desperation. The U.S. is acting in desperation, trying to stop everything. And President Putin described this already in 2022. He was laying the groundwork for what we’re seeing flowering today. He said Western countries have been saying for centuries that they’re bringing freedom and democracy to other nations, yet the unipolar world is inherently anti-democratic and unfree. It is false and hypocritical through and through.

Well, that’s about as direct a statement as you can have, and you can see how many people outside the United States have said, the last three years from 2022 to today have just borne that out. We’ve got to have an alternative. And that’s really the point.

This is the first time that they’ve been really pushed into spelling out just what the rules of an alternative are. They can’t simply say, we’re going to break from the United States and go it alone. They have to say, what are the rules by which we go it alone? How are we going to set rules to shape how we trade in a fair way with each other and how we finance this foreign trade?

China has announced that it’s going to set up a bank that will be able to extend credit to countries that are running deficits with China or paying for China’s investment in these countries to develop the Belt and Road Initiative and the Transportation Initiative that is going to enable them all to produce for each other’s markets instead of for the U.S. and European markets.

⁣GLENN DIESEN: My last question is, this is a very different economic system. Of course, traditionally we only see liberal economic systems function under the British hegemon in the 19th century, and then the American hegemon in the 20th. That doesn’t mean that there haven’t been any alternatives. It’s not that long since the Industrial Revolution and the introduction of capitalism and all that. But in this multipolar system, what are the opportunities as well as the challenges of creating a stable economic system?

⁣MICHAEL HUDSON: Well, what’s so ironic is that what China is doing in its socialist market economy is exactly what the classical economists outlined as the development strategy of industrial capitalism in Britain, France, Germany, and other countries in the early 19th century.

It has a mixed economy, which is exactly where the European economies said, we’re going to get rid of all of the monopolies that were created in the feudal Middle Ages to enable kings to raise the money to pay their creditors for the war debts that they took on to fight each other. We’re going to make these public entities so that instead of being monopolies, they can supply basic services, health, education, transportation, and communications, at a subsidized rate to lower the economy’s cost of doing business.

That’s what China’s doing, that it’s following the mixed economy. Where China has gone further than the classical economists of the 19th century went is that it’s really controlled finance as a public utility. The creation of money and credit is run by the People’s Bank of China, and it creates credit for purposes of direct tangible capital investment to increase production and to fund investment that will raise living standards, not to make money financially.

The whole structure that you’re going to see in the SCO, the BRICS countries, and the global majority is going to be to use banking and finance. Not to fund takeovers of property, not to essentially create credit (especially in real estate) and create real estate bubbles or stock market bubbles or run the economy as a Ponzi scheme. Not the creation of financial wealth in the hands of a narrowing financial sector at the very top of the economic pyramid, whose product is debt, getting the rest of the population into debt for itself and getting monopolies that extract interest, monopoly rent, and all the financial overhead that characterizes the West. But to actually use credit creation and the economic surplus to plow back into overall national production.

That’s the way that we’re really moving, into what are described now as the new rules of civilization, but they’re the very rules of civilization that followed naturally from the Industrial Revolution, from the question of how Britain (and European countries) are going to industrialize and make Britain the workshop of the world.

Well, we’re going to lower the cost of production, we’re going to get rid of the rent overhead, we’re going to get rid of the landed aristocracy and its demands for ground rent, we’re going to get rid of the monopolies and make them into public utilities. And we’re going to do what Germany and Central Europe were doing, we’re going to redesign banking so that it’s actually going to finance industry, not just finance war debts and predatory debt without regard for the economy’s ability to pay and to carry these debts.

⁣GLENN DIESEN: I know that, on the face of it, it’s almost obligatory for anyone in the West that we should all interpret these developments as something negative, given that this represents a massive power shift from the West to the East. Of course, there’s something to be said about that.

On the other hand, it has to also be recognized that the system which these countries are seeking to decouple from seems to have reached the end of the line. That is, as you mentioned, our economies have become excessively financialized. They’re simply not that competitive anymore. The debt has grown to such crazy levels, it’s not sustainable. Trust in this economic system is faltering.

The amount of economic inequality has built up, it’s given rise to an oligarchy, which is being very destructive, not just for society, but also for politics, for democracy to function. And as you suggested as well, the addiction to the forever wars. It’s reaching the end of the line, it seems.

So at this point in time, it’s strange to me that we have this almost instinctive hostility towards these alternatives emerging. But again, the alternative to what is being done in places such as the Shanghai Cooperation Organization is not to go back to the 1990s or the 1950s. This is already exhausted. It’s gone. I’m a bit confused by this hostility. I saw the German media, the Bild wrote this morning that this was the summit of tyranny or the villains, you know, of rogue nations. It’s just a very strange way of framing these massive historical developments taking place now in the present time.

⁣MICHAEL HUDSON: It’s a class war against socialism, it’s a class war against labor, it’s a Thatcherite/Reaganomics demand for privatization.

Just in the last hour that we’ve been talking, Glenn, the US stock market is down. The Treasury bond prices are falling as long-term interest rates are rising. Gold prices have just gone over $3500 an ounce, 100 times their 1971 price.

You’re seeing the fact that what the West calls democracy is an oligarchy. What it’s attacking as autocracy is a society such as China that aims at raising living standards and preventing the kind of economic polarization between the financial class and the rest of the economy, the indebted economy at large that you’re having in the West.

The West for the last century has been following an anti-classical reaction, a fight against the whole ideals of classical economics and of a mixed economy, to essentially fight against government control. It’s a fight by the rentier interests, a fight by the banks backing the landlord class and the monopoly class against all of the reforms that you saw flowering in the 19th century before World War I. All this counter-revolution has now ended up tying the United States and Europe in a knot and blocking its development.

It’s the rest of the countries that are picking up the development and the trajectory that civilization was going in on the eve of World War I before this whole last century as a long detour of U.S. and European dominance under an increasingly unfair, polarized financial oligarchy. That’s the big picture in my view.

⁣GLENN DIESEN: There’s a lot of depth to what’s happening now. I just wish it deserved some proper discourse in the West. I think it’s just depressing to me that the only way they can refer to what’s happening in China now is a summit of dictators who hate the West and hate freedom and democracy. It’s very intellectually bankrupt, but there we are. Anyway, Michael Hudson, thank you so much for your time, and I hope you can come back on soon.

⁣MICHAEL HUDSON: I love these discussions. They’re the big picture. Thank you for having me.

Global South

Richard Wolff & Michael Hudson: What Has America Become? A Global Power in Decline

The economic and financial war against allies and recreation of colonialism. Somebody else must pay! There is hardly any coverge in the US press of these issues.

Global South

Michael Hudson: Trump’s Tariff Wars Hit Europe, Korea & Japan

[Note:  Kindly pay attention, friends and colleagues.  This needs to be widely distributed.]

Most discussion of the past week’s SCO and BRICS meetings understandably have focused on the rising strength of their multilateral alternative to America’s attempt to impose its unipolar world control under its own rules calling for other countries’ subordination to U.S. demands to concentrate all the gains from trade and international investment in its own hands. China, Russia and India have established their ability to create an alternative to this control.

But that has by no means diminished the basic U.S. ideal of control. It simply has led U.S. strategists to be realistic enough to narrow the scope of this control to focus on subjecting its own allies in Europe, Korea, Japan and Australia.

Trump’s over-reaching attempt to control India’s economy quickly drove that nation out of the orbit of U.S. diplomatic dominance. (There is still substantial neoliberal support for India to join in the Atlanticist dream.) The question now is whether such demands will have a similar effect on driving other allies out of this U.S. orbit.

And the subsidiary question is whether U.S. success in enforcing this control will have the effect of economically weakening its European, East Asian and English-speaking allies to the point where their ability to remain viable contributors is fatally crippled and will lead to a nationalist reaction to de-dollarize their own economies

The most obvious basket case is Europe, especially the most pro-U.S. members Germany, France and Britain whose public opinion polls show their populations strongly rejecting their current pro-U.S. puppet leaders.

The most immediate breaking point is the EU’s open-ended submission to U.S. demands considerably beyond what was expected in the abject surrender by EU policy head van der Lehen to Trump’s tariff threats. She had explained her surrender as being worth it for Europe because at least it provided an environment of certainty. But there can be no uncertainty where Trump’s diplomacy is concerned.

He has pulled a fast trick out of his hat by sharply raising tariffs above the promised 15% base, by dissolving that promise into his broader 50% tariff rates on imported steel and aluminum. These tariffs were to promote U.S. employment (and hence labor union support) in these two basic materials inputs despite raising costs for all U.S. manufacturers using these metals in their own products. That in itself was a crazy reversal of the basic principle of tariff policy: import low-priced raw materials to provide a cost subsidy for the high value-added products of industry. Trump put narrow political symbolism over national self-interest.

What nobody anticipated was that the Commerce Department would apply these 50% steel and aluminum tariffs to European and other foreign industrial imports of motors, tools and agricultural and construction equipment. The Wall Street Journal quotes the head of Germany’s Mechanical Engineering Industry Association (VDMA), Bertram Kawlath, as warning that machinery accounts for some 30% of Germany’s exports to the  United States, creating so serious an “existential crisis” for its industrialists that European Parliament may not approve Trump’s July tariff dictates.

A company producing agricultural harvesting machinery, the Krone Group, laid off a hundred employees and is reported to be redirecting its exports already being shipped to the United States. The German affiliate of the John Deere has been similarly affected, as 20% of its exports are reported as being sold in the United States. The Germans are said to be insisting on the same 15% U.S. tariff limit that Trump extended to pharmaceuticals, semiconductors and lumber imports.

The effect has been to promote nationalist parties gaining support to replace the pro-U.S. Atlanticist parties committed to participating in America’s war against Russia and China, and even picking up the costs of fighting in Ukraine, the Baltic Sea and other areas bordering on Russia as well as extending “Atlantic” protection to mischief making in the China Sea.

U.S. foreign policy has also imposed strains on Korea and Japan. Having demanded that Korea’s automobile company Hyundai shift production to the United States by investing in a $30 billion factory in Georgia, the immigration service descended on the plant under construction and deported some 475 employes (of whom 300 were reported to be Korean) who had been hired to provide the specialized labor.

Hyundai explained that the workers were highly trained and under the direction of contractors that the company had used in Korea in order to complete the construction speedily and indeed to avoid the problem of having to deal with the lack of vocational education in the United States to supply such labor – not to mention the price differential from using Korean labor familiar with work on such projects. An official at the Korea International Trade Association accused U.S. policy of imposing an “impossible position” by sending such labor back to Korea by denying it the kind of working-visa arrangement that was granted to Australia. For many years Korea had sought to get equal treatment with such white immigrants and with Singapore, but was consistently turned down, although the immigration was permitted informally – until September 5, in what turned out to be a long-planned attack by armed ICE troops arresting the immigrants in other manacles.

Hyundai and other foreign firms have discovered that investments they make in the United States provides America First administrations to use them as hostages, setting and changing the terms of their investment at will, knowing that the foreign investors are hardly prepared to simply walk away and lose their costly investments.

But countries are being browbeat to make such investments as part of the financial shakedown policy that Trump has adopted: To avoid having U.S. tariffs raised against Korea’s automotive imports from 15% to 25%, Korea had to spend tens of billions of dollars to shift production to the United States. The threat was to crash Korean export income (and hence employment and earnings) if it did not surrender to Trump’s terms – with no military conflict being necessary to impose this trade-peace treaty.

Trump used a similar bait-and-switch shakedown policy against Japan, threatening to create commercial chaos in its economy by imposing steep tariffs on its trade with the United States if it did not pay $550 billion in protection money for Trump to invest in projects of his own choice, keeping 90% of the profits for himself after Japan was reimbursed for its capital advance. The Japanese version of the original agreement indicated that the profits would be split 50/50, but the U.S. drafted a final version saying that that split would only govern the initial reimbursement of investment by Japan, not the profits.

Such was Japan’s desperation – and abject surrender to U.S. demands, German-style – that it accepted Trump’s tariff deal of “only” charging Japanese esports 15% instead of 25% – the same deal that he had made with Korea. Japan was given only 45 days to pay up. The resulting slush fund was a political godsend to Trump, who is now able to use it as bait for his leading campaign contributors and supporters, while using the more than half a trillion dollars to help finance his budget’s tax giveaway to the wealthiest Americans.

Trump also demanded a kickback on Japanese investment in U.S. steel production by Nippon Steel’s $15 billion purchase of U.S. Steel. The U.S. Government received a free golden share of the company’s stock to ensure U.S. control over the company’s operations

In the wake of the recent SCO and BRICS meetings, it seems u unlikely that countries not already closely allied with U.S. control would make any such deals as Germany, Korea and Japan have done so far in 2025. These deals serve as object lessons highlighting the contrast between the U.S.-allied West and the rest of the world.

Alaister Crooke on Monday, September 8, described how “The default psychological mode of the West will be defensively antagonistic. … To acknowledge China, Russia or India as having ‘detached’ from the ‘Rules-based Order’ and constructed a separated non-western sphere clearly implies accepting the end of western global hegemony. And it means accepting too, that the hegemonic era as a whole is over. The U.S. and European ruling strata are categorically not in the mood for this.”

It obviously is not over for America’s relationship with its NATO and other new Cold War allies. But it is limited to them, and Trump is seeking to extend the U.S. sphere of control to the Western Hemisphere as a whole – not only Latin America and Canada, but Greenland as well. The effort needed to lock in their dependency and withstand what one would expect to be nationalistic reactions against such subservience seems to have led U.S. policy to turn away from the conflict with its declared enemies Russia, China and Iran at least for the time being.

The great question is whether these abused allies will at some point seek to choose a different set of alliances.

Global South

Michael Hudson: SCO and BRICS 2025

Eurasia’s Re-alignment in the face of Late Stage Barbarism

The Shanghai Cooperation Organization’s meetings in China last week (September 2 and 3) took a remarkable step forward in defining how the world will be dividing into two great blocks as Global Majority countries seek to free their economies not only from Donald Trump’s tariff chaos, but from the U.S.-sponsored increasingly Hot War attempts to impose unipolar control on the entire world’s economy by isolating countries seeking to resist this control with trade and monetary chaos as well as direct military confrontation.

The SCO meetings became a pragmatic forum to define the basic principles that are to replace other countries’ trade, monetary and military independence from U.S. with mutual trade and investment among themselves, increasingly isolated from reliance on U.S. markets for their exports, U.S. credit for their domestic economies, and U.S. dollars for trade and investment transactions among themselves.

The principles announced by China’s President Xi, Russian President Putin and other SCO members set the stage for spelling out in detail the principle of a new international economic order along the lines that were promised 80 years ago at the end of World War II but have been twisted beyond all recognition into what Asian and other Global Majority countries hope will have been just a long detour in history away from the basic rules of civilization and its international diplomacy, trade and finance.

It really should not be surprising that not a word of these principles or their motivation has appeared in the mainstream Western press. The New York Times depicted the meetings in China as a plan of aggression against the United States, not as a response to U.S. acts. President Donald Trump summarized this attitude most succinctly in a Truth Social post: “President Xi, Please give my warmest regards to Vladimir Putin, and Kim Jong Un, as you conspire against The United States of America.”

U.S. press coverage of the SCO meetings in China presents a foreshortened perspective that reminds me of the famous Hokusai etching of a close-up tree in the foreground completely overshadowing the distant city in the background. Whatever the international topic is, it’s all about the United States. The basic model is a foreign government’s adversity toward the United States, with no mention of such policies being a defensive response against U.S. belligerence toward the foreigner.

The press treatment of the SCO meetings and its geopolitical discussions has a remarkable similarity with its treatment of NATO’s war against Russia in Ukraine. Both events are seen as if they are all about the United States (and its allies), not about China, Russia, India, Central Asian and other countries acting to promote their own attempts to create orderly and mutually beneficial trade and investment. Just as the war in Ukraine is depicted as a Russian invasion (with no mention of its defense against NATO’s attack on Russia’s own security), the SCO meetings in Tianjin and Beijing meetings were depicted as confrontational scheming against the West, as if the meetings were about the United States and Europe.

On September 3 the German Chancellor, Friedrich Merz, called Putin perhaps the most serious war criminal of our time, as it was Russia that attacked innocent Ukraine, not vice versa from the 2015 coup onward. As Putin commented on Merz’s accusation: “we do not assume that any new dominant states should appear. Everyone should be on an equal footing.”

The military parade in Beijing that followed the meetings was a reminder to the world that the international agreements that created the United Nations and other organizations at the end of World War II were supposed to end fascism and introduce a fair and equitable world order based on the United Nations’ principles. To depict this frame of the meetings as a threat to the West is to deny that it is the West itself that has abandoned and indeed reversed the seemingly multilateral principles promised in 1944-1945.

The U.S. and European treatment of the SCO meetings as shaped entirely by antipathy toward the West is not merely an expression of Western narcissism. It was a deliberately censorial policy of not discussing the ways in which an alternative to U.S.-sponsored neoliberal economic order are being developed. NATO head Mark Rutte made it clear that there was to be no thought that there even was such a thing as a policy by countries to create an alternative and more productive economic order when he complained that Putin was getting too much attention. That meant not to discuss what really has happened in the last few days in China – and how it is a landmark in introducing a new economic order, but not one that includes the West.

President Putin explained in a press conference that confrontation was not at all the focus. The speeches and press conferences spelled out the details of what was necessary to consolidating relations among themselves. Specifically, how will Asia and the Global South simply go their own way, with minimum contact and exposure to the West’s economic and military aggressive behavior.

The only military confrontation that is threatened is by NATO, from Ukraine to the Baltic Sea, Syria, Gaza, the China Sea, Venezuela and North Africa. But the real threat is the West’s neoliberal financialization and privatization, Thatcherism and Reaganomics. The SCO and BRICS (as are now being discussed in follow-up meetings) want to avoid the falling living standards and economies as the West deindustrializes. They want rising living standards and productivity. This attempt to create an alternative, more productive plan of economic development is what isn’t being discussed in the West.

This great split is best epitomized by the Power of Siberia 2 pipeline. This gas was planned to go to Europe, feeding into Nordstream 1. That has all ended. Siberian gas will now go to Mongolia and China. It powered European industry in the past; now it will do the same for China and Mongolia, leaving Europe to depend on U.S. LNG exports and declining North Sea supplies at much higher prices.

Some geopolitical upshots of the SCO meetings

The contrast between the successful consolidation of SCO/BRICS trade, investment and payments arrangements and the U.S. destabilization makes it difficult for countries to try and join both the US/NATO bloc and the BRICS/Global South countries. The pressure is especially strong on Turkey, the Emirates and Saudi Arabia. They are observers of BRICS, and the Arab countries are especially financially exposed to the dollar and also host U.S. military bases. (India has blocked Azerbaijan from joining.)

Two dynamics are at work.

On the one hand, the BRICS and Global Majority are trying to defend themselves against US/NATO economic aggression, and to de-dollarize their economies so as to minimize trade dependence on the U.S. market. That saves them from the U.S. weaponizing its foreign trade and monetary system from blocking their access to supply chains that have been put in place, and thereby disrupting their economies.

The other dynamic is that the U.S. economy is becoming less attractive as it polarizes, shrinks and de-dollarizes as a result of its financialization and rising debt overhead. It is becoming inflationary, subject to a debt-leveraged financial bubble that is at increasing risk of sudden collapse.

This basic moral contrast catalyzes the contrast of economic systems and policy between oligarchic privatized and financialized markets (neoliberalism) and industrial socialist economies. This socialism is the logical extension of the dynamic of early industrial capitalism, seeking to rationalize production and minimize waste and unnecessary costs imposed by rent-seeking classes demanding income without playing a productive role – landlords, monopolists and the financial sector.

The great problem, of course, is that the Americans want to blow up the world if they can’t control it and dominate all other countries. Alistair Crooke recently warned that the Evangelical Christian movement sees this as an opportunity for a conflagration that will see Jesus return and convert the world to Christian jihadism. The term “late stage barbarism” is now being used throughout much of the internet for the ethnic supremacy fanaticism ranging from Wahabi jihadists and al Qaeda breakoffs through Gaza and the West Bank to the Ukrainian neo-Nazi revival (with its echoes in Germany’s hatred of Russia) not seen since the Nazism of the 1930s and ‘40s, denying that their opponents are fellow human beings. As an alternative to the SCO, BRICS, and Global Majority, this defines the depth of the split in today’s geopolitical alignment.

I”m sure that client oligarchies throughout BRICS will try to hold on to as many of their privileges (that is, economic rents) as possible.

That is why the key ultimately will be tax policy.

All that member countries can do at the beginning is insulate their monetary and balance-of-payments relations with each other, along with mutual investment. (Already I see China apparently driving a hard deal with Russian oil.)

So the real “new civilization” is a way’s off. But US and its European satellite policy is a great catalyst for speeding up the discussion.

Global South

Richard Wolff & Michael Hudson: Trump Is Collapsing the Pillars of the U.S. Economy —Disaster Ahead!

What is the whole idea of SCO, BRICS and Global South and what was discussed?

Michael: How to become independent of the West .. how do we NOT get involved in their business. “We don’t want to fight with you, we want to get rid of you!”.

The US, the West is in Late Stage Barbarism.

Global South

Michael Hudson, Richard Wolff: NATO Shifts to New Fronts

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, August 21, 2025, and our friends Richard Wolff and Michael Hudson are back with us. Welcome back.

RICHARD WOLFF: Glad to be here.

NIMA ALKHORSHID: Michael, I want to start with you. You believe that the outcome of those two meetings between the United States and Russia, then Europeans coming to the United States together with Zelensky, somehow shows that Trump is pushing NATO into new proxy wars after Ukraine collapsed. What’s your logic? What’s your understanding of that?

MICHAEL HUDSON: Well, part of the logic is the fact that everybody seemed so harmonious when the meetings in Washington ended. And the mainstream media said, look how Europe has capitulated to the United States. Trump said, I want peace in Ukraine and peace with Russia. And, basically, Trump’s position is to forget Ukraine. The war in Ukraine is over. We know what’s going to happen. Russia is going to take over. There’s nothing that Zelensky or that the European countries can do by giving arms that is going to prevent Russia’s victory. So let’s forget that.

Of course, we will support Zelensky in trying to have his troops. He’s called up apparently the Azov Battalion themselves to actually go to the front and fight and be decimated. Let him fight and bother Russia and Ukraine as much as possible. But let’s talk about what we really want. We really still hate Russia. I hate Russia as much as you do, Trump said, but we’re not going to beat Russia in Ukraine. So let’s talk about where we can beat Russia.

Well, we can begin to trouble it, we’ve already shown, we can trouble it in the Baltic. We can sabotage its tankers. We can block Russia’s Baltic tanker trade. We can bother Russia in Azerbaijan and Armenia. We can build that road to not only threaten Russia, as Azerbaijan is already pretty much broken with Russia, but we can threaten Iran also, the whole Russian-Iranian mutual support. We can threaten Russia in Syria by backing Netanyahu’s takeover of and alliance with the al-Qaeda al-Nusra Wahhabi terrorists there to prepare to attack Russia and Iran, Russia from the south, so we can beat Russia in Syria. We can look all over the world where we can destabilize not only Russia, but also the BRICS.

And that’s where we have a chance to really build up and open new fronts against Russia, make it fight on a number of fronts. And I think the Europeans said, oh, are we relieved? We thought you wanted peace. And I think Trump said, look, forget it. The reason that I’m making such a big stink about wanting the peace prize and calling the former head of NATO, who’s now Norway’s finance minister, and saying, Do you think I can get the peace prize?

He wants to make it appear as if he’s a man of peace when actually he’s worked with the deep state to plan a whole war, not only against Russia and Iran, but against the BRICS as well. There’s talk now of him planning an attack on Venezuela, sending in the special forces to kidnap or kill Maduro. He said, well, you know, just in case there’s a chance of winning the peace prize, what do you have to do to win it? You have to be like Kissinger. Kissinger sent in attackers to murder Allende and put in the fascist Pinochet government.

Well, Trump’s going to send in attackers to kidnap or murder Maduro and put in a U.S. proxy right-wing government and spread that throughout Latin America. You’re already having the Bolivia elections moving to the right. I think Trump has planned to follow the neocons in the CIA and the National Security Agency and the military right down the line. But he wants to sort of prevent the rest of the world from realizing that we’ve really got to organize and this is really going to be a war. He’s trying to deaden their realization as to what he’s really trying to do.

And everything that he’s done is the opposite of anyone who wants peace. It’s trying to prepare as strong a case for what he looks at as the final battle. And by the final battle, I think he’s bought the neocon argument that, well, we are losing the empire. We are losing our influence. And given that, if our influence is going to wane, then the sooner we go to war, the less costly it will be. Because the longer we wait to go to war, the longer we have peace, the more China, Russia, Iran, the BRICS, the global majority is going to gain power.

So what Trump was able to convince the Europeans of was: okay, we’re not going to give up Ukraine. Of course, we’re going to try to stabilize our control. We’re going to insist on, well, we have to support Ukraine’s security. Well, what does security mean for the United States? It means the ability to totally control a puppet government.

If you don’t control a puppet government, you feel insecure. If you don’t have the power to destroy it, you feel insecure, just like Netanyahu feels insecure if he can’t exterminate the Palestinians. To America and Zelensky, Russian-speaking Ukraine is Ukraine’s Gaza. It’s exactly the same feeling of hatred that he’s tried to spur there. And you could say that he has this same antagonism; it’s almost a religious fight of supporting American values and autocracy, the ability to control the rest of the world.

This is the last time there’s any chance of doing it. And if we don’t fight now, we’re certainly going to lose a fight if we fight labor. So I think that Russia immediately understood this two days ago when it bombed Odessa’s oil export, oil refineries and export facilities. These were the export facilities owned by Azerbaijan to export Azerbaijani oil to the rest of the world. I think this accounted for maybe 25% of Azerbaijan’s foreign trade. So Russia immediately saw this and the fact that it is now focusing on fighting against Azerbaijan.

I don’t know what it’s going to do in Syria. I think that the Russians and the Americans understand what’s happening. I don’t see any discussion in the media. And even some of your guests are optimistic that maybe Putin really does want to go down in history as the Prince of Peace instead of the War Devil.

NIMA ALKHORSHID: Richard, coming to you, here is what Scott Bessent said about the case of Ukraine.

[clip starts]

Scott Bessent said, “Trump is very vigilant. Right now, we are selling arms to the Europeans, who are then selling them on to the Ukrainians. And President Trump’s taking a 10% markup on the arms. So maybe that 10% will cover the cost of the air cover.”

[clip ends]

NIMA ALKHORSHID: Yeah. I was wondering, what is your take on the two meetings? The first with Russia, then in the United States with Europeans coming, it’s somehow amazing. I don’t know if you saw the pictures that we had from Washington. Here is Donald Trump. Compare this to, I don’t know if you remember, Richard, those pictures from 2016 or 2017, where Donald Trump was sitting at a table and everybody was above him and trying to, you know, somehow attack him or talk to him.

And then this picture is totally different. It shows how European leaders are somehow so desperate in their sort of manner toward the U.S. president. What’s going on? What’s your take on what has happened, Richard?

RICHARD WOLFF: Well, it’s interesting. I come at it a little bit differently from Michael, but I suspect that if we have the time, we can figure out how the two points of view might, in fact, be consistent with each other. So let me respond. I begin with Scott Bessent. And all I can say is I’m sure his mother is very taken with him, but for the rest of us, not so much. I mean, that is embarrassing.

Almost every time he speaks, it is embarrassing. I have no idea half the time where he’s coming from. His fealty to Mr. Trump ranges from disgusting to pathetic, but beyond that, I wouldn’t know what to say. To look at the arrangement between the United States and Europe and to focus the attention on the 10% markup in the movement of the weapons, I mean, that is looking at an enormous tableau, and you’re at one infinitesimally unimportant dimension, and that’s what you’re going to talk about. It really, you have to take a step back.

And you’re right, Nima, you’re right to look at the different pictures of the Europeans relative to Mr. Trump then and now, because that’s Mr. Bessent, too. What’s important here is the subordination of Europe. This is the end of Europe’s maybe 500 years since the Renaissance, where Europe could be the center of the world through its colonial takeover of the rest of the world, through its early development of capitalism, through its early period of industrialization. When it could be said, it was in the lead in some sense. And perhaps it wasn’t the only part of the world then. I don’t know much about what was going on in China that many centuries ago, et cetera.

But for much of the world, this was the power, the center, the wealth. And now look at it. It’s like a group of children from the kindergarten being taken by their teacher to the big man’s building, the White House, where they are gathered in the chairs to orate or to listen to the blather that comes out of Mr. Trump. I mean, I know what they secretly think of him because they have said that in many interviews in their own country.

I follow some of those in France and Germany. I know what leaders, including those sitting there, have said about him. And there they are like puppies. For me, historically, that is the most important. And I know we may not have time today to talk about it, but if you look at the trade agreement that has been reached between Mr. Trump and von der Leyen and the Europeans, the Americans have imposed basically a 15% across-the-board tariff that all Europeans will have to basically submit to. And in exchange, the Europeans took away whatever tariffs they had so that the United States has virtually carte blanche.

By the way, that’s not enough to accomplish very much. But in terms of economics, and certainly in the short run, it is enough to show that the colonial country has become the colony and the colony has become the colonizer. Britain and Europe are now minor players in a game orchestrated by Mr. Trump and the United States. And the irony of it all is that the United States is doing this, as Michael correctly says, because the empire is going down.

They don’t want to spend the money. They want to take advantage of those they control to impose the costs of a declining empire on them so that they have to commit to investing in the United States. They have to commit to buying liquid natural gas and other energy products from the United States. They have to open up their fishing and agriculture to American products, which is an important business, and so on.

And so it’s wonderful. You have to do all these things because we’re running short of money. And the irony is that Mr. Bessent knows that. He kind of gets that. And for someone like him, this is an achievement. And the way you see it is he focuses on the 10% markup…what? You know, only a person who’s doing the nickel-and-dime counting…

I find it in the history of Europe, the humiliation. And I believe, and I know my belief is partly based on hope. I understand that. But of course, let me remind everyone, that’s true of everybody else also. I’m just admitting it. My hope is that the European people will be disgusted by what they’re watching and that you will see inside the European countries on the left and on the right a desire not to be dragged into this subordination.

Let me remind everyone, including the Europeans, if the United States can do what it is now doing, why do you imagine that the next president will not do more of this? Because you’re telling the Americans, here’s a way to ease your problems. Put them on us. How are the Europeans going to sustain their social welfare program? Western Europe’s welfare for its people is way ahead of what the United States does. They were able to afford that because they had no military outlays. The United States took care of that.

It was a wonderful arrangement to give a military Keynesian boost to the United States, which needed it, since we never got out of the depression. World War II got us out, and the warfare budget has sustained us ever since. So we took care of that for Europe so they could use the money they would have had to spend on military to give their people health care, free education, and all the other benefits that they get and that Americans don’t know about because it would be very difficult to get away with not giving it to Americans if they did.

Okay, now what’s going to happen in Europe now if they’re not getting these benefits, if they have to pay all kinds of costs, if they have all kinds of adjustments to make, they’re going to cut their welfare. So they’re already busy doing it. They’re going to keep cutting their welfare.

Well, here are two things. In Germany, as Michael, I believe, pointed out last week, the polling shows that the Alternative für Deutschland now gets a bigger polling result than the Christian Democratic Party, which used to be the dominant party in Germany, sometimes in partnership with the Social Democrats. But nowadays, the Social Democrats have largely collapsed. So the Alternative, that’s the right wing saying, we don’t want to be in this position. In France, it’s the left wing. The right wing is there and has importance, but the left-wing is where the action is.

The left wing is the largest faction in the parliament, and they have just declared, and I’m following this real closely: the bloc en tout – let’s blockade everything is the slogan in english. And on September 10th, they are going into the streets of Paris, Lyon, Marseille, Nice, all the major parts of France to shut the country down. And boy, they’ve shown with their yellow jackets, they’ve shown with their history going back to the French Revolution: don’t push these people too far because they have in them a gene that seems lacking in the rest of us of mobilizing their people.

I would add, therefore, it is an empire going down and it is taking extraordinary steps. If we want to give Mr. Trump credit for recognizing that the war in Ukraine was a vast amount of money was wasted over three years, okay. But meanwhile, what the other things they’re doing, whether they’re neocons or not, these are minor. This is not going to work.

Fooling around with Azerbaijan, you got to be kidding. What are you going to accomplish by murdering Mr. Maduro? I mean, really, these are the desperate acts of a declining empire, and they will be seen that way. Look, I suspect, just my own vision from it, that much of the Azerbaijan noise, and Michael’s right about looking at it, or in Syria or in Venezuela, or if they renew the Taiwan noise once the Ukraine thing is put to sleep, these are indeed typical Washingtonian punches. But to me, they look like a desperate effort to maintain the theater of American imperialism once the reality is no longer available.

Their problem, which they know, is China and the BRICS. And those places are growing way faster than the United States is. They grew faster throughout the Ukraine war. I want to remind people: China’s economic growth per year is in the 5% range, American growth per year: half that, if that. And India’s is even faster. Russia grew faster during the war than it had been growing before, and grew faster than any European country, including the United States. You’re losing. You’re losing left, right, and center.

And much of these efforts, indeed, I would argue the Ukraine war itself is a demonstration they can’t do it. And I think that’s a crisis for Europe that we’re not appreciating. All those people sitting around the desk that you just showed us of Mr. Trump in the Oval Office. These are the leaders who were born into – grew their entire careers as the American ally, as the allies of the United States, the subordinate allies, the ones who had been defeated in World War II, emerged from it ruined if they were on the winning side, ruined if they were on the losing side. The United States is dominant, and they’re going to rebuild Europe, as it’s all over for them.

They are desperate people, desperate in terms of their own careers, desperate in terms of their own worldview. They picked the wrong horse and it’s too late to get off. So they’re going to ride him as long as he’s still standing. They will continue the war in Ukraine forever if they have to look at them. That’s how they talk. They see no defeat. They see Russia keeps moving X kilometers to the West. They don’t see it. It is an extraordinary display of weakness. And the theater around it shouldn’t obscure that.

NIMA ALKHORSHID: Go ahead, Michael.

MICHAEL HUDSON: Richard, we always end up in agreement. I think that the European response has gone beyond disgust. They are now afraid. There is a wonderful editorial in today’s Financial Times, an op-ed by Professor Schock, saying that the new arena, the most important arena between the United States and Europe is, and really the rest of the world, has to do with artificial intelligence.

She says that America’s policy, especially under Trump, has been to weaponize any form of trade into a form of threatening to make your trading partner dependent on you. And in the past, America has been doing precisely this with oil and with grain exports, willing to turn off the taps and turn off the food and to start to isolate, to put sanctions on and isolate other nations and starve them out or cut off their energy if they don’t obey. Schock says that the new weaponization of American foreign trade, specifically against Europe, because that’s what she’s writing for the Financial Times, is artificial intelligence.

She says that one of the focal points of this agreement that America has been pressuring Europe to sign is that they do not follow through on their plans to regulate artificial intelligence, the computerized internet, the cloud, and all of these things. They leave, they remain dependent on the United States for the algorithms, the way that the whole artificial intelligence system is programmed in such a way as to lock in users. And it locks in users by the fact that as the system spreads and becomes more widely used, the cost of creating an alternative system is larger and larger and larger.

And that if Europe does not prevent the American domination of AI now and tries to assert its own ability in AI, in chip making, and basically in the way in which the artificial intelligence system is structured, the logic system of it – I’m not a computer specialist, so I can’t get into the details – but she gets into the details and says that essentially the U.S. can impose a garbage in, garbage out system on the rest of the world.

She doesn’t call it that. She calls it just building in the algorithm in a way that reflects American values and policy. And in the process, she says, Trump is turning America into an autocracy, not a democracy. And its mode of control of Europe is in the new growth industry, replacing oil, replacing food. Now that other countries have alternative sources of oil and are producing their own food, the one thing that is up for grabs is artificial intelligence. And I think it’s the magic seven AI stocks that have been accounting for 80% of the value of the increase in stock exchange prices in the United States. This economic arena is very important.

Also, you make the important point: what about where the opposition is in Europe? Well, let’s imagine, going back to Monday’s meeting, if Trump really had wanted to show up Europe, imagine if he had said, well, I know that many of you leaders now are carryovers from past elections, but you got to realize in the next election, we’re going to have the Alternative für Deutschland replace Merz. We’re going to have the French left replace Macron. And in England, one would expect Starmer and the collapsing Labour Party will be replaced either by Corbyn on the left or an alliance between Corbyn and the nationalist party, the Brexit leader over there.

He would have had them and say, let’s all get in the same room and see what they have. And you’d have these other groups all saying, well, we’re against the war with Russia. We’re against the war in Ukraine. But Trump didn’t do that. And that’s because they would also have been against his requirement to say, yes, I’ll go along with you. We’ll expand the Cold War. We’ll fight Russia. But you have to follow our leadership in this economic growth industry, the artificial intelligence.

And it’s a wonderful editorial on all of this saying that by weaponizing technology, by weaponizing any area of foreign trade in which the United States can establish dependency on other countries, that indicates a policy of preventing other countries from creating an alternative. And that’s what America’s definition of security is. Security is preventing other countries from having an alternative. Then they can feel secure.

So that’s what they mean by security for Ukraine. There’s no alternative to American control of a puppet government. So you have to have a puppet government. But that military idea of security is exactly the same economically. You can’t have any independent technology capable of becoming a rival.

Well, what doesn’t this include? This may or may not work for Europe, but it certainly isn’t going to work for China, which is already forging ahead in artificial intelligence and computerization and chipmaking and the whole sphere of technological breakthroughs, including rare-earth magnets and all of the high technology, including hypersonic missile development. America is behind in all of this. And its question is: what part of the world do we have the power to prevent that part of the world from having an alternative? It’s trying to lock in Europe. Europe today, tomorrow, BRICS. And that means the world.

So through all of this, I think America has told Europe, don’t worry, we’ll do it together, but together under American hegemony. And that ‘together’ will be turned against somehow through trying to establish a critical mass of artificial intelligence. Through a way of programming that will try to pry away other countries, global south countries, other BRICS countries, from China. And by having their own independent AI system that presumably Europe would ultimately have to adopt. If China and its neighboring Asian countries can create their own artificial intelligence system and prevent backdoors from being imposed, then the United States will end up completely isolated. And isolated means without its export markets to create its balance of payments and to posit its trade balance by the technology services.

And you can already see this in the fight over Intel and the fight to prevent blocking out NVIDIA from exporting more to China. America says you can export all you want. We want a backdoor location controller so at a certain flick of the switch, we can disable every NVIDIA switch in China, paralyze their machines, and turn off all of their computers if they use your chips. So China has just moved to block NVIDIA’s export of chips until it can secure itself to make sure that there’s no back door.

But how do you do this? It takes so long to go through the millions of commands that are built into the chip that how do you know they haven’t put in this geolocator and the on-off switch that can enable them to paralyze China very much like Germany sabotaged the Iranian refiners, the centrifuges, and blew them all up by putting in a secret control there. That’s what America wants to do with AI for the rest of the world.

And it’s become so apparent that it’s insisted on this. It has insisted on doing this for Britain and for continental Europe as well. This is the most immediate arena of the parallel fight to the military rivalry and fight that’s going on.

RICHARD WOLFF: Yeah, you could see that already earlier. Remember, arresting the daughter of the Chinese gentleman, CEO of Huawei Corporation, when she was in Canada, and forcing the Canadians to arrest her. And I mean, hysterical anxiety about what you just said: that the Chinese had the capacity already then, and that’s many years ago now, already then to do this kind of warfare. I don’t want to beat the dead horse but I want to make it clear: the scariest part of what Michael has outlined for us is the part that says that this is the strategy of the United States. But then the really crucial part is: that strategy is being frustrated by an equivalent opposite strategy in China and the BRICS.

Okay, that means that the United States confronts a situation where it either has to act militarily now or risk losing this contest. And if it loses it, well, then the game is over and the military won’t solve your problem. But they might try it. And you know, the irony there is that then gives the American left its opening.

Here’s what happens: the American left becomes a movement. It’s, of course, not there yet, to say the least, but it becomes a movement that says the best thing for the United States is not a confrontation with China, which costs us too much in the way of lost quality of life in this country, given the risk that we’re going to lose, that China is just too much bigger. And with the BRICS, it’s ridiculous how much bigger they are. And that bigness is in the end going to overwhelm us. Therefore, stop it now.

Change the policy, work out a live and let live deal with China as the alternative to the confrontation. It’s a little bit like saying, and if we go in that direction, we will be saying: you had a chance in April of the year 2022 when you sat down in, if I remember correctly, Istanbul, and you worked out most of a deal that would have ended the Ukraine war weeks after it began, you would have had a better deal for Ukraine, much better than what you’re going to get now. You lost it. You’re now embarking.

This becomes the mantra. You’re embarking on the same losing proposition in your struggle with China. Only it’ll be longer and more costly and with greater risk than was involved. Learn from Ukraine. Don’t do it again. Right now in the United States, that position would get an enormous number of people supporting it, left, right, and center.

MICHAEL HUDSON: That’s why they’re trying to make sure that elections can still be financed. I want to add one thing. What really gives Asia and China the advantage, a total winning advantage over the West in AI? It’s open source. Everything China is doing and AI is open source. That makes it impossible to put back doors in. It makes it impossible to sabotage chips. America cannot win in a fair competition.

It can only win by sabotage, bribery, assassination, and by playing dirty. But in a fair play with everything’s open, sort of the equivalent of free trade, it cannot win. That’s the dilemma that Trump and the neocons have in common. And I think you should look at Trump, really as the neocon leader for all of this, because he’s willing to do explicitly what other neocons never thought they could possibly get away with.

And Trump is able to play the Christian card, saying God is telling him to do all of this, and he’s found religion, and he talks about what he has to do to go to heaven. I don’t think any of the neocons who were not that kind of Christian ever would have conceived that being a winning ploy to produce MAGA behind them. But the purpose of all of this flimflam is to prevent open source, prevent free trade, and prevent other countries from making a choice.

That’s what national security is: preventing other countries from making a choice other than to subordinate themselves to the United States and to sacrifice their own growth to pay their foreign debts to the United States, to rely on the United States for its military support for locking in their military arms systems, their Air Force, their ships, American airplanes, ships, and guns requiring replacement parts and continual fix-ups by the United States. Without replacement parts, it’s as if the United States militarily has the ability to flip a switch and just turn off the ability for foreign supersonic airplanes, fighters, ships, and submarines to operate. You could apply this system of “how do we turn off and disable other countries” right across the board.

So while the global majority thinks, how can we provide means of technology raising living standards for the rest of the world? America says, how can we sabotage this effect? That’s all that they can do to delay the decline of the American demand for control. They can’t prevent it in the end. They can delay it, and that’s all they’re playing for. It’s a short-run game, but it’s the short-run game that is the center of politics and financial markets.

NIMA ALKHORSHID: Richard, before coming to you, here is what Scott Bessent said in terms of what the nature of the economic ties between Russia and China and India is – how dependent they have become during the war in Ukraine.

[clip starts]

Scott Bessent said, “China importing it is suboptimal. But if you go back and look pre-22, pre-invasion, 13% of China’s oil was already coming from Russia. Now it’s 16%. So China has a diversified input of their oil. If you go back and look now, I believe India had less than 1% of their oil, 1%, and now I believe it’s up to 42%. So India is just profiteering. They are just profiteering. They are reselling. They made 16 billion in excess profits, some of the richest families in India.”

[clip ends]

NIMA ALKHORSHID: So yeah, they’re reselling to whom? To Europeans. Two days ago, Richard, there was a meeting in which the foreign minister of China went to India to talk with Modi, and Modi posted on his X account. He said that the situation between the ties between India and China are improving like never before. I think Donald Trump is doing everything to unify. He’s just achieving something that nobody could have ever achieved in terms of what’s going on in BRICS.

RICHARD WOLFF: Well, for me, what I see is the relentless march of the decline of the American Empire. It is in the interest of India to get discounted oil because the Russians give them a very good price. They’re just doing business. The Russians can’t sell oil and gas in Europe. That was a European decision and an American decision. Close the market, bring Russia to its knees by depriving it of its export markets.

The Russians turned to the Indians, with whom they had long trading relations and military relations anyway, and gave them a price they couldn’t believe. And of course, the Indians… What is it you want? India isn’t in Europe. India is not interested in the fight between East and West over Ukraine. India is interested in developing its economy, which is the number one demand upon the government by its people. And getting cheap energy from Russia is a way to do it.

I remember listening to the very able foreign minister from India now, who’s very, very good, looking incredulous at the newsmen asking him: why is India buying oil from Russia? He said, you know the answer. Why did Germany buy oil from Russia? Why did Europe buy oil? What are you asking us? You want us to take sides in a war we had nothing to do with? Well, we’re not required to take sides in a war we had nothing to do with. You don’t take sides in your country in wars, you have nothing to do with. So, what is there? There are no answers to these questions.

And there are no answers because of what’s going on. And I think that’s why China and India are discovering that they have lots of interests in common. They always did, right? India was a colonial property. China never was, but was almost. And so, they have a great deal in common. Britain has been a problem for both of them. They all know that, et cetera, et cetera, et cetera. And they all know that they would be better off if they were less dependent on the West and more dependent on others, like one another. I mean, of course, they should expand exports and imports between them.

They are the two biggest countries on this planet. They are desirable markets for each other. They ought to be developing their countries in a coordinated way because it will be a faster growth for both of them rather than being oriented to the West, which intrudes its interests on their exchanges. By the way, they know that. They talk about it, they’re aware of it. Economists I know at the university in New Delhi, they have debates about this.

By the way, they have radical economists in a way that American universities don’t tolerate. So, they actually could get a diversity of points of view. Americans celebrate it, but don’t have it. They don’t make such a big deal of it because they have it. And so, they are able to build on diverse perspectives, many of which agree, left, right, and center, that, of course, their relationship to China has to develop. And the cheap energy from Russia makes that easier, makes it quicker, gives them a boost because they become an important manufacturing country.

I mean, India is not where China is and won’t be for a while, but it is becoming important, so it needs energy. It’s a developing country. It needs a lot of energy. Russia is in a position to provide. The idea that India, to satisfy Britain and the West, would sacrifice its own growth development is preposterous. That it should even occur to a journalist just shows you how lost those journalists are in their country of origin and the mentality of the colonial mind. It is pathetic.

Of course, Mr. Bessent, you know, he can’t spell colony, so he won’t bring that to bear in his thinking. He will look at numbers like, gee, India is making a lot of money. Notice him again. He was fascinated with the 10% markup on weapons. Now he’s fascinated by the fact that discounted oil from Russia is making families in India rich. Of course it is. But again, that is the least important dimension. But for Mr. Bessent, it’s what he wants to talk about in the 30 seconds he has on national television. You’re talking here about a true mental midget.

MICHAEL HUDSON: I want to add the balance of payments dimension to this Indian-Russian trade. You pointed out that the families are getting rich because Russian oil is less expensive to India than foreign oil. But the most important feature of this is that the payments are denominated in their own currencies. Well, the result is that Russia’s accumulated a very large volume of Indian currencies and probably more than it needs, but it’s still willing to do this to establish the principle of trading in their own currencies instead of in the dollars.

Well, that’s spread throughout the whole world. You’ve had China especially leading all of this, and one result is that as a result of China’s holding foreign currencies that it receives in payment for its exports, its dollar holdings have fallen to the lowest level in 20 years to about $750 billion. So it’s lowering dollars. Now, just imagine what would happen if America really does attack Venezuela. That is a sign that this is the first step: today Venezuela, tomorrow the BRICS. You can imagine the BRICS countries accelerating their flight out of the dollar.

They said, well, how did America start this whole war with Venezuela? It confiscated Venezuela’s whole investments in the United States held by the government, by the oil company, in the oil distribution that it had here. And it told its puppet Britain, the Bank of England, to confiscate China’s gold and give it to Mr. Guiadó, whom America designated as the president. Well, for the rest of the BRICS, this is in the forefront of their memory. They say, okay, we know the buildup of the escalation procedure. And if they’ve already gone military in Venezuela, we can expect them to begin financially eating away at us.

You’re going to have an acceleration away from the dollar. Well, Trump is happy with that because he thinks the lower dollar value is going to help American industrialization, but it’s not going to. But I think that that is basically the key to all this. And along with that, I want to point out that, since we’re talking about the balance of payments, which I always end up talking about, you’re having the effect of capital movements, hot money, and financial flows in determining the price of the dollar. The headlines every day in the United States financial press have been that Trump wants to fire the Federal Reserve Chairman to force the Fed to lower the interest rates.

Well, CNBC announced on Tuesday something very interesting. Trump has invested $100 million of his own money in buying municipal bonds and corporate bonds. Well, he’s bought these bonds yielding fairly high interest rates. And if he succeeds in replacing the head of the Fed or arm-twisting him into lower interest rates, this is going to create an enormous capital gain for Trump. It can double from 100 million to 200 million. So you have Trump putting his personal fortune behind this manipulation of U.S. foreign policy. And you can believe that for him, with his foreshortened view, his personal fortune comes first, American strategy the second.

And in Trump’s case, they tend to converge in all of this. So you’re having an American financial war against the rest of the world, saying we’re going to lower the dollar’s value. That means if you hold U.S. dollars in your foreign reserves, as we lower the interest rates here, these dollars are going to be worth less and less and less in your own currency. So your private banks, your central banks, and your corporations that hold dollar balances are all going to show a loss in their profit and loss statements and their net worth statements. And this financial maneuvering is trying to impair the financial resilience of other countries. And that’s a dimension that is left out of discussion because the balance of payments analysis is not a topic taught in American universities, much less discussed in the public press.

RICHARD WOLFF: Yeah, and just a footnote: if Russia is accumulating rupees, you know, Indian currency out of the oil exports to India, well, here’s one thing you can be sure the Russian central bank is figuring out: it would be interesting to use those rupees to stimulate the production in India of goods that Russia would otherwise have to produce itself, or even worse, might have to import from Western Europe or the United States. They won’t have to. They can build on India. In other words, it allows the BRICS to help each other by opening up the channels for currency movements among them.

So rupees go to Russia for oil and then from Russia back to India for exports, or maybe not. Maybe the rupees will be accepted by the Chinese to pay for things they export to Russia because the Chinese know they can use them to buy who knows what from India, thereby recreating what made all the other currencies, including the dollar, become bigger than wherever they started. And this is part of the BRICS replacing America in the empire story.

And it’s relentless, and it is much more powerful than anything they can do in Azerbaijan or Venezuela or Syria. That may look good and may make a good headline here. Michael’s right about that, but it is not stopping in the same way that the Ukraine war did not stop all the things that led up to that war. They’re right, continuing. The war started, the war developed, and now the war is ending. And the other processes we’ve been talking about, they march on.

MICHAEL HUDSON: Wonderful, Richard. So now they can call us Modi’s puppets.

RICHARD WOLFF: Yes. It would work, except in America, given our level of reporting. Nobody knows who Modi is.

MICHAEL HUDSON: That’s our advantage.

NIMA ALKHORSHID: Yes. Yeah, we’re going to be pro-India. They’re going to call us pro-India. Thank you so much, Richard and Michael, for being with us today. Great pleasure, as always.

MICHAEL HUDSON: And a good discussion.

NIMA ALKHORSHID: Thank you.

Global South

Richard D. Wolff and Michael Hudson: The U.S. just lost everything – End of American Power

With Nima on Dialogue Works, plus notes from Michael Hudson.

Michael added a note as the transcript for this video will take some time.  Enjoy!

US Monopoly in AI strategy 2025

Any country’s trade with the United States can be weaponized by turning it into a dependency relationship.

For many years this is how U.S. strategists used its dominance of grain exports and the world oil trade as a weapon, by threatening to starve China out in its attempt to prevent Mao’s revolution (the sanctions were broken by Canada) and oil exports (by blocking other countries’ option of having an alternative in Russian oil or Iraqi and Syrian oil not controlled by U.S. puppet regimes

In the more technological arena, the United States used arms exports as a similar lever to impose dependency relationships. Purchases of U.S. aircraft, submarines, ships, and other weaponry require almost constant repairs and replacement parts. The United States can turn off the tap to countries using U.S. arms for military purposes not approved by the United States.

The key arena in establishing U.S. technological advantage has become AI. Europe realizes that if Trump succeeds in blocking Europe’s ability to regulate AI, it will lock Europe into reliance on America’s AI and internet platform leaders – and chip makers, and hence U.S. computers and other products in which U.S. national security strategists can assert geo-locators and kill switches.

China recognizes this threat and has recently decided against relying on Nvidia chips in fear of such kill switches being installed.

China’s counter-strategy – and that of Asia and the BRICS as a whole – is to make its AI and related informational technology open source. That prevents (so I’m told) the opportunity to impose backdoors such as geo-locators, kill switches, and spycraft.

Europe recognizes this strategy and is trying to prevent becoming locked into U.S. high-technology sources. This was clearly spelled out in an op-ed by Marietje Schaake in “Beware America’s AI colonialism,” Financial Times (August 21, 2025):

Pres­id­ent Don­ald Trump’s trade wars are teach­ing the world a harsh les­son: depend­en­cies get weapon­ised. In the White House’s view, inter­na­tional trade is zero-sum. With his AI Action Plan prom­ising “unchal­lenged” tech­no­lo­gical dom­in­ance, a fur­ther ambi­tion is clear. Will the rest of the world recog­nise that embra­cing US arti­fi­cial intel­li­gence offers Trump an even more potent tool for coer­cion?

Since his “lib­er­a­tion day” tar­iffs, the Trump admin­is­tra­tion has under­taken an aggress­ive cam­paign to exact con­ces­sions from Amer­ica’s trad­ing part­ners. Dec­ades of trade integ­ra­tion mean there is no easy path back to square one. Depend­en­cies run deep and altern­at­ive mar­kets, sup­ply chains and flows of goods and ser­vices take time to develop.

With AI, there is not yet such global entan­gle­ment. So why would any coun­try vol­un­tar­ily hand more lever­age to the White House?

AI is an ideo­lo­gical project for the Trump admin­is­tra­tion and the AI Action Plan lays out a clear blue­print for US tech­no­lo­gical hege­mony. Its pil­lars focus on super­char­ging domestic AI devel­op­ment and adop­tion, aim­ing to yield eco­nomic bene­fits and pre­vent “woke” model use. This is the archi­tec­ture it hopes the world will embrace.

More than pre­vi­ous tech­no­lo­gies, AI sys­tems cre­ate uniquely vul­ner­able depend­en­cies. Algorithms are not trans­par­ent and can be manip­u­lated to bias out­puts — whether chal­len­ging anti­trust rules or sup­port­ing pro­tec­tion­ism. With a sig­ni­fic­ant set of US tech chief exec­ut­ives pledging alle­gi­ance to this admin­is­tra­tion, the syn­ergy between polit­ical and cor­por­ate agen­das is clear. AI com­pan­ies have even deployed team mem­bers in the US armed forces.

The weapon­isa­tion pos­sib­il­it­ies are extens­ive. Take the Cloud Act, which forces the dis­clos­ure of for­eign data by domestic cloud pro­viders, whose ser­vices dom­in­ate world­wide.

It is easy to see how tech can become an even greater bar­gain­ing chip in US for­eign policy. As with steel or phar­ma­ceut­ic­als, Trump’s White House can simply impose a tar­iff on AI ser­vices or crit­ical ele­ments of the sup­ply chain.

The admin­is­tra­tion is already push­ing the EU to weaken its Digital Ser­vices Act and con­sidered lever­aging tar­iffs to force a change to the UK’s online safety laws earlier this year.

What makes AI depend­ency par­tic­u­larly dan­ger­ous is its opa­city. Unlike trade in phys­ical goods, AI decision­mak­ing pro­cesses are often black boxes, mak­ing subtle manip­u­la­tion nearly impossible to detect. These sys­tems become deeply embed­ded in crit­ical pro­cesses, with high replace­ment costs. Many coun­tries already have sig­ni­fic­ant depend­en­cies on US tech com­pan­ies. Add AI and power­ful lock-in effects would intensify. The rapid pace of its evol­u­tion makes it dif­fi­cult for altern­at­ive sup­pli­ers to main­tain com­pet­it­ive altern­at­ives, adding choke­point effects. With the integ­ra­tion of such tech­no­lo­gies in infra­struc­ture, defence and secur­ity sys­tems, the stakes are high.

The Trump admin­is­tra­tion frames the AI race as a com­pet­i­tion between democratic and author­it­arian mod­els. Yet this obscures a troub­ling real­ity: the gap between US and Chinese approaches to tech­no­lo­gical con­trol is nar­row­ing. Gov­ernance grows more author­it­arian by the day in Trump’s Amer­ica, with polit­ical inter­ven­tions reach­ing indi­vidual com­pany levels.

The win­dow for con­vin­cing Amer­ican part­ners to embrace “full stack” AI exports (where US com­pan­ies sell access to plat­forms instead of products) is clos­ing. Gov­ern­ments are learn­ing from their trade war mis­takes and invest­ing in sov­er­eign altern­at­ives in the hope of avoid­ing crit­ical dependencies. Ensur­ing trans­par­ency and security require­ments and build­ing in con­trac­tual pro­tec­tions against ser­vice termin­a­tion might help in the short term, but coali­tions with like-minded democracies to foster altern­at­ive AI eco­systems free from uni­lat­eral US policy change will be more sus­tain­able.

The choice facing world lead­ers is not between US or Chinese AI dom­in­ance but between tech­no­lo­gical sov­er­eignty and digital colo­ni­al­ism. Each trade confront­a­tion should teach poten­tial partners that today’s com­mer­cial rela­tionships can become tomor­row’s coer­cive lever­age.

Trade wars show how far the Trump admin­is­tra­tion is will­ing to go. The AI Action Plan offers the pres­id­ent the means to make that vis­ion more vast and more per­man­ent.

The rest of the world should think twice before volunteer­ing to take part.

Global South

Michael Hudson: Passive Income Poodles

In Short Form: America will continue to export financial colonialism abroad — and deepen economic feudalism at home.

Economist Michael Hudson warns that the U.S. has morphed into a “free lunch economy,” where wealth flows not from production but from unearned rents and financial gains. Wall Street landlords like Blackstone buy up homes, driving rents higher while families face stagnant wages and rising debt. What was once industrial capitalism has become finance capitalism, hollowing out the economy and enriching a rentier elite. The result is growing inequality at home and financial colonialism abroad.

The United States prides itself on being the land of opportunity, but its economy has been quietly transformed into something closer to a rentier feeding ground. The “free lunch economy” sees a system where wealth is siphoned not by producing value, but by extracting unearned income — rents, fees, and financial gains made in one’s sleep.

Wall Street firms like Blackstone now own hundreds of thousands of homes across the country, turning what was once the American dream of homeownership into a landlord’s empire. As rents soar and homelessness explodes, private equity celebrates “passive income” as if it were innovation, while working families face rising costs and stagnant wages.

This isn’t industrial capitalism, where profits once came from organizing production and employing labor. It is finance capitalism — an economy dominated by debt, speculation, and monopoly control. The wealthiest Americans have successfully shifted the tax base away from themselves, while inflating housing and healthcare costs that drain workers’ paychecks.

Milton Friedman once declared “there is no such thing as a free lunch.” Yet modern U.S. capitalism is built on exactly that: a free lunch for the landlord, the monopolist, and the banker, funded by the indebtedness of everyone else. Meanwhile, nations like China that keep banking and credit in the public sphere are outpacing the West in real, productive growth.

The “free lunch economy” is not sustainable. It hollows out the industrial base, fuels inequality, and locks society into dependency on the very rentier class the classical economists once fought to abolish. As Hudson argues, unless this system is confronted, America will continue to export financial colonialism abroad — and deepen economic feudalism at home.

Global South

‼️ Michael Hudson: Note 4 – Post Alaska Meeting: Trump getting ready for Zelensky and EU

Trump’s upcoming meeting with Zelensky to turn the tables on NATO

On Monday, August 18, Zelensky is coming to the White House. He has been prepped by his main anti-Russia sponsors, Merz, Starmer and Macron (along with von der Leyen and Finland’s president) in hope of using his popularity with Congressional Cold Warriors to deter Trump from accepting the reality of NATO’s attack on Russia using Ukraine as the arena willing to force the population to a fight to the last Ukrainian (excepting the neo-Nazi Azov battalion that prefers to let farm boys do the fighting).

Here’s what Trump can do to quite simply de-tooth the NATO contingent.

He is absolutely correct in insisting on meeting alone with Zelensky first. He can simply ask Zelensky to explain to him just what happened when Boris Johnson came to Kiev to talk him out of signing the Minsk agreement with Russia that would have avoided the ensuing war with Russia.

What did Johnson tell Zelensky that led him to agree? Did Johnson say what the aim of rejecting the agreement would be – and proceeding to prepare an attack on Russia on the eve of February 2022?

Was the stated aim indeed to weaken Russia? What did he believe would be the result? Would the Russian economy collapse from actually fighting in Ukraine? Did he believe that Russia’s population would oppose its soldiers dying in war, and replace Putin with a NATO- and oligarch-friendly regime?

Having established that Russia was indeed responding to a NATO attack – not the aggressor itself – Trump can then hold a mini meeting with Zelensky in front of reporters. He can explain what Zelensky has explained. (I assume that Zelensky will have no option other than to confirm what Putin and Lavroff explained to Trump in Alaska.)

He can ask Zelensky whether he is surprised at his army’s collapse and casualties. If Zelensky continues to claim that Ukraine is winning against Russian troops, Trump can ask his cabinet members whether that is the CIA and NSA’s understanding of reality.

Trump will conclude that instead of following the European plan to keep attacking Russia, he wants to go to the root causes and cure not only the fighting in Ukraine but the entire Cold War antagonism toward Russia.

He can speak of U.S. investment opportunities. On Friday while he was in Alaska, Exxon was negotiating an oil deal with Russian officials. Russia can offer to buy U.S. equipment and materials to help rebuild the former eastern provinces of Ukraine that its nationalists attacked, and which now must be rebuilt. That is, if Brussels releases the $300 billion plus interest that it has illegally confiscated.

NOW, having set the stage with a realistic sense of context and proportion, he can go into the closed meeting with the Euro-thugs. They presumably will have been waiting somewhere in the White House and heard what Zelensky and Trump have agreed on, but may perhaps have been kept busy and isolated.

Trump can NOW ask them for their story – and confront them with what he has been told by Zelensky, which either will confirm what Trump was told by the Russian contingent in Alaska, or try to brazen it out.

Either way, Trump has them trapped, taking a pro-war stance in contrast to trump’s Nobel-prize hopes to depict himself as the Prince of Peace and the resulting prosperity from saving America from the cost of further NATO spending. Henceforth Europe will be on its own. If it insists on fighting, it can buy arms from the United States. But Trump will say that there is no military cause for armament, given Russia’s lack of interest in pursuing trade and investment with Western Europe as it turns eastward.

He can let von der Leyen or others hang themselves with their recommendations, and say that this is what divides his Republican policy from that of Biden, and from Obama before him who sponsored the regime change in the Maidan coup of 2025.

Trump can point to the criminal proceedings against Obama and also Biden officials in the FBI and CIA who organized the Russiagate scandal.

This strategy seems obvious to me. Will it be obvious to Trump?

Global South

Richard D. Wolff & Michael Hudson with Nima: Trump Declares WAR on Russia in Alaska

Global South

‼️ Michael Hudson: Note 3 on the planned Alaska meeting

Alaska Breakdown Looming

It looks like Trump has just announced that the Alaska meeting will be hostile and he is rejecting all Russian demands. He has threatened to walk away in the first two minutes if Russia does not agree to a cease fire on Ukraine’s terms. His intention is to threaten Russia with more U.S. blustering that poses no real threat to Russia, but will (he hopes) solidify his support from the Donor Class, CIA and EU Russia-haters.

It is literally impossible for Trump to make any peace deal with Russia. First of all, he cannot control Europe, and Starmer, Macron and Merz have announced that they are going to fight Russia regardless of what Trump might want.

Second, Ukraine’s Azov battalion and related neo-Nazi nationalists insist that they will continue to fight – if not overtly, then by constant sabotage. Ditto the CIA alongside MI6.

And Trump’s neocon coterie is pressing the third rail: ny treaty settlement needs Congressional approval. Trump is no more in charge of Congress than the is of the CIA. It’s they that are running him.

So why is Putin attending, now that the original hints of reasonability by Trump has been summarily rejected, according to the Wednesday afternoon New York Times and WSJ reports of his statements? Trump has reverted to calling Russia the aggressor, as if it rather than Ukraine is bombing civilians. It is clear that he is incorrigible.

The last few days has seen Trump accelerate its military confrontation with Russia. The EU has announced a trillion-euro arms buildup against Russia’s threat to send 10 million troops to occupy it – as if countries still fought by armies occupying enemies instead of just bombing them.

The only way to salvage this meeting is not to talk about Ukraine at all, but about NATO/Russian relations and possible negotiation of a new atomic arms control treaty.

All that I can imagine Putin saying are two things. First of all, of course Russia wants Ukraine at the table to end the war. He hopes that by the end of the year his troops will establish a new Ukrainian government that will be able to sign the armistice, creating a New Ukraine with a new constitution. He’ll tell Trump that he is trying to end the war as quickly as possible.

Putin may bring up Armenia and Azerbaijan and ask the US to withdraw its intrusion, unless he wants a repeat of the Kennedy/Khruschev showdown with Russia putting atomic missiles in Cuba. The sphere-of-influence principle will come up – as it did in the Monroe Doctrine, which promised that the United States would not intervene in European affairs if European kingdoms stayed out of the Western Hemisphere.

Finally, Putin can say that in view of the fact that they can’t agree not to continue the US/NATO attack on Russia (and China and Iran and the entire rest of the world), at least they should agree that even in the absence of an arms treaty, they won’t bomb each other. The United States is free to sell all the arms and missiles it wants to Germany and other bellicose NATO countries. But once these arms are bought by Europe, Russia will treat any attack on its territory (including its extension into former Ukraine) as an attack by the country supplying the arms – and will feel free to bomb the hell out of it.

Putin can quip to Trump that this is the most peace-oriented thing that the United States can do: avoid a direct US/Russian exchange of bombs. “You can have Europe,” Putin can say. “It has nothing that we need or want.” Just leave us alone and stay out of our way, and you’ll have your US-Russia peace.”

It will be interesting to see how Trump depicts this as a great victory.

Global South

‼️ Michael Hudson: Note 2 on the planned Alaska meeting

The discussion and the thinking continue:  Note 1 is here

Putin started this year’s meetings with Trump by saying that the root of their problems is not Ukraine. Ukraine is only an arena in the fight by NATO (led by the US) against Russia, China, and their BRICS and Global South allies.

To solve the fighting in Ukraine, the expansion of NATO must end. That is what Putin demands.

But there seems to be zero chance of this developing. Even if Trump stops US support of NATO’s war in Ukraine, NATO’s roots in the EU bureaucracy (von der Lehen and KK), Britain under Starmer and MI6, Germany under Merz and the Bundeswehr trying to become the new Wehrmacht, and Macron’s France are acting on their own, almost instinctive hatred of Russia.

So there is little chance of agreement, certainly over Russia’s demand that the West recognize its imminent military victory and ability to create a postwar shrunken Ukraine.

NATO has just intruded into the Caucasus with Azerbaijan and Armenia, with US control of the Zangezur Corridor threatening Iran and also China’s Belt and Road trajectory.

And the US has withdrawn from the last vestiges of atomic arms control, while sending nuclear submarines nearer to Russia in at least a symbolically threatening move.

This reflects the Neocon demand for U.S. unipolar hegemony, preventing any country from having its own sovereignty to act independently of the United States.

So my guess is that at the upcoming meetings, the United States has only one tactic – and it is a tactic that Trump loves for his own psychological purposes:

America has only one thing to offer other countries: the (temporary) promise NOT to hurt them. There’s nothing positive to offer, given its de-industrialization and the world’s de-dollarization. (Has Germany ever begun to get back its gold reserves left on deposit with the New York Fed?)

Trump’s generals (the hardest-liner is now in Kiev) and EU/NATO are urging more and tougher sanctions against Russia, mainly to fall on the EU and BRICS countries.

Global South

‼️ Michael Hudson: Note 1 on the planned Alaska meeting

It is a distortion of reality for the press to depict Russia as at war with Ukraine. It is at war with NATO; Ukraine is the battlefield for this war, the arena.

NATO uses the old police tactic of Good Cop (now ironically played by Trump for the dominant US side – that’s usually the lead cop), with the EU (Britain, Germany and France) being the bad cops, good type casting.

As a passive arena for NATO expansion, Ukraine has no right to be represented, except to augment the bad-cop contingent for “peace talks.”

The talks in Alaska will be in two parts. Part I is whether the U.S. will acknowledge that the trajectory of the current fighting is for a total Russian victory, on the terms that Putin has been explaining for two years: no NATO membership, no foreign arms supplies, Nuremberg-like trials of the Banderite leaders, and perhaps reparations by Ukraine and NATO for the rebuilding of formerly “Ukrainian” Russia.

Russia may give a sop to depict the $300 billion that the EU has confiscated to rebuilding what was Ukraine’s Russian-speaking East. That would be a concession that’s not really a sacrifice.

The real discussion will determine the aftermath, starting with whether a new atomic missile and arms treaty will be put in place.

If it cannot be enacted, Putin’s position logically will be as follows:

“We don’t want an atomic war with the United States. Let’s agree that if a German or other EU/NATO missile hits Russia, when we retaliate it will only be against Britain, Germany and France, not North America.”

The US will be told to keep its submarines away from Russian borders, and to stay out of the Black Sea altogether.

That’s the “peace” proposal. Peace in the Ukrainian arena will be (or will have been) established on the battlefield, now that the outcome is obvious.

A new Ukrainian government will be a Russian proxy, not Poroshenko or other NATO puppet oligarch.

Global South

Michael Hudson & Radhika Desai: The MAGA Mirage

That’s his great talent: to promise to do one thing, get people paying attention to what he promises, and then doing the opposite. That’s how he got rich, as a real estate crook, basically.

[Intro]

RADHIKA DESAI: Trump always essentially cherry-picks the evidence. He picks all the statistics that make him look good. And what’s worse, even when there is some disaster, he acts as though he’s kind of one.

MICHAEL HUDSON: The stock market is not a mirror of the economy, but it’s something that is being independently manipulated and that’s what Trump is into, manipulating the perception of reality so that people will focus on the fact that the stock markets look as if they’re making money instead of the 10% of the population that own about 75% of the stocks and bonds.

[Start of program]

RADHIKA DESAI: Hello and welcome to the 49th Geopolitical Economy Hour, the show that explores the fast-changing political and geopolitical economy of our time. I’m Radhika Desai and today I’m joined by one of our favorites and regulars, Professor Michael Hudson. Michael, welcome.

MICHAEL HUDSON: Well, I’m glad you’re back from Asia. While you were gone, the U.S. economy’s been torn apart by the combination of Trump’s tariffs, his policies, and Musk’s chainsaw that cuts government spending. Including the Treasury’s IRS which has been cut back. So, there’s no one to check the tax returns of the wealthiest 1% who had all their tax cuts. So, we have a lot to talk about, but I’m not sure how much the papers in Asia have been covering all of this.

RADHIKA DESAI: Oh, well, I was certainly following much of this while I was there. But, more to the point, I’ve been catching up since I’m back. And so, today, Michael, what we want to discuss is the Trump presidency at six months. The papers have been full of it with different kinds of commentary.

Indeed, if we go to the White House website itself, if you believe their briefings, what we are told by them is that Trump has been working unrelentingly since day one to make America great again. And his six-month record has already made him, according to them, the greatest president of the United States. If he were to finish being president today, according to them, he’d still be the greatest president ever. Now, of course, if you believe that, I’ve got a bridge to sell you.

Naturally, in this deeply divided society, there is plenty of the opposite type of commentary. Mother Jones headlines that six months in, Trump has made American life immeasurably worse. Meanwhile, Newsweek ran an op-ed by a clearly Democratic political science professor, which headlined that six months in, Trump has too many failures to count.

Many people would say simply that the truth lies somewhere in between, but in fact, it lies somewhere else on an entirely different plane. Indeed, perhaps the most interesting thing about the last six months is how Trump has come unglued from his MAGA base. The relationship is showing cracks and contradictions. And if you follow the logic of where this is leading, it could very well lead to the sinking of the Trump enterprise. And to understand how it might get there, we need to grasp what the Trump enterprise is all about.

Let’s remember that Trump cut through the bipartisan consensus that kept saying decade after decade that the economy was doing great when in fact it was not. They claimed that all it needed was a little bit of Republican tweaking here or a little bit of Democratic twisting there. Twice, however, Trump won elections by rejecting this discourse and by telling US voters what they already knew and felt deeply from their direct experience, that the US economy was doing very badly. It was certainly not serving them. So he assured them that if they voted for him, he would make America great again and make their lives in particular better.

The problem was that once this electoral strategy worked, Trump had little use for this kind of discourse and belief. He had needed it to get elected so that he could serve more or less the same ruling class as the previous Democratic and Republican establishments had done for decades. A ruling class of which Trump himself is a sort of C-class member.

I say Trump serves “more or less” the same ruling class because there’s an interesting little wrinkle here. During the campaign, pundits talked about a split in the U.S. corporate ruling elite. On the one side, there was the established house-trained capitalist class. On the opposite side, there was a maverick, cowboy, robber-baron capitalist class.

The latter demanded vastly more neoliberal policies, policies that give capital even more freedoms than they’ve been given over the last four and a half decades – more freedoms and more privileges than working people. And these were the guys who supported Trump all along. Indeed, if they had their way, they would get rid of government altogether and replace it with the direct rule of big corporations. They’re not kidding. They’ve been nursing these fantasies for decades. The former, the establishment corporate ruling elite, however, was more or less happy with just a little bit more neoliberalism and they supported Biden and then Harris.

By the time of the inauguration, however, this little wrinkle had been ironed out, for Trump at least. The U.S. ruling class seemed to close ranks behind Trump, possibly sensing that the Democrats were in complete meltdown after the election. A veritable who’s who of the corporate elite reverentially witnessed Trump taking the oath of office. They include not just the old, once lonely maverick supporters of Trump like Peter Thiel and Larry Ellison, but also newer, hitherto solidly democratic tech bros like Elon Musk and very late and repentant converts like Mark Zuckerberg. Clearly the US ruling class had closed ranks behind Trump.

But perhaps by doing exactly that, they had rendered him less able to save them. Six months into his second term, what’s more clear than ever is that Trump is splitting the very megabase on which he got elected.

Now, of course, at a pinch, a capitalist society can dispense with democracy and elections altogether. It’s happened before. Remember Hitler, remember Mussolini, remember Franco. And given how little Western and U.S. democracies reflect what people want and need, many would argue it’s already happening again. But such a move would have a political cost and can be messy to say the least. So if it can all be managed in such a way that at least the appearance of democracy can be maintained, the capitalist ruling class would prefer that.

The question before us, Michael, is this. Has Trump already started undermining the base without which he cannot get elected to serve the ruling class in a democratic fashion? Has he already started making himself useless to that ruling class, ironically by his very zeal to serve them? Perhaps the most prominent sign of this split is Elon Musk’s break with Trump over the big beautiful bill and his New America Party, which I read in the papers, is already polling high among Republican voters, particularly among men. So, Michael, what do you think are some of the main fronts along which the Trump-MAGA relationship is cracking?

MICHAEL HUDSON: Trump was elected making two promises: to reverse the democratic policy of the Cold War against Russia in Ukraine, and to stop the soaring U.S. price inflation that was squeezing consumer income.

He’s defaulted on both of those and gone directly in the opposite direction. That’s his great talent: to promise to do one thing, get people paying attention to what he promises, and then doing the opposite. That’s how he got rich, as a real estate crook, basically.

First, he promised to stop America’s foreign wars, at least in Ukraine – in just one day, if you remember. And also in the Middle East, if only to prepare Ukraine for the really big looming war with China. Well, translated into English, what it really means is that he promised to lead President Putin down the garden path and pretend to be an honest broker between Russia and Ukraine. But actually, he took Ukraine’s side as the U.S. head of NATO. So he was the person behind the U.S. that was sponsoring the whole attack, never-ending in the first place, the eternal war meant to drain Russia.

Secondly, Trump promised to stop the rise in consumer prices. Everything he’s done has been to accelerate inflation. His policy has drastically raised tariffs, and in addition to now having to pay much higher prices for anything that’s imported or the price umbrella that the import tariffs cause, he’s let companies know that they can raise monopoly prices at will without any government attempt to stop all of this. I guess you have a chart showing that.

RADHIKA DESAI: Yes, what we have here is a chart just showing the 12-month percentage change in the consumer price index going back to 2005. While, of course, inflation has fluctuated around the Federal Reserve’s 2% mark, although it has often exceeded it quite substantially, what you see here is the pandemic spike, or I should say the recent spike, in the inflation rate, which has come down but it’s still remains at historically high levels, higher levels than before. This is basically what’s called core inflation: inflation minus food and energy. This is really quite important.

So inflation remains high. And of course, we are going to talk about the Federal Reserve later which will feel at least some pressure to deal with this by keeping interest rates high.

MICHAEL HUDSON: Instead of making America great again, these tariffs and tax cuts for the rich, the domestic budget deficit, and Musk’s slash-and-burn mass firings of the government agencies are creating havoc, as you just pointed out. Above all, for the recipients of Medicaid who have now been cut off, especially in the Republican states themselves, and also for the U.S. health care system.

Weather forecasting has been cut back. Medical research has been abolished. Cutbacks in scientific research and development forecasting, everything having to do with the environment/global warming has been cut back. Everything except military spending has been cut back, especially social spending, all in order to cut taxes on the very rich. So this has been the most regressive tax policy that we’ve seen of any president, I think, in the last hundred years. And I think the most immediate and destructive signs are in the financial sector.

RADHIKA DESAI: The Doge cuts have gutted the federal government, massively reducing the capacity of the government to do anything. And of course, this is part of the fantasy of these maverick cowboy capitalists who have been supporting Trump, people like Peter Thiel and Elon Musk, and so on.

This just shows you the month-by-month increases in unemployment insurance claims. And you can see, of course, that they are the highest at the time when Elon Musk was hyperactive at the so-called Department of Government Efficiency. But they have remained fairly high all the time. And as we were discussing earlier, the Treasury, agriculture, but also state and defense… all these different departments have been very badly affected. So you can see that they are gutting government capacity.

MICHAEL HUDSON: Here’s the problem. The consumer prices are up, but pressure from Trump is on the Federal Reserve to lower interest rates. And he’s essentially tried to fire the head of the Federal Reserve on the grounds that the Fed is not lowering interest rates.

The number one motivation, for anything Trump or Biden or the Democrats or the Republicans do, is to serve their donor class, the 1%, by pushing up bond prices and stock prices. As these prices rise, you’re going to have consumer prices essentially offsetting whatever the interest rate is. There will be a capital gain for holders of stocks and bonds, and the stock market has been soaring, but the adjusted interest rate is negative.

Suppose you’re making 4.5% on a 10-year government bond. That sounds pretty good. But the dollar has gone down by 10%. And so you’re actually losing 5% of the value of whatever you’re holding in U.S. Treasury securities if you’re a foreign central bank or a foreign investor. Essentially, the increase in the inflation plus the low interest rates by the Fed are driving capital out of the United States. The dollar is going down.

And that means that to the extent that foreign countries and investors remain tied to the U.S., they’re going to be losing money unless the stock market can be pushed up with enormous gains.

But the stock market turns out really to be seven big companies, Nvidia and Google, and the other main information technology companies. The rest of the stock market doesn’t look very promising because the policies that Trump is doing, the combination of price inflation and the shift of taxes off the 1% onto the 99%, are shrinking the economy. And if the economy shrinks, how are companies going to make enough profits to justify this increase in prices?

RADHIKA DESAI: Here you see a chart of the stocks and the dollars. The first chart here on the left is the stock market, the SP 500, which nose-dived on so-called Liberation Day, the day on which Trump announced these extremely drastic tariffs. So the stock nose-dived, and of course, more or less immediately, and as a consequence, Trump paused the tariffs.

Since then he has been announcing tariffs and postponing them and so on, giving rise to the very funny acronym TACO, which is that Trump always chickens out, because, of course, these tariffs are not just bad for the American economy, but they are bad for exactly the donor class that Michael was talking about. But since then, what you see is that the stock markets have gone up and essentially recovered all the value there was before.

But there is also a problem here, which is that this has nothing to do with anything that’s going on in the real economy. It has nothing to do with the confidence that investors feel in the real economy. Look now at this chart here. Let’s look at the chart on the right.

On the chart on the right, the dark red line shows the S&P 500 excluding the top 10. And then [the other line] the top 10, 7 to 10 shares are really rising. You can see that most of the stocks are not going up at all. And only a small number of the so-called magnificent 7 plus a few others, maybe the magnificent 10, are doing very well.

And remember also that they are doing well based on a lot of hype around AI. Around AI, you will remember that in January, we already had a big disaster hit the US AI investment model: the Chinese company DeepSeek released its R1 model, which turned out to be capable of doing as well as, if not better than, all the multi-billion dollar models that various American companies had put out at a fraction of the cost, which means that all the investment that’s going into all these magnificent seven industries may not be very, how can you say, very justified at all. So that’s the first thing.

The second here is that the gap between stock prices and the real US economy (the productive economy) is widening.

What the Financial Times has done here is that the dark blue line is the S&P 500, which as you can see is way above all the other lines. Now, what do the other lines represent?

This light blue line, which you can barely see, is nominal GDP, basically the lowest of all the lines. Nominal GDP, despite the fact that inflation is high, which means nominal GDP will also be high, is not doing very well at all.

Then, you have corporate profits before tax, they are just a little bit above a nominal GDP.

Then, you have S&P earnings per share. They are not doing well either. Having recovered from the pandemic, they certainly do not justify the rise of the S&P 500.

And the average, the green line, is the average of economic indicators. They are also not doing very well.

This is what Michael was just saying. All of this stock market increase is really completely unjustified.

Meanwhile, as you know, the dollar has been declining. Indeed, this decline of the dollar that you can see from January to July, this is apparently the worst first half of the year the dollar has had since 1973. And remember what happened in 1973 with the quadrupling of oil prices. The dollar had really sunk very low, and throughout the 1970s, it would continue sinking until it got to the point where it was, you know, gold was worth $800 an ounce. Today, we are being told that this accounting for inflation, the dollar’s value vis-à-vis gold, has sunk again to a similar level.

So, we are looking at a really, really difficult situation for the U.S. economy and for the U.S. dollar.

MICHAEL HUDSON: That’s exactly right. What’s real and what’s unreal?

The media keep talking about the stock market going up as if the stock market’s the economy. But what’s real is all of this money going out of the economy. Not only are foreign investors moving out of the dollar, American investors are moving out of the dollar. And central banks are not adding to the dollar. To the extent that central banks are building up their reserves, it’s largely in gold, it’s in each other’s currencies.

They’re doing everything they can to dissociate because the stock market is not a mirror of the economy, but it’s something that is being independently manipulated. And that’s what Trump is into: manipulating the perception of reality so that people will focus on the fact that the stock market’s up as if they’re making money instead of the 10% of the population that own about 75% of the stocks and bonds.

He’s representing the exact opposite end of the economic spectrum from what his MAGA supporters and the working class are supposed to be. And almost every policy that Trump has announced is turning out to be self-defeating or on the surface is actually what I think he wanted all along, but it is the opposite of what he’s promised. And his whole theory.

RADHIKA DESAI: Exactly. If you’re going to talk about the real economy, one of the key things you have to look at there is, of course, the entire tariff situation.

One thing I should say before we go on to discuss the tariff situation. You said something very, very good. Trump always essentially cherry-picks the evidence. He picks all the statistics that make him look good. And what’s worse, even when there is some disaster, he acts as though he’s kind of won.

For example, he’ll say, I’ve come up with this great deal with this country or that country. And when you look more closely at the deals, it turns out that it’s very doubtful that it’s going to look, it’s going to be very good for the United States.

And certainly, in the case of tariffs, Trump has made… I mean, it’s a show.

The reason why Trump promises to unleash such destructive tariffs is because, as we’ve said in a couple of shows before…

Trump has essentially won the election. Yes, he told one truth, which is that the economy was not doing well. But he then told an accompanying lie, which he had to tell if he was to serve his big corporate masters well.

Which is that instead of telling them that Americans were suffering from four and a half decades of neoliberal policies, he told them that they were suffering because of China, because of trade, because of immigrants. And so this tariff stuff is really entirely about making it look as though he’s addressing the problems of the U.S. economy.

But in fact, he’s not addressing them at all. Let’s take a look at a few charts here. And Michael, you know, please come in and comment on every one of them as you like.

I’ll just first talk briefly about this one. What you have here is a simple chart which goes back to 1900, which shows that the average tariff rate in the United States has returned to levels not seen since the Second World War. So, we are here in May 2025 at this level here at 8.9%. And the only time it’s been higher was basically in the 1940s during the war. And, of course, much higher was during the 1930s when, of course, the entire world trading system had broken down and there were tariffs and retaliatory tariffs and so on. So, that whole Great Depression madness was going on. Now what you see is that the average American tariff rate is very high.

MICHAEL HUDSON: Well, here’s what’s so schizophrenic. You’d think that the effect of tariffs would be to cut exports and shift production to the United States, but the United States is deindustrialized. So, since it’s deindustrialized, the tariffs are going to have to be paid by the Americans, which is why the prices are going up.

But there’s a nutty theory that’s almost schizophrenic behind Trump’s policies. He thinks that a lower exchange rate is going to make exports more competitive and that that will lead to new investment and new hiring in the United States. At least that’s his claim.

But the U.S. is no longer an industrial exporter or investor. So, the effect of the lower dollar is simply going to raise the price for imports even over and above the tariff rate. And the combination of high tariffs and a lower exchange rate is going to create an umbrella for U.S. companies to increase their own price levels as they’re doing now.

Well, Trump has threatened them with jawboning pressure. He went to Amazon and said, promise not to raise your prices. Amazon at first said, oh, of course we’re not going to. But then the fact that what they sell are very largely made of imports, they did raise their price. They’re not going to go bankrupt and lose their profits in order to make Trump look good. What Trump has said to the investment community and to the billionaires is, we want you to lose money and take it on the chin and lose your profits in order for me to be re-elected and go down in the history books.

RADHIKA DESAI: It’s actually worse than that. At one level, if they were to pay for the tariffs, then they would lose money. But ultimately, what he’s doing is he is asking the very voters who voted him in to pay for the tariffs.

Here is a chart which is also really interesting because a lot of people have been saying that, oh, tariffs are not leading to great increases in prices. And in fact, some commentators have even been saying that the rise in tariffs in the United States will actually result in increases in prices elsewhere as companies will try to reduce the impact on the American consumer while raising prices elsewhere. This is completely nonsensical.

Here’s a chart that shows that retail prices of tariff goods have risen more than other prices. So here you have the rise in prices of all imported goods, which is fairly high. Then you have the pink line, which is the goods in tariff-affected categories, which have risen the most. And yes, goods in categories not affected by tariffs have kind of risen but then also gone down. So they are not affected.

This clearly shows that the imposition of tariffs has actually led to an increase in prices for ordinary Americans simply because the big corporations are not going to swallow the tariffs. The big corporations are not going to increase their costs at all. They will only try to increase their profits. As you rightly pointed out earlier, the big corporations are able to pass on price increases to their consumers, and that’s essentially what they’re doing.

MICHAEL HUDSON: Well, we’re in a competition to keep saying it’s even worse than the other person says. I think it’s even worse than you think.

Because what do these price indexes that you’ve shown mean? They’re increasing discussion among economists. There was just a poll. How much faith do you have in the consumer price indexes that the Bureau of Labor Statistics puts together, especially since their employment was cut back by Musk-DOGE? And over half the economists that are polled say we don’t have faith in it.

As any shopper knows – and I’m here while you’re not here – the prices are going up much, much more than is indicated. The price increase is actually led by the price of housing. And you can imagine that rents are going up. Well, that’s not considered much in the price, that’s not one of the prices that’s counted in the price index. But there’s a feeling by most of the voters, the public, who know that there’s inflation if they do their own shopping.

As a result, their distrust of the economy, the distrust of the deep state, the distrust of politicians is now spreading over to, gee, we’ve been fooled. I mistrust Trump. I know there’s inflation. He says he ran to cure the price inflation. We’re seeing the inflation. He’s not doing it. He’s pretending that he’s doing it when we know that the inflation and the charts that you show is understating how serious the actual problems are. So that’s part of the political problem.

You can imagine not only the consumers are feeling this, but the business sector must be feeling it now that they’re being squeezed by the price increases that Trump has imposed. If you’re using copper, that increases the cost of copper wiring and electricity.

Trump said there’s going to be a huge increase in public utility power production for all of these computers that we need for AI and Bitcoin for the economy. And we need this increased energy because it uses a lot of water, and the water that it uses to cool the computers is already creating a drought and changing the water level throughout the Midwest, causing crop shortages.

In addition to the global warming that I’ve just said, Trump’s policy is: how can we accelerate global warming even more to increase the drought and the climate change? We’re going to do it by pushing oil and coal as the fuels of the future and pulling out of every international climate agreement.

So you’re having all over the United States droughts and crop failures, not only in the United States, but in other countries, Asia and Europe, the drought is causing decreasing crop yields. This is going to push up food prices all the more, and it’s a self-feeding problem as the United States adds to global warming, supported by the Greens in Europe. The Greens say one of our policies towards global warming is to support the war with Russia and to support the war in the Near East. And that is the largest single increase contributor to global warming. All of these weapons, all of this bombing, all of the wars, and all of the aircraft and the missiles are accelerating it.

RADHIKA DESAI: Yeah. Yeah, so let me resume our competition of saying exactly how much worse things are.

Here’s another really interesting chart that shows just how opposed how the Trump administration is opposed to the interests of ordinary people. So here is a chart which shows that U.S. tariff revenues have surged since the start of the year. Look at the word surge, right?

Tariff revenues were relatively low and then they have gone up from about two and a half. During the first Trump administration, it went up a fair bit. Under Biden also it went up. Now we are at $26.6 billion. But this is really 0.5% of a $5 trillion U.S. federal government revenue. And this is going to be used.

You remember the big beautiful bill?

Here is a chart which shows that the big beautiful bill has increased defense spending by a little bit, and then decreased spending on student loans and Medicaid and so on. But the biggest thing they’ve done is they have given huge tax cuts. The idea that somehow the tariff revenues are going to finance these tax cuts is complete rubbish. This is not what’s going to happen at all. So the whole tariff story is seriously problematic from a revenue point of view.

MICHAEL HUDSON: Trump’s love of tariffs, as we’ve discussed before, is the thought that if we can only be like the world was back in the 1890s. Before there was an income tax in 1913, government revenues were tariffs. If we can only raise tariffs enough, we can cut taxes on the rich even more. And that won’t add to the budget deficit.

Well, as you point out, despite the fact that the tariff revenue has gone up, it’s nowhere near enough to compensate for the vast tax cuts on the wealthiest people. So the budget deficit is increasing. That means that somebody’s got to buy all these bonds. Well, it turns out that the Federal Reserve has been creating the money to buy all of these bonds. In other words, foreigners aren’t buying them. Americans aren’t buying them. The Federal Reserve is simply monetizing the credit. It’s as if it’s modern monetary theory, except that the Fed is buying these bonds from the private banking sector.

RADHIKA DESAI: It’s buying them for the secondary market.

MICHAEL HUDSON: It’s not simply letting the government print the money so it doesn’t have to tax. I think that’s what we’re moving for.

RADHIKA DESAI: Just to clarify, because this is a very important point which may be lost: the Federal Reserve could easily buy the bonds at source, i.e. at their face value, when the government issues them directly from the government. But the Federal Reserve does not do that. It buys them on the secondary market, which means it props up the prices of these bonds. That means that if it wasn’t for the Federal Reserve’s intervention, bond prices would be very low. The bond market may even crash. So, this is what the Federal Reserve is trying to do.

Now, having made that clarification, let me just say a couple of other things about just how anti-voter, anti-working people Trump’s policies are.

The trade war that Trump is launching: we are still in the on-again, off-again phase. [In this chart] the blue bars are a sort of base scenario and then [the red bars are] if there is a major escalation, which is how badly the economies will do. Even if you just have the base level scenarios, what’s very clear is that the three economies that will suffer the most out of this are, yes, Mexico and Canada, but also the United States, which will suffer just as much as Canada. This is the prediction. Whereas, most of the rest of the world’s economies will not suffer as much. So, the United States and Trump, or rather, the Trump administration’s policies on tariffs are only inflicting harm on the ordinary US worker, the ordinary U.S. voter who has voted for him.

There is another thing that is very interesting to look at. This graph [relates to the fact that] the Trump administration’s tariff policy is premised on the idea that somehow the whole world is going to be really afraid because the U.S. is such an important consumer.

(We’ll ignore the exports chart because the U.S. is not such a big exporter anyway. The U.S. exports account for some 10.4% of the world’s exports, whereas the EU accounts for 14.3% and China for 17.5%.)

But look at the imports chart, which is what the tariffs are about. If the United States is a really big market for the rest of the world, then the rest of the world has much to fear. But what do we see here? This estimate puts it at some 15.9%… 16% of the total imports of the world are imports of the United States. This is not a small number, but it is not a very big number either. And it seems as though the Trump administration assumes that its hand is stronger than in fact it is. So what we are going to see is every time there is a tariff deal with any country, it always turns out that the United States ends up making a lot of concessions.

Here’s another really interesting chart which is worth looking at because even this statistic is actually going to get a lot worse (the statistic of the US importing nearly 16% of the world’s imports). Because all of this assumes that there is this US consumer, this legendary US consumer, that is going to consume what the whole world produces.

But what we see here is that after the pandemic, personal consumption expenditures have risen, but they have since, under the Trump administration, evened out. They are not rising as much anymore. You can’t see that.

And a very big chunk of that is non-discretionary spending, spending you have to do. And in the United States, a very big chunk of non-discretionary spending is spending on health. This is regarded as spending on services, but actually it’s spending that you’d rather not have to do, but you have to do anyway. And so this is going to eat up more and more of ordinary Americans’ incomes, which means they’re going to have less and less money to buy that TV, to buy that car, to buy that frock or to buy that shirt, etc. This is going to be a very important chart going forward.

The rest of the world is going to see that actually the American consumer is no longer as attractive a market as they used to be.

(Of course, another big chunk of this is rent. You know, you’ve got to pay your taxes, you’ve got to pay your rent, you’ve got to pay your healthcare expenses and so on.)

On the right-hand side, you also see that the bulk of the consumers, the middle 40% and bottom 40%, are not spending much more at all. So the big spending is done by the top 20% and even their spending is leveling off. So this idea that somehow the whole world loves the American consumer and is going to essentially concede everything to Trump’s threats… it’s not going to work because barring Canada and Mexico, the world is not so reliant on selling to the U.S. And quite frankly, selling to the U.S. is no longer as attractive, as powerful as it once was.

MICHAEL HUDSON: What your chart just showed is that because of the fact that discretionary spending can’t really increase without wages increasing as prices go up, the answer is the economy is being pushed further and further into debt as we’ve talked before. So the credit card arrears are rising, defaults on home mortgages are rising, arrears and defaults on automobile loans are rising. The whole population is becoming more and more indebted because as the prices go up and the wages don’t go up, something has to give.

And already the economy, for I’d say half the population at least, doesn’t have any savings at all, according to the Fed. They have no net worth. Their debts exceed the savings, and it’s actually negative net worth. They’re being squeezed, and they cannot increase their purchasing power.

But just to try to break even, they have to finance it by running it all up on a credit card. Well, despite all of this, the government’s flooding the economy by sort of monetizing the financial sector debt. The result of some of this, along with the tariffs, is to inflate and to make investors think, rightly or wrongly, that there’s going to be such a heavy price inflation and defaults in the United States that buying a Treasury security for 10 years or even 30 years, they’re not going to be very much worth anywhere near as much in 10 or 30 years.

Nouriel Roubini just came out, I think, last week, expecting interest rates to go up to 8% in the next year or two, by 2030. And at 8%, that’s going to cut bond prices and stock prices down to, well, they’ll lose it out two-thirds.

RADHIKA DESAI: In fact, it will lead to a stock market crash.

MICHAEL HUDSON: Yes. The crash won’t just be something that then you recover from and go on like last crashes. The fact is that this whole stock market run-up has been an artificially generated financial bubble to benefit the 1%. This is what the economy’s paid for ever since the Obama bailouts of 2008.

RADHIKA DESAI: If I may just add a small clarificatory point, which will help the listeners, artificially increased by easy monetary policy. And now that monetary policy is tightening, it’s going to go all into reverse.

MICHAEL HUDSON: That’s right. And the reverse is actually going to be a return to normal. It’s not going to be a reverse that you can then unreverse and go up again. This is it. The reverse is going to be wiping out so much wealth.

All this is taken into account with the artificial intelligence that’s already cut off employment. The reports in the last month are that new graduates from universities in the United States are facing heavy unemployment rates, especially for male graduates more than women graduates. And they can’t get jobs.

Roubini says that he expects a 70 to 80% unemployment rate in a few decades. Well, that seems to be a little bit crazy, but it means that the economy is facing not only a technological restructuring in what kind of jobs are people hired for and educated for to get the job, but the combination of the financial restructuring and disinflation, the disinflation of asset prices as opposed to consumer prices. Asset prices are up, consumer prices not so much. There’s no way that corporate profits can increase.

Where is our theory that we understood that the business interests are supposed to be running the government? Well, it turns out that under Trump, the business interests are not Wall Street, not the corporate sector, but Silicon Valley, the high-tech and Bitcoin interests, the financial interests.

RADHIKA DESAI: Sure. I mean, I think that what you’re saying is that there will, of course, be disinflation of asset prices, and that will be triggered by the rise in consumer prices, which will require the Federal Reserve to increase interest rates and so on.

It’s a separate question, even if nominal interest rates go to 8%, whether real interest rates are high or low will depend on how much inflation there still is. And I suspect that the way in which all this is going, inflation may remain high as well, so that you know, real interest rates may not have improved, but nevertheless, nominally high interest rates may easily reach 8%, there will be a bursting of the bubble.

You were mentioning, is this government still a government of the corporate capitalist class? And I would say, yes, it is. The problem is not that Trump is not doing the bidding of the corporate capitalist class, it is that today the situation has come to such a pass that no one can do anything that will improve the situation for the corporate capitalist class.

This is the problem. It’s a crisis in which the election of Trump is just a new chapter. It is not a resolution of the crisis, but just another unfolding, another chapter in the unfolding of the crisis.

We’re coming to the end of our program. I just wanted to maybe say a few things.

We’ve discussed all the main things I would say economically, particularly, that are bound to unglue, bound to detach Trump from his MAGA constituency. All the people who voted for him thinking that he was going to solve their problems are going to realize, they are already beginning to realize that they’ve been had, that something has gone seriously wrong, that what they desired, what they wished is not happening. On top of that, Trump has reneged on his promises of peace – why that is the case, well, that will be a subject of another show. Nevertheless, he has not improved the economy. In fact, if anything, he’s going to destroy the economy.

And on top of all that, we have the Epstein situation in which Trump seems to have gone back on his promise of releasing the Epstein files. He got elected by encouraging all these rumors and debate and theories about how the Democratic establishment was part of this big pedophile ring and so on. And now that he has a chance to actually expose it, he’s suddenly fighting shy.

Naturally, people are going to ask why. What is his stake in it? Was he part of it too? We know that he was a good friend of Jeffrey Epstein. And of course, finally, we have Elon Musk launching his new party, which is apparently polling rather well. Maybe, Michael, you want to say a few things in closing.

MICHAEL HUDSON: Well, the point that you just made a few minutes ago is the important point: that the economy is going down.

Many investors with hundreds of billions of dollars agree with you and me. And we know that because they’re selling stocks short. They believe that the economy is going to crash. And the result is volatility in the market. This volatility by buying short sales, arbitrage, guessing which way/squiggle are the prices of bonds going to go.

This has made immense profits for the New York banks. They’ve just declared their earnings. Their earnings are way up. Other bank earnings that are not making loans for stock speculation and bond speculation are not.

But there’s an enormous constituency out there that agrees with what you and I said. This can’t continue.

And the result is that someone must be losing when all of this volatility is going up. Some firm is going to go under.

Suppose you and I say, okay, we know there’s going to be a crash. Let’s sell the market short. Well, Keynes quipped half a century ago: the market can stay irrational longer than short sellers can stay solvent. And so you can be a premature pessimist. Somehow the economy always goes on longer than you can expect because, you could say, the whole quantitative easing bubble since the Obama bubble since 2008 has been a way of somehow turning the economy from an industrial productive economy into a Ponzi scheme.

In this Ponzi scheme, as long as the Federal Reserve and the government can pump enough more money into the economy to keep pushing up the spending on stocks and bonds, somehow there will be an illusion that the stock market and the gains of the wealthiest 10% are the gains for the whole economy, which is being indebted, defaulting, and torn apart. That’s the big dynamic at work.

All the rest is Trump’s trying to distract attention onto this by blaming immigrants, by blaming all the people that you’ve spoken about, and by essentially saying, well, I promised to close down the deep state, but it turns out, imagine my surprise when I found they were my main campaign contributors, and I’m one of them. I’m part of the deep state after all. So he’s pulled (or has tried to pull) the same trick on the American voting public, that he’s tried to pull on Putin, saying, yeah, I’m an honest broker. I’m on your side… when he’s not on their side at all.

RADHIKA DESAI: Michael, I didn’t quite get the point you were making, but let me just say that while of course stock markets can be irrational for a lot longer than short sellers can stay solvent, this situation does not just date from Obama. It goes back decades. It’s been brewing for decades.

Greenspan first made his appearance back in 1987. The Federal Reserve was engaged in low interest rate policies since the bursting of the dot-com bubble in 2000, although this was then interrupted by the need to raise interest rates in the face of the downward pressure on the dollar in the mid-2000s. And the increases in interest rates eventually pricked the bubble, and you got the 2008 crisis and so on. But nevertheless, this game has been going on for a very long time.

It’s not so much an Obama thing, it’s actually a Federal Reserve thing. It’s basically giving the reins of monetary policy, which is the only policy in town. There’s no fiscal policy to speak of anymore other than cutting taxes for rich people. You give the reins of monetary policy to the one institution that the big financial interests control almost entirely.

I think that a crash is probably more imminent than it looks and the US economy is already doing much worse than the statistics are showing us because these statistics are increasingly doctored as well.

If we have been competing to make it look like things are much worse, I think perhaps there’s a reason for that because it’s actually never been this bad for such a large part of the people.

I just want to say in closing, one final thing. A week or two ago, I did an interview with Jackson Hinkle of the MAGA communism fame. And it was very interesting because I expected that given my level of criticism of Trump that he would resist what I had to say. But he simply asked.

If you look, he’s published it on X. If you simply listen to the interview, it basically consists of him asking four relatively short questions and me answering them. So he did not counter what I said.

It really told me that, although I don’t really know Jackson Hinkle at all (I just responded to an interview request from him), it may be that people like him who had vested some hopes in the Trump administration are beginning to feel that they were had, that he has pulled a fast one on them.

This is a very sad situation for ordinary Americans. And unfortunately, without a robust left alternative, this situation is not going to be resolved. So we are going to see this [unclear] bouncing for a considerable while. So hopefully people will take the initiative and organize some kind of a realistic left alternative soon.

Thank you very much for listening. We are going to take a break during August, but we hope to be back in September. So looking forward to seeing you. Thanks very much. Please hit the like button, subscribe button, and please share also with other people that you think should be listening to this. Thank you and goodbye.

 

Global South

Michael Hudson on Dialogue Works: EU caves, BRICS tightens Grip, the US opens a New Front

Global South

From Babylon to Wall Street: How Bankers Make You Poor

Michael Hudson and Jonathan Brown

Michael Hudson: My entire life, ever since I became an economist in, the 1960s was to realize that debt was the major problem that was going to be growing exponentially and stifling society. And it was clear that debt grew at compound interest faster than the economy was able to grow and pay the debts.

 

Jonathan Brown: Hello and welcome to the Shepheard Walwyn podcast series. My name is Jonathan Brown. Shepheard Walwyn is a campaigning book publisher based in London, England. Our purpose is to uncover and promote new ideas to society’s oldest problems, and whilst our specialty is ethical economics -something Anthony Werner, our driving force for over 40 years has pioneered, we have branched out over the years to other related areas such as the environment and the lives and works of society’s change agents.

These podcasts promote ideas we’re convinced can actually help us build a better society for all of us. So have a listen and be sure to share with your friends if you like them, but also tell us what you think.

These are debates we all need to be part of. So, without further ado, let’s get into the interview.

Today we have a new interview with Michael Hudson, perhaps the world’s most [00:01:00] influential but rarely acknowledged economist and Shepheard Walwyn’s most famous author. Michael has had a remarkable career working first as an economist for some of the most important institutions in the USA, but now as a prolific writer with perhaps his most famous work being Super Imperialism, the Economic Strategy of American Empire.

Michael may be the world’s best classical economist and economic historian as his research economist going back thousands of years and many of his most remarkable ideas in the books over the last 30 years were first seen in his Shepheard Walwyn work, A Philosophy for a Fair Society. So do check out this book if you’d like an introduction to his whole body of work.

In this episode, we look at his latest insights from his recently published books and also update listeners on the predictions he made in his last interview with us in 2022. Michael, welcome back to the podcast.

Michael Hudson: Well, it’s good to be back. Thanks for having me.

Jonathan Brown: Michael, I know we’ve rereleased a podcast that you did three years ago and the remarkable [00:02:00] predictions that you made, just as the Ukraine, Russia conflict was getting going.

Before we do that though, I know you’ve been extremely busy publishing books following your Peabody Museum research into the ancient world, most notably Temples of Enterprise: Creating Economic Order in the Bronze Age near East and the Collapse of Antiquity- Greek, Greece and Rome in Civilization’s Oligarchic Turning Point.

I just wonder if we could start there, echoing, I think it was Winston Churchill who said, if you want to look forward, then you need to look back as far as you can. Would that be okay?

Michael Hudson: Sure.

Jonathan Brown: You’ve often spoken about your aha moments when delving into ancient economic history. I just wonder what have been some of your unexpected discoveries about studying ancient civilizations like Sumer or Babylonia?

Michael Hudson: My entire life, ever since I became an economist in, the 1960s was to realize that debt was the major problem that was going to [00:03:00] be growing exponentially and stifling society. And it was clear that debt grew at compound interest faster than the economy was able to grow and pay the debts.

I spent quite a few decades warning about the fact that the global south could not pay the Dollarized debts, as indeed it didn’t in the 1970s. There was such a reaction to what I was saying, such a refusal by the economics profession to look at debt as being important, that I decided to look at the whole history of how different societies had coped with debts.

And I began to write a history of debt, after I left the United Nations in 1979 after warning that there was going to be a, third world, Latin American debt crash in a few years, as indeed there was in 1982. I got all the way [00:04:00] back to Greece and Rome, and then into the biblical, and came across the jubilee year.

There were a few references to the fact that there were antecedents of this in Babylonian law and I began to look through the literature in Babylonia. And I found out rather quickly that every ruler of the Babylonian dynasty, whenever they took the throne for their first full year on the throne, they would proclaim a clean slate, annulling the personal agrarian debts that had built up.

Freeing the debt bond servants whose had to go to work for their creditors to work off the debt and redistributing the land, the words that Hammurabi and other rulers used in proclaiming these clean slates were exactly those of, the Judaic Jubilee in [00:05:00] Leviticus, that apparently was written into Mosaic law when the Jewish exiles were permitted to return to Israel and brought their familiarity with Babylonian law with them.

So, I began to write up my ideas, shared them with a friend of mine, Alex Marshak, a professor at Harvard. He introduced me to the head of Harvard’s anthropology and archaeology department. I was made a research fellow at the Peabody Museum by Carl Lambert Klowski. I realized that there was this wealth of Babylonian, Sumerian, and near Eastern, academic records that economists had completely ignored.

And the reasons that our economists ignored it was that the way that society created its economic relationships were completely different from those that they ended up with after Greece and Rome. And so, I [00:06:00] realized that I can’t simply write this all up myself because I’m an economist, not an Assyriologist.

So, at Harvard we decided to organize a group of scholars who were specialists in Sumerian, Babylonian, Egyptian, Judaic and other Middle Eastern records and we decided to do three volumes.

At the first conference in 1994, we discussed privatization. How did land come to be privatized? How did economic rent come to be taken by individuals, mainly creditors instead of becoming the tax base the palace?

The second one was on land ownership and the ancient areas. How did land come to evolve from being allocated to the population on the condition of serving in the army, giving your labor on corvee work during the off season when you’re not harvesting.

And the third was on [00:07:00] debt and economic renewal in the near East. And, I was able to get the top scholars and, each of the periods and the geographic regions that we were dealing with. And that was difficult because they had avoided talking to economists for over 50 years. Beginning in the 1920s that almost every economic ideology projected itself back on to the Bronze Age where economic records begin.

And, you had the free enterprise boys saying, well, interest charges and rent were created by individuals with their own money. The government had nothing to do with it. You had the Catholic church saying, well, it was a state economy- the temples and palace were running everything.

The reality is it was a mixed economy and it had a general philosophy, and it also had an economic model of how economies work. [00:08:00] And the mathematics of the model by Hammurabi’s Dynasty around the 18th century BC was much more sophisticated than the economic models that are used today in the United States.

We have the training texts that were used to teach scribal students how to reason economically. One set of test questions were how long does it take a given unit of money to double at the given interest rate? The given interest rate was one 60th per month or the decimal equivalent of 20% a year. A debt doubles it in five years, quadruples in 10 years, octuples in 15 years, all the way up to, 64 times in 30 years.

Obviously, this is faster than any economy can grow at that. We also have models of how the real [00:09:00] non-financial economy grows. We have models of how a herd of cattle grows, and it was an S-curve tapering off.

I realized that you could make a similar model to the United States for that and to Europe. In every western economy since 1945, you’ve had the volume of debt growing more rapidly than GDP and national income so that every business cycle has started from a higher and higher debt level until finally debt service interest rates, financial fees, management fees, late fees, absorb so much of the income of consumers and businesses and even government budgets at the local level and the federal level that the result is economic austerity.

Jonathan Brown: Michael, just to be clear what you did, you’ve taken some financial equations from [00:10:00] Hammurabi’s dynasty from the 18th century BC and that’s predicted the Western malaise that we’re facing today where debt will overtake the economy and eventually choke it to death.

Michael Hudson: Yes. and that was the logic that led kings to realize that if we do not cancel the consumer debts, the agrarian debts, they left the commercial debts in place- because that was owed among merchants to settle among themselves.

But if we let the population at large, an agrarian population living off the land and if we let them go into debt, then they’re going to forfeit their land to foreclosing creditors and they’re going to forfeit their labor to the creditors. And if we do not cancel the debts and they have to work for the creditors, they won’t be able to work in the army. They won’t be able to work on the Corvet project building, temple walls, city walls, doing the kind of [00:11:00] public infrastructure, that, was necessary for the Bronze Age societies.

And, so they realized that you had to restore order, make things the way they were in the idealized beginning when the economy was in balance. And you have this beginning already in the Sumerians. The first documentations we have are Sumerian, clean slates around 2,500bc.

So, the economists, say, oh, you can’t write down the debts that would cause economic chaos. Well, the Babylonians realized that if you did not cancel the debts, then you would have economic chaos and you would have runaways- the population would simply flee.

That was very well documented in the ancient, middle East. The population would simply defect to attackers who said, if you support us, we’ll come in and we’ll liberate you from debt bondage and we’ll cancel the debts. That was how the Middle East worked from about [00:12:00] the earliest records in the third Millennium BC right down to the middle of the first millennium BC to the Babylonian and the Syrian empires.

And of course, that was written into the Jewish Leviticus Law, and that started a whole kind of class warfare within Judea that ended up with Jesus giving his first sermon advocating unrolling the stroll of Isaiah, calling for the Jubilee year and then giving a sermon on the Mount saying, forgive them their debts as we forgive our debtors.

Well, Rome had a long attempt not to cancel the debts and to say no, no, he wasn’t cancelling debts, he was cancelling sin. That’s another story, at any rate, we completed the first three studies and the result was my Harvard group wrote I won’t say rewrote, rewrote for the first time an economic history of the ancient Near East, which had not been written before because the thought of how the ancient near East managed to avoid [00:13:00] polarizing its economies was anathema to people who believed that if Margaret Thatcher or Milton Friedman had gone back and advised Hammurabi to privatize everything we really wouldn’t have had civilizations.

Jonathan Brown: This sounds like this would be a wonderful thing for the agrarian laborers and stuff who got into debt and got into trouble. But from a pure strategic power play point of view, it also serves a ruler, doesn’t it? Because by announcing a jubilee and restoring land to labourers, you are not going to allow oligarchy to develop in that society where a few people, a few debt collectors, gather together all the wealth and they then become more powerful than the king.

Michael Hudson: Well, that’s exactly why the kings cancelled the debt. If you did not cancel the debt, you would’ve had an independent oligarchy emerging that would’ve ended up with the labor that normally was devoted to [00:14:00] perform public, sector work, and, serve in the army.

So, by cancelling the debts, you prevented financial fortunes of being accumulated in Babylonia and its neighbors. We have the family archives of some families that did indeed become very rich. But after a generation or so, their wealth disappears. It’s very much like the Chinese government has treated Jack Ma and other billionaires saying, well, you can get rich, but not to an extent where you’re going to impoverish society around you. We’re not goanna permit that. You can get some money for a while. But we’re going to continue to restore economic balance every once in a while, so that we’re not going to become an unbalanced economy, such as happening in the United States and Europe.

Jonathan Brown: So, if it were to fast forward then to the 19th century, then those ideas are very similar to the ones of Henry George and the [00:15:00] people that were in favor of that kind of approach in the 19th century in America.

Well, Henry George wasn’t. Henry George was the defender of the banks, and, he rejected the whole analysis of Adam Smith, the Physiocrats. The whole 19th Century School of Classical political Economy was based on the theory of economic rent defined as the excess of market price over the actual cost value.

Well, the paradigmatic form of economic rent at that time was land ownership. And the task of industrial capitalism in England, Germany, all over Europe, was how can you develop an industrial economy if you have an overhead of privileged rentiers, rent recipients, that take so much money that the economy becomes a high-cost economy and we’re not able to develop industry at [00:16:00] a competitive rate?

Well, what all of the classical economists had in common was saying you have to tax away land rent because the land rent is going to grow and grow. David Ricardo, had a warning of the fact that as population increased, he thought that there would be pressure to move to less fertile soils. The cost of production on marginal lands would rise. This would give increasing rents to the landlords of, more fertile lands. And the landlords would end up with all of the income of labor, of industry, and, essentially, the landlords would be rich at the cost of impoverishing the economy.

Well, as it turned out by the end of the century, this concept of economic rent, developed for land was extended to monopolies along with the landlord class that was inherited from feudalism, [00:17:00] you hid monopolies which the bankers had helped kings and later parliamentary governments create a trade monopoly for England. It was in wool. Create a trade monopoly that will yield monopoly rents.

And you can use these rents to pay interest on the war loans that were giving you the English kings. Starting with Edward the third in the 14th century, the proliferation of monopolies was created and they also just as landlord land rent was an intrusive cost into the economy, raising the price of goods without actually being necessary for production.

That had to be liberated and that’s why in the United States, you didn’t nationalize the monopolies, many of which were kept in government hands in Europe to begin with, but you had anti-monopoly legislation in the beginning in the 1890s.

Well, the third, legacy of feudalism was, of course, the banking [00:18:00] class. It was the bankers who had organized the monopolies and their lending was more or less predatory lending, mainly war lending to governments to wage war or for other purposes, but not lending to actually build factories and buy machinery and hire labor and be part of the industrial process. So you had these three kinds of land rent. Henry George interfered with this. He said, don’t talk about monopoly rent. He said, there’s no such thing as economic rent in the way that the classical economists developed it. He rejected the value in price theory from Adam Smith through the entire 19th century and followed the landlords and the financial class had backed an alternative to classical economics, and they said no such thing as economic rent- it’s consumer preferences. It’s consumers that bid up the prices and their demand creates a [00:19:00] scarcity relative to demand- These infernal supply and demand charts- and Henry George supported them.

But most of all, he supported the banking monopoly, the most, productive monopoly that there was. And he supported Monopoly rent. And he wrote his chapter on interest in Progress and Poverty, and basically said, interest is created by having a technological monopoly enabling you to make a monopoly rent by being able to have a technology that has lower costs then the rest of the economy is if somehow the rest of the economy wouldn’t simply adopt that monopoly.

Even the opponents of land taxation such as the Austrian Bohm-Bawerk wrote a whole chapter, showing that Henry George had a naive productivity theory in Bohm-Bawerk’s Capital and Interest.

But, George in the United States, told his followers, don’t advocate getting rid of monopolies. Don’t criticize the banks. Don’t even [00:20:00] support government price controls on rent in New York- just, talk about a national land tax.

And, his books were very successful. But the followers he had he tried to break away from their political movement towards socialism basically. And George said, we do want to tax the rent, but we must not have a government that is strong enough to take on the landlord class. He was a libertarian. He was against strong government, and his followers in the 20th century, certainly became small government people, and essentially thought of a land tax as an alternative to overall reform.

So, by the 1890s in America, you had followers of Henry George and followers of Marx and other socialists going around the country debating each other. And these debates are wonderful, using the economics of [00:21:00] Adam Smith and John Stewart Mill and all of the classical value theory to say economic rent is more than just land rent. It’s monopoly rent. Its interest is the primary monopoly of all, you have to do that and you have to have a government strong enough to prevent a landlord class and the banking class behind it from developing.

Well, while all of this was happening, the reformers in England and Europe had indeed been able to reduce the control of the landlord class over parliament. In England, this really was completed in 1909 and 1910, and, despite the fact that you don’t have an absentee hereditary landlord class anymore collecting rent, you still have landlord land rent.

The fact is that the whole reform movement, the anti-rent movement of classical economics ended up [00:22:00] not succeeding in spreading land tax. It was, replaced by an anti-classical reaction in the United States by the landlord interests, basically backed by the banks.

The banks Increasingly became the sponsors of the landed interests and the mother of monopolies. And that was because as you got rid of a landlord class that really hadn’t existed in the United States as it had in Europe land rent ended up being paid as mortgage interest in order for people to buy homes.

And today, from the United States to England, continental Europe, the largest element of bank loans is to real estate. And most of the increase in the price of real estate is the increased rent of location to the land. And so, this whole increase in economic [00:23:00] rent that the classical economists, Ricardo and others had warned this is going to absorb all of the economy’s income. And it’s going to impoverish the consumer class because they’re going to have to pay for housing, so much money. If they’re, going to be hired by industry, the industrialists are going to have to pay their labor force enough money to pay for the increased cost of housing, increased cost of food, as well as the increased cost of monopolies. And that’s exactly the kind of squeeze that you’re having in England, Europe and the United States today.

Jonathan Brown: What you’re saying then, that essentially explains by the bankers taking the value of the land in interest payments for mortgages and gaining the power that way. We then see with one of our guests on the show, Nomi Prins, and she wrote a book about the way in which in America the political class and the banking class intermarried for over a hundred years. So, they’re now basically one group of [00:24:00] mutually supportive individuals and families who are all intermarried with each other. So that used to be the landowners and the politicians doing that. Now it’s the bankers and the politicians because the bankers now hold the value of the land.

Nomi’s quite right. We’ve appeared on a number of shows and meetings together. It’s not only the intermarriage; it’s the harmony of interest. The fact that the banks are the main recipients of economic rent, now that rent is for paying interest, that has become the main form of economic rent.

That’s why it was such a tragedy that Henry George came out in support of the banks and did not extend the concept of economic rent as unearned income is adding to prices without playing a role in the productive process at all. That’s why the western economies are de-industrializing today.

They’re de- industrializing because it’s easier to make money by financial means, by creating a monopoly [00:25:00] or by buying housing and commercial buildings that are bid up on debt increasing their price, and you make capital gains. And what’s so striking about the contrast between modern economies and what the classical economists wanted, they wanted to use economic rent as the tax base so that you wouldn’t have to tax wages and profits.

But instead, it’s economic rent that is untaxed that gets special tax advantages of the commercial real estate industry has Not had to pay income tax since 1945. Donald Trump has written all about this. He loves depreciation because there’s a pretence that buildings are losing their value instead of their property being, bid up, in price largely because of land. The oil industry for years had the depletion allowance, enabling it to avoid having to pay an income tax. The [00:26:00] financial sector has avoided having to pay various taxes because of things like the carried interest.

And, the small print of the, tax code basically makes rent recipients pay much lower taxes, if any, compared to wage earners and corporate profits. And so, you have, the fiscal squeeze and this system is spread not only in the NATO and US countries, but to the whole world economy where there’s a whole body of international tax law and international diplomacy that’s all being run by the rent recipients.

And the result is, we’re, having more and more economies, subjected to economic austerity to pay the rent recipients. So, we can call them the 10% or the 1%, or the 0.1% that gets most of all instead of having progressive, [00:27:00] income tax falling mainly on economic rent, you have a regressive tax falling more and more on industry and labor.

And this is what’s de industrializing the West. And the question is whether the rest of the world, China, Russia, the global majority, the global south, are going to be able to do basically what China’s done, which is reinvent the wheel of Adam Smith and John Stewart Mill, and the classical economists and take the rent yielding sectors headed by finance into the public domain instead of letting financial fortunes be made at the expense of the economy as a whole.

Jonathan Brown: Amazing. And so just before we come into the predictions that you made three years ago, is there anything, especially from the collapse of antiquity and the oligarchic collapse that happened in Greece and Rome that you want to raise our awareness of and the [00:28:00] learnings that you think could be present for us in looking back that far in society?

Michael Hudson: Well, that’s what the second book that you mentioned, the Collapse of Antiquity, the Bronze Age ended around, 1200BC. There was really bad weather, it was a climatic change and it ended to a collapse of the agriculture populations. The palace economies of Western Asia were drastically interrupted. The whole cosmopolitan Middle Eastern trade came to an end.

The palaces in Greece with their linear b writing disappeared. The population shrunk and there was a dark age, meaning an age without much documentation from 1200 BC to the middle of the eighth century BC.

Well, in time by the eighth century, you begin to have Syrian and Venetian near Eastern traders trade throughout the Mediterranean, trade with [00:29:00] Greece and Italy, trading with the Italian Peninsula, offshore from Rome just like offshore from Athens in Greece.

And they brought all of these economic practices that had been developed in the Bronze Age, weights and measures, account keeping, contracts, and, the charging of interest.

What made the West different from everything that had gone before in the Near East is they did not have any central authority to be able to proclaim a clean slate, cancel the debts, and stop their economies from polarizing.

The chieftains essentially were taught how to charge interest because when they would run into financing their own trade with the Eastern Mediterranean on credit they had to pay debt. And so, you had much of Greece and Italy in the hands of what classical [00:30:00] historians have called mafia like states.

The chieftains took over absolutely everything, build the population in debt, and reduced it to debt bondage. And, what really started the recovery of Western civilization were in Greece the tyrants were upstarts from the aristocracy saying, this is crazy we want, prosperity.

They overthrew the worst and most oppressive of, the leaders and, basically redistributed the land to the people at large, cancelled the debts, and they did themselves what the Eastern rulers did in Rome.

You had, actually kings created from the very beginning without there being an aristocracy to be overthrown. Rome was situated on the Tiber that was very mosquito ridden, and was pretty much avoided for, geographic reasons. The founders of [00:31:00] Rome the few people who were there said how are we going to get a population and attract people?

Labor was a scarce resource in the ancient world. There was plenty of land, labor was what they needed. According to all of the Roman historians, the kings of Rome had a policy, if you come to Rome and become our citizens, we will give you land. We’ll assure you enough land to support yourself and the family and of course, if you become citizens, you’ll have to serve in the army and defend ourselves against any neighboring regions that would attack.

And that went on for a number of centuries until finally, at the end of the sixth century, Rome became prosperous enough so that an aristocracy developed, overthrew the kings and developed a rather violent aristocracy and made Rome like the Greek states essentially a land-owning creditor oligarchy. This [00:32:00] had not developed in the Near East. The whole idea of near eastern Rulership was to keep the management of the economy in a centralized, temple and palace ethic that was built into their religion or moral values. Whatever we’ll say the moral values is you needed a free population to have its own means of support. And that meant means of support on the land. And, you can’t have an economy of polarizing none of this ethic occurred in the West.

So, what has made the West different from the whole Bronze Age that preceded it was, the fact that, it had this, creditor land owning oligarchy that ended up with the Roman Empire. And in turn, that not only led to feudalism, but it bequeathed to subsequent Western society the whole body of creditor oriented, [00:33:00] property-oriented law inherited from Rome. And that’s the problem that we have today.

China has in a way not only picked up the economic analysis of classical economics by saying we don’t want a Rentier class to develop independently. When Mao had the revolution in 1945, it had to drive out the creditor class and the land-owning class. China’s big fight was against landowners and the wealthy classes.

And so, they had no alternative, but really to keep money creation and credit allocation in the hands of the banks. Well, that became the basic structural seed that developed and, was able to free China from having the kind of oligarchy that the western nations had. And we know the results China’s been able to grow by preventing a domestic oligarchy. The western economies [00:34:00] have been buckling in austerity under their own financial oligarchies.

Jonathan Brown: I just want to go back now to the interview we had three years ago. One of the biggest predictions you made was the acceleration of a dedollarisation trajectory. you were saying that America had just seized Russian reserves. You said it effectively ended the dollar centered trade and financial system much faster than we’re thinking.

I’m just wondering, since that time in early 2022, what have you seen that supports this accelerated dedollarisation and what new specific indicators should we be looking out for as it develops?

Michael Hudson: Well, there’s more and more discussion of dedollarisation in the United States and Europe, but mainly the United States have seen de dollarization as a threat to the American empire’s attempt to control a unipolar world economy.

Dedollarisation is an attempt to withdraw not only from [00:35:00] having to base its money supply on the dollar, but to avoid the whole financial system, the, international monetary fund imposition of austerity in order to force global south countries and other debtor countries to impose austerity and anti-labor taxes, in order to pay their debts and to privatize their public infrastructure, to sell it off to buyers who will monopolize them and create huge monopoly profits by, privatizing them.

So, dedollarisation means a withdrawal from this whole predatory rent seeking system. It has not really gained momentum yet because there has not been any spilling out of what is the logic of what we’re doing if we’re going to have an alternative to the de dollarization and the de-industrialization and the polarization that’s [00:36:00] plagued the west. What is our economic guide? What are the basic concepts?

Well, what there has not been a discussion of is how did classical economists solve this problem? And the fact is that the problems that the global south countries and the, Asian countries, African countries have today is very much like the problem that England had in the 19th century.

It doesn’t have so much of a hereditary landlord class, but the main form of land rent in many global south countries is natural resource rent. And the natural resource rent is owned largely by foreign investors, not by domestic investors. Much of the most prestigious land is owned by foreign investors, not domestic investors.

The natural monopolies that have been sold off from the government domain have been bought by foreign investors, not their [00:37:00] own. And the banking that they use are basically extensions or branches of banks in the United States and Europe, not their own. So, where England, Germany, the United States only had to deal with freeing their own economies from the rent overhead, the rest of the world has to free their economies from a foreign owned rent overhead.

Suppose we set out to do what Adam Smith and the Physiocrats and John Stewart Mill wanted to do. Suppose we tax the oil rents and the natural resource mineral rents and the forestry rents and the monopoly rents and the land rent – take that as a tax base. How do we calculate how much rent there is to tax? That’s the key. What is the concept of economic rent? Now that concept was the whole key to classical value theory- value [00:38:00] is less than price. The excess of market price over the actual cost value is economic rent that doesn’t have to be charged because the cost value is what you actually need as a cost of production. But Rent is a transfer payment from the production economy to the Rentier economy, to the sphere of circulation more or less, not the sphere of production. How are they going to actually measure this?

Well, you’d think that they would pick up this analysis that was already developed for just such a purpose throughout the 19th century. But, most of the economists of the global majority countries have been trained in the United States and Europe, and the economics curriculum no longer includes the history of economic thought- it doesn’t include economic history. So, there’s no real familiarity with how they actually go [00:39:00] about creating an alternative to the dollarized Rentier finance capital system that they have in the west- they’re trying to reinvent the wheel.

And even in China, there’s not a discussion of the classical thought. There’s a discussion of Marxism, but, it does not focus on volume two and three of capital where Marx discussed, rent and finance and the expansion path and the laws of motion of rent and finance. So, there’s really no discussion anywhere.

Now that I’ve finished my historical writing on the origins of economic practice in the Bronze Age and the collapse of antiquity that has shaped the Western economies by the way that Rome fell apart, my mission is to re-familiarize governments with the concepts of classical economics and [00:40:00] value and rent theory that would be the basis for creating a policy to tax away the economic rent so that they would not have to do what the International Monetary Fund says, and we’ll tax labor and, to finance the government, minimize government spending, impose austerity- this is not what the classical economists, said at all.

Jonathan Brown: I know you talk about the rentier approach or the new Cold War being the approach of the rentiers versus the anti-war stance of what would be described as China Russia and the global south.

You also talked last time about Europe’s economic suicide, through the leaders of Europe aligning themselves with American interests rather than European interests. I just wonder how you’ve seen that develop over the last few years and where you see that going.

Michael Hudson: That’s a very important point. All of the polling of what voters want is quite different from what their leaders are doing. The European Union, and NATO have been reshaped [00:41:00] in order to essentially make the European Union and the national governments a branch of NATO, which is a branch basically of the US Defence Department and US Neoliberalism.

in addition, the United States has been giving huge amounts of grants to nurture foreign politicians whose main personal and economic loyalty is to the United States, not to their own voters. And so, you could say that Europe, like the United States, has failed to achieve the supposedly democratic aim of having governments reflect what voters want.

There’s been a corruption of the political process in Europe by US control. I’ve been told by former members of the Treasury Department that all they need to do to get European, leaders to support US positions instead of their own position is give them an envelope full of a lot of [00:42:00] money. In other words, bribery.

The, European leadership has been bribed to appoint NATO representatives from the United States in charge of the European Union-von der Leyen and Kaja Kallas, representing their foreign policy. American Imperialism has, captured control of European politics.

And of course, that’s what is leading to the nationalist reaction all the way from England to the, German parties and Italian and Spanish parties that are trying to be nationalist. And these nationalist parties are primarily on the right wing of the political spectrum, unfortunately, not the left wing except for the Sarah Vagan Connects group in Germany.

Although they’re opposing the, capture of European politics by NATO and the Cold War and the neocons, there has not been very much discussion of economic [00:43:00] reform along the lines that the classical economists taught along the lines that I’ve been advocating you’re going to have to essentially do what China does and did and make banking and credit public in character, not private.

If you leave privatized banking monopoly, you’re going to have a financial oligarchy. Just as you have the privatization of land rent, you’re going to have a wealthy, real estate class obtaining rent at the expense of the government’s fiscal policy, and at the expense ultimately of the economy’s ability to be competitive with a low cost, low wage, low price, industrial economy.

There’s not that kind of discussion in Europe. I mean, you could say that Europe needs the same thing that the global majority and BRICs countries need- a discussion of how to make [00:44:00] an economy grow by minimizing the economic overhead that is paid to a financial landlord and monopoly class that plays no role in production itself, but is simply an overhead charge, extracting money from the rest of the economy without playing a productive role.

If the more money an economy pays for unproductive economic rent, the less money it’s going to have to invest in new factories, machinery, research and development, new hiring, to expand. That’s the economic problem that Europe and, the whole world is facing right now.

Jonathan Brown: I remember, I think you said on one video that the British Labour Party is out neoliberal the conservatives, and Tony Blair Kier Starmer being essentially more right wing than the right wingers. But it’s not necessarily a right-wing policy, is it? It’s just that they’ve adopted the approach that the Americans want them [00:45:00] to and Tony Blair’s been rewarded fabulously for his support of American interest, or American leadership interest, not necessarily American interest.

Right. The Americans I know don’t want Europe and Britain and Australia to be weakened and, having their economies wrecked. But it just suits the interest of those who control American interest.

Michael Hudson: That’s exactly right.

Jonathan Brown: You also do quite a lot of Australia listeners, and you described Australia once as a hopeless US satellite. I just wonder if you could explain how that’s come about and what Australia could do about it.

Michael Hudson: Well, it’s also a British satellite, of course. I’ve met with the central bankers of Australia and it’s clear to me that Australia is pretty much run by the banks. The banks have made most of their fortunes by creating what looks to me like the most oppressive real estate bubble in the entire world.

They have lent, more and more debt relative to the [00:46:00] price of property to keep the price rising. They’ve done everything they can to increase the price of housing and also the price of a commercial building by increasing the amount of money that a, bank will lend to new buyers of this housing.

And basically, in Australia, just like in England and Europe and America, the value of a house is whatever a bank will lend it against it because, you can sell your house for however much a new buyer can take out a mortgage.

And how do the buyers bid against each other to make a winning bidder by the property? They promise to pay as much of the land rent as possible to the bank as interest. And, the bank ends up with all of this increasing land value that is being inflated on price, I should say land rent, not land [00:47:00] value. The land rent has become the main source of banks interest. And, they want to keep this interest growing.

And the only way that they can avoid housing in Australia from being brought down to a level where it’s affordable enough so Australia could have its own domestic industry would be to tax away the land rent and say, land rent is to be paid as the tax base. It’s not to become the basis of financial fortunes for banks, many of which are foreign owned.

So, the question is, who’s Australia going to put first -its own growth interests or the wealth of its banks? Well, the banks have controlled the politics of Australia very much, and, Australians have accepted the bank control as if they look at this price inflation either is a force of nature not as an artificially [00:48:00] created result of the tax system. Or, they think real estate prices are going up, I want to play that game and I want to get rich by buying property and hoping that the banks are going to keep lending enough money so it continues to go up in price. But they don’t realize that at the high prices that Australian real estate charges, it’s going to be very hard to be competitive in a world economy.

And that’s why Australia is dependent on financing its balance of payments by mineral exports, iron exports. One banker explained to me Australia’s very fortunate to live in a nice neighborhood of China so that it can have the Chinese market for its minerals. And also makes a lot of money by foreign students coming to its universities. this is not an industrial economy as such.

Jonathan Brown: Talking about land value increases and stuff, you famously had a [00:49:00] 2006 Harper’s article that predicted a coming real estate collapse. We’ve now got global debt, 331% of GDP, commercial real estate is showing some shines of distress. I’m just wondering what should we be watching to look at when this potential slow crash could accelerate into a more acute crisis or a snap, as you’ve described it previously?

Michael Hudson: Well, banks were lending so much money against real estate in the United States that they were lending more money than the homeowners or the business owners could make in economic rent. So, the only way that the housing prices could continue to rise would be that the homeowners or the business owners would borrow the interest to pay the banks.

And you just add the interest charge onto the overall mortgage debt that was owed to the bank. The principle was exactly that of a Ponzi scheme. You need new entrants into the scheme in order to keep it [00:50:00] expanding. And the new entrants were the banks themselves lending more and more money including lending the interest to bid up the price.

And there was an enormous amount of financial fraud in the United States, fictitious, mortgages. That’s why the new terms were invented for the English language, like junk mortgage, meaning a mortgage that had no basis in the actual ability to be paid out of the existing rents that the real estate had. Or ninja- no income, no job, no assets.

Banks were just writing mortgages and they knew that there was no way these mortgages could be paid that were extended to bid up the price of housing especially by the ethnic minorities who had been blocked from having access to bank credit to having their own homes.

You’d had the fictitious mortgages and the banks sold them to, for [00:51:00] instance, community savings banks in Germany to Europeans. The American bankers said, boy, the Europeans are so naive, they trust us. You know, they don’t realize that what’s happening we can write mortgages that are completely unrealistic when it comes to their repayment prospects, but the Europeans will buy them. And, that’s exactly what happened.

And that’s why when the banks were bailed out in the United States, the French banks, and other foreign European banks, were bailed out as well, because they were all victims of this huge financial mortgage fraud for which nobody was sent to jail.

Jonathan Brown: What do you see happening in the next few years, Michael, if you were going to write another Harper’s article, how far away would you see us from the next crash?

The United States and European economies are locked into austerity. You may have price inflation largely as a result of the chaos caused by Donald Trump’s tariffs. The basic [00:52:00] analysis is debt deflation. More and more money has to be paid by wage earners to pay for rent and for monopoly prices that there’s less and less money to pay for the goods and services that labor and industry produces.

So, you’re going to have a shrinking market in the United States and Europe. Germany is the most obvious case in this because it’s been willing to commit economic suicide by cutting its industry off from low priced gas and oil from Russia.

But the problem is plaguing all of the European Union as well as the United States. And as, you pointed out a few minutes ago, England doesn’t seem to be doing very much to rectify its problems either. I guess Thames Water is the model that you have to look at. England is, still living in the aftermath of Margaret Thatcher and Tony Blair.

Jonathan Brown: I know some people call you Dr. Doom for your ability to [00:53:00] predict economic issues for countries. What could we as citizens do looking at your experience from the ancient world all the way forward to today? How could citizens influence this process and what do we need to be doing to either change the system and if we can’t change it enough, how can we protect ourselves and those we care about?

Well, I’m trying to put my reputation of Dr. Doom behind me and say, adopt solution. I’m trying to reintroduce classical economics into the policy debate so that people will think in terms of value, price, and rent theory and realize that, if the economy is to recover and be prosperous, it has to get rid of this whole Rentier overhead.

The heaviest overhead is now no longer the landlord class; it’s the financial class and the monopolies that the financial class created and the financialization of real estate that [00:54:00] the financial class has created and the whole tax system that has protected rentier rental income from taxation that has forced it on to labor and industrial profits.

I think that if there was a renewal of the economics and the French Physiocrats, Adam Smith, John Stewart Mill, to Marx and Thorstein Veblen and the American economists such as Simon Patton, it doesn’t have to be this way. But if you want a way out for the way that it is the path was all laid out by the late 19th century. All of this changed with World War I.

Nobody in the late 19th century had forecast anything like the finance capitalism, and the polarization of economies that you have today. They all thought that the government is going to play an increasing role because the government will be the recipient [00:55:00] of land rent and natural resource rent. The government will be investing in natural monopolies, communication, transportation, schooling, providing basic needs and services at cost or at a subsidized basis or freely in the case of public education and, healthcare for instance.

All of this was what was spelled out in the 19th century seemed to be moving towards a very balanced economy where you didn’t need a centralized king to essentially nationalize the rent and return land to the public domain. It seemed to be happening by the economic reform.

But World War I ended all that and Rentiers fought back, and my Killing the Host explained how the financial interests and the real estate interests fought back in the United States and England and in Europe [00:56:00] against the classical economics and created a post-classical neoliberal economics that claimed that there was no such thing as unearned income -that bankers making tens of millions of dollars per year were the most productive workers in the United States because the GDP accounts include economic rent as gross national product.

What I’m trying to do is recast the concept of what is GDP, is land rent a product or is it a transfer payment from the economy to landlords? Is interest a product or is it a charge? And when banks charge late fees- credit card companies make more money on late fees than they do on actual interest charges on the credit card- these late fees are all included as providing financial services.

In the US, GDP account is a product. I’m trying to promote the idea [00:57:00] of if you think of what is really gross national product, you have that sort of stabilizing and going down in the western economy where the reported GDP is going up. But all of this increase in reported GDP is not product at all, it’s economic rent. So, I’m trying to get, a group of people who will go to the trouble of recasting the GDP accounts. And if you really visualize your economy as your real economy of production as shrinking and the reported economy is all being economic overhead a kind of tumor on the real economy that will help, you think, well, maybe we ought to begin to measure, mathematize exactly how much economic rent is it and get rid of it. Either we tax the land or we take it into the public domain as ownership. Either [00:58:00] we tax monopolies or better yet we don’t want monopolies to exist. If something is a basic need and a natural monopoly, this should be provided by the government at cost or at a subsidized rate. All of these were what were discussed by the late 19th century and not only by Marxist, it was called socialism, but there were many kinds of socialism.

Henry George was considered a socialist. There was libertarian socialism, Christian socialism, Catholic socialism, Marxian socialism, social democratic socialism, mutual aid socialism. There was a whole idea that the economy should not end up the way Margaret Thatcher and Ronald Reagan redesigned the British and American economies in the 1980s.

Jonathan Brown: Hmm. So, if anyone is feeling hopeless about the economic situation, it’s not because there isn’t hope, it’s just because using the model of economics and control that’s been forced upon us, mainly from around the first World [00:59:00] war, we feel hopeless in that situation because that’s really how it’s designed.

The people in charge get more and more interest and they get the exponential growth of the compounding of their wealth. And it comes from ours because we have to pay more and more of our wealth in order to pay off mortgages and debts and other such things. So, there’s actually a whole load of answers if we go back to our original interview that we did.

And also, I know your work, the Destiny of Civilization on Economics and Killing the Host and all the other books that you’ve done, can offer people hope in that sense in that the solutions are actually relatively simple but they’re not easy because we have to overcome the control of the interest that do get all the interest and the land rent that we’re currently paying to them. Is that right?

Michael Hudson: Yes, you’ve got it.

Jonathan Brown: So instead of Dr. Doom, we’ll call you Dr. Possible.

Michael Hudson: Yes. I’m trying to reintroduce the concept of economic rent as a distinction. Rent is not profit. Profits are part of value. That was what Marx contributed. He said that it is true [01:00:00] that the industrialist makes more money than it costs him to actually hire labor. But this surplus value is the industrialist contribution to production of organizing industry or creating markets for it creating supply. And so, profits are an element of value. Rent is not an element of value. That’s the concept that I’m trying to get across.

Jonathan Brown: Michael, where do you see us going in the next few years? What do you see happening?

Michael Hudson: Well, you mentioned what I’ve discussed in our last discussion. it’s still a slow crash. I guess, you could say a slow crash that happens faster and faster. There’s no way that there can be an economic recovery when more and more of the income of wage earners and of industrial firms have to be paid for land rent, monopoly, rent, natural resource, rent and financial, charge overhead.

These forms of overhead are crowding out [01:01:00] spending on goods and services and the industrial economy. The question is whether the countries that are trying to depolarize are more open to these ideas than the countries, Europe and America that remain in the dollar area.

I’m trying to talk to both. I’m talking to you and Britain. I’m talking to Americans. I’m talking to global south countries. So far nobody’s really picked up the focus on the need to free economies from rent just as Europe freed itself from feudalism 200 years ago.

Jonathan Brown: And what do you see as possible triggers for the acceleration of the crisis?

Michael Hudson: That seems inevitable because that’s compound interest. It’s an upsweep. It gets Faster and faster. That’s the mathematics of it.

Jonathan Brown: And if you had to put some money on where you think the trigger’s going to be?

Michael Hudson: Usually there is a particular crisis. Some big firm goes bankrupt. Someone will make the wrong guess. Or, the [01:02:00] chaos that Trump and American cold War policy is causing will create some economic crisis in some country like it’s began to create in Germany.

This crisis will probably become politicized. But what worries me about Europe, and even England, is that so far, it’s only a right-wing political response that is positioning itself to take control of the crisis for itself. The left wing has disappeared as a group talking about economic conditions. It is ironic that almost the entire talk of economic problems has occurred on the right by the nationalists, not by the former left parties. And of course, your Labour Party, you’re never going to have Starmer talking about the economic problems because he and leaders like him in Europe are part of the problem, not part of the solution.

Jonathan Brown: I don’t see a right, left anymore. I just [01:03:00] see the same uni party saying the same things and Kier Starmer is more conservative than the conservatives now. He came in on a socialist platform and he is done hardly any of those things. The latest news is him pushing through welfare reforms and then more recently he was just saying how he wants UK defence spending to get up to 6% of the government budget.

Michael Hudson: That’s a travesty of military Keynesianism. but it’s paying more money to the military industrial complex. That’s the form of overhead also. It’s not really part of the production, uh, economy as such.

Jonathan Brown: No, no. Well, Michael, it’s absolutely fabulous to talk to you again. How can people find you and, learn more about your work?

Michael Hudson: Well, I have my website, Michael- hudson.com, and all of my interviews, and my writings are on the website. That comes out of Australia. And it’s interesting, most of my contacts, are in Australia precisely because it’s the most debt ridden [01:04:00] financialized real estate bubble economy that there is. So of course there’s a receptivity.

Jonathan Brown: Would the Destiny of Civilisation be the best place to start to learn if someone doesn’t already know about your economic theories, would that be the best place to focus?

Michael Hudson: The Destiny of Civilization, followed by Killing the Host.

Jonathan Brown: Well, Michael, thank you as always.

I love this discussion. There are not many discussions on this topic in the public media. Thank you very much for having me.

Jonathan Brown: Thank you for listening to the Shepheard Walwyn Podcast. To explore these ideas further, be sure to visit our website, www.shepheardwalwyn.com, and join our mailing list for news and special offers. Check out our authors and buy the books to learn more. And you can also find us on social media. Links are also on the website.

And if you like the podcast, please head over to iTunes or Spotify to give us a review. It’s surprisingly helpful in getting the ideas out there. So, until next time, keep [01:05:00] reading.

 

 

Global South

US Think Tank releases a report titled “China After Communism: Preparing for a Post-CCP China.”

From Geopolitcs Prime

The Hudson Institute—a top US think tank—just released a mind-bending 128-page report titled “China After Communism: Preparing for a Post-CCP China.”

Sounds academic? It’s anything but.

This is no policy debate or analysis of long-term trends

This is a blueprint for regime collapse and post-collapse occupation of China—military deployments, economic restructuring, asset privatization, constitutional redesign, even re-naming the country. All under US guidance.

Selected Insanities:

US Special Forces stabilizing a post-CCP China “by, with, and through” locals.

Plans to target Chinese bioweapons labs.

Advising a new Chinese regime to repudiate debts, sell off state assets, and embrace a US-friendly constitution.

Calls to seize PRC assets inside the US and fully decouple.

But here’s the real story:

This isn’t a strategy document. It’s a psychological artifact—a desperate cry from a declining hegemon that no longer understands its own limits. The arrogance is stunning, but more telling is the detachment from reality.

Conclusion:

Strategic Delusion – Failed in Iraq, Afghanistan, Libya—now imagines managing China’s collapse? 1.4B people, nuclear-armed, ancient civilization. Not strategy—fantasy.

Compensatory Extremism – Declining empires escalate, not retreat. Like the Confederacy clinging to slavery, US elites double down on regime change, zero-sum thinking, and denying others’ agency.

Anthropological Value – This report reflects Washington’s neuroses, not China’s future: narrative obsession, moral superiority, rewriting rules when they stop serving US interests.

The full 128 pages text is here “China after Communism: Preparing for a Post-CCP China” https://www.hudson.org/politics-government/china-after-communism-preparing-post-ccp-china-miles-yu

 

Global South

Michael Hudson: Today’s Civilizational Conflict

The video accompanying this article is with Glen Diesen and it is here:  https://globalsouth.co/2025/07/17/michael-hudson-with-glen-diesen-the-economics-of-a-civilizational-conflict/

The two pieces of work are stand-alone but together form the bigger picture quite eloquently and elegantly. This article is the key chapter in Michael’s new book. The article is also on Ben Norton’s site: https://geopoliticaleconomy.com/2025/07/17/michael-hudson-global-majority-us-financial-colonialism/

—

Industrial capitalism was revolutionary in its fight to free Europe’s economies and parliaments from the hereditary privileges and vested interests that survived from feudalism. To make their manufactures competitive in world markets, industrialists needed to end the land rent paid to Europe’s landed aristocracies, the economic rents extracted by trade monopolies, and interest paid to bankers who played no role in financing industry. These rentier incomes add to the economy’s price structure, raising the living wage and other business expenses, thus eating into profits.

The 20th century saw the classical aim of clearing away these economic rents rolled back in Europe, the United States, and other Western countries.

However, today, land and natural-resource rents in private hands are still rising and even receiving special tax advantages. Basic infrastructure and other natural monopolies are being privatized by the financial sector — which is largely responsible for carving up and de-industrializing economies on behalf of its real estate and monopoly customers, who pay out most of their rental income as interest to bankers and bondholders.

What has survived from the policies by which Europe’s industrial powers and the United States built up their own manufacturing is free trade. Britain implemented free trade after a 30-year fight on behalf of its industry against the landed aristocracy, aimed at ending the protectionist agricultural tariffs, the Corn Laws, which had been enacted in 1815 to prevent opening the home market to low-priced food imports, which would have reduced farming rents.

After repealing these laws in 1846 to lower the cost of living, Britain offered free-trade agreements to countries seeking access to its market in exchange for these countries not protecting their industry against British exports. The aim was to deter less industrialized countries from working up their own raw materials.

In such countries, Europe’s foreign investors sought to buy rent-yielding natural resources headed by mineral and land rights, and basic infrastructure headed by railroads and canals. This created a diametric contrast between rent-avoidance in the industrial nations and rent-seeking in their colonies and other host countries, while European bankers used debt leverage to gain fiscal control of former colonies who had won independence in the 19th and 20th centuries.

Under pressure to pay the foreign debts that were run up to finance their trade deficits, development attempts, and deepening debt dependency, debtor countries were obliged to relinquish fiscal control of their economies to bondholders, banks, and creditor-nation governments, which pressed them to privatize their basic infrastructure monopolies. The effect was to prevent them from using revenue from their natural endowments to develop a broad economic base for prosperous development.

Just as Britain, France, and Germany aimed to free their economies from feudalism’s legacy of the vested interests with rent extraction privileges, most of today’s Global Majority countries need to free themselves from the rent and debt overhead inherited from European colonialism and creditor control.

By the 1950s these countries were being called “less developed” or, even more patronizingly, “developing.” But the combination of foreign debt and free trade has blocked them from developing along the balanced public/private lines that Western Europe and the United States followed.

The tax policy and other legislation of these countries has been shaped by U.S. and European pressure to observe international trade and investment rules that perpetuate geopolitical domination by Western bankers and rent-extracting investors to control their national patrimony.

The euphemism “host economy” is appropriate for these countries, because the Western economic penetration of them resembles a biological parasite feeding off its host.

Seeking to maintain this relationship, the U.S. and European governments are blocking attempts by these countries to follow the path that Europe’s industrial nations and the United States took for their own economies with their 19th-century political and fiscal reforms that empowered their own takeoff.

Without these countries adopting fiscal and political reforms aimed at developing their own sovereignty and prospects for growth on the basis of their own national patrimony of land, natural resources and basic infrastructure, the world economy will remain bifurcated between Western rentier nations and their Global Majority hosts and held subject to neoliberal orthodoxy.

The success of China’s model poses a threat to the neoliberal order

When U.S. political leaders single out China as an existential enemy of the West, it is not as a military threat but for offering a successful economic alternative to today’s U.S.-sponsored neoliberal world order.

That order was supposed to represent the End of History, succeeding through its logic of free trade, government deregulation, and international investment free of capital controls, while detouring away from industrial capitalism’s anti-rentier policies.

We can now see the absurdity in this self-satisfying evangelical view that had emerged just as Western economies were deindustrializing, as a result of the dynamics of their neoliberal finance capitalism.

The vested financial and other rentier interests are rejecting not only China but the logic of industrial capitalism as described by its own 19th-century classical economists.

Western neoliberal observers have closed their eyes to recognizing the ways in which China’s “socialism with Chinese characteristics” has achieved its success by a logic similar to that of the industrial capitalism advocated by classical economists to minimize rentier income.

Most late 19th-century economic writers expected industrial capitalism to evolve into socialism of one form or another, as the role of public investment and regulation increased. Freeing economies and their governments from control by landowners and creditors was the common denominator of the social-democratic socialism of John Stuart Mill, the libertarian socialism of Henry George focusing on the land tax, and the cooperative mutual-aid socialism of Peter Kropotkin, as well as Marxism.

Where China has gone further than earlier socialist mixed-economy reforms has been in keeping money and credit creation in the hands of government, along with basic infrastructure and natural resources.

China SOE composition sector industry IMF

Fear that other governments might follow China’s lead has led U.S. and other Western finance-capitalist ideologues to view China as a threat by providing a model for economic reforms that are precisely the opposite of what the 20th century’s pro-rentier, anti-government ideology fought against.

The foreign debt overhead owed to U.S. and other Western creditors, and enabled by the 1945-2025 international geopolitical rules designed by U.S. diplomats at Bretton Woods in 1944, obliges the Global South and other countries to recover their economic sovereignty by freeing themselves from their foreign (mainly dollarized) banking and financial burden.

These countries have the same land-rent problem that Europe’s industrial capitalism faced, but their land and resource rents are mainly owned by multinational companies and other foreign appropriators of their oil and mineral rights, forests, and latifundia plantations, who extract resource rents by emptying out the world’s oil and mineral resources and cutting down its forests.

Taxing economic rent is a precondition for economic sovereignty

A precondition for Global South countries to gain economic autonomy is to follow the advice of the classical economists and tax the largest sources of rental income – land rent, monopoly rent, and financial returns – instead of letting them be sent abroad.

Taxing these rents would help stabilize their balance of payments, while providing their governments with revenue to finance their infrastructure needs and the related social spending needed to subsidize their economic modernization.

That is how Britain, France, Germany and the United States established their own industrial, agricultural, and financial supremacy. This is not a radical socialist policy; it always has been a central element of industrial capitalist development.

Recapturing a country’s land and natural-resource rents as its fiscal base would enable it to avoid taxing labor and industry. A country would not need to formally nationalize its land and natural resources outright; it simply needs to tax the economic rent over and above actual “earned profits,” to cite the principle of Adam Smith and his 19th-century successors that this rent is the natural tax base.

But neoliberal ideology calls such taxation of rent, and the regulation of monopolies or other market phenomena, an intrusive interference into the “free market.”

This defense of rentier income inverts the classical definition of a free market. The classical economists defined a free market as one free from economic rent, not as one free for the extraction of economic rent, let alone as freedom for creditor-nation governments to create a “rules-based order” to facilitate foreign rent extraction and stifle the development of financially and trade-dependent host countries.

Debt remission is a precondition for economic sovereignty

The fight by countries to free themselves from their foreign debt overhead is much harder than Europe’s 19th-century fight to end the privileges of its landed aristocracy (and less successfully, of its bankers), because it is international in scope, and is now confronted by a creditor-nation alliance to maintain the system of financial colonization created two centuries ago, as former colonies sought to finance their independence by borrowing from foreign bankers.

Starting in the 1820s, newly independent countries like Haiti, Mexico, and other Latin America nations, as well as Greece, Tunisia, Egypt, and other former Ottoman colonies, won nominal political freedom from colonialist control. But to build up their own industry they had to take on foreign debt – on which they almost immediately defaulted, which enabled their creditors to establish monetary authorities in charge of their fiscal policy.

The governments of these countries were turned into collection agents for international bankers by the late 19th century. Financial dependency on bankers and bondholders replaced colonial dependency, obliging debtor countries to give fiscal priority to foreign creditors.

World War II enabled many of these countries to accumulate substantial foreign monetary reserves as a result of supplying raw materials to the belligerents. But the post-war order designed by U.S. diplomats, based on free trade and free capital movements, drained these savings, and obliged the Global South and other countries to borrow to cover their trade deficits.

The resulting foreign debts soon came to exceed the ability of these countries to pay – that is, to pay without surrendering to the destructive IMF demands for austerity that blocked the investment needed to raise their productivity and living standards.

There was no way that they could meet their own development needs to invest in basic infrastructure and provide industrial and agricultural subsidies, public education, health care, and other basic social spending that is characterized by the leading industrial nations. This still remains the case.

Their choice today, therefore, is between paying their foreign debts – at the cost of blocking their own development – or claiming that these debts are odious and insisting that they be written off.

Creditor debt developing countries region UN 2024

At issue is whether debtor countries will gain the sovereignty that is supposed to characterize an international economy of equals, free of foreign post-colonial control over their tax and trade policies, as well as their national patrimony.

Their self-determination can only be achieved by joining together in a collective front.

Donald Trump’s tariff aggression has catalyzed this process by drastically reducing the U.S. market for exports from debtor countries, preventing them from obtaining the dollars to pay their bonds and bank debts, so these won’t be paid in any event.

The world is now busy de-dollarizing.

The need to create an alternative to the U.S.-centered post-war order was expressed in 1955 at the Bandung Conference in Indonesia, and then later by the Non-Aligned Movement. But these countries lacked a critical mass of self-sufficiency among themselves to act together.

Attempts to create a New International Economic Order in the 1960s faced the same problem. Countries were not industrially, agriculturally, or financially strong enough to “go it alone.”

Today’s Western debt crisis, de-industrialization, and coercive weaponization of foreign trade and financial sanctions under the dollarized international financial system, capped by the “America First” tariff policy, have created an urgent need for countries to collectively seek economic sovereignty, to become independent from U.S. and European control of the international economy.

The collective BRICS+, with Russia and China taking the lead, have just begun talking about making such an attempt.

BRICS 2024 summit Kazan Russia participants

China’s success has made a global alternative attainable

The great catalyst for countries to take control of their national development has been China. As indicated above, its industrial socialism has largely achieved the classical aim of industrial capitalism of minimizing rentier overhead, above all by publicly creating money to finance tangible growth.

Keeping money and credit creation in government hands, via China’s state-owned banks, prevents financial and other rentier interests from taking over the economy and subjecting it to the financial overhead that has characterized Western economies.

China’s successful alternative for allocating credit avoids making purely financial gains at the expense of tangible capital formation and living standards. That is why it is viewed as an existential threat to the current Western banking model.

Western financial systems are overseen by central banks that have been made independent from the Treasury and government regulatory “interference.” Their role is to provide the commercial banking system’s liquidity as it creates interest-bearing debt, mainly for the purpose of making wealth financially by debt leveraging (asset-price inflation), not for productive capital formation.

Asset price inflation real economy

Capital gains – rising prices for housing and other real estate, stocks, and bonds – are much larger than GDP growth. They can be made easily and quickly by banks creating more credit to bid up prices for buyers of these assets.

Instead of the financial system being industrialized, Western industrial corporations have become financialized, and that has occurred along lines that have deindustrialized the U.S. and European economies.

Financialized wealth can be made without being part of the production process. Interest, late charges, other financial fees and capital gains are not a “product,” yet are counted as such in today’s GDP statistics.

Carrying charges on the rising debt overhead are transfer payments to the finance sector, by labor and businesses, out of wages and profits earned by actual production. That shrinks the income available for spending on the products produced by labor and capital, leaving economies debt-ridden and deindustrialized.

The strategy of creditor-rentier nations to prevent withdrawal from their global control

The broadest strategy to block countries from avoiding the rentier burden has been to wage an ideological campaign from the educational system to mass media. The aim is to control the narrative in a way that depicts government as an oppressive Leviathan, an inherently bureaucratic autocracy.

Western “democracy” is defined not so much politically as economically, as a free market whose resources are allocated by a banking and financial sector independent of regulatory oversight.

Governments strong enough to limit financial and other rentier wealth in the public interest are demonized as autocracies or “planned economics” — as if shifting credit and resource allocation to the financial centers of Wall Street, London, Paris, and Japan does not result in an economy planned by the financial sector in its own interest, with the aim of creating monetary fortunes. Its aim is not to improve the overall economy and living standards.

Global Majority officials and administrators who have studied economics at U.S. and European universities have been indoctrinated with a value-free (that is, rent-free) pro-rentier ideology to frame the way they think about how economies work.

This narrative excludes consideration of how debt polarizes economies by growing exponentially at compound interest. Also excluded from mainstream economic logic is the classical contrast between productive and unproductive credit and investment, and the related distinction between earned income (wages and profits, the main components of value) and unearned income (economic rent).

Beyond this ideological campaign, neoliberal diplomacy uses military force, regime change, and control of the main international bureaucracies associated with the United Nations, the IMF, and World Bank — and a more covert network of non-government organizations (NGOs) — to prevent countries from withdrawing from today’s pro-rentier fiscal rules and pro-creditor laws.

The United States has taken the lead in using force and regime change against governments that would tax away or otherwise limit rent extraction.

It should be noted that few early socialists (except anarchists) advocated violence in pursuit of their reforms. It has been the vested interests, unwilling to accept loss of the privileges that are the basis of their fortunes, who have not hesitated to use violence to defend their wealth and power against attempts at reform to check their privileges.

To be sovereign, nations must create an alternative that enables them to be in charge of their own economic, monetary, and political development. But American diplomacy views any attempt to enact the necessary political and tax reforms and strong government regulatory authority as posing an existential threat to U.S. control over international finance and trade.

This raises the question of whether it is possible to achieve reforms and a strong public economy without war. It is natural for countries to wonder whether they can achieve economic sovereignty without a revolution, such as the Soviet Union, China, and other countries that fought to end their domination by their foreign-supported landlords and creditors.

The only way to protect economic sovereignty against military threats is to join an alliance for mutual support, since individual countries can be isolated in the way that Cuba, Venezuela, and Iran have been — or destroyed, like Libya.

As Benjamin Franklin put matters, “If we don’t hang together, we will hang separately.”

American writers characterize the attempt of other countries to join together to achieve economic sovereignty as a civilizational war. While this is indeed a civilizational contest, it is the United States and its allies that are waging aggression, against countries trying to withdraw from a system that has provided the United States and Europe with a huge inflow of economic rents and debt service from host countries subject to U.S.-backed diplomacy.

How U.S.-centered financial colonialism replaced European colonial occupation

After World War II, the era of settler-state colonialism gave way to financial colonialism, with the international economy dollarized under U.S. leadership.

The Bretton Woods rules established by 1945 enabled multinational corporations to keep economic rents for land, natural resources and public infrastructure out of domestic fiscal reach. Governments were reduced to the role of acting as collection agents for foreign creditors and as protectors of foreign investors from democratic attempts to tax rentier wealth.

The United States was able to weaponize world trade by monopolizing oil exports through U.S. and allied oil companies (the Seven Sisters), while U.S. and European agricultural protectionism and World Bank “aid” policy steered food-deficit countries to focus on tropical plantation crops instead of grain to feed themselves.

President Bill Clinton’s 1994 NAFTA free-trade agreement swamped Mexico’s market with low-priced U.S. farm exports (highly subsidized by strong government support). Mexican grain production plummeted, leaving it food-dependent.

To block governments from taxing or even fining foreign investors to recover compensation for damages to their countries, today’s rentier powers have created Investor-State Dispute Settlement (ISDS) courts requiring governments to compensate foreign investors for increasing taxes or imposing regulations that reduce foreign-owned income. (I provide the details of this in Chapter 7 of my 2022 book The Destiny of Civilization.)

This system blocks national sovereignty, including by preventing host countries from taxing the economic rent of their land and natural resources owned by foreigners. The effect is to make these resources part of the investor-nation economy, not their own. (The Saudi oil company Aramco, for instance, was not a corporately distinct corporate affiliate but a branch of Standard Oil of New York (ESSO). This legal nicety meant that its income and expenses were consolidated into the parent company’s U.S. balance sheet. That enabled it to receive a tax credit for the “depletion allowance” for oil, rendering the company effectively free of U.S. income tax, although it was Saudi oil that was being depleted.)

Other nations permitted the United States to dictate the post-World War II order, with it promising generous aid to support free trade, peace, and post-colonial national sovereignty, as spelled out in the United Nations Charter. But the United States squandered its wealth on military spending abroad and financial wealth addiction at home.

That has left America’s post-industrial power based mainly on its ability to harm other countries with chaos if they do not accept the U.S. “rules-based order” designed to extract tribute from them.

The U.S. imposes protectionist tariffs and import quotas at will, and subsidizes agriculture and key technologies as potential global high-tech monopolies, while forbidding other countries from implementing such “socialist” or “autocratic” policies to become more competitive. The result is a double standard in which the U.S. “rules-based order” (its own rules) replaces adherence to international law.

U.S. agricultural price support policy initiated under Franklin D. Roosevelt in the 1930s provides a good example of double standards. It made farming the most heavily subsidized and protected sector. It became the model for the European Economic Community’s Common Agricultural Policy (CAP) introduced in 1962.

However, U.S. diplomacy opposes the attempts of other countries, especially Global South countries, to impose their own protectionist subsidies and import quotas aimed at achieving self-sufficiency in basic food production — while U.S. “aid lending” and the World Bank have (as indicated above) supported the exportation of tropical plantation crops by Global South countries by lending for transportation and port development. U.S. policy has consistently opposed family-owned farming and land reform throughout Latin America and other Global South countries, often with violence.

Moves toward a multipolar world order

It is not surprising that, inasmuch as Russia has long been the United States’ main military adversary, it has taken the lead in protesting against the unipolar U.S. order.

Advocating a multipolar alternative to the U.S. neoliberal order in June 2025, Russian Foreign Minister Sergey Lavrov described the post-colonial economic subjugation of the countries that achieved political independence from colonialist rule in the 19th and 20th centuries but which are now facing the next task needed to complete their liberation:

Our African friends are paying more and more attention to the fact that their entire economies are still largely based on siphoning off natural resources from these countries. In fact, all value added is produced and pocketed by the former Western metropoles and other European Union and NATO members.

…

The West is using illegal unilateral sanctions, which increasingly become the harbinger of a military attack, as this has happened in Yugoslavia, Iraq and Libya and is now happening in Iran, as well as the instruments of unfair competition, initiating tariff wars, seizing other countries’ sovereign assets and taking advantage of the role of their currencies and payment systems. The West itself has actually buried the globalization model, which it developed after the Cold War to promote its interests.

Marco Rubio made the same point in the U.S. Senate hearings to confirm him as Donald Trump’s Secretary of State, explaining that the “postwar global order is not just obsolete; it is now a weapon being used against us.”

Violating the rules of foreign trade and investment that the United States itself dictated in 1945, and yet another instance of Washington resorting to the “rules-based order” of its own rules, President Trump’s unilateral tariffs aimed both at shifting the New Cold War’s military costs onto other countries, which are expected to buy American arms and provide proxy armies, and at reviving the U.S.’s lost industrial power by forcing countries to relocate industries to the United States and to permit U.S. companies to extract monopoly rents by controlling the leading emerging technologies.

The United States aims to impose monopoly rights and related rentier privileges uniquely favorable to itself on the entire world’s trade and investment. Trump’s “America First” diplomacy demands that other countries conduct their trade, payments and debt relationships in U.S. dollars, instead of their own currencies.

The U.S. “rule of law” is one that permits unilateral U.S. demands to impose trade and financial sanctions dictating how and with whom foreign countries can trade and invest. They are threatened with economic chaos and confiscation of their dollar reserves if they do not boycott trade and investment relations with Russia, China, and other countries refusing to submit to U.S. control.

The United States’ leverage to obtain these foreign concessions is no longer industrial leadership and financial strength, but its ability to cause chaos for other countries. Claiming to be the indispensable nation, the U.S.’s ability to disrupt trade is ending its former international monetary and diplomatic power.

That power originally was based on U.S. holdings of the world’s largest monetary gold reserves in 1945, its status as the largest creditor nation and industrial economy, and, after 1971, its dollar hegemony, arising in large part as a result of its financial market being the safest for other nations to hold their official monetary reserves.

The diplomatic inertia created by these former advantages no longer reflects the realities of 2025. What U.S. officials do have is the ability to disrupt the world’s trade, supply chains, and financial arrangements, including the SWIFT system for international payments.

The U.S. and European confiscation of $300 billion of Russia’s monetary deposits has darkened America’s reputation for financial safety, while its chronic trade and balance-of-payments deficits threaten to disrupt the international monetary system and free trade that made it the major beneficiary of the 1945-2025 world order.

us current account percent gdp 1970 2024

In keeping with the principle of national sovereignty and non-interference in other countries’ internal affairs that underlay the creation of the United Nations (the basic principle of international law grounded in the 1648 Peace of Westphalia), Russia’s Foreign Minister Lavrov described (in his speech cited above) the need “to establish foreign trade mechanisms [that] the West will be unable to control, such as transport corridors, alternative payment systems and supply chains.”

As an example of how the United States had paralyzed the World Trade Organization, which it had created on the basis of free trade at a time when America was the world’s leading export power, he explained:

When the Americans realized that the globalized system they had created – one built on fair competition, inviolable property rights, the presumption of innocence, and similar principles, and which had allowed them to dominate for decades – had also begun benefiting their rivals, primarily China, they took drastic action.

As China started outplaying them on their own turf and by their own rules, Washington simply blocked the WTO’s Appellate Body. By artificially stripping it of a quorum, they rendered this key dispute settlement mechanism inactive – and it remains so to this day.

The United States has been able to block foreign opposition to its nationalist policies by having veto power in the United Nations, IMF, and World Bank. Even without such power, U.S. diplomats have been able to block United Nations organizations from acting independently of U.S. wishes by refusing to appoint leaders or judges not primarily loyal to U.S. foreign policy.

The International Atomic Energy Agency (IAEA), charged with keeping nuclear proliferation in check is the most recent notorious case in point. Iran published documents showing that the agency’s leader Rafael Grossi provided U.S. and Israeli intelligence with the names of Iranian scientists who were killed, and details of the Iranian nuclear refinement sites that were bombed.

The U.S. veto has prevented the UN Security Council from condemning Israeli attacks on the Palestinian population. And when the International Criminal Court (ICC) brought charges against Israeli Prime Minister Benjamin Netanyahu for committing war crimes and crimes against humanity in a genocide against the Palestinians, U.S. officials imposed sanctions on the ICC and demanded the removal of the prosecutor.

The world no longer is to be governed by international law, but by unilateral U.S. rules, subject to abrupt change depending on the vicissitudes of American economic or military power (or loss thereof).

As Russia’s President Vladimir Putin described this new state of affairs in 2022, “Western countries have been saying for centuries that they bring freedom and democracy to other nations,” yet the “unipolar world is inherently anti-democratic and unfree; it is false and hypocritical through and through.”

The United States’ self-image depicts its long dominant world position as reflecting its democracy, free market, and equality of opportunity that has enabled its power elite, in their view, to acquire their status by being the economy’s most productive members, through their management and allocation of savings and credit.

The reality is that the United States has become a rentier oligarchy, one that is increasingly hereditary. Its members’ fortunes are made mainly by acquiring rent-yielding assets (land, natural resources, and monopolies) on which they make capital gains, while paying most of their rent as interest to their bankers, who end up with much of these rents and have become the new oligarchy’s leading managerial class.
Summary

The real conflict over what kind of economic and political system the Global Majority will have is just gaining momentum.

Global South countries and others have been driven so deeply into debt that they have been obliged to sell off their public infrastructure to pay its carrying charges. Recovering control of their natural resources and basic infrastructure requires the fiscal right to impose an economic-rent tax on their land, natural resources and monopolies, as well as the legal right to recover environmental cleanup costs caused by foreign oil and mining firms, and to implement financial cleanup costs (i.e., write offs and cancellation) of the foreign debt burden imposed by creditors who have not taken responsibility to ensure that their loans can be paid under existing conditions.

U.S. evangelistic rhetoric describes the imminent political and economic fracture of the world economy as a “Clash of Civilizations” between democracies (i.e., countries that support U.S. policy) and autocracies (i.e., nations acting independently).

It would be more accurate to describe this fracture as a fight by the United States and its European and other Western allies against civilization — assuming civilization entails, as it seems it must, the sovereign right of countries to enact their own laws and tax systems for the benefit of their own populations within an international system that has a common set of basic rules and values.

What Western ideologues call democracy and free markets has turned out to be an aggressive rentier-financial imperialism. And what they call autocracy is a government strong enough to prevent economic polarization between a super-rich rentier class and an impoverished population at large, such as is occurring within the Western oligarchies themselves.

Global South

Michael Hudson with Glen Diesen: The Economics of a Civilizational Conflict

This came recommended by the man, the legend, himself.  Across the world we all recognize the nature of this conflict as civilizational whether it plays out kinetically much bigger, or in any other form of war. This is brand new and the transcript will follow. Michael says that this summarizes his overall view.

(Don’t lose it now kids! Learn it well. Get the lineaments right here!)

This is the first essay accompanying this video.  https://geopoliticaleconomy.com/2025/07/17/michael-hudson-global-majority-us-financial-colonialism/

Global South

Richard Wolff & Michael Hudson: The US is BLIND to BRICS – And It’s Crushing America’s Future!

(00:06) – BRICS and U.S. Tariff Policies
(05:06) – BRICS’ Progress and Challenges
(10:03) – Impact of Tariffs on Global Trade
(15:06) – Economic Reforms for BRICS
(20:01) – Historical Parallels to Feudalism
(25:03) – Economic Rent and Foreign Control
(30:00) – Transition to Socialist Economic Models
(35:00) – Restructuring Economic Systems
(40:00) – Cost Accounting and Taxation
(45:03) – Shift in Global Economic Power
(50:03) – U.S. Monopoly and Global Influence
(55:03) – Protectionism and Global Competition
(1:00:02) – Future of BRICS and Global Order

Global South

Richard Wolff & Michael Hudson: Trump’s “The Big, Beautiful And The Ugly” (Updated with transcript)

The transcript is not available yet but this is Important (and fast!), so please leave enough time for it. The effect of the BBB is going to end the Dollar’s free lunch, says Michael. They’re running for the exits – We’re seeing the end of an Era! This bill is that important. (And this is only the start of it! I was wondering whether Michael would pause to take a breath ). Richard takes over and describes a ‘screaming’ devaluation of the dollar – the number he quotes is 17%. There is an ‘out of control’ ruling class who is grabbing as much as they can before it all disappears – a clear sign of a fast declining empire. Grotesque, says Richard – from the poorest people you take food and medical care. The gap between rich and poor is stupifying.

It sounds like hyperbole and that is what I thought, until I understood the game and realized, Grotesque and Stupifying is correct. We will see wealth initially in the 1% sector, (not food, or production or working people, or business, or healthy trade, but financialization).

Michael quotes Adam Smith: “Wealth is very often most apparent in countries going fastest to ruin.”

This ‘exceptional society’ is becoming better than a movie to watch, but it is deathly serious and this is a must listen to! I won’t spill any more fascinating beans. Thank you Michael, Richard and Nima for making the space!

Why would foreign investors do what Trump wants them to do?

Halfway through the sheer pace reduced. Take a good note of Michael’s explanation between China and the US (+ Europe), as a civilizational conflict.

Transcript

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, July 3rd, 2025, and our friends, Richard Wolf and Michael Hudson, are back with us. Welcome.

RICHARD WOLFF: Glad to be here.

NIMA ALKHORSHID: I want to start, Michael, with you and the “Big Beautiful Bill” of Donald Trump. We could manage to do something with the bill, but we know that the history between Donald Trump and Elon Musk — Elon Musk went against him — and what has happened in the aftermath. But when it comes to the bill, what is the importance of this bill for Donald Trump? And we know that he’s insisting on it. He’s somehow trying to do everything to get it passed. Your take on that?

MICHAEL HUDSON: Well, I think that Trump’s bill — the (Republican) Big Beautiful (Budget Deficit) Bill — along with Trump’s tariff policy will have the effect of ending dollar hegemony and will lead to a falling exchange rate of the dollar because Trump has said he wants the dollar’s exchange rate to go down, imagining that this is going to make America’s industrial exports more expensive.

The problem is it doesn’t have many industrial exports anymore. They’re all made abroad.

So it’s a fantasy that somehow lowering the exchange rate of the dollar is going to cure America’s trade deficit and enable much more profit to be made and hence taxes to be paid. So it’s all a fantasy. It’s amazing junk economics. And looking at the newspaper and media coverage this morning, it’s all about how so many Republicans say: We can never be re-elected after we pass this bill. We’re not even going to run next time our Senate term’s up.

And some of the House Representatives have said — [Thom] Tillis, he can’t run again because the cutbacks in medical coverage and Medicaid are going to hurt his constituency so much that they just give up.

So the effect is going to end — the dollar’s free lunch — this exorbitant privilege of being able to run huge military and trade deficits, without having to see its exchange rate decline and prices rise. Now you’re having a flight out of the dollar. The dollar’s exchange rate has gone down 10%. That’s the largest decline since Franklin Roosevelt devalued the dollar in 1933. They’re running for the exit. So we’re seeing the end of an era. This bill is that important.

And it’s been an era that enabled the United States to finance both its balance-of-payments deficit and its budget deficit by printing IOUs — Treasury bonds — that supposedly would never have to be repaid. Because (we’ve discussed on an earlier show) when the United States spends money abroad, mainly for military purposes, these dollars end up in the hands of foreign central banks. And what are they going to do? In the past, until right now, for the last 54 years, they had only one choice: to recycle them into safe U.S. Treasury bonds, or federal agency bonds that have yielded a little bit more.

But for the first time now, they’re running for the exits. That’s what’s happened today.

The Financial Times has a wonderful article about how investors are borrowing at a low interest rate to buy European junk bonds. And in the last week, as this bill has been working its way through Congress, investors have been doing arbitrage, borrowing low rates here, buying high-yielding junk bonds in Europe. And it’s a bonanza — but it’s all about making money financially, not industrially.

So you’re seeing that big financial funds in the U.S., as well as foreign investors, are beginning to worry that this artificial affluence by the dollar standard for international monetary reserves is coming to an end.

Today, the stock market’s up because stocks are what the wealthiest 1% are going to be spending their money on. Gold prices also jumped because they realize that while the stock market’s going up, the economy is going down. And interest rates rose for 10-year Treasury bonds because there are more sellers than buyers.

The Republicans continue to use this old trickle-down theory. They claim that giving more money to the wealthiest 1% is going to increase investment and employment.

But that’s not what billionaires do with their wealth. They buy more stocks and bonds and interest-bearing loans. They make money financially, not by building new factories and employing more people.

So the tax giveaway doesn’t really trickle down. It actually trickles up because this added untaxed income of the billionaires, the 1%, the 10%, is going to be used in bidding up stock market prices, bond prices, and real estate prices, all the more. That’s how you make a fortune in today’s finance capital economy.

And shifting taxes onto wage earners, which the bill also does, the wage earners are taxed more in order to help cover up some of the budget deficit resulting from this giveaway. Well, that will force them yet further into debt and having to pay yet more of their income to the banks as interest and late fees.

Well, we’ve just seen the highest returns are likely to be made abroad now. So giving more money is going to weaken the dollar, as both the U.S. and foreign investors bail out of the U.S. bond market, and out of the dollar itself.

And the result will be a devaluation of the dollar. And that’s going to raise prices because now you have to pay a larger dollar sum for imports that remain the same price in foreign countries, quite apart from Trump’s tariffs, which are also raising prices.

So Trump has managed to pick the worst of both worlds for the United States. It’s made the 1% richer, and it’s ended the whole era of easy growth for the United States.

RICHARD WOLFF: Let me comment on that, and take it a couple of steps further. It wasn’t very long ago (I’m talking a matter of months), when there was nearly parity between the Euro and the dollar. I checked this morning, and the Euro is now costing $1.18. Okay, that’s a devaluation relative to the Euro of 18%.

By the way, a devaluation of the dollar by 18% means that you have a situation where you have to give more and more dollars to get the European currency. It’s a statement to everyone in the world who has dollar assets, who holds anything denominated in a dollar — like a U.S. Treasury note, of which there are 700 billion in the hands of China, of which there are a trillion in the hands of Japan, and so on — are now worth 18% less.

That is a screaming message because, as Michael correctly says, that’s a devaluation at a speed that is frightening. That is a screaming recommendation to people to get rid of the dollar before they suffer worse losses. They’ve been doing that for the last year, and they’re going to continue to do it since there is no end in sight. And if Mr. Powell, or his successor, is going to lower interest rates because Mr. Trump is beating the drum to do it, it will make all of that likely worse. Okay, that’s the first thing.

The second thing: Let’s do a little history. The only meaningful economic act achieved by Mr. Trump in his first presidency was the tax cut of December 2017. Let’s remember, that was an enormous tax cut for corporations and the rich. It happened at the end of a 40-year period — mid-1970s to 2015 (40 years) — during which we have had a massive redistribution of wealth, from the bottom and the middle, to the people at the top.

Never, therefore, in the year 2017, never did an American corporate sector, or rich sector, need a tax cut less than they did at the end of a 40-year redistribution. Mr. Trump gave it to them anyway.

And that signaled an out-of-control ruling class that is simply grabbing as much as they can before it all disappears. A behavior very common in empires that are declining. The people at the top are in a position because they’re at the top to hold on to wealth. Everybody else pays the price of the declining empire.

So weak were the Democrats in 2017 that the only thing they could do was not to stop the tax cut, not to stop all the damage it did, but to put a proviso that it would end on the 31st of December of this year, 2025 — eight years into the future, then.

What did they bring Mr. Trump back into office for? To do the next logical step: to get rid of the little limit that the Democrats, in their weakness, imposed.

And that’s what this new bill does. It permanently fixes the cuts of 2017. It negates the sunset they were supposed to suffer at the end of this year, and they add a few more.

Therefore, the gross inequality of the last 40 years, which was worsened by the tax cut of 2017, will be further worsened by what we’re going through now. And in my opinion, that’s the biggest threat to social stability in this country at this time.

You are taking away medical support for poor people at the same time that you are giving the wealthy yet another… it is grotesque! As, by the way, even a significant number of Republican and Democratic politicians have been able to say: It is grotesque! You are taking away from the food stamp — the SNAP program — supports that they give. From the poorest people, you take food and medical care. This is like a cartoon come to life. And it is a severe additional inequality that the country suffers.

I did some work on the New York City — where I live — economic situation. The city of New York is the richest city in the United States, and the city of New York is among the ten poorest cities. Both statistics are correct.

How is it counted?

If you take a measure, the percentage of the people in the city who live at or below the poverty line, you can get a list of the ten poorest cities. New York City is among them.

If you ask about wealth, New York City is the richest city in the country. Listen to these numbers: 380,000 millionaires live in New York City; 88 people who have 100 million or more live in New York City; and 66 billionaires live in New York City.

How is a city as rich as that among the ten poorest cities in the country?

Because we live in a society in which the gap between rich and poor is stupefying. And that’s not tenable. That’s not tenable in any society, very long.

But in a society whose entire 20th century was devoted to saying: We are the exceptional society? We don’t have rich and poor? Everybody here is in the middle class? A society trained with that, dumped into what’s happening now, is a recipe for catastrophe.

And the poor people look, and they watch, and they see that there are special police called ICE who beat up and harass poor immigrants. How much of a step do you think it takes to wonder whether the next poor people they will be going after are the ones that were born here? Come on. We are training people.

I learned this morning — last point — that in Los Angeles, there is now a volunteer civilian patrol: local people who mobilize and drive their cars in and around the immigrant neighborhoods, with cameras, who have been trained by lawyers as to what immigrants’ rights actually are, and what ICE can, or cannot, legally do.

There it is, folks. There’s the escalation. We’re going to have an army on both sides. This is the end of whatever the consensus was that held this country together.

We are watching the people at the top desperate to become even wealthier than they already are. And this is their own undoing.

And they will all look back when Warren Buffett, himself one of our great billionaires, told us over the recent years that there’s something wrong, that his secretary pays a higher percentage of taxes on her income than he does on his.

MICHAEL HUDSON: Well, if any of you have taken an Economics 101 course, you’re taught in the first week that what Richard said could not possibly happen because all of the price theory is based on diminishing marginal utility. The idea is that wealth is like bananas. The first one tastes good, after about the tenth banana, you really get sort of sick of it. So the idea is that as people get wealthier and billionaires, they become satiated.

And if that really were how economies work, what Richard has described couldn’t possibly happen.

The irony is that the Greeks, and the Romans, and most of antiquity before that, realized that there was such a thing as wealth addiction, as money love. And the fact is that wealth is addictive, and they keep wanting more and more. It is insatiable and grows, exponential.

But I want to focus, my specialty has always been the balance of payments. And I want to explain why Trump’s budget is going to lower the dollar’s exchange rate. And that’s what affects the 1%, as Richard said, are the whole group behind the bill. Most of the media blames the deficit, as if this money is going to be spent into the economy to raise prices, instead of on stocks and bonds and bank loans.

But already in the 17th century (the mid-1600s), there was an argument, just like today. And the British economists said: Well, wait a minute. Rich people don’t buy goods and services, except for luxury Italian imports and luxuries, and luxury real estate. All this money gets recycled into more and more loans.

And from the vantage point of foreign investors and money managers, the most serious threat to the dollar’s exchange rate is Trump’s pressure on the Federal Reserve to lower interest rates. And he said that if Federal Reserve Chairman Powell does not lower rates, once his term expires next year, he’s going to handpick a successor whose loyalty to Trump will lead him to lower interest rates yet more.

And I want to describe how this policy is going to be an exclamation point beyond the dynamic that Richard has just been explaining. It’s going to have a twofold return.

First of all, as I mentioned, investors can make an easy arbitrage gain by borrowing lower interest rates here to buy high interest rates in other countries. They can do it freely. All they have to do is arrange at their bank: Lend me money at 4.5%. I’ll buy something yielding 6%.

And there’s been so much money flowing into junk bonds in Europe, as the Financial Times explains, that shipping lines and tourist lines that had to pay double-digit interest rates a year or two ago, now are only paying 6.5%. There’s a flooding of the market — the stock market and bond market — in Europe and America, and all over the world, with money.

Well, the second point is that as the dollar declines relative to foreign currencies, the bonds and stocks of countries with higher interest rates are going to rise, and there will be a foreign exchange premium over and above this. So if you’re an American investor, and you move out of 4.5% in the U.S. to buy a 6.5% bond in England, that’s going to push up England’s exchange rate, and you get an exchange rate premium on top of the interest rate you’re getting.

So you borrow at a low rate, buy securities yielding a higher rate, all on credit for debt-financed capital gains.

None of this has anything to do with actual GDP production or incomes for the non-financial sector, except to interfere with it, as I’ll explain.

The decline in the dollar’s exchange rate is probably going to exceed the interest that you make on the American bond. And if that’s the case, then why would foreign investors and governments and national wealth funds want to invest in the United States? If the highest returns are likely to be made abroad, it’ll weaken the dollar. That’s going to raise prices and higher import costs, plus the tariffs.

And the result is that Trump is actually destroying America’s financial free lunch of being able to run a balance-of-payments deficit without limit. But he’s spurring the stock market. And as Adam Smith said: Wealth is very often most apparent in countries “going fastest to ruin.”

Well, that’s exactly what’s happening in the United States. We’re seeing what the classical economists realize: When you let the income be made not by production, not by industrial capital, businesses, or labor’s living standards, but solely in a financial way, that is purely manipulative, and turns out to be anti-labor and also anti-business.

That’s what’s ultimately so destructive about Trump’s Big Beautiful (Budget Deficit) Bill. And it makes a lot of free, easy money for the billionaires and those financial speculators and hedge funds and other capital funds. But in order to make money for themselves in this way, they’re willing to sacrifice the actual business.

Because why would a foreign investor do what Trump has promised that he’s going to do, and move their production facilities, their automobile companies, and others, into the United States? They can’t, despite the high tariffs in the United States that keep Japan’s cars out of the United States. And Trump says he’s going to raise the tariffs on Japanese cars and other imports to the U.S. to 35 to 40%. Well, even if Toyota and other companies were to move their plants into the United States to avoid the tariff, they’re going to have to pay a 20% tariff on aluminum, on steel, on the components that go into the car.

It’s not going to work.

The whole bill and the logic that the economics profession is trying to popularize turns out to be junk economics that’s going to be destructive because lower interest rates mean easier debt financing. That’ll increase the stock and bond prices for the wealthy, not consumer prices. But the consumer prices are going to rise anyway because of the tariff policy.

And you can be sure that a lot of the tax cuts that are being given are going to be spent on buying up yet more real estate, concentrating the absentee-landlord-owned real estate at the expense of homeowners.

So they’re ending the membership in the middle class that, as Richard just said, is supposed to be what America is all about.

So the effect of the giveaway to the financial sector is going to accelerate America’s deindustrialization. And that’s the dynamic of today’s finance capitalism. And because it’s the dynamic, that’s why the big campaign donors — indeed, as Richard said — threw all their support behind him to make sure he was the candidate. And also, they must have encouraged the Democratic Party to lose, to throw the fight — by keeping either Biden or Harris — which guaranteed Trump’s victory.

RICHARD WOLFF: Let me give you a different way of handling this. In many ways, the world’s manufacturers are comparing the United States and the People’s Republic of China as possible, or likely, locations for manufacturing industry. China, in recent years, has not imposed tariffs in anything like the way the United States has. It hasn’t been changing the few tariffs it imposed because most of them are responses to what Mr. Trump did, if they happened at all.

The country is very stable. It has promised manufacturers that if you come to China, you will have access to well-educated, well disciplined, relatively low-wage workers, and you will have access to the largest and fastest-growing market in the world. They have consistently offered that to the world’s manufacturers, and after much hesitation, the world’s manufacturers took the invitation and went there, including many, many American megacorporations.

They voted with their feet that they preferred being in a country run by a communist party, which was the political adversary, more or less, of the United States, of which they were a company because that was a better deal than the United States could offer them.

What do we have now?

China is offering pretty much the same it always did, and doing a good job of giving reasons to go there. Their technology is now top of the line, the dispersion of their industry extraordinary, and their social stability equally extraordinary.

Whereas the United States? We don’t know from one day to the next what the tariffs will be. We don’t know from one week to the next what the value of the dollar in exchange will be. We don’t know how long Mr. Trump will survive as president. We don’t know what he’ll do. We don’t know what his successors will do.

So, yeah, if in that situation, all the cards say go to China, then what Mr. Trump is doing are marginal shifts that cannot change that process. That’s what Michael has just explained.

Whatever he does, it’s marginal to what all led to what we have now lived through in the last 30 to 40 years, which is deindustrialization. That’s why we are cutting Medicaid and food stamps. Mr. Starmer in England is reducing the money laid out for people with disabilities, and the Chinese got an award for lifting 800 million people out of poverty.

Hello? There’s a difference here. And that difference has to do with the totality.

No company is going to come here because of a tariff for a moment, or a value of the dollar for a while. There are too many other variables that they need to have under control that aren’t under control here, or going in the wrong direction. An 18% drop in the value of the dollar. That means if you come here and you have inputs that are imports, what are you going to do? You factored that in?

Think clearly and you will understand. The biggest likelihood for a downturn in the American economy is the fact that we’re going to have stagnation because the industrial foundation of this economy keeps shrinking, as do the recent numbers for manufacturing in this country.

The return of manufacturing has not happened. He promised it in his first administration. It did not happen. Mr. Biden promised it. It did not happen. Mr. Trump has promised it again. It still hasn’t happened.

You have to now answer the question: Why not?

And that’s because the totality of variables that any decision-making corporate executive uses says: Don’t be crazy, don’t undertake the costs and the risks of moving production to the United States, given the uncertainties and the instability of what is going on in the United States. And Mr. Herky-Jerky Trump’s tariff policy and interest rate policy, only makes that worse.

MICHAEL HUDSON: Well, let’s look at China’s success and see: What is it doing so differently from the United States?

Why do American leaders accuse China of being America’s existential enemy? They are singling it out as an enemy because it demonstrates that there is a better way of organizing an economy, and raising living standards, and creating prosperity, than the finance capital model that the United States and Europe are following.

And what China’s doing is actually following the classical economics of industrial capitalism. They call it industrial socialism, but industrial socialism was the logical evolution of industrial capitalism already by the late 19th century. The idea of a free market, from Adam Smith’s time to John Stuart Mill all the way through Marx, was a market free from rentier income, free from the landlords.

The first half of the 19th century was spent by the industrialists saying: We cannot compete with foreign countries if we have a landlord class that is going to block food imports in order to make higher farm rents for their agricultural land at the cost of higher food prices by the labor that we have to employ. You have to repeal the Corn Laws.

Well, that took 30 years from the time that the Corn Laws were imposed in 1815.

The economists then said: It’s more than landlords. It’s economic rent. It’s the excess of prices over the real cost of production. And that cost can be not only for land rent, but for the monopolies. And the monopolies are created largely to help kings and parliamentary governments raise money to pay the war debts that they were running up ever since the 13th century.

And the final problem to be attacked was that banks in England and America didn’t really play a role in financing industry at all. The whole idea was to change the financial system that actually financed industry.

None of that worked out. All of these hopes: What everybody expected to see, that economies would be socialized into a mixed public and private economy, they’d be regulated markets to get free of economic rent, so that people wouldn’t have to deal with a class of wealthy people that made money without working and contributing to production in any way.

Well, it turns out that China’s biggest, unique characteristic of industrial socialism has been to keep money and finance in the hands of China’s central bank, in its own Treasury. So it’s the government that creates money, not an independent commercial banking system.

And so China’s banks don’t lend for corporate takeovers. They don’t borrow money to make dividend payouts or stock buybacks to push up their prices. The credit that’s created based on the Chinese Treasury and the People’s Bank of China is designed to build infrastructure, factories, and all of the things that China has been doing.

To the Americans, that’s what makes China an existential enemy. If America were to do that strategy of raising industrialization, increasing employment and living standards, that would free the American economy from this billionaire class that we’ve been talking about for the last half hour. The billionaire class is — think of it almost as a tumor on the economy, as a parasite. They pretend to be part of the real economy of production and consumption. They pretend to be helpful, and even necessary, for industry to take place.

But they’re not helpful at all.

They’ve led the deindustrialization of the country. And so, of course, what we’re dealing with is almost a civilizational conflict now between a society, from Europe to the United States, run by billionaires who make money by deindustrializing the economy, and squeezing living standards, and driving the wage-earning force further into debt so that it can’t afford to buy the products that it makes, on the one hand.

And then you have China’s model on the other. And by providing this model — the antithesis of the American model — that’s what today’s fights internationally, including next week’s BRICS meetings, are all about.

NIMA ALKHORSHID: Richard, I think we can bring in the case of BRICS and the conflicts we have — the conflict in Ukraine, in the Middle East, with China, all of that. How are these conflicts with the West going to be translated into the future of BRICS?

We have the BRICS summit here in Brazil. In your opinion, what are the main issues to be considered by this summit?

RICHARD WOLFF: The way I would begin this is to remind everyone of a really historic statistic that was released last week. And that statistic said that, for the first time, the total of trade within the BRICS community crossed $1 trillion. It had never done that before, and, for me, this is a summary of everything we’ve been talking about.

What the BRICS are — and at this point, I feel free to exaggerate a little bit because the line of direction is clear — the BRICS are becoming the economic alternative, the other context for Russia, China, India, Brazil, and South Africa, and the other countries that are involved. They are now in a position to do what they never could do before in at least three or four hundred years: namely, live and grow without a dependency on the United States or Western Europe or Japan.

And that is what this statistic shows.

They could find in one another the market for their exports and the source for their needed inputs that would enable them to have a growth path adequate to sustain those societies. That’s never been true, in my judgment, before.

Part of the result of colonialism and its lasting economic achievement was to force Asia, Africa, and Latin America into a subordinate position in Western capitalism. So that whatever they might do, their dependence on that subordinated position would hold them back from doing anything that the West didn’t want them to do, which included becoming independent.

Oh, they could become, after a while, independent politically, when that couldn’t be prevented anymore — when the Mau Mau in Kenya and Mahatma Gandhi in India put an end to all of that — they were still subordinate to economic capitalism.

Now, for the first time, they have created an institution that was the dream of the Bandung Conference back in 1955, but could not be realized. Now it’s realized. And the credit for that goes to China.

This has nothing to do with endorsing what happens in China or being critical of China, which you can be, and should be, in many ways. They have their flaws like everybody else.

But what they have achieved, no amount of pretense can be taken away from them. They now are able to say to the United States that the longer you act as a rogue nation in the world, the more we will build an alternative to you that will, in the end, isolate you. And you better be careful, lest the policies you choose accelerate your isolation rather than overcome it.

And I’ll give you two examples.

The decision to push NATO all the way into Ukraine. The Americans understood it. The literature there is clear. They understood what they were doing. They understood that the Russians opposed it. They made that clear. They understood that the deal at the end with the unification of Germany entailed a commitment not to move NATO to Russia’s border. When they did it anyway, Russia was too weak to do anything, when they did it in Poland or they did it in the Czech Republic, or they did it in Romania. But when they finally came to Ukraine, Russia felt it had the military means, but just as important, it had the BRICS. And that meant it could be free of its dependence.

The first thing that the Europeans and the Americans did, once the Russian military moved into the Donbass in February 2022, was to develop the so-called sanctions policy. They didn’t need to develop the military. They had been working militarily with the Ukrainians for at least the previous eight years.

What was new, what was different, and what was thought to be decisive were the sanctions. Europe would no longer buy Russian oil and gas. If Russia was a gas station pretending to be a nation — a joke made in America — well, they would show them what happens to a gas station when no one stops by to load up with gas.

What they never counted on was the BRICS, that Russia could turn to two BRICS allies — India and China — and sell all the oil and gas it could pump; and thereby fund the very military operation that the sanctions were supposed to make impossible.

That was a miscalculation whose results we’re living through: the deindustrialization of Europe because it doesn’t have cheap energy from Russia anymore; the particular disintegration of the leading position of Germany, which was the dominant economy and is, now, with Britain, the basket case of the European economy… Wow, the cost of not understanding the BRICS!

And now the Chinese can make jokes about Mr. Trump’s tariffs. If they can’t sell in the United States, they have another place to go.

This is cataclysmic in its consequences, not just in terms of economics, but in terms of military struggles, political struggles, on and on and on. Israel cannot proceed against Iran if Iran’s membership as a BRICS nation gives it access, as it looks like it does, to the support of Russia, China and India.

And of course, you have to have a ceasefire. Israel, I mean, that’s not going to work: Israel has 8 million Jewish Israelis, and Iran has 90 million Muslims. You don’t want to do that. You do not want to do that. Not unless you have the old colonial system. It’s really the old colonial system that’s finally dying.

And we have to understand that we have been living through 300 to 400 years in which colonialism has been the way the world capitalist system organized itself. It shouldn’t have, didn’t have to, but that was the way it developed. And now those chickens are coming home and the world has changed.

And the BRICS that meets next week, having achieved the milestone of a trillion dollars worth of trade among them, is in the driver’s seat.

And the United States is watching because that’s about all it can do.

MICHAEL HUDSON: Well, President Trump certainly agrees with you, Richard, about the BRICS and China, what you just said. I’ve also been saying it, and I think we’ve been saying it on Nima’s show.

Trump has been threatening this week and next week. He says he’s threatening countries that trade with China by imposing very high tariffs to deny them the U.S. market. Well, as you point out, the United States isn’t the only market, and the market it has is shrinking anyway. So, of course, this is going to lead China to work with other Asian countries and global south countries to develop the market.

Trump is also imposing sanctions on Russia. If countries don’t impose trade sanctions on Russia, they’re going to have very high tariffs. I think, for China, he said the tariff will be 500%. That’s five times the price of the imported good if you trade with China. This really is, for Trump, a conflict of civilizations, and he’s betting everything on it.

And you’re right. What is he defending? It’s financial colonialism.

And although, quite rightly, this is no longer the old colonialism of military occupation and settler states that you’ve had from Africa to South America to North America, it’s still very highly military. And as we’ve discussed before, the military arm is the final threat that America has against other countries to enforce its policy.

Well, to do that, you need an enormous military expenditure. And if you look at the United States and also Europe, the leaders of the stock market are the military firms. This is called Military Keynesianism. Trump’s bill, I think, is leading to a trillion dollars to be spent on building the Golden Dome, his version of Israel’s Iron Dome, to protect itself from Russian missiles — if they go very, very slowly. But Russian missiles don’t go very, very slowly. It doesn’t work.

The whole strategy is so transparently just a means of spending the largest element in the budget for arms and products that don’t have a function, except to make profits for the investors in these companies. That’s yet another element in America deindustrialization for all of this.

But it’s also very dangerous because it’s threatening the whole world. If you’re going to have all of these arms, you’re going to try to use them sometimes. They don’t work, and you’re going to lose, just as you’re losing in Ukraine. But that’s the policy we have, and it’s a bipartisan policy.

Democrats and Republicans together all have pretty much the same donor class funders for deciding who’s going to be on the ballots when you vote in November. So that’s really the problem.

The BRICS and China are not only breaking away with trade and investment in the United States, they’re creating a different kind of economy. And that’s really what Richard and I have been talking about for most of our lives: a socialist economy as opposed to a finance capitalist economy.

RICHARD WOLFF: Yeah, I should also remind people that the United States, once, as the empire, had what its supporters like to call things like ideological influence, or cultural hegemony, or, you know, a lot of words — soft power — words like that.

And there is a great anxiety right now in Washington. I don’t want to minimize this. Mr. Trump doesn’t have a clear sailing.

There’s a great deal of anxiety that, for example, eliminating USAID, whatever you think of it, is damaging American soft power. It was an agency that did some good around the world — hyped the good it did for the maximum amount of publicity you could get for it — but those are parts of what successful empires do. It made sure that when votes came up in the United Nations, it could mobilize pretty much the whole world to vote in a particular way, to make it look like what the United States was doing was globally supported.

All of that is gone now. One of the reasons they’re giving all the money to the military is their economic influence is shrinking and their political influence is shrinking.

Really, one of the few things they have is the ability to keep being the number one military power, at least by the amount that they spend. There’s a famous statistic, been well known for the last 50 years, that the United States spends more on military than the next nine countries, together, spend. And those nine include Russia and China, and the remaining ones are all allies of the United States.

So, with this overwhelming predominance, you’re getting a mentality that shouldn’t surprise you: that the military has to be what we celebrate, and focus on, and rely on.

And I think you could see it coming up when a decision is made, a week or so ago, by Mr. Trump — unilaterally — to bomb Iran, a country with whom we were not at war, which had not declared on us, nor we on them, that we were in the midst of actual negotiations with. Mr. Trump suddenly hit them with a bomb, and then immediately the next day said: Now let’s sit down and talk.

Well, that is a use of the military to intimidate, and to shape, and to control, what’s going on. And maybe it’ll work for a while, but it is the last card they have to play. And it should be understood in that light.

And that’s why the BRICS is important. And I need to say to some of my fellow economists: This is not an argument that the BRICS represent the socialist future, or that the BRICS are homogeneous. They’re not. Mr. Modi in India is a different thing from Xi Jinping in China. And they’re both very different from Lula in Brazil, and so on. They have enormous differences, as an international collection of 25 countries would have to be.

What I’m focusing on is the project they all share. That’s what’s remarkable. They haven’t been able to do that in the past. They haven’t overcome all of their differences to be able to do that in the past. They are now being caught up, in my judgment, in this historic moment of the final end of colonialism that they know they’ve been fighting all of their lives.

They know the end is in sight.

And the United States is a society devoted to not seeing what I just said.

That’s why, in the last presidential election, neither Mr. Trump, nor Mr. Biden, nor Kamala Harris, ever said a word about a declining empire. This is the greatest example of collective denial that you could ask for. But for just that reason, it jumps out at those of us who don’t need to deny it. We see it all too clearly.

MICHAEL HUDSON: Well, what you’re saying is that the BRICS and the other countries, despite their differences, they’re reinventing the wheel. And what’s so striking is that the wheel that they’re reinventing is very much like the revolutionary impact of industrial capitalism that it had in Britain and the rest of Europe. The British had to deal with the problem that there was land rent that was taken by their landlord class. There isn’t a landlord class; they got rid of it. But the BRICS countries have something much like a landlord class, and that’s the foreign investors in their subsoil wealth; foreign investors in their oil, their mining, their forests.

RICHARD WOLFF: And, Michael, what you specialize in: their heavy international debt.

MICHAEL HUDSON: Yes, that too. But I want to focus, first of all, on the fact that they’re dealing with the rentier class — that England and Germany and the industrial capitalist countries of the 19th century had to deal with — [it] was domestic. But the BRICS have to deal with a foreign capitalist class. That’s what makes financial imperialism so different and independent from colonialism. The monopolies, because the attempt to finance their economy when the foreign investors take all of their natural wealth rents for themselves — instead of leaving it as the tax base for their own countries — means that the government doesn’t have enough money to build the infrastructure necessary to make a balanced economy like the industrial capitalists.

And so they run a budget deficit and a balance of payments deficit. They have to borrow from the International Monetary Fund, or else see their currencies plunge and their inflation going up. And that requires them to sell off their natural monopolies — their communications, their transportation infrastructure — all the things that were kept in the public domain in the mixed economies of Europe and the United States. Well, of course, once they sell this off, the monopoly rents have to be sent abroad, along with the land rents.

And finally, as you point out, the debt service. Once you borrow from the IMF and from bondholders to finance the balance-of-trade deficits that you’ve suffered as a result of letting the United States and Europe impose a neoliberal model that doesn’t work, then you’re left without national self-sufficiency and sovereignty anymore.

The BRICS countries are trying to — for the first time — achieve the sovereignty that they have not been able to achieve by running into debt, by not being able to tax foreign investment in their natural resources, by not being able to tax monopoly rents from the public utilities that they’ve had to sell off.

All of this had to break down at a point. And Trump has catalyzed all of this breakdown because, by imposing tariffs on these countries, they can’t pay their foreign debts anymore. The United States is going to treat this as an existential threat and do everything it can against them.

So now they think: Well, why don’t we do what made industrial capitalism work so well in its take-off? Why don’t we impose rent taxes on foreign investors in our national resources? Why don’t we nationalize the monopolies by passing antitrust legislation? And why don’t we just realize that the debts that we’ve run up have been run up as a result of financial colonialism, not our sovereign decisions, but their odious debts.

That’s the fight that we’re going to see, is the inherent logic of the situation.

RICHARD WOLFF: We’ve already seen that in recent years. There are movements around the world to cancel the debts. There is a reminder for those who take seriously the religious histories that almost all religions many centuries ago understood how we began today’s conversation: that unbridled inequality, if allowed to continue, destroys the community, destroys whatever social cohesion holds us together.

So they developed, and attributed to whatever deity they believed in, the commandment for a Jubilee year, for every 10 years, or every 20 years. It varied. You would take the land and redistribute it. If you happened to have gotten a good piece of land that made you a rich person, in the redistribution, that land would go to whom? It would go to a person whose land didn’t get enough rain or didn’t get enough soil fertility, and that way the rich would become poorer and the poorer would become richer. And no one would become crazy about accumulating wealth because you are getting every day closer to the time when you would lose it anyway.

It just transformed the whole relationship of people to accumulated wealth.

And the irony is, of course, the same religion, once capitalism comes, has to get rid of that, and does get rid of that, because it would undercut the whole notion of the value, the incentive value, of becoming rich, which was their argument, which would justify the endlessness of exploitation.

All of that is coming to an end. That’s what it means to be at the end of an empire. The really interesting question, which maybe we should take up, is whether the end of the U.S. capitalist empire, is it the end of capitalism itself? Or not? That’s like asking: Is China the next empire? Or will the Chinese bring us a multinational community, which was after all the ideal of the League of Nations, the United Nations, and people who wanted to see peace as the rule of law, rather than violence, which is what we have now.

NIMA ALKHORSHID: Thank you so much. Michael, do you want to add something?

MICHAEL HUDSON: No, I’ve been saying the same thing that Richard has been saying. We’re the two people who were saying this because we’re taking the long historical point of view. And what Richard has just described is what Confucianism was all about: rulers were supposed to keep the peace. They were supposed to keep the population satisfied enough so that they did not revolt. And again, they’re reinventing the wheel now.

It’s a different mentality from America’s bully mentality: If you don’t let us take all of the wealth for ourselves, we’re going to hurt you.

I don’t think that was the philosophy of any earlier religion, which was the ideology of their societies. It’s Western finance capitalism, or whatever you want to call it, that has diverged from this core of civilization from the very beginning. So, in a sense, you could say that the BRICS and China and global majority are moving back to this central norm, leaving the United States and Europe isolated, unless they join the movement of history, instead of accusing this return to civilization as being a clash of civilizations, as if the U.S. and Europe is actually a self-sufficient civilization, instead of barbarism. The world will choose socialism, not barbarism, as Rosa Luxemburg put it.

RICHARD WOLFF: Well, I would add that we should remember one more historical reality. Successive kings of France accumulated wealth. But when the accumulation of wealth reached absolutely insane proportions in the 18th century, when you would have unbelievable urban poverty in Paris, and an hour away, in Versailles, you would see, as you can still see today, the most spectacular collection and concentration of wealth imaginable by the last king. He’s also the one who got his head chopped off. That’s how that story of the accumulation… you know.

And when you watch Jeffrey Bezos take over the city of Venice for two weeks of indulgence of his wedding, when he arrives at the port in his $500 million dollar yacht, that’s what we’re watching. We’re watching this eon’s Versailles. And we’re going to get the next step of it, likely, also.

MICHAEL HUDSON: Well, the question then is: Can this return to civilization that we’re talking about be done without a military confrontation? Is America actually going to war with China? It’s trying to stir up fights against China, with Taiwan, with its neighboring countries. It’s trying to stir up fights in Central Asia against Russia.

China was able to make its reforms because there was a revolution in 1945.

And when China emerged as a country in 1949, they didn’t have a financial class. So, of course, the government had to create the money. But that took a revolution.

Will it take a revolution, a defensive revolution, for the BRICS, and this higher civilization, to emerge?

Because the violence will not be on their part. Marx pointed out that there would probably be violence by the privileged classes, the rentier classes, by the landlords and the wealthy against the people attempting to get a revolution, as you saw in the Paris Commune in 1871. It’s the people who have made wealth without working, who know that there are parasites who are willing to fight so hard, and so violently, to preserve their claims on wealth that consist of the ability to impoverish the rest of the population below them.

RICHARD WOLFF: Yeah, and you have to wonder whether that isn’t matched by the military thinkers who tell us that looking, as a military person, at China over the last 40 years and the United States, one is crystal clearly ascending, and the other one is crystal clearly descending. And what that means is time is on one side, and not the other.

And what will that lead the military of the United States to contemplate?

NIMA ALKHORSHID: Thank you so much, Richard and Michael. Great pleasure, as always. Have a great time. Bye-bye.

Global South

Michael Hudson: The Collapse of America’s Economic Empire

Prof. Michael Hudson, a world-renowned classical economist, discusses one of his greatest books: “Super Imperialism: The Economic Strategy of American Empire”.

The US empire changed fundamentally as it transitioned from a creditor to a debtor, although it the model has now run into a wall.

US debt is unsustainable, its technologies are no longer dominant, and new centres of power are establishing alternative economic architecture. In the final stage of Empire, the US is threatening countries to use its currency and technologies.

Super Imperialism: The Economic Strategy of American Empire: https://michael-hudson.com/books/super-imperialism-the-economic-strategy-of-american-empire/ https://michael-hudson.com/

Global South

Michael Hudson: Understanding the Great Rip Off

Quarterly Q & A June 13, 2025
Please support Michael’s work by becoming a Patreon supporter. 

KARL FITZGERALD: Michael, it’s so great to see you. We’re all so enthusiastic about this meeting, so we’re glad you got here. Okay, let’s get into it.

MICHAEL HUDSON: We have seven minutes left to discuss the whole thing.

KARL FITZGERALD: Michael, I thought we had two hours tonight!

MICHAEL HUDSON: I know, I’m kidding. All right, let’s begin.

KARL FITZGERALD: Welcome, everyone, to our quarterly Q & A session with Michael Hudson, who’s been analyzing the economic matrix for 55 years. Over a dozen books. A lot of support out there for his work. We love seeing all the comments on all the different YouTubes he’s involved in.

Great to have our Patreon supporters here today to delve into the topics of the day from their perspectives. We really respect everyone’s support. The support and independent funding of Michael’s work is just so important. As we know, it’s getting harder and harder to get the word out. So, great! We can come together here and ask Michael the key questions of the time.

We do have a bit of a different format today. We don’t have a separate Q&A question stream, so just put your questions in the chat. After a little while, we’ll get some people to come up on screen.

So Michael, how are you reading the L.A. riots and what’s happening there? What sort of distraction agenda is going on in America at present?

MICHAEL HUDSON: Well, they’re not riots at all. Just as in Ukraine, you have people rising up against the army recruiters that are going in and grabbing Ukrainians to send them to the front.

Here, you have the immigration authorities coming. They’re going into Hispanic restaurants, they’re going into construction sites, they’re going into anywhere they think there may be Hispanics and just arresting whatever Hispanics, without looking at whether they’re citizens or not.

Just being a Hispanic is grounds for being arrested and quickly deported before they can have a chance to say: Let me go home and get my passport (that I usually don’t carry out, if I’m going to have dinner).

So Trump says: If you don’t agree with American policy, you’re a rioter, you’re a Marxist.

It would be wonderful if there were all these Marxists in California. California and Marxism are about as antithetical as you can probably get on the ideological spectrum.

So, a riot is simply not agreeing with what Trump said. And there are a number of quotes he’s been giving: I want everybody to agree with me. Or at his birthday parade this Saturday, he said: If there’s anybody with a sign or anything, they’ll be arrested.

We don’t have any First Amendment anymore, guaranteeing the right of free speech.

So if you want a right of free speech, and it doesn’t agree with Trump, you can be arrested.

You remember, or you may not remember, what Mark Twain said: If elections really mattered, they wouldn’t let you do it.

So basically, that’s the situation. Trump can do whatever he wants, and the Supreme Court can say: This is illegal under the Constitution. And Trump will say: What are you going to do about it? The Supreme Court doesn’t have an army. The Congress doesn’t have an army. He’s in control of the National Guard. And so he can send in the National Guard.

I remember in the 1930s, my father convinced Floyd B. Olson, the governor of Minnesota, to call in the National Guard to protect the strikers in the great truckers strike, a general strike in Minneapolis. And the National Guard was called in by the governor — not the president, the governor — to protect the strikers and the demonstrators against the thugs that — I’m told — Walgreens and other trucking companies had all called in to try to bang up the strikers.

So it’s possible that the National Guards can do some good, but that was during the Roosevelt era. Of course, by the time of the Vietnam War, the National Guard was called in to shoot students that demonstrated against the Vietnam War. And you had the shooting at Kent [State] University.

The National Guard has basically turned into the personal army of the president, and there’s nothing that the government can do about it. And there’s nothing Congress is going to change about that.

None of this is about economics. This is just in case there are non-Americans listening, and you don’t know the weird twists and turns of the American constitutional government and legal system. It’s all been very educational in the last few days.

KARL FITZGERALD: Okay. There’s interest from Suneil Basu on when your new book will be published on the debt crusades.

MICHAEL HUDSON: Well, the book’s all finished. It’s being proofread now, and the index is being made. The index, which is being made in Australia, will probably take about two months. Then it’ll take another month for the typesetting that’ll be done in Hong Kong.

I’m looking for a better cover designer. What am I going to have for a cover? If I do have an illustration, I’d like it to be on the left-hand side. You’ll have a church, and somehow this church will be metamorphosing into a bank. Because in America, many of the banks look just like the old Greek temples, the same “temples of finance,” you could say. I’m thinking that there could be something like that, but there has to be room for the title too. Otherwise, it’s just the title.

So, if any of you know of very good book designers, that would be appreciated.

There’s also something else we’re looking for. As you know, I do a weekly broadcast on Nima’s show, “Dialogue Works,” with Rick Wolf. And a number of publishers — lefty publishers — have wanted to take our lectures and put them into a book — at least the best lectures — and publish them.

But we need an editor, somebody who can go through–

In the early, maybe ten or twenty shows, I would give sort of my usual zippy remarks, and then Richard would usually have a fifteen-minute set piece that he would do. And many of the set pieces would go way beyond the topic that Nima was asking about. So there has to be some way of paring down what both of us say, to get the essence of what we’re talking about, as we’re analyzing the whole geopolitical structure of the world and how it’s all changing.

So, if anybody thinks they’d like to be a copy editor and have pretty free range in cutting, pasting, deciding what’s important, what should come out, how do you summarize, how do you boil down what was, let’s say, a fifty-minute interview (sometimes an hour or more), into ten or fifteen pages, we could have maybe twenty interviews.

And I would probably publish it through ISLET because lefty publishers don’t have much distribution anywhere. And if you’re not going to have distribution, at least we have the internet to let people know that they can order it, through Amazon or the usual bookstores that take their 40% cut.

KARL FITZGERALD: So, we are looking for a new book designer and an editor. So, crowdsourcing through our Patreon supporters here.

Andrew McKeen asks about U.S. Treasury debt levels. “[They] seem to keep increasing beyond all expectations but don’t seem to cause significant economic disruptions. When does that stop being the case? When is the level of debt just too much? And, Michael, what are you seeing with the U.S. bond rate? How’s that influencing that exact story?”

MICHAEL HUDSON: Well, today there are two problems. The pretended problem that the right-wingers — the Von Misesians and other people — are saying is: Oh, the debt is so high, the government can’t afford to pay it. And, somehow, the government will go broke and you’re not going to get the promised dollars of interest and principal that you invested. That’s just silly.

The advantage of having debt in your own currency is you can always pay the debt. There’s no problem at all in getting repaid for your 10-year bond, 30-year bond, short-term 2-year Treasury security, in your own currency.

The problem is if you’re a foreign investor in Treasury securities, if you’re a central bank, and you’ve been receiving all of your foreign reserves, basically, all of the money that America has been spending militarily over the whole world in excess of what it’s earning ends up in foreign central banks.

So Germany, Europe, Saudi Arabia, Russia, China all end up holding U.S. Treasury bills.

Well, what happens if they decide, as they’ve been deciding in the last month or so, they don’t want to spend their savings on lending to the United States, investing in government Treasury securities to finance the budget deficit that pays for the military deficit to go to war with them and fight against them?

So they’re bailing out of the dollar. They’re de-dollarizing. That’s one of the central things that I’ve been saying.

Well, the dollar’s gone down 10% so far under Trump, and falling.

So suppose you say: Oh, I’m going to buy 10-year Treasury securities. They’ve been yielding 4.5% for the last couple of months.

Well, what’s the point of investing in Treasury securities, getting your 4.5% in dollars? That’s okay, but if the dollar goes down by 10%, then you end up losing 5.5% on your investment. So it’s not really something that is safe at all.

This is the same problem with stablecoin. Stablecoin says: We’re investing every dollar that you put into the crypto stablecoin in Treasury securities.

Well, that’s fine. That means that the holder of stablecoin gets a Treasury security, but he or she doesn’t get any of the interest payment on it.

It’s the stablecoin or the other crypto company that organizes the crypto that says: Okay, you know, we’ve invested their money in stablecoin. We’re taking all of the interest for ourselves. We’re making billions and billions of dollars on this.

Well, one problem is they also will get the capital gain, if the dollar goes up, or the capital loss, if the dollar goes down.

So, suppose that you’ve invested in stablecoin and now all the investors say: Okay, we don’t want to be part of an international financial system whose purpose is to finance America’s military deficit and NATO’s war on the 85% global majority. So please give us our money back.

Well, the stablecoin company [says]: Alright, we’ll sell all of the Treasury securities that we’ve invested your money safely in.

But as they sell these securities, they’ll be getting much less dollar money than was put in because the interest rates will probably go up, meaning the price of these securities is going to fall as people cash into securities and make withdrawals.

Even though it’s all safely invested in securities, the securities prices go up and down.

And from 2008 to about 2022, you had the biggest bond market rally in history. You had interest rates going down all the way to 0.1%. So this means that a huge, huge increase in the price of people who held bonds that were paying 5%, maybe even 6% on government bonds.

Well, now that the interest rates are going up again, you’re having the price of the bonds going down.

So the problem is you can have a capital loss in your investment in Treasury securities, even though the government will pay you all of the interest and all of the principal that the bond says it’s going to pay. The market price of this bond is going to fall and you won’t get as much as you would have when interest rates were lower. That’s the problem.

KARL FITZGERALD: And with yesterday’s inflation figures out, coming a little lower than were expected, how does inflation relate to the rising interest rate and the bond interplay?

MICHAEL HUDSON: It doesn’t. That’s a myth.

The pretense is that — and this is a pretense that’s been made since the 1750s — bondholders and bankers are just like everybody else. They’re sort of middle-class people just trying to make a living and they live off their bonds. And if they make money on bonds — the interest — they spend it on goods and services. Somehow, the money that you pay them, they spend back into the economy.

Malachy Postlethwayt in 1752 had a whole argument about why England was running into trouble investing by borrowing from the Dutch. He said: When we borrow from the Dutch, we have to pay them debt service. And the Dutch don’t buy English goods and services at all. They don’t spend the money to England. In fact, they don’t spend their money on goods and services at all.

What do bondholders do when they get more and more interest that goes up and up and up over time? (That is, the interest-bearing debt goes up and up over time.) Well, they use their interest receipts to make more loans and buy more bonds.

Or, they buy luxury real estate, especially real estate in the biggest cities, the biggest cities specifically that are the big banking centers. So if, for instance, the Dutch did buy anything in England, they would buy nice, big, expensive properties in London.

And in fact, the more money that England paid foreign investors, whether it was Dutch investors or others, the more international investors would buy in England, and the balance — between London and other countries that were not banking centers — was going to become more and more disproportionate. London would grow relatively to the other centers.

And the other thing that Postlethwayt said, that the Dutch might spend money on (or English creditors, bondholders that bought British bonds)? They would spend money on goods and services — on luxuries, mainly Italian textiles — but not in England. I mean, England didn’t really make that many luxuries.

So this whole myth that, somehow, when interest rates go up and debt goes up, it’s all recycled into the economy…

And you have to keep the bondholders whole so that they don’t lose money off the fact that now that there’s a price inflation in goods and services — which they don’t buy — they would lose out. And your heart should bleed for them and say: We’ve got to make sure that if the prices for our goods and services go up, that the bondholders don’t lose money from this. We’ve got to cut back the money supply in order to keep the prices low, and impose austerity.

And David Ricardo came out, by the time he was a bullionist in 1809 and 1810. Ricardo said that debtor countries should not have any paper money at all. Paper money just increases the ability to spend. They should have hard money. Silver and gold coinage should be all that they had so that they’d keep the prices low.

And Ricardo’s aim was, of course, to prevent debtor countries from having enough government money to spend in subsidizing and developing their own industry and agriculture, so that they could do for themselves what England, France, and Germany were doing for themselves.

So to answer your question, interest rates going up and down are simply an excuse for the Federal Reserve to impose austerity using “junk economics.”

KARL FITZGERALD: Nice. And how much further can U.S. debt go? The “Big Beautiful Bill” pushing debts further up towards $40 trillion? Are bondholders going to keep buying this or de-dollarization? How much of a threat is this to America’s future?

MICHAEL HUDSON: Well, it’s a Ponzi scheme that has worked quite well so far.

A Ponzi scheme will work as long as there are enough new investors in the scheme to pay interest and dividends to the already subscribed investors. But you need to keep expanding and have more and more investors come in.

Well, for government debt, the government is the subscriber to the Ponzi scheme of government and private credit.

And the government can continue to extend money to the banking system, to the economy — more and more debt. The economy and the banks will borrow the interest to be paid. And as the volume of debt goes up, the volume of interest payments is going to go up, that the government has to pay, as well as rolling over the debt as maturities shorten, as the debt people only lend for a short-term period of time.

So you’ll have the government basically monetizing it.

And if you look at the Federal Reserve, the Federal Reserve now has a negative net worth on its balance sheet because it’s been just subsidizing the banks and the large financial institutions, so that they are able to remain solvent in an economy that, basically, is insolvent.

We don’t have enough money to pay the debts.

So, what do you do if you don’t have enough money to pay the debts? You print more money.

I would write down the debts, but obviously the government is not going to do that.

So, we’re just going to wait for some crisis. And the likely crisis will be not a problem of the government stopping printing money as the federal debt rises.

It’ll be foreign central banks de-dollarizing, isolating the United States economy, and saying: You know, we’re not interested in investing there anymore. We’re not interested in agreeing to the sanctions that the United States insists that we impose on Russia, China, and other countries. We’re willing to give up trade and investment with the United States to turn to parts of the world that are growing more rapidly, primarily in Asia.

KARL FITZGERALD: Virginia Cotts asks: “What would be the effect of a Zero Interest Rate Policy, a permanent ZIRP?”

MICHAEL HUDSON: Well, that’s what we had for quite a few years. Zero interest rates means that bank customers will borrow at zero interest, and they will buy a stock or a bond that’s yielding 4.5%.

For instance, if I could borrow a million dollars at zero interest, I could buy a 10-year government Treasury bond that’s yielding 4.5%. On that million that I borrowed, I could make $45,000 a year on it. I could just keep borrowing cheap, and investing in bonds.

Or I could invest in stocks that may pay dividends and capital gains together of, maybe, 9% or 10%.

And I get to buy more and more assets, bonds and stock, or real estate — on credit — and hope that the asset that I buy will yield a higher return — not only interest, but capital gain — than the zero interest rate that I have to pay.

So it guarantees that debtors can make a free lunch by borrowing, and also that there will be more and more financial institutions and individuals borrowing to bid up the price of assets. So you’re going to have asset price inflation for all of this.

Despite all of the debt, you’re not going to have debt deflation because even though there’s more interest that has to be paid, you still can borrow cheaper than the nominal interest and capital gain prospect that stocks, bonds, or real estate provide.

KARL FITZGERALD: Sunil asks another good question. “It appears that the U.K. is increasing its share of U.S. treasuries roughly at the same rate China is reducing them. Where is Britain getting the huge amount of money to do this?”

MICHAEL HUDSON: Probably from offshore banking centers.

Where is Britain getting the money to buy the U.S. Treasuries?

KARL FITZGERALD: Yeah.

MICHAEL HUDSON: I think it could be acting on behalf of other governments who are doing their transactions through the Bank of England, through England. I’d have to look at the overall balance-of-payment statistics to answer that. But it’s not really British money so much.

Where is England getting the money? Its economy is in a mess right now.

So it has to be foreign money going through England to the United States. And partly, maybe, it’s a lot of Europeans.

If you’re a German, for instance, you realize that Germany’s been defeated financially by the sanctions on Russia. They’re called sanctions on Russia, but the American sanctions are really sanctions against Germany and Europe.

It’s America essentially asserting its control over Europe, fighting to the last European business, until the last business, last industry, goes out of business. Just like we’re fighting for the last Ukrainian to pass away.

So, I would imagine it’s European money via England.

KARL FITZGERALD: There’s plenty of interesting plays going on there in the Treasury space. Who’s selling down their Treasuries more, Japan or China?

MICHAEL HUDSON: China is worried that the United States is simply going to confiscate its U.S. dollar holdings, as the United States did for Russia. Since America says, China is our number one existential enemy, you really don’t want to keep all your savings in the hand of someone who says you’re their great enemy, and they’re going to — in two years — attack you and destroy you. So it’s understandable why they may not want to hold dollars.

Japan, I think, is in somewhat of a squeeze right now. Right now, especially with the tariffs, Japan just isn’t obtaining the dollars from its foreign trade that it was obtaining before. And so it’s having to cover its balance-of-payments deficit by selling its savings in the form of Treasury securities.

KARL FITZGERALD: Okay, so gently, gently. Matt Connors has a bit of a tongue twister here: “I know the long-term goal is to get out of this system. But in the meantime, would something like a functioning society bond, in the spirit of victory bonds during World War II, be a worthwhile political tool for a new party? A clumsy question, I know, but I want to end the argument that we need to keep floating bonds with none of the money raised going to real social needs.”

And I suppose a way to reflect on that question is the Canadian use of community bonds, where they have community bonds that are used to raise finance for community housing, for example.

MICHAEL HUDSON: Communities cannot create money. They can accumulate assets and repay debts, but only a national government can create money.

So a community bond is sort of like a credit union account, or a savings bank and a savings and loan association. They’re not banks and they’re not part of the money creation process. They’re on the sidelines.

KARL FITZGERALD: Switching gears, Jonathan Becnel asks: “What assistance can Marxist political organizations in America help you, Doc Hudson, spread your economic message of an alternative GDP, that you suggested in our last Patreon meet-up.”

MICHAEL HUDSON: I’ve had almost no connection with any Marxist party in my life. They’re completely uninterested in finance.

I grew up in a Marxist family. I knew many Marxists. None of them had any interest or understanding of finance. And as far as I could tell, none of them read Volumes Two or Three of Capital. So they didn’t have any idea what Marx wrote about debt and finance and rent theory.

And this is not only the case in America and Europe, it’s the case in China.

I haven’t found much receptivity in China to my talking about land rent, or economic rent, or value theory, or the tendency of finance capital to grow exponentially to the point where there is a crisis — and to essentially act in a predatory and parasitic manner.

So, Marxism has really very little to say about what I talk about.

And the only reason that I’m considered a “Marxist” is I’m a classical economist. And my whole focus in all the work that I do is value and price theory. From the Physiocrats through Adam Smith to John Stuart Mill, the whole of classical economics unfolding reached its pinnacle, really, in Marxist value theory. And it’s very detailed.

Like the other economists before him, he said that the excess of market price over cost value is economic rent.

How do you explain the fact that prices are in excess of the actual cost of production to the landowner, or to the banker, or to the monopolist, or to the miner? And this is what Adam Smith, Ricardo, the Physiocrats, were all about.

And the classical economists were essentially the theoreticians of the emergence of industrial capitalism. They said: What do we need for Britain to become the workshop of the world, to become an industrial country?

Well, they all agreed that you have to cut the cost of production so that you can undersell your rivals. And Marx pointed out that the ideal of industrial capitalism is to get rid of all the unnecessary costs.

The unnecessary costs were economic rent that, as John Stuart Mill said, landlords make in their sleep, without playing any productive service at all.

So, the objective of all of the classical economists was to get free of economic rent. Starting with land rent, you get rid of the hereditary landlord class. How do you do it? Either you tax the land rent away, or you socialize the land.

You make it a public utility.

Same thing with natural resources. They’re the national patrimony. You don’t let them be privatized.

You let miners and developers, even oil companies, come in and they get a return on their capital investment to mine the ores, or the minerals, or the oil, but they don’t get a value for what nature provides for nothing. This should belong to the public domain.

Same thing with natural monopolies, railroads, communications, education, health care. The American school of the late 19th century said that the governments should provide these services on a subsidized basis, not to make a profit.

You don’t want any rent extraction to exist so that you support a class that gets income without playing a productive role.

Well, by the late 19th century, the landlords, and the bankers, and the monopolists, fought back.

And they said that there’s no such thing as economic rent, that everybody plays a role. The landlord plays a productive role. He decides: Who am I going to rent to, and how much am I going to charge, and how am I going to keep repairing the building?

The banker gets to create money on a keyboard. (It was paper and pen, originally.) They decide: Who am I going to lend this money to? Basically. But basically, there’s no cost of production for a rent-yielding purpose.

So, the whole idea was to minimize this entire cost.

Now, tell me what your question is again, and I’ll get to the point. Oh, about Marxism.

Marx refined the idea. All of the classical economists from Adam Smith on, Ricardo, had the labor theory of value, and said: Well, ultimately, how do we decide what’s the cost of production, as opposed to non-production costs? Well, it can all ultimately be reduced to labor.

And Marx said: Quite right, but what kind of labor are you referring to? Are you referring to the cost of labor to the industrial capitalist, or the price of this labor when the capitalist sells the products of the factory that employs this labor at a markup, namely, his profit?

This is surplus value.

Now, when Marx used the word surplus value, he didn’t say “rent.”

He said: It’s true that the industrialist sells a product for more than it costs, but he’s not like a landlord, or a banker, or a monopolist. He doesn’t make money in his sleep. The industrial capitalist actually plays a productive role.

And so, the profit and the surplus value that the industrial capitalist makes is an element of value.

And that should be included in the economy’s measure of product.

What should not be included in the economy’s product would be economic rent: the land rent, the natural resource rent, the monopoly rent, and the financial returns from the banking privilege. All rent is a return to some kind of political privilege, or other, and this is not part of the production process.

And Marx, more than his predecessors, was very clear in dividing the economy into two parts: the production economy that we’re all familiar with, and what he called the “circulation economy.” He meant the financial real estate sector — what I call the FIRE sector: Finance, Insurance, and Real Estate, plus monopolies.

Now, suppose you translated this value theory into national income, or GDP accounts. The GDP being gross national product would include what’s actually produced by industry, agriculture: actual output.

But the anti-classical school, which basically was a reaction against classical rent theory, said: Well, there’s no such thing as rent, and so there’s no rentier class. And so there’s no return to rentier products.

So it’s all part of GDP. It’s all part of the product: The landlord creates a product, the banker creates a product, the miner creates a product, the monopolist creates a product.

And so, if you follow the classical value theory, then you’d have the GDP of the United States being maybe only, order of magnitude, half as large as it actually is. Because at least half of what is counted as national income and product is the returns to the finance, insurance, and real estate sector, and the various monopolies. Whereas in China — that does not have an independent financial class that makes money financially — China has essentially industrialized the financial system and creates money through the Bank of China for what it considers to be actual production, not speculation.

So China has a much higher proportion of what the United Nations consider to be GDP than the United States, that has all of this rentier exploitation, and what Marx called unnecessary costs of production, and what Mill said [was] income that they make in their sleep.

So that’s the difference.

And you can imagine that this is exactly why the vested interests do not want to follow classical value theory. And since Marx was the last great classical economist — there were also Thorstein Veblen, he came later, there were others — but it was Marx.

If Adam Smith were alive today, he would be called a Marxist. If John Stuart Mill were alive today, he would be called a Marxist. Anybody would be called a Marxist who says there’s such a thing as economic rent and it’s unearned income, because that’s what Marx said, like all the other classical economists.

So, the whole history of economic thought has been dropped from the academic curriculum so that people won’t really know what Adam Smith said, what Ricardo said, what Mill said. They were supposed to be free-market economists, but the whole meaning of a free market has been turned inside out.

When the classical economists talked about a free market, they meant a market free from economic rent, and from the rentier class. Now, the anti-classical reaction says: No, no! A free market is a libertarian market. It’s the freedom for rentiers not to be regulated by government, not to have their rent taxed away. It’s the freedom to be able to become a rentier at society’s expense.

That’s basically the inversion of classical economics.

And today, almost all classical economics is considered to be part of Marxism.

And in that sense, because I’m a classical economist, I’m considered to be a Marxist.

KARL FITZGERALD: And so neoliberalism is really eating the eyes out of classical economics because so few people actually understand what you’re talking about that they can get away with it.

When I hear Michael of talk about the alternative GDP discussion, that’s what happens after decisions are made. It’s far better to think strategically and work on tax reform and get in front of those decisions, so that we can target these rentier incomes and actually make a difference. It feels, for me, frustrating when people talk about the need for the World Happiness Index, or some other form of GDP measure: It’s too late by then. The problem’s already occurred.

Let’s get stuck into the tax reform. And that’s what the classical economists were on to.

MICHAEL HUDSON: Well, happy… I never liked the whole idea of happiness, it’s silly. I remember I must have been about 22 years old, and I was invited to a party, and they were passing drinks around. The hostess came over to me and said: Are you happy? And I thought, gee, it’s a philosophical question: What is happiness? And she said: No, no, do you want a refill on your whiskey?

I mean, that’s my idea as far as I can understand happiness. I’m not a philosopher.

KARL FITZGERALD: Yeah. Okay. Why don’t we open it up? Karl Sanchez, you got a question there. Do you just want to ask it? Come on screen.

MICHAEL HUDSON: There you are.

KARL SANCHEZ: I’ve got to figure out what I wrote here now. Oh, yeah. What did Marx specifically write that pissed off the capitalists and the rentiers? Why did they wage war on Marx/Marxism?

MICHAEL HUDSON: They were waging war not against Marx himself, but against the whole of classical economics. They were waging war against Adam Smith, against John Stuart Mill, against Ricardo. They were waging war on the concept that some people did not earn the money and the wealth that they had. That some was unearned. It was an unnecessary cost of production. The money that you paid them wasn’t for them playing a productive role.

And the parasites said: We are not parasites. We are part of the host itself.

And that’s the point that I made in Killing the Host, that they wanted to be considered productive. That’s what they didn’t like about Marxism.

Quite apart from the fact that — before Marx, the value theorists who developed the theory of value and price (that price is the excess of rent over cost value) — these were basically bourgeois. They were capitalists. They were not trying to develop: How do we make industrial capitalism more efficient?

They made it ‘more efficient’ by minimizing the amount of wages that they had to pay their labor force. And to Ricardo and the other classical economists, you minimize what you have to pay your labor by making their food cheaper, by making their basic needs cheaper, so that you didn’t have to pay them enough money to pay agricultural landlords for high-priced food, housing landlords for high-priced housing. You didn’t have to pay any of that.

But what Marx said was: Let’s look at this from the point of view of the workers. Do they really need the capitalists to be the major investors?

You’re already having government investment in public infrastructure, government investment in America, the Erie Canal, the railroad. Private investment is not as cost-efficient as public investment.

So, to them, the fact that the whole tendency of classical economics was to evolve into socialism.

And the opponents of socialism, mainly the rentier class (the rent-extracting class), didn’t want to see governments get strong enough so that they could tax the land.

They said: We don’t want a strong government. If we can keep governments weak, they won’t be able to tax the land and we can defeat them. They won’t be able to regulate banking and keep us honest. They won’t be able to regulate rents and keep the price of housing from being extortionate on housing people. They won’t be able to have antitrust legislation to prevent monopolies from exploiting people. So, essentially, these were opponents of governments strong enough to actually implement classical political economy.

KARL SANCHEZ: Okay, so you have the rentiers, we’ll go ahead and call them that. Now, the main argument that I recall against communism was that they’ll take your property from you. That’s what was said to America back in the Red Scare after World War I: The communists will take your property from you. You’ll lose all your property to them. They’ll confiscate everything you own.

Now, I don’t think there’s a shred of truth to that because, as I understand it, you can go ahead and keep your property. It’s just a matter of now it’s going to get taxed. You’re not going to be able to go ahead and keep the excess that you earn from that property.

MICHAEL HUDSON: That’s right. The Marxists and the classical economists said: You don’t have to take their property. You just have to collect the economic rent that the property has.

Same thing, look at Russia today. You don’t have to actually take back the property that the kleptocrats have registered in their own name, from the oil industry, all of the other assets that they stole in the 1990s. All you have to do is collect the rents from these properties. You can leave them with the property.

The key is the income from this property.

KARL SANCHEZ: So the big lie back in the Red Scare in post-World War I was that the communists will take your property. That was the big lie that was said. Was it ever really backed up by any particular empirical evidence? I don’t recall ever reading anything in my history quests that showed any of that. It was just, you know, that’s what the narrative was.

MICHAEL HUDSON: Well, while that was going on, think of Lenin. He had the New Economic Policy, the NEP. And he certainly left the property in the hands of the bourgeoisie, but he didn’t permit them to make an income that was exploitative.

And, of course, this occurred much more in China under Deng. Deng said: A white cat, black cat, what difference does it make as long as it catches mice?

He let one hundred flowers bloom. He let individual enterprises develop and they can get rich.

And if you got super rich, like Jack Ma and other billionaires, you’d say: Okay, you can’t get that rich. We are going to have some kind of progressive wealth tax. And even if we don’t legislate a wealth tax or a rent tax, we’re not going to permit billionaires getting much more than we think is morally right. But we’ll leave you with the property. You just can’t become a billionaire from it.

KARL SANCHEZ: Okay, that covers the question that I had pretty much about wanting to pin the tail on a donkey, with regards to the whole narrative scheme that communism is evil, and all that. So, essentially, it was a big lie from the get-go, and all too many people swallowed it.

MICHAEL HUDSON: Remember, they were saying that government is evil, Adam Smith is evil, John Stuart Mill is evil. What they called “communism” was everything that was considered industrial capitalism a century earlier.

KARL SANCHEZ: Right. So in your investigations, did you uncover anything that was specifically publicly stated like that? Did you ever find out anything that was specifically publicly stated in that manner? Papers written or speeches given?

MICHAEL HUDSON: No, Marx did not write–

KARL SANCHEZ: No, any of the reactionaries, in what they said?

MICHAEL HUDSON: What you do have is their alternative explanation of price. You had the English saying, well, there’s no such thing as rent creating an excess of price over value. The consumer is king, and consumer utility is what explains the high price. It has nothing to do with cost of production, nothing to do with economic rent. It’s just if consumers want something, it’s going to be a high price, relative to the cost of production. And they didn’t distinguish the cost of production between necessary and unnecessary costs, between profits and rent.

You had the Austrian school, also, that tried to imagine that there could be an idealistic economy without government at all, when essentially the capitalist sector could do whatever it wanted. Like it did in Vienna, murdering the communists. The communists were accused of violence.

What Marx did say is that the rentier class is going to fight with violence to prevent economic reform. Look at the Paris Commune in 1871, I think, around that time of the Prussian-French War.

Marx saw that it was the classes that did not have to work for their income and actually create their own product that were fighting to keep their privilege. That somehow the classes that actually did work — the industrialists and labor — did not fight with the violence that the rentiers fought back: the Austrian school, and the right-wingers in the United States — the followers of anti-rent theory of John Bates Clark, and the anti-classical reaction that I described in Killing the Host.

KARL FITZGERALD: Interesting. Michael, information flows are one of the big criticisms under the communist system. They don’t rely on the pricing mechanism to allocate resources. Have you seen any improvements in socialist/Marxist thinking on how those information flows can be improved to better reflect genuine price?

MICHAEL HUDSON: That gets into computers and things, and I’m a techno-peasant, so not my department.

KARL FITZGERALD: Okay, let’s move on to Steve Reed, who asked a good question, and good to hear from you, Steve: “I’d love to know the historical countries or places where money creation was done by the ruler for the good of the people, and not private debt-based.”

MICHAEL HUDSON: Well, all money is debt, and some kinds of debt are accepted as money.
So if you’re talking about money creation, you have to talk about credit and debt creation. And that goes way beyond money itself.

And if you talk about money without credit and debt, then it’s as if you’re talking about commodity money instead of money as a legal institution, as Aristotle pointed out. And as I describe in my history of the Bronze Age […and Forgive Them Their Debts], and Temples of Enterprise and Creating Economic Order, and the other books that I’ve talked about antiquity.

And the book that I will be publishing, that Karl mentioned at the very beginning on the history of the banking sector’s political alignment from the Crusades to World War I, is all about the transformation of money away from commodity money, to government debt serving as money, starting with the Bank of England.

KARL FITZGERALD: Yeah, it’s going to be fascinating to see that book come to life, Michael. Really looking forward to that one. Kimberly Mims from our excellent transcription team has a bit of a long question, but let’s get into this: “A new generation of Americans is talking about feeling, character, role, story at work and at play. Hollywood film, theater and performance art are coming together. The other day, Norman Finkelstein compared Rosa Luxemburg and her cohort unfavorably to today’s left. The point, someone has scored a generational win against labor as a classical European enlightenment project. Can it be reversed or moved productively forward?”

MICHAEL HUDSON: Could you paraphrase that?

KARL FITZGERALD: I’d love to. I think she’s talking about identity politics working against labor and how can the left move forward from that?

MICHAEL HUDSON: There we go. You’ve explained it all.

The Democratic Party is the most anti-labor party. It’s the hardline Wall Street party. And its idea is how do we get voters to stop talking about economic issues? And so their solution is identity politics. First of all, during the 60s and 70s, there was ethnic politics. The Democratic Party was divided into organizations of Greek-American, Italian-Americans, Irish-Americans — they worked through various ethnicities to get that. Then it gradually became increasingly racial equality politics.

And then finally, the great breakthrough was under Clinton and the really hardline anti-labor strategists who said: Let’s bring in the LGBTQ. And so you can have every different, every kind of identity — Irish, Italian, black, white, LGBTQ — every identity except being a wage-earner. And if you can just keep distracting people so that it’s every identity except the one common denominator of being a wage-earner, then they’re not going to see what an enemy of all of them the Democratic Party is — and its support of Wall Street, its support of war, its support of the military-industrial complex, its support of the landlord and financial class.

It wants to make itself invisible by having people talk about something other than its identity and their identity, which are opposite.

KARL FITZGERALD: Dena Lebowitz has another long question. Let’s see where we go with this one: “We’ve read that one explanation of the whole U.S. deportation of tens of thousands of refugees and immigrants is part of a program planning to remove people currently working low-paid jobs and to replace them with children, as well as to replace them with almost rightless H2A visa workers. The point of this, according to various sources, is to create a large, extremely vulnerable sub-class of workers, unlikely to fight back, to disempower workers altogether.

“Also, Bukele is apparently in bed with the gangs and wants as many gang members shipped to him ASAP because their prosecution through the U.S. courts will expose this. Any thoughts on this? Please speak on how different sectors within the elites are fighting.”

How is this likely to play out?

MICHAEL HUDSON: Again, if you could translate that question into something more specific, I don’t know what the connection is.

KARL FITZGERALD: I’m seeing from Australia a fake battle between labor and capital being set up so that rentiers can continue carrying on as usual, and the immigrant deportation thing is the giant distraction–

And Michael, please tell me what’s happening with special economic zones. I want to hear the analysis of what Trump’s doing through the “Big Beautiful Bill.” What tax carve-outs is he putting in there for the rentiers?

Those special economic zones–

MICHAEL HUDSON: To me, it looks like just old-fashioned American racism. White people hate people who aren’t white. They hate the Indians. They hate the Blacks. They hate the Native Americans. They hate each other’s ethnicities.

That’s what Western civilization – that’s what Christianity is all about.

The Western religions are hate religions, and the population is brought up to hate. That’s what made Roman Christianity different from every other religion. And I go into this in my book on the Crusades. I explain why it was that the Roman church — the papacy — became so authoritarian, in order to reform an utterly corrupt Roman papacy.

The first crusade was supposed to liberate Jerusalem, but Jerusalem didn’t need liberation. There was already a Christian church there. There was a Jewish church there. There were Islamic churches there because the Muslims were in charge. The Muslims were tolerant of all the different religions, all the way from the Middle East to Spain, and Sicily, that was very largely Muslim.

Charlemagne, around the eighth century of our era, decided to declare — and his forebears declared — war on the Saxons in northern Germany and tried to kill them because their religion was based around sacred trees.

There was this intolerance that was characteristic of Western civilization that had not characterized other civilizations all the way back through antiquity.

You remember Persia, when Persia conquered Babylonia, they left the Babylonians to follow their own religion: You can do whatever you want, as long as you pay taxes and tribute.

They were all tolerant of the Jews. There was no anti-Semitism.

It was the Catholic Church that really introduced anti-Semitism, just as it introduced the anti-Muslim, anti-Islamic spirit: There can only be one God and one church, and that’s us.

It was all a kind of power play, and that feeling of religion that if you’re not part of our group, you’re not going to heaven, you’re the devil. This either-or polarization thinking, politically, and ethnically, and racially, and religiously, every other way, is a distinct feature of Western civilization in the modern era. It just didn’t occur before.

And in America, it’s really the worst of all because of America’s history of slavery in the South.

But what began simply as race hatred and a hatred of Indians, Native Americans just as much, became a hatred of the new immigrant influx — the Central Europeans, Central European Jews, the Italian immigrants, the Irish immigrants (especially the Irish). They were all really prejudiced against. All this is distinctly American.

I think that Trump simply wants to get elected and he’s appealing to this rotten American identity politics and racism, quite different from the Democratic Party’s identity politics, in just a demagogic manner.

KARL FITZGERALD: But Michael, when it comes to racism, don’t you think that the original sin was indigenous people around the world inherently understanding the value of the earth? And that was something that must be despised and deterred at all fronts. And so that’s where the genocide originally began–

MICHAEL HUDSON: Yeah, that was the cover story. They really wanted to just to get rid of the domestic population. I mean, all they really wanted was gold. And all they wanted was the metal: the silver and the gold.

But again, there was a hatred of the other. There was a hatred for people who were not yet Christianized. And even after you’d be Christianized — if the Jews would convert to Christianity (the Marranos) — they were held again with some degree of hatred. I mean, all of that was a by-product of the Catholic Inquisition. You know, the Americans are still singing popular songs about that.

Do any of you remember the movie The Singing Nun with Debbie Reynolds? There was that tune, “Dominique?” It’s about the Dominicans killing and torturing the Cathars of France for saying that their Christianity thought that, yes, there is a heaven and hell, and the hell is here on earth, and it’s run by the Church. So they all had to be killed. And that was the Inquisition. I mean, to think that that can be a popular song by the Church, and they make funny movies about, you know, happily singing about the Dominicans, is quite something. I think that there were later comedies about Torquemada, the Grand Inquisitor of Spain, by comedians. But that was meant to be black comedy, not really serious ditties.

KARL FITZGERALD: What about the role of art in previous times, helping the everyday person to understand the role of the rentiers? You mentioned Mark Twain earlier. There was a long tradition of artists who understood the power of monopoly and helped to break that down through poetry, music, theater, and the like. Where do you take your leads from on that side?

MICHAEL HUDSON: There was a big anti-monopoly movement. It was all untracked, unfortunately, by someone who hated classical economics — Henry George — who essentially said there’s no such thing as economic rent, which is ironic.

KARL FITZGERALD: Come on! He did not say that!?

MICHAEL HUDSON: Yes, he did. He wrote this awful book, Progress and Poverty, when he said: I agree with the attack on classical value theory that says rent is the excess of price over cost value. That’s not it at all! Rent is the price, is what the British say it is. It’s all consumer utility. The consumer is really a king.

He expelled anyone who talked about classical economics. Anyone who talked about Marxism he expelled from his group. Nowhere, in any of his writing, do you have any discussion of classical value and price theory.

He said: I’m the person who invented the fight against rent. He was a narcissist and he really took the side of the opponents of economic rent. He was a libertarian and said: You must not have a government strong enough to tax landlords because a strong government is the enemy. I’m a libertarian. You need a small government. So he crippled the whole idea of fighting against economic rent by being a socialist. He declared war on socialists. He was a right-winger and spent his life fighting against socialism, expelling the socialists.

He wrote a wonderful book on the Irish land question that made a reputation. Then he wrote Progress in Poverty. It was a very popular journalism book. But he was a journalist, not an economist. And so the socialists and the labor groups of New York City said: Well, we really want to have a chance to take over New York City. And they nominated Henry George to be mayor. And George said: Only if I can write the political program. They had read Progress and Poverty. They were under the illusion that he wanted to essentially get rid of economic rent and the power of landlords.

Well, the first thing George did was get rid of all of the rent controls. He said: All you have to do is tax rent, and you won’t need rent controls anymore. He got rid of every socialist, every element of the platform, except tax the land, without looking at the economy as an economic system. And basically, he very quickly dragged his followers to fall off the right wing of the political spectrum.

And so the combination of saying a small government — we don’t need big governments because that’s socialist. We don’t need the value theory of Adam Smith and John Stuart Mill and Marx. That’s socialist.

He was all by himself and ended up completely being isolated.

And when there was a revival of Henry George followers in the United States in the 1920s, they were all right-wing libertarian anti-socialists, exactly the kind of people that you and Karl described earlier: the right-wing anti-socialists. So that sort of helped untrack the fight against land rent in the United States.

And you had, during the 1890s, Marxists and followers of George going around the country debating each other. And these were published by a Marxist publisher in Chicago, Charles Kerr and Company. And the debates were really wonderful. They spelled out the difference between socialism and the classical economists, on the one hand, and the Georgist followers, on the other. And all of this was spelled out.

And they kept saying: Well, why don’t you followers of Henry George become socialists and support a government strong enough so that we can, first of all impose rent control, take away rents, then we can begin to get tax out of the landlords, tax all of this? George would have no part of it.

So, the socialists said: Okay. You go your way, we’ll go our way. We’re going to talk about labor issues and social democratic reforms, you know, what labor needs, what government reforms for the poor need. You can handle the economic rent. But we’re all in favor of taxing land. You don’t want to work with us. So, goodbye.

KARL FITZGERALD: So, Michael, I don’t know how you got from arts to your beating up on Henry George, one of my heroes.

But yeah, it’s perfectly acceptable for there to be a diversity of tactics. We know that there is a strong libertarian movement in America at present. So, why not speak to them about the economic efficiencies that taxing land and monopoly can create, and reducing the dead-weight costs–

MICHAEL HUDSON: Because they’re crazy people. There’s no point in talking to a crazy person.

KARL FITZGERALD: You could say that about plenty of socialists as well. How do you find the radical center and be able to speak to both left and right at once? And that is the beauty of being able to talk about the lowest dead-weight costs when you do tax land and monopoly.

So, that’s how I speak to government here in Australia, and that’s how I’ve changed three taxes.

Henry George did come up with a really powerful economic formula: production minus rent equals wages plus interest.

MICHAEL HUDSON: Ah, that’s it! I forgot to say George was a big promoter of the banks. He was a defender of the rentier class. He was the defender of the financial class. Of course! That’s what I should have said right away. If you look at his awful chapter in Progress and Poverty, he calls profits interest. He wanted industry to be financialized. He was basically the apostle of financial doom. That’s exactly it. Imagine, interest, celebrating interest…

KARL FITZGERALD: Certainly that chapter was not his best effort, and it would have been much more advisable if he’d taken Flürscheim’s much wiser approach to interest. But switching back to the–

MICHAEL HUDSON: I want to interrupt. The reason that you and other Australians have an appreciation of George is because of Michael Flürscheim, who came to Australia and had originally been an associate of George because he saw the need to tax the land as part of the overall reform of the rentier class.

But he also saw the role of finance very clearly and was a wonderful popularizer. His Clue to the Economic Labyrinth, I think, was published in Perth initially. At least the copy that I bought, it was published in the 1890s.

And it was Flürscheim that sponsored these ideas in Australia. Flürscheim had tried to popularize George. There was a big land tenure conference in France, in Paris. And he brought Henry George to Paris and George got very embarrassed. He was unable to be the center of attention because other people were talking about Adam Smith and John Stuart Mill and socialism. And so, Flürscheim said, George just stayed in his hotel room all alone, and went with his wife throughout Paris. He was too ashamed to show himself in public for being so economically illiterate and unable to be part of the discussion with people who actually talked about economics, not just journalistic sloganeering.

KARL FITZGERALD: Andrew McKeen says: “I thought if you tax the economic rent properly, you don’t need a big government. And Michael, I would love to hear you talk more about it.”

MICHAEL HUDSON: Karl, the entire thrust of the 19th century classical economists was to tax the land. They failed. They thought that this was what classical economics was all about. Of course, they wanted to tax all forms of economic rent, monopoly rent, and finance, but it was all trying to free industrial capitalism from the landlord class. It failed.

KARL FITZGERALD: We understand that. So let’s talk strategically. Imagine, you’re, what, 84? We’ve got to get this wisdom out of you.

If we are to have a strong government so that they can take on monopoly, and we also have a pricing system that’s reflective of production plus a small return to capital — reasonable return — where is the role for big government? Do we have an army of lawyers, like Matt Stoller has sitting in every court case, government versus big monopoly? Where is the resourcing of government dedicated towards, to keep monopoly in check?

MICHAEL HUDSON: I see the problem. How do you get from here to there? Of course, what you describe is just exactly what would be ideal. Of course, we’d like what you describe. Of course, it would be how you want to end up. The problem is that, as I said, and as we were talking about with Karl Sanchez, the rentiers fight back violently.

And it looks like the only countries that have been able to prevent a rentier class from taking over, — either the landlords or, in the modern world, the bankers — have been through revolutionary form. First, the Russian Revolution, and then the Chinese Revolution. You needed a revolution, and the Chinese Revolution got rid of the landlords, and got rid of the financial bankers. And so the government, of course, had land as a public utility. And, of course, had money and credit creation and banking as a public utility. But you needed to get from here to there.

And it looks like, because of the willingness and ability of the rentiers, being the vested interests, after all, to use their power as vested interests to control the army — as Trump is controlling the National Guard, as we discussed. I think Marx said the end of capitalism will not be a pretty sight. Well, that’s the problem. How do you get from here to there? Now, that was the problem with what Henry George said. How to get from here to there?

He would have had to work with a socialist movement to essentially overpower the landlord class.

KARL FITZGERALD: Let’s get to the point now. Let’s get to the argument now. We’ve identified that people would prefer in a way to focus on identity politics rather than understand the pricing structure and rentier behavior. The people at the forefront of this pressure of high land price, high banking costs, high taxation, are small business.

So, I said at the last gathering that if we’re going to get anywhere, we have to find a way to split the right wing, to reveal what in Australia are called the classical liberals. Probably the wrong terminology in America, but these are people who respect the market system but know something is wrong, and recognize that if we pull the power of big business backwards, we get a fairer society where we can walk the streets without worrying about being robbed.

MICHAEL HUDSON: Well, that’s exactly what I’m trying to do, Karl. And now I realize what the problem is. If you just say the enemy is the landlord, then you don’t realize, well, who’s protecting the landlord?

The protector of the landlord is the financial class because in today’s society, you no longer have a hereditary landed aristocracy that lives off its hereditary ground rent as the legacy of what their forebears had conquered.

Anybody can obtain housing or buy a commercial office building. But in order to afford a home or an office building, you have to take out a mortgage. The result is that the land rent is used to pay interest. Rent is for paying interest.

And the leadership of the fight against critics of rentiers are the banks. The banks are protecting the landlord class because 80% of bank loans in the U.S., England, and other countries, are mortgage loans. And of course, the banks are going to protect their number one customer, the real estate sector, just as they protect their other customers in the monopoly business.

So it’s the banks that have become the central planner and the controller of fiscal policy. That’s also a theme of my book on the politics of international banking from the Crusades to World War I.

So, you have to realize that, yes, landlords collecting rent are bad, but let’s go after their big protectors, the banks. You have to attack the banks. And if you celebrate interest, and say, I’m all for interest — like George did — then poof! You’ve crippled your vocabulary. You’ve crippled your way of thinking about how to create a political movement to explain what I’ve been trying to do for the last, really for all my life, to explain how it’s the financial sector that is the protector of the rest of the rentier sectors altogether, because rents are for paying interest.

KARL FITZGERALD: Yeah, well, how does it play out today with the Koch brothers, the Heritage Foundation, Project 2025? Are they really bankers behind that, or is it other, you know, the conglomeration of rent-seekers that have driven this agenda that’s now created this immigration paranoia distracting from what AI has just told me the “Big Beautiful Bill” is expanding in terms of tax deductions?

MICHAEL HUDSON: Well, the Koch brothers made their money in rent-seeking. Especially their big fortune, I think — I’m told — was stealing oil from the Native American Indian reservations. And they were about to be prosecuted under the Clinton administration, when you had the Clinton affair, with the dress and all, coming out. And the deal was, okay, we’re not going to impeach. The Republicans agreed not to impeach Clinton, if Clinton agreed not to prosecute the Koch brothers for their steals.

So, the Koch brothers realized that you can’t really come out and say, I’m going to have a political party that is all in favor of economic rent, because you don’t even want people to think in terms of economic rent. You try to get a populist cause by appealing to the lowest common denominator. And as you just pointed out, the lowest common denominator is anti-immigrant racism. And the Koch brothers and these other right-wing institutions are part of the whole matrix of fighting against thinking about how to create a government and a society without a rentier class.

KARL FITZGERALD: So the “Big Beautiful Bill” has enhanced tax breaks for real estate investors, including 100% bonus depreciation restored; the Section 199A deductions extended for real estate investment trusts; and estate and gift tax exemptions increased from $15 million per individual, or $30 million per couple, indexed to inflation. Alongside of that, the SALT deduction cap has been raised to $40,000 to give relief to property owners in high-tax states.

Additionally, the special economic opportunity zones have been expanded with a limit of 25% of eligible low-income tracts per state. My understanding of the special economic zone is, if you invest in a community, you get a 50% capital gains tax deduction if you leave the investment there for a decade. So, yeah, these are the things, Michael. I would love to hear American–

MICHAEL HUDSON: I’m glad you brought up Karl Marx again. This is very important. It was Marx who created the theory of depreciation as an element of value. Prior to Marx, the classical economists only considered income as a component of value, the return to capital. And Marx said the value of an industrial product is not only the return to capital, it’s the actual original capital investment itself.

And he introduced the concept of depreciation into value theory, or what now is called EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization.

Well, what has happened is that the real estate sector — and I’ve written quite a bit about this, and I think you were alluding to that in your lead-in — they pretend that real estate depreciates, and they pretend that buildings depreciate. And all of the American statistics follow this false, misleading economics that pretend that they increase in the market price. The market price of real estate is the increase in the construction cost of a building. Every time a real estate property is sold, the new owner of the property — if it’s a rental property, homeowners are not allowed to charge depreciation, but commercial investors are — they’re allowed to start depreciating the building at a higher and higher and higher level.

And what you and I know is really land rent is somehow included into the price of the building.

That whole twist to give free money to the landlords was developed by the head of the Schalkenbach Foundation and the Henry George School, C. Lowell Harriss, that basically supported all that. It was a Georgist who thought, well, in order to have a land tax, we got to get mayors on our side. Who finances mayors’ campaigns? The real estate interests. So, if we can back the real estate interests, we can get the mayors to support Henry George. And here, if we give them a whole giveaway with free depreciation, look at what we’ve done. They’ll support Henry George. As long as he supports the landlords, they’ll support him back.

This was the craziness that I encountered.

When you say 100% depreciation… Imagine, if you buy a building, you begin depreciating the whole building right away, not at twenty years, or seventy. The depreciation tax write-off that you do not have to pay income tax on because it’s not considered income? It makes real estate tax-free. It makes any kind of monopoly tax-free, if you can somehow depreciate the monopoly privilege.

And so the concept of depreciation has been turned into a way of making rentier, rent-yielding properties tax-exempt. That is the twist.

I know that’s very technical. I’ve written about it. I think I have all my charts on that in The Bubble and Beyond, and I’ve described it more briefly in Killing the Host, and the other articles that I’ve published. The articles that I’ve written with Dirk Bezemer have all the statistics on this depreciation rip-off.

KARL FITZGERALD: That’s why Trump calls depreciation a beautiful thing–

MICHAEL HUDSON: Yes, it’s why he didn’t have to pay income tax.

If you’re a landlord, because of depreciation, you don’t have to pay tax on land rent. That’s the irony. Look at how economic orthodoxy has been inverted from the time of the 18th century Physiocrats and Adam Smith to the 19th century classical economists who wanted to tax the land. And now the orthodoxy makes land rent tax-exempt.

That’s the inversion of economics. And it’s only by studying this inversion and by studying value and price theory and analyzing its components (EBITDA) and the twists and turns it’s taken, that you can somehow educate a political movement to understand the rip-off that’s been pulled.

Most people don’t understand that rent-seeking is a rip-off.

And even Milton Friedman, and even Margaret Thatcher’s advisors, recognized, yes, there is such a thing as economic rent, they never really followed it up and said that is today the most important economic concept, just as it was in classical value theory.

KARL FITZGERALD: Yep, I think that’ll be the title of this episode: “Rent-Seeking is a Rip-off.” Nicely said.

But behind that, a whole depreciation play is really the drive to downvalue the value of land, of the earth. And so property valuers have been encouraged to overestimate the building valuation, and underestimate the land. And that’s maxed the depreciation write-offs, but it’s also helped delegitimize an understanding of how location, location as the number one real estate strategy was also the number one taxation base for government, back when Adam Smith was writing about it. That was the understood trajectory: We were heading that way to remove these feudal overlords from our lives, once and for all.

And we could do it in a way that was more efficient than what tariffs, and the like, could deliver. So yeah, what’s your latest take on tariffs? Where are we sitting on TACO Trump? And can we just call him Dickie Don now, Dictator Don?

MICHAEL HUDSON: I should say that one of the tragedies of the socialist revolution is that it has not applied the land tax. The Soviet Union got rid of landlords and so they got rid of the concept of economic rent. And they didn’t take into account the rent of location, and how important that was.

And certainly the Westerners who bought real estate in Russia found that.

And China has not taken in the rent of location as a means of preventing the increased rent of location in the form of land price that became the real-estate bubble.

I’ve had the most difficulty of introducing the concept of economic rent to socialists. Marxists don’t accept it, and governments that consider themselves to be Marxists have a resistance to thinking of the concept of economic rent. That’s how far they’ve moved away from Volumes Two and Three of Capital and the classical economic tradition on which Marx was based.

KARL FITZGERALD: Matt Connor says: “Two hours of Hudson equals three hours of future reading to keep up.” Good point there.

MICHAEL HUDSON: It helped that I got very annoyed that I had to wait a half-hour to get on, and my annoyance gave me enough energy to go through all of this. Isn’t that ironic?

MATT CONNOR: Yeah, and that’s three hundred hours, not three hours. And that’s an understatement, for sure.

KARL FITZGERALD: Yeah, well, get into it, Matt. There’s so much interesting reading out there that Michael brings to light.

Karl Sanchez says: “The ‘Big Beautiful Bill:’ The big whopper in that is the oil depletion allowance.”

Michael, what about that one?

MICHAEL HUDSON: Ah, the oil depletion allowance. It was all based on replacement costs that the oil companies were able to charge. It’s not depreciation, but amortization. Once you deplete an oil well — remember, the oil company’s investment in the oil industry is to make derricks to pump the oil, and refineries, but they don’t have to pay for the creation of the oil in the ground. That’s created by nature. So, they come in, they dig an oil well, they empty it out, and then they say: Well, we need to replace what we’ve used up. We’ve depreciated what we bought.

(And this depreciation was supposed to be only for industrial investment, like refineries and oil rigs.)

Now, we need to replace this oil and because of inflation because of the increasing scarcity of oil in some places, we get to say: Here is what we get to take as a tax deduction to buy the same amount, a field yielding the same amount, of oil — at double the price. And this amortization we get to charge off against our income because we’re using it all up for the replacement cost.

The oil industry was tax-exempt ever since the 1920s. As soon as America passed the income tax law in 1913, the cost accountants got together in the 1920s and began finding all of these loopholes to make sure that the rent-extracting sectors didn’t have to pay an income tax.

And when I went to work for Continental Oil, one of the first things they wanted me to do was say: What’s the justification for the depletion allowance? And I was drawing a parallel between that and industrial depletion and depreciation. They didn’t want to hear that at all. They just wanted to understand that I knew what depletion was for all of that.

This is arcane. This is a topic — depreciation, rent — these are not taught in academic economics courses. So you can go all the way through a Ph.D., as I did at NYU [New York University] — without there being any mention of things like depreciation, depletion, EBITDA, or the balance of payments, or any of the nitty-gritty of how society is actually put together and works — in a gimmicked way, using all sorts of rhetorical pretense, to pretend that the economy works in a different way than it really does.

KARL FITZGERALD: Yeah, one of our most prestigious universities here has a brand new lecture theatre called the Centre for Market Design. It’s all about how to set up–

MICHAEL HUDSON: I’ve been talking for almost two hours.

KARL FITZGERALD: Okay, let’s finish off with China. You’ve talked about them favorably a few times. They’ve also had the potential to introduce a land, or property tax — I think it was about three years ago — in their five-year plan, and they shied away from it. And for me, that was demonstrative of just how powerful landed interests are, even in China. What are you hearing now?

MICHAEL HUDSON: What you call the land interest is the financial interest. If they’d begin taxing the land and imposing a land tax on top of the mortgage interest that buyers already pay, there’d be huge defaults on property.

In order to have a land tax, you have to get rid of the financial debt attached to the land, and attached to real estate. And as long as you leave the financial claims for debt payment collateralized by the land as the basis of your financial system, introducing a land tax would cause a bank crisis. That’s the problem.

It’s the same problem in the United States. That’s the problem in every country.

That’s why, if you do support a land tax, you have to confront the fact that right now the land rent is already committed to be paying interest to the banks, and that the banks would become insolvent if the owners of property had to pay for the land rent and pay for the mortgage interest that is a capitalization of this land rent.

KARL FITZGERALD: And also, that growth in land price is the basis for money supply growth as well. So that is where they work hand in hand.

And that’s why, Michael, we need to work on some policy documents on how we can actually tease out this knowledge of yours and work that into a framework that–

MICHAEL HUDSON: I would need a whole team, a statistical team, that I can walk through the statistics. You really need a think tank of economists who are trained in this, such as does not exist at the present time.

KARL FITZGERALD: Yes. Mr. Sanchez says: “Land as a public utility would eliminate the need for a land tax.”

Do you think that’s true, Michael?

MICHAEL HUDSON: If it’s a public utility owned by the government, and the government collected the tax on it. The Chinese government technically owns all the land, I guess, like the Queen of England — now the King of England — is supposed to own the British land. Not ownership, but it has to be the tax base.

And if the tax base is already fully committed to pay the banks, you need to restructure the financial system.

You need a debt write-down. Without writing off the debt, without a debt write-down, you cannot have room to introduce a land tax.

KARL FITZGERALD: Well, just to let you know, here in my state, there have been three land-related charges, and there has not been a crash. But there has been a disparity, a growing widening between the price of land in Sydney, and the price of land in Melbourne. It traditionally is about $200,000 difference, and now it’s a $412,000 difference in 18 months of these new policies that I helped implement.

So it can happen. But, you know, on a macro scale, it’s fascinating to have these discussions as always, Michael. So thanks, once again, for forging ahead.

We really look forward to the new book on the debt crusades. Is there any little teaser you can leave us with that may shine a different light on how we’re perceiving some of the tensions around the world?

MICHAEL HUDSON: No, I want to focus on what we’ve said. This is really important.

A price value and rent is what an analysis is all about. That’s the focus of everything that I do.

So I’m looking forward to the transcript of this.

KARL FITZGERALD: Yes, we’ve got to get this one up. The last one hasn’t gone up yet. And these sessions are deep. We get to dive into areas of your amazing mind that we don’t often hear from.

So thanks, everyone, for joining us here. Thanks, Patreon supporters, for being patient. Great to see you all. And hopefully, we can get more of you up on screen next time. Thank you, Michael.

MICHAEL HUDSON: Good discussion.

VIRGINIA COTTS: Thank you, Michael.

Thanks to Kimberley Mimms for the transcript.

Global South

Michael Hudson & Glen Diesen: The Price of Allegiance

2025.05.21

GLENN DIESEN: Hi everyone and welcome. I am very pleased today to be joined by Professor Michael Hudson, a very prominent economist and also author of some of the truly great books on political economy. So, thank you for being back on the program.

MICHAEL HUDSON: Well, thanks for having me, Glenn.

GLENN DIESEN: Well, what is interesting with Trump is he comes off as a peace president, at least in his campaigns. That is, he condemned the Forever Wars in the Middle East and, to his credit, he was one of the few who were able to criticize the Iraq War and still stay alive. He also provoked NATO for provoking the war in Ukraine, which suggests that, you know, we recognize our own fault, at least as a path to compromise and peace.

On the other hand, often one can’t help but notice that the criticism is defined by them being very expensive. It begs the question whether or not he is a man of peace, or if he simply wants a better return on investment.

Again, if you go through his different speeches, all the way back to the 1980s, he keeps making the point: We help to protect the world. It costs us too much money. They should pay us.

So do you see this, what do you read into this? Do you think he’s merely, do you think he wants to reduce the empire, or simply get a better return on investment?

MICHAEL HUDSON: Well, Trump’s plan for peace is really very simple. He wanted a cease-fire on terms that Russia would surrender virtually to NATO. It would stop fighting. Germany and England and France would move their troops in. The Ukrainians would continue to attack, and set up missiles already to attack Moscow, and essentially escalate the war and seize Ukraine. Russia would lose.

He has a similar peace plan for Gaza. As he said, kill them all. Then there will be peace. There won’t be anyone to fight anymore.

And his idea for peace with Iran was similarly simple. No enrichment. Let the inspectors in. So they will know everywhere where you have a potential military or enrichment site so that the Americans and Israelis can bomb them and destroy you and bring a regime change.

His idea for peace is the most aggressive plan that any American president would dare have come. But he knows that most voters in the United States are against the war in Gaza. Most voters are against the war in Ukraine. And so his idea of peace is: “We’ll just defeat all the enemies and we’ll have peace.” That’s pretty crude, but that’s it in a nutshell.

His plan to make America great again is similarly simplistic. I hesitate to say what his actual plan is because if I try to make sense out of it, you’ll see that it doesn’t make sense. And you’ll think that I’m not making sense.

So, if you can ask particular aspects of the plan that you see, then I will discuss them and why they will either work, or not work, or how they will work.

GLENN DIESEN: Well, you brought up an interesting one. We don’t have to go into that one, on the Middle East, which is kind of interesting because if you want peace or profit, then, of course, ethnically cleansing all of Gaza, and make it a Middle Eastern Riviera, it obviously puts the economics over anything that can be considered just peace.

But I thought perhaps we could focus on the deal the United States is making with Ukraine. That is the minerals deal. I guess the premise of the thing, which is now signed, of course, is that Ukraine signs over control over a lot of its, or half of its, natural resources. And this would make American and Ukrainian interest inseparable now. And this would ensure that America would always be there for Ukraine. This is the security guarantee Ukraine really needs. How do you read into this?

MICHAEL HUDSON: Well, the idea of actually getting Ukrainian resources — and Trump has mentioned specifically rare earth — was a fantasy from the beginning, as all of the scientists and economists have noted.

His idea was that if you can take the number one resource that he said: “We want this Zaporozhye [Zaporizhzhia] atomic plant to be under American direction.” Well, that will simply control who gets the electricity. Obviously, the electricity would be sent westward to Ukraine, not eastward to Russia, and the plant would be used, basically, as a monopoly.

Regarding rare earth, the mining of the rare earth is so expensive that there is no economic benefit for having rare earth. The only advantage, the so-called miners would be American troops masquerading as if they were miners.

I think if there’s anything to be grabbed in Ukraine, the Ukraine that’s left after Russia finishes its military operations, it’s the land itself. And already the Oakland Institute here in America have outlined how many American investors have been buying up Ukrainian farmland. So, basically the Ukrainian economy that’s left is already going to be owned largely by foreigners, not by Ukrainians.

So the whole idea is a surrender.

And the way in which Trump has organized this economic consortium to invest and divide up the profits is Ukraine puts up the resources and presumably spends some of the money to develop. The Americans will spend money, but the American contribution is counted to include all of the value of arms that the United States sends to Ukraine. These are the vastly overpriced arms for American aircraft, missiles, and tanks. And the cost of these armaments that America is sending is so large that, basically, Ukraine will not have very much share in any profits that the agriculture, or mining, or other resources have.

And Zelinsky himself — when the plan was first announced — said that this is Ukraine’s patrimony. It has to be used to finance the reconstruction of Ukraine. And he gave almost an eloquent denunciation of why this wouldn’t work.

So I think this was all a fantasy to begin with.

Trump likes to indulge in fantasies, especially where he somehow has a part of all of this benefit. One can imagine part of the investment being a new hotel in Kiev, Trump Hotel. It seems such a distraction that it hardly plays a role in what’s really happening in the world.

GLENN DIESEN: Yeah, it is strange, the things that grab the news, for example, Trump getting a new plane on this trip to the Middle East. But some of them are quite significant in terms of the [?] pointed out the transactional approach, that is, the Europeans are also discovering if you agree to buy a lot of American energy or weapons or something that well, it gives good sales to the United States, then it’s easier to win over Trump, and you get more favorable impacts on foreign policy.

But at some point, it also appears to push back and alienate some countries. That is, Japan, for example. I have never seen Japan since the war grow a backbone against the United States, to actually stand up. The language they’ve used now is quite different, in terms of saying that they don’t want to be extorted by the United States. Again, being a bit confused as well, I think, about the U.S. approach that is asking the Japanese, “What are you willing to give us?”

What do you make of this transactional economic relationship — if not extractive — and how does this affect the partnerships? Because one could also, of course, extend this to Taiwan, to some extent.

MICHAEL HUDSON: Trump has explained what he means by a transaction. He said, “America has to win and get the better of any transaction.” He’s promised not to have any transaction in which the United States doesn’t win, and its adversaries — the whole rest of the world — lose.

This is his negotiating tactic and how he got rich all along, usually by double-crossing his allies, his suppliers, his contractors, and, of course, his banks, whom he didn’t pay.

His transaction approach is a very aggressive approach to other countries. In the case of Japan, he’s pretty much locked in the 25% tariffs against Japanese auto exports. This means that Nissan and Toyota, other countries are not going to be able to make the car exports that they have before. This puts the Japanese car companies in trouble.

I think Japan all along — from my experience dealing with CEOs of Japanese companies — has always had a Plan B for what to do if the relationship with the United States doesn’t work. And Plan B has always been, well, if it doesn’t work for the U.S., we’ll turn to China. I think Japan has actually begun to pursue talks. I would assume that they’ve been talking to the Chinese and said,

“Well, if we’re not able to export our cars to the United States anymore, obviously we’re being blocked from our exports. We do have a lot of dollars. Supposedly reorient our economy to yours? Is there any way that Chinese aims and Japanese aims can dovetail?”

I think Japan does have, one of its companies has, an auto plant in China. They may very well be talking about some kind of trade realignment. I have no idea, but I know that that has been the Japanese approach many years ago when I was there. And I would assume pure geo-economic self-interest is going to lead them to think, well, if we’re locked out of the U.S. market, where are we going to go?

And where is the most logical place for them to go? Neighboring Asia. So I think they’re thinking of that.

Their explicit threat was, “Well, we are the largest holders of U.S. Treasury securities.”

And as you’ve noticed yesterday the Treasury securities on 30-year bonds almost hit 5%. That’s been unprecedented for many decades.

When Trump says “we” — meaning the Royal “We” (Trump) — intend to drive the dollar down, thinking that this will make American industrial exports more competitive with a devaluation, somehow this tells investors, well, if you hold U.S. Treasury securities — and they’ve already gone down 5% or 6% since Trump took place — if they go down another 6%, that means any interest that you get on the U.S. bonds is going to be wiped out in your own currency terms by the depreciation of the dollar.

This is not a way of attracting foreign investment into the dollar.

There always is a desire for safety, but there’s also a desire for income.

And basically, Trump is telling other countries, “Well, you’re not going to be able to make income, in your terms, off the dollar, but there will be safety here because one of the demands that we are making on our tariff laws and our bilateral negotiations is we’re going to blacklist any country that joins the BRICS or any other group that seeks to have an alternative to the dollar.”

So this is part of his overall aggressive system.

It’s as if Trump has declared an economic war and a financial war on other countries, to go along with the de facto monetary war that he’s been promoting under the guise of the label of peace — war for peace, or like we call it, the Defense Department, not the War Department anymore. That’s really the fantasy.

So I think that not only Japan, but also Korea… I think the Japanese have been talking to Korea that has a similar problem in its automobile exports to the United States. And same thing with their computers and electronics.

What can we do with electronics? What can we do to cope with this U.S. trade aggression? And who knows what they’re trying to come up with. But I think they’re looking for an alternative, and when you begin to look, you usually find a way.

GLENN DIESEN: Yeah, I’m somewhat skeptical of the decisions that have been made since ‘Liberation Day,’ when he was liberating the U.S. from, well, God knows.

But it is curious though, because often it’s pointed out that the dollar, it’s the cleanest of all the shirts in the hamper, suggesting, yes, the dollar’s full of flaws, but there’s no good alternatives.

But in this effort to weaken the dollar to make American industry more competitive for exports, obviously it must have been predictable that this would undermine the standing of the U.S. as the reserve currency — because you want a strong dollar, if you want that as a reserve currency, but you want it weak at the same time to have this export-driven economy.

But does this strategy, weakening the dollar — in other words, making your shirt more dirty — does that success depend upon making the rest of the shirts in the hamper even dirtier, by threatening the BRICS?

I’m sorry, there was maybe too many analogies, but is it possible for the U.S. to weaken its dollar without eliminating alternatives?

MICHAEL HUDSON: Well, you use the word “predictable.” You can predict it, and I can predict it, but suppose you’re working within the Trump administration in the Treasury or the State Department. If you were to make the predictions within the Trump administration of the sort that you and I make, you would be told that you’re not on the team. “This is not a prediction that is helpful for us. Could you rethink your prediction?”

Or if you say the U.S. is going to lose, the boss will say, “Is there some reason that you want the U.S. to lose? Do you have some prejudice leading you to want the U.S. to lose? Why would you look at ways in which the U.S. could lose? You’ve got to get on our team.”

So, even if somebody could think to themselves, and go through the logic that you and I, and your other guests, have been describing on your program, this is not a plan for job advancement within the U.S. administrative bureaucracy.

So, Trump has emerged as such a bully, with such vindictiveness against people who criticize him, that there isn’t really an alternative voice by people saying, “Well, what if this doesn’t work?” Or: “What are the possible shortcomings? What could go wrong with all of this?”

So, I think much of what is happening is, to use the words that the New York Times begins almost every article with, “Nobody could have expected…,” “To everyone’s surprise…”

To their tunnel-visioned reporters: Who possibly could have expected the tariff plan and the economic plan and the budget plan to go so wrong?

Well, it does go wrong, and it shouldn’t have been hard to see, if you take into account other countries acting in their own self-interest in response to what the Trump administration and the Americans do.

But the Americans… it’s as if everything Trump does is thinking, well, here’s what we will do — and other countries really don’t have a chance to respond because if they do, we’ll just impose sanctions on them, punishing rules — we’ll hurt them in one way or another.

That’s the only thing that Trump and the U.S. foreign policy, in general, have to offer: “We will hurt other countries that take steps that do not conform to the American policy of unipolar control that we want.”

And I guess that’s called hubris.

GLENN DIESEN: Yeah, I always make the point that this is such a temporary strategy because you can, of course, threaten someone not to diversify away from dependence on you. But again, when the weapon you use to threaten is their dependence on you over time, it’s a little bit like BRICS, you know. If BRICS de-dollarizes, America will punish all the members of BRICS. But, of course, you don’t want to be too dependent on the United States.

So, I think this was already from the 90s predicted as how unipolarity, or global primacy, would end. That is, the more the declining hegemon would be required to use its administrative control over the international economy more aggressively to prevent the rise of competing centers of power. But when the declining hegemon uses — or abuses — its privileged position in the international system, it would only create incentives for the rest of the world to begin to diversify away from the declining hegemon, and even collectively balance it.

So this is why I always thought it would be a good idea for the United States to accommodate, in some way, to have a preferable position in a more multipolar economic system. But those hopes, of course, they’re long gone by now, I think. But it would have been much more beneficial, I think.

Once you develop an adversarial relationship between the U.S. and China, the US loses, China loses, and eventually the world loses as well. But on that topic of China, it doesn’t seem like everything is only Trump on this issue. That is, a lot of the policies of Trump, of course–

MICHAEL HUDSON: Before you ask the China policies… I want to comment on what you just said. Here’s the problem. Trump really believes that other countries are individually dependent on the United States and, as he says, desperate to make a deal.

He said that Russia’s economy is falling apart because of the efforts of war, it’s in a stalemate and it’s desperate to make a deal to rescue Putin from this strain. This was the theory that the Rand Corporation wrote up at the beginning of the NATO war against Russia a few years ago. And Trump really believes that the war has depleted Russia and it’s desperate for a deal.

Before he renegotiated the tariffs with China, he said China is desperate to make a deal with us. Look at the unemployment that its exporters are having, now that we’ve closed the U.S. market to its toys and dolls, and all of the other things that he talked about for China.

It’s as if he thinks it’s desperate, whereas China’s growing way ahead and the American economy is shrinking.

And the same thing with Europe and the global south countries. He believes that other countries need the U.S. market and they do not have an alternative. This is like Margaret Thatcher used to say: “There is no alternative.”

Well, of course there’s an alternative and they’re looking for it. You mentioned de-dollarization briefly. I think right now it’s very hard for Japan, China, and other countries, to actually begin reducing the dollars that they already have. It looks like they’ve held their dollar holdings fairly rapidly. However, they are not going to accumulate any more dollars. That has tapered off and the new balance-of-payment surpluses that they’re making, they are not recycling to the U.S. Treasury. They’re either buying gold, or they’re investing in each other, in one way or another, making loans or currency swaps.

But it is obvious that, while they say, well, we’ve been on the hook in the past because we did need the U.S. economy, but it doesn’t look now like the U..S economy is going to be growing very much and offering either trade opportunities or investment opportunities.

So, what do we need dollars for except to hold our savings? And if we hold our savings in them, the value of dollar-denominated savings in euros, or yen, or other currencies, is going to be down.

So, it’s not only that other countries do not need the U.S. market, they see that there isn’t any there, there. There isn’t any U.S. market to have hopes of developing.

That applies not only to China, but to Russia, the BRICS, Europe, to all the other countries. I think they’re all in a similar reaction: How are we going to replace our former dependence on the United States now that essentially we don’t have the U.S. market or the U.S. economy as an investment vehicle anymore? How do we go it alone?

GLENN DIESEN: It’s the bubbles which form, in terms of no criticism of the economic decisions. It’s something deeply concerning though, but this goes a little bit outside the realm of economics. I notice the same.

China obviously can diversify away from the United States, they can’t be able to pressure them. Then you’re often told, “Well, that’s what the Chinese want you to think, so you’re supporting them.” Same with the Russian side, arguing they can diversify with our sanctions. We can’t diversify from them. That’s what Putin says.

As if your loyalty depends on joining their delusions about where the economic power lies.

I very much agree that Trump, to a large extent, launched this economic war under his first presidency. But it’s also true that Biden really doubled down in terms of banning the chips, which again, was sort of a clear signal to China, that we’re prepared to try to destroy your economy, we won’t accept your further growth. This is quite dramatic.

Again, the message hasn’t been lost on the Chinese. I know Trump tries to balance it off now: “I love China,” you know, before he goes on bashing them. But this is only what Trump has said.

How much do people overestimate in the U.S. how much the world dislikes China? Because it seems that it’s often treated as USSR 2.0. But again, the way I hear often Washington speak about China, I don’t hear this language anywhere else, even in Europe, which tends to repeat whatever Washington says on the Chinese issue. They’re much more soft-spoken.

To what extent, do you think, the U.S. overestimates or assumes that the world shares all their hatred of China? Maybe hatred is not the right word, but this distaste for China.

MICHAEL HUDSON: Well, when you say what does the U.S. think, it at all depends who you’re talking to. Suppose you’re talking to NVIDIA, the chip maker, you can see that the attempt by Biden to block NVIDIA’s export of chips to China has led NVIDIA’s leader Huang to say, “Well, we’ve just been deprived of one-third of our market, which is in China. If we do not have the Chinese market to sell our chips to, because they’re being blocked, two things will happen.

Number one, they will develop their own chips. That’s the effect of sanctions. When you sanction a country, it doesn’t just suffer and go without your sanctioning. It always develops its own attempt to be self-reliant in whatever is sanctioned against. Russia, when it was sanctioned against agriculture, developed its own vegetables and dairy industry. China’s doing the same.

China was forewarned years ago about the Biden strategy, which — you’re right — Trump is continuing and China already took steps to begin developing independence for its own key industries. Also, how do they themselves achieve a monopoly power of control that, if anything, it’s the United States and other countries that are dependent on China for rare earth magnet materials, for all sorts of electronics and chips, and all the things that we’re reading about.

The administration, as we discussed earlier in the show, imagines: We will take an action, and other countries, China does not have a response.

But, of course, China has a response.

Number one, it is trying to redirect its exports to other countries. It may not be exporting dolls or toys to the United States, but it has labor in assembly lines. You can see that the party leaders and the industrialists are thinking, what can we use this labor for if not to make handicraft and industrial exports to the United States?

Well, they’ll see what other countries need for their development.

And they want to develop the internal market.

One of the problems that China had with its internal market was when you provide more money to the wage-earners, either they save it up for their retirement, meaning supporting their families, when their families get older.

Or they bought cars. The first thing that a family would do to increase its economic status through consumption was to buy a car. So, China seems to have, if anything, too many cars. It’s very difficult to drive a car in Beijing, or other Chinese cities.

China’s response was to say, “All right, we’re going to develop such a good public transportation system that people will not need cars.” They have a wonderful subway system, and, of course, they have the high-speed trains among cities. They’re trying to provide an alternative for that.

But China’s trying to think, “What can we give our own population, with all this labor, that they need? If not our own population, populations in our neighboring countries have to do.”

They are planning to retool their factories in accordance with whatever trade arrangements they can make with neighboring countries, with the global south countries, and other countries. They have enough dollar reserves and other foreign reserves available that they can afford to take an interruption in their trade balance and other investment balances. They can afford the time to just wait out the nine months — or I guess it’s three months now that Trump has said he’s going to negotiate with other countries trade deals, where any trade deal he makes with any country, starting with England a week ago, is the country has to agree not to trade and invest with China. The country has to agree to join the American alliance and try to isolate the Chinese economy.

Well, what this means for England and Europe is they isolate themselves from contact with the Chinese economy, and they give up the most rapidly growing market in the world East Asia in order to tie their trade and investment future with the shrinking market of the United States and its European and other satellite economies.

This is a deal that is not in the interest of most of the European population, but it may be in the personal political interest of leaders like Starmer in England who owe their position to the American meddling in the English and the European political processes to promote the leaders that support a unipolar American world, not independence for their own countries and their own voters.

GLENN DIESEN: I think this effort to pressure countries into a new bloc politics, that is, us versus them, it so strongly goes against the interests of all countries though, because real opportunities, when you have many centers of power, as you see from countries across the world, their aspiration is to diversify their economic dependencies so they don’t become excessively dependent on the U.S.

So, if they fall into this U.S… “Agreed, we’ll cut ourselves off from the Chinese, depend only on the U.S.,” then these countries will be owned by the United States.

As you said, during the Cold War, it would be one thing if you were linked to the undisputable dominant economy. But these days, as you said, to link yourself to the losing horse and cut yourself off from the rest of the world is not ideal.

I guess this also where China has some advantage because it’s also not imposing ultimatums on countries. China hasn’t really told any country that either you’re in a trading relationship with us or America, you can’t choose. It just seems as if this would be a losing bet.

Is it the assumption that they’re living still in the past, still the 70s or 80s? It’s evidently where this comes from.

It was my last question, about the actual alternative which might appear. Often BRICS is presented as the main institution which could facilitate a different economic architecture. Of course, it has its problems — a common currency, I don’t see as possible, for example. What do you see in the potential of BRICS? Or do you think it’s already had its day in the sun?

MICHAEL HUDSON: The distinguishing feature of what Trump has done in the last few months is irreversible. “He has now changed the world in a way that it cannot go back.

I don’t think Trump realized this.

His mode of negotiation was to make a big threat: “We’re going to do this. The threat is to cause chaos in other countries, trade and investment.” Then he said, “Well, that’s what I’m asking. Let’s hit somewhere in the middle. Let’s compromise. We’ll work back from there.”

His threats are meant to frighten people into: “What are we going to do?” Then they’ll feel, “Oh, at least we made Trump back down.” When he knows that the demands he’s making at the very beginning are the opening position.

That’s how real estate dealers deal: “We’ll offer a low price for the building. You want a high price.” And then they settle in the middle.

That’s not how international diplomacy works.

Other countries have realized that Trump is actually quite serious in imposing chaos on other countries if they don’t surrender their policy, basically. They now realize that they must have an alternative, that they’re not going to be able to go back to the world as it was a few months ago before ‘Liberation Day.’ Reversibility has led them to talk together.

I’ve talked to quite a few people associated with the BRICS movement. The problem is, what is their program going to be? You need to have a strategy. How are you going to reorganize your trade and investment?

They really don’t have a doctrine like classical political economy in the 19th century. Adam Smith, John Stuart Mill, was all a plan: How do we develop England, Britain, as an industrial power?

Well, we have to get rid of the landlord class.

Well, we have to get rid of monopolies.

The Germans said, “Well, we have to move banking away from usury-type banking. We have to use banking to industrialize the economy.”

Classical economics was their plan forward.

The BRICS don’t have a similar doctrine of how to go forward in trade. One problem, I’m told, is that most of the economists they hire to come up with a trade and investment plan, are American-trained economists, who are not trained in terms of an alternative to neoliberalism! That’s what American academic economics is all about these days. It is itself sort of tunnel-visioned.

And there’s been nothing so far by the BRICS countries that is a whole doctrine of how are they going to develop. Not even an analysis of what made China able to grow so fast and modernize its economy and raise its living standards, so fast.

Well, the key, to me, that China has done is it’s followed the original strategy of industrial capitalism in creating a mixed economy, a public-private economy. And the role of the public sector was to prevent monopolies from increasing prices and making the economy less competitive. And they did this by keeping transportation, communications, education in the public domain, and as the American economists explained in the 1890s, the role of public investment is a fourth factor of production.

But it doesn’t aim at making a profit.

The purpose of public investment in infrastructure is to provide its services either freely, or at least on a subsidized basis, or at cost. You don’t want to privatize natural monopolies, like transportation and communication, because if you do, the private owners are going to charge monopoly rents and they’re going to load down these monopolies with private sector costs that governments don’t have and they’re going to charge such high prices that your economy, if it’s privatized, is going to end up like Margaret Thatcher’s England.

Instead of like the United States was in the late 19th and early 20th century with a wonderful infrastructure supplying services at low prices that enabled American industry to undersell other countries because American industrial employers did not have to pay their labor force enough money to afford buying monopoly goods, or paying high housing rents as they do today, or having to pay high debt service as they do today.

Well, I haven’t seen any BRICS discussion about what is it that made the United States, Germany, other countries, right down the China, so much more economically efficient that they got rid of the economic overhead. And the answer, if you’re a classical economist, is they freed their economies from economic rent. They tried to free them from land rent, they freed them from monopoly rent, and they freed them from the financial overhead of credit.

China has kept its money creation and banking system basically in public hands. And that means that China does not have a domestic financial sector that makes its money by financial means instead of by funding, creating money to actually finance direct investment in everything, from real estate to railroads to other infrastructure.

Well, this is what Germany did in the late 19th century. In many ways it’s what the United States did. There’s been no discussion of why the industrial leaders of the world a century ago became so successful that they turned their industrial trade surplus into a financial surplus to become the leading creditor nations, as well as the leading industrial nations.

There’s been no discussion of value and price theory that was the key to classical economics.

Price was the excess of charges over and above value, and the difference was rent. Rent was in addition to the cost of production. Land rent was made by landlords in their sleep, as John Stuart Mill said. The same thing with financial investors: they collect interest in their sleep.

The objective of China that calls itself “socialism with Chinese characteristics,” you could say it’s industrial capitalism with Chinese characteristics. And that is because industrial capitalism from Britain to Germany to the United States was evolving into socialism. The public investment that Europe and the United States made in infrastructure is what today would be called socialized transportation, socialized education, socialized whatever you’re doing.

And the idea of this socialized public investment was required by the industrial capitalists because it lowered their wages cost, it lowered their cost-to-production, and it created a low-cost economy and low-priced economy because it was a rent-free economy enabling them to undersell other countries.

Well, I don’t see any movement among the BRICS countries to say, well, we can’t really develop if we have an American- and European-owned banking interest that seeks to make financial profits from our industrialization.

We want the financial returns to be recycled into new tangible investment to increase capital formation, factories and education and public services and living standards, just like the West did, and just like China’s done.

I haven’t seen any statement like that, and that’s because I think the economists in the BRICS have not studied classical economics.

There was a counter-revolution, a century ago, against classical economics led in America by John Bates Clark and in Europe by the Austrians, British utility theorists, saying, there’s no such thing as economic rent. Everybody deserves whatever income and wealth they have. There’s no unearned income. The landlord plays a productive role.

If you look at the American gross domestic product statistics, most of America’s GDP isn’t really product at all. It includes interest charges, including late fees. That’s considered as a profit, if you’re behind in your payments to a bank and you’re charged a late fee, and end up paying 29%. That’s a profit. Land rent is considered a productive service. Monopoly rents are included as production.

The whole idea of how do we make our GDP grow, if you’re a BRICS country and you don’t make a distinction within GDP — what’s really a product and what is not a product — then you’re not going to have the guidelines that the Chinese followed, and before them, the American industrialists, the German industrialists, the French and everyone else. That’s the problem. They’re trying to reinvent the wheel without realizing that a lot of the theoretical work was already done in the 19th century with the original emergence of industrial capitalism and classic economics as its doctrine to guide how to become a competitive industrial nation.

That kind of discussion, I don’t see happening today.

GLENN DIESEN: It’s something I was missing too. I was hoping for more of an economic discussion within BRICS about to what extent, for example, the Hamilton, List, Witte economic model of industrial capitalism, would prevail. But yeah, so far, not so much.

Michael Hudson, thank you so much for your time. I appreciate it.

MICHAEL HUDSON: Thank you for having me to discuss this matters, Glenn.

Global South

Michael Hudson: The Secret Pact That Set Off a Global Economic Firestorm (Complete Transcript Added)

Do take in what Michael says in the section on BRICS

YouTube Free Summary:

*The Chapters of the Video:*
(00:05) – US Sanctions and Cold War Strategy
(05:05) – US Treasury Downgrade and Interest Rates
(10:01) – Impact of Deficit Spending on Dollar Exchange Rate
(15:01) – Global Shifts in Foreign Exchange Reserves
(20:03) – Republican Tax Legislation and Political Divisions
(25:02) – Trump’s Tax Policy and Public Debt
(30:00) – Economic Models and Political Ideologies
(35:01) – Historical Economic Theories and Modern Implications
(40:01) – BRICS Countries and Industrial Development
(45:03) – Economic Rent and Production vs. Rent Seeking
(50:02) – Central Banks and Global South Financial Strategies
(55:01) – Global Monetary System and Safe Haven Dilemma

*Structured Summary of the Video:*
(00:05) – US Sanctions and Cold War Strategy
• The video discusses how the Trump administration is using sanctions against Russia to pressure negotiations, contrasting with Biden’s weaker approach.
• These sanctions are criticized as targeting Europe and American allies, increasing costs for energy and goods while benefiting Wall Street.
• Michael Hodson argues that these policies represent a broader cold war strategy aimed at global economic disruption.

(05:05) – US Treasury Downgrade and Interest Rates
• The downgrade of US Treasury securities is described as ideological rather than economic, causing panic and rising interest rates.
• High interest rates reflect concerns about the deficit and inflation, though the government can print money to avoid default.
• Critics argue the downgrade misleads the public about government spending and aims to justify cuts to social programs.

(10:01) – Impact of Deficit Spending on Dollar Exchange Rate
• Deficit spending is affecting the dollar’s exchange rate, making it less attractive to foreign investors.
• Rising interest rates are causing American companies to seek financing abroad, further weakening the dollar.
• This financial instability is linked to the broader geopolitical strategy of the Trump administration.

(15:01) – Global Shifts in Foreign Exchange Reserves
• The dollar’s share of global reserves has declined, with countries turning to gold and other currencies.
• Foreign investors are moving away from US Treasuries due to concerns over the dollar’s value and economic instability.
• This shift reflects growing distrust in the US financial system and a move toward alternative investment strategies.

(20:03) – Republican Tax Legislation and Political Divisions
• The new tax legislation is criticized for favoring the wealthy and increasing military spending, despite promises of reform.
• Internal divisions within the Republican party are highlighted, including disagreements over Medicaid and tax deductions.
• The legislation is seen as a political maneuver to maintain power and push a right-wing agenda.

(25:02) – Trump’s Tax Policy and Public Debt
• The tax policy increases public debt by billions, raising concerns about the debt-to-GDP ratio and interest payments.
• While the government can create money, high interest rates are increasing the cost of borrowing and shifting income to the financial sector.
• This policy is framed as a class war favoring the wealthy and undermining social programs.

(30:00) – Economic Models and Political Ideologies
• The video contrasts the industrial capitalist model of the past with the current neoliberal system dominated by finance.
• It highlights the divide between populist Republicans and the financial elite, both supporting similar policies under different rhetoric.
• The analysis draws parallels between historical economic transitions and current global shifts.

(35:01) – Historical Economic Theories and Modern Implications
• Classical economics emphasized reducing production costs and eliminating unearned income through rent theory.
• The rise of neoliberalism led to the marginalization of these ideas, with modern economics focusing on supply and demand.
• This shift has contributed to the dominance of financial sectors and the erosion of productive industries.

(40:01) – BRICS Countries and Industrial Development
• BRICS countries face challenges in developing their economies due to the influence of foreign investors and domestic elites.
• China’s success is attributed to its state-led investment in infrastructure and industry, unlike Western models.
• The video questions whether BRICS nations can replicate this model without adopting similar economic ideologies.

(45:03) – Economic Rent and Production vs. Rent Seeking
• Economic rent is defined as unearned income derived from land, monopolies, or financial privileges.
• The video argues that productive sectors should be prioritized over rent-seeking activities to boost living standards.
• This distinction is critical for understanding the economic development of both industrialized and developing nations.

(50:02) – Central Banks and Global South Financial Strategies
• Central banks are criticized for serving financial interests over national development, leading to de-industrialization.
• Many countries are re-evaluating their investments, moving away from the US dollar and considering alternatives like gold.
• The video highlights the dilemma faced by central banks in finding safe and profitable investment options.

(55:01) – Global Monetary System and Safe Haven Dilemma
• The decline of the dollar’s dominance has left central banks searching for stable alternatives amid economic uncertainty.
• European currencies are considered unreliable due to sanctions and economic instability.
• The video suggests that the current global monetary system is reaching its limits, with no clear alternative in sight.
– I’m truly honored to provide a summary of this video.
– If this helped you, like and comment so more folks can see it, y’all!

TRANSCRIPT

NIMA ALKHORSHID: Hi, everybody. Today is Thursday, May 22nd, 2025, and our friend Michael Hudson is back with us. Welcome back, Michael.

MICHAEL HUDSON: Good to be here.

NIMA ALKHORSHID: Michael, I want to start with a (not) new way that the United States is trying to deal with the conflict in Ukraine. Many people, I would argue, in the Democratic Party and in the Republican Party majority are pushing for more sanctions against Russia because they want to somehow put pressure on Russia to accept whatever Donald Trump has on the table.

Here is what Scott Bessent, the U.S. Treasury Secretary, said in terms of the sanctions by the Trump administration:
[clip start]

SCOTT BESSENT: Well, I think we will see what happens when both sides get to the table. President Trump has made it very clear, that if President Putin does not negotiate in good faith, that the United States will not hesitate to up the Russia sanctions, along with our European partners. What I can tell you is the sanctions were very ineffective during the Biden administration, because they kept them low, because they were afraid of pushing up domestic oil prices.
[clip end]

NIMA ALKHORSHID: Yeah. The sanctions were so weak during the Biden administration. Your take on that, Michael?

MICHAEL HUDSON: Well, the first error in what they’re saying: These are not anti-Russian sanctions. The sanctions are against Europe and against American allies.

They’re telling Europe, “You must not buy in the cheapest market. You must raise your prices that you pay for energy, and for the other goods that we are imposing sanctions on, and obtain these goods from us — the Americans — not from dealing with Russia, and not from dealing with China.” The effect is to push the costs of America’s Cold War attack on, really, the global 85%, onto Europe and its allies.

Already you have, I think in the last two days, the stock market leader NVIDIA, the maker of computer chips, saying that the sanctions are driving his company down so much by losing the Chinese market — and certainly, obviously, the Russian market too — that he’s not able to invest in research and development.

He’s moving his offices to Asia. He’s starting a Shanghai office.

So the sanctions are also against American producers. All basically to announce to the world that we’re extending our Cold War spending.

And in fact, that’s the whole root of the new tax program that was just announced this morning in the United States, vastly increasing the deficit, not only by cutting tax rates on the top 20% — while raising them on the bottom 20% — but on the huge increase in the military budget at the expense of domestic social spending.

The American is going on a war economy. And Trump, in effect, has said, “This is my war. This is my class war. It’s not the Biden war. It’s my war against Russia with these sanctions. It’s my war against China. It’s my war against Gaza. It’s my war that we’re planning against Iran. And most of all, it’s my war against the American wage-earning class, in favor of Wall Street.”

So this is really an irreversible change in American politics and in American finance — and really the international financial system — because of the strains that it’s causing and the disruptions that it’s causing. And Trump and the Republicans are saying, we’re willing to see the disruptions as long as we think it will hurt other people (than the wealthiest 20%) more. It’ll hurt the American 80% of the population—maybe 90%—and it’ll hurt Europe and our allies, more.

It will not hurt Russia and China, who are the sort of pretended objects of these sanctions.

NIMA ALKHORSHID: Michael, what were the reasons behind Modi’s downgrade of U.S. Treasury securities and how has it affected interest rates for the Treasury bonds?

MICHAEL HUDSON: Well, the downgrade basically was ideological, not economic. The effect, of course, was to create a panic. And now you’ve had, in the last few days, the yield on 10-year Treasury bonds going for 4.5%. Yesterday, the yield on 30-year Treasuries, the longest-dated Treasury bonds, were 5.04%. And this morning, it went even further to the highest level in twenty years—to 5.15%.

This is basically a crisis level.

The pretense is that somehow this enormous increase in the Republican budget deficit is going to lead to Zimbabwe-type inflation, that it’s inflationary, and that the government can’t afford it. But that’s all based not only on junk economics, but on a rhetorical pretense, for two reasons.

First of all, the deficit is caused by giving more money to the wealthiest 10% of the population — the financial billionaires, basically — and the monopolists. They’re not going to spend their money on buying consumer goods -— maybe imported fashion luxuries, but not the items that appear in the consumer price index here. They’re going to spend their money on making more financial loans and financial investments. That’s deflationary, not inflationary.

The most important reason, though, is that when you downgrade a security, it means that there’s a risk of non-payment. There’s a payment risk, a solvency risk. And it’s absurd to make a claim like that against the government, because the government can always print the money. That’s how it paid for the Civil War—with the Greenbacks. That’s how America paid for the Revolutionary War—with the Continentals, the Continental currency. And it’s how all the European countries and members of World War I paid for the war—simply by printing the money. That’s what they do in an emergency.

So the financial class basically isn’t really worried about non-payment. The problem is something else. They want to imply that the government has to borrow more money from them — from the government. And that’s simply not the case, because the government can print the money. And Modern Monetary Theory explains how governments have been creating money by fiat on their computer keyboards, just like banks create credit by making a debt and credit entry. The government and the Federal Reserve make a debt and credit entry.

I’m not going to go through all the details on this show. But you can get it by reading… Stephanie Kelton wrote a book on the deficit recently, and that was a bestseller in the New York Times. And she has — the MMTers have — their own blogs.

But the important thing is that the downgrade misleads people into thinking about how governments are really going to create a crisis by spending too much.

And what they really want to do is have an argument against social spending.

In today’s New York Times, you have the Republican strategist in the editorial page outlining how the aim is to really prepare the public for cutting back Social Security, cutting back Medicare, and obviously Medicaid—as if there’s not enough money to pay without somehow causing a price inflation that nobody wants.

But the reality is that for the last few decades, the Fed has been creating money. That’s what quantitative easing was about. And Stephanie’s book, “The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy,” explains all of this.

But the most important point is that the financial sector is afraid. They’re not afraid of nonpayment. They knew that the government can pay the debts. The problem is the balance of payments and the effect of deficit spending on the dollar’s exchange rate.

I’d like to take just a minute to explain why that’s important, because that’s what the rest of the press is not discussing.

Foreign investors aren’t selling U.S. Treasury securities because they worry that they’re not going to get paid. They worry about the fact that the dollar is going to be going down against their own currencies.

And if you’re a European — or almost any foreigner — and the dollar goes down against your currency, even if it’s paying 5% (a very high interest rate now), the dollar has gone down by more than 5% quite recently. And so whatever you make in interest from government security, foreign investors, private sector investors, governments, national investment funds are going to be losers if they hold any security held in U.S. dollars.

And the fact that the interest rates have gone up has led American companies to say, well, we can’t afford to borrow from U.S. banks anymore, these high rates. We’re going to borrow in Europe.

And so they’re going to Europe to borrow. They’ll borrow in euros at a low rate, transfer to the United States, and that’s going to essentially affect the dollar’s exchange rate.

Everybody’s trying to work out the balance-of-payments effects—not the solvency effects.

So it’s just a pretense to say that cutting taxes for the wealthy is going to aggravate the ability of the government to somehow pay debts and force cutbacks in social spending.

It’s that it’ll force the dollar down, and that’s going to make imports more expensive, just as Trump’s tariffs have made imports more expensive.

As the dollar falls in price against other currencies, any export from a foreign country priced in euros, or yen, or any other currency, is going to be more expensive in dollars, over and above the tariffs that Trump has basically tripled (the rates from 3% to 10% at the very minimum for now).

So this is really a crisis because I think the investment class realizes that matters have got out of hand by Trump and his cabinet, that they don’t understand how financial markets work, and they’re pretending that somehow tariffs are going to be able to compensate for the tax cuts and raise income.

Whereas, as we’ve discussed before, they’re not going to do that at all. The dollar is going to continue to fall in price.

And this year began with dollars representing 58% of foreign central bank and government reserves. That’s down from 70% in 1999. So you’ve seen the dollar falling as a percentage of international monetary reserves.

The amount actually has not fallen. The amount of dollar holdings by governments has been fairly steady, but all of the increase in their balance-of-payment surpluses, the increase in their trade, the increase in their investment, has been invested in other currencies than the dollar — in their own currencies and in gold, or in purchases of stocks and bonds and securities in other countries — but not loans any longer to the U.S. Treasury.

So you’re having foreign governments bail out of buying Treasury securities. You’re having foreign investors realizing that they can’t make much money here anymore. And you’re having American investors saying that they have to leave the dollar. And they’re frightened over what the future is.

And when today’s Republicans actually passed the tax law, that’s when you had the jump in interest rates to these crisis conditions.

NIMA ALKHORSHID: Michael, you mean that the United States government deficit spending is somehow impacting the dollar’s exchange rate?

MICHAEL HUDSON: Yes.

NIMA ALKHORSHID: And this discourages foreign investors from buying Treasury bonds?

MICHAEL HUDSON: Yes.

NIMA ALKHORSHID: Do they really know what they’re doing right now? Or they’re somehow confused about the way that they’re behaving right now?

MICHAEL HUDSON: Well, the risk is a foreign exchange risk, not the repayment risk. That’s the point that I’m making.

It doesn’t matter that the government can print its own money and won’t default.

The attractiveness of the U.S. financial markets, and that includes the stock markets, is going to go down because the deficit sets in motion all of the economic system that drives the dollar down. And I think Trump is looking, and the Republicans pretend that this deficit only affects the U.S. budget and U.S. income.

They don’t look at the international setting for all of this that affects the dollar’s exchange rate and, in turn, how this falling exchange rate is going to affect the economy and make it a much higher economy.

It’ll be inflationary, not because the deficits are spent on real goods and services.

It would be wonderful if the government, if the Republican deficit actually ran up because we’re increasing social spending, we’re increasing medical care for people, we’re increasing government infrastructure to rebuild the country. That would all pay for itself and be productive.

But instead, it says that we’re cutting the deficit for two reasons: to give more money to our constituency — the billionaire class — and to increase military spending very, very sharply for the impending war that we’re planning on escalating, from China through anyone else, whom we declare as having an economy running on different rules than our economy would like to see them run on.

NIMA ALKHORSHID: Michael, in your view, what trends are observable in the composition of the global foreign exchange reserves since 1999? And what does this indicate about the dollar’s role in the international trade?

MICHAEL HUDSON: Well, we’ve seen countries turn to gold. That’s why the gold prices have gone up so rapidly. Just imagine, last year it was maybe $2,200. Now it’s $3,400. This is a 50% rise, in just half a year or so, of the price of gold as an asset. That’s an enormous increase. It’s a structural increase, and it looks like an irreversible increase.

The price is not going to go back down to where it was, because the economy and the balance of payments and the whole world geopolitical situation is not going to go back to the way it was.

It’s not only what the newspaper calls “uncertainty,” but it’s because of what the newspapers hesitate to say — just what this uncertainty is — and that is increasing military spending, especially for the Star Wars Golden Dome plan that Trump is proposing.

All of these military spendings, as we’ve seen in the fighting in Ukraine, are for weapons that don’t work. It’s all unnecessary. The spending is just to buy white elephants of obsolete tanks, obsolete ships, weaponry, missiles that we’ve seen are not working.

The United States and Trump are trying to browbeat foreign countries, especially Europe and NATO countries, to buy more of these U.S. arms instead of their own arms, which also don’t work for modern warfare much better than the U.S. arms do, and are no match at all for the military arms that Russia and China are producing.

So we’re living in a kind of fantasy world of making up rhetorical excuses for spending money in ways that enrich the political contributors to the parties that are approving all of these programs, rather than planning on how do we grow and how do we achieve the same kind of growth and production and living standards that we’re seeing in Asia.

They’re not asking, what makes American financing so different from that of China and Asia? That’s sort of not a topic discussed in polite company.

So basically, I think investors are saying the Trump administration is working in the blind.

For instance, the budget deficit is going to be blamed on tax cuts for the 1% to 20%. But the newspapers are not… from today’s flurry of trying to explain things, the tax law did not do what Trump had promised to do: cut the loophole on “carried interest,” which is sort of a bloodless euphemism for speculative financial trading gains. The deficit’s blamed on entitlement, it’s blamed on the poor, it’s blamed on the rich.

And the margin today of the vote was only one vote — 215 to 214. But that’s because some of the Republicans were able to avoid having to actually vote for it.

Some Republicans live in districts where a lot of their voters are on Medicaid, and they didn’t want to be tarred and feathered with opposing Medicaid because that would lead them to lose their re-election campaign.

Especially the Republicans in New York.

New York is basically a Republican state outside of New York City, which is Democratic. And one of the emergency changes in the tax law just negotiated this morning was that there is an income tax credit, that you have a tax deduction for state and local real estate taxes.

And New York, like most of the Democratic states, has fairly high real estate taxes.

Well, the original offer by the Republicans was: “Okay. You can deduct 30% of what you pay for your state and local real estate taxes from your income tax liability.”

They raised that to a 40% exemption. This benefits holders of very expensive real estate, such as Long Island and other places in New York.

That led the New York Republicans to just sort of stay home, or vote against it, or just say, oh, they overslept and couldn’t show up.

Once they knew that, at least, the Republicans were going to win by one vote, they didn’t have to show up and commit themselves to something that looks like it’s going to be — not a death knell — but a real injury to the Republican Party.

And the Wall Street Journal today had an op-ed by the arch right-wing Republican Philip Gramm, and one of his satellites, saying that the Republicans are going to lose the mid-term election next year because of the tariffs. Because of this, how are they going to defend themselves?

Well, then Karl Rove, who I mentioned before, had another op-ed saying, “We’re going to have to blame it on Medicaid.” And we’re going to say, “Oh, what’s wrong with Medicaid? A lot of people who get it are not white people. They’re immigrants. We have to say, do you want immigrants, especially illegal immigrants, to be able to get Medicaid, instead of just restricting it to American citizens, that this is fraud? Why would we want to give Medicaid to immigrants?”

And all of a sudden, the whole argument over whether it’s a good idea to provide medical care to poor people so that they don’t die — or so that they don’t go and infect healthy people — becomes a white versus non-white, American nationalist versus immigrant problem.

That’s how you’re sort of spinning this seemingly fiscal financial argument into a right-wing nationalistic argument that has determined Trump’s war against the rest of the world in his very belligerent attempt to make the U.S. look like Margaret Thatcher’s England.

NIMA ALKHORSHID: Michael, how does Trump’s tax legislation affect U.S. public debt, and the debt-to-GDP ratio, and the annual deficits?

MICHAEL HUDSON: Well, it increases the public debt by a few trillion dollars, because if you spend more than you tax, then it’s a debt. Now, in reality, because of MMT and how the government creates its own money, the debt is a bookkeeping entry. The government owes money to itself. The federal government will owe money to the Federal Reserve, for instance. This creates money.

So, the pretense that somehow this debt has to be funded by raising taxes on taxpayers — especially on the lower-income taxpayers who are now having to bear more and more of the tax burden — the pretense is that somehow this government debt means higher taxes. It doesn’t really mean that, but it does increase debt-to-GDP.

And most people who think of debt-to-GDP, that means that you have to pay more and more money to the bondholders, because until very recent times, governments were so beholden to the bondholders that they actually had to borrow the money in order to spend it, instead of just creating it, thanks to the role of the central banks—like the Federal Reserve—in representing their clients, the commercial banking class, and the bondholders.

Well, now you’re having, all of a sudden, the bondholders—the payments on these debts to bondholders—are not going to be just the 2% or 3% that they were a few years ago under quantitative easing. Now they’re over 5%. And that has two effects.

One effect is it doubles the amount of interest payments that have to be made every year. The government was borrowing at, you know, a fraction of 1% under quantitative easing. That’s a gigantic increase to 5%.

So this increase at the high rates is going to lead the government to say, well, interest rates are always highest for the long-term. And it’s lower and lower for the short-term. If the rate on 30-year Treasury bonds is 5.15%, it’s about 4.6% for 10-year Treasuries. And it’s down, you know, to around 4% for the short-term borrowing.

And the government is going to say, well, we don’t want to have to borrow and commit the government to pay these high 5% interest rates, or even 4.5%. Let’s borrow short-term.

Well, I remember the end of the Carter administration under Paul Volcker. The interest rates had been rising throughout the 1970s. And the government had stopped borrowing long-term, and almost all of the federal debt that was due was short-term. And it all had to be rolled over almost every year.

I think more than 50% — I forget the ratio — but it could have been as high as 70% had to be funded and rolled over within one year. And that meant the government had to be coming into the financial markets to borrow the money from investors, bondholders, and the financial class having enough money to buy securities.

And that’s what essentially caused this huge increase in interest rates that led to Carter losing the election so drastically to Ronald Reagan.

So yes, a high debt-to-GDP ratio, high debt-to-income means that more and more government spending has to be spent on debt service—not on the real economy, not on production and consumption, and on the economy of the 90% of the population—but just on the end of the financial sector.

It’s a transfer of income from the real economy to the financial sector — from wage earners to financial investors.

NIMA ALKHORSHID: Michael, it seems that somehow the Republican Party is divided in two camps. One of them is the MAGA populists and the other one is plutocratic interests. And what do they want? When it comes to the U.S. budget, what is the division between the two parts of the Republican Party?

MICHAEL HUDSON: They’re both plutocratic, especially the populists. The populists that were fighting for the last few days in Washington, the populist Republicans, said the budget is not harsh enough.

The populists were saying there’s not enough cutback in Medicaid spending. You’re still giving money for nursing homes to have more nurses. You’re giving money for home visits to sick people. You’ve got to cut back even more.

So the populists are different, using a different rhetoric to get exactly the same right-wing policies that the plutocrats want.

And in fact, as Donald Trump has shown, you can’t be more of a plutocrat than Donald Trump. And how did he get elected? With a populist rhetoric claiming to represent the white working class instead of the financial class.

So populism is just rhetoric. It’s not really the substance.

NIMA ALKHORSHID: How does your analysis compare the current global economic realignment led by the global majority to the historical transition from feudalism to industrial capitalism?

MICHAEL HUDSON: Well, you’d think that this would be a warning to them, a warning to say we have two models before us. We have what we’ll call the Chinese model because it’s the most successful model. And that’s the model that, although they call it “socialism with Chinese characteristics,” it’s really industrial “capitalism with Chinese characteristics.”

It’s the mixed economy, just as the United States and Germany and other industrial nations had a program of industrial capitalism. The industrialists wanted the government to provide as many basic needs and services — at a subsidized price — as possible, for basic services like transportation, communications, education. They didn’t want these services to be high-priced because, otherwise, they’d have to pay their employees higher wages to afford these higher prices.

And so it was the industrial classes that promoted what basically was called socialism. You could have called it socialized infrastructure, socialized medicine, or whatever. That was an industrial idea.

And the guidance for all of how Europe and America developed their industry was classical economics. That’s the economics of Adam Smith and John Stuart Mill. It was the same line of economics that culminated in Marx, who was a classical economist.

And the root of their theory was Value Theory. And you don’t hear about that whole discussion that guided industrial capitalism throughout the 19th century. It has disappeared from discussion. And the theory of value was really a theory of prices and rent. The Value Theory, especially as David Ricardo refined it right after the Napoleonic Wars, was: the economic rent is the excess of market price over the actual cost of production.

The business plan of industrial capitalism was to keep prices low by not including unearned income. And the whole fight throughout the 19th century in Europe was against the legacy of feudalism, which took the form of economic rent, primarily to the landlord class.

And so the plan of Adam Smith (that he took over from the French Physiocrats), of Ricardo, and especially John Stuart Mill; and the first line of the Communist Manifesto was: You want to tax land rent. You don’t want this hereditary landlord class that inherited its lands from the warlords who conquered England and other countries to be able to make wage-earners, and businesses, have to pay rent to support them to make money in their sleep.

So the idea was to reduce prices to the actual cost value. That was the plan of capitalism.

Same thing with monopoly rents.

During the feudal epoch and Middle Ages, kings had gone into debt — to wage their wars — to bankers. And in order to pay interest on their debts, when Parliament would not give them the taxes to raise to pay them, they created foreign trade monopolies.

England had a wool monopoly that it established in the 14th century. Other countries created monopolies. All of these monopolies had survived into the 19th century.

And again, the industrialists said, if our economy has not only a landlord class, but a monopoly class, where the monopolies are owned largely by financial investors (monopolies are financial privileges, basically, to charge high prices without any competition), then the industrialists said, we’re going to have a high-[cost] economy.

How can England become the workshop of the world if we still have a financial class and a monopoly class and a landlord class that makes money in their sleep?

The ideal of capitalism was to get rid of all of these unnecessary costs of production, all of the unearned income that resulted from prices in excess of cost value.

So what the labor theory of value was really about… it was simply, well, ultimately, the cost of everything is basically labor.

So let’s just look at what the actual minimum social cost of production is. That’s what we want in order to make our economies so low-priced that other economies (the raw materials exporters, the ‘backward’ countries, then called the Third World countries, now called the Global South) with all of their landlord class, all of their monopolies, and all of their residue of European colonialism (which was very much like Europe’s; Europe inherited feudalism, the rest of the world inherited the colonialist excesses)… That difference is what made the industrial nations more competitive.

Now, what the BRICS countries, to answer your question, would say: How do we achieve the same kind of take-off that made England, Germany, and America the industrial leaders of the world? We’ll do what they did. We will cut back the payments to the rentiers.

Well, who are the rentiers in these BRICS countries?

Well, a lot of them are foreign investors, who concentrated on raw materials, rent, mining profits. The subsoil resources, as Ricardo pointed out, are just like land. The oil industry, the mining industry, is able to charge prices much more than the cost of actual production. That’s what makes them so profitable.

Well, foreigners control these sectors throughout many BRICS countries. And so do many of the elites of the BRICS countries—they are largely the rentier class. The elites of the BRICS countries are very much in the same position that British landlords were in relative to the industrial class.

So the question is: How are the BRICS countries going to free their economies from these rent charges — these rentier incomes of land rent, natural resource rent, creditor payments to creditors and to banks?

Well, what did China do? China had a revolution. And it took a revolution.

And after the revolution, it didn’t have a financial class to lend money to governments anymore. So, it did something that went beyond what Europe and the United States did in their industrial take-off.

China made money creation and credit extension not only a public utility, but an arm of the Treasury. It didn’t have a central bank to represent domestic banks and financial bondholders, as in Europe and America. China was in charge of creating its own money and credit.

And what did it do? It created money in order to finance tangible investment in capital formation, in factories, to produce goods and services, in housing (maybe a little too much in housing), and in huge public infrastructure, such as its low-cost domestic subway and urban transportation, and its long-distance hyper-speed trains.

Now, how are you going to get the BRICS countries to say, well, we want to create our money not really for our bankers to spend in flight capital and moving their money out of our countries into safe havens abroad?

How are we going to prevent our elites from benefiting from regressive taxation (that they don’t have to pay taxes and the foreign investors don’t have to pay taxes because of the way that we’ve written the tax code), and only our wage earners have to pay taxes?

How can they possibly industrialize without emulating the same kind of policies that were the result of applying the value, price, and rent theory that was developed by the classical economists?

Well, one of the problems is that by the time I was going to school in the 1960s, the only people — the only groups — that were talking about classical economics and Value Theory were the Marxists, because there was a counter-revolution at the end of the 19th century and the beginning of the 20th century.

The rentiers fought back.

There was an anti-classical school saying that there’s no such thing as economic rent. Everybody earns whatever they can get. And they essentially drove out the classical economists. They replaced them. It was by Austrian theory in Europe, by utilitarian theory and supply and demand in England, and by the economics of John Bates Clark in the United States, all in the late 19th century.

And by the time that World War I ended, there was no more classical economics really being taught. Everything was restructured to say there’s no such thing as economic rent.

And that was because England, America, Germany — the industrial nations — had used their classical economic policies to achieve such a head start that they didn’t need protection anymore. They were able to, all of a sudden, pull up the ladder to prevent other countries from developing in their same way and becoming rivals. And they themselves became the rentier economies.

And it was as if they were rolling the clock slowly back towards feudalism and its rentier classes, very much so.

You had only the Marxists talking about this. And now if people talk about value, they still use the word labor theory of value, as if somehow this is a class war of labor. But that wasn’t how Marx used it at all.

Marx simply said the historical role of industrial capitalism is to cut costs, to create a free market. And a free market was a market free from rent extractors—not free for extractors.

Well, this counter-revolution that I talked about in the 20th century became so successful that — I think, as we’ve talked before on your show — if you look at the modern GDP analysis, the modern national income analysis, the gross domestic product includes economic rent as a product.

Landlords play an economic role in production by deciding just who to rent to and how much to charge. And banks play a productive role—not only in charging interest and earning it, but in charging late fees. That’s called providing a financial service. I’ve mentioned this before.

And monopolies. We know that there are a lot of monopolies in the United States. That’s what all the hearings are about now, with Alphabet and Facebook and all of the others. All of their income is counted as a product.

But if you make income in your sleep without working—if it’s a purely rentier charge, a rent-seeking charge—that’s not a product.

That’s a transfer of income from the productive sector of production and consumption to the rent-seeking classes.

Now, the reason I’m bringing this up for the BRICS countries is, if they want to develop their economies to become as successful along the lines that China has done, they will have to say, well, what is the product that we want to produce and that we want the government to encourage to produce?

Well, the product is production.

The product is not economic rent for the privileged real estate classes, mineral companies, oil companies, monopolies, and the domestic banks.

It’s the production, because that is the only way that we can increase our productivity.

And to do that, they have to increase the living standards of our laboring class. That’s really what’s at issue.

Now, domestically, how are you going to get all of the BRICS countries to acknowledge how the industrial nations got wealthy in the first place?

How are you going to lead governments that still have been put in place, first of all, by centuries of European colonialism, and then by American imperialism backing, interfering with local politics by overthrowing leaders who are not dictators, following the American foreign policy?

How are you going to replace the ruling classes that were put in place by the Europeans and Americans with classes that actually represent their populations as a whole?

Can this be done simply by reasoning with them? Does it take a revolution? What does it take?

Well, there can’t even be a revolution unless you have a political doctrine and ideology to have a revolution about. And I don’t see in the BRICS countries, or even in China, an exposition of the ideology that made industrial capitalism so productive in the first place, from England, Germany, France, and the United States, on.

I’m told that most of the economists hired by the BRICS countries actually are trained in America. Even if they’re abroad, they’re trained in the American neoliberal economics.

You can’t have a BRICS economic revolution run by neoliberals, or by government officials trained in the neoliberal way of thinking, that does not include the concept of economic rent as unearned income.

Now, this may seem to be very academic, but I think that the most important thing that I have to comment on and to offer the BRICS countries is: You’ve got to look at this economic history and how you think of the economy as being divided between producers and rent-seekers.

Marx used the phrase: There’s the sphere of production and the sphere of circulation. By the sphere of circulation, he meant the sphere of privilege — the financial sector and the property rights sector, property being real estate monopolies and the privilege of banks creating their own credit.

Have I explained it clearly?

NIMA ALKHORSHID: Michael, I was wondering what’s going on right now in the central banks of the global south countries. And when it comes to the dollar, to the decline of the dollar’s value since Donald Trump took office, and are they really thinking about non-dollar currencies or investing in gold?

What’s going on in the mind of these countries, in your opinion right now?

MICHAEL HUDSON: Well, there’s a difference between the mind of these countries and the central banks. The BRICs cannot develop until they get rid of their central banks. The role of central banks is to oppose the role of the Treasury.

Central banks have as their clients the commercial banking system and the bondholders. They represent the financial sector.

That was exactly why the Federal Reserve was created in the United States—to replace the Treasury that was not very efficient in 1913.

And this is a quantum leap too far for most countries to take.

If you’re a central banker, you have to be trained in neoliberalism assumption — that finance is the most productive sector; finance is where the money is made; finance is where wealth is made, and therefore finance is the most productive sector, not industry.

The role of central banks is to de-industrialize the country, and siphon the income and wealth into the hands of a non-industrial rentier class.

So, when you say, how does that central bank think?

How can we fight against living standards? How can we make sure that we represent our financial interests, and the bankers, and the bondholders, altogether?

And what that means is: How can we support the United States as having some vehicle in which we can keep our national savings?

Even countries like Norway — that has a national wealth fund, not a central bank — but how are they going to keep the savings? Well, there’s a lot of protest in Norway. I was brought over to be a consultant to the government on this some years ago. Much of their investment is in American monopolies because that’s what yields the most money.

If you want to make money, first of all, you want to put it in drug dealing—that’s the most profitable thing. But governments don’t do that unless they’re part of the deep state — the CIA or the intelligence services.

So you want to make money, you go where the money is. Just like bank robbers rob banks because that’s where the money is, investors make money by investing in monopolies and private capital and in the big American information technology stocks, which are monopolies.

And that’s why they’re charged with being monopolies by the European governments and the American governments. That’s where you want to put your money if your objective is to make money financially.

So that’s the problem. Central banks want to be able to make money and returns for their government financially, not by direct investment in creating new factories, farms, infrastructure, and means of production. That’s not their mentality.

They’d say, that’s not the central bank’s problem, that’s the problem for the Treasury to do domestically.

Our job is to make money. And because we’re not going to save domestically, we have a balance of payment surplus. What country are we going to put the money in?

Most of them have in the past looked for the U.S. dollar. But now, because of what we talked about earlier in the flight out of the dollar, they’re thinking, where are we going to put the money?

Well, the euros represent only 20% of world monetary reserves, and Europe is pretty much a dead zone. We don’t see it rising because of the sanctions that America has just imposed upon it to prevent Europe’s trade with Russia and China, or Iran or other countries like that.

So the central bankers really have a problem. Where is a safe haven?

They are talking about: how can we sort of avoid the issue? Maybe we can hold each other’s currencies?

They’d like to hold the currency of a strong country, like China, but the problem is China has no reason to give them a market to invest.

If China would let them invest in its own securities, it would have to say, well, we’re going to run into debt for the government so that we can give you bonds, a market for bonds, that you can hold, denominated in Chinese RMBs.

They’re not going to do that.

In fact, they just had a huge stock auction in Hong Kong. They didn’t let American investors be part of this new initial public offering that they just offered in Hong Kong.

So they don’t need dollars. They don’t need American investments, or Global South investments, or investments from any other country coming into their economies because they have enough already.

They would like their own citizens, their own savers, to be able to buy stocks in their own companies. But they have no reason to provide financial vehicles for other countries to benefit from China’s remarkable industrial take-off.

So again, the central banks have a dilemma. There’s nowhere that is safe any longer.

There’s been a long cycle since 1945. There’ve been a lot of little business cycles, but each one has risen higher and higher and higher. And America, Europe—countries throughout the world—have reached the maximum debt-servicing capacity that they have.

It’s not simply debt-to-GDP—that doesn’t really matter because a lot of that’s just bookkeeping.

It’s really the debt relative to wage earners’ income, debt relative to corporate income, debt relative to state and local financial income.

The debt has become so heavy that other countries that remain part of this whole geopolitical system that America put in place in 1945—it’s run its course. It’s a dead end.

And yet, the BRICS countries have not come up with an alternative. How do you have a revolution and a new policy without defining what the alternative policy is?

And that is what is lacking.
But that’s what your show is all about.

NIMA ALKHORSHID: Thank you so much, Michael, for being with us today. Great pleasure as always.

MICHAEL HUDSON: Well, I’m glad we were able to introduce these topics into as wide a discussion as possible, Nima.

Global South

The Ultimate: Michael Hudson

Exposed: The Secret Deal That Started a Global Economic War!

In the first 5 minutes you will learn what the economic situation is all about.  In the next 3 minutes to learn what countries are going to have to face.  And then you will know why, in the previous piece that we looked at, Michael said .. To change economic policy will take a social revolution.

But you will have to listen sentence by sentence.

Global South

Michael Hudson was interviewed by Liberation Daily from Shanghai

[Ed Note:  This is a short, concise, and accurate vision of the near future.  As Michael ends this interview, his assessment of the future in the US is a political dark age.   “The conflict is between social systems”.  Another note of real value, is that Michael says there is no walk-back here.  The US cannot fix it because they are not prepared to take the actions required.  And then, as my Chinese friends say, they are not going to walk gently into that good night.   If one considers this concise material as well as the circus in the Gulf States now, the picture remains one of turbulence and not peace.  This is clearly the conflict of social systems and there is more to come on that.]

The video is linked in the text and with Chinese material, I cannot embed it.  Kindly click and the next page will have it.

Michael mentions that the viewership is huge.  Congratulations Michael!]

Shanghai Jiefang (Liberation) Daily, May 9, 2025

Michael Hudson was interviewed by Liberation Daily from Shanghai on May 9, 2025. The video and report appeared in Tencent News on May 14, 2025.

Title of report:

Liberation Daily interviewed Michael Hudson: The trade conflict has brought irreversible impacts, Trump is compromising himself

解放日报访迈克尔·赫德森：贸易冲突带来不可逆的影响，特朗普在自我妥协-腾讯新闻 https://view.inews.qq.com/k/20250514A01FVR00?web_channel=wap&openApp=false

1、如何看待中美贸易冲突的根源？你认为这是经济利益的冲突，还是更深层次的政治和意识形态的较量？

How do you view the root causes of the U.S.-China trade conflict? Do you believe it is primarily an economic dispute, or is it a deeper political and ideological confrontation?

Hudson:  It’s much deeper than a trade conflict. It’s a conflict between social systems. The United States is a neoliberal economy dominated by finance capital. Its political aim is to dismantle government regulation and privatize basic infrastructure, and to make financial centers (Wall Street) the economy’s central planner. This planning is not in the economy’s overall interests.

The problem is that this plan polarizes economies between creditors and debtors, and imposes austerity on labor and the rest of the population. So the United States cannot tolerate a successful alternative model. That’s why the United States fought against the Soviet Union after 1917. It looks at China as an existential threat not because of foreign trade, but because it shows a much more successful economic model. And this success has made other countries orient their trade and investment around China instead of on the United States.

So the United States seeks to disrupt China’s development. Trump is using his tariff threats against other countries as a lever to say that he will reduce tariffs if they agree not to trade with China. He is bound to fail, and that makes him hate China all the more.

2、你提到中国的经济发展模式与美国的资本主义制度有根本性的不同。在你看来，这种差异如何影响了中美之间的贸易关系？

You mentioned that China’s economic development model is fundamentally different from the U.S. capitalist system. In your view, how has this difference influenced trade relations between the two countries?

Hudson: The United States has made a choice to permit the financial sector to make money for itself instead of using the financial system to serve the overall economy’s economic growth and rise in living standards. This is what has forced it to outsource its industry to Asia. It has chosen to create a “market” that rewards making gains purely financially, not industrially.

The most important infrastructure in China’s public domain is the Bank of China and its financial system that aims at increasing tangible capital investment to increase productivity and living standards to uplift its population. The U.S. financial system has found its major loan market in rent-seeking sectors. Banks have added to debt leverage bidding up prices for real estate (80% of bank loans), as well as stocks obtaining natural-resource rents and monopoly rents on credit.

The result is a rentier economy with an increasing the cost structure. In Marxian terms, financial revenue is the Sphere of Circulation, not the Sphere of Production. U.S. industry has to pay labor enough to carry housing costs up to 43% of income, debt service (apart from mortgages) another 10 or 15%, plus student education loans ($1.8 trillion), credit-card debt ($1.3 trillion) and privatized health care (18% of GDP). There is no way that employers can pay labor enough to meet these costs of living and be competitive in foreign markets.

3、中美贸易冲突中，美国采取了一系列关税措施。你认为这些措施能否真正解决美国的贸易逆差问题？还是会导致更广泛的经济后果？

In the trade conflict, the U.S. has implemented a series of tariff measures. Do you think these actions can truly resolve America’s trade deficit, or will they lead to broader economic consequences?

Hudson: The aim of Trump’s tariff measures is to create government revenue that will enable him to cut taxes on the wealthiest 10% of the population, mainly the Finance, Insurance and Real Estate (FIRE) sector. But the effect of these tariffs will be to stop much trade altogether.

If the trade deficit shrinks, this will have two effects. Most broadly, it will sharply increase inflation, by the degree to which tariffs are raised. That will squeeze labor’s income, leading to defaults on mortgage debt and personal debt. That will lead to home foreclosures, loan defaults and much less personal income being available to spend on domestic products. Many small businesses will have to go out of business.

The tariffs also will cause breaks in the supply chain of many companies – for instance, auto companies that rely on particular parts that are imported, or pharmaceutical companies reliant on key chemical components. And also, the military arms and high-tech industries that need rare earth magnets and other key raw materials.

So the US economy will be forced into recession and perhaps a longer-term depression.

4、你曾指出，中国的经济制度避免了苏联式的微观管理，允许市场反馈和创新。在中美贸易冲突中，这种制度优势如何体现？

You have pointed out that China’s economic system avoids Soviet-style micro-management and allows for market feedback and innovation. How does this institutional advantage manifest in the context of the U.S.-China trade conflict?

Hudson: China has sought to make its economy flexible – and also independent of reliance on U.S. attempts to monopolize information technology, military arms making and other products. U.S. companies seek a monopoly position, which minimizes competition in order to extract monopoly rents. China is still letting a hundred flowers bloom in order to see what succeeds best.

5、你认为中美贸易冲突对全球经济秩序有何影响？是否会加速全球多极化趋势？

What impact do you think the U.S.-China trade conflict has on the global economic order? Could it accelerate the trend toward global multipolarity?

Hudson: Trump’s trade conflict insisting that the United States must be the winner in any agreement will change the whole world’s trade relations, and do so IRREVERSIBLY. Trump’s act cannot be taken back. The damage is done.

Trump is making the US-China trade conflict into a wedge to try to force European, Global South and other countries to choose EITHER to focus their future trade and investment on the U.S. market – which is shrinking as a result of Trump’s trade war – or else to participate in the most rapidly expanding market in the world, that of China and its Asian associates along the Belt and Road Initiative.

The choice is whether to live in the short run and avoid U.S. trade disruption (and threats of political regime change), or to look at their long-term growth prospects.

But finance lives in the short run, and many heads of foreign governments owe their political positions to U.S. support. So their loyalty is to U.S. geopolitical aims, not to their own populations.

6、在你看来，中美贸易冲突中，哪一方更有可能采取妥协措施？这种妥协可能以何种形式出现？

In your opinion, which side is more likely to make compromises in the U.S.-China trade conflict? What form might such compromises take?

Hudson: China has announced that it is not going to compromise on its principled position. It doesn’t have to, because it has many alternatives to ties with the United States (although there will of course be a short-term disruption).

But Trump already is compromising – with himself. It is as if he has been negotiating against himself since April 2, rolling back his threats to tax Canadian and Mexican auto parts 25%, and also reversing his tariffs on China’s exports of I-Phones and other products that Trump’s key political supporters need in order to keep their businesses profitable.

So the United States will find itself in a weakening position as Trump’s hope to get other countries to join his anti-China coalition fail to gain support – especially his closest political allies and satellites in Europe, and even from Japan and other ASIEN countries.

7、中美贸易冲突对全球贸易格局有何影响？

How will the U.S.-China trade conflict impact on the global trade landscape?

Hudson: When the chaos dies down, the effect will be that the United States has isolated itself from the rest of the world instead of isolating China. And its trade barriers will cause price inflation and further polarize the U.S. economy, deepening U.S. de-industrialization and making it even more dependent on other countries that are not following the U.S. financialization ideology.

8、在中美贸易冲突中，你认为有哪些可能的解决方案可以实现双方的互利共赢？这些方案需要克服哪些障碍？

In the U.S.-China trade conflict, what possible solutions do you see for achieving mutually beneficial outcomes? What obstacles must be overcome to realize these solutions?

Hudson: The real question is, who do U.S. policy makers want to benefit? The United States is run by special interests, mainly in the financial sector and in monopolized sectors, not in the public interest. They are willing to see the economy shrink and living standards be squeezed even more, as long as they themselves get richer. That has been the economic trend steadily since 2008, and it will accelerate.

There is only one way for the United States to overcome this obstacle. That is to change its economic system. But economic systems don’t change unless the population is able to empower a government that is strong enough to keep the financial sector from becoming a predatory exploiter of the economy at large. That would require either a new political party, or a revolution.

I don’t see either of these things happening in the foreseeable future. The Republicans and Democrats have blocked the emergence of a third party by a complex maze of election restrictions. That’s why even “progressive” Democrats realized that they have to work within the confines of their party controlled by Wall Street and military neocons. The Green Party behind Jill Stein was unable to even get a slot on the presidential ballot last November here in New York where I live.

I don’t see a revolution. There is little left-wing movement in the United States. What is called “left” or “Marxist” is actually focused on identity politics of ethnicity (racial minorities) and LGBTQ, not the identity of being a wage-earner. And Trump’s clamp down on universities whose students protest against economic injustice or genocide show the power of a new McCarthy period of police state and FBI censorship of the mass media, the press and the educational system.

The result is looking more like a political Dark Age than an alternative to U.S. economic polarization and shrinkage. So I see a slow crash, rising discontent but not a revolutionary situation.

Global South

Michael Hudson: From Clean Slates to Debt Traps

Devika Dutt & David Adler in conversation with Michael Hudson [Transcription]
DGI May 2, 2025

Nika Dubrovsky: Hello everyone. So this is the David Graeber Institute and we are working with David’s archive and preparing his work for publication. Each month we host a dialogue on debt inspired by the work of David Graeber and Michael Hudson.

Today for our second session I’m happy to welcome Michael Hudson, David Adler and Devika Dutt. The global debt system lasted because it was seen as a moral story, one many people believed in. But this belief is now breaking down as more and more people see the system as neither fair or just.

So my question is what kind of future can we imagine when the only options are financial globalism tied to a declining empire or nationalist capitalism where the state acts as a corporation and citizens are treated like employees. With that I’ll hand it over to David Adler who has kindly agreed to moderate today’s conversation and introduce our speakers.

David Adler: Thank you so much Nika and thank you to the David Graeber Institute for hosting these really critical dialogues and conversations with such esteemed guest as we have today.

Two brilliant minds, one I must admire, I’m a little starstruck myself and very delighted to be sharing a stage with Professor Michael Hudson and a dear friend David Kadat who I believe joins us now from London. So we’ll be talking today as Nika mentioned about the past, present and future of debt, the international financial system, its rapid and thorough transformation and potentially new horizons for what it might mean to transcend the limits of this highly financialized mode of capitalism and the moral stories that we tell around what it means to be in debt to each other, to our states and of course to empire. And so I’ll be moderating this discussion, we’re going to take it for the next hour and use we hope the last 10 minutes or so to engage you all, people who are viewing and watching from home, from work, your bosses, to take some time with us this morning or afternoon and so I’ll be keeping attention to the comments section where I’ll be able to relay some questions in the Q&A to our esteemed guests.

And so to kick this off I wanted to give us a sense of orientation. We’re coming off a set of discussions that were happening in dark corridors as well as in public plenaries about the states of the so-called Bretton Woods Institutions, the IMF and the World Bank in Washington DC, their spring meetings, one of their two semi-annual meetings where there was a lot of anxiety, a lot of hand-wringing about the state of the international financial system, the position of the United States as a dominant player in it and the vision of the Trump administration for either maintaining or transforming the financial hegemon of the United States in that position. I thought we could go to our two esteemed panelists today to give us a sense of orientation, of where we are now and how we understand this present conjunction.

I’m sure many people who are listening and watching this program have read in the pages of the FT or in their social media feeds about this geoeconomic conjuncture and I’m hoping that we can spend a little time at the beginning of this program giving a sense of how we might understand that. So Michael you’ve written a lot about this both in long form and in short form on your website and I thought we might start here. How do you think we should understand the question of where we are now as we hear these rumors of sovereign debt crises escalating across the south but we also at the same time have a kind of crisis of the self-image of empire taking place right there in the heart of these so-called Bretton Woods institutions in Washington DC.

So what do you think Michael, how might we understand this present conjunction?

Michael Hudson: Well most of my discussion in super imperialism and my economic books has been a critique of the junk economics promoted by the International Monetary Fund and also the World Bank to explain why they have to impose austerity plans on debtor countries that have prevented them from achieving the government investment that’s required in order to make them self-reliant. But what Nika has done and in asking me to talk to this discussion is focus on something that is completely left out of account in the financial sector’s discussion of debt servicing capacity and that’s the moral dimension. So I want to talk about the moral dimension because the financial sector has created a narrative and this narrative makes it appear as if somehow it’s perfectly natural for countries to run increasingly into debt, for the population to polarize between creditors and debtors, almost as if this is really not a policy discussion at all but a function of nature itself.

And so what Nika and David Graeber has done is put it in the context of you know what is moral, what is fair, and I think the reason why David’s book was so powerful and so important was precisely because he focused on anthropological communities where debt all began and in these indigenous communities everybody owed debts to each other. It was a mutual gift exchange. Sometimes people would give crops to their neighboring families.

The neighbors would give the same crop back. All of that was technically a gift, technically debt, but the idea in indigenous communities was that it was an integrating function. It tied people together.

There were other kinds of debts, for instance, personal injury debt, what the medieval Europeans called Bergel debt, and if you injured somebody you or your family had to make restitution to their family so that there wouldn’t be a feud taking place and everybody just tries to have an eye for an eye and a tooth for a tooth. All that was kept in line with the ability to be paid and if for any reason it couldn’t be paid, the offenders were sent to a city of refuge until there would be a kind of peace, the equivalent of debt cancellation, a clean slate, a new beginning where they’d all come back. The other kind of debt was bride wealth or a dowry for women. They were inter-family debts that also were always able to be paid.

The reason was that these indigenous anthropological communities were low surplus. They couldn’t afford usury because that would have polarized them. If you would have permitted debt to be beyond the ability to be paid, then some families would have fallen into bondage to their creditors and the community would have lost their labor, including the labor on public infrastructure projects like Corvee or in the Middle East building city walls, irrigation, all of the public enterprises that are in the crop season cultivators had to promote.

So the debt that was formal and at a stipulated interest rate to be paid no matter what developed in a particular part of the world in Sumer in the third millennium BC and it was based on equity. It wasn’t really a debt relation when the palace would provide foreign traders with textiles to travel abroad to obtain the silver and the metal and the copper and the tin and the stone that the economy needed that wasn’t available in Sumer. How were they going to share the profits with the merchants that they consigned these to? Well, they assumed that the merchants were not going to keep records of every transaction, so they said, all right, in five years you’ll have to repay double the original principle. We assume you’ll much more than double your money. It can be paid.

You then had a mutation to agriculture where the advance of land or seeds or cattle to do the harvesting would come. That’s where the problem came up and it was recognized that if there was a crop failure that the cultivators really couldn’t pay the debts, they’d fall into bondage. So the solution was to avoid debt from causing this kind of economic polarization and they did it by every new ruler taking the throne and throughout the ancient Near East from Sumer to Babylonia to Iran to the neighboring territories, they would have a clean slate when a new ruler would take the throne. This is like a forgiveness of crime, a forgiveness of criminals.

People could return from cities of refuge presumably and other kinds of countries. Almost all of the world from the Near East to China had rules to prevent creditors and merchants from using their economic gains to impoverish the rest of the economy because it was recognized that debts, every rate of interest at debt is a doubling time and this doubling time of debts grew faster than the ability to be paid and so you had to write the debts down. That was the basic narrative of ancient Near Eastern religion and it was basically the logic that led Confucianism and Eastern countries to prevent merchants from having a high enough status to be able to take over the government and run the government on behalf of the creditors instead of for the public interest.

Well, what happened then was a dark age. Bad weather came around 1200 BC in the Near East. The palace economies fell apart and when trade began in the 8th century BC with Greece and Italy, the European countries didn’t have any background, any historical experience with divine rulership, with rulers able to keep that in place.

So Western civilization was the first part of the world that didn’t have debt cancellation, that didn’t have a prevention of a financial oligarchy from developing. Well, we all know what happened from the 8th century to about the 4th century AD. The creditor class became an oligarchy, it impoverished the economy, it reduced much of the agrarian population to bondage and then to serfdom.

And then there was such a revulsion against the economic polarization, the luxury at the top throughout the Roman Empire and the poverty that was created at the bottom that the Christian religion, the Islam when it was developed, the Persian religion, this revulsion led to a banning of interest altogether in the hope that that would somehow prevent that from causing the problems that it had caused. And this abhorrence of usury was the basis of early Christianity. When Jesus came to give his first speech to a synagogue, he unrolled the scroll of Isaiah calling for the year of the Lord, meaning the jubilee year, to cancel the debts and said that was his mission.

And his sermon on the mount was the Lord’s prayer, forgive us our debts as we forgive our debtors, the basis of Christianity. Until the 12th and 13th centuries of our era, when the Roman church sent out to take over the rest of Christianity, Christianity was an Eastern Orthodox church centered in Constantinople. And the church essentially recruited warlords, Norman warlords, such as William the Conqueror, and who said, we’ll let you conquer England and make you king if you will agree to pay tribute to Rome and serve our interests and be our feudal vassal.

And before that, William Guiscard in Southern Italy made a similar agreement. So these vassals were put in power and essentially told to fight against Germany, the Balkans, Constantinople, churches that didn’t accept Christianity. And somehow the problem was that to go to war required borrowing and debts required the payment of interest.

So it was Christianity, it was precisely the Vatican that reversed the Christian abhorrence to usury and said, we need usury and interest so that we can fight the wars to fight against people who don’t accept Roman domination of religion. Well, what happened then was their local kings had a problem with local parliaments. The parliaments didn’t want to approve the king’s ability to levy debts to fight the Vatican’s war.

This was first fought in 1215, you had the Magna Carta, which limited the king’s power. And 40 years later, the English nobility waged a civil war to prevent the king from taking on money to fight Rome’s war against the Germans who gained support in Southern Italy and Sicily. Well, what did the popes do? Pope Innocent III opposed the parliamentary supporters of the Magna Carta and denounced that as unchristian.

And later you had Alexander IV excommunicate the barons who fought a civil war to limit the ability of England’s king to run up debts at their expense. So, and how are they going to create a narrative to support all of this inversion of what had been the center of Christianity? Well, that was the job of the 13th and 14th century schoolmen. And they developed a new word, interest, as distinct from usury.

No ancient language had a distinction between interest and usury. All charging of interest was considered to be a form of usury. But the medieval churchmen said, well, there’s an excuse.

And let’s look at the individual businessman, the money lender. If you have the money lenders who are merchants, they were the people who had the coinage to lend out. And if a merchant lends money to a borrower, then he’s not able to use this money to make his own, pursue his own trade. So he deserves compensation. And that’s lucrum cessans, there’s a long discussion. So all of a sudden, instead of focusing on the vast expansion of debt for war lending by the international banking class of North Italians and Transalpine bankers, the whole focus of analysis and moral judgment was, well, doesn’t the merchant have a right to make enough money to live on that cover his costs of doing business and being like other people? All of a sudden, the attention was shifted away from the international banking class lending to governments, not to individuals, to fight wars against each other.

And in the 13th century, the wars backed by the Roman Church, and then afterward wars done by the kings on their own, trying to conquer other countries. Well, the final nail of the coffin was that the merchant banking class got so strong and so rising to the top of the economic pyramid, instead of the bottom of the economic pyramid, where it was in all earlier countries, that you had one of the wealthiest international bankers, the Medici, Pope Leo the 10th became Pope. And in 1515, he gave a long justification for usury and saying, well, banks have to get their money to lend to countries to wage war.

How do they get the money? They pay interest to their depositors. And look at the Montepiata, that is a bank that was founded to provide low interest credit to poor people. And he said, if we didn’t have interest, how are the poor people going to get the money to live? They would have to depend on these voracious Christian money lenders.

And so we’re doing a good job. Well, all of this was focused on somehow interest was a cost of doing business. It wasn’t exploitation. And creditors just had to live. Well, as you had to take off, I’m going to fast forward to the 19th century. And you had more and more arguments that debt was impoverishing and polarizing society.

Well, you had the Austrian economists, Bohm-Bawerk, for instance, said these wealthy people are making loans and doesn’t the creditor deserve some kind of reward for abstaining from consumption? If the creditor makes a loan to somebody who needs the money, then he has to forgo consumption. Well, Karl Marx poked fun at this by saying, gee, the Rothschild family must be the most abstinent family in Europe because they must forego consumption so much that that’s how they’re getting the money. Well, of course, this was all a myth.

The wealthy people didn’t forgo consumption. They were just the opposite. They were the most profligate and over consuming class there was.

So there was an idea that somehow interest was payment for a service. And that idea that interest is all fair and a payment for a service is built into today’s gross national product statistics, the national income statistics. The GDP includes interest payments as providing a service somehow that adds to GDP, just like landlords provide a service, even though that landlords and creditors, bankers make interest in their sleep.

So there’s been a whole focus narrative that don’t look at the effective debt on impoverishing society, on empowering a financial oligarchy to get rich enough to take over the government today, like the financial oligarchy took over the Vatican and Christianity in the 16th century. It’s all sort of equilibrium. And basically, you have the culmination of this in the International Monetary Fund’s theory that other countries have to pay interest because they need the money to develop. They’re like the poor people before. They’re in need. And of course, being in need, they have to go into debt.

And that’s the narrative that somehow justifies today’s international division of labor and specialization of production between raw materials exporters in the global South and the creditor industrial nations, the industrial power nations from the United States, Britain, France, and the other great creditor powers. So somehow this whole moral dimension that originally shaped how society dealt with debt and interest payments has just been, how do we squeeze out enough money from the debtors to be able to pay? And it’s become a purely technological question. And what David’s book Debt did was to shake up this discussion and show, put it in the context of, is society going to run for the benefit of the creditor class to live by earning on interest, or is the financial sector and banking going to be run to serve society? That’s the great moral question that has to be raised and should frame the discussion of interest payment in debt.

David Adler: Thank you so much, Michael. And Devika, I thought I would pass it to you now. I mean, Michael’s given us this unbelievable tour of centuries and centuries of the political, economic, and moral dimensions of debt.

I thought maybe you could fill in and take us to the present. I know you’ve got a lot of experience in thinking about 20th century struggles for economic justice and full economic decolonization, for example, in which the question of debt was epicentral. If you think about not just, you know, Sankara’s call for a united front against debt, but really from Bandung forward and thinking about colonialism in modern dress and the ways in which even though territorial colonialism had come to a close in the phase of high decolonization, there were these renewed forms of dependency and financial subordination to which these countries of the so-called global south or then third world were subjected.

Do you see what kind of traces or how can we take Michael’s story about the moral frameworks and, you know, through the late 20th, some of the later movements in the 20th century around debt jubilee, debt abolition, and kind of more concrete examples, whether it’s Correa’s Ecuador or even up to present day, you know, you’re in South Asia now in thinking about a country like Sri Lanka, who is facing off with an International Monetary Fund now. Do we see a kind of more consistent trajectory from the history that Michael’s traced here? How should we understand the long legacy of these medieval and early modern stories about that through the lens of third worldism or, you know, of global south struggles for full economic sovereignty?

Devika Dutt: Thanks, David, and thank you Michael, for such a commanding history of debt and sort of telling us how interest became sort of just the cost of doing business for creditors. I already learned so much from you when you were talking, but catching us up to the present and the more contemporary history of sort of capitalism and decolonization in the late 20th, in the 20th century for a large majority of countries.

Debt, rooted in colonial exploitation, still controls the Global South. Even after decolonization, economic sovereignty remains out of reach due to debt, resource extraction, and reliance on the Global North. The US-dominated monetary system keeps countries dependent, and attempts at autonomy often face resistance or interference. Debt crises and austerity measures continue to harm developing nations, but there’s hope as more people challenge the current system and seek new economic models.

But again, there are causes for hope, I think, and I’m sure we’ll get to that soon. I think the unpopularity of the IMF and also now the blatant, I feel like a lot more people who have, for the right reasons, lost faith in sort of the liberal international order, which literally is supporting genocide in Gaza and all kinds of bad things. Nobody has any faith anymore in this global international system, which for a lot of reasons, even though, yeah, it gives me a bit of hope in that way, but we can get to that soon.

David Adler: Thanks so much, Devika. I’m going to turn it right back to you, Michael, and we’ve done a lot of trudging our way through centuries of history and trying to get up to the present. And you’ve written a lot about this sort of conjuncture, both as a site of contestation and perhaps a set of renewed imperial plunder and extraction.

I wonder to this point, whether you think that the present moment gives us a unique opportunity to transcend and to rewrite some of those kinds of narrative frameworks that have been so instrumental in creating a global system that normalizes, facilitates, and enables under the South to the North? And if we’re turning to this question of what is to be done, how far do we have to go? Many of the questions that are coming into the Q&A are, should we be abandoning the banking system? Should we be moving to a more cooperative model? How can we finally break with these old, if renovated, moral frameworks that facilitate such subjugation and try to build a new kind of future? What could be some lessons and some guidelines and a vision that could carry us out of this so-called interregnum and into a future that doesn’t require us to follow these rules that, as you’ve pointed out before, were written by the mighty to subjugate the less powerful across the world?

Michael Hudson: Well, there’s an international crisis of imminent defaults by global South countries right now, and any crisis offers an opportunity. Here’s the basic principle that should guide it. The existing volume of debt, foreign debt, dollar debt by global South and other countries cannot be paid without stopping their economic growth and preventing the investment that’s needed to enable their economies to grow forward.

If they pay their debts, they cannot grow, the debt crisis will increase. And there’s an implicit moral principle in all of this that the United States and its academic economics promoted, and that was that the creditor countries have an obligation to enable the debtor countries to pay their debt. This is the basis of John Maynard Keynes’ proposal for a Bancor in 1944, as an alternative to the IMF.

The United States did not want to take any responsibility for letting other countries pay. It wanted to exploit them. That’s its business plan.

That’s how it ended up being able to use debt, to weaponize debt, to weaponize the dollar, to weaponize its foreign trade, to weaponize the World Bank’s prevention of other countries from borrowing money, if it was to feed themselves instead of becoming dependent on American agriculture. Well, right now, that implicit moral principle is blocked by President Donald Trump, who has imposed tariffs to disrupt the trade of every country in the world with which the United States trades with. And his threats made a few weeks ago was, we are going to wreck your economy if you don’t sit down and make a deal with us.

The deal will be that you have to fight against China. You have to trade with the United States, not trade with China. Instead of trading with Asian countries that are growing, you have to trade with the United States that’s shrinking.

You have to pay their debts, and you have to give the United States special privileges to take over your economy by using its debt to buy out your public infrastructure, privatize your infrastructure, sell it to the creditors, essentially dismantle your government, and impose the same neoliberal doctrine that has de-industrialized the United States, England, Germany, and the Western economies. Well, if the United States and its tariff policy and its creditor policy prevents other countries from paying their debts by making exports to the United States and using their export proceeds to pay their creditors, then the United States has prevented the debts from being paid. It has turned the international debt system into odious debts.

And there’s a long discussion dating back a century on odious debts and why odious debts must not be paid because they’re odious. And so I think the debtor countries can get together and say, we are suspending our debt obligations now because the United States prevents us from paying. The United States blocks us from exporting not only to the United States by the tariffs, but to China and Asia that are the growing countries.

But if we can’t export, how on earth can we pay our debts except by selling off every acre of land that the government owns, every public utility, every asset that the government owns? And this is itself an odious economic dynamic. And so we are suspending our debt payment with the intention that this suspending will be permanent until such time as we can make a new beginning and use a credit to finance our economic growth and development and economic self-sufficiency in agriculture, in basic consumer goods, in industry, just as the United States, Britain and Germany developed their own economies by doing this. We want the ability to do what the West did instead of letting the West use debt leveraging and debt dependency to prevent us from growing, to keep us in debt peonage.

That should be their economic campaign.

David Adler: I thought we were coming up to the last 10 minutes when I had promised to do a bit of Q&A. And so I just want to pass to you quickly Devika for just one quick comment, maybe one, two minutes before we turn to the Q&A, which is just, you know, Michael’s given us a really clear sense of what needs to be done and what could be done. And you’ve got a lot of experience in looking across the world and seeing sort of what countries you think are doing, what they hope to be doing.

And I, you know, in my capacity as the co-general coordinator of this Progressive International, I also have a chance to talk with a lot of these governments and representatives and officials about this. And what I find sort of remarkable about the present conjuncture is there’s a very clear sense that something must be done. I mean, they’re drowning in sovereign debt.

It’s massively impacting their fiscal space, as you mentioned, their ability to invest in health, housing, education, and critical services for their people. It’s handicapping progressive projects everywhere from Brazil to Colombia and beyond. But we’re not seeing the same kind of appetite for a Jubilee, for a debt cancellation, even that we saw 25 years ago.

Now, part of that has to do with questions of leadership. You know, where we used to have Fidel Castro calling the world to Cuba to support a global struggle against these odious debts, as Michael has said. We’re not seeing the same kind of leadership on the question of sovereign debt.

We’re also seeing a renewed attempt by the United States to override those efforts. We saw the South Africans try to launch a cost of capital commission through the G20 process in the U.S., forcing them to change the cost of capital commission. We just wanted to talk about the terms of integration into the international financial system into a review of the cost of capital.

Why do you think we’re struggling so much to revive and renew a kind of politics of debt cancellation, of a more radical and protagonistic attempt to rewrite the rules that, as you rightly point out, continue to subjugate the world’s majority?

Devika Dutt: That’s a really hard question, David, but if I had to take a stab at that, I think you’re absolutely correct. But I feel like this is definitely still a result of the decades of austerity that have sort of compromised basic, like compromised and worsened the lives of different people all over the world, which has given rise to fascist movements all over the world, which are not necessarily amenable to challenging global capitalism or the global debt system, especially when it’s in the interest of some of them to be in the good graces of President Trump now, for instance. So in a way, like it’s a very hard question, but in another way, it’s very obvious that this is the result, this is an outcome of the past 50 years of debt peonage, austerity, and the impacts of horrible policies imposed on many countries of the global South.

But that being said then, the challenge then is that we need to sort of reclaim these movements, reclaim our projects of not just nation building, because I don’t think nation building is appropriate anymore in this context when nationalism is only about sort of demonizing the other or keeping people out or just sort of excluding somebody from your project and taking muscular control of something in every nation. And so the challenge of course then is to sort of reclaim, fight fascism and fight all these authoritarian movements everywhere, so that we can build this leadership, build this movement against sort of the system of debt peonage as well. I don’t wanna say that it has to be like one before the other, but I think this is in my view, one of the biggest impediments, because as you mentioned, there are leaders like Fidel and even in the global South, there are other places in the global South, like Nehru or Sukarno and all these great leaders, Nasser, who had a vision, who once again, weren’t necessarily perfect, but were definitely trying to build towards something better.

And the leaderships in those countries now are nowhere near those that don’t have that kind of vision of sort of an anti-imperial project against sort of the hegemony of the global North, but specifically the United States.

David Adler: Thank you, Devika. And so Michael, now that we’re coming to kind of the conclusion of the discussion, I wanna turn to a couple of the questions.

Michael Hudson: Yes, that’s what I want, questions.

David Adler: And they really focus on this question about the politics of debt. So one is asking about how legal and accounting systems that allow for ill-gotten profits to be obfuscated using corporate structures and ledger trickery.

One is about how the international balance of payments have been privatized and forgotten ever since finance was untethered from reality as this comment points in 1971. And both these questions are pointing to looking at the past half century, how it may have become more difficult to build this movement as Devika and I were discussing a kind of different politics of debt. So what do you think of those questions about how corporate and banking sectors have transformed in the past 50 years? Obviously thinking about 1971 as a critical juncture of Nixon making some world historical unilateral decisions about the future of the international financial system.

What are those changes in the past 50 years of the global economy mean for the politics of debt around the world?

Michael Hudson: Well, part of the problem is the academic system. Economists don’t talk about debt. Debt plays no role in the economic models.

They say, well, it doesn’t matter. Debt is, money is only avail and debt is only avail. And we owe the debt to ourselves, so it doesn’t matter.

But the we is the 99% and ourselves that we owe it to are the 1%. So the academic economic profession plays no role. I think now you’re beginning to see UNCTAD potentially playing an important role.

But there’s very little discussion in the mainstream press against all of this. Debt is something that is considered impolite to bring up in polite company. You know, a little over a century ago, sex was what people couldn’t talk about until really Freud came along.

It just wasn’t what you talked about. Today, talking about debt is just like talking about sex around 1900. It disturbs people.

They don’t wanna talk about it because there’s no solution to the debt problem without going beyond the permissible barriers of polite company and just acknowledging that debts can’t be paid. There is no equilibrium process that automatically keeps debt and foreign trade in a system of balance and equilibrium. The Ricardian theory, the theory that is used by, that Nobel prizes are given for, proves that there is no debt problem and can be no debt problem because paying debt automatically provides the opportunity to pay it.

This is absolute nonsense, but the mathematics underlying the academic theory are less sophisticated than those taught in Babylonia in 1800 BC. And we know that because I’ve published the school texts that scribes were taught and scribes were taught to describe how long does it take for a debt to double? And the answer is exponentially doubling in five years, quadrupling in 10 years, octupling in 15 years, multiplying 16 times in 20 years and 64 times in 30 years. Well, obviously no economy can keep up with this rate of growth.

And at the same time, the Babylonian said, well, how fast can economies grow? And we have their mathematical training texts, for instance, how fast does a herd of cattle grow? Well, it begins to grow, but then it tapers off. This is the opposite of modern business cycle theory of the National Bureau of Economic Research. You have academic economics being weaponized.

The National Bureau’s theory of business cycles says that there are automatic stabilizers. You don’t need a government to do any interference at all because automatically the economy is going to keep running and stabilizing. This leaves out of account the fact that every recovery since World War II from the United States to England to continental Europe has occurred at a larger and larger ratio of debt to income and debt to GDP.

And now it’s reached the limit. That is said to be impossible according to every economic theory that’s received a Nobel Prize. So you have to realize that there has been the narrative of analyzing the debt problem has been turned into junk economics, basically, because it denies reality.

It’s been formulated by the financial sector as a kind of propaganda to distract governments and the population and political parties and movements from realizing that the debts can’t be paid and therefore doing something about it. So you have to almost start another discipline. I don’t know if you’d call it anthropology or something or futurism, that’s what I called it in the 1970s because futurism doesn’t mean anything at all and it doesn’t have the baggage of academic economics saying debts don’t have any problem at all, just keep on paying them.

So that’s what you have to come up with. And if you have an agency, let’s say like UNCTAD pointing out that the debts can’t be paid, then it’s obvious that if they can’t be paid, they won’t be paid. And the question is, how won’t they be paid? Well, you just have to write them off on something more drastic than the Brady Bonds of the Latin American debt bomb that occurred after 1982.

And you have to replace academic economics with reality economics. And that’s very hard to do because if you’re an economist and want to bring it up, you really can’t get academic acceptance in the major journals that are all run from a pro-financial, pro-creditor point of view. Economic journals, economic teaching has been turned into special interests by the financial sector and by the rentier sector.

Finance, insurance, and real estate have essentially justified themselves claiming to be making a productive contribution to the economy and to GDP and to economic growth instead of being a form of economic overhead. So the whole vocabulary and set of concepts dealing with how to look at the debt problem have to be popularized. And this has to be done, I think, from the self-interest of debtor countries outside of the United States that are trying to explain why the debt simply can’t be paid and therefore shouldn’t be paid without creating such a degree of impoverishment and economic polarization that it’s odious and abhorrent.

David Adler: Thank you, Michael. I can think of no more of a rousing call to action than the odiousness and abhorrence of the international system of debts and the very importance stamp on all of our foreheads that if it can’t be paid, it won’t be paid. And whether it’s our generation who takes up that call or we’re able to set the terrain for a truly radical position on the abolition of odious debt remains our task.

I do think, as we’ve said before, that because of these problems of academic ignorance, political myopia and structural subjugation, we live in a time in which it’s our task to revive and rejuvenate politics around sovereign as well as household of debts, a time to break the taboo, as Michael was saying, around debts that has come to replace the taboo around sex in our public imagination and move toward the truly liberatory paradigm that requires us to be literate in the great history that you’ve traced out for us, Michael. And of course, that David Graeber traced very eloquently through his work. And with that, I wanna thank Nika.

I wanna thank the team at the David Graeber Institute for the opportunity to continue a dialogue with Professor Hudson. I wanna thank Devika for joining us on short notice to have this important conversation. And I wanna thank you all for joining us online and joining us with your comments and with your questions and with your dialogue in the comment section of the broadcast.

I hope that we can meet again soon to continue this conversation, to continue with debates about how we can really work together to rejuvenate the politics around debt and think together about what a new vision might be, what it might mean to forge a common horizon for this liberation from such an odious and abhorrent system of debt, as Michael has said. Thank you so much to everyone. We’re gonna close it here.

I hope you have an excellent weekend and see you next time.

-End

Global South

When Usury Became Doctrine

Michael Hudson with LOGO DAEDALUS: When Usury Became Doctrine

LOGO DAEDALUS: Well, I just wanted to say thank you. First off, your books have been extremely important to me. I’ve done, I think, some good work in helping to popularize them on Twitter or X, I guess we’re calling it these days.

But when I first found your work, I was really coming from more of a literary studies sort of perspective. I studied Russian literature and Russian in college, and was mostly interested in literature, and then slowly became interested in economics, more from a literary perspective.

In your one of your interviews about your biography, you described going into musical composition, classical composition, and then finding a sort of aesthetic satisfaction in the study of economics.

I found that very inspiring personally, because I feel sort of the same way. The appeal to Marx and other political economists like Veblen and guys like that, guys like yourself, was that they gave me the same satisfaction of reading a great novel, especially like a great satirical novel. And that’s been sort of my interest in all of this… how economics is sort of an outgrowth of literary satire, and the genre of the anatomy that people like Northrop Frye would describe. So I think of you as like the greatest living satirist in the world – you make me laugh more than anyone in the whole world. So thank you.

MICHALE HUDSON: Well, you understand where my mentality is at.

LOGO DAEDALUS: If there’s any question I could start off with – I’m sure you’re going to cover this in the book you’re working on. I‘ve been a long time follower of your work. So I’m waiting patiently for the next book in the cycle on debt covering the crusades and onward, because that’s a particular interest of mine from a literary perspective on Christian hermeneutics. The translation of the Lord’s Prayer was a major thing for me – the “forgive us our debts” and whatnot. Tying this into material economics really opened all of this up for me.

So I believe you referred to a specific school of the Catholics, men who come up with the justification for charging interest on debts, but under a different name, so it doesn’t qualify as usury. I was wondering if you could go into detail about when specifically you would say this shift happened and under what dispensation?

MICHAEL HUDSON: Well, funny, you should put the question that way about literary
discussion, because most of the discussions about economics in the 13th and 14th Century – and that’s when the schoolmen were coming up with their justification of interest – the best discussions were all of a literary character, of course, by Dante. I mean Dante describes putting all the usurers back in the seventh circle of hell.

And there was a kind of theme of usurers being put together with the sodomites, in the sense that they said lending is sterile. Lending does not produce an economic return for the borrower. The borrower has pay the interest out of whatever they earn elsewhere.

If it’s the government borrowing money to go wage war, then it has to levy taxes, and this reduces the population. If it’s an individual who borrows from a usurer, then they have to cut back their consumption or lose their property, or lose their economic freedom and fall into debt bondage.

So it’s the literary people that describe this, just like in Greek and Roman history. It’s the literary writers that describe what was happening in the creditor landowning oligarchy that ended up stifling Rome. Also, in the 20th Century it was the literary historians that won the Nobel Literature Prize for writing about antiquity, or were nominated… people like Theodor Mommsen and Guglielmo Ferraro. They were viewed as literary historians.

Economists don’t talk about debt, they don’t talk about finance, they don’t talk about interest, or how it began at all, because it didn’t begin in the private sector. It was the Catholic Church that created and sponsored the first international banking in the 12th and 13th Century. And they sponsored it because the Roman church wanted to essentially take over all of Christianity, and the crusades were waged mainly against Christians.

The official crusade, the first real crusade, was in southern Italy and Sicily by Robert Guiscard. The Catholic Church asked, who are we going to get to kill the Christians that don’t agree with us? Who are we going to get to fight the Germans? The Germans wanted a decent, balanced church without all of the craziness and fighting against everybody who didn’t agree with you. How are we going to fight against the Muslim territories? But most of all, how are we going to fight against Orthodox Christianity, the majority of Christianity. There were five Patriarchates in the 12th Century. Rome was the least important. The most important was Constantinople, then, Antioch, then Alexandria, and then Jerusalem.

Rome was at the nadir in the 9th and 10th Century. The Catholic Church histories call it the pornocracy, because it was basically just the local families of a wealthy Roman suburb called Tusculum that sort of had controlled the church as their own personal set of sinecures for themselves, and they were so corrupt that you had Germans set out to try to reform it.

And then they said, how are we going to get rid of the nepotism and the fact that the Vatican is captured by churches? – basically, so they could find either young women or boys to screw… the utter corruption that you read about these families. They asked, how are we going to make some semblance of Christianity again? And they tried to reform.

Well after them came another reform that wanted to prevent an aristocracy from taking over the Catholic Church and making it a family business. They did not want to let the clergy and popes be married, because if they marry, they’re going to have kids, and if they have kids, they’re going to make them the Pope. That’s what happened from the 9th and the 10th Century in Tusculum. You can find it all on Wikipedia or in the Catholic Church histories. They’re sort of embarrassed.

So that made Western Christianity, Roman Christianity, different from all the other Christian churches that permitted priests to get married.

LOGO DAEDALUS: Yeah, that used to be something you had to do. That was a way of demonstrating that you were invested in the community that you were overseeing.

MICHAEL HUDSON: Sure, and the German reformers wanted to make the Christian church part of society, even playing a role in trade and in the military. They wanted, you know, to have a Christian community. That’s not what ended up happening.

And also, the Roman church wanted to introduce this theory of the the Trinity that basically said Jesus wasn’t the Son of God, he wasn’t a human being, and he had nothing to do with being a political or social leader, or leading opposition to the creditor class. It was all about God.

And the Catholic Church basically had been poisoned in the 4th and 5th Century by two of the most evil theologians in history, Cyril of Alexandria, who based the Christian church on anti-semitism because he wanted to drive out all of the Christians who weren’t under his personal control. And most early Christians were Jewish. So he led pogroms against the Jews in addition to killing Hypatia, who was a mathematician, and he put in the Trinity idea and elevated the Virgin Mary to the Trinity, knowing that that’s the one thing the Jews were not going to go along with because they wouldn’t have a woman as part of the Trinity.

LOGO DAEDALUS: Well, it’s like a constant refrain in the Old Testament where they’re putting up the stack of idols to the Queen of Heaven and things like that, which becomes a major problem for the reformers. That’s one of the first things I think Jehu does in the Old Testament, is destroy all of the shrines to the Queen of Heaven.

MICHAEL HUDSON: Right. And the other person, of course, St. Augustine, the Bishop of Hippo in North Africa, said, how do we get rid of the fact that a lot of Christians don’t like interest? They also don’t like landlordship, and if there’s a landowner that’s a creditor reducing people to bondage – according to the documents that have survived – they raid the guy’s house, and they freed the bond persons.

So Augustine said, look, we’ve got to kill all of these Christians that are not pro-Roman. And he said, you’ve got to give their churches to us, not them… and he said, we’ve got to get rid of the fact that in the Lord’s Prayer they’re all praying “forgive us our debts,” because all the debts are owed to you – my constituency, the Romans, the 0.1%.

And so he said, it’s not really about debt at all. It’s about sin, and we’re all born with sin, and there’s nothing we can do, just like you have to pay a debt, you have to pay for the sin, and you have to pay us, the church. And this led to a large argument, and there were Welsh, British theologians…

LOGO DAEDALUS: The Pelagians!

MICHAEL HUDSON: Who said, no, if we’re Christians, we want to do good things, good works for the world. You know, we want to use our money to help people, maybe to forgive the debt. Augustine said, no, no, I’m excommunicating you. You can’t have anything. You can’t have people spend their own money in helping the society around them. You have to give to the poor. The poor are us. The poor are us clergy who are going and helping them – we get the money. And it’s all about sin. And the sin is inborn. There is nothing you can do but go through us, and when you die, give us your estate so that you can go to heaven by giving us the money.

I mean he sounds like one of today’s Protestant evangelical leaders. So this was the Roman setting for that.

This did not characterize the Eastern Christian Church orthodoxy. It was Constantinople and the rest of the Patriarchates… Antioch, Alexandria and Jerusalem that we’re following pretty close to the original Christianity. The Romans said, we’ve got to fight against that in order to control the entire church and make it all celibate, so that we can’t have the Tusculum people, the Popes, making it a family.

They had the same problem that they had that Stalin pointed to in World War II. He said, How many armies does the Pope have? Well, they didn’t have an army. So what were they going to do? They found Norman warlords who had come down and were raiding the lands of Southern Italy and the Popes said, to Robert Guiscard, well, we’ll give you the kingship of Southern Italy and Sicily – Sicily was the key – if you promise to be pledge fealty and become our vassal King, then we will back your divine kingship.

And he did. He became king. And a couple of decades later, you had another warlord, William the Conqueror, and they made a deal. They said, William, if you want to take over Britain we will make you King. You have to promise to give us tribute and perform vassalage to us and do pretty much what we say. And William the Conqueror made the deal. He became King, and it was the Catholic Church.

Well, then they went into the Crusades, really, to take over the lands that Constantinople held as Orthodox Christianity, especially in what used to be Yugoslavia – the whole peninsula going down the Balkans. Greece, they tried to grab that land. They opposed Germany, because the German Emperor was the Holy Roman Emperor, and that upset Constantinople, because they said, wait a minute, we’re the Roman Empire. We’re the New Rome. You’re not the New Rome. You’re old Rome. We’re the real Rome. You’re just on the sideline there.

So the Catholic Church, the Romans, said, how are we going to have the British King and the Sicilian King fight against the Germans and Constantinople? The sinews of war are money. They needed money. How are we going to raise money? That’s when it was the church itself that created the banking class… merchant bankers in Northern Italy and right across in the Alps – the trans-Alpine bankers. Roman popes would go to the British Kings, especially at first King John, and then his son, Henry the Third, and say, you know, we want you to go into debt to pay for an army to go and fight the Germans, who somehow gained more control over southern Italy and moving into Spain and Sicily.

So this led to a fight within the church. And you have wonderful documentation from the analysts at the time who wrote the annals, like Matthew Paris, who wrote all about all of this in great detail. He was a friend of Henry the Third and was very well situated at the monastery in Saint Albans, where he worked.

So when Henry the Third was was told, well, you have to raise money and we’ll make your son King of Italy, as long as he pledges fealty and pays us tribute like you’ve been doing. Well, if you can imagine, the nobility fought back and said, wait, we don’t want to pay taxes in order for you to go to war to fight the church’s war, that’s not our war. Well, this fight had already occurred in 1215 with the Magna Carta under King John. King John wanted to look for Vatican support to grab the land. He was called John Lackland, while Richard was fighting in Jerusalem. And so the the Barons got together and wrote the Magna Carta.

And John wrote something finally – you know they were going to overthrow him – so he said, okay, I’ll agree with all of your demands and I promise if I go back on my word then everything I say will be negated in all of this and I promise not to go and ask for any override.

Well, as soon as they signed it – I guess he was the Donald Trump of his day, or Barack Obama – he immediately went to the Pope and said excommunicate all of these people who will not let me serve you. And the Pope excommunicated the Barons that supported the Magna Carta.

In the 1250s, under Henry the Third, the same thing happened. Henry the Third wanted to go into debt to fight the Germans in Sicily and the church said, if you disagree with usury we will excommunicate you. And you can imagine the turmoil this caused in the church. The church used to excommunicate usurers and now they’re excommunicating those who oppose usury.

What happened? Well, when the Pope kills other people and does usury it’s not a crime, to quote Richard Nixon, basically. It was all okay. The theologians were put to work to figure out how to get rid of all these critics of usury because the church is all about usury now. We have to create a banking class that will make its money by war lending to Kings who will go fight our wars against people who will not accept Roman leadership over the Orthodox Christian leadership and the German support of it.

So that’s when the churchmen came in and said, we have a new word – it’s not called usury anymore, lets call it interest. And they acted as if somehow loans were made – not to wage war, not to fight and kill people, not to serve the Vatican – but just to do mercantile trade. Because after all most of the bankers had made their money in mercantile trade. They we’re merchant families and became merchant bankers.

Well, they had a whole logic that we were taught in the history of economic thought when I was in college in the 1960s, and it was the problem of foreign exchange dealing. That’s not really interest – you’re charged a fee for foreign exchange. And since these were international loans you’re changing from one currency into another so you’re allowed to make agio.

LOGO DAEDALUS: Take your bite.

MICHAEL HUDSON: Yeah, just like when you exchange money at the airport they take a cut.

Also, if a merchant banker lends money he is not able to use this to make profits for himself. So he is giving up the profits, and that’s called lucrum cessans – you stop getting lucre, money. They get compensated, and the rate was 22%. And if you’re late, the late fee is another 22%.

The church became a Visa card.

So it ended up in England to be 44% that they had to pay, and this was all legitimized by the churchmen as interest. Well, you can understand if someone is late in paying it costs money, so what did the bankers do? Well Matthew Paris, and local bishops in England, described just exactly what they did. They said, okay, you borrowed from us, now you have to pay us.

The repayment is going to be in just one month or two. Well, normally you make a loan and pay at harvest time, because at harvest time – a year later – is when you get the money to pay the loan. Soon, you end up doubling the interest rates with the late fee. And the small print was easy to manipulate if you were a banker.

And the Popes all stood behind that and basically got together and essentially reversed Christianity’s long standing opposition to Christianity. And this is after St. Augustine changed the Lord’s prayer to “forgive us our sins” for which you have to pay the church to get to heaven, instead of “forgive us our debts” that you’d have to pay to the Romans – if we’re following Christian documentation.

So it was the Roman church that created the banking class. It’s very funny, there’s hardly any of this impetus on the church in economic histories. And a lot of it is because of Jewish historians that were understandably concerned about the fact that there was so much anti-semitism aimed at the Jews. Some, even many Jews, if they’re merchants, did lend money. But Matthew Paris and others say, well, they weren’t charging as much as the Christians. Well, Christians immediately – wanting to get rid of the Jewish money lenders – got King Henry’s son Edward to exile the Jews from England. And Phillip the Fourth exiled them from France.

And so the Jews did not play a role in this creation of international banking – it was the church. And I’m just amazed at how the Jewish historians haven’t said that this whole idea of identifying Jews with international banking has been used as an anti-semitic accusation. They did not play any role at all. The Vatican, when it was organizing the war loans to its vassal Kings, did not borrow from the Jews. They would confiscate their money, but they wouldn’t borrow, and they would certainly not pay interest.

The role of Jews when they were brought into England was the fact that they were the merchant class. And the warlords didn’t know too much about creating mercantile trade or production because they were robbers, not merchants.

LOGO DAEDALUS: Well, listen, they did a lot of human trafficking so they had some industries.

MICHAEL HUDSON: Right, so it was the Jewish population that had the background of organizing trade credit, along with the Islamic lenders. But of course the English and French chose to let the Jews in but not the Muslims, basically.

LOGO DAEDALUS: That is making me think – I’m a big fan of Thorstein Veblen, and I know you’re a big fan of Veblen, too. He has this great, little essay he wrote called An Experiment In Trusts, which is about the origin of financial trusts with the Jomsvikings, in their slate trading corporations that they would establish.

So I’ve been interested in how these Norman warlords are the reason why the Catholic Church develops this whole ideology so it can justify the extraction of interest. Why is it that none of this is ever covered in mainstream economics?

It seems to lead to what now looks like a massive rise in anti-semitism you could say, but it’s really more like how Marx and Engels described anti-semitism as like, retarded political economy. Because it’s these people who are genuinely trying to understand how the system of economics that we live under works and where it came from, but, outside of you, there’s really not many great resources to point people toward in order to come to an understanding of the actual history of these things. And most of the people who are going to tell them that story are just going to tell them the Jews invented banking and here we are.

MICHAEL HUDSON: Well, there’s a reason for this tunnel vision. If you look at Böhm-Bawerk and all of the apologists to justify the charging of interest, they all do it on an individual bases. Well, if a lender makes a loan then he’s not able to spend this money on his own consumption. So he is giving up something and he is being paid for being abstinent.

That led Karl Marx to say that the Rothschilds should be the most abstinent family in all of Europe – obviously, if you’re a very wealthy banker you don’t really give up consumption. Because the money that you do get, the interest and others, you make new loans. You don’t consume more with it, you make new loans. And you mentioned trusts – you’re corporatizing, essentially, a monopoly, a business monopoly. Well, this is because of the genius of financial organization.

By the 13th and 14th, you had the banking class decide… how can we extend the market for our loans? Well, I mentioned the fact that the Barons of England first opposed King John taking on debt with the Magna Carta. And then Henry the Third, again the Barons opposed it. And most Kingdoms of Europe – there was a kind of parliament of one kind or another – that had the power to block the Kings from taxing and said, you have to tax for the benefit of the country. And at that time they didn’t believe that going to war for somebody else’s war was for the country. The King was constrained.

When a King took on debt from the international bankers there were only two resources a King had. One was his own royal domain – that part of the land that belonged to him personally. The royal domain was much less than the church domain. The largest landowner in almost every kingdom in medieval times was the church, not the King. So the King had that, and the King had the power to tax subject to parliamentary constraint.

So, the bankers got together – and remember, they’re merchant bankers who did foreign trade as well as war lending – and they said, well, you’re able to charge customs duties, and that does not require parliamentary approval. They found the small print in the legal code and said you can organize the import and export trade.

So you had the English Kings, Edward and onward, being able to make a corporation or partnership group out of England’s wool trade. And England would export the wool to Flanders and the low countries, to weave into cloth to send to Italy to be made into fashions. And the money would then go from Italy back to England via the low countries to pay for the wool. And that the triangular flow that you had in England, basically.

So the way that Kings were able to make money without taxing the people was to make royal corporations that would be monopolies. By the 17th Century these extended to the East and West India Corporations. And the Bank of England was a corporation. You’d create a monopoly, you’d give it to the company to raise money, and you’d say, were going to sell it, and that’s how we get the money to pay our foreign creditors. And so the creditors sort of help the Kings organize their finances so they could raise enough money to pay the debts they took on.

Well, by the late 17th Century, you had leading Kings who were all Catholics. French, the Spanish, and the Austrian, the Hapsburg Kings, all kept defaulting again and again and again in the 17th Century because, even though Spain had all of this silver coming in from the New World, it just went right out. The silver was squandered on luxury spending. None of the money being used was spent on developing its own handicraft industry.

Instead, with all of this money coming in, they taxed handicraft labor and other labor, and you had a huge emigration of skilled labor. And Adman Smith pointed to this – they’d go to places like England, or the Protestant countries, where things were free. And the Protestant countries had a completely different form of political organization than the royal autocracies.

The idea came from the self-governing cities of Europe, like Venice for instance, or Genoa and Florence. These self-governing cities would elect leaders, and because they were a commune, all of the members of the community were liable for the debts that the community took on. And the bankers said, this is a wonderful idea, if only we could have nations act this way.

Well, you had a lot of these communities in the Dutch countries – and these communities joined together to create Holland. And the idea of having a whole national government as a community where all of the citizens were liable for debts and not only the King. If a King ran into debt and couldn’t pay and the debtor went bankrupt then the bank lost the money. Because they didn’t have any recourse to all the money in England when the King didn’t have the ability tax all of the citizens. But the new parliamentary democracies became something that have been called fiscal states. The bankers took the lead in organizing these fiscal states where the leadership in Holland and especially in England after the 1688 revolution that brought King George to England – all of that became the new kind of political organization.

And the result was that the parliamentary democracies were able to borrow from creditors to get the military loans to defend themselves against the Catholic Kings who were attacking them to take them over. And the Catholic Kings couldn’t raise war loans because they were no longer as credit worthy as the democracies that could tax the entire population against them.

So, it is very funny – Max Webber talked about the Protestant revolution as promoting a financial class because of its ethic of personal gain. But it was really the organization of the fiscal state that made the big change for what really emerged from all of this. And ever since, the Bank of England, and later the English and French governments tried to raise more money by selling off their monopoly of the slave trade. France sold the Mississippi bubble based on plantation slave agriculture in Louisiana. And England had the South Sea bubble – they had conquered Spain and had the Asiento monopoly on the slave trade. Everyone thought that the slave trade was going to be the industry of the future, sort of like computers today… so basically a bubble.

So, you have the financial sector helping governments organize mercantile monopolies and organize finances. And the bankers of the 13th Century backed royal autocracies because the church was able to protect the Kings against the nobility, who would not want to pay the war debts they took on.

By the 17th Century the banking class said, well, we really can’t afford autocracies anymore because they go to war – and because they’re an autocracy – all the debts are owned only by the King because the King controls everything, but there’s the rest of society around them… so now were going to switch to the opposite position that we had originally: we’re going to back the parliaments that we opposed when parliaments wouldn’t pay the debts, because now, under the new fiscal parliamentary states, the parliaments are promising to pay the debts. Because that was the condition on which they were able to borrow war loans from the banks. So that made them more credit worthy and they could borrow on better terms than the autocratic Kings who really couldn’t borrow at all. And that shifted the economic and military advantage to Northern Europe because of the banking class.

Well, what happened is the banking class basically created a new web of interconnections within Europe that took the place of what used to be the Catholic Church. Instead of the Catholic Church creating a system of integration – largely economic, and above all financial with Europe – what this financial class created became the new organizer of the system of integration that shaped Europe and it’s gone right down to the present day.

The banking class, through government, has backed governments who promote creditor interest. Because, if governments do not promote creditor interest then nobody will lend to it because it’s not credit worthy anymore. When it goes to war it’s not going to be able to get as much money as the other groups and war is fought by money and paying mercenaries.

And that’s sort of the big theme of my book. The title I’ve come up with is A Political History of the West’s Financial Takeoff from the Crusades to World War I. And I’m working on the final chapters and rewriting the chapter summary now.

LOGO DAEDALUS: Amazing. I can’t wait to read it. If there’s one last thing I could ask you about – I guess we’ll go to current events.

MICHAEL HUDSON: Very briefly, because I don’t want to drain your audiences attention.

LOGO DAEDALUS: I just wanted to throw this by you because I just read your interview with Ben Norton on the tariffs. There’s a great Veblen quote where he says, “all business sagacity reduces in the financial estimation to a judicious use of sabotage.”

MICAHEL HUDSON: Ah ha!

LOGO DAEDALUS: Would you describe that basically what’s going on is an attempt to sabotage the global economy – that’s all that it comes down to?

MICHAEL HUDSON: Well, Veblens point was that it was the financial sector that sabotaged industrial capitalism. It’s the financial system that seeks to make its gains financially – capital gains, corporate raiding, living in the short term, paying out profits as quickly as it can instead of reinvesting its profits in long term investment like the German banks were doing. So it’s a shift from industrial capitalism to finance capitalism that ended up destroying industrial capitalism leading to deindustrialization.

Veblen’s pointing on how the American economy was turned into a rentier economy, largely on real estate. Because 80% of bank loans are for real estate. And the effect of increasing the loan to value ratio is you lend more and more money against any given property or home or office building and the effect is to constantly inflate real estate prices. Well, the financial sector gained enough power over the government by being able to make mortgage interest the primary financial return along with monopoly rent.

So you have land rent and monopoly rent being the objective of finance capitalism, not industrial profits. So the finance sector took the lead against classical economics. And the fight against classical economics was much like that of the Roman Church against early Christianity. The whole idea of classical economics and the free market – from the French physiocrats to Adam Smith to John Stuart Mill and Marx, all the way up to Veblen – was that a free market is one free from the landlord class and its land rent. Free from monopolies and monopoly rent. And free from predatory banking and its interest, which was a form of monopoly rent because banks had a monopoly on being able to create money and credit with government banking.

And so, as the financial sector took over governments moving toward the apotheosis that you have in America since the Supreme Court Citizens United case – essentially privatizing the election process, saying anybody can fund elections – you have a shift of politics to favor the financialization of the economy, which in turn favors land rent, monopoly rent and interest. And also the financial class became the major donors to the Universities. Especially the business schools, and they backed economic curriculum that rewrites all of economic history as if its all individuals… well, international banking began when merchants wanted to lend money to handicraft people who were exporting to other people, weaving cloth, it was all part of business and its was all very productive. No discussion at all over the fact that that wasn’t what created banking. It was war lending that base of the international banking class. This is not a private enterprise approach to history.

So, you have part of the financialization of the economy taking over the industrial aims – increasing labor productivity, raising wages, increasing the internal market. Now you have just the opposite. You have more and more of the economy siphoned off in the form of the various forms of various rent and less and less available for personal spending, the internal market, and private capital investment. So that’s basically the dynamic, which has gone hand in hand with an ideological airbrushing of history. When I went to graduate school, 60 years ago, we not only had the history of economic thought where you knew what Adam Smith really wrote – I wrote my book J is for Junk Economics on how the vocabulary has changed – we also had economic history. And even though the economic history wasn’t what I wrote about, at least you had economic history and a long term approach and you realized that markets are shaped by government, by society, by public policy, and there’s no room to analyze that.

LOGO DAEDALUS: Yeah. There’s the irony that the creation of markets and all these things that are the bedrock of libertarian theory are all government creations, they’re all public goods – a corporation is a public good, markets in general are a public good. These things didn’t emerge from voluntary individuals but were state projects.

MICHAEL HUDSON: Right.

LOGO DAEDALUS: That’s an irony that’s very difficult for libertarians to see.

MICHAEL HUDSON: Well that’s the neoliberalism. Economists are brought up with a tunnel vision. That’s the problem. They don’t see that there’s a role of government because the financial sector wants to take over government and dismantle it, and make what used used to be government – including all of the public enterprises and natural public monopolies and the election process – all part of the financial sector, not part of the political sector.

LOGO DAEDALUS: Yeah, yeah… yeah. We’ll hopefully things get better, but it’s going to be a long road ahead. How do we change this view on economics en masse, how it is even possible when all of the institutions are effectively captured by the most powerful interests in the world to teach the exact opposite.

MICHAEL HUDSON: Well, the only way I can do it is by writing my books. No publisher has been eager to publish my books so they’re all done by my research foundation. They’re published by a Chinese group.

LOGO DAEDALUS: Chinese, yeah.

MICHAEL HUDSON: I translate my books into Chinese so obviously this idea is very popular there because they have a public-private economy and they’re open to this idea. Other countries translate the books but there’s very little English language discussion of this so there’s no market for publishers to write books like this because – how do you fit the ideas that I just described in the academic curriculum? It is not going to be in the economic courses because there’s no economic history anymore, maybe in the literary courses but I don’t think I’m going to win any literary prize for this. People don’t know how to characterize this approach just explained in the last 45 minutes.

LOGO DAEDALUS: Well, it’s the approach that me and my listeners are a big fan of so keep up the good work. Thanks for letting me talk to you, man. Its been a dream of mine for a while and… get some rest. Stay strong, stay healthy.

MICHAEL HUDSON: Thank you, I look forward to what your group comments on and what they see in all of this.

LOGO DAEDALUS: Yeah, alright man, well, thanks again.

MICHAEL HUDSON: Thank you.

LOGO DAEDALUS: Peace out.

MICHAEL HUDSON: Bye bye.

Global South

Richard Wolff and Michael Hudson: Alarming Signs the American Empire Is Crumbling Before Our Eyes