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Introduction

These proverbs were collected by my father, Carlos Hudson, during the time he was jailed under the Smith Act in 1941, ostensibly for “Advocating the overthrow of the government by force and violence,” It was called the “gag act” because it put a gag on what one could read or say. Guilt was determined by whether one had the works of Lenin and Trotsky on one’s bookshelf.

The Stalinists urged the death penalty for the Smith Act, not realizing that it would be used against them after World War II.

The Minneapolis 17 who were convicted had taken the lead in organizing the Teamsters Union and the great Minneapolis General Strike of the mid-1930s. (The story is told in Charles Rumford Walker’s American City.) Minnesota’s governor, Floyd B. Olson, said “I hope the capitalist system goes straight to hell.” Roosevelt’s Attorney General, Biddle, wrote in his biography that the one thing that he was ashamed about was having framed up the Minneapolis 17, because by no threat were they really a danger. The deal was a political favor to AFL head Daniel Tobin who opposed my father’s pressure to organize the teamsters within the CIO, and to the mafia that was eager to take over the Teamsters Union and had always had great sway within the Democratic Party.

My father’s crime was calling in the National Guard to protect the strikers from the police and thugs who had been hired as strike breakers to beat up the Teamsters and their supporters. His party name was Jack Ranger, and so I was nicknamed “The son of the Lone Ranger” as a kid. His major writing was the pamphlet “Next: A Labor Party.” He also wrote articles on the Minneapolis strikes for the Nation.

Minneapolis was the only city in the world that was under Trotskyist leadership — where, as one reporter put it a few years ago, being a Trotskyist was a career advancement opportunity.

My father had graduated from the University of Minnesota business school with an MBA in 1929 and hoped to become a millionaire in Latin American mining. But then the stock market crash and depression occurred, and he discovered that capitalism wasn’t fair. He read widely, and joined Jim Cannon’s Socialist Workers Party, the Trotskyist party.

I knew most of his fellow felons growing up as a little boy. I remember visiting him in jail, and everyone singing the Internationale and other songs to fan the flames of discontent.

After 1945 he followed Max Shachtman’s Independent Socialist League, and Max became a mentor of mine. Other members of the Minneapolis 17 who moved to Chicago was the group’s lawyer, Al Goldman, who spent much of his life trying to track down who killed his two German colleagues Emma Goldman and Karl Liebknecht. Al Russell also often visited from New York. Dad’s former cellmates helped me acclimatize when I moved to New York in 1960. So here, as in statist Russia, prisons were indeed the University of the Revolution.

My father said that his year in jail was the happiest year of his life. (He wasn’t much of a “people person.”) He was assigned to the library, where he collected the proverbs in this collection. After we moved to Chicago, he stenciled many proverbs on each wall of our house, from the living room down to the bathrooms.

He also compiled a dictionary of everything that Lenin and Trotsky had said about virtually every political subject. As a teenager, my friend Gavin MacFadyen and I used to sit down in the basement (where the banned books and pamphlets were kept in the 1950s) and pore over the index cards with these maxims. This was a great help in our Social Science classes at the University of Chicago’s Laboratory School. (Gavin was expelled for being a bit too attentive to what we learned.) Unfortunately, this collection somehow got lost in Dad’s move down to Florida when he retired from his position as editor of Dental Abstracts. He had edited Traffic World, but the FBI came around to his boss and asked why they had hired a Marxist. His boss was about to accuse others of Communism, so Dad was fired. But the American Dental Association, which hired him as an editor, said that they didn’t care about his politics, and he worked happily there for perhaps 20 years. (He died at the age of 95 in 2003.)

Informally, Dad also edited the pacifist Liberation magazine, whose mailing address was our house on Dorchester in Hyde-Park Kenwood (about a block or so from where Obama’s house now is.) Along with Sidney Lens, he became an advocate of Rev. A. J. Muste.

FBI men would often appear at the house and ask him questions like where his loyalty would lie in case of an atopic war with China. Also, they liked to set up cameras across the street and take pictures of us when we left the house. When neighbors would ask them what the fuss was all about, they would say, “Don’t you know who lives there …?” They didn’t mention the proverbs book. I got used to coming home and sometimes finding two crew-cut FBI men in the living room with my father, up-dating their files on him. (Later, Gavin got copies of the FBI files, and they were filled with wrong information from obviously bad informers. It was comical in retrospect.)

When I joined the Hudson Institute (no relation, except that we were both named after the river, which an ancestor of mine discovered) in 1972, Herman Kahn asked me whether there was any reason I couldn’t get a security clearance for when he took me to the White House and military think tanks. I told him about Dad’s conviction, and he said not to worry — the government knew that I wasn’t soft on Stalinism. (Herman collected many Schachtmanites around him.)

Many years after compiling these proverbs, Dad added a preface to say that over time, he had come to the conclusion that Trotsky’s economic program would have turned out along much the same lines as Stalin’s. When talking to socialists he became a libertarian, although when talking to most people he remained a socialist.

About 15 years ago Gavin produced an hour-long documentary and interview with Dad, discussing his work with Trotsky in Mexico. (Dad’s sister, my aunt Jeri Hudson de Leon, was married to a Mercedes dealer in Mexico City at the time, so my parents stayed with her while working with Trotsky, along with other Minneapolis activists.) But Gavin’s colleagues have not been able to find just where he put the CD, and I don’t remember his giving me a copy after we screened it in London.

When I went to Russia in 1994, I was brought to the house of some researchers who were reading the then-recently released files on Trotsky. They said that one thing puzzled them: Did he really have an affair with Frieda Kahlo?

I phoned Dad from their Moscow house. Dad got worried that the phones were being tapped and that I’d get in trouble, but I said that all the Russians really cared about those days was money, not old politics. So he laughed and laughed and said that, yes, he used to drive Trotsky back and forth to see Frieda.

Huck (“Michael”) Hudson

A

Behind the able man there are able men. Chinese

Pierce the abscess.
(i.e. come to the point.) Bantu

An abscess heals when opened.
(i.e. peace comes by sharing your troubles with another.) Bantu

Abundance causes poverty. German

Abundance creates daintiness. Italian

Abundance is a friendly fellow, he is loved by big and small. Semitic

The abuse of a thing is no argument against its use. Latin

It is honorable to be accused by those who deserve to be accused. Latin

The pig which is once seen in the crevice of the fence is accused of all faults. Finnish

He who accused too many accuses himself.

Acorns were good till corn was discovered. Latin

One does not sleep to sleep, but to act. German

(Reprinted from Michael-Hudson.com by permission of author or representative)
 
• Category: History • Tags: Communism, Leon Trotsky 

As published in Harper’s Magazine.

Two years before the 2008 Wall Street crash that toppled the global economy into deep recession, Harper’s Magazine published a dark prophecy of what was to come. In “The New Road to Serfdom,” economist Michael Hudson laid out how millions of Americans had taken on huge debts to buy houses on the presumption that they could later sell them at a profit. “Most everyone involved in the real estate bubble so far has made at least a few dollars,” he wrote. “But that is about to change. The bubble will burst, and when it does the people who thought they would be living the easy life of a landlord will soon find out that what they really signed up for is the hard servitude of debt serfdom.” As the twenty million people who lost their homes discovered, Hudson got it entirely right.

Today, unemployment is at record lows, and the stock market is at record highs. Allegedly, we have recovered from the disaster. I talked to Hudson, Distinguished Professor of Economics at the University of Missouri-Kansas City and the author, most recently, of J is For Junk Economics, A Guide to Reality in an Age of Deception, about his pre-crash prediction, and what he now sees in our future.

Let’s start with your 2006 Harper’s article. What did you see happening at that point?

It was very clear that more and more of everybody’s income had to go to buying a house. Housing prices were soaring, and the reason wasn’t because of population growth. And it wasn’t because people were getting richer. It’s because a house is worth whatever a bank is going to lend against it, and banks were lending more and more money against houses and pushing people further and further into debt so that basically they had to spend almost their entire working life to pay off the price of getting a home. People thought they were getting richer as house prices were going up, but while the sellers were getting richer, the people who had to buy the house had to pay a larger and larger proportion of their income.

When I first went to work on Wall Street in the 1960s, the rule of thumb in banks was you’d lend people enough money so that they could afford to pay the mortgage fully out of only one quarter of their income. In other words, banks wouldn’t lend if the cost of carrying a mortgage was over 25 percent of what they earned. The balance had to be written off in 30 years, so at the end of their working life 30 years later people would own the home free and clear.

All of that had changed by the mid 2000s. Banks were lending almost 100 percent of the mortgage. You didn’t have to put down 20 percent of the purchase price as you had to in the 1960s. You didn’t have to save up any money to buy a house. Banks would lend you money regardless of whether you could pay it or not. They would lend money up to 40 percent of your income or even 50 percent of your income.

You could just see that mortgage debt was going up so much that, instead of making the economy richer by people living in homes that were building up their net worth in terms of assets, it was making them more and more indebted. More and more money was being paid by wage earners and the middle class to the banks, and the economy was polarizing. You could see that this was not only going to break, but once there was a break it was going to leave a whole residue of debt that was going to shrink the economy. Indeed, that’s what I forecast was going to happen in 2008.

As you predicted and as happened, people just couldn’t pay anymore and the thing collapsed. You could’ve made a lot of money out of this. Did you?

No, I couldn’t. I could only make money if someone would’ve lent me a billion dollars, like they lent to Mr. Paulson [the Wall Street operator who made billions out of the housing crash] to bet against it. I’m a professor and a book writer. They’ll only lend you money if they can grab the assets, and I’m somebody that doesn’t have many assets, except a big collection of economics books.

Have you ever heard of someone sitting on Wall Street who read Harper’s in May 2008 and acted appropriately?

I don’t think they needed me. If they’re on Wall Street, they didn’t need me to tell them that the economy is going to collapse. They all knew it was going to collapse. That was in the language of “liar’s loans” and “NINJAs.” It was pretty obvious what was going on. It’s just the media didn’t talk about it because the media was giving handouts from Alan Greenspan saying that it’s not possible for there to be a real estate collapse, it’s only local. The media are cheerleaders for the stock market. Whenever it goes up they celebrate, even if it goes up because there’s a short squeeze on speculators. The media have not done a good job in educating the American public.

Has that improved in the time since the crash? Did they learn anything?

No. If anything, it’s gone down, because the media have all been in a financial squeeze, and they’re getting pretty inexperienced editors, reporters.

At least you have the satisfaction, if that’s the word, of events proving you correct. But we’ve supposedly now recovered from that disaster. Have we?

No, we haven’t at all recovered. That’s why Hillary lost the election. She said, “Look at how much better you are since 2008. Obama has saved you.” Trump said, “Wait a minute. Look at how bad you are. You’re not saved.” Everybody thought, “Who are you going to believe, your eyes or Hillary?” We haven’t recovered at all. Obama saved the banks and Wall Street, not the economy. From 2008 until today, the economy has grown by 2 percent, but the top 5 percent of the economy have got all of that growth. The economy isn’t recovering.

That’s why when the Department of Labor statistics gave the most recent employment figures, everybody commented, “It’s very interesting. Employment is up, but wages are continuing to fall.” It’s all minimum wage work. The debt ratio for most families is rising, not falling, especially for student debt, for mortgage debt, for automobile debt. The default rate is continuing to rise.

Last time around it was housing debt or housing loans that blew everything up. Have the loans you just mentioned been turned into speculative packages similar to the infamous collateralized debt obligations [securities based on housing loans] of yesteryear?

The difference between today’s packaged student and auto loans compared to those toxic junk mortgage loans is that the buyers recognize the risks involved. No ratings agencies are going to stick AAA labels on consumer debt where arrears and defaults are soaring. They are unlikely even to package student debt from for-profit “universities” or technical schools with bona fide institutions. Every investor knows that students are NINJAs – No income, No jobs, and no assets.

[But] you could say that the whole stock market is a kind of a ponzi scheme, because $4.3 trillion has been provided to the banks by the Federal Reserve in quantitative easing to keep the interest rates down. So if you’re a good bank customer, you can borrow from the bank at 2 percent, you can borrow to take over a company or to buy stocks or to buy risky bonds that are yielding more, and you can make an arbitrage. That is, you can make in dividends or interest more than you have to pay.

So are we heading for another explosion comparable to 2008?

(Reprinted from Michael-Hudson.com by permission of author or representative)
 
• Category: Economics • Tags: Banks, Donald Trump, Housing 

Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class.

But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job.

The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class.

Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing.

Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.

And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.

This is simply a replay of what banks have negotiated for real estate mortgage lending. Students who do succeed in getting a job hope to start a family, or at least joining the middle class. The most typical criterion of middle-class life in today’s world (apart from having a college education) is to own a home. But almost nobody can buy a home without getting a mortgage. And the price of such a mortgage is to pay up to 43 percent of one’s income for thirty years, that is, one’s prospective working life (in today’s as-if world that assumes full employment, not just a gig economy).

Banks know how unlikely it is that workers actually will be able to earn enough to carry the costs of their education and real estate debt. The costs of housing are so high, the price of education is so high, the amount of debt that workers must pay off the top of every paycheck is so high that American labor is priced out of world markets (except for military hardware sold to the Saudis and other U.S. protectorates). So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers.

The Federal Housing Authority guarantees mortgages that absorb up to the afore-mentioned 43 percent of the applicant’s income. Income is not growing these days, but job-loss is. Formerly middle-class labor is being downsized to minimum-wage labor (MacDonald’s and other fast foods) or “gig” labor (Uber). Here too, the fees mount up rapidly when there are defaults – all covered by the government, as if it is this compensates the banks for risks that the government itself bears.

 

From debt peons to wage slaves

In view of the fact that a college education is a precondition for joining the working class (except for billionaire dropouts), the middle class is a debtor class – so deep in debt that once they manage to get a job, they have no leeway to go on strike, much less to protest against bad working conditions. This is what Alan Greenspan described as the “traumatized worker effect” of debt.

Do students think about their future in these terms? How do they think of their place in the world?

Students are the new NINJAs: No Income, No Jobs, No Assets. But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That’s why so many have to keep living at home.

The problem is that as they do get a job and become independent, they remain dependent on the banks. And to pay the banks, they must be even more abjectly dependent on their employers.

It may be enlightening to view matters from the vantage point of bankers. After all, they have $1.3 trillion in student loan claims. In fact, despite the fact that college tuitions are soaring throughout the United States even more than health care (financialized health care, not socialized health care), the banks often end up with more education expense than the colleges. That is because any interest rate is a doubling time, and student loan rates of, say, 7 percent mean that the interest payments double the original loan value in just 10 years. (The Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt. Just divide 72 by the interest rate, and you get the doubling time.)

A fatal symbiosis has emerged between banking and higher education in America. Bankers sit on the boards of the leading universities – not simply by buying their way in as donors, but because they finance the transformation of universities into real estate companies. Columbia and New York University are major real estate holders in New York City. Like the churches, they pay no property or income tax, being considered to play a vital social role. But from the bankers’ vantage point, their role is to provide a market for debt whose magnitude now outstrips even that of credit card debt!

Citibank in New York City made what has been accused of being a sweetheart deal with New York University, which steers incoming students to it to finance their studies with loans. In today’s world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties.

It is the same thing with housing, of course. However much the owner of a home receives when he sells it, the bank will make an even larger sum of money on the interest charges on the mortgage. That is why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent.

 
• Category: Economics • Tags: Student Debt 

SHARMINI PERIES: Just prior to the economic collapse of 2007-2008 there were several economic indicators which could have given us a clue of the impending disaster. If we look at the economic situation today in the US, we find many of these very same indicators. Housing prices are getting very high. Credit card debt has begun to rise again. Student loans are in default, many of them, and the stock and bond markets reached an all-time high.

Are we actually in another housing bubble just nine years later? On to talk about this with me is Michael Hudson. Michael is Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and Its Discontent, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. His latest book is J is for Junk Economics.

Michael, about 10,000,000 families lost their homes in the 2007-2008 crash, and many of these homes were bought by hedge funds such as the ones organized by Blackstone let’s say. The hedge funds didn’t really resell the housing that they bought, but rather hung onto them and rented them instead. But let’s really start off with the indicators that you had highlighted for me in an email, saying we might already be there in terms of another crisis. Give us the essence of what those indicators are and why you predict that.

MICHAEL HUDSON: Many of the indicators may be the same, but the character of the crisis is very different now from what it was in 2008. You mentioned, for instance, that real estate prices now age exceed their early 2008 levels. All that’s true, but as you just pointed out, 10,000,000 people have already lost their homes. That’s what economists call housing moving from weak hands into strong, and they applaud that because instead of poor families, minorities, African-Americans and Hispanics buying homes that are way beyond their ability to pay the mortgage on, these houses have already been lost or foreclosed and Blackstone and other hedge funds bought them. They bought them for all cash.

The reason they did that instead of debt leveraging, which is how people had been buying their houses in World War II, is that interest rates are so low. The Fed was plunging at zero interest rate policy (ZIRP) in order to try to re-inflate a bubble. But with these low interest rates, Blackstone and other hedge funds, Wall Street, could make more money renting out these properties than they could by actually selling them or speculating, or that they could make in the bond market.

The effect is very interesting. Leading up to 2008, rents were actually going down. The more real estate prices were going up, the lower rents were falling, because 17% of the market was by flippers, by speculators who borrowed to buy a home or apartment. They thought okay, we’re going to buy a condo, buy a house, we’re going to wait for the price to be inflated. They all were desperate to find somebody to live in these apartments, to at least help cover the interest expense of buying these things.

The result was that rents fell. Right now it’s the opposite. Rents are going way up because there’s much less property available either to buy or to rent. People can’t afford to qualify for the bank loan, so they can’t afford to buy housing, and they can’t find rental apartments because these have been monopolized, maybe 20% in some areas by the hedge funds and Blackstone and other people.

My friend Gary Null, for instance, had Blackstone buy his building, smashed the furnace, wouldn’t turn on the heat, and forced him to move out so it could empty out the property and try to raise the price. That’s on commercial real estate. So these guys are really putting the class war back in business.

Housing prices are going up in Canada and Australia, but again it’s not so much a bubble like it was before. The financial structure has shifted, largely because it’s being bought by very wealthy absentee owners instead of by the population as a whole. So the rate of home ownership in America has fallen by about six percentage points. That’s about 10% of the housing population, so you’re having housing way beyond the ability of most Americans to afford and beyond what banks are going to lend to buy a house.

SHARMINI PERIES: All right. How does this benefit those holding the property, like hedge fund owners?

MICHAEL HUDSON: They can make a large return renting it out. They can make five, 10, 15%. That’s much more money than they can make in the bond market and it’s much more secure money than they can make in the stock market, because stock prices may go down and corporate sales may go down as the economy shrinks, but people are desperate to have housing. It’s the one thing they absolutely need, so rents now are rising as a percent of the American budget. They’re 40% to 50% of income in places like New York City, San Francisco, the high rent areas of the country.

SHARMINI PERIES: What are NINJA loans?

MICHAEL HUDSON: That’s the other thing that’s changed. What was powering and pushing up prices in 2007 and ’08 were loans to borrowers with No Income, No Jobs, and No Assets. As Bill Black has explained, these are largely fraudulent loans. The frauds were the banks. The frauds were the mortgage companies that just faked the incomes of the buyers and would lend for almost the entire mortgage.

Now we only have one kind of NINJA left, and those are students. Student loans have been the most rapidly growing loans in the country. They’re no about $1.3 trillion, more than credit card loans, more than most other kinds of loans. Everybody knows that students are not able to earn enough to repay them, because default rates on student loans are going way up. They’re not going up on mortgages. They’re falling on mortgages – home mortgages – but they’re rising on student loans.

But the banks knew that they couldn’t pay and the government knew that they couldn’t pay, so the government made a sweetheart deal with the banks: “You can make all the loans to students you want. You can lend them as much money for any education, even for junk education, for junk colleges, or for-profit colleges like Trump’s college, and we know that the students are going to default, but we’re going to guarantee your loans and we’ll guarantee a higher rate of interest than you can make on any other loan, because we know these loans are risky. We know they won’t pay, but the government will take all the risk and we’ll pay you as if you were taking the risk and as if you were making a real loan, thinking you’d get repaid.”

The whole student loan scandal is a corrupt. It shows the degree to which the universities and the government loan system have been taken over by banks writing the loans to give themselves a free ride at public expense.

SHARMINI PERIES: Michael, the federal government already guarantees student loans, so when they default on these loans, does paying it back come out of the public purse?

MICHAEL HUDSON: Yes. Not only paying back the loan, but paying the loan with enormous interest, higher than the banks can get on any other kind of loan, and very heavy penalty fees, so the banks are basically cleaning up on these. The ultimate beneficiaries, if you can call them beneficiaries, are the universities, because the basic principle in real estate that we learned in 2008 was that a house is worth whatever a bank is going to lend. Well, the same thing is true for education.

(Reprinted from Counterpunch by permission of author or representative)
 

Sharmini Peries: The European Commission announced on May 2, that an agreement on Greek pension and income tax reforms would pave the way for further discussions on debt release for Greece. The European Commission described this as good news for Greece. The Greek government described the situation in similar terms. However, little attention has been given as to how the wider Greek population are experiencing the consequences of the policies of the Troika. On May Day thousands of Greeks marked International Workers Day with anti-austerity protests. One of the protester’s a 32-year-old lawyer perhaps summed the mood, the best when he said …

“The current Greek government, like all the ones before it, have implemented measures that has only one goal, the crushing of the workers, the working class and everyone who works themselves to the bone. We are fighting for the survival of the poorest who need help the most.”

To discuss the most recent negotiations underway between Greece and the TROIKA, which is a European Central Bank, the EU and the IMF, here’s Michael Hudson. Michael is a distinguished research professor of Economics at the University of Missouri, Kansas City. He is the author of many books including, “Killing the Host: How Financial Parasites and Debt Bondage the Global Economy” and most recently “J is for Junk Economics: A Survivor’s Guide to Economic Vocabulary in the Age of Deception”….Michael, let’s start with what’s being negotiated at the moment.

Michael Hudson: I wouldn’t call it a negotiation. Greece is simply being dictated to. There is no negotiation at all. It’s been told that its economy has shrunk so far by 20%, but has to shrink another 5% making it even worse than the depression. Its wages have fallen and must be cut by another 10%. Its pensions have to be cut back. Probably 5 to 10% of its population of working age will have to immigrate.

The intention is to cut the domestic tax revenues (not raise them), because labor won’t be paying taxes and businesses are going out of business. So we have to assume that the deliberate intention is to lower the government’s revenues by so much that Greece will have to sell off even more of its public domain to foreign creditors. Basically it’s a smash and grab exercise, and the role of Tsipras is not to represent the Greeks because the Troika have said, “The election doesn’t matter. It doesn’t matter what the people vote for. Either you do what we say or we will smash your banking system.” Tsipras’s job is to say, “Yes I will do whatever you want. I want to stay in power rather than falling in election.”

Sharmini Peries: Right. Michael you dedicated almost three chapters in your book “Killing the Host” to how the IMF economists actually knew that Greece will not be able to pay back its foreign debt, but yet it went ahead and made these huge loans to Greece. It’s starting to sound like the mortgage fraud scandal where banks were lending people money to buy houses when they knew they couldn’t pay it back. Is it similar?

Michael Hudson: The basic principle is indeed the same. If a creditor makes a loan to a country or a home buyer knowing that there’s no way in which the person can pay, who should bear the responsibility for this? Should the bad lender or irresponsible bondholder have to pay, or should the Greek people have to pay?

IMF economists said that Greece can’t pay, and under the IMF rules it is not allowed to make loans to countries that have no chance of repaying in the foreseeable future. The then-head of the IMF, Dominique Strauss-Kahn, introduced a new rule – the “systemic problem” rule. It said that if Greece doesn’t repay, this will cause problems for the economic system – defined as the international bankers, bondholder’s and European Union budget – then the IMF can make the loan.

This poses a question on international law. If the problem is systemic, not Greek, and if it’s the system that’s being rescued, why should Greek workers have to dismantle their economy? Why should Greece, a sovereign nation, have to dismantle its economy in order to rescue a banking system that is guaranteed to continue to cause more and more austerity, guaranteed to turn the Eurozone into a dead zone? Why should Greece be blamed for the bad malstructured European rules? That’s the moral principle that’s at stake in all this.

Sharmini Peries: Michael, The New York Times has recently published an article titled, “IMF torn over whether to bail out Greece again.” It essentially describes the IMF as being sympathetic towards Greece in spite of the fact, as you say, they knew that Greece could not pay back this money when it first lent it the money with the Troika. Right now, the IMF sounds rational and thoughtful about the Greek people. Is this the case?

Michael Hudson: Well, Yanis Varoufakis, the finance minister under Syriza, said that every time he talked to the IMF’s Christine Lagarde and others two years ago, they were sympathetic. They said, “I am terribly sorry we have to destroy your economy. I feel your pain, but we are indeed going to destroy your economy. There is nothing we can do about it. We are only following orders.” The orders were coming from Wall Street, from the Eurozone and from investors who bought or guaranteed Greek bonds.

Being sympathetic, feeling their pain doesn’t really mean anything if the IMF says, “Oh, we know it is a disaster. We are going to screw you anyway, because that’s our job. We are the IMF, after all. Our job is to impose austerity. Our job is to shrink economies, not help them grow. Our constituency is the bondholders and banks.”

Somebody’s going to suffer. Should it the wealthy billionaires and the bankers, or should it be the Greek workers? Well, the Greek workers are not the IMF’s constituency. It says: “We feel your pain, but we’d rather you suffer than our constituency.”

So what you read is simply the usual New York Times hypocrisy, pretending that the IMF really is feeling bad about what it’s doing. If its economists felt bad, they would have done what the IMF European staff did a few years ago after the first loan: They resigned in protest. They would write about it and go public and say, “This system is corrupt. The IMF is working for the bankers against the interest of its member countries.” If they don’t do that, they are not really sympathetic at all. They are just hypocritical.

Sharmini Peries: Right. I know that the European Commission is holding up Greece as an example in order to discourage other member nations in the periphery of Europe so that they won’t default on their loans. Explain to me why Greece is being held up as an example.

Michael Hudson: It’s being made an example for the same reason the United States went into Libya and bombed Syria: It’s to show that we can destroy you if you don’t do what we say. If Spain or Italy or Portugal seeks not to pay its debts, it will meet the same fate. Its banking system will be destroyed, and its currency system will be destroyed.

The basic principle at work is that finance is the new form of warfare. You can now destroy a country’s economy not merely by invading it. You don’t even have to bomb it, as you’ve done in the Near East. All you have to do is withdraw all credit to the banking system, isolate it economically from making payments to foreign countries so that you essentially put sanctions on it. You’ll treat Greece like they’ve treated Iran or other countries.

“We have life and death power over you.” The demonstration effect is not only to stop Greece, but to stop countries from doing what Marine Le Pen is trying to do in France: withdraw from the Eurozone.

(Reprinted from Counterpunch by permission of author or representative)
 
• Category: Economics • Tags: Counterpunch Archives, EU, Greece, IMF 

mhudson0330government-240 KIM BROWN: Welcome to The Real News Network in Baltimore. I’m Kim Brown.

Donald Trump promised repeatedly to, “Drain the swamp,” during his presidential campaign, his vow to end the cycle of corruption within the Federal government. All while touting his own experience as a businessman, as reason enough for him to be Commander-in-Chief.

Yet, his Cabinet appointments and his hand-picked advisors seem to reflect the contrary to draining the swamp, with former hedge fund manager, Steve Mnuchin, as Secretary of the Treasury; former Exxon Mobil CEO, Rex Tillerson, as Secretary of State; and private equity billionaire Wilbur Ross as Commerce Secretary.

But this week Trump’s own son-in-law and senior advisor, Jared Kushner, echoed a very popular sentiment about this White House’s approach to governing — run it like a business. And looking at who so far has been tapped to staff this administration — few folks with any public service or government experience — will this be an effective approach to running the country?

Well, joining us to discuss this we have Michael Hudson. Michael is a distinguished research professor of economics at the University Missouri at Kansas City. He’s the author of many books, including: “The Bubble and Beyond” and, “Finance Capitalism and its Discontents”, also “Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy”, and most recently, “J is for Junk Economics: A Survivor’s Guide to Economic Vocabulary in the Age of Deception”.

Michael is joining us today from New York City. Welcome back to The Real News.

MICHAEL HUDSON: It’s good to be here.

KIM BROWN: So, Michael, in an interview that Jared Kushner gave the Washington Post over the weekend from his West Wing office, where Jared Kushner says that the American government needs to be run like a business — I’m paraphrasing here. This seems to be a feeling, an ethos, if you will, shared by this Trump administration.

So, is it a good idea to try to run government the way that corporations are being run?

MICHAEL HUDSON: Not only is it a bad idea, but yesterday, the Financial Times of London, the premier financial paper, had a wonderful editorial, saying why business cannot make government great. In other words, why it can’t be run like a government.

The main reason is that businesses are run to make a profit. And it’s very surprising that Trump’s supporters say, well, we need a businessman to put the government in order. Business people are their employers.

Imagine somebody working for an employer, and the last thing you want is for the employer to run his business the way he wants, without any safety conditions, without paying you overtime, without paying you a pension, without paying you medical care.

The idea of running it like a business is to screw labor. To pay labor as little as possible, and to get as much money for themselves — the businessmen — as possible. So, when Kushner says, “Let’s run government like a business,” what he really means is, let’s run government for business.

The Financial Times gave a wonderful example. They said, look at what really made Trump’s reputation in New York politically. And I remember it. I was here. It’s when the city had been trying to build the Wollman Skating Rink, they’d spent like $13 million on it. Trump said, I can do it much cheaper as a businessman. And so, the first thing he said was, well, if I’m going to do it like a businessman, you’ve got to… the rule was you’ve got to suspend the rules about fuel efficiency.

The Financial Times said the Parks Department had a double mandate, of building a rink and making it fuel-efficient. The latter requirement was dropped for Mr. Trump.

So, in other words, running the government as a business says, let’s get rid of the environmental concerns, because that’s a cost to business. Let’s not tax business, because that’s a cost. Let’s get rid of any pro-labor legislation. We have our consumer protection. Let’s get rid of the Consumer Financial Protection Agency that blocks banks from cheating their customers, because business is all about gouging as much as you can get.

So, do you really want a government that is going to be run like a business and gouge people? And then the final kicker that really makes the analogy between business — and a private balance sheet — and government different is that businesses can’t run a deficit. Just like a family household is supposed to save and run a deficit.

But governments are supposed to run a deficit, because they’re supposed to lose money in balance sheet terms. They’re supposed to spend money into the economy; that’s how the economy gets enough money to grow.

And so, the Republicans in the chaos have always said you’ve got to be fiscally responsible, don’t run a deficit. Meaning, don’t dump money into the economy; make the economy borrow from the banks. And what we want is austerity for labor.

Well, now all of a sudden since the Obamacare repudiation didn’t work, they’re not able to get the trillion dollars that they wanted to squeeze out of there. So, Trump says, well, we want to spend money into the economy by cutting taxes on the rich, and also by spending more on the Pentagon.

None of this is going to put money into the economy.

And all of a sudden the Democrats are quite correctly saying, well wait a minute, we are all for running a deficit if it’s to increase employment and raise wage levels. But we’re not for running a deficit simply by cutting money for the rich.

Because the businessmen don’t make their money by employing labor, the businessmen really make their money by increasing the price of their stocks; they make it by speculation; the stocks and bond market; real estate speculation. And they get it by avoiding taxes and avoiding environmental laws; avoiding all of the laws that governments are supposed to impose to create checks and balances, to make a government democratic, and the kind of world the people want to live in. The businessman is pro-business.

KIM BROWN: Well, Michael we have a real world example of this when we look at the State of Michigan, under the Governorship of Rick Snyder, their, “One tough nerd,” as he calls himself, on Twitter.

After his election, he vowed to make Michigan more financially solvent, and he did this by taking a number of steps, including appointing emergency managers over a handful of Michigan towns; in effect rendering the will of the people obsolete, because now instead of being governed by elected officials, they are being governed by these hand-picked emergency managers.

And obviously, the Flint water crisis is a perfect example of that; how the emergency manager in the interest of trying to save money, decided to change the water source for the Town of Flint from the Detroit River to the very polluted Flint River, and as a result, the entire town has been dealing with lead contamination of all kinds of nasty stuff in their water, for almost four years now.

So, how can we apply how Michigan has been run by Rick Snyder to what the Trump Administration intends to do?

MICHAEL HUDSON: That’s a perfect example. The Trump Administration wants to cover… cutback what they call red tape and bureaucracy.

And what they call red tape is everything that consumers and workers want to protect themselves: to protect themselves environmentally; to protect themselves from fraud, and to protect themselves from being cheated.

(Reprinted from The Real News Network by permission of author or representative)
 

Michael Hudson explains that the Senate hearings on Russia are an effort by Democrats to torpedo improvements in Russia-US relations and lack any real evidence of Russian meddling.

KIM BROWN: Welcome to The Real News Network in Baltimore. I’m Kim Brown.

On Thursday, the Senate Intelligence Committee held its first hearing, as part of an inquiry as to whether or not there was collusion between Russian officials, and the Trump campaign of 2016, along with the subsequent transition team into the White House. There’s been a lot of speculation –- a lot of leaks –- coming from the intelligence community, about whether or not Donald Trump and his associates had extensive contact with Russian officials, and this Senate Intelligence Committee hopes to try to get to the bottom of that.

But, is this much to do about nothing? Or is there actually smoke, and subsequent fire? Well, to discuss this, we’re joined today with Michael Hudson. Michael is a Distinguished Research Professor of Economics, at the University of Missouri at Kansas City. He’s also the author of many books, including, “The Bubble and Beyond, and Finance Capitalism and its Discontents,” “Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy,” and most recently, “J is for Junk Economics: A Survivors Guide to Reality in an Age of Deception.” He joins us today from New York.

Michael, welcome back to The Real News.

MICHAEL HUDSON: Good to be here.

KIM BROWN: Michael, this committee hearing seems to culminate weeks now, of a lot of speculation, not just from the left, or not just from Democrats, rather, about whether or not there was collusion between members of the Trump campaign, and his transition team, and Russians, in order to propel him into the Oval Office.

Your thoughts about today’s opening hearing, and whether or not the premise behind this hearing, is valid in the first place?

MICHAEL HUDSON: The premise is not valid. It’s fake news, and the one thing that the Senate committee does not want to find is where these leaks come from. The one thing they do not want to do is have any discussion of the actual evidence. The evidence itself is notoriously fake.

You remember when the DNC ostensibly hired somebody to find out who got their information. They hired a propaganda organization … a lobbyist. They hired CrowdStrike, which is not only connected to the DNC, but to the pro-war neocon Atlantic Council, which is the lobbyist pushing for military confrontation with Russia.

KIM BROWN: Michael, I’m sorry… Not to cut you off – really quick, but you’re saying that this particular firm hired by the Democrats, that they hired this firm to look into the hacking of the DNC over the summer of 2016 – is that what you’re referring to?

MICHAEL HUDSON: Yes. But that’s not what they tried to do. They didn’t want them… the one thing they did not want CrowdStrike to do was look into the so-called hacking and who got the information. They hired CrowdStrike as a propaganda organization, to make accusations against Russia that had no evidence whatsoever. And James Clapper, of The Deep State, himself has said there is no evidence.

So, CrowdStrike was hired because it’s part of the neocon establishment, the Atlantic Council, and represents the Ukraine, also… the neo-Nazis in the Ukraine, they hired a propaganda organization. And the FBI said they also went to the FBI, to Mr. Comey, who is a Democrat, and said we don’t want the FBI to look into it because if the FBI looks into it, they’ll find that probably there wasn’t Russian hacking. And so, what happened was that you had the Democrats come out, and say something obviously false on the surface of it, 17 intelligence agencies have all believed that there is Russian hacking.

The 17 – this would include the Coast Guard Intelligence and other things. The reality is, there were only three intelligence agencies involved: the National Security Council, the CIA and the FBI. None of these organizations came out with any evidence whatsoever. WikiLeaks, who actually got the information, said that it came from a DNC member who didn’t hack it, who just copied the information, delivered it to him. And the hint that they told me when I was in London, was that the hacker was the DNC worker who was mysteriously killed, in an unsolved crime two days… a few days later, walking in the park.

So, what should be asked is: how did WikiLeaks get the information from the DNC? Nobody’s asking that. They don’t want to look at it, because they want to make the unjustified claim that this was a Russian hacking, and the intelligence professionals all sort of agree that anybody could’ve done the hacking. There’s no evidence of one person or another -– if indeed there was hacking -– neither the FBI, nor the NSC, nor the CIA have examined every computer to try to find out.

Only the propaganda lobbyist organization that the DNC hired, essentially to fight Trump, and not only fight Trump, but to fight Trump’s attempt to make a rapprochement with Russia. To try to fight against the ISIS, and Al-Nusra that the Obama administration was backing in Syria and in Libya. The Russians have met with the Americans and said, look, let’s have a meeting between the Justice Department and the Russia Prosecutor General on cyber-crime. We want an international treaty against it.

The United States refused it. They said, we can’t sign any international treaty, because then we would have to obey its rules. And we have no intention whatsoever of obeying any rules of any international treaty, when it comes to cyber-crime. In other words, America can do cyber-crime and hack foreign countries, but claims that they’re hacking us, when there’s no evidence at all.

Why is this fake story coming out? It’s come out in order to discredit any attempt that President Trump may have to wind down the confrontation with Russia, to try to do what Ronald Reagan did, and disarm the atomic warfare, to stop the build-up of atomic weapons around Russia, and basically to wind back the military-industrial complex.

The neocons and the military-industrial complex are all a unit, because the military-industrial complex needs an enemy. It needs bases to put all these weapons it is producing at enormous profits in. The only place to put them, logically, is around Russia and China. But when you put the weapons that close to these countries, you’re increasing the risk of war. Trump wanted to wind that down, but the neocons, the Democratic Party, the Atlantic Council, and the Senate Committee are the pro-war, anti-Russian group, so you…

KIM BROWN: Well, Michael… Michael… Let me ask you about… in your opinion, what is the difference between the so-called Russian reset of the earlier part of the Obama administration, when Barack Obama was sending Hillary Clinton, and then eventually John Kerry, out to negotiate with the Russians, particularly about nuclear treaties in order to draw down the amount of nuclear weapons in each country’s respective stockpiles.

Now, the Russian reset has been largely touted as a failed diplomatic attempt, because of different relationships, the dynamic I suppose, between Barack Obama and Vladimir Putin. But so, what’s the difference between the Obama-Russian reset, and what Donald Trump is attempting to do?

MICHAEL HUDSON: Just the names attached to them. The Russian reset wasn’t a reset at all. It was really a new Cold War. He appointed a virulent anti-Russian as the ambassador to there. Someone who was trying to promote an orange revolution and local protest movements within Russia…

KIM BROWN: Ambassador Michael McFaul.

(Reprinted from Michael-Hudson.com by permission of author or representative)
 
• Category: Foreign Policy • Tags: Democrats, Donald Trump, Russia 

Mike Whitney has written an excellent expose of the “Russiagate” cover story for Obama’s political use of national security to help his party oppose Republicans. http://www.informationclearinghouse.info/46775.htm

Covert surveillance of politicians on Obama’s Nixon-like “Enemies List” has been going on for many years, but is only now being unmasked as a result of the failure of Obama’s cover story–“We weren’t spying on political opponents; only on Russians to protect America.”

The presstitute media has passed on the cover story authored by former Obama-administration officials led by CIA director John Brennan, FBI director James Comey, the DNC, and Democratic Rep. Adam Schiff. The loose ends in this cover-up have now been so widely exposed as hearsay and political that only 13% of Republicans believe the fact-free story – but 67% of Democrats cling to it.

Whitney reports that Comey began the investigation in July 2016. As of last Friday (March 31, 2017) not a scrap of evidence has turned up. This did not deter Comey from telling Congress that Putin “hated Secretary Clinton so much that the flip side of that coin was that he had a clear preference for the person running against the person he hated so much.” So the Russians allegedly “engaged in a multifaceted campaign to undermine our democracy.”

Comey based this conclusion on what has become a hilarious bit of gullibililty. The Russians, he said “were unusually loud in their intervention. It’s almost as if they didn’t care that we knew, that they wanted us to see what they were doing.”

Alternatively, someone wanted investigators to infer that the Russians were doing the hacking. As Wikeleaks Vault 7 releases prove, the CIA can hack computers and leave anyone else’s signature. Due to poor security, the CIA’s cybertechnology ended up in the Internet domain.

“They’ll be back. They’ll be back, in 2020. They may be back in 2018,” warned Mr. Comey. But who is the “they”? “They” seem to be “us,” or at least what numerous former national security officials have suggested: either the NSC, CIA or its “Five Eyes” partner, British MI6.

Wall Street Journal editorialist Kimberley A. Strassel poses the real question: Why hasn’t the Trump administration had the Secret Service to arrest Comey, Brennan, Schiff, the DNC and Hillary for trying to overthrow the President of the United States? “Mr. Nunes has said he has seen proof that the Obama White House surveilled the incoming administration—on subjects that had nothing to do with Russia—and that it further unmasked (identified by name) transition officials. This goes far beyond a mere scandal. It’s a potential crime.” https://www.wsj.com/articles/what-devin-nunes-knows-1490914396

What we are watching is turning out to be traces of a plot against a government elected by the American people. Attempts to get at the truth by House national security committee Chairman Devin Nunes have been countered with demands by Democrats to recuse himself so as to stop his exposé of how “Team Obama was spying broadly on the incoming administration.”

It seems that this has been going on for many years now. Former Rep. Dennis Kucinich has dropped a bombshell about what appears to be his own illegal surveillance under Obama’s NSC. “When the president raised the question of wiretapping on his phones in Trump Tower, he was challenged to prove that such a thing could happen. It happened to me.”

Here’s what happened, which was revealed two years after he left office in 2013 when the Democrats were overjoyed to see Ohio Republicans redraw the election district lines to get rid of his candidacy. The Washington Times asked him to authenticate a secret recording of a cell phone call “from Saif el-Islam Qaddafi, a high-ranking official in Libya’s government and a son of the country’s ruler, Moammar Qaddafi.”

Before taking the call, Rep. Kucinich “checked with the House’s general counsel to ensure that such a discussion by a member of Congress with a foreign power was permitted by law.”

“I was assured that under the Constitution a lawmaker had a fundamental duty to ask questions and gather information—activity expressly protected by the Article I clauses covering separation of powers and congressional speech and debate.”

Given the quality of the recordings was excellent on both ends of the call, Kucinich concluded that “the tape was made by an American intelligence agency and then leaked to the Times for political reasons. If so, this episode represented a gross violation of the separation of powers.”

His repeated Freedom of Information Act requests made in 2012 before leaving office have been stonewalled by the intelligence agencies for five years.

We are now in a position to see the real story behind “Russiagate.” It’s not about Russia. The real news is the Obama regime’s abuse of the government’s surveillance powers to spy on Donald Trump and other Republicans in order to build a dossier for the DNC to leak to the press in an attempt to slander or compromise Trump and throw the election to Hillary.

They’ve been caught, but we can now see that they took steps to protect themselves against this. They prepared a cover story. They pretend they were not spying on Trump, but on Russians – which only by fortuitous happenchance turned up alleged incriminating smoke against Trump.

This cover story was buttressed by the fake news story prepared by former MI6 freelancer Christopher Steele. As Whitney reports, Steele “was hired as an opposition researcher last June to dig up derogatory information on Donald Trump.” Unvetted and unverified information by so-called informants somehow found its way into U.S. intelligence agency reports. These reports were then leaked to Democrat-friendly media. This is where the crime lies. Obama regime and DNC were using these agencies for domestic political use, KGB style.

The Obama/Clinton cover story is now falling to pieces. That explains the desperation in the attack by Adam Schiff, the ranking Democrat on the House Intelligence Committee, on Committee Chairman Devin Nunes to stop the exposure. Russiagate is not a Trump/Putin collusion but a domestic spy job carried out by Democrats.

Law requires Trump to arrest those responsible and to put them on trial for treason and conspiracy to overthrow the government of the United States. If Trump fears to prosecute the Obama operatives within the Deep State, they will try all the harder to attack him to the point of forcing his removal or at least discrediting him and his fellow Republicans to pave the way for the 2018 elections.

(Reprinted from PaulCraigRoberts.org by permission of author or representative)
 

I just had a disastrous and embarrassing interaction with Bloomberg, and feel that I was ambushed and sandbagged by having my comments taken out of context in a hit piece Bloomberg’s journalists wrote on Venezuela – evidently trying to distort my own views in a two-for-one job.

On Monday, March 27, I received a message from a Bloomberg reporter asking me about a very nice compliment that the President of Venezuela and Secretary General of the Non-Aligned Movement, Nicolás Maduro, had said about me:

I was reading one of the greatest American economists, Michael Hudson, I don’t know if you know him, I recommend reading his work. He is an economic thinker, worked as an economist for a long time on Wall Street, knows this world very well, and has been insisting on the need for construction of a real economy. He’s been alerting for a long time through conferences, writings, books and interviews of the danger that the world has, because he says in his research that of every $20, $19 arise from the speculative economy and only $1 arises from the real economy.

More than 90% of the country’s economic apparatus is in the hands of private companies.

The reporter, Christine Jenkins, asked if I knew President Maduro or could explain what he found of value in my writing. I said that I thought he probably was referring to my discussion in Killing the Host of a September 2014 Harvard Business Review article by William Lazonick, “Profits without Prosperity,” calculating that for the decade 2003-2012, the 449 companies publicly listed in the S&P 500 index spent only 9% of their earnings on new capital investment. They used 54% to buy back their own stock, and 37% to pay dividends. I told the reporter that I thought the President’s point was that the financial sector was not financing capital formation and employment to increase output.

I told her that I had not followed Venezuela’s economy closely in recent years. I did say that I had discussed how Argentina and Greece were subjected to austerity as a result of foreign debt, and my belief that no sovereign nation should be obliged to impose austerity on its population to pay foreign bondholders. That has indeed been the problem confronting Latin America for decades, and is a central theme of all my books since Super Imperialism in 1972.

And to cap matters, of course, U.S. foreign policy has mobilized the World Bank and IMF to back creditor interests, foreign investment and privatization – while isolating countries from Cuba through Venezuela (and now Greece) to demonstrate that neoliberal diplomacy will make such a country a pariah if it makes a serious attempt to oppose austerity and financialization.

Apart from that, we had no substantive discussion. The reporter ran down some recent economic facts about Venezuela’s economic crisis, and I replied to the effect that it sounded like a real quandary. She said that the country looked like it was straining to pay its foreign debts and might soon default. I replied with the same advice that I had given Greece: If you are inevitably going to default on sovereign debt, it’s best to stop paying now and keep what foreign exchange you have, and try to renegotiate the debt to bring it within the ability to be paid. Otherwise, you will end up suffering the legal tangle of default, but be stripped of funds needed by the domestic economy to survive.

I said that I didn’t have a solution to this problem. I haven’t studied the legal status of Venezuela’s foreign debt, or what alternatives the government might have had open to it in the face of strong opposition from its domestic oligarchy as well as foreign pressure.

The reporter, Christine Jenkins, said that she would read my books to see how they might have attracted the attention of President Maduro. On Wednesday, she got back to me, and said that she was going to write up an article for Bloomberg.

I asked for a copy, and she wrote back that “Hi – so we actually aren’t allowed to send articles before publication!” That’s what raised a red flag in my head. My impression is that every serious reporter checks back with his or her source to ascertain that the report is accurate. This seems to be basic journalistic ethics.

The article was to appear at 6 AM Thursday morning. She tried to allay my fears by telling me “a little bit about what it says … we make it very clear that you don’t consider yourself a Venezuelan expert, like you said, but that if the government sees that default is inevitable, that its better to get it over with. We mention your recent book, and also that Killing the Host is the one that probably got Maduro’s attention. And we talk about how you’ve gotten an international following, advising some governments, but the one thing I wanted to give you a heads up about is that we call you a somewhat obscure economist – and I hope you agree that’s fair, that you’re definitely not in the mainstream, not a household name, and like you talked about your area of coverage not being taught at the typical universities, etc.”

But by noon I still had not received a copy. I asked for it, and when I got it, it was nothing at all like what I had said. It made me appear to be criticizing Venezuela’s politicians and, by implication, President Maduro. But at no point had I criticized Venezuela’s attempts at reform. Rather, I had criticized the problem of neoliberal opposition to countries trying to uplift their populations along the lines that Venezuela had done, using debt leverage to force countries to impose austerity. It looks to me like Venezuela is getting the “Greek treatment.”

I was appalled to find the article a hit-piece on Venezuela, and to make me appear to criticize President Maduro by implying that the country is not helpable. I never said that I was not “a fan of the socialist leader.” I applaud his attempts to maneuver as best he can within the corner into which Venezuela has been painted. I did indeed repeat the headlines of the day – that the country “has entered a period of anarchy.” There were riots going on, and a constitutional crisis led to the Supreme Court suspending its congress. That wasn’t a criticism, just my “umm-hmm” comment on what the reporter was telling me about the situation.

Venezuela has made herculean efforts to pay its bondholders in recent years. This has been a political decision to avoid the even deeper problems that default would cause. I’m in no position to second-guess President Maduro or other Venezuelan policy makers. They’ve probably steered the best course available to them – bad as all the choices are.

The article concluded that I would “be disinclined to add an advisory role to his busy schedule if asked to.” That’s not my language. I said that I hadn’t been following the situation and have hardly spent any time in Latin America. Of course I would help in any way that I could, if asked.

The real damage came from the right-wing paper Caracas Chronicles, which did a guilt-by-association attack piece by Jose Gonzales Vargas, “Hudson on the Guaire.” Asking rhetorically “Who the hell is he?” the article identified me with

(Reprinted from Counterpunch by permission of author or representative)
 

Nobody yet can tell whether Donald Trump is an agent of change with a specific policy in mind, or merely a catalyst heralding an as yet undetermined turning point. His first month in the White House saw him melting into the Republican mélange of corporate lobbyists. Having promised to create jobs, his “America First” policy looks more like “Wall Street First.” His cabinet of billionaires promoting corporate tax cuts, deregulation and dismantling Dodd-Frank bank reform repeats the Junk Economics promise that giving more tax breaks to the richest One Percent may lead them to use their windfall to invest in creating more jobs. What they usually do, of course, is simply buy more property and assets already in place.

One of the first reactions to Trump’s election victory was for stocks of the most crooked financial institutions to soar, hoping for a deregulatory scythe taken to the public sector. Navient, the Department of Education’s knee-breaker on student loan collections accused by the Consumer Financial Protection Bureau (CFPB) of massive fraud and overcharging, rose from $13 to $18 now that it seemed likely that the incoming Republicans would disable the CFPB and shine a green light for financial fraud.

Foreclosure king Stephen Mnuchin of IndyMac/OneWest (and formerly of Goldman Sachs for 17 years; later a George Soros partner) is now Treasury Secretary – and Trump is pledged to abolish the CFPB, on the specious logic that letting fraudsters manage pension savings and other investments will give consumers and savers “broader choice,” e.g., for the financial equivalent of junk food. Secretary of Education Betsy DeVos hopes to privatize public education into for-profit (and de-unionized) charter schools, breaking the teachers’ unions. This may position Trump to become the Transformational President that neoliberals have been waiting for.

But not the neocons. His election rhetoric promised to reverse traditional U.S. interventionist policy abroad. Making an anti-war left run around the Democrats, he promised to stop backing ISIS/Al Nusra (President Obama’s “moderate” terrorists supplied with the arms and money that Hillary looted from Libya), and to reverse the Obama-Clinton administration’s New Cold War with Russia. But the neocon coterie at the CIA and State Department are undercutting his proposed rapprochement with Russia by forcing out General Flynn for starters. It seems doubtful that Trump will clean them out.

Trump has called NATO obsolete, but insists that its members up their spending to the stipulated 2% of GDP — producing a windfall worth tens of billions of dollars for U.S. arms exporters. That is to be the price Europe must pay if it wants to endorse Germany’s and the Baltics’ confrontation with Russia.

Trump is sufficiently intuitive to proclaim the euro a disaster, and he recommends that Greece leave it. He supports the rising nationalist parties in Britain, France, Italy, Greece and the Netherlands, all of which urge withdrawal from the eurozone – and reconciliation with Russia instead of sanctions. In place of the ill-fated TPP and TTIP, Trump advocates country-by-country trade deals favoring the United States. Toward this end, his designated ambassador to the European Union, Ted Malloch, urges the EU’s breakup. The EU is refusing to accept him as ambassador.

Will Trump’s victory break up the Democratic Party?

At the time this volume is going to press, there is no way of knowing how successful these international reversals will be. What is more clear is what Trump’s political impact will have at home. His victory – or more accurately, Hillary’s resounding loss and the way she lost – has encouraged enormous pressure for a realignment of both parties. Regardless of what President Trump may achieve vis-à-vis Europe, his actions as celebrity chaos agent may break up U.S. politics across the political spectrum.

The Democratic Party has lost its ability to pose as the party of labor and the middle class. Firmly controlled by Wall Street and California billionaires, the Democratic National Committee (DNC) strategy of identity politics encourages any identity except that of wage earners. The candidates backed by the Donor Class have been Blue Dogs pledged to promote Wall Street and neocons urging a New Cold War with Russia.

They preferred to lose with Hillary than to win behind Bernie Sanders. So Trump’s electoral victory is their legacy as well as Obama’s. Instead of Trump’s victory dispelling that strategy, the Democrats are doubling down. It is as if identity politics is all they have.

Trying to ride on Barack Obama’s coattails didn’t work. Promising “hope and change,” he won by posing as a transformational president, leading the Democrats to control of the White House, Senate and Congress in 2008. Swept into office by a national reaction against the George Bush’s Oil War in Iraq and the junk-mortgage crisis that left the economy debt-ridden, they had free rein to pass whatever new laws they chose – even a Public Option in health care if they had wanted, or make Wall Street banks absorb the losses from their bad and often fraudulent loans.

But it turned out that Obama’s role was to prevent the changes that voters hoped to see, and indeed that the economy needed to recover: financial reform, debt writedowns to bring junk mortgages in line with fair market prices, and throwing crooked bankers in jail. Obama rescued the banks, not the economy, and turned over the Justice Department and regulatory agencies to his Wall Street campaign contributors. He did not even pull back from war in the Near East, but extended it to Libya and Syria, blundering into the Ukrainian coup as well.

Having dashed the hopes of his followers, Obama then praised his chosen successor Hillary Clinton as his “Third Term.” Enjoying this kiss of death, Hillary promised to keep up Obama’s policies.

The straw that pushed voters over the edge was when she asked voters, “Aren’t you better off today than you were eight years ago?” Who were they going to believe: their eyes, or Hillary? National income statistics showed that only the top 5 percent of the population were better off. All the growth in Gross Domestic Product (GDP) during Obama’s tenure went to them – the Donor Class that had gained control of the Democratic Party leadership. Real incomes have fallen for the remaining 95 percent, whose household budgets have been further eroded by soaring charges for health insurance. (The Democratic leadership in Congress fought tooth and nail to block Dennis Kucinich from introducing his Single Payer proposal.)

No wonder most of the geographic United States voted for change – except for where the top 5 percent, is concentrated: in New York (Wall Street) and California (Silicon Valley and the military-industrial complex). Making fun of the Obama Administration’s slogan of “hope and change,” Trump characterized Hillary’s policy of continuing the economy’s shrinkage for the 95% as “no hope and no change.”

Identity Politics as anti-labor politics

A new term was introduced to the English language: Identity Politics. Its aim is for voters to think of themselves as separatist minorities – women, LGBTQ, Blacks and Hispanics. The Democrats thought they could beat Trump by organizing Women for Wall Street (and a New Cold War), LGBTQ for Wall Street (and a New Cold War), and Blacks and Hispanics for Wall Street (and a New Cold War). Each identity cohort was headed by a billionaire or hedge fund donor.

(Reprinted from Real World Economics Review by permission of author or representative)
 
Michael Hudson
About Michael Hudson

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of The Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East.

Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.