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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)
 

‘J is for Junk Economics’: Michael Hudson on TRNN (2/5), February 28, 2017.

Trump’s infrastructure plan will privatize all the benefits for the financiers and make sure that the population at large gets zero benefit from it while paying the costs, says economist Michael Hudson

SHARMINI PERIES: Welcome back to The Real News Network. I’m speaking with Michael Hudson, the author of, J is for Junk Economics, a Guide to Reality in the Age of Deception. Don’t miss it. We’re going to be talking about this book, and some of the misleading concepts that are out there, in terms of economics, and understanding economics.

Being able to talk about economic concepts with a bit more knowledge than we have, requires reading this book. So, thank you for joining us, Michael.

MICHAEL HUDSON: It’s good to be back in Baltimore.

SHARMINI PERIES: So Michael, one of the things that you really try to tackle in this book is the euphemistic concepts of economics. Trump’s economic plan has focused on infrastructure investment as one of its key plans for the economy. And he says this will create a better business climate and good jobs. What do you think of that?

MICHAEL HUDSON: Well, everybody is in favor of infrastructure. Since the beginning of civilization – starting with the Pyramids, temples and city walls – most of the capital investment in every country of the world, even today, is in infrastructure. That’s why banks, corporations and wealthy investors want to privatize it, because privatizing it is like conquering a new country and being able to take its income.

You can take into your own hands, for your own profit, the largest capital investment there is – what used to be in the public domain. The roads, railroads, airline companies, water and sewer systems and everything that people need, including now the schools can be privatized and instead of providing them to the economy, to make the economy operate at a lower cost, you can make people pay two or three times as much as they were doing. Operating this infrastructure for profit (with high-interest credit) will vastly increase the cost of the economy, without increasing wages or the ability to pay for these privatized services. This will squeeze the living standards while sucking up more and more money to the top of the economic pyramid.

So I do talk about infrastructure in the book, but I also talk about important economists who discussed it. One individual whom I cite in the dictionary section is Simon Patten. He was the first economics professor at the first business school in the United States, the Wharton School at the University of Pennsylvania.

Patten said that there are four factors of production. Classical economics talks about three factors of income — land, labor and capital. But there’s a fourth factor of production, and that’s public infrastructure. However, its function, Patten said – and this is a pro-capitalist saying it, this is the business school – the function of public infrastructure, roads and schools is not to make a profit, like a private investor would do. The public aim is to lower the cost of living and doing business, so as to make the economy more competitive.

If a country does what the United States did, and finances a vast public school system, public extension system for agricultural education, and provides low cost roads, low cost transportation, water and sewers, parks and communications – if you provide all of this either freely or at least at a subsidized price – then you’re going to be able to undersell economies that don’t socialize the means of production.

That’s why, Patten said, socialized economies with active public infrastructure can undersell other economies. Imagine if you’re competing with an economy that does what Margaret Thatcher did in England. When she privatized the electric and water companies, everybody’s electricity and water rates went up. If countries privatize their roads and airlines, the private owners are going to want to borrow all the money needed to invest, and they’re going to pay interest on this.

That’s why banks and brokerage underwriters love privatization. The usual the rate of return to privatizers, over and above interest in the United States, is 12%. But this pales before capital gains of 50% and even 100%. That’s the real rip-off, because public assets are underpriced when being sold to insiders and bank underwriters.

British Telephone made a return of about 25% in just a day or two!
 That’s how Mitt Romney and other hedge fund operators go about privatizing. They add all sorts of managerial costs for their “services” (mainly looting, downsizing and scaling back pensions while intensifying working conditions to burn out labor – euphemized as “raising productivity”) as well as interest and profits.

They’re going to make a capital gain on the stock that’s issued. And all these payments to the privatizers, in what’s called a private-public partnership (PPP) is going to vastly increase the cost of popular access to this infrastructure.

Look at what happened in Indiana when it built a toll road. The state said that it needed a highway. Absolutely true. Every state needs highways. It paid privatizers to make back their investment (and then some!) with a toll. Needless to say, they set the toll very high, so as to pay the private investors their profits – and pay the bank for its loan, and pay the stockholders. All this cost so much money that drivers in Indiana didn’t use the toll road. They preferred the slower old routes.

To prevent this kind of free market, the privatizers and their banks insisted on a clause in the private-public partnership assuring investors that if Indiana lets private investor build a toll road, it can’t then build any other roads that might compete. The aim is to force people to use the toll road.

This is not a free choice economy. The aim is to to steer everybody into a private infrastructure monopoly.

By contrast, the purpose of public investment for 100 years in the United States was to prevent such monopolies. That’s why we had anti-monopoly regulations. That’s what made America so much more competitive in the late 19th century and early 20th century. It was able to undersell European and other countries that followed the private-sector emphasis.

The public-private partnership isn’t really a partnership at all. It “socializes” the losses, while privatizing the profits. Instead of society – consumers and also business – being the beneficiary of roads, schools, cable TV systems and communication systems, they are victimized. Instead of providing gains in technology to society at a low cost or even freely, so that people don’t have to earn high enough wages to pay these higher privatized costs, you raise costs. The effect is to squeeze family budgets.

By privatizing healthcare, for instance, people have to pay much higher health insurance in America than anywhere else. You have to pay the insurance companies, and you don’t enforce monopoly rules against the pharmaceutical companies. You don’t even bargain with them or buy in the cheapest market. You buy in the most expensive market, because they’re your largest campaign contributors and that’s what you’ve promised to do.

(Reprinted from Michael-Hudson.com by permission of author or representative)
 
• Category: Economics • Tags: Donald Trump, Privatization, Wall Street 
Hiding How the Economy Really Works

Michael Hudson, author of the newly released J is for Junk Economics, says the media and academia use well-crafted euphemisms to conceal how the economy really works

SHARMINI PERIES: Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City. He’s the author of many books including, “The Bubble and Beyond” and “Finance Capitalism and Its Discontents”, “Killing the Host: How Financial Parasites and Debt Destroy the Global Economy,” and most recently, of course, “Junk Economics”.

Michael, your book reminds me of Raymond Williams’ key words. That was an incredible contribution to cultural criticism, a criticism of society and cultural studies as a discipline. And I think your book is going to make a phenomenal contribution to the field of economics. It would be a reference for people to go back, especially students to go back, and look at your version of the definition of these terms and looking at economics from that critical prism. So, my first question to you is really about this book. Why did you write it?

MICHAEL HUDSON: I originally wrote it as an appendix to a book to have been called, “The Fictitious Economy.” That draft was written before the 2008 crisis. My point was that the way the economy is described in the press and in University courses has very little to do with how the economy really works. The press and journalistic reports use a terminology made of well crafted euphemisms to confuse understanding of how the economy works.

In addition to giving key words to explain what’s positive and how to understand the economy, I discuss the misleading vocabulary, the Orwellian double-think used by the media, bank lobbyists and corporate lobbyists to persuade people that austerity and running into debt is the key to wealth, not its antithesis. The aim is to make them act against their own interests, by drawing a fictitious picture of the economy as if it’s a parallel universe.

If you can make people use a vocabulary and concepts that make it appear that when the 1% gets richer, the whole economy is getting richer – or when GDP goes up, everybody is improving – then the people, the 95% who did not improve their position from 2008 to 2016 somehow can be made to suffer from the Stockholm syndrome. They’ll think, “Gee, it must be my fault. If the whole economy is growing, why am I so worse off? If only we can give more money to the top 5% or the 1%, it’ll all trickle down. We’ve got to cut taxes and help them so they can give me a job because as Trump and other people said, Well, I never met a poor person who gave me a job.”

I’ve met a lot of rich people, and instead of giving people jobs when they buy a company, they usually make money for themselves by firing people, downsizing and outsourcing labor. So you’re not going to get the rich necessarily giving you jobs. But if people can somehow think that there’s an association between wealth at the top and more employment, and that you have to cut the taxes on the wealthy because it’ll all trickle down, then they have an upside-down view of how the economy works.

I had written an appendix to the book and that took on a life of its own. If you have a vocabulary that describes how the world and the economy actually work, then one word will lead to another and soon you build up a more realistic picture of the economy. So, I not only discuss words and vocabulary, I discuss some of the key individuals and the key economists who’ve made contributions that don’t appear in the neoliberal academic curriculum.

There’s a reason the history of economic thought is not taught anymore in the universities. If people really read what Adam Smith wrote and what John Stewart Mill wrote, they’d see that Smith criticized the landlords. He said that you’ve got to tax away their rents, because it’s a free lunch. Mill defined rent as what landlords make in their sleep, without working. Adam Smith said that whenever businessmen get together, they’re going to conspire as to how to get money from the public at large – how to do a deal and mislead people that it’s all for society’s good.

This is not the kind of free enterprise that people who talk about Adam Smith explain when they depict him as if he were a tax cutter, an Austrian economist or a neoliberal. They don’t want to hear what he actually wrote. So, my book is really about reality economics. I found that to discuss reality economics, we have to take back control of the language or economic methodology, not use the logic that they use.

Mainstream economists talk as if any status quo is in equilibrium. The subliminal trick here is that if you think of the economy as always being in equilibrium, it implies that if you’re poor or you can’t pay your debt, or you have problems sending your kids to school, that’s just part of nature. As if there isn’t an alternative. That is what Margaret Thatcher said: “There is no alternative.” My book is all about how of course there’s an alternative. But to make an alternative, you need an alternative way of looking at the world. And to do that you, as George Orwell said, you need a different vocabulary.

SHARMINI PERIES: Speaking of vocabulary and euphemistic economic concepts, that’s what’s so unique about this book. It’s not just the words, like in Raymond Williams’, but it’s also about the theory and the concepts that we are tackling. You also talked about businessmen and how they use these terminologies in order to mislead us. So here we have a businessman in office, as President of the United States, who is proposing all kinds of economic reforms supposedly in our favor, in terms of workers. And you know, the big infrastructure projects he is proposing that are supposed to elevate and lift people out of poverty and give them jobs and so on. What is the mythology there?

MICHAEL HUDSON: Well, you just used the word “reform.” When I grew up, and for the past century, “reform” meant you unionize labor, you protect consumers, and you regulate the economy so that there’s less fraud against consumers. But the word “reform” today, as used by the International Monetary Fund in Greece when it insists on Greek reforms, means just the opposite: You’re supposed to lower wages by 10 or 20%. You cut back the pensions by about 50%. Ideally, you stop paying pensions in order to pay the IMF and other foreign creditors. You stop social spending. So, what you have is an inversion of the traditional vocabulary. Reform now means the opposite of what it meant early in the 20th century. It’s no longer Social Democratic. It’s right wing, anti-labor, pro-financial “reform” to cut back social spending and leave everything in a privatized way to the wealthy, and to the corporate sector.

So reform is the first word that I’d use to illustrate how the meaning has changed as it’s used in the mainstream press. Basically, what the right wing has done in this country is hijack the vocabulary that was developed by the labor movement and by socialist economists for a century. They’ve appropriated it and turned it to mean the opposite.

There are 400 words that I deal with. Many of these words show how the meaning has been turned upside down, to get people to have an upside down view of how the economy works.

(Reprinted from Counterpunch by permission of author or representative)
 
Finance as Warfare: The IMF Lent to Greece Knowing It Could Never Pay Back Debt

SHARMINI PERIES: The latest economic indicator showed that the Greek economy shrank by 0.4% in the last three months of 2016. This poses a real problem for Greece, because its lenders are expecting it to grow by 3.5% annually, to enable it to pay back on its bailout loan. Greece is scheduled to make a 10.5 billion euro payment on its debt next summer, but is expected to be unable to make that payment, without another installment from its $86 billion bailout.

A growing impasse between the International Monetary Fund, and the European Central Bank, Greece’s two main lenders, is threatening to push Greece into default, and pull out of the euro. Meanwhile, the Greece government told its lenders, that we now call “Troika” today, that it will not agree to any more austerity measures. Joining us today, to take a closer look at the Greek situation is Michael Hudson. Michael is a distinguished Professor of Economics, at the University of Missouri, Kansas City. He’s the author of many books, and the latest among them is, J is for Junk Economics: A Guide to Reality in the Age of Deception.

Thank you so much for joining us today, Michael.

MICHAEL HUDSON: It’s good to be here. But I take issue with one thing that you said. You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now.

What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015. It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

Sharmini, for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No jjunkecon austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy. As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink.

So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay. When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities. This is by now a program that has gone on and on, decade after decade.

Now, surprisingly enough, America’s ambassador to the EU, Ted Malloch, has gone on Bloomberg and also on Greek TV telling the Greeks to leave the euro and go it alone. You have Trump’s nominee for the ambassador to the EU saying that the EU zone is dead zone. It’s going to shrink. If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see.

Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

SHARMINI PERIES: Yeah, that’s an important… at the very beginning of your answer here, you were making this very important point, is that although the lenders – this is the Eurozone lenders – had set a target of 3.5% surplus as a condition on Greece in order to make that first bailout loan. The IMF is saying, well, that’s not quite doable, 1.5% should be the target.

But you’re saying, neither of these are real, or is achievable, or desired, for that matter, because they actually want Greece to fail. Why are you saying that?

MICHAEL HUDSON: Because when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece.

So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

If they can convince countries somehow to adopt junk economics and pursue policies that will destroy themselves, then they’ll be easy pickings for foreign investors, and for the globalists to take over other economies. So, it’s a form of war.

SHARMINI PERIES: Right. Michael, you were saying that the newly appointed ambassador, Ted Malloch of the Trump administration to the European Union has suggested that Greece should consider leaving the European Union, or the euro in particular.

What do you make of this, and will this be then consistent with what Greece is suggesting? Because Greece has now said, no more austerity measures. We’re not going to agree to them. So, this is going to amount to an impasse that is not going to be resolvable. Should Greece exit the euro?

MICHAEL HUDSON: Yes, it should, but the question is how should it do it, and on what terms? The problem is not only leaving the euro. The problem really is the foreign debt that was bad debt that it was loaded onto by the Eurozone. If you leave the euro and still pay the foreign debt, then you’re still in a permanent depression from which you can never exit.

There’s a broad moral principle here: If you lend money to a country that your statistics show cannot pay the debt, is there really a moral obligation to pay the debt? Greece did have a commission two years ago saying that this debt is odious. But it’s not enough just to say there’s an odious debt. You have to have something more positive.

I’ve been talking to Greek politicians and Syriza leaders about what’s needed, and what is needed is a Declaration of Rights. Just as the Westphalia rules in 1648, a Universal Declaration that countries should not be attacked in war, that countries should not be overthrown by other countries. I think, the Declaration of International Law has to realize that no country should be obliged to impose poverty on its population, and sell off the public domain in order to pay its foreign creditors.

The Declaration would say that if creditors make a debt that cannot be repaid, the debt is by definition odious, so there is no need to pay it. Every country has the right not to pay debts that are unpayable except by bankrupting the country, and forcing it to sell off their public domain to foreign countries. That’s the very definition of sovereignty.

(Reprinted from Michael-Hudson.com by permission of author or representative)
 
• Category: Economics • Tags: Counterpunch Archives, Eurozone, Greece, IMF 

An article by Robert Berke in oilprice.com, which describes itself as “The No. 1 Source for Oil & Energy News,” illustrates how interest groups control outcomes by how they shape policy choices.

Berke’s article reveals how the US intends to maintain and extend its hegemony by breaking up the alliance between Russia, Iran, and China, and by oil privatizations that result in countries losing control over their sovereignty to private oil companies that work closely with the US government. As Trump has neutered his presidency by gratuitously accepting Gen. Flynn’s resignation as National Security Advisor, this scheme is likely to be Trump’s approach to “better relations” with Russia.

Berke reports that Henry Kissinger has sold President Trump on a scheme to use the removal of Russian sanctions to pry President Putin away from the Russian alliance with Iran and China. Should Putin fall for such a scheme, it would be a fatal strategic blunder from which Russia could not recover. Yet, Putin will be pressured to make this blunder.

One pressure on Putin comes from the Atlanticist Integrationists who have a material stake in their connections to the West and who want Russia to be integrated into the Western world. Another pressure comes from the affront that sanctions represent to Russians. Removing this insult has become important to Russians even though the sanctions do Russia no material harm.

We agree with President Putin that the sanctions are in fact a benefit to Russia as they have moved Russia in self-sufficient directions and toward developing relationships with China and Asia. Moreover, the West with its hegemonic impulses uses economic relationships for control purposes. Trade with China and Asia does not pose the same threat to Russian independence.

Berke says that part of the deal being offered to Putin is “increased access to the huge European energy market, restored western financial credit, access to Western technology, and a seat at the global decision-making table, all of which Russia badly needs and wants.” Sweetening the honey trap is official recognization of “Crimea as part of Russia.”

Russia might want all of this, but it is nonsense that Russia needs any of it.

Crimea is part of Russia, as it has been for 300 years, and no one can do anything about it. What would it mean if Mexico did not recognize that Texas and California were part of the US? Nothing.

Europe has scant alternatives to Russian energy.

Russia does not need Western technology. Indeed, its military technology is superior to that in the West.

And Russia most certainly does not need Western loans. Indeed, it would be an act of insanity to accept them.

It is a self-serving Western myth that Russia needs foreign loans. This myth is enshrined in neoliberal economics, which is a device for Western exploitation and control of other countries. Russia’s most dangerous threat is the country’s neoliberal economists.

The Russian central bank has convinced the Russian government that it would be inflationary to finance Russian development projects with the issuance of central bank credit. Foreign loans are essential, claims the central bank.

Someone needs to teach the Russian central bank basic economics before Russia is turned into another Western vassal. Here is the lesson: When central bank credit is used to finance development projects, the supply of rubles increases but so does output from the projects. Thus, goods and services rise with the supply of rubles. When Russia borrows foreign currencies from abroad, the money supply also increases, but so does the foreign debt. Russia does not spend the foreign currencies on the project but puts them into its foreign exchange reserves. The central bank issues the same amount of rubles to pay the project’s bills as it would in the absence of the foreign loan. All the foreign loan does is to present Russia with an interest payment to a foreign creditor.

Foreign capital is not important to countries such as Russia and China. Both countries are perfectly capable of financing their own development. Indeed, China is the world’s largest creditor nation. Foreign loans are only important to countries that lack the internal resources for development and have to purchase the business know-how, techlology, and resources abroad with foreign currencies that their exports are insufficient to bring in.

This is not the case with Russia, which has large endowments of resources and a trade surplus. China’s development was given a boost by US corporations that moved their production for the US market offshore in order to pocket the difference in labor and regulatory costs.

Neoliberals argue that Russia needs privatization in order to cover its budget deficit. Russia’s government debt is only 17 percent of Russian GDP. According to official measures, US federal debt is 104 percent of GDP, 6.1 times higher than in Russia. If US federal debt is measured in real corrected terms, US federal debt is 185 percent of US GDP. http://www.paulcraigroberts.org/2014/07/08/deteriorating-economic-outlook/

Clearly, if the massive debt of the US government is not a problem, the tiny debt of Russia is not a problem.

Berke’s article is part of the effort to scam Russia by convincing the Russian government that its prosperity depends on unfavorable deals with the West. As Russia’s neoliberal economists believe this, the scam has a chance of success.

Another delusion affecting the Russian government is the belief that privatization brings in capital. This delusion caused the Russian government to turn over 20 percent of its oil company to foreign ownership. The only thing Russia achieved by this strategic blunder was to deliver 20 percent of its oil profits into foreign hands. For a one-time payment, Russia gave away 20 percent of its oil profits in perpetuity.

To repeat outselves, the greatest threat that Russia faces is not sanctions but the incompetence of its neoliberal economists who have been throughly brainwashed to serve US interests.

(Reprinted from PaulCraigRoberts.org by permission of author or representative)
 
• Category: Economics, Foreign Policy • Tags: Donald Trump, Neoliberalism, Russia 
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.