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De-Dollarizing the American Financial Empire
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Imperialism is getting something for nothing. It is a strategy to obtain other countries’ surplus without playing a productive role, but by creating an extractive rentier system. An imperialist power obliges other countries to pay tribute. Of course, America doesn’t come right out and tell other countries, “You have to pay us tribute,” like Roman emperors told the provinces they governed. U.S. diplomats simply insist that other countries invest their balance-of-payments inflows and official central-bank savings in US dollars, especially U.S. Treasury IOUs. This Treasury-bill standard turns the global monetary and financial system into a tributary system. That is what pays the costs of U.S. military spending, including its 800 military bases throughout the world.

I’m Bonnie Faulkner. Today on Guns and Butter, Dr. Michael Hudson. Today’s show: De-Dollarizing the American Financial Empire. Dr. Hudson is a financial economist and historian. He is President of the Institute for the Study of Long-Term Economic Trend, a Wall Street Financial Analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His most recent books include, And Forgive Them Their Debts … Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year; Killing the Host: How Financial Parasites and Debt Destroy the Global Economy; and J Is for Junk Economics: A Guide to Reality in an Age of Deception. We return again today to a discussion of Dr. Hudson’s seminal 1972 book, Super Imperialism: The Economic Strategy of American Empire, a critique of how the United States exploited foreign economies through the IMF and World Bank. We discuss how the United States has dominated the world economically both as the world’s largest creditor, and then later as the world’s largest debtor, and take a look at the coming demise of dollar domination.

Bonnie Faulkner: Michael Hudson, welcome back.

Michael Hudson: It’s good to be back, Bonnie.

Bonnie Faulkner: Why is President Trump insisting that the Federal Reserve lower interest rates? I thought they were already extremely low. And if they did go lower, what effect would this have?

Michael Hudson: Interest rates are historically low, and they have been kept low in order to try to keep providing cheap money for speculators to buy stocks and bonds to make arbitrage gains. Speculators can borrow at a low rate of interest to buy a stock yielding dividends (and also making capital gains) at a higher rate of return, or by buying a bond such as corporate junk bonds that pay higher interest rates, and keep the difference. In short, low interest rates are a form of financial engineering.

Trump wants interest rates to be low in order to inflate the housing market and the stock market even more, as if that is an index of the real economy, not just the financial sector that is wrapped around the economy of production and consumption. Beyond this domestic concern, Trump imagines that if you keep interest rates lower than those of Europe, the dollar’s exchange rate will decline. He thinks that this will make U.S. exports more competitive with foreign products.

Trump is criticizing the Federal Reserve for not keeping interest rates even lower than those of Europe. He he thinks that if interest rates are low, there will be an outflow of capital from this country to buy foreign stocks and bonds that pay a higher interest rate. This financial outflow will lower the dollar’s exchange rate. He believes that this will increase the chance of rebuilding America’s manufacturing exports.

This is the great neoliberal miscalculation. It also is the basis for IMF models.

How low interest rates lower the dollar’s exchange rate, raising import prices

Trump’s guiding idea is that lowering the dollar’s value will lower the cost of labor to employers. That’s what happens when a currency is devalued. Depreciation doesn’t lower costs that have a common worldwide price. There’s a common price for oil in the world, a common price of raw materials, and pretty much a common price for capital and credit. So the main thing that’s devalued when you push a currency down is the price of labor and its working conditions.

Workers are squeezed when a currency’s exchange rate falls, because they have to pay more for goods they import. If the dollar goes down against the Chinese yen or European currency, Chinese imports are going to cost more in dollars. So will European imports. That is the logic behind “beggar my neighbor” devaluations.

How much more foreign imports will cost depends on how far the dollar goes down. But even if it plunges by 50 percent, even if the dollar were to become a junk currency like the Argentinian or other Latin American currencies, that cannot really increase American manufacturing exports, because not much American labor works in factories anymore. Workers drive cabs and work in the service industry or for medical insurance companies. Even if you give American workers in manufacturing companies all their clothing and food for nothing, they still can’t compete with foreign countries, because their housing costs are so high, their medical insurance is so high and their taxes are so high that they’re priced out of world markets. So it won’t help much if the dollar goes down by 1 percent, 10 percent or even 20 percent. If you don’t have factories going and if you don’t have a transportation system, a power supply, and if our public utilities and infrastructure are being run down, there’s nothing that currency manipulation can do to enable America to quickly rebuild its manufacturing export industries.

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American parent companies have already moved their factories abroad. They have given up on America. As long as Trump or his successors refrain from changing that system – as long as he gives tax advantages for companies to move abroad – there’s nothing he can do that will restore industry here. But he’s picked up International Monetary Fund’s junk economics, the neoliberal patter talk that it’s given to Latin America pretending that if a country just lowers its exchange rate more, it will be able to lower its wages and living standards, paying labor less in hard-currency terms until at some point, when its poverty and austerity get deep enough, it will become more competitive.

That hasn’t worked for fifty years in Latin America. It hasn’t worked for other countries either, and it never worked in the United States. The 19th-century American School of Political Economy developed the Economy of High Wages doctrine. (I review this in my book on America’s Protectionist Takeoff: 1815-1914.) They recognized that if you pay labor more, it’s more productive, it can afford a better education and it works better. That’s why high-wage labor can undersell low-wage “pauper” labor. Trump is therefore a century behind the times in picking up the IMF austerity idea that you can just devalue the currency and reduce labor’s wages and living standards in international terms to make the economy more profitable and somehow “work your way out of debt.”

What currency depreciation does do when the dollar is devalued is to enable Wall Street firms to borrow 1% and to buy European currencies and bonds yielding 3 percent or 4 percent or 5 percent, or stocks yielding even more. The guiding idea is to do what Japan did in 1990: have very low interest rates to increase what’s called the carry trade. The carry trade is borrowing at a low interest rate and buying bonds yielding a higher rate, making an arbitrage gain on the interest-rate differential. So Trump is creating an arbitrage opportunity for Wall Street investors. He pretends that this is pro-labor and can rebuild manufacturing. But it only helps hollow out the U.S. economy, sending money to other countries to build them up instead of investing in ourselves. So the effect of what Trump’s doing is the opposite of what he says he’s doing.

Bonnie Faulkner: Exactly. What is the point of driving investment into foreign countries, away from the United States?

Michael Hudson: If you’re an investor, you can make more money by dismantling the U.S. economy. You can borrow at 1 percent and buy a bond or a stock that yields 3 or 4 percent. That’s called arbitrage. It’s a financial free lunch. The effect of this free lunch, as you say, is to build up foreign economies or at least their financial markets while undercutting your own. Finance is cosmopolitan, not patriotic. It doesn’t really care where it makes money. Finance goes wherever the rate of return is highest. That’s the dynamic that has been de-industrializing the United States over the past forty years.

Bonnie Faulkner: From what you’re saying, it sounds like Donald Trump’s policies are leading to doing to the United States what the IMF and World Bank have traditionally done to foreign economies.

Michael Hudson: That’s what happens when you devalue. The financial sector will see that interest rates are going down, so the dollar’s exchange rate also will decline. Investors will move their money (or will borrow) into euros, gold or Japanese yen or Swiss francs whose exchange rate is expected to rise. So you’re offering a financial arbitrage and capital gain for investors who speculate in foreign currencies. You’re also hollowing out the economy here, and squeezing real wage levels and living standards.

Why devaluation will not help re-industrialize the U.S. economy

Bonnie Faulkner: Do you think that Donald Trump understands what he’s doing?

Michael Hudson: I don’t think he understands. I think he has an oversimplified view of how the world works. He thinks that if we devalue the dollar, we can undersell China and Europe. But you can only undersell them if you have car-making factories available. If you don’t have a factory, you’re not going to be able to undersell foreign carmakers no matter how low the dollar goes. And if you don’t have a set of computer manufacturing factories and local suppliers already in the United States, you’re not going to have production capacity able to undersell China. Most of all, you need public infrastructure and affordable housing, education and health care. So Trump’s view is a fantasy. It’s like saying, “If we had some ham, we could have some ham and eggs, if we had some eggs.” It leaves the causes of America’s de-industrialization out of account.

If we had unemployed car makers, computer makers and other manufacturers here – factories that were idle in an economy that was pretty competitive – then devaluation might make some sense. But Americans are not just a bit uncompetitive. The housing costs in America are so high, the medical and health-insurance costs, the taxes and wage withholding on labor and prices for basic infrastructure that there’s no way that we can compete with foreign countries simply by currency manipulation.

Since 1980 the U.S. economy has been made very high-cost. Yet there also has been a huge squeeze on labor, by raising the prices it has to pay for basic needs. Even if wages go up, people can’t afford to live as well as they did thirty years ago. A radical restructuring is needed in order to restore a full-employment industrial economy. You need de-privatization, you have to break up monopolies, you need the kind of economy and economic reform that America had under Franklin Roosevelt in the 1930s. I don’t see that happening.

Bonnie Faulkner: Do you think that Donald Trump was installed as U.S. president to oversee the bankruptcy of the United States and dismantling the U.S. Empire?

Michael Hudson: Nobody installed him; he installed himself. I don’t think most people expected him to win. If you look at the odds that professional bookies and oddsmakers gave from the time he announced his candidacy, most people thought that sleepy Jeb Bush would get the nomination, and that Bush then would lose to Hillary. So there were indeed attempts to install Hillary or Bush. But nobody tried to install Trump. He made an end run around them, by straight talk, humor and celebrityhood.

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He didn’t have advisors that he would listen to, because he’s always been a one-man show. And he doesn’t really know what he’s doing economically. He knows how to cheat people, victimize suppliers, and how to make money in real estate simply by not paying suppliers, and by borrowing from banks and not paying them. But he has no idea that you can’t run an economy this way. Being a real estate mafioso isn’t the same thing as running a whole economy. Trump has no idea and I don’t think anyone knows how to control him, except maybe Fox News.

Wall Street vs. the “real” economy: Which turns out to be more real?

Bonnie Faulkner: What is going on with the ruling class in the United States? Does anybody in its ranks know how to run an economy?

Michael Hudson: The problem is that running an economy to help the people and raise living standards, and even to lower the cost of living and doing business, means not running it to help Wall Street. If someone knows how to run an economy, the financial sector wants to keep them out of any public office. High finance is short-term, not long-term. It plays the hit-and-run game, not the much harder task of creating a framework for tangible economic growth.

You can do one of two things: You can help labor or you can help Wall Street. If running the economy means helping labor and improving living standards by giving better medical care, this is going to be at the expense of the financial sector and short-term corporate profits. So the last thing you want to do is have somebody run the economy for its own prosperity instead of for Wall Street’s purpose.

At issue is who’s going to do the planning. Will it be elected public officials in the government, or Wall Street? Wall Street’s public relations office is the University of Chicago. It claims that a free market is one where rich Wall Street investors and the financial class run an economy. But if you let people vote and democratically elect governments to regulate, that’s called “interference” in a free market. This is the fight that Trump has against China. He wants to tell it to let the banks run China and have a free market. He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise. In effect, he wants Chinese to be as threatened and insecure as American workers. They should get rid of their public transportation. They should get rid of their subsidies. They should let a lot of their companies go bankrupt so that Americans can buy them. They should have the same kind of free market that has wrecked the US economy.

China doesn’t want that kind of a free market, of course. It does have a market economy. It is actually much like the United States was in its 19th-century industrial takeoff, with strong government subsidy.

U.S. changing monetary strategy, from payments-surplus to deficit status

Bonnie Faulkner: In your seminal work from 1972, Super Imperialism: The Economic Strategy of American Empire, you write: “Whereas US domination of the world economy stemmed from 1920 through 1960 from its creditor position, its control since the 1960s has stemmed from its debtor position. Not only have the tables been turned, but US diplomats have found that their leverage as the world’s major debtor economy is fully as strong as that which formerly had reflected its net creditor position.” This sounds counter-intuitive. Could you break it down? Let’s start with 1920 through 1960. How was the United States able to dominate the world economy from its creditor position?

Michael Hudson: The U.S. creditor position really began after World War I, based on the money it lent to the Allies before it joined the war. When the war ended, U.S. diplomats told England and France to pay us for the arms they had bought early on. But in the past, for centuries, the victors usually forgave all the debts among each other once a war was over. For the first time, America insisted that the Allies pay for the military support it had sold them before joining them.

The European Allies were pretty devastated by the war, and they turned to Germany and insisted on reparations that quickly bankrupted Germany. German bankrupted its economy trying to pay England and France, which simply sent it on to pay the United States. Their balance of payments was in deficit, and their currencies were going down. American investors saw an opportunity to buy up their industry. Gold was the measure of power, the backing for domestic money and credit and hence capital investment.

America was much more productive, not having suffered war damage here. Between the end of World War II and 1950 when the Korean War broke out, America accumulated over 75 percent of the world’s monetary gold. The United States had heavy agricultural exports, growing industrial exports, and enough money to buy up the leading industries of Europe and Latin America and other countries.

But beginning in 1950 with the Korean War, the U.S. balance of payments moved into deficit for the first time. It got even worse when President Eisenhower decided that America had to support French colonialism in Southeast Asia, in French Indochina – Vietnam and Laos. By the time the Vietnam War escalated in the 1960s, the dollar was running large balance-of-payments deficits. Every week on Wall Street we would watch the gold supply go down, losing gold to countries that weren’t at war, like France and Germany. They were cashing in the excess dollars that were being spent by the U.S. military. By the 1960s it became clear that America was on a trajectory to run out of gold within a decade because of this overseas war spending.

It finally did, by August 1971when President Nixon stopped selling bold on the London exchange and the price was allowed to soar far above $35 an ounce. The U.S. balance-of-payments was still running a deep deficit because of the fighting in Southeast Asia and elsewhere, creating a permanent balance-of-payments deficit. The private sector was just in balance during the 1950s and 1960s. The entire deficit was military.

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When America went off gold, people began to wonder what was going to happen. Many predicted an economic doomsday. It was losing its ability to rule the world through gold. But what I realized (and was the first to publish) was that if countries no longer could buy and hold gold in their international reserves, what were they going to hold? There was only one asset that they could hold: U.S. Government securities, that is, Treasury bonds.

A Treasury bond is a loan to the US Treasury. When a foreign central bank buys a bond, it finances the domestic U.S. budget deficit. So the balance of payments deficit ends up financing the domestic budget deficit.

The result is a circular flow of military spending recycled by foreign central banks. After 1971 the United States continued to spend abroad militarily, and in 1974 the OPEC countries quadrupled the price of oil. At that time the United States told Saudi Arabia that it could charge whatever it wanted for its oil, but it had to recycle all its net dollar earnings. The Saudis were not to buy gold. The Saudis were told that it would be an act of war if they didn’t recycle into the American economy the dollars they received for their oil exports. They were encouraged to buy U.S. Treasury bonds but, could also buy other U.S. bonds and stocks to help push up the stock and bond markets here while supporting the dollar.

The United States kept its own gold stock, while wanting the rest of the world to hold its savings in the form of loans to the United States. So the dollar didn’t go down. Other countries that were receiving dollars simply recycled them to buy U.S. financial securities.

What would have happened if they wouldn’t have done this? Let’s say you’re Germany, France or Japan. If you don’t recycle your dollar receipts back to the U.S. economy, your currency is going to go up. Dollar inflows from export sales are being converted into your currency, increasing its exchange rate. But by buying U.S. bonds or stocks, bid the price of dollars back up against your own currency.

So, when the United States runs a balance-of-payments deficit under conditions where other countries keep their foreign reserves in dollars, the effect is for other countries to keep their currencies’ exchange rates stable – mainly by lending to the U.S. government. That gives the United States a free ride. It can encircle the world with military bases, and the dollars that this costs are returned to the United States.

Imagine writing IOUs when you go out to spend at a store or restaurant – but your IOUs are never going to be collected! The store might say, “We have an IOU from Bonnie Faulkner. Let’s keep it as our savings. Instead of putting it in the bank or asking for payment in real money, we’re just going to keep collecting these IOUs from Bonnie Faulkner.” Corporations call such IOUs and trade credit “receivables.” Now, suppose you went on a spending spree and gave the store a billion dollars’ worth of your IOUs. There’s no way that you could pay off this billion dollars. In that case the stores receiving these IOUs would say, “Well, we really don’t want to foreclose on Bonnie, because we know that she can’t pay. We’d lose the value of receivables on the asset side of our balance sheet – all these IOUs that we’ve been collecting.

That’s essentially what foreign countries are saying about their buildup of dollars. The U.S. position is, in effect, that we are not going to repay any foreign country the dollar debt we owe them. As Treasury Secretary John Connolly said, “It’s our dollars, but your problem.” Other countries have to pay us or else we’ll bomb them. The military dimension to this arrangement is the U.S. position that it would be an act of war if other countries don’t keep spending their export earnings on loans or U.S. stocks and bonds.

That’s what makes the United States the “exceptional country.” The value of our currency is based on other countries’ savings. The money they save has to be held in the form of dollars or securities that we’re never going to repay, even if we could.

This is a huge free ride. You’d think that Donald Trump would want to keep it going. But he claims that China is manipulating its currency by recycling its dollars into loans to the U.S. Treasury. What does he mean by that? China is earning a lot of dollars by exporting its goods to the United States. What does it do with these dollars? It tried to do what America did with Europe and South America: It tried to buy American companies. But the United States blocked it from doing this, on specious national security grounds. The government claims that our national security would be threatened if China would buy a chain of filling stations, as it wanted to do in California. The United States thus has a double standard, claiming that it is threatened if China buys any company, but insisting on its right to buy out the commanding heights of foreign economies with its electronic dollar credit.

That leaves China with only one option: It can buy U.S. Treasury bonds, lending its export earnings to the U.S. Treasury.

Trump is now driving other countries out of the dollar orbit

China now realizes that the U.S. Treasury isn’t going to repay. Even if it wanted to recycle its export earnings into Treasury bonds or U.S. stocks and bonds or real estate, Donald Trump now is saying that he doesn’t want China to support the dollar’s exchange rate (and keep its own exchange rate down) by buying U.S. assets. We’re telling China not to do what we’ve told other countries to do for the past forty years: to buy U.S. securities. Trump accuses countries of artificial currency manipulation if they keep their foreign reserves in dollars. So he’s telling them, and specifically China, to get rid of their dollar holdings, not to buy dollars with their export earnings anymore.

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So China is buying gold. Russia also is buying gold and much of the world is now in the process of reverting to the gold-exchange standard (meaning that gold is used to settle international payments imbalances, but is not connected to domestic money creation). Countries realize that there’s a great advantage of the gold-exchange standard: There’s only a limited amount of gold in the world’s central banks. This means that any country that wages war is going to run such a large balance-of-payments deficit that it’s going to lose its gold reserves. So reviving the role of gold may prevent any country, including the United States, from going to war and suffering a military deficit.

The irony is that Trump is breaking up America’s financial free ride – its policy of monetary imperialism – by telling counties to stop recycling their dollar inflows. They’ve got to de-dollarize their economies.

The effect is to make these economies independent of the United States. Trump already has announced that we won’t hire Chinese in our IT sectors or let Chinese study subjects at university that might enable them to rival us. So our economies are going to separate.

In effect, Trump has said that if we can’t win in a trade deal, if we can’t make other countries lose and become more dependent on U.S. suppliers and monopoly pricing, then we’re not going to sign an agreement. This stance is driving not only China but Russia and even Europe and other countries all out of the U.S. orbit. The end result is going to be that the United States is going to be isolated, without being able to manufacture like it used to do. It’s dismantled its manufacturing. So how will it get by?

Some population figures were released a week ago showing the middle of America is emptying out. The population is moving from the Midwestern and mountain states to the East and the West coasts and the Gulf Coast. So Trump’s policies are accelerating the de-industrialization of the United States without doing anything to put new productive powers in place, and not even wanting other countries to invest here. The German car companies see Trump putting tariffs on the imported steel they need to build cars in the United States. It built them here to get around America’s tariff barriers against German and other automobiles. But now Trump is not even letting them import the parts that they need to assemble these cars in the non-unionized plants they’ve built in the South.

What can they do? Perhaps they’ll propose a trade with General Motors and Chrysler. The Europeans will get the factories that American companies own in Europe, and give them their American factories in exchange.

This kind of split is occurring without any attempt to make American labor more competitive by lowering its cost of housing, or the price of its health insurance and medical care, or its transportation costs or the infrastructure costs. So America is being left high and dry as a high-priced economy in a nationalistic world, while running a huge balance-of-payments deficit to support its military spending all over the globe.

Bonnie Faulkner: So it sounds like when the United States went off the gold standard, the dollar basically replaced gold as the main asset in which foreign governments could hold their assets. Now you’re saying that when there was no more gold standard, if foreign economies didn’t buy U.S. Treasuries, the price of their currency would rise and make them uncompetitive.

Michael Hudson: Yes. Imagine if Americans would have to pay more and more dollars to buy German cars. There’s going to be a larger demand for German currency, the euro, whose exchange rate would rise. That was happening throughout the 1960s and 1970s, before the euro. The only way that Germany could keep down the value of its mark was to buy something that cost dollars. It didn’t buy American exports, because America already was making and exporting less and less, except for food – and Germany can only eat so much wheat and soybeans. So the only thing that Germany could buy that was priced in dollars were U.S. Treasury bonds. That kept the German mark from rising even more rapidly, and kept the balance of payments in balance.

Japan had a similar problem. The Japanese tried to buy U.S. real estate, but they didn’t have any idea of what made real estate valuable here. They lost a reported billion dollars on buying Rockefeller Center, not realizing that the building was separate from the land value, and the land was owned by Columbia University. The building itself was running at a deficit. Most of the rental value paid was to the owner of the land’s groundrent. The Japanese had no idea of how American real estate worked.

The euro is only a satellite currency of the U.S. dollar

Some Americans worried that the euro might become a rival to the dollar. After all, Europe is not de-industrializing. It is moving forward and producing better cars, airplanes and other exports. So the United States persuaded foreign politicians to cripple the euro by making it an austerity currency, creating so few government bonds that there’s no euro vehicle large enough for foreign countries to keep their foreign reserves in. The United States can create more and more dollar debt by running a budget deficit. We can follow Keynesian policies by running a deficit to employ more labor. But the eurozone refuses to let countries run a budget deficit of more than 3 percent of its GDP. Now running more than 3 percent of their GDP. That level is very marginal compared to the United States. And if you’re trying not to run any deficit at all – and even if you keep it less than 3% – then you’re imposing austerity on your country, keeping your employment down. You’re stifling your internal market, cutting your throat by being unable to create a real rival to the dollar. That’s why Donald Rumsfeld called Europe a dead zone, and why the only alternatives for a rival currency are the Chinese yuan. They’re moving into a gold-based currency area along with Russia, Iran and other members of the Shanghai Cooperation Organization.

Bonnie Faulkner: The European Union not allowing European countries within the eurozone to not run deficits more than 3 percent was basically cutting their own throat. Why would they do such a thing?

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Michael Hudson: Because the heads of the Central Bank are fighting a class war. They look at themselves as financial generals in the economic fight against labor, to hurt the working class, lower wages and help their political constituency, the wealthy investing class. Europe always has had a more vicious class war than the United States does. It’s never really emerged from its aristocratic post-feudal system. Its central bankers and universities follow the University of Chicago free-market school, saying that the way to get rich is to make your labor poorer, and to create a government where labor doesn’t have a voice. That’s Europe’s economic philosophy, and it’s why Europe has not matched the growth that China and other countries are experiencing.

Bonnie Faulkner: So it sounds like then the United States has been able to dominate the world economy since 1971 from a debtor position.

Michael Hudson: When it was losing gold, from 1950 to 1971, that wasn’t dominating; that was losing America’s gold supply to France, Germany, Japan and other countries. Only when it stopped the gold-exchange standard and left countries with no alternative for their international savings but to buy U.S. Treasury bonds or other securities was it able to pay for its military spending without losing its power.

Since 1971, world diplomacy has essentially been backed by American military power. It’s not a free market. Military power keeps countries in a financial strait jacket in which the United States can run into debt without having to repay it. Other countries that run payments deficits are not allowed to expand their economies, either to rival the United States or even to improve living standards for their labor force. Only countries outside the U.S. orbit – China, and in principle Russia and some other countries in Asia – are able to increase their living standards and capital investment and technology by being free of this globalized financial class war.

Bonnie Faulkner: In Super Imperialism you write that, “Pressures to create a New International Economic Order collapsed by the end of the 1970s.” Are you saying that other countries simply gave up and acquiesced to American monetary imperialism? What happened?

Michael Hudson: I’m told that there was wholesale bribery. Officials in the Reagan administration told me that they just paid off foreign officials to support the U.S. position, not a New International Economic Order. U.S. agencies maneuvered within the party politics of European and Near Eastern countries to promote pro-American officials and sideline those who did not agree to act as U.S. satellites. A lot of money was involved in this meddling.

So the United Stateshas corrupted democratic politics throughout Europe and the Near East, and much of Asia. That has succeeded in sterilizing foreign independence in the United States. Meanwhile, Thatcher’s and Reagan’s neoliberal ideas were promoted instead of the kind of mixed economy that Roosevelt and social democracy had been pressing for fifty years.

Who will plan economies: Financial managers, or democratic governments?

Bonnie Faulkner: If there were pressures to create a New International Economic Order in the 1970s, what was this new order looking to achieve?

Michael Hudson: Other countries wanted to do for their economies what the United States has long done for its own economy: to use their governments’ deficit spending to build up their infrastructure, raise living standards, create housing and promote progressive taxation that would prevent a rentier class, a landlord and financial class from taking over economic management. In the financial field, they wanted governments to create their own money, to promote their own development, just like the United States does. The role of neoliberalism was the opposite: it was to promote the financial and real estate sector and monopolies to take economic management away from government.

So the real question from the 1980s on was about who would be the basic planning center of society. Would it be the financial sector – the banks and bondholders, whose interest is really the One Percent that own most of the banks’ bonds and stocks? Or, is it going to be governments trying to subsidize the economy to help the 99 Percent grow and prosper? That was the social democratic view opposed by Thatcherism and Reaganism.

The international drive to de-dollarize

Bonnie Faulkner: Was this pressure that blocked a New International Economic Order brought on by the United States going off the gold-exchange standard?

Michael Hudson: No. It was a reaction against the U.S. policy of siphoning off the commanding heights of foreign economies. The United States wants to control their raw-materials exports, especially their oil and gas. It wants to control their financial system, so that all of their economic gains will go to foreign investors, mainly U.S. investors. It wants to turn other economies into service economies to the United States, and to make them into a kind of super-NATO military alliance that will oppose any country that does not want to be part of the U.S.-centered unilateral global order.

Bonnie Faulkner: How does today’s monetary imperialism – super imperialism – differ from the imperialism of the past?

Michael Hudson: It’s a higher stage of imperialism. The old imperialism was colonialism. You would come in and use military power to install a client ruling class. But each country would have its own currency. What has made imperialism “super” is that America doesn’t have to colonize another country. It doesn’t have to invade a country or actually go to war with it. All it needs is to have the country invest its savings, its export earnings in loans to the United States Government. This enables the United States to keep its interest rates low and enable American investors to borrow from American banks at a low rate to buy up foreign industry and agriculture that’s yielding 10 percent, 15 percent or more. So American investors realize that despite the balance-of-payments deficit, they can borrow back these dollars at such a low rate from foreign countries – paying only 1 percent to 3 percent on the Treasury bonds they hold – while pumping dollars into foreign economies by buying up their industry and agriculture and infrastructure and public utilities, making large capital gains. The hope is that and soon, we’ll earn our way out of debt by this free ride arrangement.

ORDER IT NOW

Imperialism is getting something for nothing. It is a strategy to obtain other countries’ surplus without playing a productive role, but by creating an extractive rentier system. An imperialist power obliges other countries to pay tribute. Of course, America doesn’t come right out and tell other countries, “You have to pay us tribute,” like Roman emperors told the provinces they governed. U.S. diplomats simply insist that other countries invest their balance-of-payments inflows and official central-bank savings in US dollars, especially U.S. Treasury IOUs. This Treasury-bill standard turns the global monetary and financial system into a tributary system.

That is what pays the costs of U.S. military spending, including its 800 military bases throughout the world, and its foreign legion of Isis, Al Qaeda fighters and “color revolutions” to destabilize countries that don’t adhere to the dollar-centered global economic system.

Bonnie Faulkner: You write: “Today it would be necessary for Europe and Asia to design an artificial, politically created alternative to the dollar as an international store of value. This promises to become the crux of international political tensions for the next generation.” How does the world break out of this double-standard dollar domination?

Michael Hudson: It’s already coming about. And Trump is a great catalyst speeding departing guests. China and Russia are reducing their dollar holdings. They don’t want to hold American Treasury bonds, because if America goes to war with them, it will do to them what it did to Iran. It will just keep all the money, not pay back the investment China has kept in U.S. banks and the Treasury. So they’re getting rid of the dollars that they hold. They’re buying gold, and are moving as quickly as they can to be independent of any reliance on U.S. exports. They are building up their military, so that if the United States tries to threaten them, they can defend themselves. The world is fracturing.

Bonnie Faulkner: What are foreign countries like China and Russia using to buy gold? Are they buying it with dollars?

Michael Hudson: Yes. They earn dollars or euros from what they’re exporting. This money goes into the central bank of China, because Chinese exporters want domestic yuan to pay their own workers and suppliers. So they go to the Bank of China and they exchange their dollars for yuan. The Bank of China, the central bank, then decides what to do with this foreign currency. They may go into the open market and buy gold. Or, they may spend it in foreign countries, on the Belt and Road Initiative to build a railway and steamship infrastructure and port development to help China’s exporters integrate their economy with others and ultimately with Europe, replacing the United States as customer and supplier. They see the United States as a dying economy.

Bonnie Faulkner: Can the Chinese build up their Belt and Road infrastructure projects with dollars?

Michael Hudson: No, they are getting rid of dollars. They already are receiving such a large surplus each year that they only use the dollars to buy gold or some goods, such as Boeing airplanes, but mostly food and raw materials. When China buys iron from Australia, for instance, they sell dollars from their foreign-exchange reserves and buy Australian currency to pay Australians for the iron ore that they import. They use dollars to pay other countries that are still part of the dollar area and still willing to keep adding these dollars to their official monetary reserves instead of holding gold.

Bonnie Faulkner: Well, it is kind of surprising, Michael, that countries haven’t started doing this a lot sooner.

Michael Hudson: There has been political pressure not to withdraw from the dollar-debt system. If countries act independently, they risk being overthrown. It takes a strong government to resist American interference and dirty tricks to put its own country first instead of following the U.S. advisors and agents who pay them to serve the U.S. economy rather than their own, or to resist brainwashing by University of Chicago’s junk economics.

Bonnie Faulkner: How far along is the dollar’s demise as the world’s reserve currency?

Michael Hudson: It’s already slowing. Trump is doing everything he can to accelerate it, by threatening that if foreign countries continue to recycle their export earnings into dollars (raising the dollar’s exchange rate), we’ll accuse them of manipulating their currency. So he would like to end it all by the end of his second term in 2024.

Bonnie Faulkner: What would the United States look like if the dollar is no longer the world’s reserve currency?

Michael Hudson: If it continues to let Wall Street do the economic planning, the economy will look like that of Argentina.

Bonnie Faulkner: And what does Argentina look like?

Michael Hudson: A narrow oligarchy at the top, keeping labor at the bottom, taking away labor’s rights to unionize – an economy whose financial and military sectors have won the class war.

Bonnie Faulkner: China, with its Belt and Road infrastructure project, is now buying gold on the open market, as are a number of other countries. Has the Western banking system penetrated China? And if so, how would you characterize China’s banking system?

Michael Hudson: There’s an attempt by the United States to penetrate China. In the recent trade agreements China did permit U.S. banks to create their own credit. I’m not sure that this is going to really take off, now that Trump is accelerating the trade war. But basically, in America you have private banks extending credit to corporations. In China you have the government banks extending the loans. That saves China from having a financial crisis in the way that the United States does.

About 12 percent of American companies are said to be zombie companies. They’re already insolvent, not able to make a profit after paying their heavy debt service. But banks are still giving them enough credit to stay in business, so they won’t have to go bankrupt and create a crisis. China doesn’t have that problem, because when Chinese industry and factories are not able to pay, the public Bank of China can simply forgive the debt. Its choice is clear: Either it can let companies go bankrupt and be sold at a low price to some buyer, mainly an American; or, it can wipe the bad debts off the books.

ORDER IT NOW

If China had been crazy enough to have student loans and leave its graduates impoverished instead of providing free universities, China’s central bank could simply write off the student loans. No investors would lose, because the banks are owned by the government. Its position is, “If you’re a factory, we don’t want you to have to close down and unemploy your labor. We’ll just write down the debt. And if your employees are having a really hard time, we’ll just write down their debts, so that they can spend their money on goods and services to help expand our internal market.”

America’s banks are owned by the stockholders and bondholders, who would never let Chase Manhattan or Citibank or Wells Fargo just forgive their various categories of loans. That’s why public banking is so much more efficient from an economy-wide level than private banks. It’s why banking should be a public utility, not privatized.

Bonnie Faulkner: Can you explain further how writing down debts is good for the economy?

Michael Hudson: Well, think of the alternative to writing down debts. If you don’t write down America’s student debts, the graduates are going to have to pay so much of the student debt service (now to the government) that they’re not going to have enough money to be able to buy a house, they won’t have enough money to get married, they won’t have enough money to buy goods and services. It means that most people who can buy houses are graduates with trust funds – students whose parents are rich enough that they didn’t have to take out a student loan to pay for their children’s education. These hereditary families are rich enough to buy them their own apartment.

That’s why the American economy is polarizing between people who inherit enough money to be able to have their own housing and budgets free of student loans and other debts, compared to families that are debt strapped and running deeper into debt and without much savings. This financial bifurcation is making us poorer. Yet neoliberal economic theory sees this as a competitive advantage. For them, and for employers, poverty is not a problem to be solved; it is the solution to their own aim of profitability.

Bonnie Faulkner: So is this whole privatization scheme, particularly the privatization of the banking system and privatizing a lot of infrastructure what’s bankrupting the United States?

Michael Hudson: Yes, just as it’s bankrupted England and other countries that followed Thatcherism or the neo-liberal philosophy since about 1980.

Bonnie Faulkner: Michael Hudson, thank you again.

Michael Hudson: It’s always a pleasure to have these discussions.

Bonnie Faulkner: I’ve been speaking with Dr. Michael Hudson. Today’s show has been: De-Dollarizing the American Financial Empire. Dr. Hudson is a financial economist and historian. He is President of the Institute for the Study of Long-Term Economic Trend, a Wall Street Financial Analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972 book, Super Imperialism: The Economic Strategy of American Empire, the subject of today’s broadcast, is posted in PDF format on his website at michael-hudson.com. He is also author of Trade, Development and Foreign Debt, which is the academic sister volume to Super Imperialism. Dr. Hudson acts as an economic advisor to governments worldwide on finance and tax law. Visit his website at michael-hudson.com.

Guns and Butter is produced by Bonnie Faulkner, Yarrow Mahko and Tony Rango. Visit us at gunsandbutter.org to listen to past programs, comment on shows, or join our email list to receive our newsletter that includes recent shows and updates. Email us at [email protected]. Follow us on Twitter at gandbradio.

The audio of this interview with Michael Hudson is available on:

 
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  1. Nehlen says:

    If you don’t have a factory, you’re not going to be able to undersell foreign carmakers no matter how low the dollar goes. And if you don’t have a set of computer manufacturing factories and local suppliers already in the United States, you’re not going to have production capacity able to undersell China.

    Finally. Someone who gets it.

    • Replies: @Bill H
  2. Lucid, precise, clear, salient facts, penetrating analysis of essentials — Michael Hudson, he duh man.

    America, a country ruled — strictly for their own benefit — by unelected, hereditary oligarch financial parasites headquartered on Wall Street. Pimps. “How much for your seester, Meester?”

    • Agree: MEFOBILLS
  3. Michael Hudson: I don’t think he understands. I think he has an oversimplified view of how the world works. He thinks that if we devalue the dollar, we can undersell China and Europe. But you can only undersell them if you have car-making factories available. If you don’t have a factory, you’re not going to be able to undersell foreign carmakers no matter how low the dollar goes. And if you don’t have a set of computer manufacturing factories and local suppliers already in the United States, you’re not going to have production capacity able to undersell China.

    Sorry, but I don’t believe that Trump is that stupid. Considering what he has achieved (and not ignoring his failures) both his supporters & his detractors constantly denigrate & underestimate him.

    • Replies: @Realist
    , @Gyre07
  4. That the best economist and historian in the world is not intervie in the main stream financial media is all you to know about the times we are in.

  5. Miro23 says:

    He (Trump) thinks that if we devalue the dollar, we can undersell China and Europe. But you can only undersell them if you have car-making factories available. If you don’t have a factory, you’re not going to be able to undersell foreign carmakers no matter how low the dollar goes. And if you don’t have a set of computer manufacturing factories and local suppliers already in the United States, you’re not going to have production capacity able to undersell China.

    In other words, US corporations have off-shored every piece of manufacturing they can, to gain extra profits and avoid employment legislation hassles. The problem is that de-industrialization is a one way street, and they’ve also off-shored future innovation, middle class employment and the nation’s skill base.

    However, I suppose that they’re not too worried. They self identify as an international elite, quite separate from the Deplorables of one country or another. And elites live very well in places like Argentina, Brazil and the Philippines.

    • Agree: Ilyana_Rozumova
  6. padre says:

    “If we had some ham, we could have some ham and eggs, if we had some eggs.” is a great comparission, only that in Trumps mind it goes more like: “If we steal some ham, we could have some ham and eggs, if we steal some eggs.”

  7. Realist says:
    @Bardon Kaldian

    Sorry, but I don’t believe that Trump is that stupid. Considering what he has achieved (and not ignoring his failures) both his supporters & his detractors constantly denigrate & underestimate him.

    Elaborate.

    • Replies: @Bardon Kaldian
  8. Escher says:

    Interesting article, but I doubt Dr. Hudson’s premise that Trump is able to single handedly reverse decades of American monetary policy. There are too many stakeholders to allow that to happen, some of whom are likely very close to Trump.

  9. Sean says:

    The best Hudson post yet. Still, I do not think he appreciates the problems America would have coping with China even under the mixed economy he advocates . All other things being equal, the qualities and quantity of the Chinese population means China must inevitably win any kind of competition with America.

    The Korean war was the begining of the rot, but who was America fighting in the the Korean war? Vietnam was another war against China. Two clear military defeats of the US by China, led to Japan becoming an economic power, and destabilized America. Now the loss of productive capacity and financial bifurcation is going to be well nigh impossible to come back from.

    Hudson sees it all as an international class war, but if one uses his analysis but in translates it into rival countries rather than classes, it boils down to a very long term trend taking China over the top of America.

    • Replies: @Wally
    , @Wally
    , @Feryl
  10. @Realist

    Sorry, but this would be too long. By now, you should know most things about obstacles, promises, MSM warfare, culture wars, China, Russia, Israel, border(s), economy, scandals, SCOTUS, EU, North Korea, ….

    • Replies: @Realist
  11. The zionist banking kabal privately owned FED and IRS own America and until these two unconstitutional illegal parasites are abolished , we will remain in slavery to the zionist slave owners on their plantation!

  12. onebornfree says: • Website

    M. Hudson says: “…world diplomacy has essentially been backed by American military power. It’s not a free market.”

    And that’s good, right? After all, you are against free, [ or even freer] markets! Or are you just hopelessly contradicting yourself here?

    After all, your grand “solution” is not free [or even “freer”] markets, it is instead the same old tired, hackneyed “we need more government laws and bigger government” crap that the rest of mainstream economic academia and its willing sycophants tries to shove down our collective throats day in and day out.

    For example you say : “..A radical restructuring is needed in order to restore a full-employment industrial economy. You need de-privatization, you have to break up monopolies, you need the kind of economy and economic reform that America had under Franklin Roosevelt in the 1930s.”

    Translation : ” Despite the fact that Roosevelts top-down enforced policies made everything worse for the average person, I want even more government interference in the economy; bigger government and more laws , modeled on the exact same ideas “.

    In sum you are just [yet] another sad-sack cheerleader for even bigger government, and even less freedom.

    [And you don’t even get into the whole centralized, legalized [ie government protected] monopoly monetary system [ie the Fed] , with its legal permission to fabricate money out of thin air, or into the existence of the same copy cat monetary fiat currency systems in many of the rest of the worlds countries, which indicates complete ignorance of the subject and systemic problems created by government-run and protected fiat monetary systems. ]

    Summary: Despite the obvious, “in our faces” fact that government “solutions” [including Roosevelts] have never worked, Mr Hudson is just [yet] another blind-to -the-truth proponent of even bigger government, ever more government interference in our lives, and of [therefor] even less freedom for the individual.

    No regards, onebornfree

    • Agree: DESERT FOX
    • Replies: @MEFOBILLS
    , @lysias
    , @FB
    , @Sam J.
  13. Bill H says: • Website
    @Nehlen

    Finally. Someone who gets it.

    Yes, until he says, “China doesn’t have that problem, because when Chinese industry and factories are not able to pay, [i.e. become bankrupt] the public Bank of China can simply forgive the debt.”

    • Replies: @PetrOldSack
  14. Bill H says: • Website

    All of the talk about the “free market” seems to revolve about whether it should be controlled by the government or by management. No one ever offers the true definition of a free market, which that it is a market controlled by the consumer.

    • Replies: @onebornfree
  15. checkbe4 says:

    Hudson is another gold bug dud who throws around erroneous “facts”.

    Hudson: “If the dollar goes down against the Chinese yen…”

    (The Chinese “Yen” – what’s that?)

    Hudson: “What currency depreciation does do when the dollar is devalued is to enable Wall Street firms to borrow 1% and to buy European currencies and bonds yielding 3 percent or 4 percent or 5 percent, or stocks yielding even more.”

    (Really? Where are European bond and equity yields right now?)

    Hudson: “So China is buying gold. Russia also is buying gold and much of the world is now in the process of reverting to the gold-exchange standard (meaning that gold is used to settle international payments imbalances, but is not connected to domestic money creation).”

    (Does China pay for Russian LNG with gold? How about India? Folks are trying to avoid using U.S. dollars, but they don’t seem to be using gold as a trade currency.)

    And for Hudson’s trick question: Where are broad nominal and real effective U.S. exchange rates and what has been their course since Trump assumed office?

  16. Gyre07 says:
    @Bardon Kaldian

    It’s pretty obvious that Trump has the attention span of a gnat. And, that his advisors are cowards and sycophants. So what about Trump’s short-term play to devalue the dollar do you find surprising?

    • Replies: @Bardon Kaldian
  17. Realist says:
    @Bardon Kaldian

    You listed no achievements. I voted for him…but vastly overestimated him.

    • Replies: @Wally
  18. weakhand says:

    Oh, the only “surprising” things when considering what Trump could do to try to weaken the buck would be the following:

    1. FX direct interventions are best undertaken jointly (as in with foreign partners in tow) and are really effective if monetary policy is adjusted alongside intervention.

    2. Given that Trump will probably be “going it alone”, does he have the Fed on board sufficiently – not only with rate cuts, but with their balance sheet?

    3. The Secretary of the Treasury can use the ESF – $22bn?? – from which he can sell dollars, but that ain’t much. He can probably access some other funds to sell (or, more correctly, have the the Fed sell for him as his agent).

    4. So, if the Fed is unwilling to change rates and sell some of its U.S. dollar assets voluntarily, can Trump force their hand by declaring some sort of “national security/national emergency” regarding exchange rates?

    In short, if he really does go it alone, he’s gonna have to go the whole nine yards.

    More importantly, if the world doesn’t take kindly to his behaviour and he finds himself with some sort of stampede/crisis which he cannot control, he’ll be lynched.

  19. MEFOBILLS says:
    @onebornfree

    M. Hudson says: “…world diplomacy has essentially been backed by American military power. It’s not a free market.”

    There is no such thing as a free market. Markets are the invention of man, and they operate by law.
    Markets are elastic, inelastic, or mixed.

    And that’s good, right? After all, you are against free, [ or even freer] markets! Or are you just hopelessly contradicting yourself here?

    There is no contradiction. Government in its sector increases productivity. Hudson has discussed Simon Patten’s view about the “fourth mode of production.”

    The real question is where the demarcation line is. Hudson also answers that question: Government belongs in inelastic sectors as a regulator or an owner. Also, the notion of public money or public banks is discussed as being necessary. “Free Market” neo-liberal banking is a slow motion disaster.

    it is instead the same old tired, hackneyed “we need more government laws and bigger government” crap that the rest of mainstream economic academia and its willing sycophants tries to shove down our collective throats day in and day out.

    This is you with your simple minded austrian dialectic: Government bad libertarian economics good. We don’t need more government laws and bigger government, but we do need government that is right sized, and in its role.

    Translation : ” Despite the fact that Roosevelts top-down enforced policies made everything worse for the average person

    Roosevelt was both good and bad. In economic terms, he injected credit using RFC into various sectors. Most importantly was electrifying farms, which boosted farm productivity enormously. Farmers used motors instead of human labor, and their workday extended into the night with lighting. Roosevelt also built out aluminum smelting and improved power generation with hydroelectric works. Then there was improved productivity with farm to market roads, and general infrastructure.

    Hudson could have used other examples, for example National Socialist Germany – which was even more successful than USA under Roosevelt and improving the lot of their people. NSDAP Germany avoided depression entirely, and their industry was world beating. This was done using similar tactics to Roosevelt, but instead Germany had the genius Schacht, while Roosevelt had a bunch of Zionist advisors.

    And you don’t even get into the whole centralized, legalized [ie government protected] monopoly monetary system [ie the Fed] , with its legal permission to fabricate money out of thin air, or into the existence of the same copy cat monetary fiat currency systems in many of the rest of the worlds countries, which indicates complete ignorance of the subject and systemic problems created by government-run and protected fiat monetary systems. ]

    The FED is a money trust, a private cabal of bankers who usurped government. Hudson is constantly advocating for some sort of legal money, usually public banking. He rightly points out that a public bank can jubilee debt instruments, because said debts are housed in the bank. In a private “free market” of the type you advocate for, the debt instruments are dispersed, and thus finance oligarchy arises.

    Personally, I would prefer banks remain private while the money becomes legal, as that keeps government from injecting itself too much as a third party in day to day human relations. But, that is an argument over your head.

    Despite the obvious, “in our faces” fact that government “solutions” [including Roosevelts] have never worked

    They did work, you are fact challenged. Real economic history is not taught, so people are caught up in false narrative.

    If there is a ding on Roosevelt, it is that he was surrounded by Zionists, and that is always bad. Roosevelt also was determined to go to war, causing much destruction. For that, he is a bad guy, but in terms of economic policies, much of what he did was good.

    Roosevelt even spent debt free money sourced as line items in the budget. This money went on to build out north american aviation and synthetic rubber manufacturing. Later, the new industry was sold to american people for one dollar.

    • Agree: bluedog, FB
    • Replies: @Miro23
    , @Zumbuddi
    , @Feryl
    , @Sam J.
  20. lysias says:
    @onebornfree

    Never worked? Isn’t China succeeding spectacularly before our eyes right now?

    • Replies: @DESERT FOX
  21. nothim says:

    “If there is a ding on Roosevelt, it is that he was surrounded by Zionists, and that is always bad.”

    Who surrounds Trump?

    • Replies: @MEFOBILLS
  22. MEFOBILLS says:
    @checkbe4

    Hudson is another gold bug dud who throws around erroneous “facts”.

    The book super imperialism is about the effects of USA going off of gold trading standard.

    GOLD-TRADING-STANDARD.

    That is no gold buggery, but instead was the Bretton Woods post WW2 system. Imbalances in goods flow between nation states was re-mediated with gold flows.

    The movement of gold then signaled for exchange rate adjustment. This system worked reasonably well up until Nixon deficit spent dollars to fund Vietnam war. Returning dollars from Indochina and Europe (mostly France) demanded gold instead of American mainstreet goods.

    Nixon’s position was that he was protecting Europe from communism, and then dared them to buy american goods when he went off of the gold standard.

    Instead, they bought TBills. The Petrodollar/Tbill economy was born at that moment.

    Note: Petrodollar/Tbill economy is also fraudulent, as mercantile countries like China recycle dollars into buying debt rather than buying main-street goods; the end effect is indebting American people and the theft of America’s patrimony.

    On the other side of the fraud equation, is recycled dollars support MIC, and the surrounding of America’s trading partners with military bases.

    Other countries in the world are buying gold, so they can go back to a GOLD-TRADING-STANDARD. Also, according to BIS rules, you can shove gold into your private banking reserve loops and this helps keep your bank solvent – you don’t have to depend on dollars as reserve.

    The future international TRADING-STANDARD will likely be a basket of currencies, with gold and some commodities in said basket.

    (Personally I think Keynes’s bancor is the most advanced theory, but it gets no discussion.)

    (Does China pay for Russian LNG with gold? How about India? Folks are trying to avoid using U.S. dollars, but they don’t seem to be using gold as a trade currency.)

    It is moving in that direction. For example, Yuans for oil are convertible to gold in some exchanges. This then allows oil producing countries of the middle east some confidence they can escape to gold if they hold yuans, and the gold in turn can be converted to dollars.

    You don’t think Russia buying all their domestic gold production is an accident do you? How about China acquiring gold? Every country that is trying to exit the TBill/Petrodollar/ Dollar as Reserve system is acquiring gold.

    • Replies: @MEFOBILLS
  23. @lysias

    China’s success is thanks to US industry and technology investments in China where almost every US company has factories in China to take advantage of China’s slave labor and this was built on the backs of American labor who lost their jobs to these predator US industrials who moved American jobs to China.

    • Agree: Sam J.
  24. Miro23 says:
    @MEFOBILLS

    There is no such thing as a free market. Markets are the invention of man, and they operate by law.

    Some markets are freer than others, and some involve less law, and some more.

    African street markets work fine, and are quite free (anyone can sell there) with little law (a simple exchange of cash for goods). What they can’t do, is make the complicated long term contracts (stretching over years), enforced by law, and with enough guarantees to integrate thousands of highly skilled people in technological projects. The quality of legal protection (enforcement) comes from government.

  25. MEFOBILLS says:
    @nothim

    “If there is a ding on Roosevelt, it is that he was surrounded by Zionists, and that is always bad.”

    Who surrounds Trump?

    LoL… you know the answer.

    It is always a bad thing.

  26. dollarz4u says:

    Clearly, the dollar is strong enough to infuriate both the President and gold bugs.

    It’s never “an accident” when they try to jawbone it lower…

  27. Wally says:
    @Sean

    said:
    “Hudson sees it all as an international class war:

    Of course, Hudson is a Communist right out of the Communist Manifesto playbook who also, true to form, is a Believer in the impossible “holocaust” horseshit.

    • Replies: @MEFOBILLS
  28. MEFOBILLS says:
    @Wally

    Of course, Hudson is a Communist right out of the Communist Manifesto playbook who also, true to form, is a Believer in the impossible “holocaust” horseshit.

    He is not a communist. Hudson advocates for mixed economy and some sort of Sovereign money, usually public banks.

    In terms of communism, Marx’s thesis was that advanced capitalist economies would morph into communism naturally. That it would be an organic process, not one “pushed” and funded by Zionists.

    In terms of Trotyskyism, Hudson was born into a Trotskyite family, and you cannot pick your parents. To our everlasting benefit, his birth and circumstances of life has led him to investigate these ideologies, including unearthing ancient economic history.

    These new narratives overturn most of the false hypnosis that passes for economic thought today.

    Let’s give some credit where credit is due.

    With regards to Jews and Holocaust myth, Hudson doesn’t go there – or he carefully tip toes around. This is the world we live in today. You cannot investigate the Jew and be a prominent thought leader, or our (((friends))) will go after you and destroy you. The nature of Jewish power is such that you had better be very smart to not get ensnared, and Hudson is very smart.

    Jews like Ron Unz are more than brave, they are putting their lives on the line. And besides, Jewish power has spread to shabbos goys, so it no longer is specifically Jewish, but has morphed into Globo Homo.

    To Hudson’s credit, he has implicated Hillel as one of the originators of false teachings.

  29. onebornfree says: • Website
    @Bill H

    Bill H says: “No one ever offers the true definition of a free market, which that it is a market controlled by the consumer.”

    Exactly .

    But no one wants that – can’t have that!

    According to all the control freaks , parasites and sycophants, consumer control [ie the natural sum of millions of freely made, unique individual choices] , is always bad and “evil”, whereas top down, enforced at the point of a gun, “one size fits all” government control is somehow “good”, and works, to boot , because government somehow”knows” what each individual “really” wants 🙂 .

    And so it goes..

    Regard, onebornfree

    • Replies: @renfro
  30. In either case, it’s quite a certain bet that the US economy needs an overhaul and the US citizen needs a lesson in what that means.

    You cannot dump an economy based on 200 years of production and dump it in less than fifty years and pretend there will be no consequence.

    ———————-

    Laughing a gold bug or something comparable to tangible value and proud of it.

  31. “For example, Yuans for oil are convertible to gold in some exchanges…”

    Which ones and how does it work?

    There are energy futures priced in Dollars, Yuan or any thing else you can think of, but this utter crap about a Yuan-priced oil futures contract that is “backed by gold” was all just gold bug nonsense.

    Get the Chinese exchange rulebook and contract specs and show us the proof.

    Otherwise, stop re-hashing gold bug conspiracy hearsay like you have any idea about what is going on.

    • Replies: @MEFOBILLS
  32. onebornfree says: • Website
    @checkbe4

    checkbe4 says: “Hudson is another gold bug ”

    Are you sure about that? He doesn’t sound anything like the standard gold bug to me, so that would surprise me.

    regards, onebornfree

  33. Zumbuddi says:
    @MEFOBILLS

    Was Henry Morgenthau, Jr, Treas Sect to FDR, a contributor to Good FOR or in the camp of bad / Zionists surrounding FDR?

    Morgenthau implemented payroll deductions to finance war; numerous bond sales and schemes for same purpose. Morgenthau and his right hand man, Harry Dexter White created the World Bank and IMF, in essence, Morgenthau created– or at least jump-started implementation of the system of Empire Capitalism that Hudson describes.

    • Replies: @MEFOBILLS
  34. FB says: • Website
    @onebornfree

    Hey… ‘OnebornSTUPID’…

    You first need to realize that you are a completely brainwashed dolt…who is programmed to respond to meaningless buzzwords like ‘free markets’ in a knee jerk reaction…

    China is the proof for all you brainwashed dolts…the average Chinese is already better off than the average American…and it’s only getting better…

    It’s not about bigger or smaller government…but about what the government’s priorities are…whether it is the welfare of ordinary folks…or giving free rein to billionaire parasites to drive us all into the ground…

    You’re the most brainwashed dolt I’ve come across in quite some time…I guess it’s a genetic thing…the inability to think for yourself…

    • Replies: @Alohajim
  35. kiers says:

    Sure enough today, Czech Republic, Hungary, and Poland’s Euro denominated bonds are seeing Humongous inflows of money such that they ALL (euro denominated sovereigns of these shaky countries) are NEGATIVE YIELD (ie the bonds are priced > 100). Money flowing ==> dollar down

  36. fxisfun says:

    How do you know that inflows into Czech/Hungarian/Polish EUR-denominated bonds are coming from U.S. Dollar investors and not existing EUR debt holders???

    To put it in terms you might understand: No New Purchases of EURs by $-holders means ===> no change in the buck versus the EUR

  37. Alohajim says:
    @FB

    Fb : “the average Chinese is already better off than the average American…and it’s only getting better…” No they are not. Not using any metric I can think of.

    “It’s not about bigger or smaller government…but about what the government’s priorities are…whether it is the welfare of ordinary folks…or giving free rein to billionaire parasites to drive us all into the ground…” Indeed. But do you really believe that a government exists on this planet that is NOT run and owned and controlled by wealth/bankers/oligarchs?

    I won’t call you any names but respectfully disagree. You’ve got three points completely backward.

    1. average Chinese citizen better off than the average American
    2. governments actually care about and work for ordinary folks (labor)
    3. the size of government does not matter

    • Replies: @FB
    , @Feryl
  38. Poor “kiers” – his bond maths is poor enough that he truly believes that any bond priced above par must sport a negative yield!

    Here’s what he is stupid enough to state (with confidence!): “NEGATIVE YIELD (ie the bonds are priced > 100)”

    What a thread – Unz contributors should stay away from the nitty gritty of the trading markets and stop embarrassing themselves like the President does…….

  39. @Gyre07

    Well, simply: Trump has waged the war against the entire US/world establishment-and won. And many people still think that: a) he is just a pawn of XYZ (insert your favorite paranoia), b) he simply got lucky.

    And, after he became POTUS even sympathetic talking-heads, who, with just a few exceptions, were all sure he would lose, insisted that he should lead the policy as they thought he should have led. And he booted them, one after another- and won in most crucial matters, with just a few defeats. And those airheads, both left & right, ideologues & Nobel prize winners, still think they know better than him.

    Well, he won just because he didn’t listen to various Coulters, Shapiros, Bannons,…nevermind. And they still think, because he is not articulate in comparison with all of them, they’re smarter, he should listen to their advice…

    On the contrary.

    • Replies: @DESERT FOX
    , @bluedog
  40. FB says: • Website
    @Alohajim

    There are several articles by Godfree Roberts on this website that provide the statistical facts…plus read some of Fred Reed’s recent travel articles on China…you’re living in ignorance and denial…

  41. @Bardon Kaldian

    Trump is a world class puppet of the zionist banking kabal who bailed him out of his many bankruptcies and hold the paper on everything he supposedly owns, and he is a world class charlatan!

    • Agree: renfro
  42. MEFOBILLS says:
    @factzonfutures

    There are energy futures priced in Dollars, Yuan or any thing else you can think of, but this utter crap about a Yuan-priced oil futures contract that is “backed by gold” was all just gold bug nonsense.

    It’s not gold buggery. I already mentioned that.

    Gold is not money… it is metal.

    Money’s true nature is law.

    A gold trading standard is FLOWS EXTERNAL TO AN ECONOMY. Whenever there is imbalance in goods exchange between nations, then gold flows SIGNAL to change the exchange rate.

    Exchange rates are relative to individual nations money, and have nothing to do with gold as money.

    If you want to figure out how the Yuan gold futures and contracts work, then it is on you. The entire reason for having gold backing up contracts is so under some circumstances you can exit into gold… and that is written into CONTRACT LAW. In that case, you would be exiting into gold weights as an asset class, and it would not be money.

    It is not money until the King gives it his legal stamp.

    • Replies: @J. Alfred Powell
  43. Trump wages war against only his own low IQ and disgraceful record.

    This fantastic parade of excuse by himself and his apologists isn’t even capable of jumping off of twitter feeds.

    Dreary.

  44. MEFOBILLS says:
    @Zumbuddi

    Was Henry Morgenthau, Jr, Treas Sect to FDR, a contributor to Good FOR or in the camp of bad / Zionists surrounding FDR?

    Morgenthau was an arch Zionist. What else do you want me to say? He was one of the worst humans to ever live.

    During times of extreme stress when a host is about to die, a parasite will do the right thing, to then save his hide.

    Some of the money tricks Morganthau did was OK, especially low interest loans channeling into infrastructure. But mostly if had never lived, the world would be much better off.

    Can you tell when Trump is listening to his Zionists, or if he is using his own instinct?

  45. @MEFOBILLS

    What makes money money is that a state declares it to be legal tender payable for all debts public and private. Period.

    • Agree: MEFOBILLS
  46. Interest rates are historically low, and they have been kept low in order to try to keep providing cheap money for speculators to buy stocks and bonds to make arbitrage gains.

    The elephant in the room is the “shale boom”. All the fracking is dependent on (near) zero interest rates.

    It did turn U.S. into a net exporter of oil (if you ignore grade differences for a moment) but failed to achieve any geopolitical goals. And now you’re stuck with an industry that’ll blow up if the interest rates rise too much. Good job.

  47. Agent76 says:

    February 1, 2019 A World without Dollars? Are We Approaching the End of America’s Financial Order?

    For Washington, the U.S. dollar is leverage, a financial weapon to dominate the world economy, to impose its foreign policy agendas and to secure a steady flow of natural resources over sovereign countries who use the currency.

    http://silentcrownews.com/wordpress/?p=6149

    May 22, 2019 The Financial CRISIS & The Storm That Follows! – The END Of Freedom with G. Edward Griffin

    While we talk a lot about the inevitable collapse of the US dollar among other fiat currencies throughout the world as well as the bubbles growing unsustainable and showing the signs of popping throughout the world, it’s important as well to talk about what comes after the crisis.

  48. Wally says:
    @MEFOBILLS

    Distinctions without differences.

    – Hudson is all about government control of the economy, try reading what he says. He IS a Communist.

    – Right. “public banks” that that government controls. Like I said.

    – I wasn’t interested in his family, I never knew his family was Communist. Hmm. Thanks for that on.

    – Yawn. Whether Marx embraced Zionism or not is irrelevant to the fact that Zionists embrace Communism. I suggest a good look at phony ‘academia’

    – “New narratives”?
    Recycling Communism is hardly new.

    – Ron Unz is open about his rejection of the fake “holocaust” narrative, Hudson openly embraces it. I suggest you actually read what Hudson writes.

    Hudson is a fraud, he deserves scorn.

    • Replies: @MEFOBILLS
    , @anon
  49. Wally says:
    @Sean

    And notice that comrade Hudson’s mindless attacks on corporations avoid mentioning the fact that practically all retirements are based upon corporate profits.

    [MORE]

    • Replies: @bluedog
  50. Agent76 says:

    Oct 1, 2016 RISE OF CHINA – China’s Yuan / RMB

    Joins Elite Global Reserve Currency Club Currency’s entry into IMF basket a milestone in long march to international acceptance Renminbi joins U.S. dollar, euro, yen, and British pound in SDR basket Change represents important milestone for IMF, SDR, and China Move recognizes and reinforces China’s continuing reform progress.

  51. Realist says:
    @Wally

    Better than Hillary.

    Yes, but faint praise that.

  52. MEFOBILLS says:
    @Wally

    – Hudson is all about government control of the economy, try reading what he says. He IS a Communist.

    A mixed economy has government control over SECTORS. Those sectors are inelastic markets and the commons. This then prevents rent seeking and monopoly forces from taking over.

    When Hudson talks about Marx, it is always in regards to the classical economy that Marx used, especially in the book “capital.” If you are an intelligent person, you can read the enemies literature and extract what is correct.

    Right. “public banks” that that government controls. Like I said.

    The actual history of public banks is much better than private banks. Did I say much? Even the bank of North Dakota, which is public, consistently return gains to the state, while having very low overhead.

    My personal preference is private banks, but having the money supply nationalized. In this way, government is removed from being a third party between our relations. But, anybody who is aware of data, has to agree that private banking has been a disaster, and is the main usury vector funding globo homo.

    – Yawn. Whether Marx embraced Zionism or not is irrelevant to the fact that Zionists embrace Communism. I suggest a good look at phony ‘academia’

    Zionists got on board with Rothschild in the first Zionist Congress in 1897. Finance capital funded communism into existence, especially the take over of Russia. Communism/Finance Capitalism are both closely related, and in turn the are closely related to private banking. The first thing Trotsky did is install a wall street bank. It gets tiresome repeating this basic fact of history.

    Sorry I don’t know where Hudson is shilling for holocaustianity, mostly he tiptoes around it. You will have to inform me of the actual statements.

    Not a fraud… Hudson mostly drills bulls eyes. He is actually dangerous to “finance capital” and oligarchy.

    • Agree: FB
    • Replies: @Feryl
    , @Parfois1
  53. renfro says:
    @onebornfree

    Oh for gawds sake……

    Tell us how ‘government’ is ruining your life and taking away your freedom

    Come on , quit the nitwittery ranting and explain to us exactly how you aren’t free.

    • Troll: bluedog
  54. anon[117] • Disclaimer says:
    @Wally

    Its the economy which Hudson has spent all his time on . Trump has not addressed the economy . Hudson is pointing out the fact that Trump for some unknown reason has started following a path that will make USA lose its last ace- the dollar -from its sleeve. Trump’s accomplishment in non economic areas are subject of Pat Buchanan .

  55. anon[117] • Disclaimer says:
    @Wally

    “Ron Unz is open about his rejection of the fake “holocaust” narrative, Hudson openly embraces it. I suggest you actually read what Hudson writes”

    You need some intervention – may be new medication or new kind of therapy- to move out of this narrow band of mental activity which is engrossed with Zionism /Holocaust . This place has better things to delve into and understand .

  56. anon[117] • Disclaimer says:

    How is the American market going to support the selling spree of other countries in US ? Who will buy the German Italian Chinese or Korean or Indian products ? US will have to manufacture raise or grow its technological agricultural fishery diary products and supplies. It will be subsistence economy . The world will be back to 19 the century for America but rest of the world is not They are not in 19th century waiting for US fishery diary agricultural or forest products

    How
    will dollars rise to the occasions of the new reality of not having excess dollars recycled to the treasury ?

    May be a new equation will develop- Interest rate will go up People will get more returns on dollars , wage will go up and there will be some new buying capacity . In that scenario -America will look like any other country . America can start returning the dollars to the foreign countries and get dollar value down more .

    Meanwhile asset process of big banks and corporation held in dollars will also go down Apple cant use dollars to buy its supplies. Microsoft or Google products will face same . Their value will disappear unless they replace the value with the gold or with the currencies of China India Indonesia Russia or Nigeria .

  57. Feryl says:
    @Sean

    The best Hudson post yet. Still, I do not think he appreciates the problems America would have coping with China even under the mixed economy he advocates . All other things being equal, the qualities and quantity of the Chinese population means China must inevitably win any kind of competition with America.

    But ideological trends dictate how talent is put to use. Since the 1970’s more and more intelligent Americans have entered the fields of law and finance, as opposed to say, engineering. Our “best and brightest”, for the last 40-50 years, have been steering us toward a “post-modern” economy in which little of value is produced, and about 4/5 of the population has lousy pay and few assets (in fact, since the 1990’s wealth gains have been increasingly concentrated in the generations born before 1950, while those born later are progressively more poor; in other words, today’s elders are begging to be dragged to the guillotine by frustrated and cheated younger generations).

    Wisdom and virtue are not the same thing as intelligence, sadly enough, which we all knew all along, anyway; back in the early 90’s, it was blue collar Rust-Belters warning about the dangers of NAFTA, while the upwardly mobile airheads in places like suburban Atlanta were eager to gang-rape American labor.

    • Replies: @Sean
  58. Feryl says:
    @MEFOBILLS

    The actual history of public banks is much better than private banks. Did I say much? Even the bank of North Dakota, which is public, consistently return gains to the state, while having very low overhead.

    My personal preference is private banks, but having the money supply nationalized. In this way, government is removed from being a third party between our relations. But, anybody who is aware of data, has to agree that private banking has been a disaster, and is the main usury vector funding globo homo.

    Private banks behaved better in the period between the beginning of the Great Depression (1929), and the election of Reagan (1980). Why? They feared greater regulation (including out-right take over) by the public sector. Might as well treat customers with respect, and not do too much gambling, so as to not give Uncle Sam and the consumer class reasons to oppose private control. Once Reagan took office, that was the go-ahead for the private sector to start screwing around again, since privatization and de-regulation was trendy.

    As for the Bank of North Dakota, well, the libertarian types never deign to acknowledge the existence of successful public sector institutions except to some extent the military and the police.

  59. Feryl says:
    @Alohajim

    Public sentiment rises when things are getting better (however gradually) and leaders are on the same page about the pressing issues of the day. Americans felt more confident, and got married at younger and younger ages, from about 1900-1960 (The Great Depression was admittedly a set back, but it ended up serving as fuel for elites to get on the same page and make changes that society welcomed, quite a contrast from the ’08 financial crisis becoming a vehicle to further impose punishment on the working class). On the other hand, public sentiment in America has been falling since the 60’s, due to things like forced multi-culturalism, the failure of Vietnam, de-industrialization, and so forth. The average American now understands that elites govern according to the debased greed of today’s wealthy and powerful, whereas as recently as the 1970’s American were generally charitable about elite mistakes, ascribing them to misguidededness and hubris rather than corruption.

  60. Feryl says:
    @MEFOBILLS

    Hudson could have used other examples, for example National Socialist Germany – which was even more successful than USA under Roosevelt and improving the lot of their people. NSDAP Germany avoided depression entirely, and their industry was world beating. This was done using similar tactics to Roosevelt, but instead Germany had the genius Schacht, while Roosevelt had a bunch of Zionist advisors.

    Well, the trend throughout the Western world in the early-mid 20th century was investment in infrastructure and manufacturing capacity, although WW2 obviously crippled much of this stuff in Europe. But this led to tremendous strength of the Labor class, which the elite class began to actively resent in the 1970’s, setting the stage for the post-1980 neo-liberal era of deliberate efforts to utterly destroy the wages and power of the working class*.

    *Both the neo-lib Left and Neo-lib Right entirely were in agreement that multi-cultural ID politics were to be encouraged under the guise of “progress”, though whether they realized it or not such politics inevitably were going to undermine social and working class solidarity, since affluent whites, women, and ethnic minorities were being conditioned to think that only working class white men resented “modern changes” which they thought came at the expense of themselves. In recent Western politics, populist voters from the Labor class, who voted for Trump and Brexit, are being called xenophobic dinosaurs for wanting to restore the economy of the mid-20th century.

    • Replies: @MEFOBILLS
    , @Miro23
  61. “Only when the last tree has died,
the last river been poisoned,
and the last fish been caught, will we realize we cannot eat money.”

    – Cree Indian proverb –

    • Replies: @Anonymous
  62. bluedog says:
    @Wally

    Corporate profits to fuel the 401Ks, and whats going to happen to them when the house of cards come falling down,after all old Bush made it legal for the business sector to steal their employees pensions funds and forced them into the 401K to fuel the market, and take the pension cost off the business sector and put on the back of the working class,now comrade where will those pensions be when 29 re-appears again.!!!

    • Replies: @Wally
  63. MEFOBILLS says:
    @Feryl

    Yes….

    Populism and wanting to return to “mid 20th” century is people looking wistfully backward toward a better time.

    It is based on three insecurities:

    Border insecurity, Economic insecurity, and cultural insecurity.

    Each of these insecurities is a function of globo homo finance capital.

    Border insecurity as finance and tied corporations want low cost labor, to then drive down wages.
    Economic insecurity as capital flies elsewhere in the world, to then take gains on wage arbitrage.
    Cultural insecurity as your culture is wiped out by third world invaders.

    Countries don’t need international capital, Schact proved that with his trading bank scheme. Is it no wonder nationalist Germany was attacked by the usual suspects.

    Invade the world, invite the world strategy is part of globo homo as well. Invade the world to crack open new markets and also get their resources at a reduced price. Invite in people of the world, especially the country you just invaded, to then lower wages.

    It all begins and ends with the money. This idea of private bank hypothecating new credit into existence, and also said banks being networked worldwide is a disaster. Globohomo gets its energy from usury flows. And yes, our (((friends))) are deeply implicated as being foot soldiers for mammon and this international finance capital construct.

  64. bluedog says:
    @Bardon Kaldian

    What ever your on must be a beaut but the trip down will be a real bitch.Lol never read such garbled nonsense in my life Trump hasen’t done a thing in three years except twit and twitter about how great he is, and plunging the country another two or three trillion into debt.!!!!!!

  65. A really good interview. Prof. Hudson is informative as usual. A special mention to MEFOBILLS for carrying the arguments in the thread.

    I’d like to hear Prof. Hudson’s take on Andrew Yang’s Freedom Dividend. In fact, I’d like to hear it debated more widely.

    Yang’s polciy for student loans is 10% of income for 10 years and forgive the rest.

    Yang also proposes giving everybody $100 Democracy Dollars to donate to their own candidate.

    Yang has a program to revive local journalism with government matching funds.

    Yang is looking for ideas on how to repurpose abandoned shopping malls .

    It would be nice to have these discussions before the election gets overheated. It looks like he is moving up in the polls and may make it to the second round of debates.

  66. MEFOBILLS says:
    @MEFOBILLS

    Here is a link showing gold acquisition.

    https://www.zerohedge.com/news/2019-07-12/world-acquires-more-gold-while-china-dumping-treasuries

    It is pretty obvious strategy.

    Gold is going to be part of the settlement system for international trade; the dollar is being downgraded.

    Selling of TBills is to exit the TBill/Petrodollar/Dollar as Reserve system.

    A bancor system exactly mirrors goods exchange between nations, and as such it is superior to gold trading standard. But, that is not the way the world is moving.

  67. Anonymous[375] • Disclaimer says:
    @Paul Vonharnish

    I doubt the Cree came up with that. Sounds like a prim, Paleface Christian shoehorned this phrase into the Cree Elder’s mouth to give it some ‘authenticity’

    • Replies: @Miro23
  68. How many of you guys understand and are prepare for the coming tech evolution that will replace all the work bees?

    I hope you all have enough to retire within 10 years or less. You better learn python code if not.

  69. Sean says:
    @Feryl

    It’s like the modern armed forces in which the support staff far outnumber the combat troops, and the weapons become so prohibitively expensive and slow to replace that no one knows what would happen in a conventional war. Are the US armed forces (furthest down this road) actually less effective than more traditional militaries like Russia’s?

    The US has a powerful economy, a large domestic market and a technological lead. Reforms of roosevelt may be what led to the Golden Age of the fifties, but it could have been WW2 that really did the trick. Racial equality was greatly increased by WW2, and the Cold War commie powers criticism of US segregation resulted in state mandated programs.

    I think we see China starting to become post industrial, which Hudson characterises as a plot by venal US , but China has its own full share of domestic venal elites. Even the the state capitalism of China in making the poor less poor is making the rich richer still. The rising inequality in China comes from China’s economic growth.

    https://www.economist.com/open-future/2018/09/10/can-inequality-only-be-fixed-by-war-revolution-or-plague

    The Economist: If equality can only come about by war, revolution, state-collapse or plague, then is there an argument that we should simply learn to adapt to a new gilded age?

    Walter Scheidel: No, but we need to appreciate that measures that worked well in the past may have done so because they were taken in the unique context of massive violent shocks and threats: the world wars and communism. This requires us to be more creative in dealing with inequality. Above all we must think harder about feasibility. It is not enough for economists to come up with recipes to reduce inequality, we also need to figure out how to implement them in an environment that is politically polarised and economically globalised. Both factors limit our scope for intervention.

  70. Miro23 says:
    @Feryl

    Well, the trend throughout the Western world in the early-mid 20th century was investment in infrastructure and manufacturing capacity, although WW2 obviously crippled much of this stuff in Europe. But this led to tremendous strength of the Labor class, which the elite class began to actively resent in the 1970’s, setting the stage for the post-1980 neo-liberal era of deliberate efforts to utterly destroy the wages and power of the working class*.

    I don’t agree with this Marx style class based analysis. The Elite Class didn’t resent and fight the Labour Class from the 1970’s onwards.

    The evidence is that digitalization and the internet opened up whole new possibilities for globalization and off-shoring production. For the first time it became possible to have world supply chains selling in the West and producing in Asia at 60c an hour. Also avoid all the hassles of US labour (unionization, health and safety regulations etc.).

    The motive was greatly increased profitability – and it was more or less obligatory since all your competitors were doing the same thing.

    However, it did need political backing, which it got through Neoliberalism ( the exact opposite of Nationalism/Socialism). Superficially it looked like a class war of the elite vs. workers, whereas in reality it was just a grab for massive new profits, using a formula that didn’t happen to include US based labour.

    • Replies: @Sean
    , @Parfois1
    , @Feryl
  71. Miro23 says:
    @Anonymous

    “Only when the last tree has died,
the last river been poisoned,
and the last fish been caught, will we realize we cannot eat money.”
    – Cree Indian proverb –

    @Paul Vonharnish
    I doubt the Cree came up with that. Sounds like a prim, Paleface Christian shoehorned this phrase into the Cree Elder’s mouth to give it some ‘authenticity’

    Whoever said it, this is the way it’s going. Check the trend in world forest coverage, particularly in Europe, India and China.

  72. Parfois1 says:
    @MEFOBILLS

    Why waste time trying to educate a hard-core devotee of neoliberalism mixed up with clear symptoms of autistic and atavistic traits. Clear case of admission into a re-education camp to acquire some basic humanity. He can’t stomach and get over the historical fact that Stalin trounced his Hitler idol. Hence the mental trauma.

    • Replies: @anon
    , @MEFOBILLS
  73. @MEFOBILLS

    GREAT POINT:

    And besides, Jewish power has spread to shabbos goys, so it no longer is specifically Jewish, but has morphed into Globo Homo.

    SHABBY.GOYIM=GLOBO.HOMO

  74. @MEFOBILLS

    We need somebody in power who recognizes, understands, and acts upon the insights you express.

    How many others out there can there be who see what you see?

    How can we implement your solutions?

    Obviously there is plenty of historical precedent for expelling “the usual suspects”. but are there already others who know the financial solutions as you do with the confidence to implement them?

    Countries don’t need international capital, Schact proved that with his trading bank scheme. Is it no wonder nationalist Germany was attacked by the usual suspects.

    It all begins and ends with the money. This idea of private bank hypothecating new credit into existence, and also said banks being networked worldwide is a disaster.

    Invade the world, invite the world strategy is part of globo homo as well. Invade the world to crack open new markets and also get their resources at a reduced price. Invite in people of the world, especially the country you just invaded, to then lower wages.

    Globohomo gets its energy from usury flows.

    And yes, our (((friends))) are deeply implicated as being foot soldiers for mammon and this international finance capital construct.

  75. Sean says:
    @Miro23

    As I understand it, Hudson’s main argument is that banks began to loan far more money on a certain income for people to buy houses and this drove up the price of housing and made US workers uncompetitive.

    • Replies: @Feryl
  76. @checkbe4

    This is a transcript of a radio interview and I doubt that Hudson transcribed it himself. Obviously he said Chinese Yuan which was then mis-transcribed as Chinese Yen. I hope this is helpful to you.

  77. duedilly says:

    “…If you want to figure out how the Yuan gold futures and contracts work, then it is on you. The entire reason for having gold backing up contracts is so under some circumstances you can exit into gold…”

    Poor MEFOBILLS, he just can’t stop digging. It’s easy to see why

    FACT: There is one oil futures market in China (Shanghai) and its crude oil futures contract is not backed by gold, but by a 10% margin on all positions maintained at the exchange clearing house (said margin is subject to change at the exchange’s discretion.)

    FACT: The Shanghai oil futures contract is priced and trades in Yuan per barrel – not gold per barrel.

    FACT: Physical deliveries of crude oil to close out futures positions are invoiced and paid in Yuan – not gold (subject to weight, grade and quality adjusments). If you deliver crude oil at one of the 5 exchange-determined delivery points, you will receive Yuan – not gold. What you do with that Yuan is your business.

    CONCLUSION: China’s only crude oil futures contract is not backed by, is not quoted in and is not invoiced in gold (when physical delivery is elected.) So, stop spewing gold bug memes you windbag.

    N.B. As far as the pricing and settlement of bilateral trade between Russia and China, both countries have been encouraging the use of the Yuan and the Ruble – not gold. This effort dates back to 2014 and is ongoing. Here is Putin from his early June 2019 hosting of Xi:

    “Russia and China intend to develop the practice of settlements in national currencies,” Putin told journalists at the news conference following the talks. He added that the states have signed intergovernmental agreements on expanding the use of the yuan and the ruble in bilateral financial operations.

    • Replies: @MEFOBILLS
  78. Svevlad says:

    This is probably why Serbia was bombed – 6 countries can pump up the debt better than one with a spine – and after Tito died the age of foreign meddling into the economy was done. Cue everyone throwing a hissy fit and the rest is history

    Anyways, this isn’t very wise to do – the oligarchs constantly risk a communist revolution. Debt jubilees are a smart thing they’ll realize at that point, but the country is ruined for a long time already then.

  79. Parfois1 says:
    @Miro23

    I don’t agree with this Marx style class based analysis. The Elite Class didn’t resent and fight the Labour Class from the 1970’s onwards.

    Doesn’t matter much what one thinks of or calls social stratification: the fact is that it is as old as organized society is and Marx has nothing to do with social classifications. Even “proletariat” (wage-earners, journeymen) was used by the Romans.

    In my understanding “Elite Class” does not refer to a distinct class, such as Upper Class. It relates to a “ruling elite” independent of its social class. In this case, Thatcher – the driving dragon for Neoliberalism – was a lower middle class grocer’s daughter. The ruling elite of the USSR after the early Bolshevik years was overwhelmingly working class; they even called it honestly “dictatorship of proletariat” because the working class was in power. Would the capitalist class in power anywhere call their regime “capitalist dictatorship”? No. They call it “democracy”.

    Neoliberalism did not arise from new technologies. It’s an old hat in economic parlance and became more influent with Friedman and the Chicago School in the 1950s as a reaction against the post-WWII welfare state.

  80. ohyoohoo says:

    Now for today’s gold bug quiz!

    How many metric tonnes of gold have the Chinese and Russians purchased for official accounts in the months of June and July and how do those compare to the net purchases by all “Non-Commercials” on the Comex over the same period?

    Could one possibly aver that speculators have had a greater effect on the gold rally than the Russians and Chinese?

    (Bonus Question: Why has the U.S. Dollar been strong as many have been calling for it to collapse?)

  81. Feryl says:
    @Sean

    Irresponsible lending practices have been known to occur for eons. It isn’t “globalism” per se that causes banks to gamble with people’s money, and drive living expenses and personal debt levels way up. It is a systematic failure of our “leaders” (in both the public and private sector) to adequately regulate poor behavior by the financial sector which causes this stuff to spiral out of control.

  82. Feryl says:
    @Miro23

    “I don’t agree with this Marx style class based analysis. The Elite Class didn’t resent and fight the Labour Class from the 1970’s onwards.”

    This isn’t just “Marx” ideology though; anyone who reads about economic “growth” and wealth distribution knows that the Western world in particular experiences cycles based on what kind of economy the elite is encouraging, and how much of the burden the elite are willing to bear for the sake of well-distributed financial security. It isn’t “Marxism” to point out that both the public and private sector began to heavily police the financial markets after the Great Depression, since the social costs of massive booms and busts, of too much speculation, was becoming unbearable to the middle and upper class who were already growing uneasy with the state of Labor in the early 20th century (the late 19th century was a monumental assault on the psyche and security of Labor, which elites began to feel embarrassed about by 1900). The Generations born from about 1930-1960 have no personal and immediate knowledge of the growing tension between Capital and Labor that did not begin to be resolved until the 1930’s. Once the post-1930 generations came of age in the 1940’s-1970’s, they gradually became more and more glib about the “problems” caused by giving Labor too much power (e.g. annoying unions, and high taxes on the rich supposedly discouraging “hard work”). This anti-Labor mentality has manifested itself in neo-liberalism* which has been an increasing return to the norms of the Social Darwinist late 19th century, however, the generations born during the New Deal era have handsomely (albeit unevenly) benefited from attacking “socialist” mid-20th century culture, as they’ve continued to make decisions that benefit older and wealthier people but bankrupt younger and poorer people.

    Just like how more and more people from the Missionary and Lost generation flirted with “socialism” in the early 20th century (before Roosevelt et al created a popular “mixed economy”), due to the predations of Capital of that era, it looks as if Millennials and Gen Z will be going down the same route as an attempted corrective to the excesses of today’s Capital class.

    *Reaganism has always been most popular with Silents and Boomers, who catapulted neo-liberal leaders of all generations to the forefront in the 80’s and 90’s. Although the GI Generation and Gen X have both produced rotten leaders during this era, the fact is that Silent and Boomer voters wanted this state of affairs. If they didn’t, they would’ve elected Mondale or Dukakis in the 1980’s (neither candidate was as pro-Capital as Reagan and Bush), and they would’ve voted for not neo-lib Dems in the 1990’s primaries. Remember that the 80’s and 90’s was when it was fashionable to say that the government needed to get out of everything, the rich and business owners were an oppressed class, and we ought run the government more “like a business”. This set of memes was given the biggest push by spoiled Silents and Boomers, who had no clue that they were bringing back Dickensian norms of a de-regulated free for all.

  83. anon[262] • Disclaimer says:
    @Parfois1

    😜👌👌

  84. MEFOBILLS says:
    @duedilly

    So, stop spewing gold bug memes you windbag.

    I’m not a goldbug, quite the opposite. I mentioned that earlier, and you are indicating some sort of inability to listen or think, which makes you a crank. Gold is metal, it is mostly stupid, and I cannot help that most humans still think it is money. But, I also don’t ignore reality and facts on the ground.

    The gold trading standard is not gold buggery, and I indicated that a Bancor system would be preferable. Is a bancor gold?

    You have to be blind or fact challenged to not notice that trading nations are buying gold and are exiting TBills.

    The gold trading standard is more of an accounting trick, where gold flows are only external to an economy. Think of it like this: Goods flow outward in exports, and a similar amount of goods flow inward in import. If there is not a similar amount of goods then there is imbalance, and that is made up by gold. Yes, its stupid – but that is the way the world is moving, to re-mediate imbalance in gold flow. This imbalance then triggers an exchange rate adjustment on national currencies.

    More likely instead it will be a basket of currencies (national money units) along with some commodities, including gold. Gold has also been changed by LAW, into a tier one asset according to new Basel 3 rules. Go ahead and call me a bug for reporting this basic fact as well. This means that when a bank is stress tested, the gold in reserves is treated the same as if it were something easy to sell, like a Tbill.

    Read the tea leaves if you can.

    https://seekingalpha.com/article/4160150-yuan-oil-future-gold

    Agreement from the Chinese government can be assumed to have been a precondition for these talks to have proceeded, even though it is a private sector matter, because it involves gold, gold markets, vaulting on the mainland and foreign regulators. It is anticipated that the vaulting facility will be available in two or three months’ time, well before the first delivery date for the oil contract.iii

    I don’t care enough about gold to look into vaulting facilities, because I’m not as you suggest – a gold bug. Making metal as a proxy for goods is stupid beyond belief, but this is the world we live in.

    If you are in imbalance in some sort of trade, then there is movement of gold about in a vault. Somebody has a pile that gets bigger, and somebody else has a pile that gets smaller. In reality, they will just move some signage around, or adjust ledgers.

    Whether or not somebody is actually taking physical gold or not in some sort of transaction doesn’t mean squat to me. How the contract LAW is written is what matters. All matters regarding money are a function of the law. And if individuals or countries want to add gold into contracts in order to avoid dollars, that is them, and not me being some sort of approval agent.

  85. Wally says:
    @bluedog

    Bush did not allow pensions to be stolen. You’re lying.

    So you admit that corporate profits fuel retirements. That’s what I said, pay attention.

    “The sky is falling”. LOL

    Failed Communists love to talk about their wishful thinking, not reality.

    • Replies: @bluedog
  86. MEFOBILLS says:
    @Parfois1

    He can’t stomach and get over the historical fact that Stalin trounced his Hitler idol. Hence the mental trauma.

    Do you feel better now in your false analysis? Look through any of my comments at UNZ where I am in anguish about Stalin trouncing Hitler.

    I think Hitler was a stupid ass for falling into the trap laid for him. This trap was laid by the “democracies.” The democracies in turn were being maneuvered by finance oligarchs of the the ((type)) well known by now. Putin is much smarter, and is not falling for similar traps laid for him.

    Stalin also got turned by western democracies to to make war against Germany.

    (Remember, the national socialist model expunged the parasites from holding the money power, and finance capitalism could not compete against industrial capitalism.)

    What I do admire about Stalin is that he turned communism on its head by nationalizing it. This is pretty much what happened by the mid to late 40’s. The (((international))) lost out.

    • Replies: @MEFOBILLS
  87. 101ers says:

    Is this high school or, hasn’t someone actually ever traded commodity futures contracts – let alone physical cargoes?

    A futures contract is a contract – actually a standardized forward contract. The specs and terms governing them have all been pre-set/pre-agreed leaving only price to be “discovered” ‘pon the exchange.

    The specs and rules governing China’s crude oil futures contract and its exchange contain no terms for “slipping into gold” or for gold to “back” or guarantee futures contract performance by longs and shorts. If you trade that contract, you’re depending on the exchange to enforce terms and performance – not gold.

    Your P&L is calculated in Yuan. If you want to make or take delivery, that too is settled in Yuan. It has nothing to do with gold.

    If you want to trade gold, don’t trade crude oil denominated in Yuan. Case closed.

    • Replies: @Parfois1
  88. Factorize says:

    Why are political parties not held responsible for the fiscal choices that they make while in office? Why do we give parties a credit card and tell them they can spend as much as they like and when they finally hand over the reins of power to someone else allow them to evade responsibility for their spending? Does anyone give their teenagers credit cards and tell them to spend as much they like?

    Political parties could be assigned a balance sheet. Any deficits, corrected for the business cycle, would be recorded in the ledger and the marginal interest required to pay for their deficits could be charged to their account in perpetuity. Likewise, any surpluses would also be recorded. Fiscal capacity for each party would depend upon the balances present in their individual ledger. If a party were to be especially fiscally reckless, then it would be possible that they would essentially become unelectable.

    Considering the nearly endless list of national scale financial disasters that have occurred even within the last few years it is difficult to understand why this change has not been mandated. People all over the world have been assigned massive financial debts for reckless financial speculations that they had no part in. If the ongoing moral bankruptcies are allowed to continue without strengthening political responsibility for debt accumulation, citizens might simply repudiate these debts. How are debts assumed with such minimal moral legitimacy and democratic safeguards even recognized as anything other than odious debt?

    It is beyond my imagination how this empty game of blatantly irresponsible government finance was ever allowed to occur at a national and an international scale. Global governments have amassed more than $50 trillion in debt, while those responsible for such overspending are in no way held to account.

    It takes no great foresight to see that the global economy is likely approaching a profound technological restructuring. It is not obvious that medical care, education and many other industries will continue to exist as they do now in the not too distant future. If we do not establish solid government financial balance sheets before the disruption, then when the time of Singularity arrives government will be unable to intervene in any meaningful way.

    Many of the posters on this thread appear to have a deep knowledge of the inner workings of the global financial system that goes well beyond what one might read in an economics textbook. I would be greatly interested if someone were to point out any lapses of rationality in my above argumentation. Are we truly already living in the best of all possible worlds, when large scale financial collapses arise with such a steady frequency? Might my idea, while perhaps not ideal, at least be somewhat of an improvement over the current rules governing government debt? This is one of my all-time best ideas; Please Comment!

    • Replies: @DESERT FOX
    , @Parfois1
  89. MEFOBILLS says:
    @MEFOBILLS

    Sorry Parfosi,

    I misread … you were indicating Wally not me. I don’t admire Hitler, as he led his country over the cliff. Hitler got duped.

    There is always hierarchy, and the leaders or “elite” who are in charge matter a lot. The U.S. elite are globo homo and a “ship of fools.”

    Russia is casting about for 130, meaning 130 good leaders to install into governorship roles. They have created special schools to find and educate these new future leaders.

    • Replies: @Parfois1
    , @Parfois1
  90. @Factorize

    There is no real difference between the demonrats and the republicons and all are controlled by the zionist banking kabal that rules America and Europe and virtually all the world via their central banks that control the money supply ie the FED in our case which is a privately owned and illegal and unconstitutional debt creating machine that was foisted on America on December 23, 1913 and their privately owned IRS which was foisted upon America in October 1913 and it has been wars and debt ever since.

    Zionism is a parasite that is destroying America.

    • Replies: @Factorize
  91. Factorize says:
    @DESERT FOX

    Desert Fox, thank you for replying.

    I will be agnostic about potentially obscure interests that might be involved in the global financial system. While this likely will be viewed by many on the thread as naive and perhaps evasive, I think the main focus should be on those nominally accumulating debt in our name and the legal and rational basis under which this is allowed to occur. However we arrived at the point in which elections, which can be won by a single vote and with possibly less than 30% of the registered electorate, are sufficient for a government to place an entire nation into debt bondage is entirely beyond my comprehension.

    For whatever reason until this point I accepted the logic that if a political party won an election, fair and square, then they were entitled to do largely as they pleased. It is only on further reflection and after watching time after time after time widespread financial collapses resulting from such minimal rationality that I have conceived of the notion that greater oversight of government fiscal policy should be pursued. How many global financial disasters is it going to take?

    The idea of requiring each political party to pay their own credit cards and to be constrained by their own spending limits calculated from past fiscal behavior seems so obvious, in retrospect, that the basic concept is hardly even worth debating. Without some grown up discussions about adding more accountability into government debt financing, citizens might reject the absurd idea that debt that was accumulated irresponsibly and immorally is ultimately their responsibility.

    • Replies: @Parfois1
  92. Parfois1 says:
    @MEFOBILLS

    I was about to disabuse you! I understood the misunderstanding straightway. Cheers.

  93. Parfois1 says:
    @101ers

    Yes, you are right. But nothing stops the Chinese government from enacting a law where all existing and future contracts within its jurisdiction expressed in yuan, dollars, or whatever, are convertible to gold at a certain rate.

  94. Parfois1 says:
    @Factorize

    My two-bob worth account. Neoliberalism became the political guiding principle in most capitalist countries in the 1980s (Reagan, Thatcher, etc.), the main thrust of which was wholesale de-regulation of the financial and economic sectors. Until then banks and other financial institutions had specific rules controlling their lending policies (e.g. separation of savings from commercial banks to protect account holders).

    Being freed from government prudential rules, the financial institutions embarked on a free-for-all frenzy of lending beyond their monetary reserves (debts became a value, liquidity). In situations of financial stress (booms and busts cycles, speculative lending) they are unable to meet their obligations and crash.

    The impetus for de-regulation had two main functions: it freed protected capital (savings, pension funds) and released that capital plus debt-created value in order to expand and energize the then sluggish economies. The end result was a concentration of capital in the financial sector to the detriment of the real productive economy (manufacturing); hence the emergence of the billionaires and impoverishment of the working class.

    While the capitalist economies trudge from crisis to crisis, the Chinese command economy keeps expanding and spreading its wealth creation among the people (plus its own billionaire class).

    • Replies: @Factorize
  95. Parfois1 says:
    @Factorize

    The idea of requiring each political party to pay their own credit cards and to be constrained by their own spending limits calculated from past fiscal behavior seems so obvious, in retrospect, that the basic concept is hardly even worth debating.

    That is the main issue for good governance: accountability to the people. The so-called democracies operate as temporary dictatorships – untrammeled use of power with impunity for their wrongs. There are some countries that put some restrictions on the use of political power such as requiring the contending political parties to publish and lodge with a constitutional watchdog their political programme and legislative measures. If the government deviates from that programme the watchdog can strike down the offending measures/laws.

    Other countries strengthen their supervision of elected officials by the rules of recalling, thereby a politician can be removed from office if the voters feel he is not performing his duties or betrayed his electoral promises. The USSR had that safeguard and people used it to good effect.

    But the main problem in “democracies” is the people’s apathy, obviously encouraged by the ruling elite. True democracy involves, among other things, people’s participation. Once again the USSR experience (and China) comes to mind where most people attended regular meetings for all purposes and places: factories, co-operatives, neighbourhoods and local government, etc. to decide on matters of personal, local and national significance. It was not compulsory but a civic duty.

  96. Parfois1 says:
    @MEFOBILLS

    Russia is casting about for 130, meaning 130 good leaders to install into governorship roles. They have created special schools to find and educate these new future leaders.

    Would you care to elaborate on that? Context.

    I am all in favour of an incorruptible propertyless ruling elite subject to good governance and recalling for misdeeds combined with electoral “sortition” where all citizens could be called to perform official functions, from head of state to town mayors, similarly to jury duty, i.e. random selected. Off course, political parties (the root of the rot) would not be allowed.

    Plato, in his “ideal republic” proposed an elite, the Guardians, as philosophers specially trained for the role of governing. Of course he knew the ways of the world and did not think it was a perfect system, merely an approximation to the ideal. Notwithstanding that, he is still accused of being totalitarian – some/most here would say he was a Bolshevik.

    Maybe not totally off the mark. The Chinese put a lot of effort into selecting and training their best for public duties, yet some bad apples manage to get through the screening at lower levels. Stalin (he was such a busybody – during the breaks from killing tens of millions) towards the end of his life was working on something similar – a special academy where the brightest in all areas of governance would be trained for public service, ethics being the paramount qualification. There is strong speculation that his sudden death was brought about by those who opposed that project, plus the “White Gowns” (doctors) conspiracy.

  97. nodreemz says:

    “But nothing stops the Chinese government from enacting a law where all existing and future contracts within its jurisdiction expressed in yuan, dollars, or whatever, are convertible to gold at a certain rate.”

    You mean the Chinese could theoretically adopt a gold standard? Yup, so can the U.S., Russia, Europe, Africa, Asia-ex-China, Canada, South America – any country in existence.

    So too it’s also theoretically possible for the U.S. to close a bunch of foreign military bases, cut its defense spending 50% and stop regime changing around the world.

    p.s. China does not have a gold standard, nor does it allow free convertibility of its own currency (which it manages in bands around a trade-weighted basket, the CFETS RMB Index). This hasn’t stopped non-Chinese gold enthusiasts from issuing confident predictions of one. They would – given China’s stock of outstanding narrow and broad money and their rates of growth.

  98. Sam J. says:
    @onebornfree

    “…your grand “solution” is not free [or even “freer”] markets, it is instead the same old tired, hackneyed “we need more government laws and bigger government” crap…”

    The problem is that if no one else is using free markets but us then eventually, as it has, all manufacturing will be gone. It’s no use complaining about it you have to counter others market behavior. Bad money drives out good. Bad trade drives out good also.

    There are also ways to counter without getting the government to run everything. Japan does a lot of these. And before you complain about Japan remember they have lost massive amounts of working age population, have next to no resources but still don’t have massive amounts of people living in tents and shitting in the streets. For what they have they are doing very well and have a large middle class that while not rich is not destitute.

  99. bluedog says:
    @Wally

    And your lying my friend under the Reagan Bush duo and” the unemployment extension act” was an amendment giving the companies and corporations the right to steal all that they had contributed to the employees pension plans,which they were more than happy to do.So bone up my friend become at least somewhat educated in the world and what goes on within it.And what I said was that corporate profits fuel the 401K’s and of course when the house of cards come falling down so will the 401K’s.!!!!

  100. Sam J. says:
    @MEFOBILLS

    “…National Socialist Germany – which was even more successful than USA under Roosevelt and improving the lot of their people. NSDAP Germany avoided depression entirely, and their industry was world beating. This was done using similar tactics to Roosevelt, but instead Germany had the genius Schacht, while Roosevelt had a bunch of Zionist advisors…”

    The Jews might have helped but they were never going to change the structure that keeps them in power so the US never really had a chance.

    I agree will all you said except banks being private. I see no need to pay the FED interest on money they create from nothing. Now what structure the banks should be…I don’t know. The FED could be public but the various banks I’m not sure. We could probably start with the local banking system the Germans still have that focus on business growth and not speculation.

    I believe the bigger banks in Germany have caught the American (Jew) bug and are speculating just as much or close to all the other banks but the local and regional banks still serve industry.

    • Replies: @MEFOBILLS
    , @MEFOBILLS
  101. MEFOBILLS says:
    @Sam J.

    Nice comment Sam.

    I’m not the enemy of the good in pursuit of perfection.

    I do want you to consider some things though:

    Money’s true nature is law. Ergo, money has to be made lawful

    Law can be made in advance, and hence examined. Morality can be encoded into said law. It is easy to see law upon examination, especially group examination, hence predators cannot hide. Privateers in smoke filled back rooms, hatch their plans… this notion of allowing privateers full reign because profit motive restricts them, does not stand up to review.

    Like a fish in water, humans are driven by money and prices. Money and prices are our water, and we use this feedback to navigate. Modern man is immersed into money and prices, and has made money his god.

    Private banks hypothecate new credit into existence with the motive of greed – to make a profit. The feedback loop for failure is low returns, or bankruptcy punishment for making bad loans. It is easy to see examples of privatizing gains and socializing losses. Remember TARP? Privateers socialized their losses, so it was heads I win tails you lose operation they created. This pattern repeats with fraud throughout the world.

    With regards to Germany, the economist Richard Werner makes the same mistake. He conflates Germany with well functioning private banks e.g. you only need to control where the emission of private credit goes. Maybe he is right, but I don’t think so. If you were an engineer and designing a full feedback loop system, you wouldn’t depend on profit motives and potential losses to be the only controlling variables… the loop equation would be inherently unstable.

    As Hudson has pointed out, a credit driven economy has a sawtooth shape, where bank credit builds up, stimulating the economy, and then goes into rapid depression e.g. the cutting edge of sawtooth. You cannot push on a string. People stop taking out new loans, and those in debt then transfer their real wealth to creditors in exchange for canceling monetary debts. It is a form of usury.

    Germany is a unique example, and germans are a unique people. Why? Centuries of dominican monks created a highly moral and law abiding people, who tend to have high guilt and do the right thing when nobody is looking. HBD aware Unz readers should be familiar with this concept.

    A typical german at 2 am will stand obediently at a do not walk signal, waiting for the signal to change. They will do this in the middle of nowhere, with nobody around. If anybody can make private banks work, it is Germans and hence they are not an example for the world.

    Even China’s private banks have borrowed low interest loans unethically from the big state banks, and then on-sold their new credit for arbitrage. These private banks have then caused property bubbles. If memory serves, Hudson has discussed the mechanism.

  102. MEFOBILLS says:
    @Sam J.

    I see no need to pay the FED interest on money they create from nothing.

    Wright Patman sniffed out the FED’s scam, and forced them to rebate their interest on TBills.

    The FED is an agent for its member banks, but FED does rebate. Most people don’t know this.

    OK? So the public debt held on FED’ ledger really means nothing. The interest on the debt is paid back to treasury, where it is recycled back into money supply by government spending.

    Private Debts are what matters. Repeat the former statement to yourself three times and put it in permanent memory. Private debts are what matters.

    That said, public debts we owe other’s like China, do matter.

    Personally, I would cancel the Chinese debt as it was gained through fraud. The stealing of America’s patrimony more than pays for the debt. Yes, wall street was an agent in the process, where wall street wanted labor arbitrage, to then make its gains.

    We get back full circle to privatization of gains, where wall street green mailed American industry to make wage arbitrage today, then transfer America’s patrimony. 401K’s went up for awhile, making wall street a hero, while main street labor became a zero.

    • Replies: @Sam J.
  103. Remember TARP? Privateers socialized their losses, so it was heads I win tails you lose operation they created.

    Yup, I remember TARP. Looking at the July 1st 2019 TARP summary from Treasury, I see that under the programme, $441.48 bn was disbursed and $442.81 bn received in repayment.

    Then, I went and looked at those derivative LLCs that the Fed was forced to take in from AIG (as well as all sorts of direct lending to that entity). Those were all repaid/wound down with a profit.

    Then, I went and looked at Treasury’s preferred capital injections to Fannie and Freddie were all repaid with healthy dividends/profit sweeps to boot.

    Then, I went and tried to eyeball the total amount of fines etc. etc. that the banks and other financial insitutions paid to the U.S. Government in the way of legal settlements for mortgage violations etc.etc. Many, many billions.

    So yes, the U.S. Government stepped in to backstop the financial system, but it has been more than fully repaid.

    What exactly is your point?

    • Replies: @Sam J.
  104. Sam J. says:
    @MEFOBILLS

    “…The FED is an agent for its member banks, but FED does rebate. Most people don’t know this…”

    It’s my understanding the FED owns over 1/2 US debt. The Japanese just zero their debt out. We could do the same. The rest of it could be printed and bought back. A problem to do so but it could be done and we would survive.

    There’s a guy who ran for President, Scott Smith, he had some damn interesting ideas. Banks under his rules would just get a fee for initiating a loan. He would pay off the debt in 5 years. All his taxes would come from “transactions”. Sort of like sales taxes but on all transactions. They would also be very small but multiplied by the VAST number of transactions it would come to a whopping big number.

    Let’s look at the numbers he quotes.

    Payrolls total $15 trillion.
    Not much for filling a $4 trillion federal spending.

    The base for what he calls payments, (transactions), is 3,600 Trillion. Big difference. So using this big difference he would only take a tax rate of just 1/8 of a percent.

    He has a load of good ideas. He’s also not some nut, He’s the one who INVENTED Mortgage Backed Securities but his actually worked because he used verified income based loans and out of this calculated the failure rate and put up extra security to take account for it. Mortgage Backed Securities were not a bad idea. It was an excellent idea until the Jews got a hold of them and like every damn thing they touch they turned to shit. They turn everything they touch to shit.

    His is is gone but it’s on the internet archive. It’s good reading for people who like to look at stuff like BIG different ideas for banking,. taxes, etc. Everyone else will be bored to death but most are info graph type stuff you can easily breeze through.

    https://web.archive.org/web/20160126102250/http://www.scottsmith2016.com/#scott-smith-home-1

    I want to add something about the US and it’s debt. Now everyone is claiming the sky is falling and it may be but…the only reason that the US is still capturing a lot of dollars for it’s bonds is in a vast amount of cases other countries look so frightening you could make horror movies out of their debts and ability to pay. We still has an assload of money in the US. Yes it’s going down but there’s a LOT of money in this country.

  105. Sam J. says:
    @funwithnumbers

    “…So yes, the U.S. Government stepped in to backstop the financial system, but it has been more than fully repaid…”

    I don’t see it this way at all. The FED lent, we know and was accounted for, $16 trillion in close to zero interest loans to the banks, from Rep. Ron Paul’s forced audit of the FED. $16 trillion. (This is the reason the stock market is roaring. They’re buying up the whole entire economy with our money I bet). Estimates of the total amounts a few years ago from looking at financial data is $29 trillion. I bet it’s more, way more. Where’s MY FUCKING FREE INTEREST LOAN????? At $29 Trillion and 300 million Americans we could have given a zero interest loan for every family of four of $386,666. Housing crisis solved and the economy would have roared with all that cash going into people’s pockets. Instead the Jew banks got all the money to buy hard assets and we got the bill. We would be much better off printing money straight up and just giving it to people. There will be a gasp at this idea but if printing 29 Trillion and giving it to the banks is not bad then why would bankrupting the banks and giving 29 trillion to the public be worse?

    The only reasonable solution is to get rid of the Jews. It would cause financial problems for short while but since we’re the ones actually making stuff in the first place we could always make more money. After taking out the Jews cut, and it’s big, we’d all be rich. Every society that has gotten rid of the Jews has prospered.

    • Replies: @Miggle
  106. Factorize says:
    @Parfois1

    Parfois1, thank you for replying.

    I appreciate you sharing your perception that the financial bubble emerged in the 1980s. Yet, my thinking was that the problem largely emerged at the dawn of the new economy era somewhere starting in 2000. What I perceive happened starting around that time was the emergence of an entirely new manifestation of economic reality that can be described largely as a non-money economy.

    Before this new economy, if you wanted something of value, then you had to punch the clock at the factory and earn the money that then bought typically some physical gadget. What has happened in the new economy is the items that I value are free or nearly free. It is truly astonishing! Money has almost become superfluous. For me almost all marginal value is created in this non-money economy. When there is no marginal cost involved, it is very easy to simply give everything away. With the open science/open data movement there is a rational argument being advanced that data belongs to the people because they are the ones who paid for the research and thus are its rightful owners.

    I have mentioned this idea to economists and they have not disagreed with the basic premise. Of course, the underlying truth is that economic value is only entered into the economic ledgers when money changes hands. If value is created and exchanged in the new economy that does not involve money, then somehow it does not exist. However, it is the dark matter of the economic universe. I am so much richer that I have all this “value” then before the megawave of technology hit before 2000. Yet, somehow or other I am supposed to bow and scrap to my feudal overlords who until very recently lived in the same old economy squalor as everyone else. How can the social hierarchy be so blind to such reality?

    Your comment also raises the difficult question of how one could assign responsibility for the larger question of maintaining financial controls in the economy. As it is not merely a matter of controlling spending, but also about maintaining proper regulatory oversight. I think it would be best to pluck the low hanging first (i.e., assigning responsibility for spending), though I could also envision a scenario in which parties that changed regulatory rules in finance could also be made to “own” the results especially if things were to turn out unpleasantly.

    My top line comment, though, stands. How did we ever allow governments to have so such minimal long term responsibility for their fiscal policies? Winning an election in a modern democracy can be achieved with only a 50 + 1 vote. If several parties are competing and there is a particular lack of interest in the electorate, then the actual percentage of the total voting pool might be especially minimal. The moral legitimacy of governments assuming trillions of dollars of debt on behalf of others who they have such tangential connections to clearly needs to be clarified. It is especially troubling when the parallel situation of handing off credit cards to one’s own family almost always occurs within the context of some understanding of assuming adult like responsibility. When governments are in the same circumstance, they usually have no similar restrictions placed on their behavior. Arguing in favor of the continuance of such behavior would seem untenable. It is criminal fraud.

    We need to recognize that society is drifting apart and that often people do not feel spending 5 minutes of their time in a voting booth every 4 to 5 years is a worthwhile investment.

    The social fabric is also unwinding. With strong organizations within the community, those in public office used to be highly recognizable to the people they served. Increasingly we are seeing politicians that have no obvious deep base or constituency to whom they are accountable to; the emergence of media politicians is almost an inevitable progression.

  107. Feddata says:

    “It’s my understanding the FED owns over 1/2 US debt….”

    “The FED lent, we know and was accounted for, $16 trillion in close to zero interest loans to the banks, from Rep. Ron Paul’s forced audit of the FED….”

    1. As of the close of business July 10th 2019, the Federal Reserve declared that it owned $2.095 trillion of U.S. Treasury debt. Just go look for yourself at their weekly H.4.1 balance sheet release. As of July 10th 2019, the Treasury website shows $16.220 trillion of debt held by the public and $5.803 trillion of debt held by the Social Security and other government accounts/trust funds. From these totals must be subtracted some $1.5 trillion of “financial assets” – which are loans that the government has funded and made directly.

    So clearly, your “understanding” is waaaaaaaay off – the Fed owns 10% of U.S. debt.

    2. The Fed is and has been audited for some time – as is required by law (The Federal Reserve Act). Their annual reports are available online and their independent auditor is KPMG and data is broken down both by 12 member banks and then consolidated. Obviously, their unaudited balance sheet is released evey week on Thursday (4:30 p.m. methinks). There was no forced or emergency financial audit.

    The total Fed balance sheet never exceeded $4.5-$4.6 trillion-ish so, by definition, it could never have had $16 trillion of loans outstanding at any one point. That $16 trillion is simply a number which some one has pulled from their rear end.

    Sam, you need to start going to the data instead of taking what x/y/z “says”. If your tax dollars produce the data, why not refer to them instead of hearsay?

    • Replies: @Sam J.
  108. Sam J. says:
    @Feddata

    I got these numbers from several years ago. So they’re wrong now. Don’t the banks hold bonds for the FED which they are paid a small interest for????

    https://www.federalreserve.gov/faqs/why-is-the-federal-reserve-paying-banks-interest.htm

    I wonder if the bonds held by the banks would raise the amount that for all practical purposes is held by the FED???

  109. Feddata, wow! Leave while you can.

    What is the source of all this crap about the Federal Reserve on the internet? It’s easy to see where it ends up – on comment chains like this one, expressed with the utter confidence of repetition rather than examination.

    How can any one mistake the Fed’s paying IOER with some sort of fee for banks “holding bonds for the Fed”? The banks do no such thing.

    Why does the Fed buy Treasury bonds (and implicitly federal-guaranteed mortgage securities & debentures) for its own balance sheet in the first place? Easy – to create base money. Commercial banks buying treasuries for their own account can’t do that (only the Fed can create base money.)

    So, when some moron says (as they have in this comment chain), “the Fed creates money from nothing”, just tell them “No, that’s BS. The Fed creates base money by purchasing existing government debt with new base money which stays in existence until either the securities mature or the Fed sells them back into the open market. The Federal Reserve asset which backs its base money (aka bank reserve) liability is a United States Treasury bond – like it or not.”

    This inability to grasp basic monetary policy mechanics is simply frightening – especially when it is accompanied by pages and pages of pseudo philosopical economic conspiracy psycho-babble…….

    • Replies: @MEFOBILLS
  110. Miggle says:

    A radical restructuring is needed in order to restore a full-employment industrial economy. You need de-privatization, you have to break up monopolies, you need the kind of economy and economic reform that America had under Franklin Roosevelt in the 1930s. I don’t see that happening.

    De-privatization, yes, crucial. But also de-mergers. It’s corporate mergers, giant corporations that swallow up all new entrepreneurial corporations, and giant corporations that swallow up other giant corporations, that is close to the heart of the problem. Simply legislate to override the “precedent” that a corporation is a person. As a corporation is not a person it does not have the right to personal ownership of stocks in itself and others. Easy! But I don’t see that happening.

  111. Miggle says:
    @Sam J.

    Every society that has gotten rid of the Jews has prospered.

    Can you be more specific? Please name two or three countries in which getting rid of the Jews improved the economy.

    • Replies: @MEFOBILLS
  112. MEFOBILLS says:
    @homeworker

    So, when some moron says (as they have in this comment chain), “the Fed creates money from nothing”, just tell them “No, that’s BS.

    That’s true, but be nice. People are moronic because the money system is kept opaque on purpose. Even economists don’t understand modern money mechanics.

    The FED expands its balance sheet thusly:

    New dollar credit is emitted as a liability.
    New TBill is acquired as an asset.

    Private Bank:
    Loses TBill as an asset, and gains FED cash as an asset. Private bank net position does not change.

    Or open market operations:
    Primary dealers make ready a tbill/bond purchase.
    Primary dealers acquire the TBill/bonds with their cash as FED agents.
    Primary dealers are paid back, and FED ledger expands with TBills.

    (Anybody who has observed Open Market Operations with their own eyes, please comment here as to how TBTF primary dealers get their forward cash to buy the bonds. It is either loans to themselves or it is some sort of mechanism from the FED that is opaque to me. I strongly suspect they make loans to themselves.)

  113. MEFOBILLS says:
    @Miggle

    Can you be more specific? Please name two or three countries in which getting rid of the Jews improved the economy.
    __________________

    All 186 countries they have been kicked out of.

    Let’s use England as an example.

    Jews were putting house next to house with usury mechanisms. During debt depression, the mechanism is to swap land and real assets to erase monetary debts. The “creditor jew” who holds the debt instrument then gains land and real property, although he did nothing to earn it.

    English people started burning Jewish homes, because that is where the debt instruments were housed. It was a form of debt relief.

    The descendants of Norman Kings (who brought Jews with them) were forced to sign the Magna Carta.

    The original magna carta has language about debts owed Jews.

    When the Jews were kicked out of England, the floating money supply of gold and silver collapsed, and English government then ramped up it talley stick system

    Under the 500 year reign of talley sticks, and without Jews, England did very well.

    The biggest Jewish problem is that Jews are foot soldiers for mammon. The other problem is that greedy monarchs invited them in to then run the usury game against their own population, which Christianity has injunctions against.

    Hillel weaponized usury as Jewish method. Sevi in 1666 weaponized Kol-Niedre and deception as method.

    See the book by Hoffman.
    https://www.goodreads.com/book/show/17672857-usury-in-christendom

  114. dealers says:

    Primary Dealers are neither the Treasury nor the Fed’s “agents” – they are counter-parties who purchase and sell securities for their own account.

    When Primary Dealers purchase new bonds at auction (i.e.in the primary market – hence their name) from the Treasury, the Fed acts as the Treasury’s auction agent. Funds flow from bank reserves to the Treasury’s account at the Fed, but the Fed balance sheet remains unchanged.

    When the Fed conducts Open Market Operations (i.e. in the secondary markets) with Primary Dealers, this will affect the Fed’s assets and its bank reserve liabilities – depending on what it does.

    No, Primary Dealers cannot “lend to themselves”, but rather, must finance the inventories on their balance sheet. Their capital and long-term funding aside, most of their financing activity occurs via short-term, collateralized loans via the repo market (with money market funds being the primary providers.)

    Methinks you haven’t really watched this stuff flow through the Fed’s balance sheet as you aver – otherwise, you wouldn’t require correction and explanation.

    • Replies: @MEFOBILLS
  115. MEFOBILLS says:
    @dealers

    Funds flow from bank reserves to the Treasury’s account at the Fed, but the Fed balance sheet remains unchanged.

    Thanks. That makes sense and is in alignment with double entry mechanics. Dollars leave reserve loops of Primary dealers and are swapped for new TBills. It is dollar as asset to new TBill asset swap, and dealer balance sheet does not expand. It does not expand, but only changes composition.

    When the Fed conducts Open Market Operations (i.e. in the secondary markets) with Primary Dealers, this will affect the Fed’s assets and its bank reserve liabilities – depending on what it does.

    Do you know the transmission path for this? I mentioned that I did not know it. How do the balance sheets work in this instance. The FED must be operating through the reserve loops with the primary dealers if indeed the FED’s reserve liabilities are impacted. The secondary market is part of the general money supply, so there is transmission from bank reserves.

    No, Primary Dealers cannot “lend to themselves”, but rather, must finance the inventories on their balance sheet. Their capital and long-term funding aside, most of their financing activity occurs via short-term, collateralized loans via the repo market (with money market funds being the primary providers.)

    That also makes sense, as it is well known that banks use repos and reverse repos as needed, and they can collateralize the loan at a price. Thanks.

    Methinks you haven’t really watched this stuff flow through the Fed’s balance sheet as you aver – otherwise, you wouldn’t require correction and explanation.

    I never avered that, I mentioned I didn’t know the transmission path, especially for Open Market Operations.

    Thanks for taking out the time to answer, it was informative. Double entry ledgers have their own logic, so it is easy to infer, and few people alive get to watch the actual funds flow.

    It is still not clear to me how Open Market Operations affect the FEDs reserves, what is the exact transmission path. The FED accounts link to private banks within the system through reserve loops, therefore there has to be some sort of jump out of reserves into the secondary market to purchase TBills.

    Otherwise, TBTF primary dealers are buying and sweeping the new TBills into their reserves some how. so the FED then has access.

    I consider this point non-trivial so if you know that would be great.

  116. Children, let this thread be a lesson to you:

    Learn your central bank balance sheets. They’re painfully simple, but you will be surprised as you get older quite how many folks you will encounter who don’t understand them, but who are free with their opinions about the Fed.

    It’s hard to assess the Fed’s performance when you can’t understand what they do.

    • Replies: @MEFOBILLS
  117. MEFOBILLS says:
    @smallstufffirst

    . They’re painfully simple

    Ledger mechanics are simple.

    But the pea and shell game that finance uses to flow funds between the ledgers is not simple at all.

    Richard Werner had to shut down a bank, and then took out a loan, to then watch the flows through the bank.

    This was the first time in history, and it finally put to bed all of the nay sayers and complainers – he used real data.

    https://www.sciencedirect.com/science/article/pii/S1057521915001477

    The title of this paper (at link above) is a lost century in economics. If the entire economic profession got hoodwinked for a century, then you should not make claims about how painfully simple it is.

    My question to dealers about transmission path is simple, lets see if he can answer it. If I were there in the bank, something like what Werner had to do (see the link) then the question can be answered.

  118. dothework says:

    You don’t need to be “inside” the Fed (let alone shut it down) in order to read their balance sheet. It and many other useful reports are available publicly.

    So too you don’t need to be “inside” the Fed (let alone shut it down) in order to take a pen and mark up that balance sheet’s asset and liability line items to reflect simple securities transactions which the Fed undertakes.

    You implied that you understand “money mechanics” (but most economists don’t you remarked) and given that you keep mentioning double-entry book keeping, you know that a balance sheet has to balance.

    Well then, you have everything necessary to answer your own questions.

    It’s “on you” (as you say) to figure it out. However, if you can’t, it’s not because of any Fed conspiracy, it is because of your inability to grasp the basics.

    (What in Heaven’s name is a “reserve loop”? What the heck is a “transmission mechanism” – you mean balance sheet entries, yes?)

  119. MEFOBILLS says:

    It’s “on you” (as you say) to figure it out. However, if you can’t, it’s not because of any Fed conspiracy, it is because of your inability to grasp the basics.

    (What in Heaven’s name is a “reserve loop”? What the heck is a “transmission mechanism” – you mean balance sheet entries, yes?)

    The very act of creating the FED was a conspiracy of private bankers. It was called the money trust back in the day. The FED was created to backstop the creation of private credit emission from private banks.

    The FED is not the dog, it is the tail of the dog. Banks make reserves at the last moment AFTER THE FACT. Virtually all money in supply is private bank credit hypothecated into existence when you take out a loan, some 97% or more.

    OK? Private banks have to have a reserve ratio relative to the amount of credit they have issued. They find reserves on the overnight market at a price. On the overnight market is where banks buy and sell reserves, and it is also the place where the FED interacts with same banks. You cannot go to the overnight market, it is only for finance actors attached to the reserve system.

    The reserve loops are NOT part of the general money supply. This is why QE did not hyper-inflate the economy. (How many know nothings in the past bleeted about QE causing hyperinflation – which never came?) Money and TBills in reserve do not have velocity, they are stuck, and just sit there. The only movement of money in reserves is on the overnight market, and to settle imbalances between banks. Reserve loops as a term is a way of saying, that money trapped in reserves flows in those channels, and not the general money supply. I am not the only one to use this term.

    A transmission path would be from reserves to the general money supply. Historically those two paths were kept separate, something like your blood flow and spinal column fluid.

    Yes, it is on me to figure it out, because apparently the “Know-it-alls” that think they know how it works, don’t. I actually was asking a high end question to an insider.

  120. The reserve loops are NOT part of the general money supply.

    A transmission path would be from reserves to the general money supply.

    There is no such thing as a “reserve loop” on the balance sheet of the Fed. However, there are reserve deposits of the banking system – a liability of the Fed.

    Bank Reserves at the Fed along with currency in circulation are indeed in the money supply – together, they comprise the “monetary base” (the narrowest measure of the money supply).

  121. MEFOBILLS says:

    There is no such thing as a “reserve loop” on the balance sheet of the Fed. However, there are reserve deposits of the banking system – a liability of the Fed.

    Yes, and the reserve SYSTEM allows banks to settle accounts, and it is done on the overnight market. Imbalances on bank ledgers are settled through this mechanism, which in some vernacular is called reserve loops, indicating flow in that channel.

    There is no such thing as a “reserve loop” on the balance sheet of the Fed.

    That is correct. The balance sheet, also called double entry ledger is connected to other ledgers.

    Bank Reserves at the Fed along with currency in circulation are indeed in the money supply

    The money supply that people use is often called M1 and M2. The reserves within the overall private banking system are not part of the general money supply.

    Here is a paper describing the split circuit:
    https://sovereignmoney.site/split-circuit-reserve-banking

  122. taccounts says:

    Yes, the monetary base/high-powered money/ M0/”narrow money” (as the Bank of England calls it) is the “settlement” base which underlies the financial system and upon which other definitions of money rest and rely. (n.b. No, commercial banks cannot “make reserves at the last moment” – only the Fed can create reserves. However, commercial banks can request the Fed to convert their reserves into physical notes and vice versa.)

    So, M1 takes M0 and while retaining its measure of currency in public circulation, it substitutes the chequable deposits of the banking system for the reserve deposits that the banks themselves have in their accounts at the Fed.

    Obviously the two measures are closely related, but what transactions might make one move and not the other and what transactions might make them both move together?

    Example 1: JPM makes a loan to MEEFOBILLS. It credits MEEFOBILL’s current/chequing account $10,000 and debits it loan asset account by a similar amount. In this case, M1 has increased by $10,000, but M0 bank reserves at the Fed have not changed. JPM’s balance sheet increases by $10,000.

    Example 2: JPM has accepted a $10,000 deposit from MEEFOBILLS and has invested this in $10,000 of treasury bonds. JPM sells $10,000 of bonds to the Fed in an open market operation. In this case, M0 increases $10,000, but M1’s chequable deposits remain unchanged. JPM’s balance sheet remains the same, its assets losing $10,000 of Treasury bonds, but gaining $10,000 of reserves at the Fed. The Fed’s balance sheet would increase by $10,000 – its bond assets and its reserve liabilities to JPM increasing by that amount.

    Example 3: MEEFOBILLS sells $10,000 of his treasury bonds to the Fed via a primary dealer on a day when the Fed is undertaking open market operations. In this case, the Fed’s purchase money for the bonds would make its way via the reserve account of the primary dealer to MEEFOBILL’s own chequing acount. Thus, M0 reserves would increase along with M1 chequing deposits. The Fed’s balance sheet would increase $10,000 and so would JPM’s.

    n.b. “Required Reserves”: No, reserves are not measured against banks’ “credit that they have created”, but rather, simply against deposits a bank holds – regardless of whether a bank has created those deposits via credit (example 1) or merely accepted them (example 2).

    According to the Fed, as of the first week of July, Total deposits of the U.S. banking system were $12.9 trillion. The reserves required to be held against those were only $200 billion or so, while the actual bank reserves held at the Fed were $1.549 trillion (before deducting about $75 billion of bank vault cash from each number).

    So, although the “required” reserve ratio in the U.S. banking system is minimal, the effective reserve ratio is fairly respectable.

    • Replies: @FoSquare
  123. MEFOBILLS says:

    (n.b. No, commercial banks cannot “make reserves at the last moment” – only the Fed can create reserves.

    My bad. They find reserves at the last moment, and if they cannot find it from other banks on the overnight market, they can get it from the FED. Find not make. Sorry.

    JPM makes a loan to MEEFOBILLS. It credits MEEFOBILL’s current/chequing account $10,000 and debits it loan asset account by a similar amount.

    Banks don’t intermediate, they create. As long as you sign a new debt instrument, they can create new bank money as their liability to you. This notion is also discussed in link I posted above.

    See bank of england paper at link below:

    https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654

  124. bookeeper says:

    I thought you said you understood double entry bookkeeping? Debits increase an asset account while credits increase a liability account.

    Thus, if JPM makes a $10,000 loan to MEEFOBILLS, JPM “credits”/increases its deposit liabilities while “debiting”/increasing its loan assets by $10,000. It’s total balance sheet has therefore increased by $10,000.

    That’s not intermediation, it’s deposit creation, but you’ve totally missed it.

    • Replies: @MEFOBILLS
  125. FoSquare says:
    @taccounts

    Very informative, taccounts

    Is the difference between the required reserves and the actual reserves held at the Fed ($1.349 trillion) what’s commonly called “excess reserves”? And are the banks voluntarily holding the excess reserves, holding them at the behest of the Fed, or because the Fed is incentivizing the decision to hold excess reserves by offering interest on them?

    Where can examples of these t-accounts be found?

  126. MEFOBILLS says:
    @bookeeper

    debits it loan asset account by a similar amount.

    When creating bank money, there is no debiting of anything.

    The bank creates new bank money and places it in your account. Your bank money is liability to the banker and an asset to you. Your debt instrument is a liability to you, and an asset to the banker.

    The balance sheet expands equally, liability and asset offsetting.

    Here is a video for those who don’t want to read at the links I’ve already provided:

  127. When creating bank money, there is no debiting of anything.

    Oh yes there is and you’ve just proven it. After all, you have just accepted and repeated what taccounts correctly stated in the first place- that JPM’s balance sheet expands as it creates a deposit via a loan:

    The balance sheet expands equally, liability and asset offsetting.

    As bookeeper pointed out to you:

    The correct double entry term for the increase in JPM’s loan asset is a “DEBIT”

    The correct double entry term for the increase in JPM’s deposit liability is a “CREDIT”

    Result? JPM’s accounting ledger debits and credits balance and thus also does its balance sheet (assets and liabilities) JPM’s balance sheet has just grown due to deposit creation as was correctly and already demonstrated by taccounts and bookeeper.

    The only one who doesn’t get it? MEFOBILLS.

  128. MEFOBILLS says:

    The correct double entry term for the increase in JPM’s loan asset is a “DEBIT”

    Debiting as a term now means to increase something? Glad you are not the language police or pretty soon up will mean down.

    I’m not the one spreading confusion. In English, the term debit means to decrease. To credit means to increase.

    JPM doesn’t debit its loan asset account in order to make new credit for somebody to take out a loan. JPM is not pulling money out of some sort of magical hidden asset account to create bank credit for its customers. That wording implies it is reducing something in order to make something.

    I keep using the words liabilities and assets, because that is a better way to explain things. None of the links I provided, especially BOE supports your assertions about JPM debiting some special loan account. One side of the ledger is liabilities and one side is assets, and they are marked up or down. Use that terminology instead, otherwise you are only spreading confusion.

    In the BOE paper (see link), the word “DEBIT” which describes ledger mechanism for money creation, isn’t even used once. I suggest that JPM give Bank of England a phone call to tell them how wrong they are.

  129. Clearly MEFOBILLS, you don’t know anything about accounting and double entry book keeping – despite specifically mentioning it several times in your previous posts. No surprise. Everything is new to you and you’re constantly playing catch-up.

    A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry.

    A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is positioned to the right in an accounting entry.

    I take it you don’t know how to generate a balance sheet or P&L from a ledger?

    Not to worry, this stuff is only about 500 years old – nothing to do with the language police.

    Charlatan.

  130. The article

    Mr. Hudson leaves some dark corners unexplored intentionally, one or two explicit lies. An interested jab to the Sopranos don, Trump. From the comments it looks like few readers have the necessary degree of oversight to be enticed to throw concise and complete replications into the public domain. Which indeed (the replications) would have been wasted.

    Mr. Hudson is a “softy´´ ever exploring and tuning, palavering with his peers as to how far he can stretch the truth. Ever infusing some new, admittedly more detailed boundaries.

    We did not yet hear M. Hudson say theoretical economics is a religion, not a science. Finance being a grand name for sad book-keeping. Would he dare to define “money´´ and all of it´s derivatives, then gold, bitcoin included, as flawed measures of balance, detail their basic flaws. Combine their strength. Instead of spreading this over a careeer, do it now, and pressing? Is there still a decade of productive life left at his?

    Any real value system is an equivalent measure to reality, what the planet stands for as to assets and liabilities, that is (should be) the true measure of money. That includes and even as the most important factor human populations, the distribution and dynamics of them. Their non-linearity as what they stand for, an asset, and at some point a liability.

    What is more, our big data (also flawed, but never existent in the near past), and interested, opportunistic ethics of academics to serve the long term, should make some explore the opportunity to adjust the puppet show and the obtuse enriching of the few, into a sustainable future.

    Not M. Hudson. To compact the annotations, no better image as brothels of the past. If hoop dresses are down to the floor, the gal who shows an ankle is the most sexy. In the West, as to our knowledge, M. Hudson is.

  131. @Bill H

    Very true,

    Yes, until he says, “China doesn’t have that problem, because when Chinese industry and factories are not able to pay, [i.e. become bankrupt] the public Bank of China can simply forgive the debt.”

    China brings no new conceptual thinking to the table.

    China, after wiping the sewer spatters of the Western elites of their faces, … went one extra step ahead. Sidestepping the Western juggling and appropriation of their assets. By deciding to build an value system within their larger realm (Russia, Iran…) (the pre-war economy of Hitler did so much), then adjusting the measure to planetary boundaries. The Belt, The Road, The Arctic, Africa, military build-up undertook that one step further.

    That distinction is now a doubly (both the US and China) indicator that the game is planetary. The US first (today, not historically), now China et al. The Chinese, on psychological analytical grounds (the psychopathic mindset of the Western elites) know that confinement, and restriction in any sense, is no option. Also that their reaction must be timely. Is is now, or too late. That is the only addendum to your true remark to be made.

    After all, since the world of finance, and it´s vocabulary cannot hide it´s simplistic underpinning and origins. We wonder why it took the rest of the world so long to see that the Western elites intention of global rule, would wipe out their own grip to even local power.

    All this is less important. The sorry issue is that the Chinese bring nothing new to the table, thus the same quest for what is left. As you stated so well.

    Maybe (indeed there are few options) we wind up with Chinese and Ashkenazim interbreeding, the thing, what side will the males be provided from. True and tried locally (UK, US, …).

  132. After all that wind (and it was mighty) PetrOldSack, do you actually have a view on whether, for example, “de-dollarization” is going to make the U.S. dollar go up or down?

    Or, do you (like the Chinese as you lecture us) “bring nothing new to the table”?

    Two lengthy posts that present precisely not one precise idea which can be evaluated.

    And yet you say economics is a “religion”?

    • Replies: @PetrOldSack
  133. @antijargon

    “de-dollarization” is going to make the U.S. dollar go up or down?

    Dear investor,

    As you know, partly thanks to continuous hard work and attention to ever newer meta tweaks, our advice in your particular case, since you desire minimal risk and maximum gains, is to bounce up, and hedge that with repeated dropping, in case the dollar droops of it´s own. This advise was customized to your particular interest case. We will give you a cold call on any change of status.

    As for international mega players, there will probably be a larger choice, partly since scaling in the magic of finance makes errors less impact prone. A first choice would be war. Shifting assets inside the emerging power fields outside the dollar will depend on many circumstances, and speed and volume will be the unknown known. A second circonstance of this would be that it would smear Chinese eateries on Wall Street sidewalks. The safest option is the IB or AC (Ashkenazi, Chinese) strategy.

  134. spareus says:

    Sounds like you don’t have a clue – in keeping with your first two posts.

    Typical puffery – lots of crap filled with lots of crap.

    How do you look in the mirror – good?

  135. Michael, could it be possible that Trump is, like other Presidents, depending for financial policy advice on his Cabinet members and other advisers in order to strategize his policy? You appear to think that either Trump is stupid or he is evil.

    What about this other alternative I suggest, Michael?

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