Today I am pleased to present a double feature on economic policy. Michael Hudson leads off with an explanation of economic policy as a social cost to the working class, and I follow up with an explanation that US economic policy is an act of national suicide.

A couple of definitions: A rentier economy is one in which monopolization or concentration of ownership permits profit without contributing to the welfare of society. Economic rent consists of payments or a rise in value of an asset in excess of its contribution to output or the cost of bringing it into production. An example of economic rent is a taxpayer financed road or transportation system. The rise in land values constitute economic rents, unearned income or wealth unrelated to any activity of the property owner.

The Fed’s Austerity Program to Reduce Wages
Michael Hudson

For Wall Street and neoliberal economic policymakers, the solution to price inflation is to push the economy into recession. Rising unemployment reduces aggregate demand. Thus, inflation is brought under control by forcing workers out of their jobs.

This class-war doctrine is the prime directive of neoliberal economics. The Federal Reserve and IMF are are the operating arms for impoverishing the masses. Whether it is Janet Yellen at the Treasury, the Federal Reserve, or the financial press, discussion of today’s U.S. inflation is framed in a way that avoids blaming the 8.2 percent rise in consumer prices on the Biden Administration’s New Cold War sanctions on Russian oil, gas and agriculture, or on oil companies and other sectors using these sanctions as an excuse to charge monopoly prices as if America has not continued to buy Russian diesel oil, as if fracking has not picked up and as if corn is not being turned into biofuel. There has been no disruption in supply. We are simply dealing with monopoly rent by the oil companies using the anti-Russian sanctions as an excuse that an oil shortage will soon develop for the United States and indeed for the entire world economy.

Covid’s shutdown of the U.S. and foreign economies and foreign trade also is not acknowledged for disrupting supply lines and raising shipping costs and hence import prices. The entire blame for inflation is placed on wage earners, and the response is to make them the victims of the coming austerity, as if their wages are responsible for bidding up oil prices, food prices and other prices resulting from the crisis. The reality is that they are too debt-strapped to be spendthrifts and haven’t enough disposable income after debt service to drive up prices.

The Fed’s Junk Economics of What Bank Credit Is Spent On
The pretense behind the Fed’s recent increase in its discount rate by 0.75 percent on June 15 (to a paltry range of 1.50% to 1.75%) is that raising interest rates will cure inflation by deterring borrowing to spend on the basic needs that make up the Consumer Price Index and its related GDP deflator. But banks do not finance much consumption, except for credit card debt, which in the United States is now less than student loans and automobile loans.

Banks lend almost entirely to buy real estate, stocks and bonds, not for consumer purchases of goods and services. Some 80 percent of bank loans are real estate mortgages, and most of the remainder are loans collateralized by stocks and bonds. The main price effect of less bank credit and higher interest rates is on asset prices – deterring borrowing to buy homes and arbitragers and corporate raiders from buying stocks and bonds. So the main price effect of less bank credit and higher interest rates is to reduce stock and bond prices and demand for home mortgages. Home ownership takes a large hit.

Rolling Back Middle-Class Home Ownership
The most immediate effect of the Federal Reserve’s credit tightening will be to reduce America’s home-ownership rate. This rate has been falling since 2008, from nearly 68 percent to just 61 percent today. The decline got underway with President Obama’s eviction of nearly ten million victims of junk mortgages, mainly black and Hispanic debtors. That was the Democratic Party’s alternative to writing down fraudulent mortgage loans to realistic market prices, and reducing their carrying charges to bring them in line with market rental values. The indebted victims of this massive bank fraud were made to suffer, so that Obama’s Wall Street sponsors could keep their predatory gains and receive massive bailouts. The costs of the fraud fell on the banks’ customers, not on the banks and their stockholders and bondholders.

The effect of discouraging new home buyers by raising interest rates is to lower home ownership – the badge of being middle-class. The Fed’s policy of raising interest rates will increase the interest charges that prospective new home buyers will have to pay, pricing the carrying charge of mortgages out of reach for some families. This follows the preceding run up in housing prices that is characteristic of a financialized economy. In short, the United States is turning into a landlord economy.

Real estate is being transferred from the middle class to private capital companies that turn homes into rental properties. Higher interest rates will not affect housing purchases by private capital companies, because they buy for all cash to receive returns as landlords just as the landed aristocracy did in England. Within another decade the nation’s home ownership rate may fall from 61 to 50 percent (and homeowners’ equity even lower), thus turning the the United States into a rentier economy.

How Much Economic Austerity Can a Debt-burdened Society Stand?
While home ownership rates have fallen, a decade of the Fed’s Quantitative Easing has increased its subsidy to those who hold troubled financial securities from \$800 billion to \$9 trillion – the rise in the Fed’s balance sheet during the QE period–of which the largest amount of rescued bad investments has been packaged home mortgages. This has kept housing prices from falling and becoming more affordable for home buyers. The Fed’s support of asset prices saved large insolvent banks from going under, but allowed smaller banks and the dispossessed homeowner to bear the cost. Sheila Bair of the FDIC singled out Citigroup, along with Countrywide, Bank of America and the other usual suspects as the beneficiaries of their own fraud.. The working population is not considered to be too big to fail. Its political weight is small by comparison to that of Wall Street banks and other FIRE-sector beneficiaries.

Lowering the discount rate to only about 0.1 percent enabled the banking system to make a large gains by making mortgage loans at around 3.50 percent. The banks kept credit-card rates high – 19% — and made money on penalty fees for late payment. America’s wealthiest One Percent, and indeed the top 10 Percent, vastly increased their wealth in stocks, while the bond market had the largest boom in history. But most Americans have not benefitted from this run up in asset prices, because most stocks and bonds are owned by only the wealthiest layer of the population. The Fed is all in favor of asset-price inflation. But For most American families, corporations and government at all levels, the financial boom since 2008 has entailed a growing debt burden. Many families face insolvency as Federal Reserve policy now aims to create unemployment. Now that the Covid moratorium on the evictions of renters behind in their payments is expiring, the ranks of the homeless are rising.

Part One:

Part Two:

Jonathan Brown
Michael, welcome to the podcast.

Michael Hudson
It’s good to be here. I’m looking forward to it.

Jonathan Brown
Michael, I think you have one the most extraordinary upbringings and journeys into economics. And I just wanted to give our listeners just some sense of how you got from being the godson of Leon Trotsky all the way to what I consider to be probably the most important economist in the world today.

Michael Hudson 00:23
There’s no direct causality there that could have been anticipated. I never studied economics in college, because I went to school at the University of Chicago. We know that there were some students at the university who were at that business school. They were such strange people that we never even thought of going near them, because there was something otherworldly about them, something abstract.

My degree was in German language and history of culture, because the head of the History of Culture Department was Matthijs Jolles, a German professor and translator of von Clausewitz, On War. And in at the time, my intention was to become a musician. And I had to learn German in order to read the works of Heinrich Schenker. In music theory, my teachers were German. And for the History of Culture, most of the books that I was reading were, were all in German. And the German professors were also heads of the Comparative Literature Department and other departments. That meant that I could take all the courses cafeteria style at the university that I wanted.

I had to go to work when I graduated. I went to work for a while for direct mail advertising for the American Technical Society, a publisher a block away from the university, and then went to work for Free Press that was headed by Jerry Kaplan, a Trotskyist follower of Max Shachtman. And he wanted to send me to New York to help set up Free Press there.

Soon after I came to New York, Trotsky’s widow died. And Max Shachtman was the executor of her estate. He thought I should go into publishing by myself. And I had already had the copyrights for George Lukacs, the Hungarian Marxist and I thought tried to get funding for a publishing company with Trotsky’s works and other works. I’ve been writing a history of music and art theory. And needless to say, I didn’t get any funding because nobody was at all interested in publishing the works of Trotsky. I even tried to get Dwight Eisenhower the write the introduction to his military papers, wouldn’t work.

I was urged to meet Terence McCarthy, the father of a girlfriend of one of my schoolmates, Gavin MacFadyen. He was the first English-language translator of the first history of economic thought that was written: Karl Marx’s Theories of Surplus Value (Mehrwert), reviewing the value theory of classical economics. Terence said that he would help guide me in economic thinking if I’d get a PhD in economics and go to work on Wall Street to see how the world works. But I had to read all of the bibliography in Marx’s Theories of Surplus Value. So I had to begin buying the books, and ended up working as a sideline with one of the reprinters, Augustus Kelly, who was reprinting many of the classical economists. He was a socialist. There were other dealers in New York: Samuel Ambaras, Sydney Millman. I began buying all of the 19th-century classical economic books that I could, sinse that was the only way that I could get copies.

I took graduate classes in the evening while working at a bank for three years, the Savings Banks Trust Company. It was a commercial bank, but was acting as a central bank for the savings banks that in America finance mortgages. All their savings are reinvested in mortgages. So for three years my job was to track the real estate market, the mortgage market, interest rates, the funding of mortgages, the growth of assets by the savings banks, all growing at compound interest. All the growth in savings in the New York savings banks in the early 1960s was simply the accrual of dividends. So you’d have a step function at dividend time every quarter, going up exponentially. There was hardly any new savings inflow. It’s as if you’ve just left a given amount of savings in 1945, and let the amount rise exponentially. All this increase in savings was recycled into the real estate market.

The New York banks wanted to extend their market so they couldn’t just keep bidding up New York housing prices. They won the right to lend out of state, especially the Florida. So my job was basically seeing that real estate prices were whatever a bank would lend. At that time, banks would not lend you a mortgage if the debt service exceeded 25% of your income. And you had to put up usually 30% of the purchase price as a down payment, but possibly 10%. So housing was affordable. You could buy a really nice house for you know, \$20 or \$30,000. Now, it costs \$400,000 to buy just a one room apartment in a condominium.

I bought a house for \$1 down – it was \$45,000 total. I took out a mortgage from Chase for half the price, and the other half was a purchase-money mortgage. So it was easy. Anybody coul get a house in New York at that time. Housing was readily affordable.

After I finished my PhD courses, I changed jobs. My real interest at the time was international finance and the balance of payments. So I went to work at Chase Manhattan as their balance of payments economist. This was at a time when the balance of payments and even balance-sheet analysis was not taught in schools. It was very specialised. I realised that what I was taught, especially in monetary theory, had nothing at all to do with what I was learning in practice.

In monetary theory, for instance, that was the era of Milton Friedman in the 60s and 70s. He thought that when you create more money, it increases consumer prices. Well, I thought that obviously was not how things worked. When banks create money, they don’t lend for people for spending. About 80% of bank loans in America, as in England, are mortgage loans. They lend against property already in place. They also lend for corporate mergers and acquisitions, and by the 1980s for corporate takeovers.

The effect of this lending is to increase asset prices, not consumer prices. You could say that money creation actually lowers consumer prices, because 80% is to increase housing prices. Banks seek to increase their loan market by lending more and more against every kind of real estate, whether it’s residential or commercial property. They keep increasing the proportion of debt to overall real estate price. So by 2008 you could buy property with no money down at all, and take 100% mortgage, sometimes even 102 or 103% so that you would have enough money to pay the closing fees. The government did not limit the amount of money that a bank could lend against income. The proportion of income devoted to mortgage service that was federally guaranteed increased to 43%. Well, that’s a lot more than 25%. That’s 18% of personal income more in 2008 than in the 1960s – simply to pay mortgage interest in order to get a house. So I realised that this was deflationary. The more money you have to spend on mortgage interest to buy a house as land and real estate is financialized, the less you have left to spend on goods and services. This was one of the big problems that was slowing the economy down.

Is the proxy war in Ukraine turning out to be only a lead-up to something larger, involving world famine and a foreign-exchange crisis for food- and oil-deficit countries?

Many more people are likely to die of famine and economic disruption than on the Ukrainian battlefield. It thus is appropriate to ask whether what appeared to be the Ukraine proxy war is part of a larger strategy to lock in U.S. control over international trade and payments. We are seeing a financially weaponized power grab by the U.S. Dollar Area over the Global South as well as over Western Europe. Without dollar credit from the United States and its IMF subsidiary, how can countries stay afloat? How hard will the U.S. act to block them from de-dollarizing, opting out of the U.S. economic orbit?

U.S. Cold War strategy is not alone in thinking how to benefit from provoking a famine, oil and balance-of-payments crisis. Klaus Schwab’s World Economic Forum worries that the world is overpopulated – at least with the “wrong kind” of people. As Microsoft philanthropist (the customary euphemism for rentier monopolist) Bill Gates has explained: “Population growth in Africa is a challenge.” His lobbying foundation’s 2018 “Goalkeepers” report warned: “According to U.N. data, Africa is expected to account for more than half of the world’s population growth between 2015 and 2050. Its population is projected to double by 2050,” with “more than 40 percent of world’s extremely poor people … in just two countries: Democratic Republic of the Congo and Nigeria.”

Gates advocates cutting this projected population increase by 30 percent by improving access to birth control and expanding education to “enable more girls and women to stay in school longer, have children later.” But how can that be afforded with this summer’s looming food and oil squeeze on government budgets?

South Americans and some Asian countries are subject to the same jump in import prices resulting from NATO’s demands to isolate Russia. JPMorgan Chase head Jamie Dimon recently warned attendees at a Wall Street investor conference that the sanctions will cause a global “economic hurricane.” He echoed the warning by IMF Managing Director Kristalina Georgieva in April that, “To put it simply: we are facing a crisis on top of a crisis.” Pointing out that the Covid pandemic has been capped by inflation as the war in Ukraine has made matters “much worse, and threatens to further increase inequality” she concluded that: “The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices.”

The Biden administration blames Russia for “unprovoked aggression.” But it is his administration’s pressure on NATO and other Dollar Area satellites that has blocked Russian exports of grain, oil and gas. But many oil- and food-deficit countries see themselves as the primary victims of “collateral damage” caused by US/NATO pressure.

Is world famine and balance-of-payments crisis a deliberate US/NATO policy?

On June 3, African Union Chairperson Macky Sall, President of Senegal, went to Moscow to plan how to avoid a disruption in Africa’s food and oil trade by refusing to become pawns in the US/NATO sanctions. So far in 2022, President Putin noted: “Our trade is growing. In the first months of this year it grew by 34 percent.” But Senegal’s President Sall worried that: “Anti-Russia sanctions have made this situation worse and now we do not have access to grain from Russia, primarily to wheat. And, most importantly, we do not have access to fertilizer.”

U.S. diplomats are forcing countries to choose whether, in George W. Bush’s words, “you are either for us or against us.” The litmus test is whether they are willing to force their populations to starve and shut down their economies for lack of food and oil by stopping trade with the world’s Eurasian core of China, Russia, India, Iran and their neighbors.

Mainstream Western media describe the logic behind these sanctions as promoting a regime change in Russia. The hope was that blocking it from selling its oil and gas, food or other exports would drive down the ruble’s exchange rate and “make Russia scream” (as the U.S. tried to do to Allende’s Chile to set the stage for its backing of the Pinochet military coup). Exclusion from the SWIFT bank-clearing system was supposed to disrupt Russia’s payment system and sales, while seizing Russia’s \$300 billion of foreign-currency reserves held in the West was expected to collapse the ruble, preventing Russian consumers from buying the Western goods to which they had become accustomed. The idea (and it seems so silly in retrospect) was that Russia’s population would rise in rebellion to protest against how much more Western luxury imports cost. But the ruble soared rather than sunk, and Russia quickly replaced SWIFT with its own system linked to that of China. And Russia’s population began to turn away from the West’s aggressive enmity.

Evidently some major dimensions are missing from the U.S. national-security think-tank models. But when it comes to global famine, was a more covert and even larger strategy at work? It is now looking like the major aim of the U.S. war in Ukraine all along was merely to serve as a catalyst, an excuse to impose sanctions that would disrupt the world’s food and energy trade. Additionally to manage this crisis in a way that would afford U.S. diplomats an opportunity to confront Global South countries with the choice “Your loyalty and neoliberal dependency or your life?” In the process, this would “thin out” the world’s non-white populations that so worried Mr. Dimon and the WEF.

There must have been the following calculation: Russia accounts for 40% of the world’s grain trade and 25 percent of the world fertilizer market (45 percent if Belarus is included). Any scenario would have included a calculation that if so large a volume of grain and fertilizer was withdrawn from the market, prices would soar, just as they have done for oil and gas.

Adding to the disruption in the balance-of-payments of countries having to import these commodities, the price is rising for buying dollars to pay their foreign bondholders and banks for debts falling due. The Federal Reserve’s tightening of interest rates has caused a rising premium for U.S. dollars over euros, sterling and Global South currencies.

It is inconceivable that the consequences of this on countries outside of Europe and the United States were not taken into account, because the global economy is an interconnected system. Most disruptions are in the 2 to 5 percent range, but today’s US/NATO sanctions are so far off the historical track that price increases will soar substantially above the historic range. Nothing like this has happened in recent times.

This suggests that what appeared in February to be a war between Ukrainians and Russia is really a trigger intended to restructure the world economy – and to do so in a way to lock U.S. control over the Global South. Geopolitically, the proxy war in Ukraine has been a handy excuse for America’s to counter China’s Belt and Road Initiative (BRI).

“Taken from an interview with the newly founded German magazine “ViER” which will be published in August 2022.” ViER (FOUR), stands for the media as fourth power in checks and balances).

(1.) Prof. Hudson, your new book “The Destiny of Civilization” is out now. This lecture series on finance capitalism and the New Cold War presents an overview of your unique geo-political perspective.

You talk about an ongoing ideological and material conflict between financialized and de-industrialized countries like United States against the mixed-economies of China and Russia. What is this conflict about and why is the world right now at a unique “point of fracture” as your book states?

Today’s global fracture is dividing the world between two different economic philosophies: In the US/NATO West, finance capitalism is de-industrializing economies and has shifted manufacturing to Eurasian leadership, above all China, India and other Asian countries in conjunction with Russia providing basic raw materials and arms.

These countries are a basic extension of industrial capitalism evolving into socialism, that is, into a mixed economy with strong government infrastructure investment to provide education, health care, transportation and other basic needs by treating them as public utilities with subsidized or free services for these needs.

In the neoliberal US/NATO West, by contrast, this basic infrastructure is privatized as a rent-extracting natural monopoly.

The result is that the US/NATO West is left as a high-cost economy, with its housing, education and medical expenses increasingly debt financed, leaving less and less personal and business income to be invested in new means of production (capital formation). This poses an existential problem for Western finance capitalism: How can it maintain living standards in the face of de-industrialization, debt deflation and financialized rent-seeking impoverishing the 99% to enrich the One Percent?

The first U.S. aim is to deter Europe and Japan from seeking a more prosperous future to lie in closer trade and investment ties with Eurasia and the Shanghai Cooperation Organization (SCO, a more helpful way of thinking about the global fracture from the BRICS). To keep Europe and Japan as satellite economies, U.S. diplomats are insisting on a new economic Berlin Wall of sanctions to block trade between East and West.

For many decades U.S. diplomacy has meddled in European and Japanese internal politics, sponsoring pro-neoliberal officials into government leadership. These officials feel that their destiny (and also their personal political fortunes) is closely allied with U.S. leadership. Meanwhile, European politics has now become basically NATO politics run from the United States.

The problem is how to hold the Global South – Latin America, Africa and many Asian countries – in the US/NATO orbit. Sanctions against Russia have the effect of hurting the trade balance of these countries by sharply raising oil, gas and food prices (as well as prices for many metals) that they must import. Meanwhile, rising U.S. interest rates are drawing financial savings and bank credit into U.S.-dollar-denominated securities. This has raised the dollar’s exchange rate, making it much harder for SCO and Global South countries to pay their dollarized debt service falling due this year.

This forces a choice on these countries: either go without energy and food in order to pay foreign creditors – thereby putting international financial interests before their domestic economic survival – or defaulting on their debts, as occurred in the 1980s after Mexico announced in 1982 that it could not pay foreign bondholders

(2.) How do you see the ongoing war/special military operation in Ukraine? Which economic consequences do you foresee?

Russia has secured the Russian-speaking Eastern Ukraine and its southern Black Sea coastline. NATO will continue to “poke the bear” by sabotage and new ongoing attacks, especially by Polish fighters.

NATO countries have dumped their old and obsolete weapons into Ukraine, and now must spend immense sums modernizing their military hardware. The outflow of payments to the U.S. military-industrial complex will put downward pressure on the euro and British sterling – all coming on topo of their own rising energy and food deficits. So the euro and sterling are headed down toward parity with the U.S. dollar. The euro is almost there now (about \$1.07). This means sharply rising price inflation for Europe.

I read and hear conflicting information on the new sanctions. Some experts in the East and West believe this will harm the national economy of the Russian Federation tremendously. Other experts tend to believe this will backfire or have a huge boomerang-effect on the Western countries indeed.

The overriding U.S. policy is to fight against China, hoping to break of the Western Uighur regions and divide China into smaller states. To do that, it is necessary to break away Russian military and raw-materials support for China – and in due course to break it up into a number of smaller states (the Western large cities, northern Siberia, a southern flank, etc.).

Sanctions were imposed in hopes of making living conditions so unpleasant for Russians that they would press for regime change. The NATO attack in Ukraine was designed to drain Russia militarily – by having the bodies of Ukrainians deplete Russia’s supply of bullets and bombs by giving their lives simply to absorb Russian arms.

The effect has been to increase Russian support for Putin – just the opposite of what was intended. There is a growing disillusion with the West, after seeing what the Harvard Boys did to Russia when the United States backed Yeltsin to create a domestic kleptocrat class that tried to “cash out” its privatizations by selling shares in oil, nickel and public utilities to the West, and then spurring military attacks from Georgia and Chechnya. There is a general agreement that Russia is making a long-term turn Eastward instead of Westward.

So the effect of U.S. sanctions and military opposition to Russia has been to impose a political and economic Iron Curtain locking in Europe to dependency on the United States, while driving Russia together with China instead of prying them apart. Meanwhile, the cost of European sanctions against Russian oil and food – much to the benefit of U.S. LNG gas suppliers and agricultural exporters – threatens to create long-term European opposition to U.S. unipolar global strategy. A new “Ami go home” movement is likely to develop.

But for Europe, the damage already has been done, and neither Russia nor China are likely to trust that European government officials can withstand the bribery and personal pressure brought to bear by U.S. interference.

Here in Germany I’m listening to the new Minister for Economy, Mr Robert Habeck from the Green Party, who talks about activating the federal “emergency gas” and asks the Emirates for resources (this “deal” seems to be failed already, news say). We see the end of North Stream II and huge dependency for Berlin and Brussels on Russian resources. How this will all sum up?

In effect, U.S. officials have asked Germany to commit economic suicide and bring on a depression, higher consumer prices and lower living standards. German chemical companies have already begun to shut down their fertilizer production, given Germany’s acceptance of trade and financial sanctions that prevent it from buying Russian gas (the raw material for most fertilizer). And German car companies are suffering from supply cut-offs.

Peter Scott, RT anchor: Joining us now is Michael Hudson, economist and author of “Super-Imperialism” and the recently-published “Destiny of Civilization”. Welcome to the programme, Michael.

Michael Hudson: It’s good to be back.

PS: Let’s say all these European programmes like the REPOWER Programme come into effect, how do you expect the EU standing to be on the stage after that?

MH: Well, the EU standing will be squeezed economically. It was trying to be a powerhouse in the world economy but in the last month the euro has been declining steadily against the dollar and it’s on the way to one dollar per euro. That’s because it’s having to pay much foreign exchange for energy, for food, for weapons. It’s shrinking in terms of other economies.

PS: Where do you think the EU’s standing will be in relation to powerhouses such as China?

MH: Well, it’s obviously out of the game. Instead of putting its own interests first, it’s really putting the US interests first. It’s acting more like a satellite of the United States thank trying to its own destiny. The whole plan of the EU 20 years ago was to get rich by investing in Russia, investing in China and a mutual exchange. And now it’s decided to stop that. The US has absorbed Europe. The war in Ukraine is a war by the US primarily to pull Europe into the US orbit, prevent European transactions with Russia or China. So Western Europe is being left out, while Russia, China and Eurasia are going with the rest of Asia. Europe is simply going to be left behind. It’s losing its export markets, it’s being squeezed and -as you just mentioned- it’s pushed up the retirement age because it’s spending its budget on replenishing American military arms instead of investing in industry as it had been doing since 1945.

PS: You did indeed write that Europe has ceased to be an independent state. You’ve almost mentioned that the United States wanted to sever EU trade ties with Russia and China. How exactly did you get to that conclusion and do you think that this alleged US plan is succeeding?

MH: Well, I simply read the speeches of President Biden and his team. They’ve said that China is America’s number one enemy. If you’re going to call a country your number one existential enemy, you’re not going to be increasing your trade and mutual dependency with it. And it’s already insisted that its allies sanction -meaning boycott- Russian sports not only of oil and agriculture but of titanium, helium and all of the other exports that Russia has been making. Europe is been following US directions not to have contact with Russia and without contact with Russia it’s not going to have contact with China because China sees that Europe is going to do to it exactly what it’s been doing to Russia.

PS: Obviously as a result of this current situation, for many years now, Russia and China have been growing closer diplomatically and economically. How do you see a global shift in power evolving over the next 5, 10 years or so?

MH: The current war is dividing the world into two parts. There’s going to be a US dollar area of the US, Europe and its satellites. And there’ll be a multipolarity; there’ll be a group of Russia, China together and basically they will be making their proposal of a different way of organising the world economic affairs to Africa, Latin America and other Asian countries. And other Asian countries, Latin America and the global south will see that it can get a better deal with Russia and China than it can get with the United States.

PS: On the flip side of that coin, one could argue that the existing situation, world order, has only been cemented by this war. You see NATO more aligned than ever, you see Europe more aligned than ever. You see Finland and Sweden on the brink, perhaps, of joining NATO. What would your response to this be, Michael?

MH: This integration of Europe into the United States sphere is like the new Berlin Wall. It’s isolated the US from the whole rest of the world. So instead of a victory for the United States it’s self-isolated itself because US strategists have realised that they’re losing the economic war with China, Russia and the whole group of emerging nations. All they can try to do is hold on to Europe as their one source of income to exploit from Europe what it can no longer get from any other country.

PS: As well as being a war on the ground, this is obviously an economic war. You yourself have noted that Nord Stream 2 (the gas pipeline from Russia to Germany) was one of the first victims of this crisis. To what extent are we now seeing an international conflict for energy resources? We obviously have the EU now weaning itself off Russian energy, the US trying to fill that gap to a certain extent with LNG. Then we have Russia now selling oil to India and China.

MH: The important thing about Russian oil being sold to India is that they’re sold in roubles, they’re no longer in dollars. The entire oil trade is now de-dollarised. It will be in roubles, in Chinese Yuan and in other currencies. But the dollar will be left out. The whole idea of dollar diplomacy, of the dollar’s free ride and monetary imperialism has ended. Everyone thought it would take 10 years for Russia, China and other countries to break away. Yet the United States itself has broken away from the other countries by grabbing the foreign exchange reserves of Afghanistan, Venezuela and now Russia. Nobody is going to trust to transact oil, trade and invest in dollars anymore because the United States can simply grab whatever money they want from countries that don’t agree to turn over their economic surplus to American investors and American traders. The United States has isolated itself. It’s shot itself in the foot.

PS: Talking of currencies, Russia is currently the most sanctioned country in the world but the rouble has recovered to way before pre-war levels. To what extent do you think the sanctions imposed on Russia by western countries have negatively impacted the countries imposing them?

MH: It’s certainly been very positive for russia. The first sanctions were imposed on Russian agriculture like cheese from Lithuania. So now Russia produces its own cheese. When you sanction a country, you force that country to be more self-reliant on its own productions. President Putin has already said that now he’s going to be investing in import substitution. If he can’t buy imports from the United States now he’ll set up factories in Russia to produce themselves. There’s no reason Russia cannot do this and be its own industrial power. It doesn’t need the West. But the West still needs Russia. You mentioned Europe doing without Russian oil, and instead getting US liquefied natural gas. But it doesn’t have the ports to import that natural gas. It will have to spend \$5 billion to build ports. It will take many years for this. What are Germany and Europe going to do for the next few years? Are they going to let their pipes freeze in their houses? So that their pipes break and flood the houses? Will the factories slow down? Already German fertiliser companies have closed down because they can’t get gas and it’s going to be years before they can get gas. Without fertiliser how are the Germans going to make their agricultural yields sustainable? Well, they won’t be. So Europe is going to increase its food deficit. It’s going to increase its energy deficit. It’s basically committing suicide on behalf of the Americans. I don’t know how long the political system of Europe can go along with leaders who represent America instead of their own national interests.

PS: As inflation and consumer prices keep rising in the US – Joe Biden maintains that it’s all Russia’s fault. Does it look like American taxpayers are buying that story, though?