Inflation and the Fed Plan to Cut Wages:
A Depression Is Coming
By Michael Hudson
July 05, 2022:
Information Clearing House-Economist Michael
Hudson explains the inflation crisis and the
US Federal Reserve’s “austerity program to
reduce wages.” Western so-called economics
experts are openly calling to boost
Hudson warns a “long depression” is
coming, in which the poor will suffer so the
rich can get richer, in order to advance
Washington’s new cold war on Russia and
Hey, everyone, this
is Ben Norton, and you are watching or
listening to the Multipolarista podcast. I
am always privileged to be joined by one of
my favorite guests, Michael Hudson, one of
the greatest economists living today.
We’re going to be
talking about the inflation crisis. This is
a crisis around the world, but especially in
the United States, where inflation has been
at over 8%. And it has caused a lot of
political problems. It’s very likely going
to cause the defeat, among other factors, of
the Democrats in the mid-term elections in
And we’ve seen that
the response of the US government and top
economists in the United States is basically
to blame inflation on wages, on low levels
of unemployment and on working people.
We’ve seen that the
chair of the Federal Reserve, Jerome Powell,
has said that inflation is being caused by
wages supposedly being too high. We’ve also
seen that the top economist and former
Clinton administration official Larry
Summers has claimed that the solution to
inflation is increasing unemployment,
potentially up to 10%.
So today I’m joined
by economist Michael Hudson, who has been
calling out this kind of neoliberal snake
oil economics for many years. And Professor
Hudson has an article he just published that
we’re going to talk about today. You can
find this at his website, which is
michael-hudson.com. It’s titled “The
Fed’s Austerity Program to Reduce Wages.”
and I’m going to let Professor Hudson
summarize the main points of his article.
Professor Hudson, as
always, it’s a pleasure having you. Can you
respond to the decision by the Federal
Reserve to increase interest rates by 0.75%?
It doesn’t sound like a lot – it’s less than
1% – but this was the largest rate hike
And now we’ve already
seen reports that there’s going to be a
depression. The Fed chair is blaming this on
wages. Can you respond to the position of
the Fed and the inflation crisis in the US
For the Fed, the only
two things that it can do is, number one,
raise the discount rate, the interest rate;
and number two, spend $9 trillion buying
stocks, and bonds, and real estate mortgages
to increase real estate prices, and to
increase the amount of wealth that the
wealthiest 10% of the population has.
To the wealthiest
10%, especially the 1%, it’s not only
inflation that’s a problem of wages; every
problem that America has is the problem of
the working class earning too much money.
And if you’re an employer, that’s the
problem: you want to increase your profits.
And if you look at the short term, your
profits go up the more that you can squeeze
labor down. And the way to squeeze labor
down is to increase what Marx called the
reserve army of the unemployed.
You need unemployment
in order to prevent labor from getting most
of the value of what it produces, so that
the employers can get the value, and pay
that to the banks and the financial managers
that have taken over corporate industry in
the United States.
You mentioned that
while the Fed blames the inflation on labor,
that’s not President Biden’s view; Biden
keeps calling it the Putin inflation. And of
course, what he really means is that the
sanctions that America has placed on Russia
have created a shortage of oil, gas, energy,
and food exports.
So really we’re in
the Biden inflation. And the Biden inflation
that America is experiencing is the result
basically of America’s military policy, its
foreign policy, and above all, the
Democratic Party’s support of the oil
industry, which is the most powerful sector
in the United States and which is guiding
most of the sanctions against Russia; and
the national security state that bases
America’s power on its ability to export
oil, or control the oil trade of all the
countries, and to export agricultural
So what we’re in the
middle of right now isn’t simply a domestic
issue of wage earners wanting higher
salaries – which they’re not particularly
getting; certainly the minimum wage has not
been increased – but you have to put this in
the context of the whole cold war that’s
The whole US and NATO
confrontation of Russia has been a godsend,
as you and I have spoken before, for the oil
industry and the farm exporters.
And the result is
that the US dollar is rising against the
euro, against sterling, and against Global
South currencies. Well, in principle a
rising dollar should make the price of
imports low. So something else is at work.
And what’s at work,
of course, is the fact that the oil industry
is a monopoly, that most of the prices that
have been going up are basically the result
of a monopolization, in the case of food, by
the marketing firms, like Cargill and Archer
Daniels Midland, that buy most of the crops
from the farmers.
The irony is that
while food prices, next to oil prices, are
the major factor that is soaring, farmers
are getting less and less for their crops.
And yet farmers’ costs are going up – up for
fertilizer, up for energy, up for other
inputs – so that you’re having enormous
profits for Archer Daniels Midland and the
food monopolies, for the distributors, and
enormous, enormous gains for the oil
industry, and also of course for the
So if you look at
what’s happening in the overall world
economic system, you can see that this
inflation is being engineered. And the
beneficiaries of this inflation certainly
have not been the wage earners, by any
stretch of the imagination.
But the crisis that
the Biden policy has created is being blamed
on the wage earners instead of on the Biden
administration’s foreign policy and the
basically US-NATO war to isolate Russia,
China, India, Iran, and Eurasia generally.
Professor Hudson, I
want to talk about the increase in interest
rates by the Fed. There has been a lot of
attention to this, although, again, it’s
0.75%, which is not that big. But it’s of
course going to have an outsize impact on
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 is now less than student
loans and automobile loans. Banks lend
almost entirely to buy real estate, stocks
and bonds, not goods and services.
So you argue that one
of the effects of this is that it’s actually
going to roll back homeownership in the
United States. You note that the rate of
homeownership has been falling since 2008.
So can you expand on
those arguments? What will be the impact of
the increase of the interest rates by the
Well, in order to get
an economics degree which is needed to work
at the Fed or at the Council of Economic
Advisors, you have to take economics courses
in the universities, and all of the
textbooks say just what you quoted me as
saying they say.
The pretense is that
banks actually play a productive role in
society, by providing the money for
factories to buy machinery, and build
plants, and do research and development, and
to hire labor; and that somehow the money
that banks create is all lent out for the
industrial economy, and that that will
enable companies to make more money that
they’ll spend on labor; and of course, as
they spend more money on labor, that
supports to bid prices up as the reserve
army of the unemployed is depleted.
But that’s all a
fiction. The textbooks don’t want to say
that banks don’t play a productive role like
that at all. And the corporations don’t do
what the textbooks say.
If you look at the
Federal Reserve balance sheet and statistics
that it publishes every month, you’ll see
that 80% of bank loans in the United States
are mortgage loans to commercial real estate
and mostly for home real estate. And of
course the home mortgage loans have been
nothing like under 1% for the last 14 years,
Only the banks and
the large borrowers, the financial sector,
have been able to borrow at these low rates.
Homeowners all along have had to pay very
high rates, just under 4%, and now it’s
going above 4%, heading to 5%.
Well, here is the
situation that the Federal Reserve has
created. Suppose that you’re a family right
now going out to buy a home, and you find
out that in order to borrow the money to buy
the home – because if the average home in
America costs $600,000 or $700,000, people
haven’t saved that much; the only way you
can buy a home is to take out a mortgage.
Well, you have a
choice: you can either rent a home, or you
can borrow the money to buy a home. And
traditionally, for a century, the carrying
charge for financing a home with the
mortgage has been about the equivalent of
paying a rent. The advantage is, of course,
that you get to own the home when it’s over.
Well, now let’s look
at what’s happening right now. All of a
sudden, the carrying charge of mortgages
have gone way, way up. The banks are making
an enormous gap. They can borrow at just
around 1%, and they lend out at 4.5%. They
get a windfall gain of the markup they have
in mortgages, lending to prospective
And of course, the
homeowners don’t have enough money to be
able to pay the higher interest charged on
the mortgages that they take out. So they
are not able to buy as expensive a home as
they wanted before.
But they’ve been a
declining part of the population. At the
time Obama took office, over 68% of
Americans owned their own home. Obama
started the great wave of evictions, of 10
million Americans who lived in homes,
essentially to throw them out of their
homes, especially the victims of the junk
mortgages, especially the lower income and
racial minorities who were redlined and had
to become the main victims of the [junk
homeownership rate is now under 61%. What
has happened? You’ve had huge private
capital firms come into the market thinking,
wait a minute, we can now buy these
properties and rent them out. And we can buy
them for all cash, unlike homeowners, we’re
multibillionaires, we Blackstone, BlackRock.
You have these
multibillion-dollar funds, and they say,
well, we can’t make much money buying bonds
or buying stocks that yield what they do
today, now that the Federal Reserve has
ground down interest rates. What we can do
is make money as landlords.
And so they’ve
shifted, they’ve reversed the whole shift
away from the 19th-century landlordism to an
economy based on financialization, and the
wealthy classes making money on finance, to
go back to making money as landlords.
And so they are
buying up these homes that American
homeowners can’t afford to buy. Because when
you raise the mortgage rate, that doesn’t
affect a billionaire at all. Because the
billionaire firm doesn’t have to borrow
money to buy the home. They have the billion
dollars of their own money, of pension fund
money, of speculative money, of the money of
the 1% and the 10% to spend.
So what you’re having
by increasing the interest rates is
squeezing homeowners out of the market and
turning the American economy into a
landlord-ridden rental economy, instead of a
homeowners economy. That’s the effect.
And it’s a windfall
for the private capital firms that are now
seeing that [they] are making money as
landlords, the old fashioned way, it worked
for 800 years under feudalism. It’s coming
back in style.
Professor Hudson, you
point out in this article at your website
that more than 50% of the value of U.S. real
estate already is held by mortgage bankers.
And of course, that percentage is increasing
Now, you, Professor
Hudson, have argued a point that I haven’t
seen many other people make, although it’s
an obvious, correct point, which is that
there has actually been a lot of inflation
in the United States in the past several
years, but that inflation was in the FIRE
sector: finance, insurance, and real estate.
We see that with the
constant increase in real estate prices;
they go up every single year; rent goes up
every single year. The difference now is
that there’s also a significant increase in
the Consumer Price Index.
And there is an
interesting study published by the Economic
Policy Institute, which is, you know, a
center-left think tank, affiliated with the
labor movement; they’re not radicals,
they’re progressives. And they did a very
And they found – this
was published this April – they found that
corporate profits are responsible for around
54% of the increase of prices in the
non-financial corporate sector, as opposed
to unit labor costs only being responsible
for around an 8% increase.
So they showed,
scientifically, that over half of the
increase of prices in the non-financial
corporate sector, that is in the Consumer
Price Index, over half of that inflation is
because of corporate profits.
Of course, that’s not
the way it’s discussed in mainstream media.
That’s not the way the Fed is discussing it
all. We see Larry Summers saying that we
need to increase unemployment. Larry
Summers, of course, was the treasury
secretary for Bill Clinton.
He’s saying that the
U.S. has to increase unemployment; the
solution to inflation is increasing
unemployment. Even though these studies show
that over half of inflation in the Consumer
Price Index is because of corporate profits.
I’m wondering if you
can comment on why so many economists,
including people as revered as Larry
Summers, refuse to acknowledge that reality.
Most economists need
to get employment, and in order to be
employed, you have to give a picture of the
economy that reflects how well your employer
helped society at large. You’re not allowed
to say that your employer is acting in ways
that are purely predatory. You’re not
allowed to say that the employer does not
earn an income.
You talked about
corporate profits. [To] the classical
economists – if you were a free-market
economist like Adam Smith, or David Ricardo,
or John Stuart Mill – these are monopoly
rents. So what you call corporate profits
are way above normal corporate rates of
return, normal profits. They’re economic
rents from monopoly.
And that’s because
about 10 or 15 years ago, the United States
stopped imposing its anti-monopoly laws. It
has essentially let monopolies concentrate
markets, concentrate power, and charge
whatever they want.
And so once you’ve
dismantled the whole legal framework that
was put in place from the 1890s, from the
Sherman Antitrust Act, down through the
early 20th century, the New Deal, once you
dismantle all of this state control, saying
– essentially what Larry Summers says is,
we’re for a free market.
A “free market” is
one in which companies can charge whatever
they want to charge for things; a free
market is one without government regulation;
a free market is one without government; a
free market is a weak enough government so
that it cannot protect the wage earners; it
cannot protect voters. A “democracy” is a
country where the bulk of the population,
the wage earners, have no ability to affect
economic policy in their own interests.
A “free market” is
one where, instead of the government being
the planner, Wall Street is the planner, on
behalf of the large industries that are
basically being financialized.
So you’ve had a
transformation of the concept of what a free
market is, a dismantling of government
regulation, a dismantling of anti-monopoly
regulation, and essentially the class war is
back in business.
That’s what the Biden
administration is all about. And quite
frankly, it’s what the Democratic Party is
all about, even more than the Republican
Party. The Republican Party can advocate
pro-business policies and pro-financial
policies, but the Democratic Party is in
charge of dismantling the legacy of
protection of the economy that had been put
in place for a century.
Now, I also wanted to
get your response, Professor Hudson, to
these comments that you highlighted in a
panel that was organized by the
International Manifesto Group – a great
organization, people can find it here, their
channel here at YouTube. And they held a
conference on inflation. And you were one of
And you highlighted
these comments that were made by the Fed
chair, Jerome Powell. And this is according
official transcript from The Wall Street
Journal. So this is not from some lefty,
socialist website. Here’s the official
transcript of a May 4 press conference given
by the Fed chief, Jerome Powell.
In this press
conference, he said, discussing inflation,
he said, in order to get inflation down,
he’s talking about things that can be done
get wages down, and then get inflation
down without having to slow the economy and
have a recession and have unemployment rise
So this is another
proposal. Larry Summers says 6% unemployment
for five years, or 10% unemployment for one
year. The Fed chair, Jerome Powell, says the
solution is “to get wages down.” I’m
wondering if you can respond to that as
Well, the important
thing to realize is that President Biden
re-appointed Jerome Powell. President Biden
is a Republican. The Democratic Party is
basically the right wing of the Republican
Party, the pro-financial, the pro-Wall
Street wing of the Republican Party.
Why on earth, if the
Democrats were different from the
Republicans, why would Biden re-appoint an
anti-labor Republican, as head of the
Federal Reserve, instead of someone that
would actually try to spur employment?
Imagine, here’s a
party that is trying to be elected on a
program of, “Elect us, and we will create a
depression and we will lower wages.” That is
the Democrat Party slogan.
And it’s a winning
slogan, because elections are won by
campaign contributions. The slogan is, “We
will lower wages by bringing you
depression;”[it brings] a tsunami of
contributions to the Democratic Party, by
Wall Street, by the monopolists, by all the
beneficiaries of this policy.
So that’s why the
Supreme Court ruling against abortions the
other day is a gift to the Democrats,
because it distracts attention [via] their
identity politics of breaking America into
all sorts of identities, every identity you
can think of, except being a wage earner.
The wage earners are
called deplorables, basically. And that’s
how the donor class thinks of them, as sort
of unfortunate overhead. You need to employ
them, but really it’s unfortunate that they
like to live as well as they do, because the
better they live, the less money that you
will end up with.
So I think that this
issue of the inflation, and what really
causes it, really should be what elections
are all about. This should be the economic
core of this November’s election campaign
and the 2024 election campaign. And the
Democrats are leading the fight to lower
And you remember that
when President Obama was elected, he
promised to increase the minimum wage? As
soon as he got in, he said the one thing we
cannot do is raise the minimum wage. And he
had also promised to back card check. He
said, the one thing we must not do is
increase labor unionization with card check,
because if you unionize labor, they’re going
to ask for better wages and better working
So you have the
Democratic Party taking about as hard a
right-wing position as sort of Chicago
School monetarism, saying the solution to
any any problem at all is just lower wages
and somehow you’ll be more competitive,
whereas the American economy is already
rendered uncompetitive, not because wages
are so high, but because, as you mentioned
before, the FIRE sector, the finance,
insurance, and real estate sector [costs
are] so high.
Rents and home
ownership, having a home is too expensive to
be competitive with foreign labor. Having to
pay 18% of GDP on medical care, privatized
medical care, prices American labor out of
the market. All of the debt service that
America has paid is pricing America out of
So the problem is not
that wages are too high. The problem is that
the overhead that labor has to pay in order
to survive, for rent, for medical care, for
student loans, for car loans, to have a car
to drive to work, for gas to drive to work,
to buy [food and other essentials at] the
monopoly prices that you need in order to
survive – all of these are too high.
None of this even
appears in economic textbooks that you need
to get a good mark on, in order to get an
economics degree, in order to be suitably
pliable to be hired by the Federal Reserve,
or the Council of Economic Advisers, or by
corporations that use economists basically
as public relations spokesmen. So that’s the
mess we’re in.
Professor Hudson, in
your article at your website,
michael-hudson.com, you have an
important section about the quantitative
easing policies. We were talking about how
there has been inflation in the past decade,
but then inflation was largely in the FIRE
sector, pushing up, artificially inflating
the prices of real estate and stocks.
You note that:
While home ownership
rates plunged for the population at large,
the Fed’s “Quantitative Easing” increased
its subsidy of Wall Street’s financial
securities from $1 trillion to $8.2 trillion
– of which the largest gain has been in
packaged home mortgages. This has kept
housing prices from falling and becoming
more affordable for home buyers.
And you, of course,
note that “the Fed’s support of asset prices
saved many insolvent banks – the very
largest ones – from going under.”
I had you on to discuss, in late 2019,
before the Covid pandemic hit, we know that
the Fed had this emergency bailout where it
gave trillions of dollars in emergency repo
loans to the biggest banks to prevent them
from crashing, trying to save the economy.
I do want to talk
about this as well, because sometimes this
is used by right-wingers who portray Biden
hilariously as a socialist. You were just
talking about how the Democrats have a
deeply neoliberal, right-wing economic
But of course, there
is this rhetoric that we see from
Republicans and conservatives claiming that
Biden is a socialist. They claim that the
reason there is inflation is because Biden
is just printing money and giving money to
Of course, that’s not
at all what’s happening. What has happened
is that the Fed has printed trillions of
dollars and given that to stockholders, to
big corporations, and to banks.
And this is a point
that I saw highlighted in that panel I
mentioned, the conference on inflation that
was organized by the International Manifesto
Group. A colleague of yours, a brilliant
political economist, Radhika Desai, she
invited everyone to go to the Fed website
and look at the Fed balance sheet.
And this is the Fed
balance sheet from
federalreserve.gov. This is the Board of
Governors of the Federal Reserve System
website. And it is pretty shocking to see
this graph, which shows the total assets of
the U.S. Federal Reserve.
Back in 2008, the
Federal Reserve had around $900 billion in
assets. Now it’s at nearly $9 trillion in
And we can see, after
the financial crash, or during the financial
crash, it increased to around $2 trillion.
And then around 2014, it increased to around
$4.5 trillion. And then especially in late
2019 and 2020, it skyrocketed from around $4
trillion up to $7 trillion. And since then,
it has continued skyrocketing to $9 trillion
Where did all of that
money go? And what was [been] the impact on
the economy, of course?
Well, the impact on
the economy has been to vastly increase the
wealth of the wealthiest 1% of Americans who
own most of the stocks and bonds.
Sheila Bair, the
former head of the Federal Deposit Insurance
Corporation, pointed out that a lot of this
$8 trillion is spent to buy junk bonds.
Here’s the problem.
The problem really began with President
Obama. He inherited a system where you had
the largest wave of commercial bank fraud in
As my colleague Bill
Black at the University of Missouri at
Kansas City has pointed out, everybody knew
that there was a bank fraud on. The
newspapers referred to junk mortgages and
“NINJA” borrowers: “no income, no jobs, no
So banks had written
mortgages way above the actual value of
homes, especially to racial and ethnic
minorities, without any ability of the
borrowers to actually pay.
And then these banks
had packaged these mortgages, and sold them
to hapless pension funds, and other
institutional investors and to the European
banks that are always very naive about how
honest American banks are.
You had this whole
accumulation of what the 19th century called
fictitious capital. Mortgages for property
that wasn’t worth anywhere near as much as
the mortgage is for.
So if the mortgage
was defaulted, if homeowners had jingle mail
– in other words, you just mail the keys
back to the bank and say, ok, take the
house, I find I can buy a house now at half
the price that Citibank or one of these
other banks lent out.
Well, normally you’d
have a crash of prices back to realistic
levels, so that the value of mortgages
actually reflected the value of property, or
the value of junk bonds issued by a
corporation reflected the actual earning
power of the corporation to pay interest on
the junk bonds.
So by the time Obama
took over, the whole economy was largely
fictitious capital. Well, Obama came in and
he said, my campaign donors are on Wall
Street. He called in the Wall Street bankers
and he said, I’m the guy standing between
you and the crowd with the pitchforks, the
people who voted for me. But don’t worry,
I’m on your side.
He said, I’m going to
have the Federal Reserve create the largest
amount of credit in human history. And it’s
all going to go to you. It’s going to go to
the 1% of the population. It’s not going to
go into the economy. It’s not going to build
infrastructure. It’s not going into wages.
It’s not going to reduce the price of homes
and make them more affordable to Americans.
It’s going to keep
the price of these junk bonds so high that
they don’t crash back to non-fictitious
values. It’s going to keep the stock market
so high that it’s not going to go down. It’s
going to create the largest bond market boom
The boom went from
high interest rates to low interest rates,
meaning a gigantic rise in the price of
bonds that actually pay interest that are
more than 0.1%.
So there was a huge
bond market boom, a huge stock market, a
tripling of stock market prices. And if you
are a member of the group that owns 72% of
American stocks, I think that’s 10% of the
population, you have gotten much, much
But if you’re a
member of the 90% of the population, you
have had to go further and further into debt
just in order to survive, just in order to
pay for medical care, student loans, and
your daily living expenses out of your
So if American wages
were at a decent level, American families
would not be pushed more and more into debt.
The reason the personal debt has gone up in
the United States is because families can’t
get by on what they earn.
So obviously, if they
can’t get by on what they earn, and they
have to borrow to get by, they are not
responsible for causing the inflation.
They’re being squeezed.
And the job of
economists, and of Democratic Party and
Republican politicians, is to distract
attention from the fact that they’re being
squeezed and blame the victim, and saying,
you’re doing it to yourself by just wanting
more money, you’re actually creating the
inflation that is squeezing you.
When actually it’s
the banks, and the government’s
non-enforcement of the monopoly policy, and
the government support of Wall Street that
is responsible for what is happening.
Very, very well said.
Professor Hudson, I
should have highlighted another part of this
graph here. This is, again, this is at the
Federal Reserve Board website. It’s even
more revealing when you look at the selected
assets of the Fed, and you see that all of
these assets basically are securities,
securities held outright by the Fed.
We see that around
2008, the Fed had less than $500 billion in
securities. And you have this policy of
quantitative easing. And since then,
basically all of the increase has been in
securities. Of the roughly $9 trillion in
assets the Fed holds, about $8.5 trillion is
I’m wondering if you
can compare this to central banks in other
countries. We’ve seen, for instance, that
the Western sanctions on Russia were aimed
at trying to destroy the Russian economy.
claimed they were trying to make the ruble
into rubble. In fact, the ruble is
significantly stronger now than it was
before the sanctions. To such a degree that
the Russian government and Russian national
bank are actually trying to decrease the
value of the ruble, because they think it’s
a little overvalued; it makes it a little
harder to be competitive.
So how does this
policy of the US Fed having $8.5 trillion
worth of securities compare to the policies
of other central banks?
You have experience
working with the Chinese government as an
advisor. Do other governments’ central banks
have this policy?
And that $8.5
trillion in securities, what are those
securities? Even from the perspective of
these neoliberal economics textbooks that
you were talking about, that people are
taught in universities, this seems to me to
be totally insane. I don’t see how there is
even an academic, neoliberal textbook
explanation for this policy.
Very few people
realize the difference between a central
bank and the national treasury. The national
treasury is what used to perform all of the
policies that central banks now do. The
national treasury would be in charge of
issuing money and spending it.
Central banks were
broken off in America in 1913 from the
Treasury in order to shift control of the
money supply and credit away from Washington
to New York. That was very explicit.
The original Federal
Reserve didn’t even permit a Treasury
official to be on the board of directors. So
the job of a central bank is to represent
the interest of the commercial banks.
And as we just
pointed out, the interest of the commercial
banks is to produce their product: debt. And
they create their product against existing
assets, mainly real estate, but also stocks
So the job of the
central bank here is to support the
financial sector of the economy, and that
sector that holds wealth in the form of
stocks, bonds, and loans, and especially
bank bonds that make their money off real
Same thing in Europe,
with Europe’s central bank. Europe is going
into a real squeeze now, and has been going
into a squeeze ever since you had the Greek
In Europe, because
right-wing monetarists designed the euro,
part of the eurozone rule is you cannot run
a budget deficit, a national budget deficit,
of more than 3% of gross domestic product.
Well, that’s not very
much. That means that you can’t have a real
Keynesian policy in Europe to pull the
economy out of depression. That means that
if you’re a country like Italy right now,
and you have a real financial squeeze there,
a corporate squeeze, a labor squeeze, the
government cannot essentially rescue either
Italian industry or Italian labor.
However, the European
central bank can, by the way that it creates
credit, by central bank deposits, the
European central bank can vastly increase
the price of European stocks, bonds, and
packaged mortgages. So the European central
bank is very much like the commercial bank.
China is completely
different, because, unlike the West, China
treats money and credit as a public utility,
not as a private monopoly.
And as a public
utility, China’s central bank will say, what
are we going to want to create money for?
Well, we’re going to want to create money to
build factories; we’re going to want to
create money so that real estate developers
can build cities, or sometimes overbuild
cities. We can create money to actually
spend in the economy for something tangible,
for goods and services.
The Chinese central
bank does not create money to increase stock
market prices or bond prices. It doesn’t
create money to support a financial class,
because the Communist Party of China doesn’t
want a financial class to exist; it wants an
industrial class to exist; it wants an
industrial labor force to exist, but not a
So a central bank in
a Western rentier economy basically seeks to
create credit to inflate the cost of living
for homebuyers and for anyone who uses
credit or needs credit, and to enable
corporations to be financialized, and to
shift their management away from making
profits by investing in plant and equipment
and employing labor to produce more, to
making money by financial engineering.
In the last 15 years,
over 90% of corporate earnings in the United
States have been spent on stock buybacks and
on dividend payouts. Only 8% of corporate
earnings have been spent on new investment,
and plants, and equipment, and hiring.
And so of course you
have had the economy deindustrialized. It’s
this idea that you can make money
financially without an industrial base,
without a manufacturing base; you can make
money without actually producing more or
doing anything productive, simply by having
a central bank increase the price of the
stocks, and bonds, and the loans made by the
And of course,
ultimately, that doesn’t work, because at a
certain point the whole thing collapses from
within, and there’s no industrial base.
And of course, when
that happens, America will find out, wait a
minute, if we close down the economy, we’re
still reliant on China and Asia to produce
our manufacturers, and to provide us with
raw materials, and to do everything that we
need. We’re really not doing anything but
acting as a world – well, people used to say
parasite – as a world rentier, as getting
something for nothing, as a kind of
So America you could
look at as a colonial power that is a
colonial power not by military occupation,
but simply by financial maneuvering, by the
And that’s what’s
being unwound today as a result of Biden’s
new cold war.
Professor Hudson, you
criticized the strategy of simply trying to
increase the interest rates to bring down
inflation, noting that it’s going to lead to
a further decline in homeownership in the
United States. It’s going to hurt working
people. I think that’s a very valid
I’m curious, though,
what your take is on the response of the
Russian central bank to the Western
sanctions. We saw that the chair of the
Russian central bank, Elvira Nabiullina, she
– actually this is someone who is not even
necessarily really condemned a lot by
Western economists; she is pretty well
respected by even, you know, Western
And she did manage to
deal with the sanctions very well. She
imposed capital controls immediately. She
closed the Russian stock market. And also,
in a controversial move, she raised the
interest rates from around 9% up to 20%, for
a few months. And then after that, dropped
A few days, not a few
months. That was very short. And now she has
moved the interest rates way down.
Back to 9%.
She was criticized
for not moving them further down.
Yeah, well go ahead.
I’m just curious. So she immediately raised
it to 20%, and then has dropped the interest
rates since then. I’m curious what you think
about that policy. Yeah, go ahead.
There is very little
that a central banker can do when the West
has declared a war, basically, a war on a
country that is completely isolated.
The response has come
from President Putin and from Foreign
Secretary Lavrov. And they pointed out,
well, how is Russia going to trade and get
what it needs. And this is what the recent
meetings of the BRICS are all about.
Russia realizes that
the world is now broken into two halves.
America and NATO have separated the West.
Basically you have a white people’s
confederation against all the rest of the
And the West has
said, we’re isolating ourselves from you
totally. And we think you can’t get along
Well, look at the
humor of this. Russia, China, Iran, India,
Indonesia, and other countries are saying,
hah, you say we can’t get along without you?
Who is providing your manufacturers? Who is
providing your raw materials? Who is
providing your oil and gas? Who is providing
your agriculture, and the helium, the
titanium, the nickel?
So they realize that
the world is breaking in two, and Eurasia,
where most of the world’s population is
concentrated, is going to go its own way.
The problem is, how
do you really go your own way? You need a
means of payment. You need to create a whole
international system that is an alternative
to the Western international system. You
need your own International Monetary Fund to
provide credit, so that these Eurasian
countries and their allies in the Global
South can deal with each other.
You need a World Bank
that, instead of lending money to promote
U.S. policies and U.S. investments, will
promote mutual gains and self-sufficiency
among the countries.
So already, every day
in the last few weeks, you have had meetings
with the Russians about this, who said, ok,
we’re going to create a mutual trading area,
starting among the BRICS: Brazil, Russia,
India, China, and South Africa.
And how are we going
to pay? We can’t pay in dollars, because if
we have money in a dollar bank, or a euro
bank in Europe, they can just grab the
money, like they grab Venezuela’s money.
They can just say, we’re taking all your
money because, essentially, we don’t want
you to exist as an alternative to the
finance capital world that we are creating.
Russia, China, and these other countries are
saying, ok, we’re going to create our own
international bank. And how are we going to
fund it? Well, every member of the bank will
contribute, say, a billion dollars, or some
amount of their own currency, and this will
be our backing. We can also use gold as a
means of settlement, as was long used among
And this bank can
create its own special drawing rights, its
own bancor, is what Keynes called it.
It can create its own credit.
Well, the problem is
that, if you have Brazil, for instance, or
Argentina, joining this group, or Ecuador,
that sells almost all of its bananas to
Russia, how is it going to get by?
Well, if there is a
BRICS group or a Shanghai Cooperation
Organization bank, obviously the Western
governments are not going to accept this.
So Russia realizes
that as a result of Biden’s Cold War Two,
there is going to be a continued rise in
energy prices. You think gasoline prices are
not high now? They’re going up. You think
food prices are not high now? They’re going
And in Europe this is
especially the case, because Europe now
cannot buy Russian gas to make the
fertilizer to make its own crops grow.
So you’re going to
have a number of countries in the Global
South, from Latin America to Africa, being
squeezed and wanting to trade with the
And the problem is
Russia says, all right, we know that you
can’t afford to pay. We’re glad to give you
credit, but we don’t want to give you credit
[where] you’re going to simply use the money
you have to pay your dollar debts that are
Because one of the
effects that I didn’t mention of the Federal
Reserve raising interest rates is there is a
huge flow of capital from Europe and England
into the United States, so that if you’re a
billionaire, where are you going to put your
savings? You want the highest interest rates
you [can get]. And if the United States
raises interest rates, the billionaires are
going to move their money out of England,
out of the euro, and the euro is going back
down against the dollar. It’s almost down to
a dollar a euro.
The British pound is
heading downwards, towards one pound per
This increase in the
dollar’s exchange rate is also rising
against the currencies of Brazil, Argentina,
the African countries, all the other
So how are they going
to pay this summer, and this fall, for their
food, for their oil and gas, and for the
higher cost of servicing their dollar debts?
Well, for Eurasia,
they’re going to say, we want to help you
buy our exports – Russia is now a major
grain exporter, and obviously also an oil
exporter – saying we want to supply you and
give you the credit for this, but you’re
really going to have to make a decision. Are
you going to join the U.S.-NATO bloc, or are
you going to join the Eurasian bloc?
Are you going to join
the White People’s Club or the Eurasian
Club? And it really comes down to that. And
that’s what is fracturing the world in these
Europe is caught in
the middle, and its economies are going to
be torn apart. Employment is going to go
down there. And I don’t see wages going up
very much in Europe.
You’re going to have
a political crisis in Europe. But also
you’ll have an international diplomatic
crisis over how are you going to restructure
world trade, and investment, and debt.
There will be two
different financial philosophies. And that’s
what the new cold war is all about.
The philosophy of
US-sponsored finance capitalism, of making
money financially, without
industrialization, and with trying to lower
wages and reduce the labor force to a very
highly indebted workforce living on the
Or you’ll have the
Eurasian philosophy of using the economic
surplus to increase productivity, to build
infrastructure, to create the kind of
society that America seemed to be growing in
the late 19th century but has now rejected.
So all of this is
ultimately not simply a problem of interest
rates and central bank policy; it really
goes beyond central banks to what kind of a
social and economic system are you going to
And the key to any
social and economic system is how you treat
money and credit. Is money and credit going
to be a public utility, or will it be a
private monopoly run for the financial
interests and the 1%, instead of a public
utility run for the 99%?
That’s what the new
cold war is going to be all about. And
that’s what international diplomacy week
after week is trying to settle.
Very, very well said.
And I really agree about this increasing
kind of bipolar order, where the US-led
imperialist system is telling the world they
have to pick a side. You know, as George W.
Bush said, you’re either with us or you’re
against us; you’re with us or you’re with
That’s what Biden is
saying to the world. And we see the West has
drawn this iron curtain around Russia. And
now they’re threatening to do the same
Now, of course, the
difference is that China has the largest
economy in the world, according to a PPP
measurement. It’s even larger than the US
economy. I don’t know how they can try to
sanction the Chinese economy, considering
China is the central factory of the world.
But this is related
to a question I had for you, Professor
Hudson, and this is from a super chat
question from Manoj Payardha, and it’s about
how Chinese banks say they’re not ready yet
to develop an alternative to the SWIFT. He
asked, how will the Third World pay Russia
And we’ve seen, maybe
you can talk about the measures being
implemented. India has this rupee-ruble
system that they’ve created.
But I want to
highlight an article that was
published in Global Times. This is a
major Chinese newspaper, and this is from
April. And it quotes the former head of
China’s central bank, who was speaking at a
global finance forum in Beijing this April.
And basically he
said, we need to prepare to replace SWIFT.
He said the West’s adoption of a financial
nuclear option of using SWIFT to sanction
Russia is a wake up call for China’s
financial development. And he said, “We must
So it seems that
they’re not yet prepared. But this is
something that you’ve been talking about for
years. Or maybe you disagree and maybe you
think they already are prepared with the
Well they’re already
using an alternative system. If they weren’t
using an alternative system – Russia is
adopting part of the Chinese system for this
– they wouldn’t be able to have banks
communicate with each other.
So, yes, they already
have a rudimentary system. They’re making it
a better system that can also be immune from
U.S. computer espionage and interference. So
yes, of course there’s already a system.
But I want to pick up
on what you said about Biden, how Biden
the war of the West against Eurasia as
between democracy and autocracy. By
“democracy,” he means a free market run by
Wall Street; he means an oligarchy.
But what does he mean
by autocracy? What he means by autocracy,
when he calls China an autocracy, an
“autocracy” is a government strong enough to
prevent an oligarchy from taking power, and
taking control of the government for its own
interests, and reducing the rest of the
economy to debt peonage.
An “autocracy” is a
country with public regulation against
monopolies, instead of an oligarchic free
market. An “autocracy” uses money and
credit, essentially, to help economies grow.
And when debts cannot be paid in China, if a
factory or a real estate company cannot pay
debts, China does not simply say, ok, you’re
bankrupt, you’re going to have to be sold;
anybody can buy you; the Americans can buy
Instead, the Chinese
say, well, you can’t pay the debts; we don’t
want to tear down your factory; we don’t
want your factory to be turned and
gentrified into luxury housing. We’re going
to write down the debt.
And that’s what China
has done again and again. And it’s done that
with foreign countries that couldn’t pay the
debt. When a debt that China has come due
for China’s development of a port, or roads,
or infrastructure, it says, well, we
understand that you can[not] pay; we will
delay payment; we will have a moratorium on
your payment. We’re not here to bankrupt
For the Americans, to
the international funds, they’re saying,
well, we are here to bankrupt you. And now
if we lend you, we the IMF, lends you money
to avoid a currency devaluation, the term is
you’re going to have to privatize your
infrastructure; you’re going to have to sell
off your public utilities, your electric
system, your roads, your land to private
buyers, mainly from the United States.
So you have a
“democracy” supporting bankruptcy,
foreclosure, financialization, and
privatization, and low wages by a permanent
depression, a permanent depression to keep
Or you have
“autocracy,” seeking to protect the
interests of labor by supporting a living
wage, to increase living standards as a
precondition for increasing productivity,
for building up infrastructure.
You have these two
diametrically [opposed] economic systems.
And, again, that’s why there’s a cold war on
And there’s another
super chat question here, Professor Hudson.
You mentioned the International Monetary
Fund, the IMF. We have talked about that
many times. This is from Sam Owen. He asked,
why do countries continue to accept bad IMF
loans when they have such a poor track
record? Is it just the US government
meddling in the national politics? Are there
cases of good IMF loans?
Well, what is a
country? When you say a country to most
people, people think, ok, let’s talk about
Brazil; let’s talk about all the people in
Brazil; you have a picture in the mind of
the Amazon; you have a big city with a lot
of people in it.
But the country, in
terms of the IMF, is a group of maybe the 15
wealthiest families in Brazil, that own most
of the money, and they are quite happy to
borrow from the IMF, because they say, right
now there’s a chance that Lula may become
president instead of the neo-fascist
Bolsonaro. And if Lula comes in, then he is
going to support labor policies, and he may
stop us from tearing down the Amazon. So
let’s move our money out of the country.
Well, normally this
would push the exchange rate of the cruzeiro
(real) down. So the IMF is going to make a
loan to Brazil to support the cruzeiro
(real), so that the wealthy 1% of Brazil can
move their money into dollars, into euros,
into foreign currency and offshore banking
centers, and load Brazil down with debt, so
that then when there is an election, and if
Lula is elected, the IMF is going to say,
well, we don’t really like your policies,
and if you pursue a pro-labor, socialist
policy, then there’s going to be a capital
flight. And we’re insisting that you pay all
the money that you borrowed from the West
right back now.
Well, that’s going to
lead Lula either to sit there, follow the
IMF direction, and let the IMF run the
economy, instead of his own government, or
just say, we’re not going to pay the foreign
Well, until now, no
country has been in a strong enough position
not to pay the foreign debt. But for the
first time, now that you have the Eurasian
group – we’ll call it BRICS, but it’s really
Eurasia, along with the Southern groups that
are joining, the Global South – for the
first time, they can say, we can’t afford to
stay in the West anymore.
We cannot afford to
submit the economy to the IMF demands for
privatization. We cannot submit to the IMF
rules that we have to fight against labor,
that we have to pass laws banning labor
unions, that we have to fight against
laborers’ wage, like Western democracies
insist on. We have to go with the Chinese
“autocracy,” which we call socialism.
And of course, when
America accuses China being an “autocracy,”
autocracy is the American word for
socialism. They don’t want to use that word.
So we’re back in Orwellian double-think.
So the question is
what will the Global South countries do when
they cannot afford to buy energy and food
this summer, without an IMF loan? Are they
going to say, ok, we can only survive by
joining the break from the West and joining
the Eurasian group?
That is what the big
world fracture is all about.
And I described this
global fracture already in 1978. I wrote a
book, “Global Fracture,” explaining just
exactly how all of this was going to happen.
And at that time, you
had Indonesia, you had Sukarno taking the
lead, the non-aligned nations, India,
Indonesia, were trying to create an
alternative to the financialized,
American-centered world order. But none of
these countries had a critical mass
sufficient to go their own way.
Well, now that
America has isolated Russia, China, India,
Iran, Turkey, all these countries, now it
has created a critical mass that is able to
go its own way. And the question is, now you
have like a gravitational pull, and will
this Eurasian mass attract Latin America and
Africa to its own group, away from the
United States? And where is that going to
leave the United States and Europe?
And we saw one of the
clearest examples yet of this bipolar
division of the world between, you know, the
West and the rest, as they say, with this
ridiculous meeting that was just held of the
Of course, the G7 are
the white, Western countries. And then
they’ll throw in U.S.-occupied Japan in
there, to pretend they’re a little more
But we saw that the
G7 just held a summit, and basically the
entire summit was about how can we contain
China? How can we expand the new cold war on
Russia into a new cold war on China?
It’s also absurd
considering that China’s Belt and Road
Initiative, which involves over half of the
countries on Earth, is estimated at many
trillions of dollars in infrastructure
projects. So the US and its allies think
that they can challenge that with $600
billion in public-private partnerships.
I should stress, of
course, what they announced is going to be a
mixture of so-called public initiative and
then contracts for private corporations.
So it’s yet another
giveaway to the private sector, in the name
of building infrastructure.
But I’m wondering if
you can comment on the G7 summit that just
Well, nothing really
came out of it. They all said that they
could not agree on any more sanctions
against Russia, because they’re already
hurting enough. India, in particular, stood
up and said, look, there’s no way that we’re
going to join the sanctions against Russia,
because it’s one of our major trading
partners. And by the way, we’re getting a
huge benefit from importing Russian oil, and
you’re getting a huge benefit by getting
this oil from us at a markup.
So the G7 could not
get any agreement on what to do. It is
already at a stalemate. And this is only
June. Imagine the stalemate it’s going to be
Well, next week,
President Biden is going to Saudi Arabia and
saying, you know, we’re willing to kill
maybe 10 million more of your enemies; we’re
willing to help Wahhabi Sunni groups kill
more of the Iranian Shiites, and sabotage
Iraq and Syria. We’ll help you back al-Qaeda
again, if you will lower your oil prices so
that we can squeeze Russia more.
So that’s really the
question that Saudi Arabia will have.
America will send it more cluster bombs to
use against Yemen. And the question is, is
Saudi Arabia going to say, ok, we’re going
to earn maybe $10 billion less a month, or
however much they’re making, just to make
you happy, and so that that you will kill
more Shiites who support Iran?
Or are they going to
realize that if they throw in their lot with
the United States, all of a sudden they’ll
be under attack from Iran, Russia, Syria,
and they’ll be sitting ducks? So what are
they going to do?
And I don’t see any
way that Biden can actually succeed in
getting Saudi Arabia to voluntarily earn
less on its oil prices. Maybe Biden can say
it’s only for a year, only for one or two
years. But as other countries know, when
America says only for a year or two, it
really means forever. And if you don’t
continue [doing what it wants], then somehow
they have a regime replacement, or a regime
change and a color revolution.
So Biden keeps trying
to get foreign countries to join the West
against Eurasia, but there is Saudi Arabia
sitting right in the middle of it.
And all that Europe
can do is watch and wonder how it’s going to
get by without energy and without much food.
Yeah, in fact,
Venezuela’s President Maduro just confirmed
that the Biden administration has sent
another delegation basically begging
Venezuela to try to work out some deal
because, of course, the U.S. and the EU have
boycotts of Russian energy.
So it’s really funny
to me that, after years of demonizing
Venezuela, portraying it as a dictatorship
and all of this, the U.S. had to decide,
well, the war in Venezuela is not as
important as the war on Russia right now; so
we’re going to temporarily pause our war on
Venezuela to stick the knife deeper into
So echoing the same
perspective that we hear from Biden, U.S.
government officials constantly say that the
US needs to challenge China in the Global
South. So Europe pledged €300 billion –
however, once again, important asterisk –
“in private and public funds over five years
to fund infrastructure in developing
So once again, we see
another neoliberal private-public
partnership. It’s going to be another public
giveaway to private corporations.
And “she said that
this is part of the G7’s drive to counter
China’s multitrillion-dollar Belt and Road
Now, this is really
just tying everything together that we have
been talking about today, Professor Hudson –
in your article “The
Fed’s Austerity Program to Reduce Wages,”
you conclude the article noting the
depression that people in the United States
are on the verge of facing because of these
neoliberal policies – telling workers in the
U.S. that they need to decrease their wages
and be unemployed in order to stop inflation
– you point out that:
Biden’s military and
State Department officers warn that the
fight against Russia is just the first step
in their war against China’s non-neoliberal
economy, and may last twenty years. That is
a long depression. But as Madeline Albright
would say, they think that the price is
And you talk about
the new cold war against the socialist
economy in China and the state-led economy
So you predict not
only a depression is coming. We have seen
that in mainstream media outlets. Larry
Summers said, you know, a depression could
be coming for a few years. But you say, no,
not only is a depression coming; it’s going
to be a long depression. We could be seeing
And basically the
U.S. government and other Western leaders,
as we see Ursula von der Leyen from the EU,
they’re basically telling their populations,
tighten your belts; we have decades of
depression coming, because we have
collectively decided, as Western leadership,
that we are going to force the world through
a long depression economically, or at least
force the West through a long economic
depression, in order to try to halt the rise
of China and Russia.
telling their populations, suck it up,
tighten your belts for decades, because in
the end, the price is worth it in order to
prevent the collapse of our empires.
That’s right. When
they’re talking about private-public
initiatives, they’re talking about Pentagon
capitalism. That means the government will
give trillions of dollars to private firms
and ask them to build infrastructure.
And if they build a
port or a road in a Global South country,
they will operate this at a profit, and it
will be an enormously expensive
infrastructure, because to make financial
money off this infrastructure, you have to
price it at [more than] the cost of
production, which is Pentagon capitalism
[cost plus pricing], hyper inflated prices;
you have to pay management fees; you have to
pay profits; you have to pay interest rates.
As opposed to the
Chinese way of funding as equity. The
Western mode of funding is all debt
leverage. China takes as collateral for the
infrastructure that it pays, an equity
ownership in the port or whatever
infrastructure in the Belt and Road that
So you have the
difference between equity ownership,
debt-free ownership, where if it can afford
to pay, fine; if it doesn’t make an income,
there are no dividends to pay.
Or you have the debt
leverage [where it] is intended that the
government cannot pay it, so that the
government that will be the co-signer for
the debt for all of this infrastructure will
somehow be obliged to tax its whole
population to pay the enormous
super-profits, the enormous monopoly rents,
the enormous debt charges of von der Leyen’s
Margaret Thatcher plan.
Von der Leyen thinks
that she can do to Europe and to America
what Margaret Thatcher did to England. And
if she does, then America and Europe deserve
And Professor Hudson,
as we start wrapping up here, I know you
have to go pretty soon, just a few short
questions here at the end.
I’m wondering if what
we’re also seeing is not only this
fundamental crisis in the Western
neoliberal, financialized economies, but
it’s also this bubble that has burst, or at
least this phase that is over.
At least this is my
reading, I’m curious if you agree. In the
1990s, the peak of, you know, the so-called
golden age of neoliberalism; we had Bill
Clinton riding this wave, and it was the
“end of history,” in Francis Fukuyama’s
nonsense prediction and all that.
How much of that was
not only based on this exorbitant privilege,
as the French call it, of the dictatorship
of the US dollar –
we talked about that based on your book
“Super Imperialism,” how the US was
given this massive global free lunch
economically because of dollar hegemony –
but how much of it was not just that, but
also the fact that in the 1990s and the
first decade of the 2000s, the US and
Western Europe had access to very cheap
consumer goods from Asia and very cheap
energy from Russia?
To me, it seems like
those two factors are some of the most
important reasons why this golden age of
neoliberalism in the ’90s and early 2000s
was even possible.
It was on the back of
low-paid Asian workers, and based on this
idea that Russia would permanently be, what
Obama called it: a gas station.
Well, we’ve seen
that, one, East Asian economies have lifted
themselves up [out] of poverty, especially
China has ended extreme poverty and raised
median wages significantly.
And now, of course,
the West has sanctioned itself against
buying Russian energy, massively increasing
the cost of energy around the world.
So do you think that
that bubble, or that brief moment of the end
of history, the golden age of neoliberalism,
that can never come back?
Because unless the
West can succeed in overthrowing the Russian
government and imposing a new puppet like
Yeltsin, and overthrowing the Chinese
government, it seems like the golden in the
1990s is never going to come back.
Well, you’ve left out
the key element of the golden age: that is
military force, and the willingness to
assassinate any foreign leader that does not
want to go along with US policy.
what America did to [Salvador Allende];
you’re neglecting how America took over
Brazil; America’s meddling and control, and
in Europe, the wholesale bribery and
manipulation of Europe’s political system,
to put in charge of the [German] Green Party
a pro-war leadership, an anti-environmental
leadership, to put in charge of every
socialist party of Europe right-wingers,
socialist and labor party turned neoliberal
largely by American maneuvering and meddling
in their foreign policy.
So it’s that meddling
that was intended to prevent any alternative
economic philosophy from existing to rival
So that when you talk
about the end of history, what is the end of
history? It means the end of change. It
means stop; there will be no reform; there
will be no change in the neoliberal system
that we have locked in.
And of course, the
only way that you can really end history is
by what Biden is threatening: atomic war to
blow up the world.
That is the
neoliberal end of history. And it’s the only
way that the neoliberals can really stop
history. Apart from that, all they can try
to do is to prevent any change that is
adverse to locking in the neoliberal order.
So the “end of
history” is a declaration of war against any
country that wants to go its own way. Any
country that wants to build up its own
economy as a way that will keep the benefits
of its economic growth in its own country,
instead of letting it go to the global
financial class centered in the United
States and Britain.
So we’re talking
about, neoliberalism was always a
belligerent, implicitly military policy, and
that’s exactly what you’re seeing in the
proxy war of US and NATO in Ukraine today.
Yeah, very well said.
That’s the other key ingredient:
overthrowing any government that is a
challenge, that shows there is an
alternative, to try to prove the maxim that
“there is no alternative.”
Here’s an interesting
comment from Christopher Dobbie. He points
out that in Australia, the average age for
their first homeowner was 27 in 2001; now
it’s 35, and increasing more and more by the
Now, in the last few
minutes here, Professor Hudson, here’s
another brief question that I got from
someone over at
patreon.com/multipolarista – people can
go and support this show. One of my patrons
asked this question: who is hurt most by the
Fed or other central banks raising interest
rates? People, average consumers, or
And obviously, you
talked earlier about how the US Federal
Reserve is different from other central
banks, but it’s kind of an open question.
Who is hurt more by raising interest rates?
Well, companies are
certainly hurt because it means that any
possibility of getting productive credit is
raised. But they’re also benefited, because
if interest rates raised go up high enough,
then it will not pay corporate raiders to
borrow money to take over and raid companies
and empty them out, like they did in the
So everything cuts
both ways. Raising the interest rates have
given commercial banks an excuse to raise
the interest charges on credit card loans
and mortgage debts.
So raising interest
rates, to the banks, have enabled them to
actually increase their margin of monopoly
profits on the credit that they extend.
And that certainly
hurts people who are reliant on bank credit,
either for mortgages or for consumer debt,
or for any kind of loans that they want to
interest rates hurts debtors and benefits
creditors very rarely helps the economy at
large, because the creditors are always
really the 1%; the debtors are the 99%.
And if you think of
economies, when you say, how does an economy
benefit, you realize that, well, if the
economy is 1% creditors and 99% debtors, you
are dealing with a bifurcation there.
And you have to
realize that the creditors usually occupy
the government, and they claim we are the
country. And the 99% are not very visible.
Democracy can only be
afforded if the population’s voting has no
effect at all on the government, that it’s
only symbolic. You can vote exactly which
oligarch you want to rule your country. Ever
since Rome that was the case, and it’s the
Is there really any
difference between the Republicans and
Democrats in terms of their policy? When you
[have] the same central bank bureaucracy,
the same State Department blob, the same
military-industrial complex, the same Wall
Street control, what does democracy mean in
a situation like that?
The only way that you
can have what democracy aims at is to have a
government strong enough to check the
financial interests, to check the 1%, acting
on behalf of the 99%. And that’s what
Professor Hudson, is about the proposal of
an excess profits tax as an alternative to
try to contain inflation. What do you think
about the proposal of an excess profits tax?
Well, only the little
people make profits. If you’re a
billionaire, you don’t want to make a
profit; you want to essentially take all of
your return in the form of capital gains.
That’s where your money is.
And the way you avoid
making a profit is you establish an offshore
bank or creditor, and you pay out all of
your profits in the form of interest, which
is an expense. You expense all of what used
to be, what really is, income. And you show
no profits at all.
I don’t think Amazon
has ever made a profit. You have huge, the
biggest corporations, with all the capital
gains, have no profits. Tesla is a gigantic
stock market presence, and it doesn’t make a
So the key is capital
gains, is financial gains, stock market
gains, gains in real estate prices, unearned
income. That’s what the free lunch is.
You want to prevent
profits being paid out in the form of
interest. So I would vastly increase
profits, by saying you cannot deduct
interest as a business expense. It’s not a
business expense. It’s a predatory parasitic
expense. So you’re going to have to declare
all of this as profit, and pay [tax] on it.
Pricing your output
from a foreign offshore banking center, so
that you don’t seem to make any profit, like
Apple does, pretending to make all its money
in Ireland, you can’t do that anymore.
You’re going to have to pay a real return.
So the accounting
profession has made profits essentially tax
free. So the pretense of making money by
taxing profits avoids talking about capital
gains and all of the fictitiously low
profits that are simply pretended not to be
profit, like interest, depreciation,
amortization, offshore earnings, management
All of these should
be counted as profits, and taxed as such as
they were, I’d say back at the Eisenhower
And finally, the last
question here, Professor Hudson, someone
asked about the U.S. government pressuring
countries in Africa not to buy Russian
wheat. And the U.S. is, of course, claiming
that this wheat is supposedly stolen from
I know this could be
a long point of discussion; it could be the
entire interview. And I know you have to go
soon. But just concluding here, I’m
wondering if you could comment.
The United Nations
itself has warned that there could be a
famine, especially in Global South nations.
What do you think the
role of these neoliberal policies and
Western sanctions are in fueling that
Well, the wealthiest
families in the world used to go every year,
now they go every few years, to Davos, to
Klaus Schwab’s Davos World Economic Forum.
And they say, the world is overpopulated; we
need about 2 billion human beings to starve,
preferably in the next year or two.
So it’s as if the
wealthy families have got together and say,
how can we thin out the population that
really we, the 1%, don’t need?
And in all of their
policies, it is as if they’ve decided to
follow the World Economic Forum and
deliberately shrink the world population,
especially in Africa and Latin America.
Remember, these are
white people at the World Economic Forum,
and that is their idea of how to retain
talking about “equilibrium,” and equilibrium
is going to be for countries that cannot
afford to grow their own food, because they
have put their money into plantation crops
and cotton to sell to the West, instead of
feeding themselves – they’re just going to
have to starve to contribute to world
And while we’re on
the subject of the World Economic Forum, I
guess I should just briefly add – we’ve
talked about this a little bit, but I just
feel remiss not mentioning it – it’s
interesting to see how right-wingers have
seized on the World Economic Forum and begun
criticizing it a lot.
Obviously, it’s worth
criticizing. It’s a horrible neoliberal
institution that represents the Western
capitalist class. But we’ve even seen, you
know, Glenn Beck, the right-winger, former
Fox News host, he published a book about the
Great Reset and the World Economic Forum.
I’m just wondering
really quickly if you could respond to the
idea that the World Economic Forum is like
some “socialist” organization. Obviously,
it’s the exact opposite.
But what do you say
to these conservatives who have a right-wing
critique of the World Economic Forum, and
think it’s like secretly socialist, and
Biden is a socialist.
They look at any
government or managerial power as socialist,
not drawing the distinction between
socialism and oligarchy.
The question is
government power can be either right-wing or
left-wing, and to say that any government
power is socialist is just degrading the
However, as I
mentioned before, almost all of the European
“socialist” parties are neoliberal. Tony
Blair was the head of something that called
itself the British Labour Party. Gordon
Brown was the head of the British Labour
You can’t be more
neoliberal and oligarchic than that. And
that’s why Margaret Thatcher said her
greatest success was creating Tony Blair.
You have the same
thing in France; the French “socialists” are
on the right-wing of the spectrum. The Greek
“socialist” party, on the right-wing of the
You have “socialist”
parties around the world being
So what does the word
socialism mean? You want to go beyond labels
into the essence.
And the question is,
in whose interest is the government going to
be run for? Will it be run for the 1% or the
And the right wing
wants to say, well, the 1% can be socialist,
because they’re taking over the government
and that’s the big government, and we’re
Well, the right-wing
is taking over the government, but it’s not
really what the world meant by socialism a
Yeah, very well said.
I just always laugh when I see these
right-wing critiques of the World Economic
Forum. I mean, the World Economic Forum is
the embodiment of capitalism. It is the
group of the elite capitalists who get
together to talk about how they can exploit
the working class and help monopolize the
global economy on behalf of Western capital.
So with that said,
there still are many questions, but I know
you have to go, and we’re already at an hour
and a half.
I do want to thank
everyone who joined. We’re at 1200 viewers
right now, so it has been a really good
you’re very popular. You should do your own
YouTube channel. Maybe we can talk about
that, because every time I have you on, it’s
always an amazing response that I get. And
hopefully we can do this again more in
Aside from people
going to your website,
michael-hudson.com, is there anything
else that you want to plug before we
Well, the book that I
just wrote, “The
Destiny of Civilization,” is all about
what we’ve been talking about. It’s about
the world’s split between neoliberalism and
socialism. So that was just published and is
available on Amazon. And I have two more
books that are coming out very shortly.
And of course, anyone
who wants to support this show, you can go
patreon.com/multipolarista. And as
always, this will be
available as a podcast, if you want to
listen to the interview again. I’m certainly
going to listen to this discussion again.
You can find that anywhere there are
it’s always a real pleasure. Thanks so much
for joining me.
I enjoyed the
And like I said
earlier at the beginning, for me, I truly
think it’s always a privilege, because I do
think you’re one of the greatest living
economists. So I always feel very privileged
to have the opportunity to pick your brain
about all of these questions.
And I want to thank
everyone who commented, who watched, and who
listened. I will see you all next time.
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