The announcement last week by the United
States of the largest military aid
package in its history – to Israel – was
a win for both sides.
minister Benjamin Netanyahu could boast
that his lobbying had boosted aid from
$3.1 billion a year to $3.8bn – a 22 per
cent increase – for a decade starting in
Mr Netanyahu has presented this as a
rebuff to those who accuse him of
jeopardising Israeli security interests
with his government’s repeated affronts
to the White House.
In the past weeks alone, defence
minister Avigdor Lieberman has compared
last year’s nuclear deal between
Washington and Iran with the 1938 Munich
pact, which bolstered Hitler; and Mr
Netanyahu has implied that US opposition
to settlement expansion is the same as
support for the “ethnic cleansing” of
American president Barack Obama,
meanwhile, hopes to stifle his own
critics who insinuate that he is
anti-Israel. The deal should serve as a
fillip too for Hillary Clinton, the
Democratic party’s candidate to succeed
Mr Obama in November’s election.
In reality, however, the Obama
administration has quietly punished Mr
Netanyahu for his misbehaviour. Israeli
expectations of a $4.5bn-a-year deal
were whittled down after Mr Netanyahu
stalled negotiations last year as he
sought to recruit Congress to his battle
against the Iran deal.
In fact, Israel already receives
roughly $3.8bn – if Congress’s
assistance on developing missile defence
programmes is factored in. Notably,
Israel has been forced to promise not to
approach Congress for extra funds.
The deal takes into account neither
inflation nor the dollar’s depreciation
against the shekel.
A bigger blow still is the White
House’s demand to phase out a special
exemption that allowed Israel to spend
nearly 40 per cent of aid locally on
weapon and fuel purchases. Israel will
soon have to buy all its armaments from
the US, ending what amounted to a
subsidy to its own arms industry.
Nonetheless, Washington’s renewed
military largesse – in the face of
almost continual insults – inevitably
fuels claims that the Israeli tail is
wagging the US dog. Even The New York
Times has described the aid package as
Since the 1973 war, Israel has
received at least $100bn in military
aid, with more assistance hidden from
view. Back in the 1970s, Washington paid
half of Israel’s military budget. Today
it still foots a fifth of the bill,
despite Israel’s economic success.
But the US expects a return on its
massive investment. As the late Israeli
politician-general Ariel Sharon once
observed, Israel has been a US
“aircraft carrier” in the Middle East,
acting as the regional bully and
carrying out operations that benefit
Almost no one blames the US for
Israeli attacks that wiped out Iraq’s
and Syria’s nuclear programmes. A
nuclear-armed Iraq or Syria would have
deterred later US-backed moves at regime
overthrow, as well as countering the
strategic advantage Israel derives from
its own nuclear arsenal.
In addition, Israel’s US-sponsored
military prowess is a triple boon to the
US weapons industry, the country’s most
powerful lobby. Public funds are
siphoned off to let Israel buy goodies
from American arms makers. That, in
turn, serves as a shop window for other
customers and spurs an endless and
lucrative game of catch-up in the rest
of the Middle East.
The first F-35 fighter jets to arrive
in Israel in December – their various
components produced in 46 US states –
will increase the clamour for the
Israel is also a “front-line
laboratory”, as former Israeli army
negotiator Eival Gilady admitted at the
weekend, that develops and field-tests
new technology Washington can later use
The US is planning to buy back the
missile interception system Iron Dome –
which neutralises battlefield threats of
retaliation – it largely paid for.
Israel works closely too with the US in
developing cyberwarfare, such as the
Stuxnet worm that damaged Iran’s
civilian nuclear programme.
But the clearest message from
Israel’s new aid package is one
delivered to the Palestinians:
Washington sees no pressing strategic
interest in ending the occupation. It
stood up to Mr Netanyahu over the Iran
deal but will not risk a damaging clash
over Palestinian statehood.
Some believe that Mr Obama signed the
aid package to win the credibility
necessary to overcome his domestic
Israel lobby and pull a rabbit from the
hat: an initiative, unveiled shortly
before he leaves office, that corners Mr
Netanyahu into making peace.
Hopes have been raised by an expected
meeting at the United Nations in New
York on Wednesday. But their first talks
in 10 months are planned only to
demonstrate unity to confound critics of
the aid deal.
If Mr Obama really wanted to pressure
Mr Netanyahu, he would have used the aid
agreement as leverage. Now Mr Netanyahu
need not fear US financial retaliation,
even as he intensifies effective
annexation of the West Bank.
Mr Netanyahu has drawn the right
lesson from the aid deal – he can act
against the Palestinians with continuing
- See more at: http://www.jonathan-cook.net/2016-09-19/palestinians-lose-in-us-military-aid-deal-with-israel/#sthash.fL4Eq28N.dpuf
How Long are People Going to be Willing
to Live in this Illusion?
By Michael Hudson
October 12, 2016 "Information
BROWN: With the worst of the great
recession, supposedly, behind us, economic
analysts still see signs that we’re not yet
completely out of the woods. A new report
released Wednesday by the International
Monetary Fund shows that some banks in the
United States and Europe may not be strong
enough to survive another downturn, even
with States assistance.
Joining us from New York is Michael Hudson.
Michael is a Distinguished Research
Professor of Economics at the University of
Missouri, Kansas City. His latest book is
Killing the Host: How Financial Parasites
and Debt Bondage Destroy the Global Economy.
Michael, thanks again for joining us
MICHAEL HUDSON: Its good to be here. But we
can’t get out of the woods.
Okay, let’s get into that. The IMF report on
financial stability says, in spite of banks
being stronger now than before the economic
crisis of 2007-2008, about twenty-five
percent of US banks and about a third of
European banks are too weak to even benefit
from a potential rise in interest rates and
any recovery aid, should the global economy
take a downward turn. But before we get into
any specific questions about the health of
banks, Michael, are we still in a recession
or are we firmly in a recovery now?
HUDSON: We are not in a recovery and we’re
not really in a traditional recession.
People think of a business cycle, which is a
boom followed by a recession and then
automatic stabilizers revive the economy.
But this time we can’t revive. The reason is
that every recovery since 1945 has begun
with a higher, and higher level of debt. The
debt is so high now, that since 2008 we’ve
been in what I call, debt deflation. People
have to pay so much money to the banks that
they don’t have enough money to buy the
goods and services they produce. So there’s
not much new investment, there’s not new
employment (except minimum-wage “service”
jobs), markets are shrinking, and people are
defaulting. So many companies can’t pay
banks’ product is debt. They try to tell
customers that “debts are good for you,” but
the customers can’t afford any more debt, so
there’s no way the banks can continue their
current business plan. In fact, there’s no
way that banks can be paid everything that
they’re owed. That’s what the IMF doesn’t
follow through its analysis, by saying,
“Look, the banks are broke because the
financial system is broke; and the financial
system is broke because the whole idea of
trying to get rich by running into debt
was a false model. So really, we’re at the
end of long cycle that began in 1945,
loading the economy with debt. We’re not
going to be able to get out of it until you
write down the debts. But that’s what the
IMF believes is unthinkable. It can’t say
that, because it’s supposed to represent the
interest of the banks. Soall the IMF can say is to wring their
hands over the fact that the banks won’t
make money even if there is a recovery.
there really isn’t a recovery, and no signs
of it on the horizon, because people have to
pay the banks. It’s a vicious circle – or
rather, a downward spiral. Basically, the
IMF economists are just throwing up their
hands and admitting that they don’t know
what to do, given the limits of their tunnel
Well, Michael, help us figure out why growth
has been so weak over these past eight to
six years or so.
HUDSON: If you take the average family
budget – and I’ve said this on your show
many times –we can go through the numbers.
If you have to pay about forty to
forty-three percent of your income for
housing, you also have to pay fifteen
percent of your paycheck for the FICA for
Social Security wage withholding. You have
to pay medical care, you have to pay the
banks for your credit card debt, student
loans. Then you only have about twenty-five
or thirty-five percent, maybe one-third of
your salary to buy goods and services.
problem here is that the way you get a job
is with a company that sells goods and
services. The companies aren’t hiring,
because consumers don’t have enough money to
buy the goods and services.
We’re in a chronic debt-deflation. There’s
no way we can recover unless you write down
the debts. And that’s what the IMF basically
is implying (and it was explicit regarding
Greece), but its not spelling it out,
because that’s not what can be said in
BROWN: Michael the headline
about this IMF report, it reads, “Forget too
big to fail. The big concern is banks too
weak to survive.” If big banks almost
capsized the global financial system, are
weaker banks actually better for consumers?
HUDSON: Banks that are very narrow and do
what banks used to do (before President
Clinton abolished Glass-Steagall in 1999).
Small banks that lend to consumers are fine.
Most banks – with Deutsche Bank at the top
of the spectrum here – have decided that
they can’t make money lending to barrowers
anymore, so they’re going to the second
business plan: They lend money to casino
capitalists. That is, to people who want to
gamble on derivatives.
derivative is a bet on whether a stock, or a
bond or a real estate asset, is going to go
up or down. There’s a winner and a loser.
It’s like betting on a horserace. So the
biggest bank lending for gambles – not for
real production, not for investment, but
just for gambles – was Deutsche Bank.
Borrowers borrowed from Deutsche Bank to
What’s the best gamble in the world, right
now? Its betting that Deutsche Bank stock is
going to go down. Short sellers borrowed
money from their banks to place bets that
Deutsche Bank stock is going to go down.
Now, it’s wringing its hands and saying, “Oh
the speculators are killing us.” But it’s
Deutsche Bank and the other banks that are
providing the money to the speculators to
bet on credit.
Michael, the IMF report says that in the
Eurozone, if the Eurozone governments could
help banks dump their bad loans, it would
have a positive effect on bank capital. What
would be the effect on consumers in the EU
economy, at large, if banks were able to
just dump these bad loans?
HUDSON: Its really very simple mathematics.
You have to abolish pension plans. You have
to abolish social spending. You have to
raise taxes. You have to have at least fifty
percent of the European population emigrate,
either to Russia or China. You would have to
have mass starvation. Very simple. That’s
the price that the Eurozone thinks is well
worth paying. It’s the price that it thought
Greece is worth paying. To save the banks,
you would have to turn the entire Eurozone
You’ll have to have the governments sell off
all of their public domains; sell off their
railroads, sell off their public land.
You’ll essentially have to introduce
neo-feudalism. You’ll have to roll the clock
of history back a thousand years, and reduce
the European population to debt slavery.
It’s as simple a solution as the Eurozone
has imposed on Greece. And it’s a solution
that the leaders and the banks are urging
for responsible economists to promote for
the population at large.
Let’s talk about the other little nugget of
information released by the IMF about debt.
Global debt has now reached about a hundred
and fifty-two trillion dollars. This
includes government debt, household debt,
non-financial firms’ debt. What does all
this debt mean for the global financial
system and for everyday people here,
HUDSON: It means that the only way people
can repay the debt is by cutting their
living standards very drastically. It means
agreeing to shift their pension plans from
defined benefit plans – when you know what
you’re going to get – into just “defined
contribution plans,” where you put money in,
like into a roach motel, and you don’t know
what’s coming out.
save the banks from making losses that would
wipe out their net worth, you’ll have to get
rid of Social Security. It means that you’ll
essentially have to abolish government and
turn it over to the banking system to run,
with an idea that the role of governments is
to extract income from the economy to pay to
the bondholders and the banks.
When you say “paying the banks,” what they
really mean is paying the bank bondholders.
They are basically the One Percent. What
you’re really seeing right now in the IMF
report, in this growth of debt, is the One
Percent of the population owns maybe
three-quarters of all this debt. This means
that there’s a choice: Either you can save
the economy, or you can save the One Percent
from losing a single penny.
Every government, from the Obama
administration right through to Angela
Merkel, the Eurozone and the IMF, promise to
save the banks, not the economy. No price is
too high to pay to try to make the financial
system go on a little bit longer. But
ultimately it can’t be saved, because of the
mathematics that are involved. Debts grow
and grow. And the more they grow, the more
they shrink the economy. When you shrink the
economy, you shrink the ability to pay the
debts, so it’s all an illusion that the
system can be saved. The question is, how
long are people going to be willing to live
in this illusion?
That was my next question for you. Not only
how long are people going to be able to live
in this illusion, but how much longer is
this illusion actually sustainable before we
see another collapse of economies around the
world? Is this something that is impending,
that we should just be expecting to come, we
should be readying ourselves for this?
HUDSON: We’re still in the collapse that
began after 2008. There’s not a new
collapse, there hasn’t been a recovery.
Wages for the ninety-nine percent have gone
down, steadily, since 2008. They’ve gone
down especially for the bottom twenty-five
percent of the population. This means that
they’ve gone down especially for Blacks and
Hispanics and other blue-collar workers.
Their net worth has actually turned
negative, and they don’t have enough money
to get by.
fact, one of the big consulting firms just
did a study of the millennials. Ernst and
Young did a study and they found
seventy-eight percent of millennials are
worried about not having enough good paying
job opportunity to pay off their student
loans. Seventy-four percent can’t pay the
health care if they get sick. Seventy-nine
percent don’t have enough money to live when
they retire. So, already, we’re having a
whole generation that’s coming on, not only
here but also in Europe, that isn’t able to
get good-paying jobs. The only way it can
live the life they were promised is if they
have rich enough parents who have given them
a trust fund.
HUDSON: Yes, later this month. It’ll be
J is for Junk Economics. And it’s a
review of why the economists promise that
somehow we’ll recover. Why this is basically
junk, and why in order to be an economist
these days, you have to participate in this
fairytale that somehow we can recover and
still make the banks rich. And it is a
fairytale. J is for Junk Economics
is about why it won’t work.
Coming to a bookstore, near you, later this
year. Michael, we appreciate you lending
your time and expertise to us, as always.
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