Each quarter, Patreon Plus supporters can ask Michael questions. Here is a transcript of the most recent one, just in time for our next Q&A this Thursday. Please support Michael’s work via his Patreon page.

Karl Fitzgerald: Alright, let’s get into it. We’ve got lots of good questions. Welcome, everyone. My name is Karl Fitzgerald. I’ve been Michael’s webmaster for over a decade now and yes, we’re so lucky to have Michael Hudson with us today. We’ve all read his books. We’ve all seen his whirlwind approach to unveiling the reality of economics so yes, Michael, great to have you here. I wanted to start off with just a nice easy one. I’m sure you could answer this in your sleep but for you, what are some of the guiding principles that listeners should really grasp in terms of just how rigged our economic system is today? What’s the handful of principles that you think are a useful barometer for people to grasp just how off-kilter our economic system is?

Michael Hudson: I’ve been working on a vocabulary to describe these principles. There are a number of seemingly opposing forces at work. I think we should call the inflation, The Biden Inflation, because the inflation that we’re seeing is almost entirely the result of Biden’s inaugurating a new 20- to 30-year cold war with Russia. He’s announced that it’s going to take 20 or 30 years. He said Ukraine is only the opening. His sanctioning of Russian oil, gas and food is pushed up by inflation by about at least 10% from Europe all the way to the United States. So, on the one hand, this inflation that people are saying is the problem has led the Federal Reserve to say, “Well, there’s a cure to that Biden inflation. Let’s have a depression and lower wage rates. If only we have more unemployment, we can cure the inflation.”

So, you have the Biden inflation and exports that are forbidden from Russia going together with a deliberately central bank inspired debt deflation. And I think we should call this the Obama debt deflation because it all stems from 2008 when Obama had promised to write down the junk mortgage debt but as soon as he got in to office, he said, “No, we’re not going to write down the junk mortgage debt. We’re going to write down the debtors. We’re going to evict 10 million American families from their houses because my campaign contributors are my constituency.” And so, he kept the debt on the book.

This is one of the few times in modern history – normally, when there is a business cycle, it peaks and then, there is a financial crash. And the one good thing about the financial crash is it wipes out the savings of the 1%. But Obama said, “The economy is really the 1%. The 99% are overhead and so, we’re going to preserve all of the debts on the book and write down what labour gets in net disposable income. That is, the disposable income after paying taxes and after paying debt service.” And in America and Europe and certainly, in the global sales countries, debt service has gone way up.

So, at the same time, you have the labour force faced with rising cost of living for energy, food and other things, with a deliberate central bank desire to cause unemployment to increase corporate profits of the 1% against the 99%. You’re also having families much more debt-ridden than they were before. Education debt is now soaring in America, even beyond credit card debt. Bank debt, housing debt, mortgage debt, they’re all way up and of course in England, there is a special twist that there isn’t in the United States. At least, in the United States, housing prices may go down but for new houses, it’s more expensive but if the credit interest rate, mortgage rate goes up from 2½% to 6%, at least, that’s for new buyers.

But in England, the rate goes up from 2% to 6% for everybody who has already taken out a mortgage. There are no fixed rate mortgages in England. And so, there is going to be a wave of up to one third of English home owners thrown out on the street. This is the ideal of what we’ve been calling neoliberal economics but as you notice from what Karl put up today, my discussion with Ralph Nader, he says that neoliberal is an academic term used by economics professors. And he says, “Instead of a neoliberal economy, say bank-run economies.” And that’s probably a clearer term.

These are phrases that I wanted to throw out for discussion to see whether they really help. I’m trying to give a new vocabulary to understand the dynamics that are happening today because the vocabulary should really describe the economics and the label should match the content instead of the labels that we have in the media.

Karl Fitzgerald: Yes. You touched on the UK there and the resignation of Truss, Britain’s current economic woes. Where do they stem from? Is it monetary mismanagement or due to self-imposed economic sanctions? How much are due to structural problems and debt overhang? So, (Patreon), John Connolly. [pause] Oh, you want me to repeat that?
(Audio problems)

John Connolly: Yes. No, you summarised the question. I’m just interested in the factors underlying Britain’s current economic woes. How much due to economic sanctions? How much due to monetary mismanagement? How much to debt?
(08:34)

Michael Hudson: Ah, I thought that was all the lead-in. I didn’t realise that Karl was reading a question. Well, the answer is just, they’re English. I mean, this has been going on for a thousand years. I probably shouldn’t say English because England hasn’t had an English king ever since King Canute in 1040 or something. They’ve all been Normans or Dutch or Franc’s or somebody else, or German’s. England is just a total mess. I think that once Thatcher followed by Tony Blair with an exclamation point turned it into a bank-run economy and essentially turned over the whole economy to the City of London, the voters got so angry that the reason they wanted to whisker off from Europe was they saw that their international banking sector was what was impoverishing them.

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And they withdrew from Europe just really to punish the bankers. And so, the bankers got the revenge by basically leaving an economy that had turned away from an industrial economy into a financialised bank-run economy and it doesn’t work. And it won’t work. I think with 20-30% of English homeowners losing their homes, where are they going to go? Maybe they’ll migrate to Ukraine, after it’s all wiped out. I don’t know. They don’t speak a foreign language. That’s a problem with English speakers. I guess they’ll all become Karl’s neighbours in Australia maybe. I don’t know what’s going to happen but basically, it’s the financialised economy, de-industrialised economy and a privatised economy.

Privatisation has killed England and the tax policy of taxing labour, not land and capital, has essentially created a parasitic ruling class. There’s almost no way to make money by producing a productive service in England. Parasitism is the only way that you can survive in an economy as backward as England has become.

John Connolly: So, what’s the prognosis? A lost cause, pretty much?

Michael Hudson: Independence.

John Connolly: Okay.

Karl Fitzgerald: Steph L asks, so what do you think the British global financial class wants to see from the UK Government?

Michael Hudson: Exactly what Ms Truss had done. Tax labour and industry, not finance.

Steph L: That’s kind of what I asked actually, because I found it so hard to understand why there seemed to be – it seemed to be like the Bank of England specifically moved against Truss to get her ousted and I couldn’t understand because from what I saw of the budget, it seemed pretty well on line. Do you think there was something else at play with why she’s getting shown the door?

Michael Hudson: Yes. It’s not the budget. It’s the fact that the labour unions and the pension funds had taken out derivatives, financial derivatives with the banks. They had thought that if you take out a derivative, that will actually protect you from losing money in the event that interest rates go up. But derivatives really don’t get rid of the risk. They merely transfer the risk. And what the derivatives trades that were done by the labour unions and the pension funds did, were basically shifting all the risk off onto them, off the banks. It’s a bonanza for the banks. You should be very happy if you like GDP. GDP has gone up. Bank earnings have gone up. Wealth has gone way up in England because you just impoverished the labour force.

This is exactly what academic economics says should be done, so the bankers should be very happy and maybe the English people can all move to Scotland if there’s any room. I don’t know, but there’s no work for them in England now and they’ve essentially had, were watching their pensions being wiped out by Trump’s policy and the Bank of England was trying to prevent that. But it’s all in the derivatives. It has nothing to do with the budget deficit, nothing to do with spending at all. It’s all on gambles. The banks told them to go to the casino and promise that they’d win. Of course, that’s just what Donald Trump told people, to go to his casinos. And the casino always wins. You don’t win in going to the financial casino unless you’re one of the billionaires and one of the big players that can monopolise and control the market.

Steph L: Okay, thank you so much.

Karl Fitzgerald: Beautiful. So, yes, over to China; What are we seeing in China? Karl Sanchez asked earlier this week about China’s 20th Party Congress and there has been a lot of talk about Xi Jinping and his conquering in a never-ending sort of rule he’s got formulated. His question, Karl’s question is centred around the ramifications of this event as well as the issues present – oh god, sorry. That’s not good. But what’s happening with the housing situation in China, Michael? Richard Vogl asks, how did they get there and is there fix adequate?

Michael Hudson: Well, I’m going to talk about your first question first because I just had a long two-hour meeting with the Chinese yesterday. And it hasn’t been – the conference has not been covered very well at all in the American or even, the European media. Basically, the theme of President Xi’s speech was back to the modern era. The word he used was again and again throughout his speech was, modernisation with Chinese characteristics. And what does it mean to be modern? It means not to be post-modern. Xi realises that the Western World really since World War One, has rejected everything that was considered modern back then.

What was modern was socialism, was a rising government role in society, that productivity would be managed to provide more of a leisure class. Modern was progressive taxation. Modern was – as Karl loves to say – land taxation, so that you tax away the free lunch. All that was modern. All that’s been rejected by Europe and by the West. It has become post-modern which is euphemism for neo-feudalism. Back to the feudal time. Back when the landlords and the wealthy banker’s-controlled society. Back to economic polarisation, not more equal distribution of income. So, when President Xi talked about modernisation with Chinese characteristics, the key really is what used to be considered modern and has now all been rejected by the West so he – in other words, he is for greater equality of income and wealth, raising the income of the lower-paid Chinese, taxing the higher-paid Chinese and that leads us into what you’re talking about, land and real estate.

The idea of making fortunes by borrowing money to bid up real estate prices for debt-financed land value gains, is not really a way to get rich. Just by inflating the counters of what a house or an office building or a home is worth by going into debt is the Western way to get rich and also, to impoverish the economy. And Xi is not doing that. He didn’t specifically talk about real estate and the financial problems that are occurring there but he made it clear that he’s going to end the whole idea of the government providing credit simply to increase the price of real capital investment, housing, factories, plant and equipment that are – he’s more concerned with economic reality than the financial image of this reality that is inflated by prices. He didn’t quite say it that way but we still have a few days for him to spell out everything.

Karl Fitzgerald: Well, that’s good to hear Michael because I must say I was disheartened when it was announced earlier this year that the talk of implementing a property tax in particular regions was, even that was quashed in China and it really, for me, drove home just how powerful property interests were. But you’re saying that there is still hope that he’s going to pull into line this post-manufacturing economic model of using real estate and population growth and infrastructure expenditure to drive growth?

Michael Hudson: Well, at least, that’s what I’ve been spending all my time in China talking about. The focus of all the lectures that I’ve done in China that you’re now putting up on my website and you put some up on Patreon, are all about that. Right now, Xi has a problem in increasing the taxes that are – if he increases the taxes on housing and real estate on the rents that are now being paid to the banks, the banks will go under. How is he going to manage this? I think that he should let the banks go under because the bankers who made a lot of money will go under but fortunately, ultimately, all this banking money is owed to the government.
(19:56)

And the government can simply write down the debt. So yes, property prices that have been inflated by debt will go down but the building won’t be destroyed. It’s just the price of the building will go down and there are all sorts of ways of compensating for that by reducing the rents to reflect the actual cost of the building. This is the discussion that’s going on throughout China and the problem is especially serious in an area that really, the government has left to the localities in the past. People think of China as being a centralised, centrally-managed economy but that’s not what’s happened at all.

Localities have had an enormous freedom to let a hundred flowers bloom, let each go their own way and the result is that localities have had to finance their domestic city and local spending by selling land to developers. And that is the problem that – that has created the enormous problems that you have today because the developers have then gone to the banks, not the government of China banks, but the banks that are borrowed from are the Bank of China and there has been a whole sort of privatised financialised banking system that’s developed. That’s what they’re finally turning to in the next presidency of Xi. And obviously, everybody in China realises that this has to be done right now and that hasn’t become explicit but that’s the problem that I’m sure they’re all talking about in Beijing this week.

Karl Fitzgerald: Yes, and when you hear that problem with the way local council is funded, it really gets you thinking that our public finance system is not just a death in taxes. Our tax system can actually enhance the way society operates and unfortunately, it’s been turned into a parasitic force. Let’s go to Karl Sanchez now. He’s always got some good questions. Karl, you were trying to get to a point. Take us away.

Karl Sanchez: Okay. Let’s see what I wrote up here. I see. I wrote my question. It says, in your Valdai Club paper that you produced last year, you called the regime a creditocracy and in your revised introduction to global fracture in 2005, you make a series of prescriptions, for the global staff to employ. In my opinion, the West is a lost cause, yet China has just announced its new goal of establishing a new international economic order based on devolvement and modernisation. If you could talk to the 20th Party Congress, what would you tell them, given your previous efforts?

Michael Hudson: Just what I just told you in the last few minutes.

Karl Sanchez: Yes, I know, I kind of figured that.

Michael Hudson: What can I say that I haven’t already said?

Karl Sanchez: Yes.

Michael Hudson: The word creditocracy was invented by my co-author of that article, Radhika Desai, and that basically means asset price inflation. It’s another word – we’re trying to develop a vocabulary to describe actually, what’s going on. And what she meant is that the West, a bank-controlled economy is controlled not by actually having wealth or even having money but the ability to create debt at will. And that’s what we’re trying – that is what is loading the economy down with debt and I’m trying to – as you know – convince countries that they have to write down the debt in order to spend income on real goods and services, not simply debt service to the banks that are given a monopoly in credit creation.
(24:24)

Well, China’s different from Russia because China has kept money and credit creation as a public utility and that is what has enabled China to avoid the problems that have occurred in the West. What I would explain to China and what I have been explaining – I should say in the next few months, there is going to be a big Chinese translation, both of super-imperialism, a third edition – it’s already been in Chinese for many years – but now, they’re doing the new edition and also, the destiny of civilisation and they’re doing four more books of mine as quick as the translators can do them.

All of this is getting into the public discussion and these are being published mainly by large commercial publishers there, not simply by the government publishers. So, all of this is being prepared. They’re going over the editing of the translations and the indexing of the books as we speak.

Karl Sanchez: Well, that will be good. You discussion with Nader was very intriguing because it brought up some very interesting points of discussion on another forum in relation to words versus actions and how they go ahead and convey information. The idea that you need to have a new vocabulary is sound. It’s just how do we go about doing that? And then, I know you are trying to go ahead and come up with your own definitions for these things that you’ve defined for decades now in a more particular manner, which is difficult. My question I just wrote here is, how do we go ahead and redefine wealth that’s not monetised? How can we get away from that?

Michael Hudson: Well, the academic vocabulary is real wealth but of course, now what’s real is finance and what’s tangible is unreal. I think Fredick (26:36) called financialised wealth, virtual wealth and Marx and even Henry George used the word fictitious capital or fictitious capital and what Wall Street economists, I think, call the Q ratio, the ratio of the market price of a corporation’s stock relative to the book value of the stock. But even the book value includes something called, all sorts of circular reasoning called – what is it called? – goodwill and things like that.

It’s hard to introduce a new vocabulary without introducing a restructuring of the GDP analysis so that you take out of GDP national income and products accounts, you take out transfer payments that really have nothing to do with product at all. Transfer payments would be what the classical economists – as you know – call economic rent. Interest payments are rent payments, monopoly prices. This is not a product. It adds to the seeming GDP which really should be growth national cost. And so, we need something to mean de-financialised output after growth national costs. For a personal income, you’d say, real disposable personal income.

So, we could say real product. The problem is there already is a word for it called real GDP and that’s the existing mass of financialised GDP just divided by the consumer price index or GDP deflator. How do we get a new word? Originally, I’d thought that for this show, I’d throw out all these words and say, “How do we develop a new vocabulary?” and “Do you have any suggestions?” It really takes a lot of speculation to develop a new label and vocabulary for this concept of GDP when you take out all of the fictitious product. Maybe you could just call it non-fictitious GDP. Maybe that makes it explicit.

Karl Sanchez: Or we could just go ahead and call it net wealth.

Michael Hudson: But net, people will then say, “Net of what?” And there are so many ways that it could be net of so I think you have to make it clear that what many people think of wealth is fictitious.

Karl Sanchez: On your balance sheet you have equity and that’s after the assets and –

Michael Hudson: But a lot of equity, for instance, if you have a monopoly, if you are like Facebook or something, a lot of your equity is a monopoly, right? And a monopoly rent. If you’re a landlord and you have a building and real estate holding that you’ve had your taxes reduced steadily, that gives you the idea that now you have equity because somebody’s – you’ve just bought buildings that the stock market says are making a killing. But that’s because the rent is paid to the landlord who pays it to the bank and far in excess of the real cost value of the building. So, we’re back into really classical economic vocabulary of the 19th century.

Karl Fitzgerald: I’ll just jump in there because yes, there’s been some interesting developments at the UN with their system of national accounts where – I think Michael, your use of the word rentier and getting that back into the public vernacular alongside all the various tax enquiries around the world. It’s brought back this concept of rent and natural resources and monopoly rents itself so what do you think of those high-level discussions at the UN looking to formally recognise rent through their system of national accounts?

Michael Hudson: There has been a lot of good work by Jacob Assa at United Nations. He’s published now, two books on GDP and National Income Analysis. You can look them up on Google and Amazon. And he’s done a very good – compared all of the UN statistical format for all over the world in doing this and has been – very influential. He’s a friend of mine. He lives out here in Long Island for – that’s where I live. If you read Jacob Assa’s books and articles, you’ll get a great detail as to what the UN is doing.

Karl Fitzgerald: Very good. Yes, I’m trying to find a segue from that one on through the questions that people are putting on the Q&A panel. It’s great that people are putting questions in there. Back to the housing story, we’ve got one here on – I’m working with a few tenants who are in a Fair Rent Commission dispute with their landlord. They had a victory in cancelling a significant rent increase. Michael, where do you stand on rent capping and does it work? Is that a way forward?

Michael Hudson: Rent capping saved New York City after World War Two when it was capped on the books. And the removal of rent capping led to such a high degree of rent increases, that led to the whole condominium and co-oping thing. Suppose you had a $10 million building for, let’s say, a 6-floor building and it was worth $10 million. The landlord would take out from the bank a $10 million mortgage and then, he’d sell the co-ops to the building for $10 million, that he’d now paid not a penny for and he’d sell it to the condominium buyers for $10 million with the $10 million mortgage on top of the whole thing.

So, in one swoop by privatising, by raising rents and frightening people into, you’d better buy your house now because if you don’t, the rents are going to go up so let’s privatise it, you made an enormous parasitic banking class, symbiotic, absentee landlord class and a banker class and they’re called developers.

Jamon Smith: That question was about the Fair Rent Commission was mine. And to follow up with that, we’re trying to prove, to demonstrate the extractive nature of the landlord along with the free lunch aspect of his income and capital gains, and I’m wondering about how – do you have any advice or direction for showing that for this landlord, how to show the free lunch ride so that we can talk about fair rents being – rents needing to be fair. Thank you.

Michael Hudson: In what locality are you in?

Jamon Smith: This is in New Haven, Connecticut, so this is in Connecticut, specifically Hamden.

Michael Hudson: Okay. I’ve made all the charts that I could on this very topic in The Bubble and Beyond. I have the chapter on rent and capital gains. Basically, the capital gains pay the taxes for absentee owners. And you can say the capital – here’s an example of where the vocabulary is wrong: they call it capital gains but it’s not a capital gain at all. It’s a land price gain. It’s the increase in the land price that is fuelled by debt. And so, you can show, find out how much debt the landlord owns on the property, see what his net equity is and net of debt and then, you look at the capital gain. And if he’s borrowed – which is typical – 90% of the value of the market price of the building from a bank, then he’s put in 10%.

And every time the price of the property increases 10%, his net investment had doubled 100%. So, you look at the – you take the – you compare the capital gain to his net investment after taxes and you show how the return is not simply the 5-6% typical rate of profit but 100%, 200% and 300%. And the question is, do you really want a society where the way to double and triple and quadruple your money is by debt-financed land price gains instead of by actually producing something.

Karl Fitzgerald: Yes, good Michael. Do you think another way would be to look at the purchase price—–

Jamon Smith: Thank you so—–

Karl Fitzgerald: Hello, Jamon, just—–

Jamon Smith: Thank you so much.

Karl Fitzgerald: Okay, Jamon, we’re going to leave it there. We’ve got a question here from Hanming Chen, a question about the value of currency. He’s living in Australia and we’ve run a balance of payment surplus here due to the price of commodities in trades but the exchange rate keeps going down typically after US interest rate rises just like all currencies around the world. What is the key factor determining the value of a currency?

Michael Hudson: Corruption. Your central – when I was down in Australia, Karl took me to your very nicely-designed capital of Canberra and I met with the central bankers there. And they said, “We’re a very lucky country. We live in the – we’re a neighbour of China and we can balance our payments and really get by just through exports. We don’t need any industry and quite frankly, we don’t need people.” So, this is – the corruption-- is just the bank-centred world view that Australia should be run for the benefit of the mining interests, the iron mining interests that created the wealthiest lady, I’m told, in Australia.

And the central bank is run for the mining interests and for the foreign investors. The Bank of Australia policy is made by England, which is made by the Federal Reserve so just as you elected a socialist Premier or Prime Minister, the Queen of England’s local representative in Australia said, “Well, you’re a colony, we don’t agree with that person. You can’t elect them. You can only elect people that we agree.” This is what Australia did and so, it passed a neoliberal regime of the government in Australia that is even worse than Tony Blair in London. And the same thing in New Zealand under Douglas economics.

The irony is that a century ago and around 1900, you had a brilliant associate of Henry George go to Australia and popularise his ideas, Michael Flurscheim, who wrote Clue to the Economic Labyrinth, that I think was published in Brisbane. You had what was at that time, positive in Georgism, with a recognition of the symbiosis between banking and real estate and land, including mining, raw materials, very clearly understood in Australia. And then, gradually, really after World War Two, you had the anglophiles there. You had American and British meddling in Australia, pushing bank-centred politicians and corrupting and really, corrupting your political system.

And that’s very hard to realise that what you’ve been suffering for the last 75 years has been the result of neoliberal, Anglo-American meddling and you have to decide, are you going to put the people of Australia first or as present, are you going to let the natural resources and land do the voting by wealth? It’s very hard.

My friend Steve [Keen] was teaching in Australia in Queen’s University and he was bringing attention to the role of finance and land prices and how needless the Australian rise in real estate prices was.

And they said, “We can’t fire him for saying this,” so they closed down the whole academic’s department, just so that Australians wouldn’t hear this analysis of land and real estate. Steve sued and won $1 million and went on to – that financed his subsequent research for the last few years. But as long as you drive out anyone who produces statistics to explain to you how the bankers are getting rich from your rising housing prices, not Australians, you’re going to be living in a parallel universe of fictitious economic world view.

As long as you let the current free enterprise economics departments guide your policy and put their puppets in charge of the central bank and the politics, you’re going to get poorer and poorer and poorer while you imagine yourself to get rich as your housing prices go up. That is the way.

Karl Fitzgerald: Yes. Wow, there you go, Michael. You’ve had fun teeing off on Australia there but yes, like any country that has a chance to enact a mixed economy, as you remind us, is always challenged. And yes, the CIA’s influence in Australia obviously has played a role in that. But if we look at Ukraine, we haven’t had that many questions come through on Ukraine, but in one of your recent interviews, you talked about Biden being happy that this war is dragging on and this is going to be draining Russia’s finances and may well weaken them. But really, the bigger play was economic impact on Europe. Where’s your latest thoughts on that topic?
(45:48)

Michael Hudson: They haven’t changed at all. You’ll notice I haven’t written anything at all on the military situation in Ukraine. I’m not a military person. There are a lot of really good sites, The Vineyard of the Saker is good, Moon of Alabama is very good. Andre Martyanov is very good. Larry Johnson is very good. I don’t have to say anything about that. But the key to American foreign policy, to dominate other countries, is not simply that Russia and China are America’s enemies. President Biden just came out with a 48-page national security report and he made it very clear.

He started off, “Every country is our enemy, any country that wants to compete, our policy must be to prevent it from competing.” That’s almost the lead sentence. And the easiest thing,  America’s number one enemy of course, is always – has been its number one competitor which is Europe, especially Germany. And so, you can think of the war, the new cold war is waged first and foremost against Germany to deindustrialise it, to end German and European competition with America for the next 50 years.

And before the Ukraine war, you had the assistant Secretary of State say – I’m blocking out her name, the cookies lady in Ukraine – say that, “If we can only get Russia to attack, then we can close down our Nord Stream 2 and all of Nord Stream.” And then Biden, again, just before the February attacks began, said, “We’re not going to permit Nord Stream to develop.” Now, why wouldn’t – he said, “We are not going to permit Europe to import one drop of Russian oil or gas.” Well, Russian oil and gas are what powered European steelmakers, papermakers, glassmakers, fertiliser companies that are made out of gas.

They announced beforehand, “We are going to try to use the war in Ukraine to essentially wipe out European competition for the foreseeable future.” And he announced it and then, he did it. And Blinken said the same thing and the Secretary of State lady said the same thing. It’s very clear, and American meddling in European politics is much more conspicuous than it has been even in Australian politics for the last 75 years. And you can see that the idea in the textbooks as well, you assume that the business interests are going to run the economy. That’s not the case in Germany.

The businesses are going bankrupt. The large steel companies are closing down. The fertiliser companies are closing down and you’re having the same thing occur in Italy, France where there are huge demonstrations. By the way, there was not a word or a visual on the American media of these huge demonstrations in Germany, France, England. All you hear about is Russia and Ukraine. It’s a totally managed fictitious view of what’s happening there but the fact is that the business interests there have no affect at all on the politicians. Their orientation is to NATO and under the European Union’s constitution, it says that Europe’s monetary policy must be coinciding with that of NATO.

So, basically, it’s NATO that runs European politics and you see the result. The Euro is plunging. The pound sterling is plunging. It’s going into a chronic depression that will last probably as long as the Great Depression or at least will be as severe as the Great Depression until Europe breaks away from the US orbit and I just don’t see it breaking away at all. I think they’re just going to – maybe the Europeans will all immigrate to Scotland.

Karl Fitzgerald: Is there any chance that EU can reform some of those constitutional blockages, particularly around deficits—–
(51:05)

Michael Hudson: No.

Karl Fitzgerald: With – no? No chance? And with those—–

Michael Hudson: There are absolutely – the European Union states that no – this is the German blocking by the bank-controlled economy – no government can run more – a budget deficit of larger than 3% of GDP. Well, if you’re having your economy plunge by 10%, 15%, you’re going to have to run a deficit of spending of – Keynes pointed out, in order to make up for the fact that your steel companies aren’t employing labour, your other companies aren’t employing labour, tourism has dried up. You’re going to have to have government spending and the constitution blocks all that. Europe would – all of this begin to come to a crisis with the Greek crisis a few – seven years ago.

It cannot be reformed. It must be totally restructured and that will require a few countries at a time going – withdrawing and creating their own organisation. I think they’re calling it the Shanghai Cooperation Organisation.

Karl Fitzgerald: And with these protests, are the right-wing parties benefiting from this concern about continual (obsequence) to NATO?

Michael Hudson: Ha, that’s a trick question. What is a party? A party are the leaders who are essentially bribed by the United States. The United States will go to the party leaders and say, “First of all, we’re going to give you $1 million in an offshore account, but secondly, you have children. Wouldn’t you like your children to go to Harvard and go to the good university, all expenses paid?” The party leaders are not the party. The party doesn’t count any more than the Democratic Party in the United States represents people who vote democratic. The Democratic Party is basically, the National Committee that are Wall Street, basically, the rentier interests.

So, the party leadership usually is the reverse of the voters. The role of the party leadership is to take a poll and to see what voters want and then, you test out the words and the policies they want and then you go to the campaign contributors on Wall Street, the financial and wealth people and monopolists and ask what they want. And you apply the labels that the voters say they want on the policies that the campaign contributors want and the foreign agents want. And that’s politics.

Karl Fitzgerald: Jamie Brown asks, right-wingers tend to place the World Economic Forum ahead of the US government in regards to global influence. And he finishes off, what’s your take on the WEF’s global role? And Michael, I’m just going to throw in a little tangent from my perspective there. There’s been a lot of talk about their most recent manifesto and how you will own nothing in the future. And that seems to have got a lot of the mega-type conspiracy heads up in arms. How useful a tool is that when we have this movement towards perhaps, leasing the land through a land tax system in terms of shooting that down from within?

Michael Hudson: When I look at the World Economic Forum’s papers, it’s really like science fiction. It’s not economics. Maybe it belongs in the literature department. It’s about a parallel future. When they say nobody will have to own anything, that means the 99.9% of the people won’t own anything, only the 0.1% will own everything. And as long as they control the banks, this will be a kind of bureaucratic collectivism worse that Stalinism because if you don’t own anything, then you’re completely dependent on what you can borrow and what you can produce this day or this year or whatever your income is.

You’re going to have to make, let the market tell you what to do and the market is controlled by the central planners on Wall Street. The idea of the World Economic Foundation is to have central planning in excess of anything that Stalin could have dreamed about, but the central planning will be done from the financial centres, from Wall Street, the City of England, the Paris Bourse, maybe Japan’s central bank.
(56:15)

It’s basically a centralised economy planned by the banking system. Well, of course, in the 19th century, socialism, even Marx thought that well, banks are going to be the transition to socialism. They’re going to decide where will credit go to increase manufacturing. He had thought that banking would become industrialised. And instead, you had industrialisation and industry and the economy and real estate financialised. It’s the reverse of everything that was before and that’s the difference between the post-modern World Economic Foundation and the modern era of the late 19th century that is now being picked up in China.

Karl Fitzgerald: Okay. Here’s a good-news angle. Steph L asks, what are your thoughts on Bolivia’s economic approach under Arce? Listening to him talk, it sounds like he’s following a lot of the same principles you outline in your counter-rentier model.

Michael Hudson: Certainly, his speeches say that. I haven’t followed Bolivia very closely since I was analysing tin markets back in the 1960’s. It sounds like Latin America is finally taking control of its own natural resources away from the American multinational firms and that’s very positive. The ultimate lever that the US is trying to conquer Bolivia and Latin America with, is the debt crisis that’s occurring now. Their currencies are all going down against the US Dollar so how on earth are they going to repay the dollar debt this Fall when they’re having to pay so much more money for food and electricity and energy?

Karl Fitzgerald: Greg Paul asks, Dr Hudson has mentioned that he foresaw a long, slow deflation in the West with deep negative interest rates. Is this still your outlook?

Michael Hudson: I don’t like the idea of negative interest rates. This is a pretence. They’re just saying the interest rate, minus the rate of consumer price inflation. That’s a fictitious term. It’s a misleading term. It makes it impossible to discuss or to give an answer to.

Karl Fitzgerald: Right, stern words there. And why is that, Michael? Why is that reflection—–

Michael Hudson: Because it’s not really – a negative interest – it’s fictitious. You’re taking a given interest rate and you’re subtracting the right of a consumer price inflation. Well, the people who are making, let’s say, 9% today are not losing money because consumers have to pay 10% more for their rent and for their oil and for their electricity. It’s a non sequitur.

Karl Fitzgerald: Then, how do you see the current interest rate agenda? Where are we headed?

Michael Hudson: The Federal Reserve winner recently for America’s Federal Reserve Bank and the former President of Harvard have all said, “Interest rates have to be held high enough so that nobody will – so few people will invest and so few people can buy homes, that there will be a depression. The depression will lower employment and wages will fall. The solution to any problem is lower wages.” That’s the IMF’s principle. That’s the basic principle of a bank-run economy, no matter what the question you ask, I have the solution: lower wages, lower living standards.

The theory is that that will increase our profit. So, the interest rates will be kept high enough until they’ve wiped out the pension funds, made it impossible for people to – new home buyers to take out a mortgage to buy a home and outbid the absentee owners that are turning America from an owner-occupied society into an absentee-owned society.

That’s part of the aim of higher interest rates, is to create an absentee-owned society where you have private capital coming in and saying, and buying out masses of housing at pennies, just as they did under Obama.
This is the Obama strategy of essentially, ending home ownership, especially for the ethnic and racial minorities. It’s basically the anti-black policy that it was under Obama, to prevent the low income ethnic and racial minorities from becoming homeowners and forcing them into rent dependency on private capitalist absentee landlords.
(61:46)

Karl Fitzgerald: Yes, good. Good, Michael. Geez, we’re getting through these questions. Have a sip of water, mate. These questions are coming in thick and fast.

Michael Hudson: Maybe I should make a margarita.

Karl Fitzgerald: Richard [Vogle] has talked about how you’ve warned against the hazards of free trade for developing economies. ASEAN is touted is a free trade bloc. Is this a problem for developing ASEAN members?

Michael Hudson: My whole book on trade development and foreign debt [Trade, Development and Foreign Debt] explains the fallacy of free trade theory, so I’ve said everything that I can say there. And you also have United States and its rules-based economy says that it doesn’t have to follow any of the rules that the other economies follow so any agreement that they make is designed to make them into economic satellites and financial colonies of the United States.

Karl Fitzgerald: Yes. The interest rate play, there has been so much jawboning with that through the early 2010’s as each country tried to force down their exchange rate to encourage export competitiveness. Where do you see that playing now in a world of rising interest rates and how can countries create a genuine comparative advantage?

Michael Hudson: They can never, ever create a comparative advantage by devaluing. When you devalue, all you devalue is the price of labour because the price of raw materials – copper, oil and food – are all set in dollars. So, no matter what your domestic currency falls to, your cost of common international goods is going to go up in proportion to your devaluation. If you devalue say, the Argentine currency by 20%, then the price of oil, of copper, of machinery, of management and your debt service is going to go up by enough. So, all you do is reduce the price of labour.

So, again, here’s the answer to your question, Karl. It’s the answer to every question: reduce the price of labour, lower living standards. That’s the answer to everything. Devaluation is designed just like the rise in interest rates, to lower living standards. That’s what the IMF says. If we’re going to give you, bail you out, you have to join the class war against labour. That’s the answer to every question you’re going to ask, if you’re a neoliberal.

Karl Fitzgerald: Yes. And pushing down wages as house prices increase intensifies the struggle and reduces the ability, the head space of the general public to really grasp what’s going on in the world.

Michael Hudson: Yes.

Karl Fitzgerald: Pretty obvious, I suppose. (65:11) asks, Michael, your work has inspired me to get an MA in Economics.

Michael Hudson: Oh dear, I’m awfully sorry. Please don’t do that. You will be taught the opposite of everything that I write.

Karl Fitzgerald: As an American, which departments would you recommend Stateside, which departments would you recommend abroad? I imagine for work, she’s talking.
(65:37)

Michael Hudson: Well, there aren’t any that I can recommend. I was along with Randy Ray and Stephanie Kelton at the University of Missouri at Kansas City but we’ve all dispersed from there and there really isn’t – it’s almost impossible to get a degree or a study in the United States or Europe if your professors can only get appointed to professor positions by publishing in University of Chicago neoliberal journals. So, economics has been – really as I said – a science fiction department. It’s like a parallel universe. There is nothing.

The reason I don’t teach anywhere except in China is because there is no way that I can fit my ideas into the curriculum. The curriculum doesn’t talk about land or real estate or debt or national income accounting. It just says lower living standards, that’s the solution to everything. So, I don’t think studying Economics would help at all. When I went to work on Wall Street, the boss of one of the companies said, “We know you didn’t learn anything getting your PhD but we require everyone to have a PhD because it shows that they’re willing to work, to spend a lot of time on something that really doesn’t matter, just because they want to get ahead. Well, if you can do that, we think you might help our corporation get ahead. And it’s something that doesn’t really matter for life except to make money for you and for us.” Well, that’s economics.

Karl Fitzgerald: And that’s why Patreon is so valuable really, because it’s giving independent thinkers like yourself, Michael, that extra income stream to be able to work outside that strict systemic control.

Michael Hudson: But what I did, mine really wasn’t the income so much. I want to see what can they do to spread these ideas. I mean, the whole idea, the whole reason that I set up Patreon is to try to get a group together that’s going to promote this way of looking at the world. I’m spending all my time writing on it that I can, but I’m only guy. How can I institutionalise my ideas by spreading these ideas to you guys and creating some kind of a critical mass? How do I make you into a critical mass?

Karl Fitzgerald: Good one. Dee Smith, hello there. We haven’t heard from you before. Welcome to today’s session. You ask a good question here. “Electoral changes to the Left in Latin America make me feel hopeful except that it seems likely these leaders will be assassinated. Are there any economic forces either in Latin America or elsewhere that can help understand the likely upcoming assassination and coups performed by the same forces as in the past?”

Michael Hudson: I don’t know. Again, not my department. I just don’t know. I know that my Chinese friends are working closely with colleagues in Venezuela. We don’t know what’s going to happen in Brazil. This is how the United States works, by its assassinations. As Stalin said, “No person, no problem.” That’s America’s motto. No person, no problem.

Dee Smith: Okay, thank you.

Michael Hudson: I wish I can be more helpful but I don’t know. I mean, I just don’t know. Nobody – I feel free from assassination threats because they ignore at lecture halls. They think that what I’m doing in writing history, that all this is just academic and I’m not really in control of any money or anything that will affect somebody’s personal fortune. Assassination comes when you do something to expose a personal fortune or corruption by some individual or group or CIA democracy promotion project.

Dee Smith. Thanks.

Karl Fitzgerald: Michael, we haven’t talked about climate but here in Australia, we’ve had massive floods over the last few months. All around the world there seems to be crises evolving on the climate front. We’ve got the economic crises coming through. We’ve got the demographic cliff happening with so many baby boomers retiring and taking their pension and limited numbers of wage earners to support that. We’ve got income taxes being cut. The Right wing are getting everything they can. How much further can they go and how long is it going to be until – Mark Mangiaratti, our friend, asks, will a debt jubilee be structurally necessary in the next ten years?

Michael Hudson: First of all, regarding the climate crisis, the one constant of American foreign policy is you have to increase and accelerate global warming, you have to prevent any anti-carbonisation movement. And the reason for that is quite simple. American foreign policy, ever since – certainly since World War Two – has been based on American control of the world oil and gas trade.
(71:33)
That’s why the United States attacked Iraq, Iran – not – overthrew Iran, Iraq, Syria, Libya and why it isolated Venezuela. America says the fuel of the future is oil and coal. The Americans have created the green parties that want to accelerate global warming as fast as they can by saying, “The future is Polish coal and cutting down the German forests.” Wood and coal. This is the constant in American foreign policy because if you can prevent anyone from getting their energy from – other than American-controlled oil companies, and if America can have these companies cut off the energy supply to any country that does not permit a neoliberal bank-centred takeover of their economy, then you’ve got the means of controlling the world.

And as the World Economics Foundation pointed out, there is 20% too much population in the world. I think it calls them the marginal’s, the Southern Hemisphere. So, global warming is going to create drought. It’s going to create famine and it will achieve the World Economic Foundation ideal of getting rid of the marginals. Basically, accelerated global warming by controlling oil and gas and preventing other alternatives is going to accelerate. That’s why the United States has banned, I think now, all solar energy imports from China.

China’s taken the lead in solar energy to fight against any attempt to have an alternative to our reliance on American controlled oil.

Karl Fitzgerald: Wow. I think we’re about ready to wrap up here but Michael, it’s a fascinating future. America has had a really good run. They’ve been able to control currency, control exchange rates, control energy, control the war reparations, to grade a country’s sovereignty. With the innovation that’s coming through and the new money we see in big tech, we’re seeing solar democratise energy production. There are all sorts of incredible developments coming through. How is this polarised future going to survive and where is the genuine leadership going to come from?

Michael Hudson: It looks to me like the leadership will come from Eurasia because the United States has pretty much controlled the West, Europe and the United States. So, the leadership, I doubt, will come from the West. That’s why most of my efforts are spent with China as – and I think you’re going to be putting on my Chinese lectures onto my website fairly soon so that’s really where the audience is. For my discussion of this, I have a million listeners for my lectures that they use in China.

And every speech I do, the average is 350,000 views. I don’t have anything like that in the West. And so, it looks to me like the only people who are looking for an alternative to neoliberal economics are in Asia.

Karl Fitzgerald: Very good. Very good. I think that about brings us to a close. I thank everyone for a fascinating series of questions. And yes, it feels like we’ve gone to exam-grade concentration there, Michael. Thanks for firing back your answers so rapidly and so willingly. But yes—–

Michael Hudson: I want to bring all the work together to institutionalise these ideas. I mean, what can they do to get active in it?

Karl Fitzgerald: Yes, well, hopefully we’re going to find a Patreon supporter who has got some really deep pockets somewhere along the way and we can get a major philanthropist to support your works so we can lift it up to the next level and bring along the next generation of economists who have been reading and bouncing off your leadership. For me, that’s what I would suggest is a way forward. Anyone else got a better idea?
(76:36)
Unidentified Audience: I’m just going to keep saying to him every chance I get, eventually, the truth is going to win out. It’s too – Michael, it’s too correct. That’s got to be worth something.

Michael Hudson: You’d think so but the race is not always to the swift.

Unidentified Audience: The truth has a long life, though. It’s really – reading your books has been such a massive impact. I think if you can get anybody to start going down that path, it really takes root.

Michael Hudson: I have a new book coming out in about two months, The Collapse of Antiquity, which is really about where Western civilisation went wrong. That will be out in two months. I’ve worked on that for thirty years.

Unidentified Audience: Phenomenal. Okay, I’ll get ready to state it many, many times.

Michael Hudson: Okay. Thank you all for coming. I appreciate the fact that you are part of this and I hope we can somehow make a critical mass.

Karl Fitzgerald: Karl, are you going to round us out there?

Michael Hudson: That was it.

Karl Fitzgerald: That was it.

Michael Hudson: And what more can I say?

Karl Fitzgerald: Here we go. Here he comes.

Michael Hudson: What more can I say?

Karl Fitzgerald: I know, but Karl, come on, give us an answer. What have you got, and that’s it, we’d better wrap up.

Karl Sanchez: I was just going to say, make one statement to everybody that’s still listening and that’s that one of Michael’s books that you cannot dismiss is The Protectionist Rise of the United States. There is a lot of keys in there to what the developing world today needs to emulate from our past that is very useful and although it’s about our history and it’s old, it follows the 19th century, there is a lot of material in there that’s very worthwhile and shouldn’t be dismissed just because it’s about what may seem to a lot of people to be ancient history and not relevant anymore. It is.

Michael Hudson: That actually was my PhD dissertation.

Karl Sanchez: Yes, I know. It was very good, too.

Michael Hudson: The historians have not paid any attention to it because historians don’t write about history and economists don’t – no, historians don’t write about economics and economists don’t write about history. So, it’s about a field that doesn’t exist. History doesn’t exist for economists and economics doesn’t exist for historians. Here’s this book that was all by itself.

Karl Sanchez: Yes. That’s something that I realised in my training as an historian that I needed to go ahead and get the economic side of it too because that’s where a lot of everything is that is part of development and so on and so forth with societal moves going back all the way to antiquity.

Michael Hudson: Yes.

Karl Sanchez: So, you’ve got to have both.

Michael Hudson: Yes, you’re right.

Karl Fitzgerald: Good one. Excellent. Thanks, Karl. Thanks, Michael. And a big thanks to the real progressive team, Virginia and co. Thanks for helping us produce this session. Yes, great discussions. I think we’ll get this one onto Michael’s website pretty soon. Thanks everyone. We’ll see you in another few months, probably early December for the next quarterly Patreon discussion. So, save up your questions until then.

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