A Strange Thing Happened … with the development of a New Order

August 15, 2022

Source

By Francis Lee

‘’The best-known definition of financialization is that it involves the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of domestic and international economies.’’ (1)

A picture containing indoor, floor, ceiling, metal Description automatically generated

In this dungeon – All that glitters is gold. Bank of England Gold Vault

The massive shift in the global system of industry and finance which had been based upon the Bretton Woods institutions – viz., the IMF (International Monetary Fund) the World Bank (previously known as the International Bank for Reconstruction and Development and the International Development Agency) which carried on regardless at the ending of the gold standard in 1971. Both the World Bank and IMF were based in Washington. Additionally, another Bretton Woods Institution – The General Agreement on Tariffs and Trade, was to become the World Trade Organization (WTO) in January 1995.

It was generally understood by all the actors that the objective was for firms to engage in the economy in order to produce goods and services with a view to further investment, growth, and profitability. This was the consensus of the time and raison d’etre of capitalism. However, this political unanimity began to change, quite fundamentally.

The massive shift as mentioned above was a step toward delinking the US$ with gold, when the US government guaranteed to exchange US$ for gold at the fixed rate of $35 per ounce. This effectively placed all the world’s currencies onto a gold standard backed by the US gold at Fort Knox. Many governments came to accept US$ as gold deposit certificates and chose to hold their international foreign exchange reserves in dollars rather than in gold.

The system worked reasonably well for more than 20 years until it became widely evident that the United States was creating far more dollars to finance its heavy military operations, firstly in Korea and then Indochina, and this combined with the domestic social spending which were part of Johnson’s Democratic party enmeshed in the ‘Great Society’ monetary splurge. What happened next was entirely predictable. Overseas holders of US$ began to take their dollars to the Fed’s bank window, but the Fed could not give them anything in return other than US Treasuries which are just a form of paper money! It was a French politician, Valery Giscard D’Estaing, who drew attention to this American ‘exorbitant privilege’. Pretty soon all the gold was beginning to fly out of Fort Knox to Europe and the Far East. The US government had to do something in order to stem the outward flow. On August 15, 1971, President Richard Nixon declared that the US would no longer redeem dollars on demand for gold. The dollar was ultimately nothing other than a piece of high-grade paper with a number and some intricate artwork issued by the US government. The world’s currencies were no longer linked to anything of real value and shared expectations that others would accept them in exchange for real goods and services.

It was a fantastic (and lucky) stroke for the Americans to pull this off. But this financial coup seemed like the opening shot in a long goodbye to the existing economic and political order. A strange thing was happening indeed. In the words of the Irish poet, W.B.Yeats, ‘All changed, changed utterly. A terrible beauty is born.’ From the poem, ‘Easter 1916.’

A Terrible Beauty

Capitalism was clearly morphing into a different animal with a new financial-economic structure which emerged from the old-style capitalist mode; the old order of production and consumption in a traditional capitalist economy which was occasioned by the production of tangible wealth, as opposed extractive or more tangibly extracted ‘wealth’. Businesses once focused almost exclusively on producing the goods and services for which they had a competitive advantage, but in the economic conditions of the present time they became likely as much if not focused more on their share price, their dividends regime, and in addition, to their interest rates.

A new class and a new system were clearly emerging, if not actually fully emerged. At the present time a tiny minority of people and corporate interests across the world are accumulating vast wealth and power from rental income not only from housing and land but from a range of other assets natural and created. Rentiers of all kinds are an unparalleled ascendancy, and the neo-liberal state is only too keen to oblige their greed.

The rentier class derive their income from ownership or control of assets that are scarce or artificially made scarce. Most familiar is rental income from land, property, mineral exploitation, or financial investments, but other sources have grown, pari passu. These include the income lenders again from debt interest; income from ownership of ‘intellectual property’ (patents, copyrights, brands, and trademarks); capital gains from investments, ‘above normal’ company profits (when a firm has a dominant market position that allows it to charge higher prices or dictate terms); income from government subsidies; and income from financial and other intermediaries derived from third party transactions. A political and economic structure began to emerge in the 1980’s. Once more quoting Yeats, ‘All has changed, changed utterly. A Terrible beauty is born.’ That terrible beauty is Neoliberalism. (2)

‘’Today’s corporations have become thoroughly financialized, with some looking more like banks than productive enterprises. This financialization of non-financial corporations has involved the transfer of societies resources from the employees to the share/stock’s shareholders. This transfer of wealth has resulted both from changes in the political and economic foundations of the global economy from the rise of a new ideology, which holds that corporations sole aim should be to maximize profitability via increasing returns to shareholders. Both ideas and power relations have to change to create any lasting economic change – and the 1980s was a period of transition of both.’’ (3)

Yes, those old enough of us who can remember the 1980s, a strange period of counter-revolution and – die Zeitgeist – yuppies, private equity, Thatcher and Reagan, The Big Bang, The Eurodollar market, Milton Friedman, and the Chicago School of Economics, ‘Greed is Good.’ Privatisation was all the rage. Heady stuff, but like all similar periods of ersatz golden ages the recent versions have crashed into the truths of economic realities. Like, you don’t get something for nothing, or booms lead to busts, or asset price inflation is not the same as growth. In order however … ‘’to maintain the semblance of vitality, western capitalism has become increasingly dependent on expanding levels of debt and of the expansion of the level of fictitious capital. This latter category is made up of financial assets which are only symbols of value, not real values.’’ (4)

Yes, indeed, company shares-stocks that are traded like goods and services do not in the same way embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as evidence of a healthy economy, but the amount money a share/stock charges hands says nothing definitive about the value of the company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.

The years roughly between the late 1970s to the present economic impasse have been unprecedented since the emerging and increasing instability of the present debacle of the 2020s. Prior to this each successive wave of crises followed a wave of credit bubbles, when the indebtedness of similarly placed group and groups of borrowers increased at a two of three times higher than the interest rate for three, four or more years which produced a series of credit bubbles in addition. These historical blow-outs have in fact become even more intractable and destructive with the passing of time. Something seems seriously amiss with the system’s dysfunctionalities which have become quite visibly failing. The economic situation in a country after several years of bubble-like behaviour resembles that of a young person on a bicycle – the rider needs to maintain the forward momentum of the bicycle, or it will become unstable. During the initial mania, asset prices will decline immediately after they stop increasing – there is no plateau or middle ground. The decline in the prices of some assets leads to a concern that asset prices will decline further and that the financial system will experience distress. The rush to sell these assets becomes self-fulfilling and so precipitous that it resembles a panic. The prices of commodities – houses, buildings, land, shares/stocks bonds – crash to levels that are just 30 or 40 percent of their prices at the peak. Bankruptcies surge, economic activity slows, and unemployment increases.

The features of these manias are never identical and yet there is a similar pattern. The increase in the prices of real estate and commodities or stocks is associated with euphoria; household wealth increases as does spending. There is a sense of ‘we have never had it so good.’ Then the asset prices peak and then begin to decline. The following implosion of the bubble leads to a decline in the prices of commodities, stocks, and real estate. Some financial crises were preceded by a rapid increase in the indebtedness of one or several groups of borrowers rather than by a rapid increase in the price of an asset or security. These deep-going changes in the world’s global economy were accompanied by political ramifications of a very significant order.

The economic shocks of the post-war period gave rise to the political shocks which if anything were more visible than what was apparent in the economies of the advanced world. Since 1945 everything had after the post-war reconstruction been regarded as L’Age Dor, (Golden Age) as the French had called it. This was a period from the early 1950s characterized by high levels of growth, low and falling unemployment, rising level wages and investment, where in the UK we were informed that ‘we had never had it so good’’ as the Conservative government proudly boasted. The Labour party had held the reins of government from 1945-1951. But things began to change during the 1970s, namely that the political/economic pivot changed definitively in the late 70s and early 80s. The Thatcher/Reagan duo grabbed the bull by the horns and established the new order.

This political/economic dispensation was to last from the early 1980s and through to what was to be the supposed blossoming of the Clinton years of growth and enrichment, the apex of the Anglo-American moment. To be sure: “Pippa’s Song.’’ See Below.

The year’s at the spring,
And day’s at the morn;
Morning’s at seven;
The hill-side’s dew-pearl’d;
The lark’s on the wing;
The snail’s on the thorn;
God’s in His heaven –
All’s right with the world!

Robert Browning (1812-1889)

Yes, if only it could always be like this. But of course, it seldom or never is, as was to be witnessed in due course.

Consolidation of the New Order

Margaret Thatcher and Ronald Reagan. Dynamic Duo!

The intellectual theorists of the new order – the Mount Perelin Society – an emergent think-tank and intellectual movement behind the Thatcher-Reagan populism. In a both internally coherent framework and an ideology used to promote the power of the owners of capital in general and finance capital in particular. The work of Hayek, Von Mises, and others constituted a serious intellectual exercise grounded in a particular set of values (including Milton Friedman albeit a junior member) namely, a commitment to human freedom, defined by control over one’s property. The fact that this justified for shrinking the size of the state, removing capital controls, and reducing taxes is what led several prominent international financiers (George Soros comes to mind for some reason) to cover a large portion of the costs for the first meeting. So, the party (in terms of both political activity and organization) was calling nearly all the shots.

Another significant event has been the intellectual collapse of Labour and Social-Democratic parties in Europe and possibly even included the left-wing of the US Democratic Party and Bernie Sanders. These were clearly the most significant political events in both Europe and North America during the 1980s. We can list them – all late converts to the neo-liberal paradigm – in France (PS Party Socialist France) (Germany SPD) (Greece PASOK) (Spain PODEMOS) (UK Labour Party) the list goes on. Moreover, having given up on any notion of socialism and equality, these ex-parties metamorphosed into centre-right outfits indistinguishable from the militant conservatives. The leaders of these counterrevolutions were the ineffable bought duo – Bill Clinton and Tony Blair.

The privatization programme was to sweep all before it including on a massive scale the expropriation of public land with little analysis or oversight. The programme of what was once the public sector and which had included, the National Health Service, Education, Transport, Road and Rail, Electricity, Water … was a policy based upon ideological rather than practical considerations; moreover, the list was extensive. Perhaps an example of this policy was education, particularly higher education which was provided and subsidized by educational opportunities in the elite universities. As a British national I was subsidized by generous government grant in 1979/82. I then finished my higher education as a post-graduate in 1986 – again free of charge. It is of course inconceivable that I would have been able to do this today.

The economic system – that is to say the present financialized system prevalent in the Western world – seems to be reaching its crisis point. Quack remedies for the ailing western economic structures, include Central Bank Digital Currencies, CBDCs, and/or the black hole of ever-increasing debt, which apparently will be overcome by issuing more debt (sic) and which are touted as a ‘solution’ to an intensifying structural problem, but which merely intensify the crisis.

According to Marx: ‘’In France and England, the bourgeoisie had conquered political power. Thenceforth, the class-struggle, practically as well as theoretically, took on more and more outspoken and threatening forms. It sounded the death-knell of scientific bourgeois economy. It was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient, or inexpedient, politically dangerous, or not. In place of disinterested inquirers, there were prize fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologetic.’’ (Capital, Volume 1, Afterword to the Second German Edition – London 1873).

The present deep economic crisis is, at bottom, a class issue. The residual elements of the old aristocracy survived the initial assault of the political economists of the 17/18/19th centuries who included Adam Smith (1723-1790), David Ricardo (1772-1823), John Stuart Mill (1806-1873), Karl Marx (1818-1883)/(Friedrich Engels (1820-1895). The ruling class saw the above group as being an assemblage of dangerous radicals who posed an alarming threat to the social and political order. Thus, from their perspective the powers-that-be saw fit to enlist a group of academics called the ‘marginalists’ in 1870. These were the counter-revolutionary mathematicians and included Leon Walras (Frenchman) William Stanley Jevons (Englishman) and Carl Menger (German). Whether or not the repudiation of classical political economy achieved by this counter-group was sustainable is a moot point (see above). But suffice it to say these gentlemen were the ideological foot-soldiers, or, in Marx’s words ‘hired Prize Fighters’ for the rentier classes. Unfortunately, their frozen economic theories survived to the present day and continue to dominate school and university curricula and represent the timeless (and tedious) axioms of micro-economics.

I’ll leave the last word to Michael Hudson.

‘’Real estate, stocks and bonds constitute the bulk of wealth in today’s economies, because most wealth is obtained by rent-seeking – land rent, monopoly rent, and financial charges for special privileges – and even more by capitalizing rentier revenues into financialized assets, all supported by tax favoritism. In contrast to industrial capitalism’s drive to minimize rentier charges to create a lower cost economy with less overhead costs, finance capitalism increases this burden. Regardless of how financiers and billionaire rentier make their fortunes, this rise in rentier wealth is counted as an addition to GDP, subtracted as an exploitive transfer payment …Much as the land and England’s Commons were privatized in the Enclosure movements from 15th to 19th centuries by a combination of force, legal stealth and corruption, today’s post-1980 privatization wave aims at appropriating basic public infrastructure to create opportunities for charging monopoly rent, along with bank lending to privatizers. Privatization and financialization tend to go together – at the economies expense.’’ (5)

Italy: La Lotta Continua! (Ongoing Struggle)

NOTES:

(1) Stolen: How to save the world from financialization by Grace Blakeley. (2) The Corruption of Capitalism – Guy Standing – (Ibid. p. 3)

(3) Grace Blakeley – (Ibid. p.62)

(4) Creative Destruction – Phillip Mullan – (p.22)

(5) The Destiny of Civilization – Michael Hudson – (p.25)

More

The Post-Oslo Social Economy: An Analysis

August 12, 2022

Israeli Prime Minister Yitzhak Rabin, US President Bill Clinton, and PLO Chairman Yasser Arafat at the signing of the Oslo Accord. (Photo: Vince Musi, via Wikimedia Commons)

By Omar Zahzah

“It’s classic Fanon, if you think about it,” Palestinian writer Yara Hawari, Senior Analyst of Al-Shabaka: The Palestinian Policy Network,  remarked in 2018 about the 25th anniversary Oslo Accords.

“It’s like, Let’s create this class of people that are going to maintain the security of the oppressed or the natives, so that we don’t have to do it.”

The “class” Hawari refers to here is the Palestinian Authority, that repressive, native informant apparatus whose incarceration and brutalization of its own people and total obedience to the Zionist colonial state was institutionalized through the passage of the Oslo Accords in 1993. Hawari relates the formation of the PA to the underdeveloped national middle-class Fanon describes in “The Pitfalls of National Consciousness,” a class that maintains its material integrity and interests by preserving neo-colonial relations and collaborations with the colonial power.

Palestinian activist Jamal Juma explains that through the Accords, the PA made it so that Palestinian livelihoods would be controlled by organizations including the World Bank and the International Monetary Fund, and that the division of the West Bank into areas A, B, and C is ultimately guided by a larger strategy of total annexation. 

An expansive exploration of the former subject, Toufic Haddad’s Palestine, Ltd. demonstrates how Western donor states and financial institutions used the Oslo Accords as a test-case in the exploration of national and governmental forms of arrangement that could be most agreeable to neoliberal capitalist ventures—an insight that suggests how Palestine operates as a “lab” in ways other than the more familiar discussion of the Zionist state honing the weaponry, crowd-control and surveillance tactics that it will eventually export to other nations and corporations upon Palestinian bodies and territories.

Yet as crucial as these insights are, they are tied to the material components of the Oslo Accords’ disastrous impacts.

I believe it’s also important to discuss other, more abstract components of the Accords’ destructiveness—components that are not even limited to Palestine alone. Such an undertaking is important, as every attempt to diagnose the true colonial character of our condition brings us one step closer to a potentially liberated–and liberatory–consciousness.

Emotional and Mental Reproduction

The physical character of colonial projects may reproduce itself emotionally and mentally, both within the collective morale of the colonized as well as in the minds and hearts of individuals among colonized populations. Thus, it takes no great leap of the imagination to consider that the physical and political fragmentation wrought by the Oslo Accords—the arrogant and arbitrary declaration that a future Palestinian state would only concern those Palestinians presently within colonized and militarily occupied Palestinian territory; the abandonment of the liberation struggle; the creation of a corrupt Palestinian bourgeoisie elite that would profit directly off of oppressing and exploiting its own people–have also reinscribed themselves within the individual Palestinian psyche.

It also stands to reason that such a reinscription would have profound effects not only upon individual Palestinian morale, but the activism (and here I deploy this term intentionally) that followed in the wake of the Oslo Accords.

My subject of analysis is a particular type of activism (again, used here to describe a mindset and various forms of prioritization) that values the individual reputation, ego, “brand,” politics, over, or at the complete exclusion of, the larger liberation struggle as well as the need for mutual and collective struggle among our people. One person or organization becomes the default representative of the Palestinian cause, and rather than seeing others involved in the same struggle as comrades, all become competitors in a cheap struggle for “authenticity.” 

Collectivity shifts from a strength to a liability, as the plurality of voices and approaches so integral to the health of any veritable liberation movement becomes crowded out by the cultural lure of being the default Palestinian voice, the Palestinian activist, the Palestinian intellectual, and so on, as opposed to one among many.

Anti-colonial criticality becomes redirected towards liberal policy analysis and so-called “thought leadership” that takes for granted and even benefits from the perseverance of structures and systems that need to be destroyed rather than sustained. But even a more critical posture is not necessarily indicative of having transcended this status quo, as being the most radical presence can become commodified as its own, cynical show of competition.  

It is no longer the Palestinian struggle that is engaged, in its entirety and contradictions, but a sanitized version that is repackaged and sold to a target audience. The fragmentation imposed upon our struggle by our colonizers and the so-called leadership among our people that willfully collaborate with them for their own personal gain is restaged in this competition, and fragmentation itself becomes incentivized rather than challenged.

All oppositional forces, from our colonizers to their imperialist allies, would like nothing more than for us to remain scattered, to remain fragmented, so it is natural that we would find ourselves in systems and situations where attacking one another as a way of building ourselves up is encouraged, however indirectly.

What is Meant By Social Economy

An “economy” typically implies a system of relation and exchange. Thus to refer to the phenomenon in question as a “social economy” might seem a strange choice of words. But through this formulation we are considering the ways in which social relations themselves are conditioned by economic processes—the way, for example, personal and professional relationships become distorted by capitalistic notions of profit, productivity, and artificial scarcity, or how neoliberal belief systems encourage a “buffet” style approach to issues of oppression that says holding a marginalized identity in and of itself entails liberatory intentions (Mahmoud Abbas should be a sufficient enough refutation of this regressive political tendency.)

In our example, political work becomes imperceptibly overtaken by for-profit incentives of competition, false scarcity, and exclusion, and a cause that is at heart a collective struggle for anti-colonial liberation becomes nothing more than a means of self-promotion and advancement. To the extent that rampant NGOization both in Palestine and internationally diverts liberation-focused efforts to reformist ones sharply limited by strings-attached funding and siphons the intellect and creativity of organizers into bureaucratic demands such as fundraising and donor relationship building, we cannot ignore the interplay between compromised institutions, predatory economic subjugation, and political mercurialness.

Good Faith and the Unconscious

However, while such engagement may at times be informed by a willful disregard, our experiences suggest that such a state of affairs is more likely to be reinforced unconsciously. Thus, even in the most intense moments of seeming competition and disagreement, the possibility of good faith should always be presumed.

One imperfect yet nevertheless amelioratory practice given this state of affairs is to insist upon intentional and conscientious distinctions between the grassroots and non-profit spheres. To be sure, there is overlap, but to consciously present non-profits as the grassroots would ultimately water down grassroots work with the demands, limitations, and restrictions of non-profit bureaucracy. 

In the interim to the complete dissolution to the non-profit system, one important approach is to navigate non-profit spaces with an awareness of these material distinctions and always ask oneself (and one’s organization(s)) how best to utilize the resources and networks of the non-profit milieu to amplify the grassroots without restriction whenever possible. 

It would be a far simpler task if the Oslo Accords had resulted in a generation of self-interested activists and organizations competitively profiting off of their Palestinian “brands,” for better or worse, but this is not what I’m arguing. The reality is murkier, and more difficult to define, but ultimately what I’m suggesting is that various factors, including the overemphasis on the individual within settler-colonial/capitalist US nationalist ethos, as well as the myriad forms of fragmentation inflicted upon us through the Oslo Accords, are themselves internalized and re-staged within US activist scenes, but often at the level of general instinct and impression. 

Various social and symbolic norms make it so that certain actions and attitudes are simply felt to come more naturally than others. This is the case with capitalism in general, which presents a complete distortion of social relations and attachments as so-called “reality,” “nature,” “society,” and so on. Our colonial condition, while in some ways more particular, nevertheless operates with similar effect: the horizon of possibility is increasingly depleted by shrinking borders and an abdication of responsibility and dedication to the struggle.

The Way(s) Forward

There is no one set “solution” to such a state of affairs, but as individualism and competition are the scourges, approaches that center collaboration and mutual uplift obviously should be prioritized. To that extent, continually engaging in (and presuming) good faith from others—with the exception of crossing red lines about Zionism and normalization—should be standardized. But even when it comes to these red lines, it is crucial to be able to name exhaustive standards for Zionism and normalization, as well as to establish and maintain cultures of principled political commitment.

At this point, it ought to be far from politically controversial to say that the Zionist entity has no right to exist, should never have existed and in fact, should not exist even now; that Palestinians have the right to all forms of resistance until total return and liberation, and that all of the Zionist entity is, in fact, occupied Palestine, an alien construction upon stolen land and lives that needs to be destroyed in the lead-up to comprehensive Palestinian liberation and reparations.

Explicitly naming competitions and turf wars as reflective of the Oslo Accords rather than feeding into them can at times aid in refocusing efforts towards the larger struggle and collective betterment, though this is not always a guarantee.

At the root of the issue is the need to operate with a sense of Movement rather than individualism or activism, and always begin from a position of helping the collective cause rather than advancing individual gains. The struggle is hurt by our fragmentation, though it’s important to resist the cynical cooptation of this principle as a means of encouraging tolerance of any and all political lines within our spaces and wider networks (such as normalization of the Zionist entity, including acceptance of the Palestinian “Authority’s” security coordination).

For the purpose is to rekindle and preserve a sense of collective identity and resistance that operates within a genuinely anti-colonial frame, rather than accepting our colonization as an inevitability, or even past event.   

– Omar Zahzah is the Education and Advocacy Coordinator for Eyewitness Palestine as well as a member of the Palestinian Youth Movement (PYM) and the US Campaign for the Academic and Cultural Boycott of Israel (USACBI). Omar is also an independent scholar, writer and poet and holds a PhD in Comparative Literature from the University of California, Los Angeles (UCLA). He contributed this article to The Palestine Chronicle.

Michael Hudson: Podcast with Michael Hudson, Steve Keen, Steve Grumbine

July 17, 2022

Posted with Michael Hudson’s permission

Grambine, Macro and Cheese, July 9 2022. https://realprogressives.org/podcast_episode/episode-180-the-end-of-dollar-diplomacy-with-steve-keen-and-michael-hudson/.

https://realprogressives.org/macro-n-cheese-podcast/
For those who would like to hear the recorded conversation

Michael Hudson [intro/music]

A central tenet of the World Bank from the beginning is to convince countries not to grow their own food, but to create plantation agriculture to prevent family-owned farming of food, to grow plantation export crops and they become dependent on the United States for their grain.

[00:00:22.610] – Steve Keen [intro/music]

If you look at just the shipping involved in international trade, it’s something of the order of 20%, I think, of our carbon production comes out of the entire mechanics of shipping goods around the planet. And we realize we’ve massively overshot the capacity of the biosphere to support our industrial sedentary civilization. So, one way to reduce that is by reducing international trade.

[00:01:35.130] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.110] – Steve Grumbine

All right. And this is Steve with Macro N Cheese. Another great episode for everyone today. I have two guests, two very good friends, and very happy to have them join me today. Professor Steve Keen and Michael Hudson. You can’t get two better guys than this. And we’re going to have a very action packed conversation.

We’re going to be talking about central banking, the IMF, World Trade Organization, World Bank. And we’re going to be looking at how the US uses the monetary system to bring about its imperial powers that it exerts on the world. And we’re going to look at some of the things that are happening with Russia and Ukraine right now that ship the US control over the global commerce and the behaviors of non US countries.

They’re starting to think for themselves and make some decisions, and we’re watching the facade crack a little bit. Steve Keen, who is the author of the book Debunking Economics and more recently The New Economics: A Manifesto, is joining me, as well as Michael Hudson, who has just recently written the book The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism. So, without further ado, Michael and Steven, welcome to the show, sirs.

[00:03:04.530] – Michael Hudson

Good to be here.

[00:03:05.800] – Steve Keen

Thank you indeed.

[00:03:06.960] – Grumbine

So the reason why I brought us together, you guys are both phenomenal on your own, but together, I think that we can maybe tackle this. As an MMT advocate, I find myself friends with an awful lot of people, and you gentlemen have been doing this for a long time, and I know that you have some pushback within the MMT community.

In particular, this concept of “imports are a benefit and exports are a cost.” This is a core MMT staple. And some of the concerns that came out as a result of the Covid crisis showed us the resource based failures of a global supply chain and how some of the aspects of our financial system and the shipping of real resources from areas that had high Covid, how it impacted our abilities to take care of life on life’s terms.

It also became quite clear that the US hegemony over the world using dollar diplomacy is starting to show cracks in the foundation as well, as we watch Russia thumb its nose at US sanctions. So, getting into this, Steve Keen, I know that you have taken some issue with Warren Mosler’s prescription that imports are a benefit and exports are a cost.

Taking Warren’s position on this, I believe Warren is saying exports are real goods and services we’re sending out, whereas imports we’re handing pieces of paper to people. And this is a win for the importing nation. And we’ve seen the power of the US dollar and the ability to basically create colonial outposts, colonized communities living and dying off of US dollars. So there’s a power dynamic as well. What is your pushback with Warren’s import/export model?

[00:05:03.270] – Keen

There are quite a few elements to it. First of all, the idea that exports are a cost and imports are a benefit. One term that I’ve seen one Modern Monetary Theory advocate used to explain is to say, the opportunity cost is all theirs. In other words, they have therefore gone by sending a good to us like an automobile to the buyer in return for currency.

They’re doing without the opportunity of the vehicle. And when you take a good look at the manufacturing side of things, the reality for most firms is they have diminishing marginal cost and excess capacity. So the standard thing when you’re competing in a domestic market is you have spare capacity you’re not using, but you can’t get enough demand domestically.

Now, I know MMT can say that should be handled by the government using additional spending power and creating the spending power to absorb the excess capacity. But they don’t at the moment. So what tends to happen instead is that countries will use export-oriented industrialization to use their additional capacity more effectively, which is what’s led to the industrialization of China and in many ways the de-industrialization of America.

Personally, I don’t think the opportunity cost is the right way to think about international trade at all. It’s a neoclassical way of thinking. It assumes neoclassical conditions about production which are empirically false. I don’t think anything in MMT should be based on bad foundations and I think that is a bad foundation.

Then when you see the discussions about monetary sovereignty and saying that countries who don’t have to issue debt in the currency which is not their own currency, they have monetary sovereignty, those who have to issue debt in a currency which is not their own don’t have monetary sovereignty. One way you end up in not having monetary sovereignty is running large balance of trade deficits and not being the reserve currency of the planet.

So I think the advice that exports are a cost and imports are a benefit doesn’t make sense for countries which have been running a trade deficit, are importing more than they’re exporting, so they’re using their own pieces of paper fundamentally, initially, but if they keep on doing it, they’ve got to start using American pieces of paper, and then they’re in deep trouble. So I just think it’s a nice slogan, but I think it’s a bad idea.

[00:07:20.250] – Grumbine

So it makes sense to me given the nature of the pandemic. You and I spoke, I guess it was almost two years ago, about supply chains and pandemics, and we talked at length about how the iPhone is made in some 37 different countries – and countries that were isolated due to the pandemic. It also impacted production in general. Right now I’m in Information Technology, and I work with Cisco, and Cisco being the backbone of the entire Internet globally.

They have lead times even today of up to a year for some of the equipment, partially because of semiconductor shortages. But this is a piggyback to that in that there is the accounting identities of trading paper for goods and services, but then there is the actual functional output of that. And for countries like the United States, we do have Most Favored Nation status in the sense that we are the primary world reserve currency.

And I think part of that has to do with the fact that the price gas and gas purchases are done through US dollars as well. But overall, I think that we have to be aware that we’re not being a very good partner on the planet in general. A lot of the power plays the United States uses to be able to get those goods and services into the US Is done through warfare and sanctions, as we’ve seen all around the world. We use them to great harm in the global South.

However, we saw Russia here recently thumb their nose at us and say, the only thing we’re really lacking is high tech products, and we got China that can hook us up with that. All you’ve done is accelerated our departure from a dollar denominated world, which I guess brings us to you, Michael. Your book talks extensively about this. Can you help piggyback off of what Steve said regarding the supply chains and the impact of that import/export dynamic with what’s going on right now with Russia, China and Ukraine?

[00:09:34.590] – Hudson

Well, MMT has not spent much time talking about the balance of payments. It’s basically a theory of the domestic economy. The problem of the whole discussion that just took place is that trade is not the most important element of the balance of payments. For the United States, the trade balance has been just about in balance for almost 50 years, 70 years, actually.

What’s in balance is America’s military spending abroad. That’s the deficit that is pumping dollars into the world economy. But now to get back to Steve’s point, realizing that we’re dealing with trade, only a small portion of the balance of payments, Steve’s point is, let’s ignore all the other elements of the balance of payments – the debt service and the capital accounts and others.

If you import more than you export, and you have to actually pay cash for the imports and get cash for the export, then you have to borrow money. And once you borrow money, because most trade is denominated in dollars, this means you have to borrow US dollars. You don’t buy imports with your own currency. Now, MMT is all about how sovereign governments can create their own money and create their own currency, but they can’t print their foreign currency.

That’s the problem with having more imports than exports. And once you begin to borrow dollars, you have to pay interest on it. And all of a sudden, they’re running a deficit, it’s going to reduce your foreign exchange rates. Well, let’s look at what’s going to happen this summer as an example. We know that energy prices, oil prices are going way up.

And President Biden just says they’re going to be with us for a very long time because his major contributors are the oil companies, and he’s promised them that he’s going to enable them to make super profits to help raise the Dow Jones average. And the other element is food. Well, America is going to make a killing on oil exports because the United States controls the world oil trade.

The United States is also a major agricultural exporter, and it’ll make a killing because NATO has imposed sanctions on Russia, preventing Russia from exporting oil and food – it’s the largest grain exporter – into the economy. So you’re going to have South America, Africa, and the global South countries all of a sudden running big deficits.

Well, at the same time, there’s an enormous deficit of debt service that they owe to finance all of the trade deficits that they’ve been running ever since they followed neoliberal ideals to open their markets to depend on foreign food and basically US manufacturers. The Federal Reserve has just begun to raise interest rates. And the result of raising interest rates has been the dollar is going way up against the Latin American currencies, the African currencies, the South African rand, the Brazilian currency.

So you’re going to have the global South being in an absolute currency squeeze this summer. What are they going to do? Well, President Putin has said, well, we’re going to offer an alternative in the form of the BRICS bank. Well, it’s true that a bank can’t create foreign currency. The BRICS bank can enable countries to run a deficit in two ways.

Number one, the bank can be fueled by each member giving, say, a trillion dollars or some kind of proportional currency to the bank. So currency swap agreements, just like the United States has been negotiating for the last 50 years. You can all have a currency swap. Also, the BRICS bank can create its version of Special Drawing Rights – IMF SDRs – or what John Maynard Keynes proposed in 1944: “bancors.”

It can create paper gold of its own and distribute to countries. Well, the problem is, Putin said, we’re willing to sell your grain and oil and to take your currency in exchange, but we don’t want to save your balance of payments simply so that now you can afford to pay the debt service that you owe to US dollar bond holders, bank holders, and the IMF and the World Bank that got you into the mess you’re in to begin with.

So the problem is the stability of insulating your trade from the foreign exchange going up and down requires a split of the world into two different economic zones: US/NATO, the white people’s economic zones, and let’s call it the nonwhite economic zones. And remember, the Ukraine say that Russians are not white and racially different. Basically, the Nazi ideology is that any country that’s not neoliberal is not white.

So you’re going to have the world splitting, and we’re really talking about how to create a monetary system for the world splitting. I want to get back to one other thing Steve said about the opportunity cost. If imports are a great advantage to the United States, is it worth having American corporations move to low wage labor abroad, shifting the production abroad so that America is deindustrialized?

Has that been an advantage? Or let’s look at it from Russia’s point of view. Until this last spring, Russia was importing food, cheese, raw materials. And because of the sanctions, Russia has had to all of a sudden develop import substitution. It’s producing its own cheese. It produced its own agriculture that’s thriving.

And President Putin has said that Russia is going to spend more and more of its oil export receipts on funding import-replacing industry. Well, that sounds like a good idea, because we’re really talking about independence. And the balance of payments ultimately determines a constraint on domestic policy. I think that’s what Steve was talking about for opportunity costs.

You can’t just look at the flows on a balance sheet: “Well, we’re getting something for nothing.” If you import more than you export, you’re running up foreign debt, and you’re becoming more and more dependent on foreign countries who are acting in their own interests, not your own interests. So you have to put this whole discussion in the political context.

[00:16:15.210] – Grumbine

So I would see this as a national security issue in that with these essentials – Fadhel Kaboub talks about the spectrum of sovereignty: energy sovereignty, food sovereignty, technological sovereignty, the ability to live without external supports. And each country has varying levels of that. And so each country would have to be looked at differently just based on what they’re even capable of producing.

I guess my question to you, as we think about countries in the global South that have had the kiss of the IMF on them and the debt peonage that they have been laboring under. In Africa, Sankara’s speech talking about “I can either pay you or I can feed my people.” You can see the role that US interests through the IMF have had to import their goods and services into our country.

They don’t have a choice. They are basically colonial states that have the US thumbprint on them. So the United States has exerted this imperial power in this geopolitical nightmare. We are watching them break away from that today.

[00:17:34.050] – Hudson

But you’re leaving one of the real villains in the piece, and that’s the World Bank.

[00:17:38.290] – Grumbine

Oh, yes.

[00:17:39.020] – Hudson

A central element of the World Bank from the beginning is to convince countries not to grow their own food, but to create plantation agriculture, to prevent family-owned farming of food, to grow plantation export crops, and to become dependent on the United States for their grain. Well, if imports are a benefit and imports mean that the United States can put a sanction on you and starve your people like the United States tried to do in China in the 1950s, do you really want to become import dependent on food?

Let’s compare the World Bank to the Chinese Belt and Road and the BRICS bank that’s proposed. The World Bank would only make foreign exchange loans. That meant it would only make loans to countries who would invest in infrastructure that would help its exports. Well, imagine how this works for agriculture.

If you were going to develop your agriculture in the global South countries, you’d do pretty much what the United States did in the 1930s that had the most rapid increase in productivity of any industry in the last few centuries. And that was because the government took the lead in agricultural extension services, seed testing, educating farmers as to seed variety, setting up local farm management organizations.

Before the time that Cargill and Archer Daniels Midland became the great intermediaries in promotion of domestic self-sufficiency for farms, the World Bank wouldn’t make any loans at all for this, even though the World Bank local commissions and reports all said that this is what they need. The World Bank was almost always headed by someone very close to the US Military, starting with John J. McCloy at the beginning and going through McNamara and all of the subsequent Pentagon people who were put in charge of the World Bank.

And above all, they wanted to continue to base America’s export boom in agriculture and to make other countries food dependent. And that is one of the things that has led them into debt. So if you have a country like Chile that has the richest land in the world because it has the richest supply of guano deposits in the world. It also has the most unequal land distribution in Latin America – latifundia and microfundia – not any kind of balanced food production.

So that all of Chile’s exports and copper, by specializing, have been overwhelmed by the costs of importing food that it could have grown all by itself. So the idea of free trade is shaped by what will the international organizations controlled by the US give credit for, ends up to create underdevelopment and dependency instead of development. And that developmental aspect is a different story from MMT money creation. And we’re talking about something else that is part of a much bigger system.

[00:20:43.410] – Grumbine

Steve, based on what Michael just said, I know that you are concerned with the environment and bringing production back home. And around the world, people that are not hip to the US empire are trying to convince countries to look at building bonds between each other to create trade zones that mitigate some of the US power over dominating their countries.

We’ve got a very tiny window to solve climate crisis as well. So all these things are converging at one time trying to deleverage US interests from the world interests and watching as the nonwhite countries are banding together and the white countries are banding together. And it seems like the opportunity to save ourselves from extinction is passing before our very eyes.

In the vein of what he just said, how do we marry some of the ideas that we have, the climate crisis with the geopolitical crisis that we’re battling here?

[00:21:49.110] – Keen

Well, the large part of it is that the focus of neoclassical economics has always been on specialization and doing it with so-called comparative advantage. And what that gives you is an incredibly fragile system, as we’ve seen with Covid, because if you actually distribute production across the planet and you have a long supply chain, then of course that can collapse in an instant with something like Covid coming along.

And equally, if you have a famine, if the major food baskets get wiped out by a famine or a war. We’ve got the war already. The famine may well come by a drought and a crop failure as well. Then suddenly you can’t feed your people and you have no domestic alternative. So I think we have to get away from the focus on efficiency and even in that sense, the gain of swapping paper for goods, which is part of the MMT slogan.

Start thinking: no, we need to be resilient and capable of handling a range of different disturbances which could come our way. And on that basis you need to have your production local.

[00:22:47.310] – Grumbine

So within that space mitigating some of the travel carbon footprint expenses that clearly solves one problem. But where you had smokestacks to create basic amounts of goods and services in one country, now you’re building smokestacks across the globe and I don’t see any meaningful effort to green technology to make those things happen.

I am curious what decentralizing production does in terms of the carbon footprint and how developing local supply chains will in turn impact our ability to stave off climate crisis.

[00:23:30.090] – Keen

Yeah, if you look at just the shipping involved in international trade. It’s something at the order of 20%, I think, of our carbon production comes out of the entire mechanics of shipping goods around the planet, and we realize we’ve massively overshot the capacity to support our industrial sedentary civilization. So one way you can reduce that is by reducing international trade.

I think that’s what’s going to start happening, partly because you have the example of Cisco. You suddenly wait a year to get a piece you used to wait two weeks for because of the breakdown of the supply chain. The same thing will become even, I think, even more extreme when climate change forces us to drastically reduce our production levels.

If you don’t have the domestic production capability, you’re going to lose the possibility of those goods. And in some cases, we have to drastically reduce our consumption of a range of goods. Automobiles is an obvious instance of that. But in others, we want to continue – and food production is one of those. Clearly, you want to produce your food locally.

So, again, I think we’ve been very blase about the physical side of production, and that’s what I would like MMT to start looking at. And in that context, I think it might change the attitude about imports and exports.

[00:24:57.730] – Intermission

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[00:25:49.010] – Grumbine

Michael, in the Russia example, where in one fell swoop they get cut off from the SWIFT system and the US is beating their chest, “We’ve got Putin on the run.” It doesn’t look like Putin is on the run at all right now.

[00:26:02.900] – Hudson

I’m glad you’re bringing up the NATO war against countries resisting neoliberalism, because you use the word “green.” And the European Greens basically are advocating two fuels of the future: coal and cutting down the forests. Germany, by blocking Russia’s gas, they are essentially replacing Russian gas and oil with Polish and Ukrainian coal – and digging down the forest.

I’ve walked very often through German villages, and most houses have whole stacks of cut-down lumber that they essentially burn in their fireplaces for heat. You’re having an enormous deforestation and replacement of gas with coal. And the Green Parties are the advocates for the major polluters in the world, and they’re the advocates for global warming.

And that’s because they’re part of the Cold War attack on Russia. And they say it’s worth having global warming as long as we can fight against countries that resist neoliberalism and resist the American European takeover. So you want to realize the politics – that the Greens of Europe are not friends of the environment.

Now, to get back to your question about the isolating of Russia. Isolating Russia hasn’t isolated it at all. It’s driven Russia together with China, in the first instance, and then China and Russia together have joined with India, Iran, Syria, they’re now joining with Brazil and Argentina all to create an alternative economic order and social order and political order.

And the political order is basically based on the main distinction between the non-neoliberals and the neoliberals, and that is: who will control the money supply. And China is the prime example. Instead of private banking creating the credit to create loans basically for financial reasons, China will create credit to spend into the economy the way that MMTers hope to see credit created.

Namely, spend to hire labor, to make new means of production, hopefully in an environmental way, as opposed to the commercial banks that look at “how do we make money in the short term?” Well, you make money in the short term by cutting down the forest of the Amazon. You don’t look at global warming.

And already you’ve had the heads of American oil companies and investment firms say “what do we care about global warming ten years in the future? We care about the next three months’ earning statement, and the next year. Ten years from now, the sea levels go up. We can deal with it then.” So you’re dealing with two different economic philosophies and as the world divides into these two different economies, this is an important element.

And as Steve just pointed out, neoliberal economics doesn’t take into account the environment because that’s long term. Economists call that exogenous, meaning it’s outside our tunnel vision. And the question is whether you’re going to look at the world economy as the overall system interconnected, which is what Steve and I do, or whether you’re going to say we’re going to just cut the financial sector apart and only look at the corporate and financial sector of how to make money quickly.

That’s really the difference. So obviously Russia was not really troubled very much by being cut off – or even by being isolated. What America is doing is driving Russia together with all of the countries that have refused to condemn it. And America basically is creating an iron curtain, locking these countries – isolating them from Europe and the United States – going their own way, which I don’t think Russia and China are unhappy to see occurring.

[00:29:54.480] – Grumbine

I completely agree with that. The idea that the US thinks they are going to knock these giants down and they’ve just said we’re going to invest in our own country. Instead of being a cooperative society, we see this as a combative society. We decided we have to fight them and create cold wars to isolate them so we can catch up.

But you nailed it with the concept of the private short-term thinking that private collateral, banking, loans, filling short-term needs because we can’t see out as far as those folks because they aren’t living and dying the same capitalist way that we do things here in the United States. They have invested in the public purpose.

China has got the ability to do just about everything. Do you think it’s going to take us getting our proverbial asses handed to us by the rest of the world to wake up? Do you think we’ll ever wake up? Or this is just the way it will always be, at least until tsunamis take us out?

[00:30:56.870] – Hudson

Who is the we? Who’s going to wake up? When you say we, it’s as if you mean American citizens in the population. But we are not the government who makes the policy. We are not the Davos Group and the campaign contributors. Their “we” are the oil industry, the big agricultural monopolies, the other monopolies, and Wall Street. That’s the finance, insurance and real estate sector [FIRE].

And they are going to just continue doing what they want. And you’ve seen from the recent Supreme Court rulings in the United States that the government is not permitted to enforce any climate preservation rules. That has been ruled unconstitutional unless Congress can pass environmental law. And in order for Congress to pass a law, as opposed to just an executive branch joining the environment, you have to have 60 out of 100 votes.

American dual politics doesn’t permit either party to get 60 votes unless there’s a landslide. And the only party that has a prospect of getting 60% would be the Republicans. So basically, even if the people wake up, the government people and their campaign contributors are just going to continue to make money to live in the short term. That’s what differentiates neoliberalism and socialism.

[00:32:17.630] – Grumbine

Very well stated. To me, I think of this as war. Murder. I don’t think of this as some polite gentleman’s disagreement. I see this as wanton death and destruction, all in the name of profit. How do we stop this? Can we stop this? Congress is bought and paid for. Our government, our Supreme Court doesn’t represent the people, and the President has proven to be a feckless neoliberal as well.

I see nothing to feel any sense of hope, and I’m not sure that hope is a requirement. It seems like the only alternative we have is in the street, is to become ungovernable, is to get rid of a government that is no longer representative of the people.

[00:33:04.010] – Hudson

[laughs]  Well, Steve’s gone to Thailand and I’m dealing mainly with China. That’s how we’ve coped. [laughter] Neither of us are going to be President of America.

[00:33:15.690] – Keen

No. The American political system is almost designed to stop anything being done. I was involved in the Australian election recently, as you probably remember. And though my party did extremely badly and money still was obviously vitally necessary to get a political profile, even in countries with good electoral systems, Australia does have a good electoral system, and America has got the best electoral system money can buy, and that’s a disaster.

It’s hard to get away from money enabling parties to have political position to be seen in the media. And that’s actually a great reason for MMT: create money for publicly financed election campaigns rather than having it out of private pockets. But given that, you have an electoral system where you don’t actually vote for anybody, the electoral college piece of nonsense, which itself is crazy.

Every state has got a different system, which is crazy. You don’t have the central bureaucracy handling the voting system, which is crazy. And you have gerrymandering because the boundaries are decided by local political groups, which is crazy. So the extent to which America needs to reform its political structure to approximate a democracy is ridiculous. And that’s partly why money interests can so easily dominate what happens in the American political sphere. And right-wing religious ideology as well.

[00:34:43.950] – Grumbine

Absolutely. The Calvinistic bullshit in this country is over the top. But there’s a tone policing aspect to this. I think there are people out there who don’t understand that this election system that we have in the United States isn’t getting us what we want or need. They think they just need to phone bank harder, vote harder.

Fact is, in my 53 years, I have not seen any meaningful legislation passed. I do not consider the ACA meaningful legislation. I’ve seen a lot of bad legislation pass that hurts us. And this is not really intended to be an America-centric show, except that America seems to be the big bully. It’s creating a lot of the problems. It’s got its own citizens in hell and it’s trying to create hell on earth for the rest of the world.

I spend a lot of time trying to get this information out the door. It’s very important information, but it’s only important in the sense that it’s good to know. I don’t see any of it amounting to a movement, a passing of legislation. We can tell people that if we don’t consider the economy in the world as a superorganism and degrowth, we don’t have anybody thinking this way.

[00:36:00.090] – Keen

There is actually – I don’t know the name of it, but I do know that there’s a political group in America which is campaigning to have Australia’s electoral system adopted by America. Have it include an electoral commission that determines borders between one electorate and another, a single centralized system that counts the votes rather than the crazy range of stuff you have at the state level.

And controls on the size of electorates so they can be no more than 20% larger or smaller than a target – and they should be 10%. And then preferential voting so you don’t just vote for one candidate, like if you vote for the Greens in America, you guarantee the Republicans win the election because the Green votes are taken away from the Democrat.

So have preferential voting, which means you can actually put the party you prefer first and know that the party that’s your fallback will actually get the vote if your first party doesn’t get up. So all these sorts of reforms. I know that there are people who are campaigning about it because the frustration that you’re expressing is very widely felt in America. But of course, try getting that through a Republican-dominated Congress. It ain’t going to be easy.

[00:37:01.170] – Grumbine

No. It does leave you wondering if this is not just political theater. I talked to Warren the other day and Warren asked the question to me. He said, “you ask, are they doing a good job? And I answer back, well, for whom?” Somebody’s doing okay right now. It just isn’t the regular people in society. Somebody’s doing great, though. And I don’t see a path. As much as I want to, I see no path forward.

I don’t want to feel this way, but I don’t see a path forward. Michael, with your international perspective, I guess my question to you, given the fact that you’re focusing on China and you see the US through the lens that we’ve just discussed, do you see an ending to this that is positive for the world, that gets us to a successful conclusion, meaning we survive? Do you see any hope whatsoever in changing that narrative? And if not, what’s next?

[00:38:01.530] – Hudson

There’s no path forward in the way that we’ve been talking about because the suggestions that Steve makes cannot be legislated by Congress. They are limited by the Constitution. And in order to do what Steve recommends – very good ideas – you would need a new Constitutional Convention. The right-wing, the polluters, the monopolists, the bankers, have been preparing for a Constitutional Convention for about 30 years, and it wouldn’t be very nice.

[00:38:32.370] – Grumbine

Yep.

[00:38:32.370] – Hudson

Our Constitution in America was written for the slave owners to permit any states to block any federal power because they worried that the federal power might try to free the slaves. Well, now that element of the Constitution, of state’s rights, is enabling the oil industry, the polluting industry, the banks, the credit card companies to essentially prevent any solution along any lines except those of the ultra right-wing.

But the problem goes beyond America and beyond Europe. Western civilization took a wrong track about 3000 years ago. The Near East and almost all of Asia had a tradition of canceling the debts when they threatened the economy. In Japan, you had revolutions, you had the Near East rulers canceling the debts. That’s what my books are about.

And you had essentially the jubilee years throughout the Near East. And this promotion of economic growth and in effect, prosperity, was always run by a central ruler. There had to be a ruler, the job of divine kingship or undivine kingship, throughout the Near East, Asia, all the way to China. And India. All of these cultures sought to prevent a commercial class and a financial class from emerging and taking over.

And the merchant class was realized as playing an important role, but it was not allowed to dominate society. But around the 8th century BC, when Syrian traders began to move into the Aegean and Mediterranean to Greece and Italy. There weren’t any kings. The west didn’t have kings. They had local chieftains who were a Mafia-type society.

And the result is that ever since Greece and Rome, you had a completely different set of laws and legal philosophy than what you had in the Near East and Asia. You had pro-creditor laws making what is called the security of contracts and the irreversibility of land being forfeited to creditors. And the result is you had creditors oligarchy evolving.

So when President Biden said the current war of NATO against Russia and China is a war of democracy against autocracy, what it means by democracy are Western civilization’s oligarchies. There haven’t been any democracies, really – maybe very briefly in Athens – but the Western cultures are all oligarchies. What he calls an autocracy is a government strong enough to prevent a financial oligarchy from developing and taking over the land and taking over politics and making its own laws for itself.

And it’s a civilizational difference. And both Steve and I have spent a lot of our time talking about how the Western economies cannot evolve further without a debt write-down, without writing down the debts that are of the 99%, they’re owed to the 1%, the oligarchy that’s controlling all of Western politics. Asia has a way to go a different way.

China doesn’t have a financial oligarchy because it treats money and credit as a public utility through the Bank of China. And so the Bank of China, as we said, makes loans to actually develop the economy. And that’s what Russia says it’s going to begin doing, not to create a financial class to make money at the expense of the 99%. So we’re dealing with a civilizational problem.

And the question is, which form of civilization? Can you rescue Western civilization from the wrong track? Well, only by creating an alternative on the right track and leaving Western civilization and say, well, you’re missing out on the development. Do you want to continue in poverty or are you going to have a revolution?

[00:42:31.650] – Grumbine

You’ve seen yellow and blue profile pictures for everybody totally sympathetic to Ukraine. And our government saying “we are not going to abandon them no matter what.” Biden has signaled that we have unlimited money to give to Ukraine, and he can’t possibly write down $2 trillion in student debt. This weird split dichotomy of truth and lies passes right by the average person.

With what you just stated, which side is going to win? Sadly, the bad guys seem to always win. I rarely see the good guys win. Who is “the good guys”? In full disclosure, I’m a socialist. We don’t even have a left party in the United States. There’s no appetite for that kind of thing in the United States. And those of us that want it are the minority. How do you envision this playing out?

[00:43:26.670] – Hudson

I thought I just said it: a different civilization going its own way.

[00:43:31.740] – Grumbine

Well, what you said was the question of good and evil, basically, which one is going to win? I’m asking you, how do you see it playing out? Because the US can’t continue doing what it’s doing and grow. You need the debt jubilee. We’ve chosen not to. Asia has those systems built and they have choices. So the question I’m proposing, given that, do you see any chance of the US coming to grips with itself? Or do you see this being a one-way trip to destitution?

[00:44:03.570] – Hudson

The latter.

[00:44:05.010] – Grumbine

Fair enough.

[00:44:05.830] – Hudson

That’s all I can say. There is no sign at all of a change. The fact that Steve and I can be on your show – we are not published in the major magazines anymore. We’re not on the major network shows. What you call the bad guys always call themselves the good guys. What you call evil calls itself good. So the question is, what kind of good guys you’re going to have?

The good guys that want to blow up the world and impoverish society, which is what neoliberalism says are the good guys or the good guys for the 99%, which America says are autocracies that we have to fight?

[00:44:41.830] – Grumbine

Yeah.

[00:44:42.670] – Keen

I think I might put a bit of a perspective. People often say, “what’s your alternative?” And what they really mean is “what’s your alternative that I’m going to like?” And I think there is an alternative, but as people feel, “I don’t like it” then other people won’t like it as well. And that is that given the scale of the environmental crisis we’re facing and the fact that it’s coming far sooner than we’re being led to believe, because courtesy of believing their classical economists on it.

When it hits, the countries that are most likely to survive will hold together are those that the West calls authoritarian. And the defining feature of those cultures when you’ve actually been inside them, is that, yes, there is a very strong state and yes, it tends to get its own way and people do what they’re told to some extent, but it’s because at the same time they know they’ve benefited from that state.

So back in China, when you talk to people in China, they will be critical of the Communist Party and say at the same time, the industrialization since then has been incredible and their lives have improved radically over that period of time. I know people who were literally in Mao suits in 1969 who are having a very comfortable retirement when they faced far worst terms back under the old strictly communist regime.

But what you have with a country like that is if China decides it has to radically ramp up renewable energy resources, also install nuclear if necessary, it’s going to do it and not face the opposition the German Greens give to new nuclear power stations, for example. So the capacity to have a top down society is more likely to be then you’re going to survive the crisis that comes forward from climate change.

I can’t see countries that call themselves democracies succeeding in that situation because they will not be able to agree on the level of cutback that’s necessary and who it gets imposed upon. We’re a more centralized society. We’re more successful at doing that and more likely to hold together during the downturn the climate will cause.

[00:46:40.110] – Hudson

You need a strong enough government to check the power of an oligarchy and to prevent a creditor landowner oligarchy from developing. And libertarians, while pretending to be for liberty, they’re for a centrally planned economy, but a centrally planned economy by the oligarchy, by the financial sector, and by the real estate owners. So every economy is planned. And the question is, who’s going to do the planning?

[00:47:05.190] – Grumbine

Yes. And with that in mind, I want to read to you some stuff that came out of this NATO 2022 Strategic Concept – just so that people understand exactly how bad it is. Document defines Russia as the most significant and direct threat to the allies’ security while addressing China for the first time and the challenges that Beijing poses towards allies’ security interests and values.

Documents also state that climate change is a defining challenge of our time. Strategic Concept is updated roughly every decade as NATO’s second most important document. It reaffirms the values of the alliance, provides a collective assessment of security challenges, and guides the alliance’s political and military activities. Previous version was adopted at the NATO Lisbon Summit in 2010.

Point I’m making is they’re bringing more countries in and now setting up China and Russia as the bad guys. This has been going on for a long time, I guess Reaganism with the Cold War. And you brought it up, I think it’s worth mentioning, towards the end of the Chinese Revolution and the US efforts back then to do these same things to China then.

All these institutions, World Bank, IMF, the Peace Corps, all these different NGOs, these were brought out as a direct counter to Russia’s communism and a fear that communism would spread to the global South to prevent them from getting in bed with the Russians. But our country, the United States in this case, has been instrumental in setting up these shadow organizations to prevent any kind of socialism or people-led initiatives around the world.

And it seems like this is going to become the next war. If it’s not going to be just another Cold War, it’s definitely going to be some war because they are lining up the Axis and allies already. I guess. Take us out on this note.

[00:49:13.290] – Keen

I think I take it over a different angle and say that the global politics we’ve had over the last 80-100 years, actually, since the dominance of America, which we pretty much say from the end of the Second World War, has been completely oblivious to the impact we’re having on the planet. The biosphere itself. And the biggest political player on the planet is the biosphere.

And that’s going to start determining what the wars are in future. And I don’t think any country in the world is prepared for that battle. China has maybe probably the most effective capacity to respond to the challenges that are coming this way, but there’s no way America or Russia or anywhere in Europe are aware of the threats they face.

This is a warfare against an implacable foe which we’ve created by destroying the sustainability of the biosphere, by expanding human industry to three to four times the scale that the planet could actually support. That’s the real war that is coming our way.

[00:50:08.600] – Hudson

And Steve, you mentioned how global shipping and trade adds to the global warming. Obviously, the military spending is a huge, huge factor. So the Americans and the Green Parties of Europe are on the wrong side of history. They are doing just the opposite of preserving de-development. They are the advocates of more and more global warming. So literally, you have a group, a bloc, wanting to destroy the environment and a bloc trying to protect itself from the Western destruction.

[00:50:40.830] – Grumbine

Yeah, very scary. And then we’ve got a lot of folks that think that they’re going to appeal to their greater sense of reason to get them to suddenly stop all this, vote their way to a Green New Deal, and it’s all just going to go away. Gentlemen, thank you so much for this time. I really appreciate it. It’s rare to have two such phenomenal guests at once, so I really do appreciate this immensely. Michael, tell us where we can find more about your work.

[00:51:07.230] – Hudson

Well, on my website, michael-hudson.com, and on my Patreon account. Steve also has a Patreon account. He got me onto Patreon. And the books that I describe what we’re talking about are available on Amazon. The Destiny of Civilization and Super Imperialism.

[00:51:27.450] – Grumbine

Very good. Steve, I know we got you on Patreon, but tell us a little bit about your books and where we can find more of your work.

[00:51:33.710] – Keen

Okay, well, again, my main recent book is The New Economics: A Manifesto, and that’s published by Polity press. So you can get it through Polity or you can get it through Amazon. There’s more than one way to get a hold of it. And the main thing I’m doing is developing the software package to enable us to think about the economy the way we should think about it, which is dynamically, non equilibrium, monetary and so on.

And that’s Minsky, which people can find at SourceForge, the open source software package site, SourceForge. Search for SourceForge and Minsky together and you’ll find it. But those are my main two things. I’ve also opened up a substack account recently – profstevekeen.substack.com – mainly because Patreon loses a lot of customers by stuffing up their credit cards. So Patreon, Substack and Minsky.

[00:52:18.030] – Grumbine

Very good. All right. And with that, my name is Steve Grumbine. My special guests, Steve Keen and Michael Hudson. This is the podcast Macro N Cheese. We’re out of here.

Hezbollah’s power card over Israel’s gas tyranny

July 17 2022

Photo Credit: The Cradle

The Lebanese Resistance has drawn a red line: they will not allow Israel to extract oil and gas until the issue of contested gas fields is resolved and Lebanon is free to extract its own.

How close is the Levant to war? Hezbollah’s leader says it all comes down to whether Lebanon is permitted to extract its own energy resources to end the country’s economic crisis. And not in the far future, but right now.

By Abdel Bari Atwan

In his speech last Wednesday, which coincided with the arrival of US President Joe Biden to occupied-Palestine, Hezbollah Secretary General Hassan Nasrallah may have set the “zero hour” for the next and imminent war with Israel.

“The Lebanese have only two months to take advantage of the golden opportunity available to extract gas and oil in the Mediterranean, otherwise the cost will be very high after that.”

This was one of the few times Nasrallah has gone on the offensive, and he made clear the resistance was prepared to liberate Lebanon’s gas and oil wealth. His speech came two weeks after Hezbollah sent three drones over the Israeli-erected gas platform in the Karish gas field – opposite the Lebanese-Palestinian maritime border – and transmitted photos of the platform to an operations room somewhere in southern Lebanon.

Why now? Nasrallah is well aware that the US and its European allies are being defeated in Ukraine, in a war that can be prolonged painfully and can bog down western attentions for the indefinite future.

This represents a truly golden opportunity to liberate the Lebanese wealth buried in the depths of the Mediterranean, and to employ the capabilities of the resistance to achieve this lofty goal. ‘Martyrdom in a war of dignity and honor is nobler than death by starvation.’ It’s a sentiment the Lebanese can understand better than most these days.

***

Lebanon is not on the path to collapse; it has already collapsed as a state. The Lebanese can no longer find bread, and they have lost hope in securing their fuel, electricity, medicine and basic primary services needs, while their children are facing starvation, disease and siege.

Lebanon is currently begging the International Monetary Fund (IMF) to obtain a humiliating loan of $3 billion which is not enough to solve any of its problems. Meanwhile, there are $600 billion worth of gas and oil reserves off Lebanon’s coastline that can solve all its crises, pay off all its debts, and make Beirut more prosperous than any oil-rich Arab capital in the Persian Gulf.

In his speech, Nasrallah stressed that all options are open to confront the Israeli enemy on land, sea and air, and revealed that Hezbollah is monitoring all gas and oil platforms along the occupied Palestinian coast.

This monitoring, it transpires, may have taken place to prepare for a foreign aggression targeting the resistance and Lebanon. According to Axios, in late June, intel experts from 30 countries, including Israel, Saudi Arabia, Bahrain, the UAE and Qatar, met under the auspices of the US State Department, to formulate ways to target Hezbollah.

Unlike most Arab leaders, the Israelis take Nasrallah’s words very seriously. He is the rare regional leader who does not fear war, has the ability to ignite it if warranted, and has won every war in which he engaged: starting with the liberation of southern Lebanon from the Israeli occupation in May 2000, to the Israeli aggression in July 2006, to the war against ISIS in Syria and Iraq in the last few years.

The Israelis, who have long mocked Hezbollah’s oft-repeated threat to “retaliate in the appropriate place and at the appropriate time” against Tel Aviv’s repeated aggressions against Syria and Lebanon, have still not responded to Hezbollah’s dispatch of three drones that flew over the Karish gas platform on 2 July.

The Israelis have swallowed the insult, because they are well aware that whoever sent the drones is eagerly awaiting Tel Aviv’s response, and has prepared to confront them with tens of thousands of precision missiles and armed suicide drones.

Without doubt, the Lebanese resistance is able to disrupt Israel’s extraction of oil and gas in the Mediterranean, at a time when the world, and Europe in particular, is facing a severe crisis in securing energy supplies. It is also capable of striking deep inside Israel and destroying most of its infrastructure, including water, electricity, airports, and all its critical military targets.

***

During Israel’s month-long aggression against Lebanon in July 2006, Nasrallah imposed the formula of bombing “Haifa, and beyond Haifa.” The phrase has stuck, and essentially means that Hezbollah can reach beyond targets that Israel cannot yet fathom.

This equation still exists, and since 2006 it has been updated by adding Umm al-Rarashash (Eilat) and Dimona in the Negev to it. The fresh new formula that Nasrallah announced in his last speech by threatening to “hit Karish, and beyond Karish, and beyond beyond Karish,” will increase the Israelis’ anxiety and fear, because missiles and drones are waiting for the green light to start a regional war from Lebanon.

For a year now, Lebanon has been plunged into darkness and has been waiting for the fulfillment of false US promises to allow it to be supplied with electricity from Jordan and gas from Egypt. We do not think that it will wait in humiliation for months or years for a loaf of bread, for there is no death after death.

In response to the Hezbollah drones, Israeli Defense Minister Benny Gantz threatened to reoccupy Tyre, Sidon and Beirut.

“Let him try,” as Nasrallah said, and he will certainly find what he does not expect. Lebanon today is different from Lebanon forty years ago. The Lebanese have nothing left to lose but hunger, poverty, suffering, and the corruption of the political elite allied to the United States. On the other hand, there is a lot that Israel will lose.

The views expressed in this article do not necessarily reflect those of The Cradle.

Michael Hudson interviewed by Ben Norton (Multipolarista) Update with transcript

June 30, 2022

Economist Michael Hudson on inflation and Fed plan to cut wages: A depression is coming

Transcript:

BENJAMIN NORTON:

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 November.

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 since 1994.

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 right now.

MICHAEL HUDSON:

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 it 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 products.

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 going on.

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, of the distributors, and enormous, enormous gains for the oil industry, and also of course for the military-industrial complex.

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 the US-NATO war to isolate Russia, China, India, Iran, and Eurasia generally.

BENJAMIN NORTON:

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 the economy.

In your article, again, this is your column at michael-hudson.com, “The Fed’s Austerity Program to Reduce Wages,” you talk about the Fed’s “junk economics,” and you say that the idea behind raising interest rates by 0.75% is that:

raising interest rates will cure inflation by deterring borrowing to spend on the basic needs that make up the Consumer Price Index and its related GDP deflator. But banks do not finance much consumption, except for credit card debt, which 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 Fed?

MICHAEL HUDSON:

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 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, since 2008.

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 homeowners.

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 mortgages.

America’s 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 are making money as landlords, the old fashioned way, it worked for 800 years under feudalism. It’s coming back in style.

BENJAMIN NORTON:

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 and 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 good study.

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.

MICHAEL HUDSON:

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 and 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.

BENJAMIN NORTON:

Yeah, and this is an article in Fortune that was originally based on an article in Bloomberg: “5 years at 6% unemployment or 1 year at 10%: That’s what Larry Summers says we’ll need to defeat inflation.” That’s how simple it is, you know, just increase unemployment, and then inflation will magically go away!

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 several speakers.

And you highlighted these comments that were made by the Fed chair, Jerome Powell. And this is according to the 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 “to get wages down, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially.”

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.

MICHAEL HUDSON:

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 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,” is 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 from 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 it 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 wages.

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 conditions.

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 is 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 the market.

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 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.

BENJAMIN NORTON:

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 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 program.

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 people.

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.

US Federal Reserve assets balance sheet 2022

Back in 2008, the Federal Reserve had around $900 billion in assets. Now it’s at nearly $9 trillion in assets.

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 in assets.

Where did all of that money go? And what was the impact on the economy, of course?

MICHAEL HUDSON:

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 American history.

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 assets.”

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 in history.

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 richer.

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 salary.

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.

BENJAMIN NORTON:

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 about $8.5 trillion is in securities.

US Federal Reserve assets securities balance sheet 2022

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.

President Biden 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 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.

MICHAEL HUDSON:

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 and bonds.

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 estate credit.

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 crisis.

In Europe, because right-wing monetarist 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 rentier class.

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 wealthiest 10%.

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 financial colonialism.

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 dollar standard.

And that’s what’s being unwound today as a result of Biden’s new cold war.

BENJAMIN NORTON:

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 criticism.

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 neoliberal economists.

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 the rates.

MICHAEL HUDSON:

A few days, not a few months. That was very short. And now she has moved the interest rates way down.

BENJAMIN NORTON:

Back to 9%.

MICHAEL HUDSON:

She was criticized for not moving them further down.

BENJAMIN NORTON:

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.

MICHAEL HUDSON:

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 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 world.

And the West has said, we’re isolating ourselves from you totally. And we think you can’t get along without us.

Well, look at the humor of this. Russia, China, Iran, India, Indonesia, and other countries are saying, hah, you say we 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 the 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.

So essentially, 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 countries.

And this bank can create its own special drawing rights, its own bank order, 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 up more.

And Europe 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 Eurasian group.

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 that you’re going to simply use the money you have to pay your dollar debts that are coming due.

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 want. 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 dollar.

This increase in the dollar’s exchange rate is also rising against the currencies of Brazil, Argentina, the African countries, all the other countries.

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 two halves.

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 margin.

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 have.

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.

BENJAMIN NORTON:

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 the terrorists.

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 around China.

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 for resources?

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 get prepared.”

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 SWIFT alternative?

MICHAEL HUDSON:

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 characterizes things.

Biden characterizes 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 you.

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 pay; we will delay payment; we will have a moratorium on your payment. We’re not here to bankrupt you.

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 down wages.

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 economic systems. And, again, that’s why there’s a cold war on right now.

BENJAMIN NORTON:

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?

MICHAEL HUDSON:

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 bank incentives, 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 debt.

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?

BENJAMIN NORTON:

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 G7.

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 diverse.

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?

And here’s a report in BBC: “G7 summit: Leaders detail $600bn plan to rival China’s Belt and Road initiative.” Now, I got a chuckle out of this. The idea that the US government is going to build infrastructure in the Global South, I mean, it’s pretty laughable.

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 if you can comment on the G7 summit that just was held.

MICHAEL HUDSON:

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 in September.

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 give 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, 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 without energy and without much food.

BENJAMIN NORTON:

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 Russia.

But on the on the subject of the the G7 meeting, this was the hilarious comment made by the European Commission President Ursula von der Leyen, in an article in Reuters titled “Europe Must Give Developing Nations Alternative to Chinese Funds.”

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 countries.”

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 project.”

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 that 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 “worth it.”

And you talk about the new cold war against the socialist economy in China and the state-led economy in Russia.

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 20 years.

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 forced the West through a long economic depression, in order to try to halt the rise of China and Russia.

They’re basically 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.

MICHAEL HUDSON:

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 the cost of production, which is Pentagon capitalism, 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 it’s building.

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 that 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 then America and Europe deserve it.

BENJAMIN NORTON:

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 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 that that the golden in the 1990s is never going to come back.

MICHAEL HUDSON:

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.

BENJAMIN NORTON:

Of course.

MICHAEL HUDSON:

You’re neglecting 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, neoliberals.

Every European 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 neoliberalism.

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.

BENJAMIN NORTON:

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.”

MICHAEL HUDSON:

Yes.

BENJAMIN NORTON:

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 year.

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 who is hurt most by the Fed or other central banks raising interest rates? People, average consumers, or companies?

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?

MICHAEL HUDSON:

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 1980s.

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 take out.

Basically, raising interest rates hurts debtors and benefits creditors.

And benefiting 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 they 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 case today.

Is there really any difference between the Republicans and Democrats in terms of their policy? When you 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 socialism is.

BENJAMIN NORTON:

Very well said.

Here is another brief question from patreon.com/multipolarista – people can become a patron and help support the show over there.

This question, 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?

MICHAEL HUDSON:

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 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 profit.

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 interest 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 fictitiously low profits that are simply pretended not to be profit, like interest, depreciation, amortization, offshore earnings, management fees.

All of these should be counted as profits, and taxed as such as they were, I’d say back at the Eisenhower administration levels.

BENJAMIN NORTON:

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 Ukraine.

This article, this headline at Newsweek, it summarizes pretty well: “U.S. Warns Starving African Nations to Not Buy Grain Stolen by Russia.” Again, that “stolen” is alleged by the U.S.

But you actually have a really good column about this over at your website, which again is michael-hudson.com: “Is US/NATO (with WEF help) pushing for a Global South famine?

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 potential crisis?

MICHAEL HUDSON:

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 equilibrium.

They’re always 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 “equilibrium.”

BENJAMIN NORTON:

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.

MICHAEL HUDSON:

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 word.

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 Party.

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 spectrum.

You have “socialist” parties around the world being neoliberalized.

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 99%?

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 against it.

Well, the right-wing is taking over the government, but it’s not really what the world meant by socialism a century ago.

BENJAMIN NORTON:

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 response.

Professor Hudson, 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 future.

Aside from people going to your website, michael-hudson.com, is there anything else that you want to plug before we conclude?

MICHAEL HUDSON:

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.

BENJAMIN NORTON:

Yeah, for people who are interested, I did an interview with Professor Hudson here at Multipolarista a few weeks ago about his new book, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism.”

And of course, anyone who wants to support this show, you can go to 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 podcasts.

Professor Hudson, it’s always a real pleasure. Thanks so much for joining me.

MICHAEL HUDSON:

I enjoyed the discussion.

BENJAMIN NORTON:

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.

Billionaire Najib Mikati named Lebanese PM for the fourth time

Mikati will now be tasked with forming a new government, a process experts believe will take weeks, if not months

June 23 2022

(Photo credit: AP)

ByNews Desk- 

Billionaire tycoon Najib Mikati was re-elected as Prime Minister of Lebanon on 23 June, after winning 54 votes out parliament’s 129 seats.

He will continue in a caretaker role until he can form a government, an often drawn-out and complicated affair due to Lebanon’s deep political divisions.

After winning the votes, Mikati spoke from the presidential palace in Baabda, calling on all of Lebanon’s political factions to put aside differences in order to work towards a solution to the economic crisis, and urged parliament to cooperate on approving the legislation needed for securing a grant from the International Monetary Fund (IMF).

“We are facing the challenge of either complete collapse or gradual salvation,” Mikati said.

President Michel Aoun then asked him to form a new government, a task analysts fear could take weeks, if not months, despite the country’s severe economic meltdown.

By convention, Lebanon’s prime ministerial position is reserved for a Sunni Muslim, the presidency goes to a Maronite Christian and the post of speaker to a Shia Muslim.

His reelection immediately followed the Lebanese president’s launch of parliamentary consultations for the election of a new prime minister.

Mikati’s name was put forward with a few other candidates, including Lebanon’s former ambassador to the UN, Nawaf Salam, who was supported by a number of independent candidates, the Phalangist Kataeb party, and the bloc led by the head of the Progressive Socialist Party (PSP), Walid Jumblatt.

A number of political forces in the country refused to back either Mikati or Salam, including the Strong Republic bloc, consisting of the Saudi-backed Lebanese Forces (LF) leader, Samir Geagea, and his allies, as well as MP Jamil Sayyed and the head of Aoun’s Free Patriotic Movement (FPM), Gebran Bassil.

According to the vote count, Nawaf Salam received 25 votes, Raoua Khallab and former Prime Minister Saad Hariri received one vote each, and 48 refrained from naming anyone.

Hezbollah and the Amal Movement, who had initially supported Mikati in his election in 2018, launched their support behind the re-elected prime minister.

“Our position is simple… and Lebanon needs a government that can manage its affairs,” the head of Hezbollah’s parliamentary bloc, Muhammad Raad said, adding: “Crises require realism, providing all opportunities and removing obstacles to form a government to deal with deadlines and developments.”

This is Hezbollah’s second political victory since the general elections last month, after having backed Speaker of Parliament Nabih Berri.

Berri was reelected as Speaker of Parliament on 31 May, a position he has held since 1992.

Mikati, who last year was named in the Pandora Papers, has been leading negotiations with the IMF in order to secure a bailout package to revive Lebanon’s devastated economy, which deteriorated rapidly after the country’s financial collapse in 2019.

On 8 April, the Lebanese government reached an agreement with the IMF after accepting a series of economic and banking sector reforms put forward by the organization.

Despite this, officials have pointed out that the recovery plan will be a difficult process, as disagreements still exist between commercial banks, the central bank, and the government.

Lebanon’s Economy Minister Amin Salam revealed on 27 April that the country’s efforts to secure the $3 billion IMF grant could be undermined by divisions over how to deal with massive losses in the financial sector.

Ukrainian troops burn wheat and grains as they leave Mariupol

6 Jun 2022

Source: Agencies

By Al Mayadeen English 

The sea port of Mariupol has witnessed a blazing fire that left all grains unfit for consumption.

Ukrainian troops leave Mariupol but first, they set fire to tons of grain

Despite the looming danger of global food shortage, Ukrainian troops set fire to tons of grain in storage facilities in Mariupol hoping to impact food security in the Donetsk People’s Republic. 

Yan Gagin, the adviser to the chairman of the Donetsk People’s Republic (DPR), said “There is a large amount of grain on the territory of the Mariupol port, this is both corn and wheat. Judging by the smell and appearance, it is unsuitable for further use… And this is due to the fact that the enemy, retreating from the port, set fire to the granaries so that this grain would not go to the Donetsk People’s Republic, so that it would be impossible to use it in any way.”

According to Sputnik, firefighters have been trying to contain the fire for several days within the Mariupol grain storage facility -which could contain up to 57,000 tons of grain-, thus spoiling all grains and leaving them unfit even for cattle consumption. 

Recently, wheat and grain exports have become a global concern as many countries have either banned exports or limited and taxed wheat exports, due to national and global food security threats. According to the International Monetary Fund (IMF), slower growth and faster inflation threaten the global economy amid the conflict in Ukraine.

“The conflict is a major blow to the global economy that will hurt growth and raise prices,” an article was written by Alfred Kammer, Jihad Azour, Abebe Aemro Selassie, IIan Goldfajn, and Changyong Rhee said. 

While countries like Egypt, Lebanon, and Turkey are all threatened by wheat prices and limitations of exports, Ukrainian troops have chosen to burn food instead of allowing the DPR to consume and export the grains. This further plays a role in the climate crisis tragedy as it increases carbon emissions and

Read more:

Is US/NATO (with WEF help) pushing for a Global South famine?

June 06, 2022

By Michael Hudson and posted with the author’s permission

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

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

U.S. Cold War strategy is not alone in thinking how to benefit from provoking a famine, oil and balance-of-payments crisis. Klaus Schwab’s World Economic Forum worries that the world is overpopulated – at least with the “wrong kind” of people. As Microsoft philanthropist (the customary euphemism for rentier monopolist) Bill Gates has explained: “Population growth in Africa is a challenge.” His lobbying foundation’s 2018 “Goalkeepers” report warned: “According to U.N. data, Africa is expected to account for more than half of the world’s population growth between 2015 and 2050. Its population is projected to double by 2050,” with “more than 40 percent of world’s extremely poor people … in just two countries: Democratic Republic of the Congo and Nigeria.”[1]

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

South Americans and some Asian countries are subject to the same jump in import prices resulting from NATO’s demands to isolate Russia. JPMorgan Chase head Jamie Dimon recently warned attendees at a Wall Street investor conference that the sanctions will cause a global “economic hurricane.”[2] He echoed the warning by IMF Managing Director Kristalina Georgieva in April that, “To put it simply: we are facing a crisis on top of a crisis.” Pointing out that the Covid pandemic has been capped by inflation as the war in Ukraine has made matters “much worse, and threatens to further increase inequality” she concluded that: “The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices.”[3]

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

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

On June 3, African Union Chairperson Macky Sall, President of Senegal, went to Moscow to plan how to avoid a disruption in Africa’s food and oil trade by refusing to become pawns in the US/NATO sanctions. So far in 2022, President Putin noted: “Our trade is growing. In the first months of this year it grew by 34 percent.”[4] But Senegal’s President Sall worried that: “Anti-Russia sanctions have made this situation worse and now we do not have access to grain from Russia, primarily to wheat. And, most importantly, we do not have access to fertilizer.”

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

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

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

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

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

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

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

The choice confronting Global South countries: to starve by paying their foreign bondholders and bankers, or to announce, as a basic principle of international law: “As sovereign countries, we put our survival above the aim of enriching foreign creditors who have made loans that have gone bad as a result of their choice to wage a new Cold War. As for the destructive neoliberal advice that the IMF and World Bank have given us, their austerity plans were destructive instead of helpful. Therefore, their loans have gone bad. As such, they have become odious.”

NATO policy has given Global South countries no choice but to reject its attempt to establish a U.S. food stranglehold on the Global South by blocking any competition from Russia, thereby monopolizing the world’s grain and energy trade. The major grain exporter was the heavily subsidized U.S. farm sector, followed by Europe’s highly subsidized Common Agricultural Policy (CAP). These were the main grain exporters before Russia entered the picture. The US/NATO demand is to roll back the clock to restore dependency on the Dollar Area and its eurozone satellites.

The implicit Russian and Chinese counterplan

What is needed for the world’s non-US/NATO population to survive is a new world trade and financial system. The alternative is world famine for much of the world. More people will die of the sanctions than have died on the Ukrainian battlefield. Financial and trade sanctions are as destructive as military attack. So the Global South is morally justified in putting its sovereign interests above those of the wielders of international financial and trade weaponry.

First, reject the sanctions and reorient trade to Russia, China, India, Iran and their fellow members of the Shanghai Cooperation Organization (SCO). The problem is how to pay for imports from these countries, especially if U.S. diplomats extend sanctions against such commerce.

There is no way that Global South countries can pay for oil, fertilizer and food from these countries and also pay the dollar debts that are the legacy of U.S.-sponsored neoliberal trade policy subject to U.S. and eurozone protectionism. Therefore, the second need is to declare a debt moratorium – in effect, a repudiation – of the debts that represent loans gone bad. This act would be analogous to the 1931 suspension of German reparations and Inter-Ally debts owed to the United States. Quite simply, today’s Global South debts cannot be paid without subjecting debtor countries to famine and austerity.

A third corollary that follows from these economic imperatives is to replace the World Bank and its pro-U.S. policies of trade dependency and underdevelopment with a genuine Bank for Economic Acceleration. Along with this institution is a fourth corollary in the form of the new bank’s sibling: a replacement for the IMF free of austerity junk economics and subsidy of America’s client oligarchies coupled with currency raids on countries resisting U.S. privatization and financialization takeovers.

The fifth requirement is for countries to protect themselves by joining a military alliance as an alternative to NATO, to avoid being turned into another Afghanistan, another Libya, another Iraq or Syria or Ukraine.

The main deterrent to this strategy is not U.S. power, for it has shown itself to be a paper tiger. The problem is one of economic consciousness and will.

  1. “Bill Gates has a warning about population growth,” World Economic Forum/Reuters, September 19, 2018. https://www.weforum.org/agenda/2018/09/africas-rapid-population-growth-puts-poverty-progress-at-risk-says-gates
  2. Lananh Nguyen, “‘It’s a hurricane.’ Bank chiefs warn of a weakening economy,” The New York Times, June 1, 2022. 
  3. Kristalina Georgieva, IMF Managing Director, “Facing Crisis Upon Crisis: How the World Can RespondApril 14, 2022. https://www.imf.org/en/News/Articles/2022/04/14/sp041422-curtain-raiser-sm2022. 
  4. “Putin meets with African Union Chairperson at Sochi, June 3, 2022.” President Sall was accompanied by Moussa Faki Mahamat, Chairperson of the African Union Commission. http://en.kremlin.ru/events/president/news/68564. For a elated discussion on the sanctions see https://www.nakedcapitalism.com/2022/06/sanctions-now-weapons-of-mass-starvation.html

Lebanon Plagued by Social and Economic Woes

MAY 26, 2022

by INTERNATIONALIST 360°

Viktor Mikhin
Almost three years of political, economic and social problems and disastrous policies have transformed life in Lebanon, once known as the “Paris of the Middle East”, and this land of hope now looks like a textbook example of how not to run a state. In a cogent analysis, the Lebanese newspaper As-Safir blames the failures on a political system which is focused on reaching a consensus acceptable to the elites of the country’s various religious groups, and which frequently sidelines experience and competence in favor of petty compromises in a region that has, throughout its history, struggled with the idea of democratic processes.

In the absence of a competent leadership, Lebanon’s economy is poised on the verge of total collapse, with increasingly serious deficits in a wide range of industries – a situation exacerbated by factors including – to name but a few – a national currency in free fall, high inflation, ill-considered government policies and a blundering ruling elite. Crises in many sectors of the economy – as evidenced by an unprecedented rise in unemployment, poverty and crime – has hastened the country on the road to total collapse, raising the specter of a deterioration in social ties and an unstoppable and irreversible decline.  In addition to being afflicted with a dizzying list of political, social and economic problems, Lebanon’s relations with the other Arab states in the region, so important to its political and economic stability, are still very fragile, and are being further damaged by an elite that is deaf to the mood in society and has knowingly plunged the country into a depression.

It is possible – even probable – that the upcoming parliamentary elections may change things for the better, by encouraging the politicians to breathe new life into their still viable democratic institutions. All those with an interest in Lebanon’s future, both within the country and internationally, have emphasized the need for the elections to go ahead without any hiccups – not least because the foreign aid that Lebanon receives from the wealthy Gulf States depends on this. Most Lebanese are hoping that the elections will bring new faces into a parliament that is better known for infighting rather than for tackling the serious problems afflicting the country. Whatever the results of the vote, the new leaders will have to deal with a turbulent situation and make a huge efforts to establish and nurture a new political structure and social contract able to confront a system that is notorious for corruption, widespread impunity and lack of accountability.  The new lawmakers should not underestimate the difficulty of their mission, which is, put simply, to reverse the chaos of the last few years. If Lebanon is to stand on its feet again it needs to eradicate the culture of crime that has dominated the country for many years, reaching a peak almost nine years ago and remaining at that level ever since.

Since 2020 the political situation has worsened, adding to the country’s problems. Initially politicians argued about the possibility of establishing an interim government, but then cabinet meetings were suspended, which led to even more arguments. Without a competent leadership, the country is simply drifting from one crisis to another, leaving the public – ordinary Lebanese families – to deal with most of the country’s social and economic problems. According to the Lebanese newspaper An-Nahar, almost 80% of Lebanese households are living below the poverty line (compared with a global average of 28%) and almost 50% are living in extreme poverty (four times the global average). Over the last two years the national economy as a whole has contracted by 60% – one of the largest falls in GDP per capita anywhere in the world.  Before its default at the beginning of 2020, the country was already living beyond its means, with a total deficit of $82 billion. Moreover, in an ill-judged attempt to shore up the national currency and rein in inflation, the government spent billions of dollars of the national reserve fund in order to finance loss-making projects. Given the state’s inability to separate the manufacturing sector and infrastructure demands, and its irrational decision to increase salaries in the public sector, it was only a matter of time before the whole national monetary and financial structure collapsed like a house of cards.

Currently the Lebanese Central Bank is squandering its remaining currency reserves (some $12 billion) at a rate of $500 million a month – even after the cancellation of a number of subsidies previously enjoyed by Lebanese citizens. This is a shocking, but entirely foreseeable situation – the ruling elite is simply patching up fiscal leaks in one area, thus causing financial holes to appear in other areas of the economy. In its original report, cited above, As-Safir claimed that “the government has no appetite for carrying out a radical reorganization of the banking sector” and lacks the will to conduct other important reforms, implement new policies or enact new laws to make the rational “corrections” necessary to put the country back on the path towards renewal. Unsurprisingly, as long as the authorities put off major structural reform, the government’s ability to invest hard currency in the economy is declining in real time. This reluctance is largely due to the fact that the current problems actually tend to favor the interests of three major groups – the government itself, borrowers, and traders.

What is more, the traders continue to benefit from generous government subsidies which act as a disincentive to domestic production, favor imports and thus boost the foreign trade deficit. These measures have not been without result – and the consequences – which are well documented – are getting more serious day by day. For example, the banking sector, the mainstay of the Lebanese economy for the last three decades, has been crippled by the deteriorating conditions. There is considerable concern, both domestically and internationally, about the fate of some $85 billion in foreign currency and consumer bank deposits, and bank assets have decreased by $40 billion, resulting in total loss of $5 billion across the sector since 2019.

While most countries have seen something of a bounce-back following the COVID-19 recession, Lebanon’s economy is caught in a self-perpetuating downward spiral. There is very little appetite for investment and the catastrophic decline in real household incomes has had a significant negative impact on consumption. Limited as it is by the need to consolidate its budget and by the financial constraints associated with its austerity measures, the government cannot afford the expansionist intervention necessary to stimulate the contracting economy. Any proposed solution would have to be seen as viable and comply with the recommendations of the International Monetary Fund, which include the appointment or authorization of the IMF to oversee the implementation of reforms and to ensure that this essential and long-overdue process is not undermined by malicious political intrigues. If Lebanon succeeds in this, it could mark the beginning of a long-awaited turnaround, increasing consumer spending, bringing in more hard currency and attracting new investment, thus boosting its faltering economy by perhaps 5%.

In the absence of an agreement, it appears likely that the Lebanese economy will contract even further, and its recession will become the longest in human history. The costs of delay will also grow exponentially, with the financial sector expected to incur losses of almost $70 billion, according to the Lebanese Central Bank. If, two years ago, the government had taken prompt and decisive measures to tackle the crisis, then the losses might have been much lower – less than $31 billion, or a quarter of the total foreign currency deposits currently in the country.

According to economists, in the future the situation in the country may develop in one of two directions. One scenario is a “soft landing”, the result of a comprehensive agreement with the IMF, followed by monitoring of capital movements and budgetary laws, and then structural reforms, which should be closely supervised, and conducted in accordance with the highest levels of inclusivity, transparency and accountability. If this process is properly managed, then international assistance would flood, enabling Lebanon to reverse its current descent into the economic abyss. In the alternative scenario, a “hard landing”, no IMF-approved program, reforms and agreement are implemented. This would result in a total collapse of the Lebanese pound. The only remedy would be to print more money, which would result in hyperinflation – and the spiraling foreign trade deficit would eat away at the country’s remaining hard currency reserves.

The restructuring of the banking sector is of absolutely paramount importance in order to strengthen Lebanon’s financial situation, government system and proven sustainability. What concerns most observers, as well as certain interested parties, is the huge size of the financial sector – about three times the country’s total GDP. This demonstrates that the sector is “overcrowded”- it is too big for the country’s productive economy to finance properly. In addition to the reform of its banking sector, Lebanon’s economy and financial system need to be thoroughly stabilized – a process which should include the restructuring of the national debt and the of the bloated and inefficient public sector. The government also needs to initiate inclusive expansionist reforms – both upwards and downwards – in order to open up the untapped potential of the domestic economy. The country also needs sustainable welfare programs to relieve the economic pressure on Lebanese households, which are struggling under a crushing burden of poverty.

Sayyed Nasrallah: Lebanon Has the Right to Drill in Its Territorial Water, We Seek A Strong State

May 10, 2022

By Al-Ahed news

Sayyed Nasrallah to the Lebanese: You are between two choices..Lebanon is a master or idles in front of the doors of an embassy
Sayyed Nasrallah: “When we entered the government in 2005, we did so against the background of protecting the back of the resistance.”

Welcoming the audience in the Dahiyeh’s electoral festival and thanking them for their massive participation, Sayyed Nasrallah underlined that “The massive contribution in Today’s [Tuesday] festival, and the one we witnessed yesterday in South Lebanon, and that we expect in Beqaa is the biggest message to those betting on the overturning of the people of resistance.”

Hezbollah Secretary General His Eminence Sayyed Hassan Nasrallah delivered a speech in Beirut’s southern suburb [Dahiyeh] ahead of May 15th parliamentary elections.

“Neither there is Arabism without Palestine and al-Quds nor with normalizing ties with the ‘Israeli’ entity,” His Eminence confirmed.

Hailing the vote of the Lebanese expatriates, Sayyed Nasrallah stressed that “Voting for the lists of resistance express expatriates’ bravery and loyalty.”

“In the past days and after al-Quds Day’s speech and the mobilization of the resistance in Lebanon. I have received a message via a diplomatic channel that the ‘Israelis’ do not want a war with Lebanon, but we do not trust the enemy nor its premier, and we will maintain the state of alert that we declared on Quds Day,” he announced.

The Resistance’s leader further announced that “Our mobilization and preparedness will remain as they are until the end of the ‘Israeli’ maneuvers, and the situation is the same for the Palestinian resistance groups,” noting that “All what have been voiced by Parliament Speaker Nabih Berri conveys the thoughts of the national duo.”

On the internal front, Sayyed Nasrallah confirmed that “The presence of the state is important and essential since the alternative isn’t but chaos.”

“Hezbollah doesn’t present itself as a state within the state, and nobody can replace the state on all levels; even in the issue of resistance, it doesn’t propose itself as a replacement for the state, it’s why we always talk about the Army, people and the Resistance,” he emphasized.

Warning that “Lebanon’s situation is very precise and sensitive and tackling its issues couldn’t happen through enthusiasm and revolutions like other countries,” His Eminence underlined that “The civil war is a redline which the Lebanese people must view as a treason.”

On this level, he recalled that “During the previous period, many tried to bring about dramatic changes, and the country was heading towards a civil war,” noting that “Through lies, accusations and siege, some bet over the past years that the resistance’s environment would turn against it.”

As he reiterated that Hezbollah doesn’t present itself as an alternative to the state, even in the issue of resistance, Sayyed Nasrallah declared that “What we seek is a fair, strong and capable state. This is what we announced in our 2009 political document. The state’s wealth belongs to all of the people and they have the right to access this wealth through fair and developmental projects.”

He also mentioned that “We neither did nor will ask the state to protect the resistance, rather we demand that nobody within the state stab the resistance’s back.”

“The Parliament is the mother of institutions that results from elections. This means that the electoral law is the key. The majority law was biased, while the proportional law is the most equitable one,” he stated, pointing out that “A fair state is that presents an electoral law whose citizens feel that they are able to be represented in the parliament.”

According to His Eminence, “There is great injustice when things are related to the voting age. The youth under 21 works and pays taxes, and the struggle must concentrate on giving the 18-year-olds the right to vote.”

Meanwhile, he detailed the aspects of the aspired strong state: “A strong state is one that can protect its sovereignty from any aggression. A fair state is one that practices balanced development among all regions, because state funds are for people and must reach them through development projects. The state should take care of citizens who are unable to work, including the elderly, orphans and those with incurable diseases. The fair and capable state is the one that is able to protect its sovereignty in land and water. It’s a state with an army capable of defending the land and does not place the burdens of liberation and protection on its people. A fair and capable state is the one that provides security to its citizens so that they feel that they are safe and away from any regional discrimination.”

Hoping that “A day comes when we have a strong state and a strong army that assumes the responsibility of defense,” Sayyed Nasrallah lamented the fact that “The Lebanese naval force can’t reach a depth of 300 or 400 meters to rescue the drowned victims in the ‘death boat’ in Tripoli.”

“We have been and will always be against taxes on the poor and the tax system must be progressive,” he highlighted, pointing out that “Given the sectarian Lebanese system, any talk of majorities and minorities is not realistic.”

In parallel, the Resistance Leader clearly stated: “If I say that Hezbollah alone is capable of building a fair and capable state, I won’t be honest. No one can do that alone in Lebanon. Rather, this needs cooperation between parties and movement, as we are in a country based on partnership.”

“Our country is built on partnership and non-elimination. Everyone must be represented in parliament according to their natural sizes, and the majoritarian electoral law did not do that but rather the proportional representation law,” he explained, warning that “Elimination and exclusion under the slogans of majority and minority would plunge Lebanon into adventures. I stress that we are with national partnership in order to pull Lebanon out of its crises.”

In addition, Sayyed Nasrallah declared that “Hezbollah feels that it is more responsible than before. From 1992 until 2005 we weren’t represented in the government because of our opposition to the policies that led to the current economic situation in Lebanon. We entered into the government because of the tense atmosphere in the country and in order to protect the resistance’s back from the political party that was allied with George Bush seeking a ‘New Middle East’.”

Once again, Hezbollah Secretary General clarified that “Lebanon can’t handle a leading sect nor a leading party, no matter how much this party may enjoy strength and popular support.”

“We insist on being present in any government, regardless of its nature, structure and program, in order to protect the resistance’s back. Now we insist to be present in the state with efficiency, seriousness, and responsibility,” he declared, noting that “The economic, living and financial situation needs a recovery plan that must be discussed honestly and seriously, without turning Lebanon into a dependent country. Hezbollah will seriously discuss this issue in the Parliament.”

However, His Eminence hinted that “The electoral and political alliances don’t mean that there are no differences between the allied parties and political groups.”

Urging the state to head towards both the east and the west, Sayyed Nasrallah viewed that “The government’s decision not to open the doors to companies from the east because of the US, means that we’ll achieve no progress.”

“We have treasure in the Lebanese water while the Lebanese people suffer from unemployment, hiking of prices, and starvation; why don’t we extract our treasure? Do we fear the Americans? If Lebanon goes to find its treasure, it will receive tens of billions of dollars. What can they do more than what they did in terms of sanctions, money smuggling, etc.?” he asked.

Meanwhile, His Eminence raised some points regarding the Lebanese maritime wealth: “Why doesn’t ‘Israel’ wait for the demarcation of the borders and explore the disputed regions? Why doesn’t Lebanon work within its waters and borders? I say that Lebanon has the right to drill as it believes that it is its territorial waters. Had the ‘Israeli’ enemy been able to prevent our exploration, Hezbollah can also prevent it from doing so.”

“Lebanon is neither poor nor bankrupt, but there are those who are conspiring against it to destroy it completely. There are those who rush to sell the state’s property. It’s not permissible to turn Lebanon into a country of beggars,” he went on to say, pointing out that “We are able to prevent the ‘Israeli’ enemy because Lebanon is rich and strong, so why should we turn to beggars and wait for the International Monetary Funding?”

Back to the internal files, Sayyed Nasrallah emphasized that “The file of bank depositors resembles a tragedy for hundreds of thousands of Lebanese.”

“The new parliamentarians’ signatures on the draft resolution presented by the Loyalty to Resistance bloc preserve the rights of the depositors. It is a major injustice for depositors to bear the responsibility for losses and the main culprit is Lebanese banks,” he said.

Moreover, His Eminence added that “The Lebanese judiciary must be dealt with, and a fair state means having a fair and transparent judicial system as well as qualified judges.”

To the Lebanese, Sayyed Nasrallah said: “Some call for partnership and cooperation while others call for exclusion; and you have to choose between those two choices. Had those who have this exclusionist mentality been able to exclude us, they would’ve done this since ages ago, but indeed they couldn’t. There are political parties today that present themselves as the opposition, while they are from the 1950s in politics.”

“Today you are in front of either choosing a team that insists on civil peace and serving the people and another team that kills people in broad daylight. The Lebanese are asked to choose between those who call for civil peace and cling to it despite being killed on the roads of Tayouneh and those who offer their services to foreign forces and are ready to make a civil war in Lebanon. Today you choose between those who employ their foreign relations to make Lebanon a strong nation, and the other team that brings the foreign money to add it to their bank accounts. Today you choose between a team whose main concern in Lebanon, and another team whose main concern is to please the US and other countries. You have to honestly select between those who shoulder the responsibility no matter what are the difficulties and between the team that has been deceiving you for years. You are in front of electing the real sovereigns who want Lebanon a strong nation, and the fake sovereigns who want it an exposed country,” he addressed the crowd.

Highlighting that “We, in Hezbollah, are neither tools nor agents nor chess pieces,” Sayyed Nasrallah explained that “The Islamic Republic does not interfere in Lebanon, neither in politics nor in elections, and you have seen which ambassadors are touring Lebanon.”

“The truthful are the ones who did not abandon Lebanon. As for the deceivers, they are the ones who will jump from the boat of responsibility, with what they earned from their money, and then present themselves as saviors. You the people of resistance, those whose houses and companies have been destroyed, who sacrificed thousands of martyrs and endured, we’re certain about your response and that your votes belong to the resistance and its allies,” he concluded.

Michael Hudson, Katie Halper and Aaron Maté: UPDATE

May 03, 2022

Michael starts at 23:40 and the transcript will be added to this thread when available.

UPDATE:  Free part of Transcript:

Katie Halper podcast, April 29, 2022

UI: Michael Hudson Free Podcast

Date: 4/29/22 Length: 24:55

 TRANSCRIPT

KATIE HALPER: Professor Michael Hudson, thank you so much for joining us. We’re really excited to have you.

We wanted to start off by asking you if you could provide an overview of what the economics driving this conflict are—and by conflict, I mean the conflict between Russia and Ukraine, and, of course, with the rest of the world, or really the conflict between Russia and US, and the economic fallout.

MICHAEL HUDSON: Well, it depends on what side you’re looking at. From the Russian side, I don’t think the economic factors were primary. They were threatened by NATO’s expansion and really a plan to attack the Russian-speaking areas of Ukraine. So, I think Russia’s calculations were simply military. The West’s calculations were quite different.

And if you looked at what the results of the conflict are, you have to assume that everybody was talking about the results [as] were known. They’re very clear. The results are a very large increase in fuel prices, oil, and energy prices, a very large increase in agricultural prices with declining supplies. This will leave most of Africa and Latin America—third-world countries, the Global South—unable to pay their foreign debts, which is going to result either in a massive debt default or it will result in a debt repudiation.

Countries are going to have to choose. Are they going to have to operate their homes without energy, their factories without energy—and energy consumption per capita is directly connected to GDP for the last 150 years. Every chart shows energy use, GDP, and personal income go up together.

So, what are countries going to do when they can’t afford to pay the higher prices for energy? Well, Janet Yellen, who was the Federal Reserve head and [now] the Secretary of the Treasury says, ‘Well, what we’re going to do is use the International Monetary Fund to preserve America’s unipolar hegemony.’ I think she used almost those words. We have to keep American control of the world and we’re going to do it through the IMF. And that means in practice using the IMF to create special drawing rights, which will be sort of like free money, the bulk of which will go to the United States to support its military spending abroad for all of this huge military escalation. And it will enable the IMF to go to countries and say, ‘We will help you pay your debts and not be foreclosed on and get energy, but it’s conditional.’ On usual conditions: you have to lower your wages; you have to pass anti-labor legislation; you have to agree to begin selling off your public domain and privatize.

The energy and food crisis caused by the NATO war against Russia is going to be used as a lever not only to push privatization, largely under control of US investors and banks and financiers, but it’s also going to lock countries into the US orbit all the more, both the Global South and especially Europe.

One casualty is obviously going to be Europe and the euro. The euro has been plunging in value day after day after day, as people realize that it’s lost its export markets in Russia and much of Asia, and now at home, too, because exports require energy to be made. Its costs of imports are going up, especially energy. It’s agreed to use, I think, now $3 billion to build new port facilities to buy US natural gas—liquified natural gas at three to seven times the price that it’s paying now, which will make it almost impossible for German firms to produce fertilizer to grow crops in Germany. The euro’s plunging.

The largest plunge of all has been the Japanese yen, because Japan imports all of its energy and most of its food and is keeping its interest rates very low in order to support the financial sector. And so, the Japanese economy is being sacrificed and squeezed. And I think this is…you can’t say, ‘Gee, this is an accident.’ This is part of the plan, because now the United States can say, ‘Of course we don’t want your yen to go down so much that your consumers have to pay more. We will, of course, give you SDRs—special drawing rights—and we will give you American aid. But we do want you to rewrite your constitution so that you can have atomic weapons on your soil so that we can fight against China to the last Japanese. Just like we’re doing in Ukraine, let us do it for you.’

And, of course, the Japanese love that. The government loves that idea. They love sacrificing the population, which is what they’ve been doing ever since the Plaza Accord and the Louvre Accord of the 1980s that basically wrecked the Japanese industrial economy from this huge upswing to just a mass shrinkage.

So, those are the economic effects of the war. And in the newspaper, you think the war is all about Ukrainians and NATO fighting Russians, and it’s really a war by the United States to use the NATO-Russia conflict as a means of locking in control over its allies and the whole Western world, and in Janet Yellen’s words, re-establishing American unipolar power.

AARON MATÉ: And do you think that, assuming that this is the US strategy, taking your argument at face value, do you think that this strategy will succeed?

MICHAEL HUDSON: Ultimately, it’ll be self-defeating. And almost every US politician and military speech has the phrase, ‘Gee, we don’t want America to shoot itself.’ And obviously they’re all worried about it. It’s a huge gamble.

Apparently, the military was not even consulted in the sanctions that were put against Russian energy. And the military wasn’t consulted even on the plans by the State Department and the National Security…the neo-cons that are running the NATO war. And so, obviously, there’s a lot of doubts within the military, but they don’t speak up—that’s not what they do.

It’s amazing that in Europe the only opposition to this is coming from the right wing, people like Marine Le Pen. Not from the left wing. So, the left wing in Europe…I shouldn’t say the left, I should say what is now the right wing, the Social Democratic parties, the Labour Party, those are the parties that are thoroughly behind NATO. And there doesn’t seem to be a political imperative in these countries, except going along with the policy that’s going to squeeze their balance of payments and lock them into dependency on the United States.

So, what seems to be happening if there’s no fight back on the part of Europe? Obviously, if you look at the United Nations vote on whether to come out with a policy against Russia, many countries either abstained or voted against it. So, the big economic result is structural. It means there’s like an iron curtain between the white Western world (Europe and North America) and Eurasia (China, India, and Russia, and their surrounding territories). And if you have China, India and Russia—or what [Halford John] Mackinder called Eurasia, the world core—then, are you going to have the rest of Asia coming along? The question’s going to be, what happens with Taiwan, Japan, and North Korea? They’re pretty much up for grabs. And yet two days ago, the NATO leader, [Jens] Stoltenberg, said NATO has to have a presence in the South China sea, that NATO has to defend Europe in the Pacific, in China. So, you can see the conflict that’s coming there. And I think you also had one of the NATO people—a European politician, negotiator—saying this war cannot be settled economically. It cannot be settled by treaty. It can only be settled militarily.

Well, so then you’re back to, how is the military going to affect the economy? Well, Russia cannot afford to lose, because if it loses, NATO is going to put atomic weapons right in Ukraine, right next to its border, as it wants to do in Latvia and Estonia. And the US, apparently, is taking a position, ‘We can’t lose, because if we lose, Biden won’t be reelected.’ And Biden apparently is now running the military and economic campaign with a view towards how can he be reelected in November [2024]—with the only real variable in the American strategy being the American public itself, which, unfortunately, there’s almost no discussion of what we’re talking about today, except your show, the internet, [The Vineyard of] The Saker and the others. So, everything is up for grabs.

AARON MATÉ: And by the way, if this is Biden thinking, he’s doing so, even though most Americans don’t wake up caring about Ukraine, it’s not their top concern. But there’s a very different attitude inside the White House. Obviously, they do.

So, let me ask you about Russia. Can Russia afford to weather all of this? As we’re speaking, Russia has recently cut off gas deliveries to Poland and Bulgaria. Let’s say other parts of Europe follow suit and refuse to pay in rubles for gas payments, as Putin has demanded. Can Russia afford to cut off more countries from receiving Russian energy, or is Putin bluffing there, do you think?

MICHAEL HUDSON: No, of course it can afford to cut it off because Russia is pretty much self-contained. It’s how it survived the 1990s and the shock therapy. Any country that could survive the shock therapy, nothing is going to be that serious again. So, it’s already shown that it can survive, 20 years ago, 30 years ago. And it can survive much better than Europe can survive.

AARON MATÉ: Michael, let me push back there. It survived, but the 90s took a very heavy toll on Russia.

MICHAEL HUDSON: Yes, it did. Absolutely.

AARON MATÉ: Are you suggesting that Russia might face that again?

MICHAEL HUDSON: No, I don’t think it’ll be that serious again, because now it has the support of China, India, and other countries. Before it was completely dismantled from within. Now, it’s not dismantled from within. It’s rebuilt; certainly, it’s military. It’s rebuilt enough of its economy and made enough links with other economies who are politically supporting it. Because Biden has said again and again, ‘We’ve got to destroy Russia because if we destroy Russia, we will cut it off in China, and then we can go against China as our real enemy.’ So, we’ve got to cut up the world potentially opposing us, first Russia and then China, maybe India, too. And he’s been very explicit in this, so you can imagine where this leaves China and India. India has already said, ‘Well, look, we’re economically linked to Russia. We’re going to continue to link.’

Russia’s foreign reserves were stolen in the West. It’s going to basically work with China to create some kind of mutual currency swaps like United States arranges with Europe and other countries—currency swaps so that they can hold each other’s currency. And China knows that, ultimately, it will be repaid through a new pipeline to deliver gas to China. So, I think a decision has been made in Russia that it’s decoupling with the West. Certainly, decoupling from Europe, decoupling from the United States, except for marginal trade, and [from] reorienting itself towards the West because it can’t afford to deal on these terms anymore.

So, yes, it’s going to be painful. But I think the Russian people, who get a very different report of the war and the violence and terrorism that’s going on than the American press [gives], the Russians seem to be 80% behind Putin. It’s not like it was in the 90s when they were utterly demoralized.

The military fighting is not going to end this year or next year. It’s going to take at least 30 years. And it will end probably with a split between Europe and the West on the one hand and Eurasia on the other hand, with more and more of Africa and South America linking itself to the Eurasian economy as Europe and the American economies shrink.

Almost everyone sees shrinkage. I think President Xi of China said the other day, he sees that the American economy is shrinking, and certainly the European economy is shrinking, for a decade or as long as it continues the neoliberal course. And I think that’s pretty obvious—it’s going to shrink. And Xi also said that’s because a centrally planned economy, which they call socialism or Marxism with Chinese characteristics, is more efficient than democracy, because democracy really turns into oligarchy very quickly, and the oligarchy turns into a hereditary aristocracy.

And the West is not a democracy anymore. The West is turning into a hereditary aristocracy. And the Chinese are trying to prevent the financial class from becoming an independent class, pursuing policies that impoverish labor, because for them banking and credit is still a public utility. That’s the most important sector to be [saved] in China, and that’s what makes China so different from the United States. You could say that bankers and Wall Street are the central planners of the US, and their central planning is in favor of the finance, insurance, and real estate sector, and bankers are in charge of China through the Treasury, which is run by party officials that are not seeking to make capital gains for wealthy families but are using finance to build up their industry and infrastructure and make themselves independent of the West, so that America can never do to China what it did to Russia.

AARON MATÉ: And if you were to predict the first places where we’re going to see a major fallout, major unrest as a result of higher commodity prices due to this war on Ukraine, where will it be?

MICHAEL HUDSON: I would say Latin America, Africa, third-world countries that have not followed World Bank policy for the last 70 years and not produced their own food, but produce the export crops, so they’re dependent on importing food, primarily American grain and importing American energy. And probably the central economic game of the NATO war against Russia was to reconcentrate control of the world energy trade in the hands of American, English, and Dutch oil companies.

So, basically the oil companies and the US are going to let the third-world countries go into a crisis. If they default on their bonds, then the United States and the bondholders get to treat Latin America like they treated Argentina or Venezuela and grab whatever assets they have outside of their country. Like Venezuela had investments in the United States and gold that it left in the Bank of England that were grabbed.

There’s going to be a huge asset grab. That is supposed to be how this unfolds, and the most obvious assets to the grabbed are going to be in Latin America and Africa. Maybe some Asian deficit countries. So, this is the weakest link, and that’s why there’s this fight within the IMF at the upcoming meetings, to create these special drawing rights to give them money on the condition that there is a class war.

So, what we’re seeing, really, isn’t a war between NATO and Russia. It’s a class war of the neoliberals against labor across the world to establish the power of finance over labor.

AARON MATÉ: And so, do you think that there’s a threat of an even worse hunger crisis in this world, one that we’re not talking about and should be preparing for it?

MICHAEL HUDSON: A threat? That’s the objective! Yes, of course. That’s what they’re aiming at. If you read what Klaus Schwab says at the World Economic Forum, he said there are 20 percent too many people in the world, especially in the Global South. This is what all the big foundations are for. The billionaires, they all say, ‘We’ve got to thin out the population, there’s too many consumers that don’t produce enough wealth for us.’ If they produce wealth for themselves, that doesn’t count because that’s not for us and we don’t get it. So, yes, that’s not going to be an accident. Obviously, anyone who looks at the basic economic trends can see that this is inevitable—and you have to assume that this was discussed as part of the whole big neoliberal plan of the Biden administration and the Deep State behind it.

KATIE HALPER: How different is this from what we saw with Trump, how continuous, or how much of an aberration do we have between the different administrations?

MICHAEL HUDSON: It’s pretty much the same. The same groups are still in control. Trump was going to appoint that general who was going to basically clean out the State Department and the CIA, but his son-in-law convinced them not to appoint this person. And Trump didn’t have anyone in his administration able to close down this whole neocon group there. So, basically, he let them destroy, essentially. They just ignored what he did. He wanted to withdraw troops from Syria and the Army just refused to withdraw the troops. Nobody followed his orders. So, he was an aberration politically, but the presidency of the US these days is pretty much a figurehead for the Deep State behind it. So, I don’t think there’s that much difference. The Republicans are as much behind this plan as the Democrats.

AARON MATÉ: Let me ask you about the economic toll on Ukraine from this conflict, and not just from Russia’s invasion, but the last eight years since the US-backed coup. And maybe we can start with what happened in the fall of 2013, because the conventional story that we get told a lot in the US is that basically this whole crisis began when Ukraine was in talks with the EU under Yanukovych, the ousted president. And Yanukovych was going to sign this agreement with the EU and that’s what most Ukrainians wanted. It would have brought liberty to Ukraine, and then Russia basically sabotaged it and ordered him not to. And that’s when Ukrainians came out to protest…

KATIE HALPER: This is not…you’re not saying this, Aaron, right? You’re saying this is the mainstream narrative that we’ve been fed.

AARON MATÉ: Yes, this is the mainstream narrative that we’ve been fed. And so that’s when Ukrainians came out to protest with the Maidan revolution, as it’s called, and that’s what led to the coup in February of 2014 that ousted Yanukovych.

Can you talk about what that narrative gets wrong, especially the actual terms of the agreements that Yanukovych was being asked to sign by the EU and what that would’ve meant for Ukraine?

MICHAEL HUDSON: Well, Russia couldn’t really tell Yanukovych what to do. Yanukovych was always independent. Russia offered a better deal, and Yanukovych said the deal that the EU was offering would make it much poorer than the continuation of the relationships that it had with Russia, which, after all, were its traditional relationships. So, Yanukovych didn’t sign the EU deals. And at that point, it wasn’t the Ukrainians that protested. It was a neo-Nazi group that was positioned in…that set itself up with snipers all around Maidan square, and it was the Nazi group that began firing on the policemen to make it appear as if it were the government, and to fire on the general crowd. So, basically, the coup was sponsored by the United States who put in the officials that were designated by Ms. Nuland, and the Ukrainians had hoped that somehow joining the EU would make them prosperous. Well, that’s the myth that Europe had, that if it would only take US advice, it would end up as prosperous with as many consumer goods as the United States. And it was all a myth.

But when Yanukovych’s board looked at it, they said, ‘Well, we’re not going to make money this way, basically.’ And the kleptocrats who were running Ukraine at that time…the Ukrainians weren’t running Ukraine. It was considered by the World Bank, every agency, to be the most corrupt country in Europe, and the kleptocrats thought, ‘Wait a minute. If we sign that then the Europeans are going to take over our property and they’re going to want to buy us out, and we’re going to end up with some yachts and some real estate in England like the Russians. But it’s really going to be a giveaway.’ So, they were certainly behind Yanukovych, saying, ‘This is not a good deal with this.’

That’s when the US decided that it needed a coup, and even at that time it wanted…it realized that it had the idea of long-term fighting against Russia as the first domino to fall in the fight against China. That was already in the discussion already at that time in 2014.

AARON MATÉ: Right. Carl Gershman is the former head of the National Endowment for Democracy. He called Ukraine, quote, “The biggest prize,” and what he saw as a struggle against Russia, he thought that actually bringing Ukraine into the Western orbit would actually lead to regime change even in Russia, and lead to Vladimir Putin’s downfall.

MICHAEL HUDSON: Well, he was a Trotskyist, a neocon, and a virulent Russia-hater.

KATIE HALPER: An example of that great Trotskyist-to-neocon trajectory that we see so much.

MICHAEL HUDSON: Yeah.

AARON MATÉ: One small point though. I think the protest that happened initially against Yanukovych, I think that was actually a large mass of people. That wasn’t neo-Nazi. I think the neo-Nazi…

MICHAEL HUDSON: Right. But they didn’t do the coup. They weren’t behind the coup.

AARON MATÉ: The coup was definitely the far-right, as they’ve even taken credit for—as they even take credit for, openly.

You mentioned the kleptocrats in Russia. Let me ask you about that. What is the real state of the oligarchy in Russia? We hear in the US constantly about the Russian oligarchs, and they’re sort of blamed for all the world’s ills. What is the actual reality of Russian oligarchs? How has that evolved under Putin? This oligarch class was obviously created under [Boris] Yeltsin with the advice of US technocrats who came in. What is the actual power of the oligarchs in Russia now, and their relationship with Vladimir Putin?

[To hear the rest of the interview, please go to UsefulIdiots.substack.com.]

###

Professor Hudson’s new book is also in publication now and available on Amazon.  We will soon publish a book review for the Saker Blog and in my reading so far, I am totally impressed with the quality and clarity.

What is the Collective West?

April 30, 2022

Source

By Batiushka

Introduction

Western State propaganda mouthpieces like the BBC or CNN, their journalists abundantly supplied and rewarded by their spy services, love to talk about ‘the international community’. They substituted this new phrase for the old one of ‘the free world’ in the 1990s. Of course, both phrases are nonsense. What did/do they actually mean?

The Free World

The 1740 Imperialist anthem ‘Rule, Britannia’ has the words ‘Britons never will be slaves’. What it means is that the ruling class of the British Empire, which was founded on genocide, piracy and slave-trading (for instance, the slaver ancestors of former PM David Cameron), ‘never will be slaves’. As for the enslaved plebs of the rest of the world, including those of the nations of Great Britain and Ireland, they will be feudalised, robbed of their land by the Enclosures (= enforced collectivisation, only not run by the State, but by oligarchs) and sent to be exploited in the sadistic factories of Industrial Revolutionary Capitalists, or else forced to emigrate to populate the future Anglosphere. In the same way, this phrase ‘the Free World’ also meant the ruling class of the First World, that is, those who threatened the Second World (the Communist bloc) with nuclear extinction, all the while exploiting the Third World, assassinating anyone who opposed them (Patrice Lumumba, Dag Hammarskjold, John Kennedy etc etc).

The International Community

The International Community is an equally hypocritical phrase which designates the Zionist Anglosphere + Colonies. In other words, it means the Anglo-Zionist elite of the USA, Israel, the UK, Canada, Australia, New Zealand + the EU, Japan and, arguably, South Korea. The latter non-English-speaking countries are simply US vassals, colonies or client-states, occupied by US troops and bases. This ‘International Community’ is dominated by a military wing called NATO (based almost next door to the EU headquarters in Brussels) and an economic wing called the G7, which is heavily influenced by Wall Street and the City of London. However, this ‘Community’ works together with vassal institutions, like the ‘World Bank’, the IMF (International Monetary Fund) or, to a considerable extent, the UN (United Nations), and think tanks and societies like the Trilateral and Bilderberg. It rewards its servants with awards like Nobel Prizes, generously funded by the CIA. However, whatever the acronym, it is all the same greedy clique.

The Collective West

This phrase is now used in Russia to designate all the enemies of the Russian Federation. These enemies are identical to ‘the international community’, i.e, that small but wealthy minority of the world, representing about 15% of the global population. There is nothing new in the reality of this collective enmity of hatred for and jealousy of Russia. For example, in the 13th century the invading hordes of Germanic terrorists, called the ‘Teutonic Knights’, were also a bunch of bandits from ‘the Collective West’. However, to illustrate our point more clearly still, let us look at the five much more recent invasions of the Russian Lands by the Collective West. These invasions have taken place in the last 210 years (exactly once every 42 years on average). They were and are the events of:

1812. The Russian Empire was invaded by the French Empire, the Austrian Empire, the Kingdoms of Italy, Naples, Saxony, Bavaria, Westphalia, Wuerttemburg, Prussia, Spain and Denmark, the Swiss Confederation, the Grand Duchies of Hesse, Berg and Baden and the Duchy of Warsaw. The result? Although the Collective Western forces reached Moscow, they had to retreat with hundreds of thousands of deaths and in 1814 Russian troops liberated Paris from the tyranny of Napoleon.

1853. The Russian Empire was invaded by France, Great Britain, Sardinia and the Ottoman Empire, supported by the Austrian Empire. This war, miscalled ‘The Crimean War’, included the invasion of the Russia through the Crimea, an attempted British invasion of Siberia from the Sea of Japan and the shelling by the British Navy of a Russian monastery from the White Sea. It lasted until 1856. The ending came when the British blew up the Russian dock installations of Sebastopol (Sevastopol), built ten years before by British engineers. For this ‘achievement’, 500,000 human-beings had died as a result of French and British Imperialism, mainly of disease. Another consequence – in 1867 Russia sold Alaska to the then friendly USA, and not to the enemy British Canada.

1914. The Russian Empire was invaded by Germany, Austria-Hungary, the Ottoman Empire and the German puppet kinglet of Bulgaria. After immense struggles, the enemy advanced only as far as Poland and Lithuania, never even entering Russian territory. The Russian Imperial Army, suffering fewer losses than the French and Germans on the Western Front even though facing twice as many enemy troops, was headed for total victory in summer 1917. However, in early 1917 the Russian Empire was overthrown by a British-orchestrated coup d’etat and implemented by a fifth column of treacherous Russian aristocrats (i.e. oligarchs, in modern language), generals, politicians, journalists and lawyers. We know what happened next.

1941. The Soviet Union was invaded by the troops of Fascist Germany, Romania, Finland, Italy, Hungary, Slovakia, but these were supported by detachments of Nazi troops from a great many Western countries, including France, Belgium and Norway. The result? Despite the slaughter of 27 million Soviet citizens by the genocidal Nazis who treated the Soviet peoples as wild animals to be massacred, in 1945 Soviet troops liberated Berlin, discovering the gruesome charred remains of the suicide Hitler.

2022. Ancient Russian Lands (recently become known as Eastern and Central Ukraine), occupied, attacked and threatened by Nazi forces, trained and equipped by NATO (the North American Terrorist Organisation), consisting of 30 states led by the USA, are being liberated. They are being freed by Russian forces fighting in what is not a Russian war against the Ukraine but a NATO proxy war against the Ukraine.

The Collective West? Nothing new in this concept.

Conclusion: A Word of Warning

27 million dead? Unless you are brain dead, please do not send Ursula von der Leyen, the President of the European Commission, to intervene in the Russian special operation of liberation in the Ukraine. Her grandfather was a Nazi who as a volunteer became a staff sergeant in the Wehrmacht, led a unit on the Soviet front which hunted down resistance groups, participated in the capture of Ukraine’s capital Kiev and took part in the barbaric September 1941 Babi Yar massacre, in which more than 33,000 Jews were shot in cold blood.

And please do not send Chrystia Freeland, the Canadian Vice-President, to intervene in the Russian special operation of liberation in the Ukraine. Her grandfather was a Ukrainian Nazi, Mykhailo Khomiak, after the war sought by the Polish authorities for his war crimes.

Our words of warning go out to all other Nazis and Fascists who seem to think that V.V. Putin is one of them. He is not. He is an anti-Fascist, whose grandfather, incidentally, was French. Like Tsar Nicholas II a century before him, V.V. Putin is for social justice against the Anglo-Zionist aristocrats/ oligarchs who run the Western world and have attempted to run the Russian world, from which the last oligarchs are currently being expelled.

Michael Hudson, Katie Halper and Aaron Maté

April 30, 2022

Michael starts at 23:40 and the transcript will be added to this thread when available.

Exclusive: Russian geo-economics Tzar Sergey Glazyev introduces the new global financial system

The world’s new monetary system, underpinned by a digital currency, will be backed by a basket of new foreign currencies and natural resources. And it will liberate the Global South from both western debt and IMF-induced austerity.

April 14 2022

By Pepe Escobar

Sergey Glazyev is a man living right in the eye of our current geopolitical and geo-economic hurricane. One of the most influential economists in the world, a member of the Russian Academy of Sciences, and a former adviser to the Kremlin from 2012 to 2019, for the past three years he has helmed Moscow’s uber strategic portfolio as Minister in Charge of Integration and Macroeconomics of the Eurasia Economic Union (EAEU).

https://media.thecradle.co/wp-content/uploads/2022/04/Unknown-6.jpeg
Leading Russian economist Sergey Glazyev says a complete overhaul of the western-dominated global monetary and financial system is under works. And the world’s rising powers are buying into it. Photo Credit: The Cradle

Glazyev’s recent intellectual production has been nothing short of transformative, epitomized by his essay Sanctions and Sovereignty and an extensive discussion of the new, emerging geo-economic paradigm in an interview to a Russian business magazine.

In another of his recent essays, Glazyev comments on how “I grew up in Zaporozhye, near which heavy fighting is now taking place in order to destroy the Ukrainian Nazis, who never existed in my small Motherland. I studied at a Ukrainian school and I know Ukrainian literature and language well, which from a scientific point of view is a dialect of Russian. I did not notice anything Russophobic in Ukrainian culture. In the 17 years of my life in Zaporozhye, I have never met a single Banderist.”

Glazyev was gracious to take some time from his packed schedule to provide detailed answers to a first series of questions in what we expect to become a running conversation, especially focused to the Global South. This is his first interview with a foreign publication since the start of Operation Z. Many thanks to Alexey Subottin for the Russian-English translation.

The Cradle: You are at the forefront of a game-changing geo-economic development: the design of a new monetary/financial system via an association between the EAEU and China, bypassing the US dollar, with a draft soon to be concluded. Could you possibly advance some of the features of this system – which is certainly not a Bretton Woods III – but seems to be a clear alternative to the Washington consensus and very close to the necessities of the Global South?

Glazyev: In a bout of Russophobic hysteria, the ruling elite of the United States played its last “trump ace” in the hybrid war against Russia. Having “frozen” Russian foreign exchange reserves in custody accounts of western central banks, financial regulators of the US, EU, and the UK undermined the status of the dollar, euro, and pound as global reserve currencies. This step sharply accelerated the ongoing dismantling of the dollar-based economic world order.

Over a decade ago, my colleagues at the Astana Economic Forum and I proposed to transition to a new global economic system based on a new synthetic trading currency based on an index of currencies of participating countries. Later, we proposed to expand the underlying currency basket by adding around twenty exchange-traded commodities. A monetary unit based on such an expanded basket was mathematically modeled and demonstrated a high degree of resilience and stability.

At around the same time, we proposed to create a wide international coalition of resistance in the hybrid war for global dominance that the financial and power elite of the US unleashed on the countries that remained outside of its control. My book The Last World War: the USA to Move and Lose, published in 2016, scientifically explained the nature of this coming war and argued for its inevitability – a conclusion based on objective laws of long-term economic development. Based on the same objective laws, the book argued the inevitability of the defeat of the old dominant power.

Currently, the US is fighting to maintain its dominance, but just as Britain previously, which provoked two world wars but was unable to keep its empire and its central position in the world due to the obsolescence of its colonial economic system, it is destined to fail. The British colonial economic system based on slave labor was overtaken by structurally more efficient economic systems of the US and the USSR. Both the US and the USSR were more efficient at managing human capital in vertically integrated systems, which split the world into their zones of influence. A transition to a new world economic order started after the disintegration of the USSR. This transition is now reaching its conclusion with the imminent disintegration of the dollar-based global economic system, which provided the foundation of the United States global dominance.

The new convergent economic system that emerged in the PRC (People’s Republic of China) and India is the next inevitable stage of development, combining the benefits of both centralized strategic planning and market economy, and of both state control of the monetary and physical infrastructure and entrepreneurship. The new economic system united various strata of their societies around the goal of increasing common wellbeing in a way that is substantially stronger than the Anglo-Saxon and European alternatives. This is the main reason why Washington will not be able to win the global hybrid war that it started. This is also the main reason why the current dollar-centric global financial system will be superseded by a new one, based on a consensus of the countries who join the new world economic order.

In the first phase of the transition, these countries fall back on using their national currencies and clearing mechanisms, backed by bilateral currency swaps. At this point, price formation is still mostly driven by prices at various exchanges, denominated in dollars. This phase is almost over: after Russia’s reserves in dollars, euro, pound, and yen were “frozen,” it is unlikely that any sovereign country will continue accumulating reserves in these currencies. Their immediate replacement is national currencies and gold.

The second stage of the transition will involve new pricing mechanisms that do not reference the dollar. Price formation in national currencies involves substantial overheads, however, it will still be more attractive than pricing in ‘un-anchored’ and treacherous currencies like dollars, pounds, euro, and yen. The only remaining global currency candidate – the yuan – won’t be taking their place due to its inconvertibility and the restricted external access to the Chinese capital markets. The use of gold as the price reference is constrained by the inconvenience of its use for payments.

The third and the final stage on the new economic order transition will involve a creation of a new digital payment currency founded through an international agreement based on principles of transparency, fairness, goodwill, and efficiency. I expect that the model of such a monetary unit that we developed will play its role at this stage. A currency like this can be issued by a pool of currency reserves of BRICS countries, which all interested countries will be able to join. The weight of each currency in the basket could be proportional to the GDP of each country (based on purchasing power parity, for example), its share in international trade, as well as the population and territory size of participating countries.

In addition, the basket could contain an index of prices of main exchange-traded commodities: gold and other precious metals, key industrial metals, hydrocarbons, grains, sugar, as well as water and other natural resources. To provide backing and to make the currency more resilient, relevant international resource reserves can be created in due course. This new currency would be used exclusively for cross-border payments and issued to the participating countries based on a pre-defined formula. Participating countries would instead use their national currencies for credit creation, in order to finance national investments and industry, as well as for sovereign wealth reserves. Capital account cross-border flows would remain governed by national currency regulations.

The Cradle: Michael Hudson specifically asks that if this new system enables nations in the Global South to suspend dollarized debt and is based on the ability to pay (in foreign exchange), can these loans be tied to either raw materials or, for China, tangible equity ownership in the capital infrastructure financed by foreign non-dollar credit?

Glazyev: Transition to the new world economic order will likely be accompanied by systematic refusal to honor obligations in dollars, euro, pound, and yen. In this respect, it will be no different from the example set by the countries issuing these currencies who thought it appropriate to steal foreign exchange reserves of Iraq, Iran, Venezuela, Afghanistan, and Russia to the tune of trillions of dollars. Since the US, Britain, EU, and Japan refused to honor their obligations and confiscated the wealth of other nations which was held in their currencies, why should other countries be obliged to pay them back and to service their loans?

In any case, participation in the new economic system will not be constrained by the obligations in the old one. Countries of the Global South can be full participants of the new system regardless of their accumulated debts in dollars, euro, pound, and yen. Even if they were to default on their obligations in those currencies, this would have no bearing on their credit rating in the new financial system. Nationalization of extraction industry, likewise, would not cause a disruption. Further, should these countries reserve a portion of their natural resources for the backing of the new economic system, their respective weight in the currency basket of the new monetary unit would increase accordingly, providing that nation with larger currency reserves and credit capacity. In addition, bilateral swap lines with trading partner countries would provide them with adequate financing for co-investments and trade financing.

The Cradle: In one of your latest essays, The Economics of the Russian Victory, you call for “an accelerated formation of a new technological paradigm and the formation of institutions of a new world economic order.” Among the recommendations, you specifically propose the creation of “a payment and settlement system in the national currencies of the EAEU member states” and the development and implementation of “an independent system of international settlements in the EAEU, SCO and BRICS, which could eliminate critical dependence of the US-controlled SWIFT system.” Is it possible to foresee a concerted joint drive by the EAEU and China to “sell” the new system to SCO members, other BRICS members, ASEAN members and nations in West Asia, Africa and Latin America? And will that result in a bipolar geo-economy – the West versus The Rest?

Glazyev: Indeed, this is the direction where we are headed. Disappointingly, monetary authorities of Russia are still a part of the Washington paradigm and play by the rules of the dollar-based system, even after Russian foreign exchange reserves were captured by the west. On the other hand, the recent sanctions prompted extensive soul searching among the rest of the non-dollar-block countries. western ‘agents of influence’ still control central banks of most countries, forcing them to apply suicidal policies prescribed by the IMF. However, such policies at this point are so obviously contrary to the national interests of these non-western countries that their authorities are growing justifiably concerned about financial security.

You correctly highlight potentially central roles of China and Russia in the genesis of the new world economic order. Unfortunately, current leadership of the CBR (Central Bank of Russia) remains trapped inside the intellectual cul-de-sac of the Washington paradigm and is unable to become a founding partner in the creation of a new global economic and financial framework. At the same time, the CBR already had to face the reality and create a national system for interbank messaging which is not dependent on SWIFT, and opened it up for foreign banks as well. Cross-currency swap lines have been already set up with key participating nations. Most transactions between member states of the EAEU are already denominated in national currencies and the share of their currencies in internal trade is growing at a rapid pace.

A similar transition is taking place in trade with China, Iran, and Turkey. India indicated that it is ready to switch to payments in national currencies as well. A lot of effort is put in developing clearing mechanisms for national currency payments. In parallel, there is an ongoing effort to develop a digital non-banking payment system, which would be linked to gold and other exchange-traded commodities – the ‘stablecoins.’

Recent US and European sanctions imposed on the banking channels have caused a rapid increase in these efforts. The group of countries working on the new financial system only needs to announce the completion of the framework and readiness of the new trade currency and the process of formation of the new world financial order will accelerate further from there. The best way to bring it about would be to announce it at the SCO or BRICS regular meetings. We are working on that.  

The Cradle: This has been an absolutely key issue in discussions by independent analysts across the west. Was the Russian Central Bank advising Russian gold producers to sell their gold in the London market to get a higher price than the Russian government or Central Bank would pay? Was there no anticipation whatsoever that the coming alternative to the US dollar will have to be based largely on gold? How would you characterize what happened? How much practical damage has this inflicted on the Russian economy short-term and mid-term?

Glazyev: The monetary policy of the CBR, implemented in line with the IMF recommendations, has been devastating for the Russian economy. Combined disasters of the “freezing” of circa $400 billion of foreign exchange reserves and over a trillion dollars siphoned from the economy by oligarchs into western offshore destinations, came with the backdrop of equally disastrous policies of the CBR, which included excessively high real rates combined with a managed float of the exchange rate. We estimate this caused under-investment of circa 20 trillion rubles and under-production of circa 50 trillion rubles in goods.

Following Washington’s recommendations, the CBR stopped buying gold over the last two years, effectively forcing domestic gold miners to export full volumes of production, which added up to 500 tons of gold. These days the mistake and the harm it caused are very much obvious. Presently, the CBR resumed gold purchases, and, hopefully, will continue with sound policies in the interest of the national economy instead of ‘targeting inflation’ for the benefit of international speculators, as had been the case during the last decade.

The Cradle: The Fed as well as the ECB were not consulted on the freeze of Russian foreign reserves. Word in New York and Frankfurt is that they would have opposed it were they to have been asked. Did you personally expect the freeze? And did the Russian leadership expect it?

Glazyev: My book, The Last World War, that I already mentioned, which was published as far back as 2015, argued that the likelihood of this happening eventually is very high. In this hybrid war, economic warfare and informational/cognitive warfare are key theaters of conflict. On both of these fronts, the US and NATO countries have overwhelming superiority and I did not have any doubt that they would take full advantage of this in due course.

I have been arguing for a long time for the replacement of dollars, euro, pounds, and yen in our foreign exchange reserves with gold, which is produced in abundance in Russia. Unfortunately, western agents of influence which occupy key roles at central banks of most countries, as well as rating agencies and key publications, were successful in silencing my ideas. To give you an example, I have no doubt that high-ranking officials at the Fed and the ECB were involved in developing anti-Russian financial sanctions. These sanctions have been consistently escalating and are being implemented almost instantly, despite the well-known difficulties with bureaucratic decision making in the EU.  

The Cradle: Elvira Nabiullina has been reconfirmed as the head of the Russian Central Bank. What would you do differently, compared to her previous actions? What is the main guiding principle involved in your different approaches?

Glazyev: The difference between our approaches is very simple. Her policies are an orthodox implementation of IMF recommendations and dogmas of the Washington paradigm, while my recommendations are based on the scientific method and empirical evidence accumulated over the last hundred years in leading countries.

The Cradle: The Russia-China strategic partnership seems to be increasingly ironclad – as Presidents Putin and Xi themselves constantly reaffirm. But there are rumbles against it not only in the west but also in some Russian policy circles. In this extremely delicate historical juncture, how reliable is China as an all-season ally to Russia?

Glazyev: The foundation of Russian-Chinese strategic partnership is common sense, common interests, and the experience of cooperation over hundreds of years. The US ruling elite started a global hybrid war aimed at defending its hegemonic position in the world, targeting China as the key economic competitor and Russia as the key counter-balancing force. Initially, the US geopolitical efforts were aiming to create a conflict between Russia and China. Agents of western influence were amplifying xenophobic ideas in our media and blocking any attempts to transition to payments in national currencies. On the Chinese side, agents of western influence were pushing the government to fall in line with the demands of the US interests.

However, sovereign interests of Russia and China logically led to their growing strategic partnership and cooperation, in order to address common threats emanating from Washington. The US tariff war with China and financial sanctions war with Russia validated these concerns and demonstrated the clear and present danger our two countries are facing. Common interests of survival and resistance are uniting China and Russia, and our two countries are largely symbiotic economically. They complement and increase competitive advantages of each other. These common interests will persist over the long run.

The Chinese government and the Chinese people remember very well the role of the Soviet Union in the liberation of their country from the Japanese occupation and in the post-war industrialization of China. Our two countries have a strong historical foundation for strategic partnership and we are destined to cooperate closely in our common interests. I hope that the strategic partnership of Russia and the PRC, which is enhanced by the coupling of the One Belt One Road with the Eurasian Economic Union, will become the foundation of President Vladimir Putin’s project of the Greater Eurasian Partnership and the nucleus of the new world economic order.

April 15, 2022

The world’s new monetary system, underpinned by a digital currency, will be backed by a basket of new foreign currencies and natural resources. And it will liberate the Global South from both western debt and IMF-induced austerity.

By Pepe Escobar, posted with the author’s permission and cross-posted at The Cradle. 

Leading Russian economist Sergey Glazyev says a complete overhaul of the western-dominated global monetary and financial system is under works. And the world’s rising powers are buying into it. Photo Credit: The Cradle

Sergey Glazyev is a man living right in the eye of our current geopolitical and geo-economic hurricane. One of the most influential economists in the world, a member of the Russian Academy of Sciences, and a former adviser to the Kremlin from 2012 to 2019, for the past three years he has helmed Moscow’s uber strategic portfolio as Minister in Charge of Integration and Macroeconomics of the Eurasia Economic Union (EAEU).

Glazyev’s recent intellectual production has been nothing short of transformative, epitomized by his essay Sanctions and Sovereignty and an extensive discussion of the new, emerging geo-economic paradigm in an interview to a Russian business magazine.

In another of his recent essays, Glazyev comments on how “I grew up in Zaporozhye, near which heavy fighting is now taking place in order to destroy the Ukrainian Nazis, who never existed in my small Motherland. I studied at a Ukrainian school and I know Ukrainian literature and language well, which from a scientific point of view is a dialect of Russian. I did not notice anything Russophobic in Ukrainian culture. In the 17 years of my life in Zaporozhye, I have never met a single Banderist.”

Glazyev was gracious to take some time from his packed schedule to provide detailed answers to a first series of questions in what we expect to become a running conversation, especially focused to the Global South. This is his first interview with a foreign publication since the start of Operation Z. Many thanks to Alexey Subottin for the Russian-English translation.

The Cradle: You are at the forefront of a game-changing geo-economic development: the design of a new monetary/financial system via an association between the EAEU and China, bypassing the US dollar, with a draft soon to be concluded. Could you possibly advance some of the features of this system – which is certainly not a Bretton Woods III – but seems to be a clear alternative to the Washington consensus and very close to the necessities of the Global South?

Glazyev: In a bout of Russophobic hysteria, the ruling elite of the United States played its last “trump ace” in the hybrid war against Russia. Having “frozen” Russian foreign exchange reserves in custody accounts of western central banks, financial regulators of the US, EU, and the UK undermined the status of the dollar, euro, and pound as global reserve currencies. This step sharply accelerated the ongoing dismantling of the dollar-based economic world order.

Over a decade ago, my colleagues at the Astana Economic Forum and I proposed to transition to a new global economic system based on a new synthetic trading currency based on an index of currencies of participating countries. Later, we proposed to expand the underlying currency basket by adding around twenty exchange-traded commodities. A monetary unit based on such an expanded basket was mathematically modeled and demonstrated a high degree of resilience and stability.

At around the same time, we proposed to create a wide international coalition of resistance in the hybrid war for global dominance that the financial and power elite of the US unleashed on the countries that remained outside of its control. My book The Last World War: the USA to Move and Lose, published in 2016, scientifically explained the nature of this coming war and argued for its inevitability – a conclusion based on objective laws of long-term economic development. Based on the same objective laws, the book argued the inevitability of the defeat of the old dominant power.

Currently, the US is fighting to maintain its dominance, but just as Britain previously, which provoked two world wars but was unable to keep its empire and its central position in the world due to the obsolescence of its colonial economic system, it is destined to fail. The British colonial economic system based on slave labor was overtaken by structurally more efficient economic systems of the US and the USSR. Both the US and the USSR were more efficient at managing human capital in vertically integrated systems, which split the world into their zones of influence. A transition to a new world economic order started after the disintegration of the USSR. This transition is now reaching its conclusion with the imminent disintegration of the dollar-based global economic system, which provided the foundation of the United States global dominance.

The new convergent economic system that emerged in the PRC (People’s Republic of China) and India is the next inevitable stage of development, combining the benefits of both centralized strategic planning and market economy, and of both state control of the monetary and physical infrastructure and entrepreneurship. The new economic system united various strata of their societies around the goal of increasing common wellbeing in a way that is substantially stronger than the Anglo-Saxon and European alternatives. This is the main reason why Washington will not be able to win the global hybrid war that it started. This is also the main reason why the current dollar-centric global financial system will be superseded by a new one, based on a consensus of the countries who join the new world economic order.

In the first phase of the transition, these countries fall back on using their national currencies and clearing mechanisms, backed by bilateral currency swaps. At this point, price formation is still mostly driven by prices at various exchanges, denominated in dollars. This phase is almost over: after Russia’s reserves in dollars, euro, pound, and yen were “frozen,” it is unlikely that any sovereign country will continue accumulating reserves in these currencies. Their immediate replacement is national currencies and gold.

The second stage of the transition will involve new pricing mechanisms that do not reference the dollar. Price formation in national currencies involves substantial overheads, however, it will still be more attractive than pricing in ‘un-anchored’ and treacherous currencies like dollars, pounds, euro, and yen. The only remaining global currency candidate – the yuan – won’t be taking their place due to its inconvertibility and the restricted external access to the Chinese capital markets. The use of gold as the price reference is constrained by the inconvenience of its use for payments.

The third and the final stage on the new economic order transition will involve a creation of a new digital payment currency founded through an international agreement based on principles of transparency, fairness, goodwill, and efficiency. I expect that the model of such a monetary unit that we developed will play its role at this stage. A currency like this can be issued by a pool of currency reserves of BRICS countries, which all interested countries will be able to join. The weight of each currency in the basket could be proportional to the GDP of each country (based on purchasing power parity, for example), its share in international trade, as well as the population and territory size of participating countries.

In addition, the basket could contain an index of prices of main exchange-traded commodities: gold and other precious metals, key industrial metals, hydrocarbons, grains, sugar, as well as water and other natural resources. To provide backing and to make the currency more resilient, relevant international resource reserves can be created in due course. This new currency would be used exclusively for cross-border payments and issued to the participating countries based on a pre-defined formula. Participating countries would instead use their national currencies for credit creation, in order to finance national investments and industry, as well as for sovereign wealth reserves. Capital account cross-border flows would remain governed by national currency regulations.

The Cradle: Michael Hudson specifically asks that if this new system enables nations in the Global South to suspend dollarized debt and is based on the ability to pay (in foreign exchange), can these loans be tied to either raw materials or, for China, tangible equity ownership in the capital infrastructure financed by foreign non-dollar credit?

Glazyev: Transition to the new world economic order will likely be accompanied by systematic refusal to honor obligations in dollars, euro, pound, and yen. In this respect, it will be no different from the example set by the countries issuing these currencies who thought it appropriate to steal foreign exchange reserves of Iraq, Iran, Venezuela, Afghanistan, and Russia to the tune of trillions of dollars. Since the US, Britain, EU, and Japan refused to honor their obligations and confiscated the wealth of other nations which was held in their currencies, why should other countries be obliged to pay them back and to service their loans?

In any case, participation in the new economic system will not be constrained by the obligations in the old one. Countries of the Global South can be full participants of the new system regardless of their accumulated debts in dollars, euro, pound, and yen. Even if they were to default on their obligations in those currencies, this would have no bearing on their credit rating in the new financial system. Nationalization of extraction industry, likewise, would not cause a disruption. Further, should these countries reserve a portion of their natural resources for the backing of the new economic system, their respective weight in the currency basket of the new monetary unit would increase accordingly, providing that nation with larger currency reserves and credit capacity. In addition, bilateral swap lines with trading partner countries would provide them with adequate financing for co-investments and trade financing.

The Cradle: In one of your latest essays, The Economics of the Russian Victory, you call for “an accelerated formation of a new technological paradigm and the formation of institutions of a new world economic order.” Among the recommendations, you specifically propose the creation of “a payment and settlement system in the national currencies of the EAEU member states” and the development and implementation of “an independent system of international settlements in the EAEU, SCO and BRICS, which could eliminate critical dependence of the US-controlled SWIFT system.” Is it possible to foresee a concerted joint drive by the EAEU and China to “sell” the new system to SCO members, other BRICS members, ASEAN members and nations in West Asia, Africa and Latin America? And will that result in a bipolar geo-economy – the West versus The Rest?

Glazyev: Indeed, this is the direction where we are headed. Disappointingly, monetary authorities of Russia are still a part of the Washington paradigm and play by the rules of the dollar-based system, even after Russian foreign exchange reserves were captured by the west. On the other hand, the recent sanctions prompted extensive soul searching among the rest of the non-dollar-block countries. western ‘agents of influence’ still control central banks of most countries, forcing them to apply suicidal policies prescribed by the IMF. However, such policies at this point are so obviously contrary to the national interests of these non-western countries that their authorities are growing justifiably concerned about financial security.

You correctly highlight potentially central roles of China and Russia in the genesis of the new world economic order. Unfortunately, current leadership of the CBR (Central Bank of Russia) remains trapped inside the intellectual cul-de-sac of the Washington paradigm and is unable to become a founding partner in the creation of a new global economic and financial framework. At the same time, the CBR already had to face the reality and create a national system for interbank messaging which is not dependent on SWIFT, and opened it up for foreign banks as well. Cross-currency swap lines have been already set up with key participating nations. Most transactions between member states of the EAEU are already denominated in national currencies and the share of their currencies in internal trade is growing at a rapid pace.

A similar transition is taking place in trade with China, Iran, and Turkey. India indicated that it is ready to switch to payments in national currencies as well. A lot of effort is put in developing clearing mechanisms for national currency payments. In parallel, there is an ongoing effort to develop a digital non-banking payment system, which would be linked to gold and other exchange-traded commodities – the ‘stablecoins.’

Recent US and European sanctions imposed on the banking channels have caused a rapid increase in these efforts. The group of countries working on the new financial system only needs to announce the completion of the framework and readiness of the new trade currency and the process of formation of the new world financial order will accelerate further from there. The best way to bring it about would be to announce it at the SCO or BRICS regular meetings. We are working on that.  

The Cradle: This has been an absolutely key issue in discussions by independent analysts across the west. Was the Russian Central Bank advising Russian gold producers to sell their gold in the London market to get a higher price than the Russian government or Central Bank would pay? Was there no anticipation whatsoever that the coming alternative to the US dollar will have to be based largely on gold? How would you characterize what happened? How much practical damage has this inflicted on the Russian economy short-term and mid-term?

Glazyev: The monetary policy of the CBR, implemented in line with the IMF recommendations, has been devastating for the Russian economy. Combined disasters of the “freezing” of circa $400 billion of foreign exchange reserves and over a trillion dollars siphoned from the economy by oligarchs into western offshore destinations, came with the backdrop of equally disastrous policies of the CBR, which included excessively high real rates combined with a managed float of the exchange rate. We estimate this caused under-investment of circa 20 trillion rubles and under-production of circa 50 trillion rubles in goods.

Following Washington’s recommendations, the CBR stopped buying gold over the last two years, effectively forcing domestic gold miners to export full volumes of production, which added up to 500 tons of gold. These days the mistake and the harm it caused are very much obvious. Presently, the CBR resumed gold purchases, and, hopefully, will continue with sound policies in the interest of the national economy instead of ‘targeting inflation’ for the benefit of international speculators, as had been the case during the last decade.

The Cradle: The Fed as well as the ECB were not consulted on the freeze of Russian foreign reserves. Word in New York and Frankfurt is that they would have opposed it were they to have been asked. Did you personally expect the freeze? And did the Russian leadership expect it?

Glazyev: My book, The Last World War, that I already mentioned, which was published as far back as 2015, argued that the likelihood of this happening eventually is very high. In this hybrid war, economic warfare and informational/cognitive warfare are key theaters of conflict. On both of these fronts, the US and NATO countries have overwhelming superiority and I did not have any doubt that they would take full advantage of this in due course.

I have been arguing for a long time for the replacement of dollars, euro, pounds, and yen in our foreign exchange reserves with gold, which is produced in abundance in Russia. Unfortunately, western agents of influence which occupy key roles at central banks of most countries, as well as rating agencies and key publications, were successful in silencing my ideas. To give you an example, I have no doubt that high-ranking officials at the Fed and the ECB were involved in developing anti-Russian financial sanctions. These sanctions have been consistently escalating and are being implemented almost instantly, despite the well-known difficulties with bureaucratic decision making in the EU.  

The Cradle: Elvira Nabiullina has been reconfirmed as the head of the Russian Central Bank. What would you do differently, compared to her previous actions? What is the main guiding principle involved in your different approaches?

Glazyev: The difference between our approaches is very simple. Her policies are an orthodox implementation of IMF recommendations and dogmas of the Washington paradigm, while my recommendations are based on the scientific method and empirical evidence accumulated over the last hundred years in leading countries.

The Cradle: The Russia-China strategic partnership seems to be increasingly ironclad – as Presidents Putin and Xi themselves constantly reaffirm. But there are rumbles against it not only in the west but also in some Russian policy circles. In this extremely delicate historical juncture, how reliable is China as an all-season ally to Russia?

Glazyev: The foundation of Russian-Chinese strategic partnership is common sense, common interests, and the experience of cooperation over hundreds of years. The US ruling elite started a global hybrid war aimed at defending its hegemonic position in the world, targeting China as the key economic competitor and Russia as the key counter-balancing force. Initially, the US geopolitical efforts were aiming to create a conflict between Russia and China. Agents of western influence were amplifying xenophobic ideas in our media and blocking any attempts to transition to payments in national currencies. On the Chinese side, agents of western influence were pushing the government to fall in line with the demands of the US interests.

However, sovereign interests of Russia and China logically led to their growing strategic partnership and cooperation, in order to address common threats emanating from Washington. The US tariff war with China and financial sanctions war with Russia validated these concerns and demonstrated the clear and present danger our two countries are facing. Common interests of survival and resistance are uniting China and Russia, and our two countries are largely symbiotic economically. They complement and increase competitive advantages of each other. These common interests will persist over the long run.

The Chinese government and the Chinese people remember very well the role of the Soviet Union in the liberation of their country from the Japanese occupation and in the post-war industrialization of China. Our two countries have a strong historical foundation for strategic partnership and we are destined to cooperate closely in our common interests. I hope that the strategic partnership of Russia and the PRC, which is enhanced by the coupling of the One Belt One Road with the Eurasian Economic Union, will become the foundation of President Vladimir Putin’s project of the Greater Eurasian Partnership and the nucleus of the new world economic order.

The views expressed in this article do not necessarily reflect those of The Cradle.

Pakistan Parliament Rejects Khan’s No-Confidence Motion over ‘Foreign’ Interference

April 3, 2022

Source

The Pakistani parliament has rejected a no-confidence vote that seeks to oust Prime Minister Imran Khan, saying “foreign powers” are interfering in the country’s democratic process.

Qasim Khan Suri, National Assembly deputy speaker, dismissed the no-trust move against the prime minister on Sunday, terming it as “contradictory” to Article 5 of Pakistan’s Constitution.

Suri said that the motion was presented on March 8 and should be according to the law and the Constitution, stressing, “No foreign power shall be allowed to topple an elected government through a conspiracy.”

The president later dissolved the National Assembly on Khan’s advice.

“The President of Pakistan, Dr Arif Alvi, has approved the advice of the Prime Minister,” a statement from his office said, meaning fresh elections must be held within 90 days.

The opposition vowed to challenge the move in the country’s Supreme Court.

Khan’s fate is now in a state of limbo which would lead to fresh political instability in the country.

Bilawal Bhutto Zardari, head of the opposition Pakistan People’s Party (PPP), promised a sit-in at the parliament. “We are also moving to the Supreme Court today,” he told reporters.

The opposition needs a simple majority of 50 percent plus one to topple the ruling Pakistan Tehreek-i-Insaf (PTI) government.

Khan needs 172 votes in the 342-seat house to foil the bid. Some defections in the PTI and cracks in his coalition partners have dented his chances to accumulate the 172 votes, needed to hold on to power.

Media reports said there was a heavy police and paramilitary presence on the streets of the capital Islamabad on Sunday, with shipping containers used to block off roads. Police were seen detaining three supporters of Khan’s ruling PTI party outside parliament.

Khan on Saturday accused the United States of being behind a parliament debate on the no-confidence motion, saying the move is an attempt at regime change backed by Washington.

The Pakistani premier had earlier accused an unnamed “foreign power” – in a clear reference to the United States – of funding a “conspiracy” to topple his democratically-elected government.

If Khan had lost on Sunday, he would have been the first prime minister to be removed through a vote of no confidence.

The cricketer-turned-politician has been accused by the opposition of mishandling the economy and foreign policy since coming to power in 2018.

His embattled government has been banking on the International Monetary Fund (IMF) to release a 6 billion-dollar rescue package, but the move has been obstructed by the US.

All That Glitters Is Not Necessarily Russian Gold

MARCH 17, 2022

PEPE ESCOBAR

The “rules-based international order” – as in “our way or the highway” – is unraveling much faster than anyone could have predicted.

The Eurasia Economic Union (EAEU) and China are starting to design a new monetary and financial system bypassing the U.S. dollar, supervised by Sergei Glazyev and intended to compete with the Bretton Woods system.

Saudi Arabia – perpetrator of bombing, famine and genocide in Yemen, weaponized by U.S., UK and EU – is advancing the coming of the petroyuan.

India – third largest importer of oil in the world – is about to sign a mega-contract to buy oil from Russia with a huge discount and using a ruble-rupee mechanism.

Riyadh’s oil exports amount to roughly $170 billion a year. China buys 17% of it, compared to 21% for Japan, 15% for the U.S., 12% for India and roughly 10% for the EU. The U.S. and its vassals – Japan, South Korea, EU – will remain within the petrodollar sphere. India, just like China, may not.

Sanction blowback is on the offense. Even a market/casino capitalism darling such as uber-nerd Credit Suisse strategist Zoltan Poznar, formerly with the NY Fed, IMF and Treasury Dept., has been forced to admit, in an analytical note: “If you think that the West can develop sanctions that will maximize the pain for Russia by minimizing the risks of financial stability and price stability for the West, then you can also trust unicorns.”

Unicorns are a trademark of the massive NATOstan psyops apparatus, lavishly illustrated by the staged, completely fake “summit” in Kiev between Comedian Ze and the Prime Ministers of Poland, Slovenia and the Czech Republic, thoroughly debunked by John Helmer and Polish sources.

Poznar, a realist, hinted in fact at the ritual burial of the financial chapter of the “rules-based international order” in place since the early Cold War years: “After the end of this war [in Ukraine], ‘money’ will ‎never be ‎the same.” Especially when the Hegemon demonstrates its “rules” by encroaching on other people’s money.

And that configures the central tenet of 21st century martial geopolitics as monetary/ideological. The world, especially the Global South, will have to decide whether “money” is represented by the virtual, turbo-charged casino privileged by the Americans or by real, tangible assets such as energy sources. A bipolar financial world – U.S. dollar vs. yuan – is at hand.

There’s no surefire evidence – yet. But the Kremlin may have certainly gamed that by using Russia’s foreign reserves as bait, likely to be frozen by sanctions, the end result could be the smashing of the petrodollar. After all the overwhelming majority of the Global South by now has fully understood that the backed-by-nothing U.S. dollar as “money” – according to Poznar – is absolutely untrustworthy.

If that’s the case, talk about a Putin ippon from hell.

It’s gold robbery time

As I outlined the emergence of the new paradigm, from the new monetary system to be designed by a cooperation between the EAEU and China to the advent of the petroyuan, a serious informed discussion erupted about a crucial part of the puzzle: the fate of the Russian gold reserves.

Doubts swirled around the Russian Central Bank’s arguably suicidal policy of keeping assets in foreign securities or in banks vulnerable to Western sanctions.

Of course there’s always the possibility Moscow calculated that nations holding Russian reserves – such as Germany and France – have assets in Russia that can be easily nationalized. And that the total debt of the state plus Russian companies even exceeds the amount of frozen reserves.

But what about the gold?

As of February 1, three weeks before the start of Operation Z, the Russian Central Bank held $630.2 billion in reserves. Almost half – $311.2 billion – were placed in foreign securities, and a quarter – $151.9 billion – on deposits with foreign commercial and Central Banks. Not exactly a brilliant strategy. As of June last year, strategic partner China held 13.8% of Russia’s reserves, in gold and foreign currency.

As for the physical gold, $132.2 billion – 21% of total reserves – remains in vaults in Moscow (two-thirds) and St. Petersburg (one-third).

So no Russian gold has been frozen? Well, it’s complicated.

The key problem is that more than 75% of Russian Central Bank reserves are in foreign currency. Half of these are securities, like government bonds: they never leave the nation that issued them. Roughly 25% of the reserves are linked to foreign banks, mostly private, as well as the BIS and the IMF.

Once again it’s essential to remember Sergei Glazyev in his groundbreaking essay Sanctions and Sovereignty: “It is necessary to complete the de-dollarization of our foreign exchange reserves, replacing the dollar, euro and pound with gold. In the current conditions of the expected explosive growth in the price of gold, its mass export abroad is akin to treason and it is high time for the regulator to stop it.”

This is a powerful indictment of the Russian Central Bank – which was borrowing against gold and exporting it. For all practical purposes, the Central Bank could be accused of perpetrating an inside job. And subsequently they were caught flat-footed by the devastating American sanctions.

As a Moscow analyst puts it, the Central Bank “had delivered some volumes of gold to London in 2020-2021. This decision was motivated by a high price of gold at that time (near $2000 per ounce) and could hardly be initiated by Putin. If so, this decision can be qualified as very stupid, or even part of a diversionist tactic (…) Most of the gold delivered to London was not stored but sold and transferred into foreign currency reserves (in euro or pounds) which were frozen later.”

No wonder a lot of people in Russia are livid. A quick flashback is in order. In June last year, Putin signed a law canceling requirements for the repatriation of foreign exchange earnings from gold exports. Five months later, Russia’s gold miners were exporting like crazy. A month later, the Duma wanted to know why the Central Bank had stopped buying gold. No wonder Russia media erupted with accusations of “an unprecedented [gold] robbery”.

Now it’s way more dramatic: RIA Novosti described the American-dictated freeze as – what else – a “robbery” and duly predicted global economic chaos. As for the Central Bank, it’s back on the gold buying business.

None of the above though explains some “missing” gold that de facto is not under the possession of the Russian Central Bank. And that’s where a somewhat shady character such as Herman Gref comes in.

Let’s check this out with State Duma deputy Mikhail Delyagin, who had a few things to say about the gold-exported-to-London bonanza:

“This process has been going on for the past year. Exported, according to some estimates, 600 tons. [Head of Russian Central Bank] Nabiullina said – whoever wants to sell gold to get cash, or if you mine gold and trade it, keep in mind that the state, in my person, will not buy gold from you at a market price. We will take it at a big discount. If you want to get honest money for it, please export it. The world center of gold trading is London. Accordingly, everyone began to export and sell gold there. Including Mr. [Herman] Gref. The head of the formally state-owned Sberbank sold a huge part of his gold reserves.”

Look here for fascinating details about Sberbank’s Gref shenanigans.

Watch for the gold-backed ruble

It may be a case of too little too late, but at least the Kremlin has now established a committee – with authority over the Central Bank nerds – to handle the serious stuff.

It boggles the mind that the Russian Central Bank does not answer to the Russian constitution as well as to the judicial system, but in fact is subordinated to the IMF. A case can be made that this cartel-designed financial system – implying zero sovereignty – simply cannot be tackled head on by any nation on the planet, and Putin has been trying to undermine it step by step. That includes, of course, keeping Elvira Nabiullina on the job even as she duly follows the Washington consensus to the letter.

And that brings us back to the ultra high stakes possibility that the Kremlin may have wanted from the start to go no holds barred, forcing the Atlanticists to reveal their true hand, and exposing their system in a “The King is Naked” spectacular for a worldwide audience.

And that’s where the EAEU/China new monetary/financial system comes in, under Glazyev supervision. We can certainly envision Russia, China and vast swathes of Eurasia progressively divorcing from casino capitalism; the ruble reconverted to a gold-backed currency; and Russia focused on self-sufficiency, productive domestic investment and trade connectivity with most of the Global South.

Way beyond its confiscated foreign reserves and tons of gold sold in London, what matters is that Russia remains the ultimate natural resource powerhouse. Shortages? A little austerity for a little while will take care of it: nothing as dramatic as the national impoverishment under the neoliberal 1990s. And extra boost would come from exporting natural resources at premium discount prices to other BRICS and most of Eurasia and the Global South.

The collective West has just fabricated a new, tawdry East-West divide. Russia is turning it upside down, to its own profit: after all the multipolar world is rising in the East.

The Empire of Lies won’t back down, because it does not have a Plan B. Plan A is to “cancel” Russia across the – Western – spectrum. So what? Russophobia, racism, 24/7 psyops, propaganda overdrive, cancel culture online mobs, that don’t mean a thing.

Facts matter: the Bear has enough nuclear/hypersonic hardware to shatter NATO in a few minutes before breakfast and teach a lesson to the collective West before pre-dinner cocktails. There will come a time when some exceptionalist with a decent IQ will finally understand the meaning of “indivisibility of security”.

(Republished from Strategic Culture Foundation by permission of author or representative)

← Say Hello to Russian Gold and Chinese P…

Biden Insists Russian Invasion “Distinctly Possible” Despite Troop Demobilization

Global Research, February 16, 2022

Featured image: Zelensky in 2019, photo by President.gov.ua, licensed under CC BY 4.0

InfoBrics

By Paul Antonopoulos

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The Russian troops that took part in defense exercises in Belarus and Crimea are now returning to their barracks, contradicting widely circulated reports that Russia is about to invade Ukraine. Although Moscow repeatedly stressed that troop mobilizations were for defense exercises, a weak and unverified intelligence leak disseminated across Western media claimed that Russia would invade Ukraine on February 16.

Doubling down on the weak leak about the imminent invasion, Western media even missed the sarcasm of Ukrainian President Volodimyr Zelensky when he referred to the report. Not realizing Zelensky’s irony, Western media reported his “confirmation” about Russia’s February 16 invasion day.

When being interviewed by Die Welt, Russia’s ambassador to the EU Vladimir Chizhov sarcastically said:

“Wars in Europe rarely start on a Wednesday.” For his part, Russian President Vladimir Putin said on February 15, “Do we want this [war] or not? Of course not.”

After weeks of propagating about an inevitable Russian invasion of Ukraine, news of troops being demobilized from the border region with the end of exercises disappointed even the most eager war mongers. It was hoped that the Russian invasion narrative would at least provide justification for harsher economic sanctions.

Yet, despite the withdrawal of Russian troops following the end of the exercises, US President Joe Biden is attempting to maintain the invasion narrative. Biden said he would “give […] diplomacy every chance,” but provocatively added that Russian forces remain “very much in a threatening position” and that “an invasion remains distinctly possible.”

West Exaggerates Russian Invasion Claim as Zelensky Loses Control of Narrative

With Biden seemingly unrelenting on letting go of the imminent invasion narrative, the situation surrounding Ukraine still remains dangerous and volatile despite Russian troops demobilizing. Ukraine, without intervention from the Organization for Security and Co-operation in Europe (OSCE), continues to deploy its armed forces along the Line of Contact with Donbass. So long as the Ukrainian military threatens to reignite the war in Donbass, whether there is a Russian troop presence on the border or not, the West will maintain a narrative that Moscow is the aggressor.

None-the-less, Zelensky is left with little choice but to continue on this path. Time magazine reporter Simon Shuster, tweeted on February 14:

“Source close to Zelensky told me the US first warned his team of a Russian invasion last fall, putting the chances at 80%. The Ukrainians didn’t buy it, but they saw an opportunity – ‘more aid, more attention’ — and played along. Now they have regrets. Too much attention.”

Yet, Western thinkers, such as Professor Jorge Guira in writing for The Conversation, are attempting to twist the narrative and argue that “it’s possible this whole tense affair may be a bluff to weaken the Ukrainian economy and sow European discord.” This argument ignores the near daily statements from Moscow that stressed there were no plans of invading Ukraine. However, now it is claimed that this whole crisis was manufactured by Russia to target Ukraine’s economy and create division within the EU.

This line of thinking not only disregards Russia’s continued statements that it has no intentions of invading Ukraine, but also ignores that there are no such divisions in the EU, with only the three minnow Baltic states and Poland breaking consensus. These four countries hardly represent the 27-member bloc, or its two most important countries – France and Germany.

As has already been heavily scrutinised, the Ukrainian economy is actually the biggest loser because of the incursion narrative which Kiev helped concoct and promote. With the unintended and unforeseen economic consequences of the Russian invasion allegations, US Secretary of State Antony Blinken announced on February 15 “a sovereign loan guarantee to Ukraine” of up $1 billion to support the country’s economic reform agenda and continued engagement with the International Monetary Fund (IMF).

“This offer – combined with the strong partnership between Ukraine, the IMF, other international financial institutions, the G7 and other bilateral donors – will bolster Ukraine’s ability to ensure economic stability, growth, and prosperity for its people in the face of Russia’s destabilizing behavior,” Blinken said.

In turn, Ukrainian Foreign Minister Dmytro Kuleba said on Twitter “another call with Blinken. We keep actively coordinating efforts to protect Ukraine. Grateful to the US for the decision to provide Ukraine with macro-financial assistance.”

Zelensky allowed the Russian invasion scenario to get out of hand, and what turned into a short-sighted opportunity to get more military aid from the West is now one that has economically indebted Ukraine to the US and under more IMF control. Kiev’s hostilities with Moscow will see it lose billions in transit fees when the Nord Stream 2 gas pipeline is activated, and now its propagation of an imminent Russian invasion sees foreign businesspeople, companies and diplomats flee the country.

None-the-less, even with Russian troops demobilizing after finishing their defense exercises, it appears that the imminent incursion assertions will be maintained, especially as Ukraine continues to provocatively deploy troops to the border of Donbass, with the OSCE remaining silent.

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Paul Antonopoulos is an independent geopolitical analyst.

How normalization with “Israel” assassinated Egypt’s economy

February 16, 2022

Source: Al Mayadeen

By Mona Issa

Economic prosperity? Anything but. After 40+ years, “peace” negotiations with “Israel” turned Egypt into a sluggish, aid-dependent rent economy.

At the bottom: 17 September, 1978: Anwar Sadat, Jimmy Carter, and Menachim Begin signing on the Camp David Accords. At the top: The 2013 Egyptian bread crisis, a result of economic assassination. 

There is no war without Egypt, and no peace without Syria – words Henry Kissinger, Nixon’s Secretary of State, uttered in the depiction of the strategic importance of Egypt to US interest in West Asia. Its manpower, resources, geographical position on the map are alone enough to make or break any project in the region. 

Egypt, in the critical years between the 1960s and the 1970s, moved from being the first industrial power in the Arab world, enjoying self-sufficiency and economic independence, to a country whose entire decision-making mechanism depends on receiving “humanitaqizqirian” aid from Washington.

How did this drastic jump, which put Egypt on a catheter mount, come to happen?

“Peace” negotiations.

Just one month after the 1973 October war – or, what’s known by the Israelis as the “Yom Kippur War,” there was a radical realignment process which brought Egypt and the US together. This was a process which initially started in 1971, the year when Anwar Sadat, Egypt’s president, invited the first US Secretary of State to visit Cairo since 1953. In the war of 1973, Egypt lost Sinai, and Sadat wanted to reclaim “self-respect”: a dream unattainable after Abdel Nasser’s death, unfound in what was coming for Egypt. 

When it came to reclaiming Palestinian land back to the Palestinians – and Sinai back to Egypt – to Sadat, the only way to negotiate with the Israelis was through the United States, in a political settlement, if you may. He thought that turning to Washington would help him solving problems unsolvable by military means, whether it was on the annexation of Sinai, or an economic crisis. 

The so-called political settlement came at the expense of the Egyptian economy, human rights and security for years to come.

The Egyptian economy enjoyed minimal imports (in 1961, with Abdel Nasser’s economic reforms, food imports to Egypt were only at 7%), redistribution of land and resources that isolated and diminished the power of traditional Egyptian landowners, the nationalization of the Suez Canal, protective policies against international inflation, and restrictions on foreign investment. Nasserism won its pioneer a substantial fan base and popularity after the 1952 Revolution.

However, his successor, a shameless lackey for the US, was determined to reverse all that revolution had done for the Egyptian people: Sadat, between 1971 and 1973, launched talks with Henry Kissinger. Sadat’s economic policies donned an ‘Open Door’ policy, which opened Egyptian markets to foreign investors and corporations without restrictions.

However, what he really got was a society lamb to the slaughter of foreign and private interest, dependent on food aid, and subject to US-Israeli policies.

Sadat wanted to be sure that Washington would come to Egypt’s rescue, so he required real, tangible evidence from the US that they will support Cairo. If such evidence was available, Sadat was willing to make Egypt undergo the necessary economic changes for US’ aid and the so-called ‘comprehensive peace plans.’ 

The evidence was provided: a basic tenant for Egypt to ride the American aid bandwagon was the normalization of relations with “Israel”, which consolidated in 1978. The free trade agreements, the astronomical numbers of foreign aid, and other agreements isolated Egypt from its neighbors, Arab and non-Arab. However, not only were both Sadat and the US eager to drive Egypt away from Soviet influence in the Cold War, but “Israel” also sought to plant itself on Arab soil, seeking Arab acceptance, which Sadat was so willing to do. 

The US seduced the Egyptian elite, by offering billions in aid, into signing on the Camp David Accords.

Let’s talk about the costs.

An Israeli official once called US aid “narcotic” – not too surprising considering that Washington is “Israel’s” godfather in West Asia, taking unconditional billions in aid and weapons to push common interests.

Between the years 1946 and 2011, the United States gave Egypt a total of $71.7 billion in bilateral foreign aid.

With Sadat’s economic liberalization, US’ conditions for aid were to integrate Egyptian and Israeli economies and boost foreign investments which would supposedly strengthen the economy. The public sector accounted for 75% of all Egypt’s outputs. However, Sadat’s laissez-faire policies only diminished them, placing them at the mercy of private companies and trade deals, such as the Qualified Industrial Zones.

The investments which Sadat was hoping for were not meant for productivity but were rather oriented towards banking and tourism. However, the banking sector, under what was called Infitah (Open Door policy), was not doing what it was supposed to do. With only 6 banks existing in 1974, Sadat allowed the influx of seventy-five banks – several of those were American, which abused the vulnerability of the situation in Egypt. The foreign banks, not to much surprise, laundered Egyptian money to the West rather than benefiting the people. 

With a deteriorating economy where the cost of production of basic goods such as rice, wheat, sugar, flour, oil, and gas was skyrocketing, many locals had left to oil-producing countries to make a living.

In Egypt, this meant one thing: bend to US interest or starve.

By 1981, Egypt was importing 60% of its food into the country: much of that was provided by Washington, in addition to Arab oil-producing countries. After normalization in 1978, Arab investors withdrew their investments; to Sadat’s convenience, the US was able to compromise.

Where has this led Egypt? Egypt today has a workforce participation rate of approximately 48%. Governmental spending exceeds the total revenue. Egypt is hideously indebted to the International Monetary Fund, its debt representing 92% of its Gross Domestic Product.  

Sadat attempted to convince the population that normalization with “Israel” would bring economic well-being and prosperity to the average Egyptian, though what it really did, with Washington’s shuttle diplomacy, is sell it to capitalists, and create a bread crisis in 1977, which was initiated by IMF and World Bank pressures to remove subsidies on bread.

Furthermore, along with the millions of dollars in US aid, a large project was initiated by the Nixon administration on March 1, 1975, to reconstruct the cities along the Suez Canal after three wars – the cost of which was to maintain peace with the Israeli neighbor. Disarmament was on the agenda, meaning that Egypt, on par with the accords, was prohibited from any military confrontation with “Israel”; however, even the Egyptians, given US-Israeli threats against them, knew that “Tel Aviv” would not be complying with the Sinai Disengagement Agreement.

As for economic growth, from the 1980s till recently, Egypt’s gross domestic product per capita has barely doubled, when emerging economies such as South Korea were able to multiply their GDP by ten times (the two countries’ economies, during the 1950s, had similar developmental conditions). Poverty rates in Egypt today hover around 30%, sustaining a high unemployment rate, last 10.4% in 2020.

As if turning to “Israel” once was not enough, wait till you see the “second Camp David Accords.” 

Despite the population’s adamant rejection of Sadat’s policies and the normalization, a greedy leader,a successor, looked for the preservation of the system at the expense of the nation’s interest. Another case taken into account is the US’ Qualified Industrial Zone (QIZ) economic proposal, which ultimately meant to expand economic cooperation between “Israel” and “Egypt.”

QIZ deal, signed in 2004 by Hosni Mubarak, was deemed by many as a “second Camp David,” and it was the most important economic deal between the two in 20 years, according to a US representative who attended the signing event.

Just a few months after that was sealed, Egypt and “Israel” signed another deal where Egypt would provide ‘Israel” with $2.5 billion worth of gas at a low price at a time when the country’s economy was running into the ground.

Those agreements came just a few days after Israel shot and killed 3 Egyptian soldiers at the border.

“One would have anticipated that with the ongoing carnage in Iraq, constant US threats against Iran and Syria, and Israel’s recent killing of three Egyptian border police, Egypt would have taken a tougher stance. But the exact opposite happened,” wrote K. Kamel, in Egypt and Israel: From Cold Peace to Warm Embrace. 

The trade agreement stipulated that the US would allow the exporting of Egyptian products free of duty and customs to the US, given that at least 11.7% of the total exports are manufactured in “Israel.”

Mubarak, though rejecting the agreement in 1994 through 2004, promoted the agreement on purely economic terms: Egypt’s textile-export agreement with the US would soon lose effect, China and India will replace Cairo in the market, and there is no choice other than to accept the QIZ agreement.

Officials in the Egyptian government told their people that the agreement will create a million jobs and that foreign direct investment will reach $5 billion in the next 5 years – both unrealistic and exaggerations.

Gamal Mubarak, Hosni’s son, defended the agreement, saying it serves the Palestinian cause.

However, facts on the ground proved otherwise. Many things were wrong with this deal, which was falsely marketed and heavily oriented towards “Israel.”

The first issue is that the deal breached World Trade Organization’s free trade conditions since the agreement gives “Israel” the power to enjoy a monopoly over Egyptian manufacturers.

Secondly, and even worse: to ensure the 11.7% quota, Israeli companies marginalized small and medium-sized businesses that supply larger textile factories with parts, as they forced them out of their jobs. The deal was heavily biased towards “Israel,” Egypt was not allowed to export its goods to the US duty-free without exporting Israeli goods, despite countries like China, India and Turkey engaging in it freely so. 

There was no real guarantee that the products will be exported to the US, prompting analysts to say that the agreement sort of resembles a Trojan horse, allowing Israel to flock into Arab markets, hence the “second Camp David.”

As some countries resist pressures to normalize relations with the psychopath ‘state’ (you can read Farah Haj Hassan’s article on Asian nations that said ‘No’ to normalization), others have not read much history on the first example of normalization in West Asia, and still deem normalization as an end to conflict, a yes to economic boom and a gateway to acceptance in both the region and the international community. 

To look West, after all their history in the West Asian region alone, should not deceive anyone anymore. Other than the fact that normalization is a human rights issue against fellow Arabs (not even just Palestinians! The US used Egyptian waters and airspace to bomb Iraq and Afghanistan in 2003), it’s suicide for any country looking to flourish with sovereignty. 

Sitrep Argentina: Odious debt and Belt and Road

February 07, 2022

The president of Argentina as a matter of urgency approached President Putin in the day before President Putin left for Beijing.  They needed help with odious debt that the country entered into with the IMF.  This is the sequence of events in the last few days:

And then, one of the most interesting points in the second tweet: China reaffirmed its support for Argentina’s demand to fully exercise sovereignty over the Malvinas.

This is then how Zone B grows, with countries saying they have had enough of hegemony and taking clear steps to help themselves.


Short report by Amarynth

Behind Gulf’s “Bright Initiative” for Lebanon: Hezbollah the Main Target!

January 24, 2022

Kuwaiti FM Sheikh Ahmad Nasser Al-Mohammad Al-Sabah in a press conference following a meeting with Lebanese PM Najib Mikati (Saturday, January 22, 2022).

Al-Manar Website Editor

“Gulf Arab states are looking to mend ties with Lebanon,” Kuwaiti Foreign Minister Sheikh Ahmad Nasser Al-Mohammad Al-Sabah said in Beirut where he was on an official visit during the weekend.

The scene here was somehow ‘bright’, as the top Kuwaiti diplomat was presented as a ‘mediator’ whose visit was aimed at solving a standoff between Beirut and Riyadh, which suspended ties last October over comments by then-information minister Georges Kordahi in which he slammed the Saudi Kingdom over its aggression on Yemen.

However, it was not long until it became distinct that Al-Sabah is no more than a ‘spokesman’ who delivered a message by Riyadh. The message was handed over to Lebanese Prime Minister Najib Mikati and included 12-point proposals, or by another language ‘conditions’ set on the Lebanese Government.

Lebanese daily Al-Akhbar disclosed on Monday the 12 conditions with at least four of them are directly or indirectly related to Hezbollah.

The ‘initiative’ provides for Lebanon’s commitment to the 1989 Taif Agreement that ended Lebanon’s civil war and what it called “decisions by international legitimacy and Arab league,” according to the Lebanese daily.

It stresses on the ‘civilization’ of the Lebanese State, and that Beirut’s so-called ‘dissociation policy’ must be ‘in words and deeds’.

The paper also stipulates that Lebanon “must put a deadline” for the implementation of UN resolutions 1559, 1608 and 1701, (most of them are related to disarming Hezbollah).

The sixth condition provides for “stopping Hezbollah’s meddling in Arab affairs, especially the Gulf affairs, as it also stipulates for Lebanon’s ‘pledge’ to pursue “any Lebanese side who is engaged in hostile actions against Gulf Cooperation Council (GCC) states.”

The so-called ‘initiative’ calls Lebanon to stop all activities related to “anti-GCC groups,” according to Al-Akhbar.

In the eighth condition, Riyadh points to importance of holding parliamentary and presidential elections in Lebanon on time.

The ninth and tenth conditions provides for tightening inspection and border controls to prevent drug smuggling to the Gulf, the Lebanese daily added.

The paper also calls on Lebanon to set up a security cooperation system in which Beirut “exchanges security data” with GCC states.

The twelfth point urges Lebanon to work with IMF in order to “solve the issue” of Lebanese citizens’ deposits in Lebanese banks.

Source: Al-Manar English Website

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