Michael Hudson explains, among other things, why we have high inflation: it is a way for the 1%, the ruling class, to get wealthier at the expense of the rest of us.
I don’t pretend to understand economics — after all, I’m just a lowly retired math teacher. But Hudson’s arguments are really chilling and extremely wide-ranging, but not easy to digest.
Here is one excerpt from a long interview. The full link: https://www.nakedcapitalism.com/2022/01/michael-hudson-what-is-causing-so-much-inflation.html
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[Interviewer: W]hy do you think central banks are are shifting to gold?
MICHAEL HUDSON: They’re protecting themselves against US political aggression. The big story last year was – if a country keeps its reserves and US dollars, that means they’re holding US Treasury securities. The US Treasury can simply say, “We’re not going to pay you.”
And even when a country like Venezuela tried to protect itself by holding its money in gold, where is it going to hold it? It held it at the Bank of England. And the Bank of England said, “Well, we’ve just been told by the White House that that they’ve elected a new president of Venezuela, Mr. Guaidó. And we don’t recognize the president that the Venezuelans elect[ed], because Venezuela is not part of the US orbit.”
So they grabbed all of Venezuela’s gold and gave it to the basically fascist opposition, to the ultra right-winger. The Americans say, “We’re going to recognize an opposition leader; we’re going to pick him out of thin air and take all the money away from Venezuela.”
Countries all over, from Russia to China to the Third World, think the United States is going to just grab [their] money, any time at all. The dollar is a hot potato, because the US, basically, it looks like, is prepping for war over the Ukraine; it’s prepping for war with Russia; it’s prepping for war with China.
It has declared war on almost the entire world that does not agree to follow the policies that the State Department and the military dictate to it.
So other countries are just scared, absolutely scared of what the United States is doing. Of course, they’re getting rid of dollars.
The United States said, “Well, you know, if we don’t like what Russia does, we’re going to cut off the banking contact with the SWIFT, the interbank money transfer system.” So if you do hold your money in dollars, you can’t get it.
I guess the classic example is with Iran. When the Shah was overthrown. Iran’s bank was Chase Manhattan Bank, which I was working for, as a balance-of-payments analyst.
And Iran had foreign debt that it paid promptly every three months, and so it [the new regime] sent a note to the bank, “Please pay our bondholders.” And Chase got a note from the State Department saying, “Don’t do what Iran wants; don’t pay.”
So Chase just sat on the money. It didn’t pay the bondholders. The US government and the IMF declared Iran in default of paying, even though it had all the money to pay the bondholders.
And all of a sudden, they said now Iran owes the entire balance that’s due, on the theory that if you miss one payment, then you default, and we’re going to make Iran do what the Fed didn’t make Chase Manhattan, and Citibank, and Goldman Sachs do. They couldn’t pay and transfer, but they weren’t pushed under bankruptcy.
So by holding your money in the US bank, the US bank does whatever the government tells it to, and it can drive any country bankrupt at any point.
If other countries pass a tariff against US goods that the US doesn’t like, it can just essentially not pay them on whatever they hold in the United States, whether they hold reserves in American banks, or whether they hold reserves in the Treasury or the Fed, the United States can just grab their money.
And so the United States has broken every rule in the financial book, and it’s a renegade; it’s a pirate.
And other countries are freeing themselves from piracy by saying, “The dollar is a hot potato. There is no way that we can believe them. You can’t make a contract with the American government.”
Ever since the Native Americans tried to make land contracts in the 19th century with them, the United States doesn’t pay any attention to the contracts signed. And President Putin says it’s “not agreement capable.”
So how can you make a financial arrangement with a country whose banks and State Department and financial department are not agreement capable? They’re bailing out.
And what’s the alternative? Well, the only alternative is to hold each other’s currencies, and to do something that, for the last 2,000 years, the world has liked gold and silver, and so they’re putting their money into gold because it’s an asset that doesn’t have a liability behind it.
It’s an asset that, if you’re holding it, not England, not the New York Fed – the German government has told the New York Fed, “Send us back to the gold that we have on deposit there for safekeeping. It’s not safekeeping anymore.
Planeload after planeload of gold is being flown back to Germany from the U.S., because even Germany – satellite as it is – is afraid that the United States may not like something Germany does, like if Germany imports gas from Russia, will America just grab all its gold and say, “You can’t have it anymore; we’re fining you.”
The United States has become lawless. And so of course you can’t trust it; it’s like a wild cat bank in the the 19th century.
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