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Interview with Swedish Positiva Pengar group, by Jessi Ora, May 27, 2021


Jussi: So welcome all and welcome Michael. Good to have you here again. How are you?

Hudson: It’s good to be back.

Jussi: Our pleasure as usual. Let me just introduce you shortly first. I think most people know quite a lot about you. I’ll make it short. You have been an advisor to governments, warned correctly about the debt crisis in Latin America and the great financial crisis 2008. You worked on Wall Street as an economist. One of your assignments was to calculate how much it was possible to indebt Latin American countries so all their export income was used to pay interest on loans. Another way to put it, how much can you put these countries in debt. As an associate at Harvard you led research into four thousand years of the history of debt, money and the economy, and published five volumes of colloquia on this history. Also you have written nine books on modern economic relations.

Last time you showed us that big financiers historically have acted to write the rules for their benefit. We call that financialization. For that to succeed, finance must influence our way of thinking, mainly with regard to how we view money, debt and value. Today we will go into value and price theory.

But before that, I think we could do a short summary of last time. You gave us a long-term view of money, debt and the economy. starting from Sumer and Babyloni to today. You showed that there have been thousands of years of power struggles with financial interests wanting to take control of a society and the economy, and it goes on today.

If you look at this picture we can simplify this by dividing history into two parts: First from Sumer until Rome. That’s the green part in the picture. During that time, debt jubilees by palaces to whom most debts were owed were common. Money and credit systems a tool to develop society. Local authorities used bookkeeping to keep track of transactions and to record debt and credit. And rulers used debt jubilees to cancel personal debt in order to preserve self-sustainability in society.

Then we jump over to the reddish parts here on the screen: from Rome to today. There we have the change and suddenly private financiers are in power due to their financial wealth. Money is viewed as wealth, a commodity and scarce. Debt is sacrosanct, otherwise no creditor will give loans and the economy will fail without financing. This made it possible to use private debt as an instrument to grab land from others as long as you can enforce it.

And you were also into, from your Canadian experience and a few other things, that government debt in your own currency is not the problem. High private debt or government debt in foreign currency is a cause for crisis. We also have had Steve Keen here and he showed this clearly, even though common thinking seems to be the other way around. I tried to make that short, is there anything you like to add on that Michael?

Hudson: That’s basically it. You mentioned that financiers write the rules for their own benefit. These rules are called constitutions and bodies of law. Pro-financial laws have been the distinguishing feature of Western civilization since classical antiquity. That represented a sharp break from earlier Near Eastern practice. Greece and Rome didn’t have kings, at least after the kings were overthrown by Rome’s oligarchy early in its history. So the elites succeeded in blocking the tradition of Near Eastern monarchies cancelling personal debts and preventing an oligarchic financial class from emerging.

That is what makes Western civilization so different from everything that went before. Because without kings, without strong central government, or what the Greeks called tyrants, the oligarchy gained control, and managed democracy by a number of political tricks. Like the pro-boule in Athens, the Roman Senate could decide what the public assembly was allowed to discuss. Rome’s oligarchic constitution let everybody vote, but a rich landowner’s vote counted for hundreds of times more than the vote of most people. It was much like the United States today, where the donor class’s campaign contributions to U.S. politicians far overshadow what most voters want. The political rules in the United States reflect the donor class rather than democracy, just as in ancient Rome.

Jussi: Okay so Rome was the cradle for what we see today.

Hudson: Yes.

Financialization’s business plan: Privatizing rents and paying them as interest and fees

Jussi: Okay, thanks. Let’s discuss financialization. Can you tell us a bit about what it is, what is its business plan, and what foundation does it stand on? How is it played out in today’s world? I think you said a bit about it, but please tell us more.

Hudson: Financialization requires going into debt in order to get basic needs – housing for instance. Instead of paying rent to the landlords, like you did ever since feudalism through the 19th century, housing now is bought on credit. So the rent that used to be paid to landlords is now paid to the banks as interest. Renters pay interest, and over the course of a 30-year mortgage the banks end up receiving more money and interest than the seller receives when he or she sells the property. So the idea of paying rent as interest for a loan to get property is how commercial real estate investors as well as homeowners operate.

This debt leveraging goes right throughout the economy. Instead of funding pensions or healthcare on a pay-as-you-go basis as they do in most of Europe, current income has to be set aside in advance and invested in the financial markets – in stocks and bonds, or in just plain financial gambling. The hope is to make money financially. But the way that the financial sector makes money involves exploiting labor. So labor obtains its pensions by financing the exploitation of labor in order go get financial returns to pay its pensions. That’s what Marx called an internal contradiction.

The financialization process is basically anti-labor. Inasmuch as the policy aim of financialization is privatization, it wants to become the government. Financialization wants the banks to be the government and allocate credit and resources, not democratically elected officials. So financialization and libertarian free markets aim at centralizing control in the hands of banks. You have a more centralized control under financialization than you do under democracy or even many state-run economies that are controlled by the financial sector.

That sector uses this control to force the state to sell off its public enterprises, railroads, pension plans, it’s healthcare and all of this, and to privatize education, healthcare and other basic social utilities. Financial charges, management charges and stock buybacks are built into the cost of providing these basic needs. So financialization sharply increases the cost of the economy and it increases the cost of the economy in the form of rents, interest and financial charges paid to the Finance, Insurance and Real Estate FIRE sector – the FIRE sector, in a way that ends up shrinking the economy and preventing its ability to pay the debts. So financialization leads to crises, because its business plan is to get all the money for itself and impoverish the economy. But by impoverishing the economy, it does what Rome did, it leads to austerity and a Dark Age.

• Category: Economics • Tags: Financial Debt, Wall Street 
Creditocracy: A Geopolitical Economy


As President Biden continues his predecessor’s New Cold War on China, it is clear that the pandemic has vastly accelerated the on-gong shift in the international balance of power, away from the US and towards China. For former US Treasury Secretary, Lawrence Summers, it was likely a ‘hinge of history’: ‘[i]f the 21st century turns out to be an Asian century as the 20th was an American one, the pandemic may well be remembered as the turning point’. It would erase 9/11 and 2008 from memory and rank alongside ‘the 1914 assassination of the Archduke, the 1929 stock market crash, or the 1938 Munich Conference’ (Summers 2020).

However, Professor Summers misses the point. The twentieth century, from our point of view, was actually more an attempted American Century than an accomplished one (Desai 2013) and the shift away from it is looking more certain and decisive than the ‘ifs’ in his assessment let on. The pandemic is less a hinge than an acceleration of the decline of US power based on financialised neoliberal capitalism (Desai 2020a). The structure of world domination that the US had sought to foist on the world in recent decades is breaking down. The US never succeeded; the structure was too unstable and volatile to work. Therefore, one cannot blame the pandemic for reversing even its limited successes. The reversal is rooted in a geopolitical economic earthquake whose rumblings date back decades. They have loosened more and more countries from the contradictory and crisis-prone structures of US domination.

The core of all international power structures of the ‘capitalist mode of foreign relations’ (Van der Pijl 2014) lies in the international monetary system – what James Steuart called ‘the money of the world’ in 1767, referring to the means by which countries settle their trade or financial imbalances among one another. The domination the US sought to exert was no different. At its heart lay the dollar-denominated international financial system that we call the Dollar Creditocracy. It has undergirded the dollar’s world role since the early 1970s and its unravelling leads the denouement of US power.

The financial commentariat is already expressing foreboding of the dollar’s coming doom. ‘The decline of the U.S. dollar could happen at “warp speed”’, warns Market Watch, while Reuters reports more sedately on how ‘King dollar’s decline ripples across the globe’. While set-tos between dollar boosters and gloomsters have long been a feature of the crises that have regularly punctuated the dollar system, what was remarkable is how many are changing sides. Benjamin Cohen (2020) warned of the end of the dollar’s ‘exorbitant privilege’ and Stephen Roach (2020) warned of a 35 percent drop in the dollar index over the coming two to three years. Although some boosters such as Barry Eichengreen (2020) stuck to their guns, they were clearly low on ammunition, unable to find solace in anything other than lack of alternatives.

Such commentators sense that doom lies ahead. However, they are far from explaining why. Cohen blamed it on Trump’s disastrous pandemic management, added to his tendency to weaponise the dollar, and Roach blames it on increased US borrowing. However, these explanations, like most commentary on the dollar’s world role, is tangled in that combination of wishful thinking and wager that one of us identified as the international financial intermediation hypothesis (IFIH) (Hudson 1972/2003). It emerged from the difficulties that ended the dollar’s link to gold in 1971 to conjure up a new basis for the dollar’s world role. By making the so-very-clever argument that the US was no ordinary indebted country but the world’s banker and that its deficits were loans to the world, a public service the world should accept gratefully by lifting capital controls and deregulating finance, this interpretation attempts to normalise the transformation of the US economy from super creditor to super debtor. However, it was never more than a barely adequate fig-leaf.

Our purpose in this article is to cut through this interpretation. Despite its faults, it dominates our understanding of the dollar system. In its place we reveal one that is theoretically sound and accords with the historical record, a geopolitical economy (Desai 2013) of the international monetary system of modern capitalism. We begin with a theoretical outline of how money operates under capitalism. We then consider how capitalism needs world money and, at the same time, makes its stable functioning difficult. We then go on to trace the fundamental instability of the modern international monetary systems based on national currencies of dominant countries, from the gold standard to the current volatile and predatory dollar-centred system, and their close connection to short-term and speculative as opposed to long-term and productive finance. We conclude by discussing of the key instabilities of the dollar system and the paths that various countries and international organizations are already taking to move beyond its destructive logics.

Money Under Capitalism

No other notion sets back our understanding of money than that money is a commodity. Money is an ancient social institution that put capitalism in a bind: The essentially public character of money is pitted against capitalism’s urge to privatise, control and commodify it. However, success in doing so only lays the basis for crisis. Karl Polanyi, following the Marxist sociology of Ferdinand Tönnies, called money a fictitious commodity (Desai, 2020b).

Unlike commodities, Marx noted, money has no ‘natural’ price, no real cost of production (Marx, [1894] 1981: 478). Precious metal coinage was the earliest of the attempts to commodify money. Marx hit the nail on the head when he observed that

For coin, the road from the mint is also the path to the melting pot… In the course of circulation, coins wear down … The weight of gold fixed upon as the standard of prices diverges from the weight which serves as the circulating medium… The history of these difficulties constitutes the history of the coinage throughout the Middle Ages and in modern times down to the eighteenth century. (Marx, 1867/1977: 222)

The acceptance of coins relied not on the precious metal they contained, but on minting by a sovereign authority that undertook to exchange them for the right quantity of the metal. ‘[A]s coin, gold becomes completely divorced from the substance of its value. Relatively valueless objects, therefore, such as paper notes, can serve as coins in the place of gold’. The coin therefore is always ‘capable of being replaced by valueless symbols of itself’ (Marx 1867/1977, pp. 223-4, 225-6).

Moreover, as Pierre Vilar points out, capitalism requires that money not be too much like a commodity. If it were, it would be punishingly deflationary: ‘if a single stable monetary system existed, a perpetual fall in prices would have continually discouraged producers and sellers, for whom the prospect of increases is the best stimulus.’ (Vilar, 1976: 11). That is also why John Maynard Keynes pointed out that there were only two periods in history when metallic money functioned tolerably well: the Elizabethan and Victorian ages, when the supply of precious metals was sufficiently plentiful. Even then, other devices were needed to forestall deflationary consequences (Keynes, 1980: 30).

We must therefore understand money as an historical institution, created by human societies and changing as social forms change. Capitalism has changed money in a very distinctive fashion, seeking to force it into the mould of a commodity. Such an endeavour could never be entirely successful, but the effort did transform money in critical ways. Two elements are important here.


Paul Jay
Hi, I’m Paul Jay. Welcome to Thank you to everybody who has clicked the donate button. And if you haven’t, maybe you might do it this time. If you’re watching on YouTube or our website, click the share button and subscribe and we’ll be back in a second with Michael Hudson.

U.S. household debt climbed to a record high of fourteen point six trillion dollars at the end of 2020 as mortgage debt surpassed 10 trillion for the first time. Now, the GDP of the United States is only around 21 trillion. Americans owe over 1.71 trillion dollars in student loan debt spread out among 44.7 million borrowers. That’s about 739 billion more than the total U.S. credit card debt. While defaults and payments have been halted due to the pandemic, I’m talking now again about student debt, there’s no plan yet for forgiving such debt in spite of promises from Biden and many others in the Democratic Party. Biden said during a CNN town hall that he would not forgive 50 thousand dollars through executive action, as urged by Senator Schumer and Warren, Biden said, I’m prepared to write off the ten thousand dollars debt, but not the fifty thousand because I don’t think I have the authority to do it. Well, a group of 17 state attorneys general called on Biden to forgive fifty thousand dollars in student debt loans per borrower through executive action, asserting he does have the authority to do so under the Higher Education Act.

On the other hand, beginning in mid-March 2020, the Federal Reserve initiated an aggressive policy of quantitative easing, which included the purchase of corporate bonds. Billions of dollars of corporate debt has been purchased by the Fed, mostly from major companies including Apple, AT&T, General Electric, Ford, Comcast, Microsoft and around 90 others, companies that probably didn’t even need their debt purchased. So the role of the state in forgiving debt is quite OK as long as it’s a major corporation and not a student. OK, I’ll admit the Fed policy is a little more complicated than I outlined, but the principle is clear. It’s not considered a systemic risk for corporations and banks to rely on the government to bail them out of debt. But it is a danger to the system for government to forgive family and student debt. Of course, it goes further than that. The system requires high levels of debt among the population for corporations and banks to continue to rake in massive profits and engorge the fortunes of the billionaire class.

Now joining us to talk about debt is Michael Hudson. Michael’s an economist, a professor of economics at the University of Missouri, Kansas City, and a researcher at the Levy Economics Institute at Bard College. He’s also a former Wall Street analyst, political consultant, commentator and journalist. Thanks for joining us again, Michael.

Michael Hudson
Good to be here. Regarding your lead in, Sheila Bair, the head of the Federal Deposit Insurance Corporation, wrote an op-ed in The Wall Street Journal recently saying the problem with the Federal Reserve is its buying junk bonds. It’s buying the bonds, as she put it, of some big corporations that can’t pay their debts. And she’s criticizing them. She pointed out that the entire financial system rests on debt because debt is the collateral for the banks. The banks’ assets are the debts of the people. So the Fed policy is aimed, ever since 2008, by somehow keeping the economy’s ability to pay its largest massive debts, real estate debts, intact by lowering interest rates to support the mortgage market. And if you support mortgage lending, then even if individual homeowners can’t pay their debts, they can at least sell them to somebody or a company that can afford to pay. So, the whole financial system is a pyramid resting on these debts.

Paul Jay
Let me just emphasize something you just said, because you kind of corrected me on something correctly, that the fact that these major corporations like Apple got their bonds and debt bought was a piece of it. But you’re right, the other piece, which actually developed maybe a little further after they started this program, is they’re now really buying tons of debt where the companies are practically insolvent and never could pay off this debt. As you call them, zombie corporations. Sorry, go ahead.

Michael Hudson
Well, imagine the Fed could have simply bought all the student debt from the government and then wiped it out. The Fed could have wiped it out. The fact is, if the government were to write down all the student debt, it wouldn’t cost the government a penny right now. And that wouldn’t cost the banks a penny because the debt is owed to the government and the government would simply be canceling a future source of revenue. And by canceling the student debt revenue, they’d say debt is a public need. Debt is what people need to get by. It’s a basic need, and so it deserves to be public as it is in England, China and most other developed countries. Only in the United States do you have education taking off at a rate that almost is approaching the inequity of health care and medical care here. That’s what makes America so different from every other industrial country and from China. And because of this heavy debt and health care and all the other expenses that other economies don’t have, that’s exactly why the United States isn’t able to pull out of the recession that we’ve been in for the last 13 years, since 2008.

Paul Jay
Would you say expenses they don’t have, individuals don’t have? They’re dealt with collectively, the health care and education. Yeah, I don’t think there’s an advanced capitalist country, industrialized country, in the world that doesn’t have more or less free higher education. Although I have to say that tuition rates in Canada have been going up with some seriousness. Not nearly at American levels. And student debt exists in Canada too, but again, not as bad as in the U.S..

Michael Hudson
That’s right. Canada is always about three years behind the United States. That’s the perception of Canada. When I worked with the State Department in Canada in 1979, we did test questionnaires on Canadians. What do you think of the future? And almost all Canadians thought their future was going to be what the United States had, but three years behind. And that’s become the basic administrative policy of prime ministers ever since.

Paul Jay
So let’s dig into what you just talked about, because the rationale for all this buying of both corporate bonds from the Apples of this world and now junk bonds, essentially, from companies that really can’t afford to pay their debts, is that this is systemically necessary because of the pandemic, because of the deeper recession. It acts as a stimulus. It stops a greater unraveling of the economy and so on. But all of that rationale would exist for student debt exactly the same way and even more because it would give so much stimulus on the consumer side. As I say, some of these companies that they’re buying their debt from are actually cash rich, like an Apple. They have debt for convenience. But the stimulus, far more stimulus would have come from relieving systemic debt. But the reason I think they don’t do it, and this is what I’m asking you, is because they don’t want people to have any notion that debt gets relieved by the government. They want people to consider that debt must always be paid.

Michael Hudson

• Category: Economics • Tags: Debt, Joe Biden, Student Debt 

In this wide-ranging discussion on the Moderate Rebels podcast, Hudson addresses US sanctions on Venezuela and Iran, the policies of the Joe Biden administration, Beijing’s economic model, cryptocurrencies, and dedollarization – the potential end to the dollar as the global reserve currency.


Ben Norton 0:03

Hello everyone, I’m Ben Norton. You’re watching Moderate Rebels. And there will be a podcast version of this after, for people who want to listen. We are joined today by the economist Michael Hudson, one of the most important economists in the world, honestly, in my view.

I don’t think he needs introduction. He has written many books, and has been an economic adviser for multiple governments, and has a long history on Wall Street and academia. And you can find his work at

Today, we’re going to talk about an issue that Michael Hudson has been writing about for decades, and something that you’re never really going to hear from other economists, especially mainstream neoliberal economists, and that’s what he calls super imperialism.

The US government has of course its military apparatus, which we talk about a lot here at Moderate Rebels and The Grayzone, with the war in Iraq, the war in Syria, the war in Libya, but then there’s also the economic form that imperialism takes. And Michael Hudson wrote the book “Super Imperialism” that details exactly how this system works.

So today, Michael Hudson, I want to start just talking about what super imperialism looks like today, in the new cold war. This is something that we talk a lot about.

We saw that Joe Biden gave his first major speech to Congress – we’re not supposed to call it a state of the union because it’s still his first year – but Biden gave a joint speech to Congress in which he declared that the United States is in competition with China to own, “to win the 21st century,” as he put it.

And we’ve seen that the US government, under Biden, and of course before under Trump, has imposed several rounds of sanctions on Russia and on China.

So Professor Hudson, let’s just start today talking about what you think the posture has been of the Biden administration, vis a vis Trump. We saw that the Mike Pompeo State Department essentially declared a kind of new cold war on China. Pompeo gave a speech at the Richard Nixon library in which he said that the famous Nixon visit to China was a mistake, and that we have to contain China and eventually overthrow the Communist Party of China.

And some Democrats hoped that the Biden administration would kind of take a step back. But we’ve seen that the Antony Blinken State Department has continued many of these aggressive policies, accusing China of genocide.

And we’ve seen that the Treasury Department just imposed several new rounds of sanctions on Russia. So what is your view on the new cold war that’s going on right now?

Michael Hudson 2:57

Well, I had originally wanted to call my book “Monetary Imperialism.” The publisher wanted to call it “Super Imperialism,” in 1972, because it was really the US moving towards a unipolar order, where it was not competing with other imperialisms; it wanted to absorb European colonialism, absorb European imperialism, and really be the single unipolar power.

And of course that is what really has come about. The United States is trying to become the only dominant power in the world. And in today’s Financial Times [on May 5], one of the reporters said, it’s as if the United States wants to be the world’s absentee landlord, and rent collector. So we’re dealing with a monetary and a rentier phenomenon.

And when Biden gave his speech last week, there was a very marked change, right in the middle of it. The very beginning was very calm, offering means of improvement for the American economy, and a set of proposals that were so wonderful that they don’t have the chance of being enacted. And that was simply to co-opt what calls itself the left wing of the Democratic Party, if that’s not an oxymoron.

And then all of a sudden, his body language changed, his voice changed, and there was just an anger towards Russia and towards China, a visceral anger that brought back the whole 30 years of his tenure in Congress. And he was the leading cold war proponent, the leading proponent of the military, and of course now he wants to increase the military budget.

So while on the one hand, he’s continuing the nationalistic trade policies of the Trump administration, he’s escalating the cold war against Russia and China, in the belief that somehow if he can impose sanctions and punish them economically, that will lead to a fall of the government. Well, you can see what he’s projecting here.

It’s obvious that the United States economy is going to be in real trouble. Once the Covid crisis stops uniting the country in a feeling that we’re all in this together – and certainly in New York, where I live, in August, the freeze on real estate evictions, by renters, and foreclosures on mortgagees is going to end, and it’s expected there will be 50,000 New Yorkers thrown into the street. They’ve very kindly decided to postpone this until August, so at least they can sleep in the park, and don’t have to begin sleeping in the subways until maybe October.

There’s no way that any Wall Street economist that I know can see if the economy is really going to recover. The stock market is going way up, thanks to a Federal Reserve policy of subsidizing bonds and stocks, with 83% owned by the 1% of the population. But the Federal Reserve is not backing any spending into the actual economy.

Well that’s where the first part of President Biden’s speech came in. He was talking about building infrastructure and somehow reviving the economy. But it doesn’t look like he’s going to get much support from this from the Republicans, and he wants to be bipartisan.

In other words, he says the Democratic Party, as always, won’t do anything that Republicans wouldn’t agree on. Because the Democrats are an arm of the Republican Party. Their role is to protect the Republican Party from left-wing criticism.

So you can expect a wishy washy sort of slow decline with a few rapid spikes in decline as the Covid crisis ends. And you’re having almost a preparation for this by – I think Biden and the government people realize that the economy cannot regain its former industrial position, because it’s a rentier economy now.

Money is not made by companies investing in industry and factories and means of production. When companies do make profits, they are largely monopoly rents, or resource rents, or other forms of rent extraction.

And 90% of corporate income in the United States is spent on share buybacks and dividend payouts, not on investing in new production. So nobody’s really expecting new private investment to occur in the United States, that is private capital investment in means of production.

• Category: Economics • Tags: China, Cryptocurrency, Dollar, Iran, Joe Biden, Venezuela 

Guests Michael Hudson & Jonathan Wilson-Hartgrove: April 21, 2021 (transcribed May 3, 2021):

Jim Vrettos:
So, Michael, Jonathan. Thank you so very, very much for being here. Jonathan, you’re from… We’re looking at you from North Carolina there and Michael is in Queens. You’ve both had tremendous influence in your respective fields. Spiritual economic activist and so on. What do you make of the contradictory statements in the news, particularly… particularly… Let’s start with the idea of the movement by the Biden administration given parameters of its neoliberal roots. Do you believe that they have the commitment and vision commensurate to Roosevelt’s build of economic whites in 1944 and the attempt to broaden the conception of social justice and democracy [inaudible 00:08:36] In other words, what do you make of the first 100 days or so? Let’s start with Jonathan. Are we moving in the right direction? Which narrative do you think is going to win out here in America? Economic-

Jonathan Wilson-Hartgrove:
Jim, it’s good to be with you. Thanks for having us. I’m delighted for the chance to engage here with Michael. I come at the question you’re asking from the perspective of the Poor People’s Campaign. For the last three years, we’ve been organizing people across this country who were already in their communities doing grassroots work to raise an alarm about the way that the current economy isn’t working. You mentioned that 140 million people were living in poverty or were low wealth before the pandemic and the pandemic that we’ve experienced for the last year has, in many ways, exposed the fissures in the economy.

We had a huge package under the previous administration, where the vast majority of the investment from the government went to corporations and to banks. The result of that was that we saw the wealthiest people get much wealthier while unemployment on the bottom has stayed very high and the people who earn often less than a living wage are the people who have suffered the most. Incidentally, those are also the people who have been on the front lines and most vulnerable to this coronavirus. All the research that we have now says not only are African Americans three times as likely to get it as their white neighbors, but poor people are three times as likely to contract as their wealthier neighbors. And so, in many ways, I think this world altering experience that we’ve all lived through has exposed the lies of the neoliberal system and the way in which we’ve gone on believing for far too long. That if the economy is doing well, the people are doing well. Well, that’s just not true.

And so I think the Biden administration has successfully passed one piece of legislation that, at the very least, did put more of the investment in the hands of people at the bottom of the economy. And so I’ll give him credit for that. But that’s only temporary and it’s only confined to COVID relief. Frankly, we need to reimagine the whole economy. Because the Poor People’s Campaign has been saying and saying clearly, in the words of the people who experience it directly and with the support of evidence from economists and sociologists who we’ve worked closely with, that when we lift the bottom, that’s when everybody can rise. And so we need economic investment that is designed to lift from the bottom. I hope and pray we can push this administration towards more of that.

I would say, just in terms of your question about how it compares to FDR, that FDR was no radical, but there was a movement that pushed him. Part of that movement was very faith-based. Frances Perkins was a product of the Social Gospel movement. She came up in Chicago, when she was getting educated, watching the settlement houses and those great Black churches of the Black social gospel in Chicago that were committed to the message of Jesus. The good news to the poor. She was determined to implement that through the Roosevelt administration. Now, they didn’t get anywhere near everything they were trying to get, but nevertheless, we did hammer out some very real universal policies that guaranteed the basic necessities of life. Things like Social Security. That’s an, I think, incredibly important piece of our history that is widely accepted and appreciated now, but when it was proposed, it was called radical. It was called Marxist. It was called all the things that these ideas get called now. So, I think it’s important to remember that history as we push together for economic activity that lifts from the bottom.

Jim Vrettos:
Great. Michael, do you want to comment on what Jonathan just said there?

Michael Hudson:
I agree with everything Jonathan has said. I think he’s put it very clearly. One comment I had… He talks about the good thing that the Biden administration has done is provide relief for the poor, but this relief went right through their hands. The vast majority of the relief was not a stimulus. It was a relief, as he pointed out, and it’s temporary. Most of this money was simply paid to the banks and to the landlords. It was paid for the rent arrears, especially by people who were unemployed and it was paid to write down credit card debt. In many cases, the relief was paid directly into the bank accounts or the other accounts of the poor. The poorest people didn’t get any of the relief because they don’t have bank accounts and they don’t have addresses because they’re already joining the homeless. Here in New York. Of course, the problem is that there’s going to be a huge wave of homelessness when the freeze on evictions of families behind in their rent expires. Landlords have already begun to illegally evict many of people who’ve been unable to pay their rents. They don’t have enough money to draw on their bank accounts to do this. So, that is very unfortunate.

Jonathan mentioned Frances Perkins and the gospel. The word gospel meant, literally, the good news, but wherever it was used in the Bible, as Sharon Ringe, a Lutheran historian has pointed out, it always was used as a code word for the Jubilee year. For the clean slate. The only way that you can really liberate the people who’ve been pushed way behind the eight ball by the virus is to say, okay, the economy is taking a pause. You don’t have to pay the rents that have accrued when you’re unable to do that. You don’t have to pay the debts that have accrued when you’re unable to do this. Because, otherwise, there’s not going to be a recovery. How on earth can you recover if most of the people have to now, all of a sudden, pay up all the arrears that they’ve been accumulating during the pandemic and, not to mention that, long before? It can’t be done.

The other comment I have… Jonathan said the economy hasn’t been working. What has been a bonanza for the five percent! And even more of a bonanza for the one percent. The top one percent of the population has made more money since the pandemic began… as much money as than they made since 1980. Economic crises are always a bonanza for the wealthy because they get to profit from the distress of others. What you call distress is for them a wonderful marketing opportunity. Wall Street has been incorporating all sorts of private capital funds to make a killing once the arrears come due. They’re planning on residential property at a discount as they did after 2008. Buying commercial property at a discount. They’re looking to make a killing, which is what usually happens in the aftermath of a crisis. So, the Biden administration has given a palliative. The palliative has helped mainly the creditors and the landlords so far with not much being used by the people and the economic activity that’s picked up is mainly by people who can afford it, which is not the constituency that Jonathan and I are talking about.

Jim Vrettos:

• Category: Economics • Tags: Banks, Debt, Joe Biden, Poverty, Wall Street 


Jussi: Welcome Michael. I just give a brief overview of the agenda and then I get back to you with a few questions.

I just show you this picture, what we want to do today is this: Today we will get a long-term view on money debt and the economy, including the different power struggles over the ages. We start from 2400 B.C. until today. It goes through Babylonia and Sumerian time to biblical times, Roman and medieval banking, to today. That’s a quite big thing to cover but we have the right man with us: Michael. I just say a few words first.

Michael has been an advisor to governments, he is an expert on financial and real estate markets and actually history too of debt and money and the economy, which is the reason why he is here today. He predicted the Latin American debt crash in the 1980s and the crisis of 2008.

Today’s topic: 40 years of research into the origins of money, debt and how the economy was organized way, way back. This kind of research is not like reading a book, because those were written in clay tablets, so Michael’s research has been a very big thing.

Michael, could you please introduce yourself, let’s take three of your defining moments that you like to share in your career. If we start with the first one with the Chase?

Michael: Well, my first major job on Wall Street was becoming the balance of payments economist for Chase Manhattan, and the very first task they gave me, in late 1964, was to look at the balance of payments of their three major Latin American creditors: Argentina, Brazil and Chile, to see how much they can afford to borrow. My job was to say: here is how much of an export surplus they can raise for and exchange for.

The idea of the New York banks, was that all of the economic surplus would be paid for debt service, so that everything that they could export to create a trade surplus, an investment surplus, a tourism surplus, etc., if you put this all together, they’re generating say two billion dollars a year, all of that can be paid as interest. You calculate: how much will two billion dollars pay in interest, how much of a loan can that support, and say: that’ll be maybe a 20-billion-dollar loan.

I did my forecasts: here is the trade balance, the tourism balance, the investment balance and they weren’t generating any surplus. So, I said: wait a minute, how are they going to repay more interest if they’re not generating an economic surplus to pay in the first place.

You can imagine that this did not make me popular with the international division within the bank, because bank officers get paid according to how many loans they can make because that’s what the bank’s business is: making loans. If I said: wait a minute, they can’t afford to repay, I was called doctor doom, already in the 1960s.

We had one meeting with the federal reserve at a later point and they said: Mr. Hudson, according to your analysis, Britain can’t pay any additional loans? And I said: that’s pretty obvious, I think that the pound is going to be devalued. They said: but we’re always going to lend Britain the money to pay, aren’t we? And I said: that’s right, if the federal reserve and the US government lends Britain the money to pay the interest to keep itself, then they can do it. And the fed guy said: then we can lend the Latin American governments if they’re friendly governments.

In other words: we will lend the dictators and the client oligarchies money to pay, but if they were to vote for somebody we don’t like, then we’ll call in all the loans, strangle the economy, block them from importing, devalue the currency, create a crisis, to say: that’s what you get for not voting for our guys.

You want to try democracy? This is the free market where we get to bankrupt you if you don’t like it.

They said: it’s not a bad thing that the government makes loans, because we can control them, we can make sure that if they elect anyone we don’t like, anyone who wants land reform, anyone who wants independence, anyone who won’t privatize their oil and their natural resources, you can just absolutely destroy them.

I said: Okay, I get it, if you lend them the money, then they can pay.This is like a Ponzi scheme: you lend the investors enough to pay the interest and keep current. That was my introduction to how the balance of payments worked between the United States and the third world and how political the whole credit problem was.

David Rockefeller had taken over the bank from George Champion, who had said around 1963-64 that the Vietnam war was fiscally irresponsible because it was ultimately going to force us off goal.

My boss at Chase, John Deaver, said: “That’s the merchants of death argument in reverse, you’re saying we can only vote for a war that we can afford. That’s wrong: we have to do what’s right; we have to fight communism everywhere! What is communism? Communism is nationalism, the opposite of democracy, communism is voting for somebody we don’t like. Even if we can’t afford it, we’ve got to do it!”

So, now the rest of us at the economic research department dealt with what the war meant. Every Thursday evening the Federal Reserve came out with a balance sheet of currency money, currency and gold. Under the gold exchange standard, Every dollar of paper currency, every green bill in your pocket had to be backed 25% for gold.

We were watching the balance of payments deficit was draining, and draining, and draining foreign exchange that was cashed in for gold by general de Gaulle in France, by Germany etc. At a certain point the dollar was going to have to stop gold convertibility.

That was the other thing that we were watching: monetary theory is supposed to be all about money being spent on goods and services. But the entire balance of payments deficit of the United states since 1950, was to pay for the war in southeast Asia and for the 800 military bases that America had around the world.

The key to the balance of payments was the military. It didn’t have anything to do with America’s prices and wages and all the things that academics talked about. It was what the academic theorists leave out: we are the gun votes. That was my first experience.

Jussi: What you’re saying is that the US had to get out of the gold standard because it made itself to be a Latin American country with US dollar loans?

Michael: That was what their worry was. But my book Super Imperialism showed just the opposite: The gold actually became a key to American dominance. But at the time they were very worried about going off gold.

There was a Columbia university group at that time of three people: my mentor Terence McCarthy, Seymour Melman, critic of the pentagon, and myself. We were the three warning that the balance of payments of the war was going to force the government off gold.

I had to leave the bank to finish my dissertation, because they kept giving me more and more work, which is what economists would have. And I got my PhD as a union card.

Then I developed a whole balance of payments accounting format at Chase. I went to Arthur Andersen, the accounting firm. Before they were closed down for fraud, they were a major accounting firm. I said I want to do my analysis for the whole US of its balance of payments. I worked for a whole year putting the US balance of payments together. That’s when I found the entire deficit was all military.

• Category: Economics • Tags: Debt 

Nearly half a millennium ago Niccolo Machiavelli’s The Prince described three options for how a conquering power might treat states that it defeated in war but that “have been accustomed to live under their own laws and in freedom: … the first is to ruin them, the next is to reside there in person, the third is to permit them to live under their own laws, drawing a tribute, and establishing within it an oligarchy which will keep it friendly to you.”[1]

Machiavelli preferred the first option, citing Rome’s destruction of Carthage. That is what the United States did to Iraq and Libya after 2001. But in today’s New Cold War the mode of destruction is largely economic, via trade and financial sanctions such as the United States has imposed on China, Russia, Iran, Venezuela and other designated adversaries. The idea is to deny them key inputs, above all in essential technology and information processing, raw materials, and access to bank and financial connections, such as U.S. threats to expel Russia from the SWIFT bank-clearing system.

The second option is to occupy rivals. This is done only partially by the troops in America’s 800 military bases abroad. But the usual, more efficient occupation is by U.S. corporate takeovers of their basic infrastructure, owning their most lucrative assets and remitting their revenue back to the imperial core.

President Trump said that he wanted to seize Iraq’s and Syria’s oil as reparations for the cost of destroying their society. His successor, Joe Biden, sought in 2021 to appoint Hillary Clinton’s loyalist Neera Tanden to head the government’s Office of Management and Budget (OMB). She had urged that America should make Libya turn over its vast oil reserves as reparations for the cost of destroying its society. “We have a giant deficit. They have a lot of oil. Most Americans would choose not to engage in the world because of that deficit. If we want to continue to engage in the world, gestures like having oil rich countries partially pay us back doesn’t seem crazy to me.”[2]

U.S. strategists have preferred Machiavelli’s third option: To leave the defeated adversary nominally independent but to rule via client oligarchies. President Jimmy Carter’s national-security advisor Zbigniew Brzezinski referred to them as “vassals,” in the classical medieval meaning of demanding loyalty to their American patrons, with a common interest in seeing the subject economy privatized, financialized, taxed and passed on to the United States for its patronage and support, based on a mutuality of interest against local democratic assertion of nationalistic self-reliance and keeping the economic surplus at home to promote domestic prosperity instead of being sent abroad.

That policy of privatization by a client oligarchy with its own source of wealth based on the U.S. orbit is what American neoliberal diplomacy accomplished in the former Soviet economies after 1991 to secure its Cold War victory over Soviet Communism. The way in which client oligarchies were created was a grabitization that utterly disrupted the economic interconnections integrating the economies. “To put it in a terminology that harkens back to the more brutal age of ancient empires,” Brzezinski explained, “the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected and to keep the barbarians from coming together.”[3]

After reducing Germany and Japan to vassalage after defeating them in World War II, U.S. diplomacy quickly reduced the Britain and its imperial sterling area to vassalage by 1946, followed in due course by the rest of Western Europe and its former colonies. The next step was to isolate Russia and China, while keeping “the barbarians from coming together.” If they were to join up, warned Mr. Brzezinski, “the United States may have to determine how to cope with regional coalitions that seek to push America out of Eurasia, thereby threatening America’s status as a global power.”[4]

By 2016, Brzezinski saw Pax Americana unravelling from its failure to achieve these aims. He acknowledged that the United States “is no longer the globally imperial power.”[5] That is what has motivated its increasing antagonism toward China and Russia, along with Iran and Venezuela.


The problem was not Russia, whose Communist nomenklatura let their country be ruled by a Western-oriented kleptocracy, but China. The U.S.-China confrontation is not simply a national rivalry, but a conflict of economic and social systems. The reason why today’s world is being plunged into an economic and near-military Cold War 2.0 is to be found in the prospect of socialist control of what Western economies since classical antiquity have treated as privately owned rent-yielding assets: money and banking (along with the rules governing debt and foreclosure), land and natural resources, and infrastructure monopolies.

This contrast in whether money and credit, land and natural monopolies will be privatized and duly concentrated in the hands of a rentier oligarchy or used to promote general prosperity and growth has basically become one of finance capitalism and socialism. Yet in its broadest terms this conflict existed already 2500 years ago. in the contrast between Near Eastern kingship and the Greek and Roman oligarchies. These oligarchies, ostensibly democratic in superficial political form and sanctimonious ideology, fought against the concept of kingship. The source of that opposition was that royal power – or that of domestic “tyrants” – might sponsor what Greek and Roman democratic reformers were advocating: cancellation of debts to save populations from being reduced to debt bondage and dependency (and ultimately to serfdom), and redistribution of lands to prevent its ownership from becoming polarized and concentrated in the hands of creditors and-landlords.

From today’s U.S. vantage point, that polarization is the basic dynamic of today’s U.S.-sponsored neoliberalism. China and Russia are existential threats to the global expansion of financialized rentier wealth. Today’s Cold War 2.0 aims to deter China and potentially other counties from socializing their financial systems, land and natural resources, and keeping infrastructure utilities public to prevent their being monopolized in private hands to siphon off economic rents at the expense of productive investment in economic growth.

The United States hoped that China might be as gullible as the Soviet Union and adopt neoliberal policy permitting its wealth to be privatized and turned into rent-extracting privileges, to be sold off to Americans. “What the free world expected when it welcomed China into the free trade body [the World Trade Organization] in 2001,” explained Clyde V. Prestowitz Jr, trade advisor in the Reagan administration, was that, “from the time of Deng Xiaoping’s adoption of some market methods in 1979 and especially after the collapse of the Soviet Union in 1992 … increased trade with and investment in China would inevitably lead to the marketization of its economy, the demise of its state-owned enterprises.”[6]

But instead of adopting market-based neoliberalism, Mr. Prestowitz complained, China’s government supported industrial investment and kept money and debt control in its own hands. This government control was “at odds with the liberal, rules-based global system” along the neoliberal lines that had been imposed on the former Soviet economies after 1991. “More fundamentally,” Prestowitz summed up:

• Category: Economics • Tags: American Military, China, Neoliberalism, Russia 


Ibrahima: [00:00:00] Good morning or good evening, depending on where you are located and welcome to the Henry George School. My name is Ibrahima Drame and I’m the director of education. It’s a great honor to have you with us today for another joint webinar co-organized with the International Union for Land Value Taxation with two great thinkers, Professor Michael Hudson and Pepe Escobar to discuss the emerging economic world order.

I’d like to, thank Michael and Pepe for accepting to share their ideas with us my friend Alanna Hartzok co-founder of Earth Rights Institute, who will be moderating the session this morning. So, before I hand it over to Alana, I’d like to ask all attendees to keep muted until we open the Q&A session. And of course, in the meantime, you are free to use the chat and, please do so responsibly. So, Alanna, please go ahead and introduce our speakers.

Alanna: [00:00:55] Yes. Happy to do so I’m also an administrator for the International Union for Land Value Taxation, and we are on the I’m so delighted to have Michael Hudson and Pepe Escobar join us once again for “In Quest of a Multipolar World Order”.

Michael Hudson is an American economist and professor of economics at the university of Missouri, Kansas City and a researcher at the Levi Economics Institute at Bard college. He’s a former Wall Street analyst, political consultant, commentator, and journalist.

He’s also teaching at the University for Sustainability in Hong Kong. Michael was the author of J is for Junk Economics, Killing the Host, The Bubble and Beyond, Super Imperialism: the Economic Strategy of American Empire. And he has a new edition of that coming up now. Also, Trade Development and Foreign Debt ,and The Myth of Aid, and others.

Those books have been translated into Japanese, Chinese, German, Spanish, and Russian, and they are very popular in China right now, I might add.

Pepe Escobar, born in Brazil is a correspondent editor at large at Asia times and columnist for Consortium News and Strategic Culture, Moscow. He has extensively covered Pakistan, Afghanistan, Central Asia, China, Iran, Iraq and the wider Middle East Pepe is the author of Globalistan: How the Globalized World is Dissolving into Liquid War, Red Zone Blues: a Snap of Bagdad during the Surge. He was contributing editor to the Empire and the Crescent. His last two books are Empire of Chaos and T he Raging Twenties: Great Power Rivalry Meets Techno Feudalism. Pepe is also associated with the Paris based European Academy of geopolitics.

He does have a new book out, The Raging Twenties, which is a collection of his excellent essays and articles for the several publications, for which he writes. So, when he’s not on the road and covering the New Silk Road, he is living in Sao Paulo, Paris, and most recently in Bangkok. So welcome both of you.

I must say that, for the chat, if you have questions, viewers, listeners, please ask your questions in the chat. And then we will ask them at the end of the conversation between Pepe and Michael. Thank you. Go right ahead.

Pepe Escobar: [00:03:38] Michael you want to start?

Michael Hudson: [00:03:41] Oh no, I don’t know what to talk about.

Pepe Escobar: [00:03:44] Come on now you should start. OK, why don’t you start with your last revised chapter for Super Imperialism.

Michael Hudson: [00:03:51] All right. 50 years ago, I wrote Super Imperialism about how America dominates the world financially, and gets a free ride.

I wrote it, right after America went off gold in 1971, when the Vietnam war – which was responsible for the entire balance-of-payments deficit – forced the country to go off gold. And everybody at that time worried the dollar was going to go down. There’d be hyperinflation. But what happened was something entirely different.

Once there was no gold to settle U.S. balance-of-payments deficits, America’s strong armed its allies to invest in US Treasury bonds, because central banks don’t buy companies. They don’t buy raw materials. All they could buy is other government bonds. So, all of a sudden, the only thing that other people could buy with all the dollars coming in were US Treasury securities. The securities they bought essentially were to finance yet more war making and the balance-of-payments deficit from war and the 800 military bases America has around the world.

The largest customer – I think we discussed this before – was the Defense Department and the CIA. They looked at it as a how-to-do-it book. That was 50 years ago. What I’ve done is not only re-edit the book and add more information that’s come out, but I’ve summarized how the last 50 years has transformed the world. It’s a new kind of imperialism. There was still a view, 50 years ago, that imperialism was purely economic, in the sense that there’s still a rivalry, for instance, between America and China, or America and Europe and other countries. But I think the world has changed so much in the last 50 years that what we have now is not really so much a conflict between America and China, or America and Russia, but between a financialized economy, run by financial planners allocating resources and government spending and money creation, and an economy run by governments democratic or less democratic, but certainly a mixed economy.

Everything that made industrial capitalism rich, everything that made America so strong on the 19th century, through its protective tariffs, through its public infrastructure investment all the way down through world war two and the aftermath, was that we had a mixed economy in America. Europe also had a mixed economy, and in fact, every economy since Babylon has had a mixed economy.

But in America you’ve had something entirely different since 1980. Something that was not foreseen by anybody, because it seemed to be so disruptive: namely, the financial sector saying, “We need liberty – for ourselves, from government.” By “liberty” they meant taking planning and subsidy, economic and tax policy, out of the hands of government and put into the hands of Wall Street. The result was libertarianism as a “free market.” In the form of a centralized economy that is concentrated in the hands of the financial centers – Wall Street, the City of London, the Paris Bourse. What you’re having today is an attempt by the financial sector to take on the role that the landlord class had in Europe, from feudal times through the 19th century. It’s a kind of resurgence of feudalism.

If you look at the last 200 years of economic theory from Adam Smith and Marx, onward, everybody expected a mixed economy to become more and more productive, and to free itself from the landlords – and also to free itself from banking. The expectation was to make land a public utility, the tax base, and to make finance basically something public. Government would decide who gets the funding. hus, the idea of finance in the public sector was going to be pretty much what it is in China: You create a bank credit in order to finance capital investment in factories. It means the production of machinery, agricultural modernization, transport infrastructure of high-speed trains, ports and all of that.

But in the United States and England, you have finance becoming something completely different. Banks don’t lend money to build factories. They don’t create money to make means of production. They make money to take over existing assets. Some 80% of bank loans are mortgage loans to transfer the ownership of real estate.


Out of habit, American economists worry about federal debt. But federal debt can be redeemed by the Federal Reserve printing the money with which to retire the bonds. The debt problem rests with individuals, companies, and state and local governments. They have no printing press.

We have explained that the indebtedness of the population means there is little discretionary income with which to drive the economy. The offshoring of middle class jobs lowered incomes, and after paying debt service—mortgage interest, car payments, credit card interest, student loan debt—Americans’ pockets are empty.

This situation has been worsened by Covid lockdowns. In the US the federal government has sent out a few Covid payments to help keep people’s heads above water as they face expenses without income. The financial press refers to these Covid checks as “fiscal stimulus,” but there is no stimulus. The Covid checks do not come close to replacing the missing wages, salaries and business profits from lockdowns.

Corporations have indebted themselves and impaired their capitalization by borrowing money with which to repurchase their stock. This has built up their debt in the face of stagnant or declining consumer discretionary income.

We propose to deal with the debt crisis by forgiving debts as was done in ancient times. Our basic premise is that debts that cannot be paid won’t be. Widespread foreclosures and evictions would further worsen the distribution of income and wealth and further contrain the ability of the economy to grow. Writing debt down to levels that can be serviced would clear the decks tor a real recovery. Income that would be siphoned off in debt service would instead be available to purchase new goods and services.

A few economists muttered that we were overlooking the “moral hazzard” of absolving people of their debts. But leaving the economy stagnated in debt is also a moral hazzard.

Policymakers did not endorse our proposal, but, in effect, policymakers adopted our policy. However, instead of forgiving the debt itself, they forgave payment of the debt service. Individuals and businesses who cannot pay their landlords or lenders cannot be evicted or foreclosed until June. This doesn’t hurt the lenders or banks, because the loans are not in default, and their balance sheet is not impaired. The banks add the unpaid payments to their assets, and their balance sheets remain sound.

When June arrives, the prohibition against eviction and foreclosure will have to be extended as the accrued debt service cannot be paid. Extending the moratorium on foreclosures and evictions will just build up arrears. Is the implication a perpetual moratorium?

The question is: If policymakers are willing to forgive debt service, why not just forgive the debt. The latter is neater and clears the decks for an economic renewal.

The US economy has been financialized. Debt has been built up without a corresponding gain in productive capital investment in order to carry the mounting debt.

In financialized capitalism, the main purpose of bank loans is to refinance existing investments, not to expand productive capacity with which to service the debt. It is not possible to grow out of debt in a financialized economy, because too much income is used for debt service. The way to deal with this problem is to write down debts.

• Category: Economics • Tags: Debt, Debt Jubilee, Government Debt 

Vrettos: 1. We’re waiting to see how the rhetoric of the new Biden administration will play out in actual policies.

Hudson: Biden’s long political career has been right-wing. He’s the senator from Delaware, the country’s most pro-corporate state – which is why most U.S. corporations are incorporated there. As such, he represents the banking and credit-card industry. He sponsored the regressive bankruptcy “reform” written and put into his hands by the credit-card companies. As a budget hawk, he’s rejected MMT, and also “Medicare for all” as if it is too expensive for the government to afford – thereby making the private sector afford to pay 18% of US GDP for health-insurance monopolies.

Hardly by surprise, Biden has chosen cabinet members as corporate lobbyists, including the new Secretary of Defense. And on February 9 he invited Jamie Dimon and other business leaders to the White House and asked them what they recommended. These billionaires said that they didn’t need $1.400, so why should anyone else? They pretended that spending money might cause inflation – yet we are in the midst of debt deflation and falling disposable income for most families.

Biden’s prejudices are why the Democratic National Committee pushed him as their candidate over Sanders, and why Rep. Jim Clyburn made his pharmaceutical industry backers happy by pushing Biden over the top in South Carolina, delivering the black vote in that state’s big primary.

What amazes me is the ability to attract this vote despite the degree to which Biden has sponsored legislation that hurts blacks and other minorities: his cutbacks in welfare spending, his anti-crime laws falling mainly on the black community, his bankruptcy laws, and of course his denial of universal public medical care to that part of the population with the highest death rates, shortest lifespans and worst medical care.

He has tried to cover up this history by appointing Neera Tanden as head of the budget, claiming that she’s a progressive presumably simply because she’s non-white. Yet she’s a leading opponent of Bernie Sanders’ Medicare for All proposals.

In our polarized economy, wages have stagnated since 1971 – home ownership rates have fallen as foreclosures, evictions and homelessness have jumped dramatically during the 2020-2021 Covid pandemic.

The big decline in home ownership was the result of Obama’s double-crossing his campaign promises by bailing out the banks and leaving all the junk-mortgage debts and other fraudulent loans on the books. This led to foreclosures and evictions of about 9 million American families, most of them Hispanic and black. Home ownership rates plunged from 68 to 61 percent of the population (an enormous and rapid 10% drop).

The covid epidemic is leading to enormous arrears mounting up – for renters and for mortgage debtors. Evictions have been suspended by moratoriums that expire in March or April, and unpaid mortgages have been added onto later due dates (with appropriate penalties making this remunerative for the banks).

So the question is whether Biden can outdo Obama in reducing U.S. home ownership rates by another 10% — say, to just 56% of the population.

Let’s look at what could be done – today and a decade ago. Obama and Biden COULD have written down the junk mortgages to realistic market prices (and thrown the mortgage brokers and bankers in jail for fraud). Instead, they supported the fraudsters against the voters who had been promised “hope and change.” Most of the millions of foreclosed homes were bought by absentee owners and turned into rental property. Companies such as Blackstone were major players. The evicted families entered the rent market – and U.S. rent charges have soared. So consumer income has been spent much more on real estate, finance and insurance than for goods and services.

It’s most severe and unstable at the bottom of the housing market where tenants who have lost jobs have amassed $11 billion in rental arrears — a broader measure which includes all delinquent renters puts the number at $53 billion.

There are two kinds of results. The first will be an enormous accrual of back-rent debts and mortgage arrears to be paid off. For commercial businesses such as restaurants, these arrears are so large that they probably will choose to go out of business rather than paying all the profits for the next few years to their landlords.

Unless these debts are written down, most of the population is too debt-strapped to buy goods and services. So corporate profits can come only from rising prices, or getting government subsidy,

A second result is going to be a rise in homelessness in many cities. Entire camps of evictees will be forming in tents, perhaps in the major parks – or on the subways as in the past.

Many properties will be sold – yet housing prices are still rising.

What are some of the specific racial effects of this housing and job crisis, what’s been the Bidden administration’s response so far and how does this relate to your own work on racial reparations measures?

The low rates of black home ownership reflect a vicious history of red-lining. Limiting the areas where non-whites can buy has gone together with charging much higher interest rates than white buyers receive.

Housing is the basic criterion for joining the middle class. And for a century, blacks were excluded, not only by banks but from the government mortgage-insurance programs dating from FDR’s reforms in the 1930s. That’s what made black buyers “more risky” and hence charged higher interest rates.

I grew up in Hyde Park, in Chicago. The University of Chicago and its property management companies were among the worst abusers. For them, a “free market” meant a market free of blacks. But in the late 1950s they saw that they could do “block busting,” that is, selling a home in a white neighborhood to a black buyer. This panicked the neighboring owners, who sold their homes. The buyers were largely the speculators, who flipped them to black buyers at marked-up prices.

That happened on my block, on 48th and Dorchester, a block from where Obama has bought his home. Once a few houses had changed hands, Mayor Daley condemned the block. My house was torn down, as were others, and the land is not gentrified.

To put the issue in perspective, think of the situation in 1945. That is when the great increase in middle-class wealth – today’s middle-class net worth – took off. It was limited to white people, because they were the only people who qualified for the great increase in net worth created by the house-price boom over the past 75 years.

The norm was that banks limited their mortgages to a level that would absorb up to 25% of a buyer’s salary. The buyer would get a self-amortizing mortgage, to be paid off in 30 years free and clear. This limit on debt leveraging kept housing affordable.

You and I have spoken about the issue of black reparations before. It’s very hard to pay reparations for slavery, because the enslaved families have died long ago. The reparations need to be paid to the living – and after all, it’s the living blacks who remain injured.

There is one way to make the black population economically as resilient as the white population has been. That is to give it the same deal that created most white middle-class wealth. The government should buy or build homes – private homes, just like white neighborhoods, not public housing. They should offer buyers the same deal that was given in 1945. Any black family would be given a home, with a mortgage of 25% of the household head’s income, to be amortized over 30 years.

• Category: Economics, Ideology • Tags: Banking Industry, Coronavirus, Joe Biden 
Michael Hudson
About Michael Hudson

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of The Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East.

Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.