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You can’t bail out the banks, leave the debts in place, and rescue the economy. It’s a zero-sum game. Somebody has to lose. That’s what happened in 2009 when President Obama came in. He invited the bankers to the White House and he said, “I’m the only guy standing between you and the mob with pitchforks,” by which he meant the voters that he was bamboozling. He reassured the bankers. He said, “Look, my loyalty is to my campaign donors not to the voters. Don’t worry; my loyalty is with you.”
I’m Bonnie Faulkner. Today on Guns and Butter, Dr. Michael Hudson. Today’s show: Rescuing the Banks Instead of the Economy. Dr. Hudson is a financial economist and historian. He is president of the Institute for the Study of Long-Term Economic Trend, a Wall Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972 book Super Imperialism: The Economic Strategy of American Empire is a critique of how the United States exploited foreign economies through the IMF and World Bank. His latest books are Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy and J Is for Junk Economics: A Guide to Reality in an Age of Deception. Today we discuss how the bank bailouts, not the crash, are killing the economy. Also, the concept of debt deflation, the magic of compound interest, the growth of the financial extraction FIRE sector, quantitative easing, tariffs, economic sanctions and isolationism.
BONNIE FAULKNER: Dr. Michael Hudson, welcome.
MICHAEL HUDSON: It’s good to be back after a few years.
BONNIE FAULKNER: Boy I’ll say. I’ve just read your article “The Lehman 10th Anniversary Spin as a Teachable Moment.” Obviously, 2018 is the tenth anniversary of the 2008 stock market crash. You immediately point out that today’s financial malaise is a result of the bank bailout not the crash. I think people might find this statement surprising since the claim is that the bailout saved the economy.
MICHAEL HUDSON: I think what the newspapers said was that the bailout saved the banks. To bankers, their banks are the economy. The problem is, you can’t save the banks and the economy. If you save the banks, you’re saving all the debt that people owe to the banks. And if you save all the debt that the people owe to the banks – and you foreclose on the millions of families that forfeited their homes in the mortgage crisis – if you leave the debts growing at compound interest, raise the debt equity ratios and the debt-to-income ratios, then the economy is going to shrink and shrink, and we’re in a slow crash. So in a sense the celebration over “Yes, we saved the banks” was correct last week, but people don’t realize that the economy cannot be saved unless there’s a bank crash.
That’s what Sheila Bair wrote in her memoir about her experience as the head of the Federal Deposit Insurance Corporation. She pointed out that Citibank was insolvent from losing all its net worth on bad gambles. She said it was the worst managed bank in America – as distinct from the just plain crooked banks and criminal banks like Countrywide, Bank of America and Wells Fargo. She said that there was plenty of theft by Citibank, but that all the insured depositors could have been reimbursed. No insured depositor would have lost money. But the stockholders and the bondholders that ran this gambling institution would have been wiped out. She said that Obama and Geithner really represented Citibank. Geithner was a protégé of Robert Rubin, the Secretary of the Treasury under President Clinton. She wrote that she found out, she was told, “It’s all about the bondholders.”
The problem is that Republican free-enterprise bankers discussing what happened ten years ago are saying, “Nothing to see here folks. Everything’s fixed now. We don’t have to do any regulation. Let the banks be free again.” Or, you have Democrats like Paul Krugman who cannot bring themselves to criticize what Obama did. A week ago, on September 14, Krugman showed himself to be a flack for the banks and for the Democrats’ donor class by writing that the Washington Beltway was crazy to believe that America had a debt problem. As I wrote in my article, he said that all you need is Keynesian policy to run a large enough budget deficit to spend enough money into the economy so that wage earners will have enough to pay the banks what they owe. I think this is the Democratic Party’s position: The role of wage earners is to make enough money so that all of their income over and above survival needs has to be paid for the banks. More and more income is needed to pay carrying charges as their debts keep rising.
Let me quote what Krugman wrote in The New York Times: “The purely financial aspect of the crisis was basically over by the summer of 2009.” But we’re still living in the rest of the financial crisis! The debt crisis is a financial crisis. He criticized the common-sense observation that I’m sure most of your listeners can realize right away: He referred to the “bizarre Beltway consensus that despite high unemployment and record low interest rates, debt, not jobs, is the real problem.” He says there’s no debt problem; it’s all just jobs, and if you pay people more, then they can pay the banks.
There’s no feeling at all within the Democratic Party that somehow the banks should have been subordinate to saving the economy. I think that is a major reason why Hillary lost the 2016 election. She kept saying, “Aren’t you better off today than you were eight years ago when Mr. Obama was elected?” Well, most people, especially in the Midwest, said, “No, we’re not better off. Are you kidding? We’ve lost our homes, employment’s down, our wages are lower, our pension funds are being seized. Of course we’re not better.” So more and more voters stayed home. Just today I was reading a survey that 55% to 85% of Americans say if there was a rerun of the 2016 election between Trump and Hillary they just wouldn’t vote, because both candidates were so bad.
So what you really have seen in this anniversary is not the discussion that you need to have: How are we going to deal with the next crisis to avoid bailing out the banks all over again? If we don’t bail out the banks, what’s the policy? How are we going to take over the insolvent banks – that means, take them public. Sheila Bair pointed out that if Citibank would have been taken over by FDIC it wouldn’t have made crooked loans, it wouldn’t have made junk mortgages. It wouldn’t have made corporate takeover loans, it wouldn’t have made loans to payday lenders, it wouldn’t have made derivative gambles. That’s not what public banks do.
That discussion somehow isn’t occurring. It’s not occurring because people don’t realize that in any economy – not only in America; you’re having the same thing in Europe – the volume of debt expands exponentially, by compound interest. All the debt that people owe keeps mounting up more and more arrears. And if you miss a payment on your credit card, or even if you miss a payment to the electric utility or any other monthly bills, your credit card’s interest rate goes up from 11 or 12% to 29%. All this accumulates up and up and up. And the result is that personal debt service relative to income is going up. Corporate debt service relative to income is going way up, and the share of government budgets that must be paid to bondholders is going up. That means that people don’t have enough money to go and buy the goods and services they produce.
Here in New York, where I live there are whole blocks down 8th Street or Broadway or 5th Avenue or Madison Avenue with more and more stores empty and for rent, because the stores are going out of business. Restaurants especially are going out of business. The big chains that have been going out of business, as you’ve seen—not only Toys R Us but the whole slew of the big global and American chains are going out. People do not have enough money to buy goods and services anymore. All of this is celebrated as “Saving the banks” instead of “Destroying the economy.” This is Orwellian Doublethink.
It’s as if keeping the debts in place instead of writing them down was a victory for the economy. The reality is that it was only a victory of the banks and their bondholders. The economy at large is going to keep limping along until it does what every other economy has done in similar conditions – write down the debts. If it doesn’t write them down, you can look at what’s happened in Greece as our future: more and more austerity.
The first debts to be wiped out are going to be what companies and states owe for pension payments. You’ll see pensions wiped out, and you’ll see Social Security scaled back. The vice is going to be tightening financially on people. That should be what people are talking about when they talk about the disaster of 2008
The first thing Obama did when he was elected was to send a list of recommended cabinet positions to Rubin at Citicorp. So Citicorp got to name the cabinet. Of course, it wasn’t going to accept anyone who would regulate it, or any people in Justice who would throw a banker in jail. That’s the crisis. It’s a political crisis now that is tearing America apart. But it’s not a crisis that’s being talked about in the press.
BONNIE FAULKNER: You indicated that unless debts are canceled, the economy will suffer debt deflation and austerity. Could you remind everyone what is meant by the term debt deflation?
MICHAEL HUDSON: I have a chapter on that in my book Killing the Host. The term debt deflation was coined in the 1930s by Irving Fisher. He said when the debts are left in place and people are losing their jobs, corporate employment is shrinking and wages are not growing, the debts tend to grow and grow. That means more and more of people’s income is diverted to pay banks instead of paying for goods and services. So what’s happened today is, people think of prices as the price that they pay for consumer goods and that’s the consumer price index. But the Federal Reserve had a choice. It created $4.4 trillion worth of credit and gave it all to Wall Street. Not a penny was given to the economy at large. The aim was to support asset prices for the real estate and other collateral backing bank loans.
So there’s been a huge creation of money to support the banks to enable them to keep the debts – including the bad debts and the fraudulent debts – in place. But this $4.3 trillion could have been used to write down the debts. It could have been used to buy the excess mortgages, to write down the bank mortgages to realistic values so they wouldn’t be junk mortgages, but realistic mortgages. They could have lowered the cost of housing for people on mortgage. They could have essentially freed much of the economy from debt. And your listeners can imagine: If you didn’t have to pay your credit card debt, your student loan debt and your mortgage debt or your other debts to the bank, think of how much better your life would be. Think of all the things you could spend your money on. You’d buy more, and you wouldn’t be so badly squeezed.
This was the road that could have been taken. But you can’t bail out the banks, leave the debts in place and rescue the economy too. Somebody has to lose. That’s what happened in 2009 when President Obama came in. He invited the bankers to the White House and – I give all the quotations in my book – he said, “I’m the only guy standing between you and the mob with pitchforks.” Hillary called her voters “the deplorables,” but Obama called them “the mob with pitchforks.” He meant the voters he was bamboozling when he assured the bankers and promised them that his loyalty was to his campaign donors not the voters. He fronted for them when he looked at his supporters and Democratic voters, and called them “the mob with pitchforks.” And he treated them that way.
The people he put in place were so pro-Wall Street that he then put in place the second big deflationary ploy, ObamaCare, the Republican healthcare privatization plan to financialize health care, eating further into labor’s take-home pay.
People don’t realize that a large portion of the politicians elected as Democrats are actually Republicans running as Democrats. They’re called Blue Dogs, such as Claire McCaskill of Missouri, Manchin of West Virginia, Heidi Heitkamp etc. Under Obama the Democratic Party would only promote quasi-Republicans to run as Democrats. They tried to purge the party of anyone who was pro-labor or pro-Bernie. You can see what they did to Bernie, and what they’ve continued to do with him. They’ve made sure that it is impossible for voters to select the 2020 Democratic candidate, because they’ve turned over most of the convention’s nominating power to non-elected representatives. They don’t get to vote until the second ballot, to be sure, but the second ballot will happen if nobody gets 50% on the first ballot and there are going to be so many people running that of course no candidate is going to get 50% on the first ballot. So the Democratic Party has been captured by the same Wall-Street people that put in Presidents Clinton and Obama.
To answer your questio, people’s credit card balances are going to keep accruing interest, their student loans are not going to be cancelled, their mortgage charges are going up as interest rates rise, and its going to be a slow crash. People are having to struggle. More than half of Americans, according to the Federal Reserve, cannot raise $400 in an emergency. They are literally one paycheck away from homelessness or disaster or losing their house or missing a credit card payment that will increase their interest rates from 11% to 29%.
BONNIE FAULKNER: Could you explain what is meant by the term quantitative easing and how it re-inflates asset prices? I’m thinking of the housing market, for instance.
MICHAEL HUDSON: The term quantitative easing is meant to confuse people. What’s being eased, and what is the quantity? The Federal Reserve went to the banks and said, “You can give us all of the loans that you’ve written – mortgage loans, junk mortgages and other loans – with us, and we will count them as Federal Reserve deposit. It’s a cash-for-trash swap. This pumped $4.3 trillion into bank reserves, enabling banks to lend to inflate prices for stocks, bonds and real estate. The pretense was that this would enable the banks to start lending to factories again, into the economy, to put people back to work.
This cover story is truly bizarre, because for the last hundred years, banks haven’t lent to build factories. They only lend against assets in place, or steady reliable income that comes in. Almost 70% of real capital investment for factories and industry is done with retained earnings of corporations. The other capital investment is financed by stock issues, by the stock market. Banks don’t lend to build capital. But they do lend to corporate raiders to take over companies.
What the Federal Reserve did was create so much credit for banks that interest rates went down to 0.1%. That’s what you’d get by lending to the government, the interest rates were virtually zero on their bank savings deposits. That meant is that banks and their customers can borrow 0.1% or 1%, and they can buy a whole entire company whose –stock dividends are yielding 5, 6, 7 or 8%. So you can borrow 1% from the banks, thanks to how the Federal Reserve has given them $4.3 trillion in liquidity, and you can use this money to buy a company on credit. You replace the company stock with bonds, because you’ve borrowed the money, so now it’s debt instead of equity.
Once you’ve bought the company what do you do? Well, the first thing is to grab the workers’ pension funds. That’s what happened at the Chicago Tribune. The raider, Samuel Zell, grabbed their funds to pay his creditors and backers.
Secondly, you downsize. You try to squeeze out as much profit as you can by shrinking the labor force, by working it harder, by telling the labor unions, “If you go on strike then we’re going to declare bankruptcy, which will wipe out the pension funds that you think we owe you – unless you agree to change your pension program from a defined payout (so you know what you’re going to get as a pension) to a defined contribution plan (where all you know is how much you’re going to pay in every month).”
They raise prices to consumers, and the result is crapification of the corporations that are taken over. So essentially, the credit that the Federal Reserve has created was given to raiders to crapify the economy, to downsize it, outsource it and move production abroad for cheaper labor. This became part of the class war of finance against the rest of the economy.
Hardly any of this quantitative easing or money creation was spent into the economy. It went to the financial sector. People talk about money being created by helicopters dropping it down on the economy. The helicopter only flies over Wall Street. That’s the key thing to understand. The Federal Reserve was created to replace the Treasury, to shift monetary policy and economic policy out of the hands of Washington, out of the hands of elected officials, into the hands of the banks. That is why the Federal Reserve acts as the board of directors for the banking system. It takes an adversarial position against the rest of the economy, not for it.
That’s why, for instance, Ben Bernanke, who was head of the Federal Reserve under Obama, wrote a paper a little while ago saying that there wasn’t any crisis in 2008. In his view, there was a panic, simply because people didn’t have faith. If you have faith in the neoliberal system and its rising debt overhead, everything will be okay. It’s as if there’s no underlying problem. So Mr. Bernanke goes hand-in-hand with people like Paul Krugman in saying that debt doesn’t matter, because we owe it to ourselves. But, of course, who are the “ourselves”? The debt is owed by the 99% to the 1%, and debt does matter if you’re the 1%. That’s why you’re growing and the 99% isn’t. The 1% holds the 99% in deepening debt. That’s the situation in which the U.S. economy has locked itself into today.
BONNIE FAULKNER: How does this procedure re-inflate asset prices?
MICHAEL HUDSON: If you can borrow from the Federal Reserve at 0.1%, then you can buy corporate bonds that are yielding 5 or 6%, so you buy stocks. All this quantitative easing credit money was lent to buyers of stocks and bonds. That pushed up their prices. Also, you could buy mortgages. There were all these mortgages that would have lost money that are paying 5 or 6% – but now you can borrow at 1%, and make 4% arbitrage on the difference between what you can squeeze out of real estate or a corporation and what you have to pay the bank as low interest.
So the rise in bank credit was used to inflate asset prices, including the housing prices that people have to pay to buy a house. It wasn’t used to help people’s income or their spending on goods and services. It was to inflate capital gains for stocks, bonds, and real estate. And most of the stock and bond market is owned by the wealthiest 1%.
So basically, all this quantitative easing was creating wealth for the 1% without helping the 99%. In fact, it was almost guaranteeing that most pension funds and even insurance companies and personal savings would fail to provide for the retirement. That’s because if the quantitative easing bids up bond prices, the bond yield is falling to about 1% for longer-term government bonds – 0.1% if you want to keep your money safe in short-term US Treasury bonds. So people who put their money in their banks or in a money-market fund to save for retirement weren’t getting any interest. All the mathematical programs specify how much a state, city or corporate employer has to put aside in order to be able to pay the pensions that’s promised. These mathematical forecasts should have been thrown out the window, because the projected income gains didn’t materialize. That made some pension funds so desperate they went to Wall Street and said, “Can’t you make more money?” The Wall Street money managers took the pension-fund money and put it into outright mathematical gambles (“derivatives”), or into corporate junk bonds, takeover loans and corporate raids. So instead of the pension funds being used to help labor, they were used to help corporate raiders buy companies and fire labor and downsize its working conditions. That make the world much harder to survive in.
BONNIE FAULKNER: Right, because if the pension funds were counting on interest accrual to keep them solvent, with no interest they were forced to do something else with the money.
MICHAEL HUDSON: Either they earn very little income, which is what’s happened, or they take risks hoping for gambling and “capital” asset-price gains. There have been, many lawsuits by state and local pension funds against Wall Street saying they were tricked. When the Wall Street boys see a pension fund manager coming in – a lot of these people are not quite as sophisticated because Wall Street hires the most sophisticated people – they look at you like a lawyer would look at you: “How much does this client have and how can I take the money out of his pocket and put it into my pocket?” They were ripped off. The fastest growing banks that have been liable for the most civil penalties for fraud have settled and said, “Okay, we cheated you. We have to give you some of the money back.” That’s been tying up the U.S. court system for the last few years.
BONNIE FAULKNER: You point out that when the debt is so enormous that the banks are not able to collect, they gain control of the government to make it pay. How do they do this?
MICHAEL HUDSON: Almost 100% of mortgages for houses under about $600,000 are now guaranteed by the Federal Housing Authority. Banks will not make loans on housing, or student loans, unless the government promises that if the loan goes bad, the government will pay. So the banks take zero risk. Meanwhile, they charge very high student loan rates because they say, “Oh, they’re very risky,” but all the risk is on the government. If a student defaults from the loan – and we’re having rising default rates on student loans – then the bank not only gets to go to the government and say, “Give us the money that the students would have paid,” but also, “Let us charge enormous penalty fees.” The penalty fees are as high as the interest rate.
So the government ends up paying the banks, making sure that they have no risk at all in mortgage loans, student loans, and other loans because they’re federally guaranteed. It’s as if the government countersigns on every loan. Just as if somebody’s parent countersigned on the student loan, the government countersigns and guarantees the banks against loss. So it’s a zero risk operation.
Well, if its zero risk, you ask, why should they get interest? Why shouldn’t they just get their fees? If the government’s going to guarantee their loans, why doesn’t it directly have its housing agency make the loans directly where there’s no incentive to write junk mortgages, no incentive to falsify, no incentive to do the crooked activities that Citibank pleaded guilty for, Bank of America pleaded guilty for, Wells Fargo pleaded guilty for and the other banks? This is simply bizarre.
BONNIE FAULKNER: You write that “FICA wage withholding and allied taxes are levied to bail out the creditor class.” If FICA withholding is supposed to be for Social Security and Medicare, how is it bailing out the creditor class?
MICHAEL HUDSON: I don’t remember writing it exactly that way. I think I must have said that the way the FICA is designed is that only people who earn incomes up to $120,000 have to pay. Rich people don’t have to pay any FICA charges on the high income that they get over $120,000 a year. They don’t have to pay any FICA charges for Social Security and tax on capital gains. They don’t have to make any FICA payments on income that they eally make in the United States but their accountants pretend that they make in Ireland or in offshore banking centers. So they let the sophisticated financial sector, people who make over $120,000 a year not pay. It’s paid for by the bottom 99%, not by the top 1% or even the top 10%.
BONNIE FAULKNER: When a bank makes a loan, let’s say for $100, $100 is then created or put into the money supply. What is not created or put into circulation at the time of the loan is the interest. Where does the money for the interest come from?
MICHAEL HUDSON: That has to be paid out of the borrower’s income. So if you borrow, if you spend $100 or more on your credit card, you get to spend the $100 but then by the end of the year, you’ll have to spend either an extra $11 in interest out of your income, or $29 if you’re at a penalty rate and have missed a payment anywhere. So the interest is paid out of income that otherwise would have been spent on buying goods and services.
BONNIE FAULKNER: Let’s talk about your FIRE sector, finance, insurance and real estate. How would you describe these three sectors of the economy, and why do you lump them together?
MICHAEL HUDSON: I group them together because they’re basically a symbiotic sector. 80% of bank loans are to the real estate sector. As a result, over 80% of bank income comes from mortgage interest. So if you are trying to buy a house, the price is worth whatever a bank is going to lend you to buy it. If you go to buy a house and there are other buyers who are going to want to buy the same house, you bid against each other, and the winner is usually the one who’s willing to pay all the rental value of the house as interest. The same thing is true for commercial property. Rent is for paying interest. If you’re buying a building, you’ll say, “Here’s the rent roll of the building, and here are my expenses. All the net rent that I get over and above expenses, I can pay the bank for amortization and interest.” So the bank will get everything.
Now, why would a real-estate developer or speculator do that? It’s because they expect to make a capital gain, because that’s not going to be taxed. It’s not taxed if you keep plowing it back into buying more and more real estate. It’s not taxed if you die, it’s not taxed if you have a good accountant. So basically, the real estate sector has become a function of finance.
Same thing with insurance companies. Ever since the 19th century, banks used insurance companies as front. In the 1830s, 150 years ago, New YorkState had a huge inquiry into the crooked insurance companies working with the crooked banks. The banks essentially underwrite insurance companies and work with them. So it’s a symbiotic sector. The first company that Citibank merged with after Clinton got rid of the Glass Steagall Act was to buy the Travelers Insurance Company so that it could combine their operations. Banks have been buying up insurance companies so if they make a loan to a homebuyer they say, “Okay, you have to pay us interest of your mortgage, but also, here’s the insurance that we’ll sell you for the home. We won’t give you a mortgage unless you buy insurance, and you have to buy insurance so that we know that if your home burns down or there’s something flooded, we get reimbursed. You pay for all the risk.” So insurance is part of every real-estate loan. So insurance, finance, and real estate are parts of the same sector.
BONNIE FAULKNER: You write that today’s financially dysfunctional economy cannot be saved without a bank crash. So if we don’t have a bailout and we don’t save the banks, we let them crash, okay. How does that benefit the economy?
MICHAEL HUDSON: I said that the debt problem is what’s hurting the economy. You could call it a savings problem, because one person’s debt is another’s savings. So the debt that’s owed by the 99% appears on the other side of the balance sheet as the savings of the 1%. The FDIC, the Federal Deposit Insurance Corporation, insures the bread-and-butter depositors, the people who use banks for checking accounts and savings accounts up to $250,000. A bank crash would wipe out the stockholders, would wipe out most of the bondholders, but would save the insured depositors. It would save the economy, but it would wipe out all of these savings of the 1% that represent the debts of the 99%.
The economy cannot recover if today’s debts all remain in place. If people continue to pay all the credit card debt they owe, all the mortgage debts they owe and all the car loans they owe, they’re not going to be able to increase their spending on goods and services. And if they cant increase their spending on what they produce, there’s going to be less production and fewer stores, fewer sales outlets. The economy’s going to shrink, just as in Greece.
BONNIE FAULKNER: Could you explain how the Eurozone has exposed austerity Greek-style on itself by limiting deficits of over 3% of GDP? Of course, the United States doesn’t do that.
MICHAEL HUDSON: The United States and England have central banks that can simply monetize a government deficit. One of the good things that President Obama did after he created the debt depression was to at least begin running a modest deficit to spend money into the economy. If the private sector is shrinking and not employing people at rising wages, then the government can spend money and as the employer of last resort. The government can spend to keep the economy fully employed at decent living standards.
Europe is different. The Eurozone was designed by rightwing politicians. It was basically a fascist plan, fascist as in the 1930s, fascist as in the AustrianSchool. Their pretense is, “We don’t want government spending to be inflationary.” That means, “We don’t want government spending to raise wages.” The Eurozone was created as an anti-labor, organization that will not let any member country run budget deficits even if there’s mass unemployment, even if there are underused resources, even if people are losing their homes. It won’t spend money into the economy to help it recover. The Lisbon agreement has written this law into the European constitution.
So they got rid of every country’s central bank and concentrated money creation in the European Central Bank. It will not let governments run deficits of more than 3% – meaning very small amounts of money. Yet the European Central Bank also has created about $4 trillion dollars worth of money only for the banks. So the Eurozone is basically a class war against labor. The intention of the Eurozone from the beginning was to break labor unions, to increase unemployment, to make living standards fall by about 20%, to shorten the life spans, to increase suicide rates, increase disease rates and lower birth rates. All of this was written at the time, as if this is a solution to the inflation problem, not a problem in itself. The solution to the economic problem, the Eurozone said, is people are living too well. We have to cut their living standards by 5, 10, 20% so that all the money goes to the wealth creators, namely the financial sector.
This plan is evil. It is the libertarian, Austrian economic plan that underlay the Eurozone from the beginning. The result is what you have in Greece, where the unemployment rate is near 30%. Lifespans are shortening, emigration is rising, people in their twenties and thirties are having to leave the country to find work, because there’s no work there. The government cannot do what the United States did in the Depression by setting up public works, public infrastructure spending to helpi the economy recover.
BONNIE FAULKNER: You mention in your article “The End of History at the Close of Roman Antiquity and an Ensuing Dark Age” – what did the dark age look like economically and how was it brought about?
MICHAEL HUDSON: The Roman historians Livy, Plutarch and others blamed the decline of Rome on creditors holding the rest of the economy in debt, foreclosing on the land, and ending up concentrating all the land ownership in their own hands. The result was impoverishment throughout the western Roman Empire, that is western Europe. Byzantium was relatively free of this.
In order to survive, laborers had to become clients of a wealthy creditor or landowner. That was serfdom. The essence of serfdom was that all the economic surplus was turned over to the landowner, and the serf owed military duty to the landlord, owed the crops to the landlord, and was supposed to be assured the bare minimum subsistence needed to live.
History stopped because progress stopped, investment stopped, literacy stopped. The money economy dried up for the 99%. The only money that was spent was by the lords at the top who lived in their manors and would continue to buy luxuries for themselves. But the vast majority of the population lived at subsistence levels.
This idea of serfdom has been rechristened the “end of history” by Francis Fukuyama who wrote a book on that a few years ago, after America defeated Russia in the Cold War. He said that the neoliberal world would make itself eternal. All power to the banks. It would be a wonderful world. The banks will take care of us and history has stopped evolving. We don’t need any more changes. All we need is to let the new status quo unfold.
That’s what we’re moving toward today. The new status quo is repeating what happened in the Roman Empire. People are falling more and more into debt, they’re losing their homes. Home ownership is falling, they’re more and more dependent on their employers. Labor unions are losing their power, because the workers are afraid to go on strike or even to protest working conditions. If they protest or strike they will be fired and they’re one paycheck away from homelessness or losing their house. So the population has lost it’s independence – and there’s an increasing dependency on employers.
The difference from post-Roman serfdom is that people can live wherever they want today, unlike serfs tied to the land. But wherever labor goes, it must to pay its economic surplus no longer to landlords, but to the financial lords, to the banks, creditors and bondholders behind the banks. The surplus goes to the creditor class that holds them in debt, through the banking system, the insurance system, the credit system and the political system. Now that politics has been essentially turned over to the donor class instead of the voter class, you have essentially voting by wealth, meaning by campaign contributions, and a loss of the popular power to protect its own interest and living standards.
BONNIE FAULKNER: So in Roman antiquity all the wealth was driven to the very top layer, which then led to a serfdom of the population. It sounds like the same thing is happening today only on a global level, right?
MICHAEL HUDSON: Yes, that’s my point.
BONNIE FAULKNER: What is your assessment of President Trump’s tariff and trade wars?
MICHAEL HUDSON: I’ve written quite a bit on tariff policy and protectionism. America got rich by protectionist policy. My book America’s Protectionist Takeoff: 1815-1914 is all about that, and my Trade, Development and Foreign Debt is all about that. There is a logic for protectionism, but the logic you want is to build up manufacturing and high value-added by minimizing the cost of raw materials and the cost of labor.
What Trump is doing is the opposite of what traditional protectionism advised. Instead of lowering the cost to American manufacturers, he raised the price of steel, raised the price of aluminum, raised the price of raw materials and other inputs. This squeezes American manufacturers. Suppose you’re a car maker or you’re making beer cans. Canadians, Europeans, Mexicans, producers all over the world who are making cars, refrigerators or beer cans can now buy aluminum and steel much cheaper than American companies can. So they can afford to make products at a lower price than American companies have to charge to break even. They can undersell American manufacturers.
So what Trump has put in place is a unemployment for American manufacturing. His strategy is to spread the Rust Belt from the Midwest to the entire country and make the whole country look like Detroit. He doesn’t seem to realize that. Nobody explained to him that there actually is a protectionist strategy but he’s doing it wrong.
BONNIE FAULKNER: Right. It seems like from what he says he doesn’t understand what he’s doing.
MICHAEL HUDSON: One hopes that’s the case. One hopes he’s not intentionally wiping out American manufacturing companies, but that’s certainly the effect.
BONNIE FAULKNER: Right. Now, these tariffs that he’s imposing, these constitute a trade war. Is that right?
MICHAEL HUDSON: That seems to be the case. He thinks it’s a trade war. Russia has said thank you very much for doing us a favor. The tariffs go hand-in-hand with sanctions against Russia and China, and so now the Russians who had moved their money abroad are moving it back into Russia. Russia and China under the World Trade Organization would not have been allowed to raise tariffs on particular industries to protect themselves. But now they are allowed, under the rules, to retaliate against American acts of trade war.
So now, other countries are legally able to erect tariffs against whatever they choose, by an equal and offsetting amount to the American warfare. This is helping other countries become more independent, especially in agriculture, which I think is very desirable. I think every country should produce its own food supply and its own means of support. So Trump is helping other countries become more independent of the United States. If they hesitate to do it, he’s forcing them to become more independent of the United States.
He’s not letting China use its balance of payments and trade surplus to buy American industries, so China is building these industries at home. So he’s spurring the disinvestment in America and the flight of capital out of America into Asia, the Third World and Europe.
BONNIE FAULKNER: Well, you just mentioned that President Trump is preventing the Chinese from buying American industries. How is he doing that?
MICHAEL HUDSON: Basically illegally. He says it’s national security. If they buy a filling station, like they wanted to buy some gas stations in California, he says that’s a threat to national security. He’s saying that if we buy Chinese consumer goods that are sold at Wal-Mart, that’s a threat to our national security.
There is a special clause in trade treaties that countries are able to protect national security. And he says, “Our national security lies in controlling every other country. To reduce every other country, let’s monopolize information technology, let’s monopolize the world and charge whatever we want, and to reduce them to dependency. Our national security is threatened if we can’t destroy every country economically.” So he’s defined national security as economic warfare against humanity. Congress has gone along with that and has let him do it.
This is war against humanity. It’s war against every other country, saying that no country can grow unless all of the result of their growth is paid to American firms and ultimately to American financiers and the 1% so that the 1% can use that to fight its real enemy, the 99%. Essentially, this is the plan for neo-serfdom.
BONNIE FAULKNER: How do economic sanctions, particularly secondary sanctions, work to bring down an economy?
MICHAEL HUDSON: If European countries and even China will buy Iranian oil or trade with Iran or North Korea or anyone that America doesn’t like, we can kick them out of the SWIFT system of bank clearing. When you write a check to somebody, it goes through a computerized bank clearing operation. Even though this SWIFT system is run out of Luxembourg, the Americans threaten to smash the whole system and break everybody’s payment system. It will pull out all of the connections of the economy.
Russia has moved quickly to create its own alternative to SWIFT, and other countries are making their own clearing systems and trade patterns as quickly as possible to become independent of the United States’ ability to wreck their economies by sanctions. So they’re going to trade less with the United States. They’re not going to use American banks, they’re bypassing the U.S. economy in every way.
The result of what Trump is doing is isolationism. Other countries are not dealing with the American banking system and they’re not becoming dependent on American agriculture because America may say, “We’ll do what we did to China in the 1950s. We won’t export any grain to you so as to starve you out.” China’s response was, “We’ll grow our own grain and have an agricultural revolution”, which they’ve done.
Essentially, America is trying to say that it will punish any country that buys foreign oil instead of American oil. We want to sell high-priced American gas. If Europe wants to buy cheap Russian or Iranian gas, we will wreck its economy. And what he doesn’t say is that we will assassinate foreign leaders who want to become independent. We will have a political war and interfere to try and make sure that pro-Americans are elected.
The basic tactic is to disrupt their food chain, their supply chains and bank transfer mechanisms, as well as their information technology if they don’t move quickly to become independent and treat the United States as a pariah country.
BONNIE FAULKNER: I’ve read that the Trump administration is putting economic sanctions on a Chinese military agency for buying Russian fighter jets and missiles that violate U.S. sanctions on Russia.
MICHAEL HUDSON: I think that’s right, yes. America says, “China, you have to buy your high-priced airplanes from us. Don’t buy Russian exports.” America has a real problem with the Russian military, because it is more efficient and technologically superior to that in the United States. America says, “China, we forbid you to buy superior Russian defense systems because we want to be able to atom bomb you to smithereens whenever we want, and we’re going to fight against you if you defend yourself. You have to buy high-priced F35s from us that don’t work, instead of buying Russian anti-aircraft radar systems that do work.” So essentially it’s a trade war with a military assist attached to it.
BONNIE FAULKNER: So is the U.S. waging economic warfare on the rest of the world?
MICHAEL HUDSON: Economic, military, demographic, every form of warfare – political, cultural, multidimensional warfare against the rest of the world.
BONNIE FAULKNER: Who do you think President Trump is taking advice from?
MICHAEL HUDSON: Nobody really knows. I guess from whoever gives him the largest campaign contribution, just like any other president, just like Obama or Bush or Clinton. They all seem to be up for sale.
BONNIE FAULKNER: Dr. Michael Hudson, thank you very much.
MICHAEL HUDSON: It’s always good to be here, Bonnie.
BONNIE FAULKNER: I’ve been speaking with Dr. Michael Hudson. Today’s show has been: Rescuing the Banks Instead of the Economy. Dr. Hudson is a financial economist and historian. He is president of the Institute for the Study of Long-Term Economic Trend, a Wall Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972 book Super Imperialism: The Economic Strategy of American Empire is a critique of how the Untied States exploited foreign economies through the IMF and World Bank. He is also author of Trade, Development and Foreign Debt, among many others. His latest books are, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy and J Is for Junk Economics. Dr. Hudson acts as an economic advisor to governments worldwide on finance and tax law. Visit his website at michael-hudson.com.
Guns and Butter is produced by Bonnie Faulkner, Yarrow Mahko and Tony Rango. Visit us at gunsandbutter.org to listen to past programs, comment on shows, or join our email list to receive our newsletter that includes recent shows and updates. Email us at [email protected]. Follow us on Twitter at gandbradio.
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It’s going to be interesting…
As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military
Tax cuts, spending increases and higher interest rates could make it harder to respond to future recessions and deal with other needs.
https://www.nytimes.com/2018/09/25/business/economy/us-government-debt-interest.html
Source: https://www.zerohedge.com/news/2018-09-27/debt-threat-rises-government-will-soon-spend-more-interest-military
Source: https://www.barrons.com/articles/gold-is-cheap-inflation-is-coming-you-do-the-math-1537582480 and http://archive.is/oE7OG
I fear Mr Hudson is right on almost all points in this interview.
Shortly after the Icelandic banking crash in the autumn of 2008 he wrote several articles about the Icelandic situation and he came to visit, spoke in public meeting and was interviewed by our leading TV host on politics.
As a member of the most active anonymous web forums in Iceland I took the initiative to translate few of his articles over to Icelandic and post them. That wasn’t easy, because I was no expert in economic vocabulary and concepts. His writing style made the task even more difficult as I had to rethink and rewrite the meaning of his long and complex sentences.
Popular blogger hosted hour long Q&A session with Mr. Hudson where people sent in questions and his answers were posted in real time. I posted some questions and after the session I spent a day translating it all over to Icelandic. Needless to say this translation work led me to much deeper and better understanding of his work.
His messages was well received by the public, but the same can’t be said about the establishment or the “educated” for that matter. Still, I believe the “Icelandic case” is one of very few success stories the International Monetary Fund has under it’s belt. If not THE success story. This is partially because they didn’t push for too much austerity and took a “soft” line in Iceland. I believe Mr. Hudson and others played important role pushing for this outcome. Still, much grief could have been avoided by following his advice to cut down overvalued loans right away.
Agree with his political angle or not, but on economic issues he is spot on. He laid out the Greece situation in details in 2008. Just look at them now. Unfortunately our banking system was restored in the image of European (western) banks. And now the Icelandic right is pushing for the very same deficit spending limits Mr Hudson is criticizing in this interview. I fear we are going the European route, also described above.
Thanks Mr. Hudson and unz.com for posting this.
President Thomas Jefferson CLOSED the Central Bank.
President Andrew Jackson CLOSED the Central Bank.
President Trump should CLOSE the Central Bank.
A non-subscription version of the Barrons article is here: http://www.sprott.com/investment-strategies/physical-bullion-trusts/gold-is-cheap-inflation-is-coming-you-do-the-math/
“Virtually every government in the world is trying to promote inflation partly because there is so much sovereign debt,” Trauner says. When there is so much debt, he contends, governments have three choices: default, restructure, or inflate the currency. “Politicians, when given the chance, will choose the latter.”
Agree with that – they always go that way. They can technically meet their obligations but in fact settle in worthless money. Also the 0,1% are far better placed to play the inflation game than the general public. In Weimar II they would appropriate what are left of the public’s assets.
How much ‘new-money’ has President Trump collected in Tariffs?
Steel & Aluminum … perhaps a couple of $B, to date. The rest have just begun. https://www.cnbc.com/2018/08/13/us-reaps-more-than-1point4-billion-from-steel-aluminum-tariffs-report.html
September 13, 2018: President Trump signed the Miscellaneous Tariff Bill (MTB) Act of 2018 into law. The new bill goes into effect 30 days after the President’s signature, which should be as early as October 13, 2018. https://shenglufashion.com/timeline-of-trade-policy-in-the-trump-administration/
I am unaware if the ancient Hebrews EVER observed the Year of Jubilee. What is the Year of Jubilee?
The Year of the Jubilee involved a year of release from indebtedness (Leviticus 25:23-38) and all types of bondage (vv. 39-55). All prisoners and captives were set free, all slaves were released, all debts were forgiven, and all property was returned to its original owners. In addition, all labor was to cease for one year, and those bound by labor contracts were released from them. One of the benefits of the Jubilee was that both the land and the people were able to rest.
Year Of Jubilee, some of the Most Relevant Biblical Verses
Leviticus 25:8-10: ‘You are also to count off seven sabbaths of years for yourself, seven times seven years, so that you have the time of the seven sabbaths of years, namely, forty-nine years. ‘You shall then sound a ram’s horn abroad on the tenth day of the seventh month; on the day of atonement you shall sound a horn all through your land. ‘You shall thus consecrate the fiftieth year and proclaim a release through the land to all its inhabitants It shall be a jubilee for you, and each of you shall return to his own property, and each of you shall return to his family.
Leviticus 25:11-12: ‘You shall have the fiftieth year as a jubilee; you shall not sow, nor reap its aftergrowth, nor gather in from its untrimmed vines. ‘For it is a jubilee; it shall be holy to you. You shall eat its crops out of the field.
Leviticus 25:13: ‘On this year of jubilee each of you shall return to his own property.
Leviticus 25:15-16: ‘Corresponding to the number of years after the jubilee, you shall buy from your friend; he is to sell to you according to the number of years of crops. ‘In proportion to the extent of the years you shall increase its price, and in proportion to the fewness of the years you shall diminish its price, for it is a number of crops he is selling to you.
Leviticus 27:16-19: ‘Again, if a man consecrates to the LORD part of the fields of his own property, then your valuation shall be proportionate to the seed needed for it: a homer of barley seed at fifty shekels of silver. ‘If he consecrates his field as of the year of jubilee, according to your valuation it shall stand. ‘If he consecrates his field after the jubilee, however, then the priest shall calculate the price for him proportionate to the years that are left until the year of jubilee; and it shall be deducted from your valuation. read more.
Leviticus 25:23-24: ‘The land, moreover, shall not be sold permanently, for the land is Mine; for you are but aliens and sojourners with Me. ‘Thus for every piece of your property, you are to provide for the redemption of the land.
Joshua 21:43: So the LORD gave Israel all the land which He had sworn to give to their fathers, and they possessed it and lived in it.
1 Chronicles 29:15: “For we are sojourners before You, and tenants, as all our fathers were; our days on the earth are like a shadow, and there is no hope.
Hebrews 11:13: All these died in faith, without receiving the promises, but having seen them and having welcomed them from a distance, and having confessed that they were strangers and exiles on the earth.
Leviticus 25:25-28: ‘If a fellow countryman of yours becomes so poor he has to sell part of his property, then his nearest kinsman is to come and buy back what his relative has sold. ‘Or in case a man has no kinsman, but so recovers his means as to find sufficient for its redemption, then he shall calculate the years since its sale and refund the balance to the man to whom he sold it, and so return to his property. read more.
Leviticus 25:32-33: ‘As for cities of the Levites, the Levites have a permanent right of redemption for the houses of the cities which are their possession. ‘What, therefore, belongs to the Levites may be redeemed and a house sale in the city of this possession reverts in the jubilee, for the houses of the cities of the Levites are their possession among the sons of Israel.
Leviticus 27:24:
‘In the year of jubilee the field shall return to the one from whom he bought it, to whom the possession of the land belongs.
Numbers 36:4: “When the jubilee of the sons of Israel comes, then their inheritance will be added to the inheritance of the tribe to which they belong; so their inheritance will be withdrawn from the inheritance of the tribe of our fathers.”
1 Kings 21:3: But Naboth said to Ahab, “The LORD forbid me that I should give you the inheritance of my fathers.”
Ezekiel 46:16-18: ‘Thus says the Lord GOD, “If the prince gives a gift out of his inheritance to any of his sons, it shall belong to his sons; it is their possession by inheritance. “But if he gives a gift from his inheritance to one of his servants, it shall be his until the year of liberty; then it shall return to the prince. His inheritance shall be only his sons’; it shall belong to them. “The prince shall not take from the people’s inheritance, thrusting them out of their possession; he shall give his sons inheritance from his own possession so that My people will not be scattered, anyone from his possession.”‘”
Deuteronomy 15:12-15: “If your kinsman, a Hebrew man or woman, is sold to you, then he shall serve you six years, but in the seventh year you shall set him free. “When you set him free, you shall not send him away empty-handed. “You shall furnish him liberally from your flock and from your threshing floor and from your wine vat; you shall give to him as the LORD your God has blessed you. read more.
Leviticus 25:54-55: ‘Even if he is not redeemed by these means, he shall still go out in the year of jubilee, he and his sons with him. ‘For the sons of Israel are My servants; they are My servants whom I brought out from the land of Egypt. I am the LORD your God.
Leviticus 25:39-43: ‘If a countryman of yours becomes so poor with regard to you that he sells himself to you, you shall not subject him to a slave’s service. ‘He shall be with you as a hired man, as if he were a sojourner; he shall serve with you until the year of jubilee. ‘He shall then go out from you, he and his sons with him, and shall go back to his family, that he may return to the property of his forefathers. read more.
Jeremiah 34:8-9: The word which came to Jeremiah from the LORD after King Zedekiah had made a covenant with all the people who were in Jerusalem to proclaim release to them: that each man should set free his male servant and each man his female servant, a Hebrew man or a Hebrew woman; so that no one should keep them, a Jew his brother, in bondage.
Luke 4:18-19: “THE SPIRIT OF THE LORD IS UPON ME, BECAUSE HE ANOINTED ME TO PREACH THE GOSPEL TO THE POOR. HE HAS SENT ME TO PROCLAIM RELEASE TO THE CAPTIVES, AND RECOVERY OF SIGHT TO THE BLIND, TO SET FREE THOSE WHO ARE OPPRESSED, TO PROCLAIM THE FAVORABLE YEAR OF THE LORD.”
Isaiah 61:1-2: The Spirit of the Lord GOD is upon me, Because the LORD has anointed me To bring good news to the afflicted; He has sent me to bind up the brokenhearted, To proclaim liberty to captives And freedom to prisoners; To proclaim the favorable year of the LORD And the day of vengeance of our God; To comfort all who mourn,
There is not European or American route. There is only Rothschild banking route. The individual issues money and he loans it to the Gvernments.
This is not just an illogical set up, it is a scam. The State is always in debt and the individual has all the money. I think it is too late for the Europeans and the Americans to wake up because through the pseudo-science (economics) and many Ph.D’s who spread the gospel with a lot of b.s. have been put to perenial sleep.
As far as I can discern, non governmental economists put the current US unemployment figures at a staggering 21.5%. That’s about a half percent off from where we were a year after the 2008 crash. The majority of America’s homeless are not living in the streets of San Francisco and LA, they are former middle class who are living an under-the-radar homeless life across the nation in cars, campers and tents, many of them former professionals who now occasionally work$6 an hour seasonal jobs at the big retail chains or cleaning toilets at camping parks across the southwest.
Now all we hear is that the next economic collapse is coming. I see no signs other than government blather that the last collapse ever ended.
My hat goes off to Iceland, though. At least they jailed their bankers.
So, it would ot be too much to call these people “enemies of the people”?
I am pretty confident they will end the way their French and Russian predecessors ended. Hopefully people will be smart enough by then to permanently remove these parasites from equation and create something good for all and lasting.
On 14 May 1948, the day before the expiration of the British Mandate, David Ben-Gurion, the head of the Jewish Agency, declared “the establishment of a Jewish state in Eretz-Israel, to be known as the State of Israel.”
Has Israel EVER celebrated a Year of Jubilee? Should Western Civilization cancel all the debts?
Leviticus 25:8-10: ‘You are also to count off seven sabbaths of years for yourself, seven times seven years, so that you have the time of the seven sabbaths of years, namely, forty-nine years. ‘You shall then sound a ram’s horn abroad on the tenth day of the seventh month; on the day of atonement you shall sound a horn all through your land. ‘You shall thus consecrate the fiftieth year and proclaim a release through the land to all its inhabitants It shall be a jubilee for you, and each of you shall return to his own property, and each of you shall return to his family.
“Rescuing the banks’, an expression that sows confusion.
What is a bank ?
A bank is an organisation where one can deposit money, the bank keeps the money, lends it, gets interest, pays its costs from the interest, and pays the depositor what remains of the interest the bank gets.
There is another business model for banks, selling and buying assets, making a profit on the provision, but this business model does not concern us here.
Now what happens when a bank is rescued from, or a bankruptcy is prevented: those who have deposited their money are rescued.
Of course, rescuing also means that the bank employees keep their jobs.
What rescuing a bank means was demonstrated during the Greek crisis, philantropist Soros hired time on German tv to lecture the German people on their duty to rescue Greek banks, and the W European banks that had lent Greece money.
What Soros did not say that the German people were rescuing Soros, what his investments in WEuropean banks were at the time, I do not know.
Well … Pilgrim,
“President Andrew Jackson CLOSED the Central Bank.”
Jackson was a real man. Of course he closed the corrupt Central Bank. He even had cock fights in the White House. How would that fly today? It’s fun to consider.
“President Trump should CLOSE the Central Bank.”
I quite agree. But, look what happened to JFK when he had the government print silver certificates.
Trump only acts careless. Like a good comedian, he works the crowd, he’s savy. Maybe he’ll close in on the FED during his second term. Right now, he’s trying to survive, and he knows who killed JFK, RFK, who attacked the USS Liberty and the WTC, who’s ass our Congress kisses. My only hope is that Pres. DT is not a puppet, or neutered to make him one. Hell, I think they’re all damn liars. Well, that’s my take on it.
Mr Hudson cannot resist attacking his pet hate: the EU. There is, of course, no such thing as the “European constitution”. All EU law takes the form of an agreement between sovereign states which they can change at any time if they want. I suspect that Mr Hudson’s problem is that the euro hasn’t collapsed as he hoped and the countries that were in bailout are all now back on their feet.
Rescuing the equity of the stockholders of the failed bank rewards their speculative excesses and imprudent loans.
Exactly. And it’s why people should stop using the term “the” economy, (as in the title). Without at least first order qualification (as stated in the sentence above), it’s essentially meaningless at best. More often it’s worse than meaningless because it gives the illusion that useful info is being disseminated when it’s often used to mislead and obfuscate aspects of reality. It’s no doubt intended deception.
Who’s “they? I.e., who’re “the state” in your scenario? Who benefits if the system functions as you describe?
Another unsubstantiated claim. Anyway, if it’s true, does the situation have staying power? Why?
A lot of truth there and it even has a name; it’s called “moral hazard.” In fact, it could be argued that creating opportunities to profit from moral hazard is a huge reason, despite the do-gooder rhetoric, why “states” exist.
Nice informative analysis by Hudson.
It is helpful to note that Hudson treads lightly on the Elephant – The Zionist Sauron Oligarchs – who control all.
However that does not queer the rest of his analysis.
The specifics on Hollywood Obomber (his role/actions as so-called ‘President’), are vital. This information on Obomber should be distributed to Democrat rank-&-filers, including to the African American community.
Hudson correctly roasts Casino Trump, the Clintons, (the titular leaders of both official controlling political gangs).
In short, almost all the Politicians of both Democ & Repub Gangs are bought/owned. Saruman asks “Whom do you serve?” The able Hudson answers in part (& we learn).
It is our duty to dot the i-s, and apply the cure.
We the People Can Fix!
For Lexington and Concord!
For the Minutemen/Women of 2018!
Our Yellow Brick Road is to Restore our Republic (destroyed in a hail of gunfire on 11/22/1963).
Until the FED is abolished the scam of a central bank will continue to control America with its ability to print money out of thin air and loan this ether created money to the government and the people and charge interest on this money and this along with the fractional banking system has kept Americans in debt as the whole scam is based on debt creation and creation of money out of thin air.
In the last so called crisis in 2007/2008 the owners of the privately owned FED created some 26 TRILLION out of thin air and loaned this money to these same FED owners at zero percent interest and even loaned this ether created money to foreign banks in a bank bailout for all the big FED owners, and no doubt the FED owners will do the same again, all at the cost of the American taxpayers.
Free America from the banking cabal , abolish the PRIVATELY OWNED FED and IRS.
All sensible people know that Republicrats are one party, and all Rep-Dem rivalry is just a cheap show for morons. Naturally, he, who pays the musicians, calls the tune. What else is new?
The Fed doesn’t create money out of thin air. It prints money backed by US Treasury securities (yes, debt) that it purchases.
This protects everyone who owns bonds, has bank accounts or otherwise has lended money, because there is a constraint against inflation caused by too much money printing.
The U.S. has printed pure fiat money (not backed by debt) twice in its history, under Lincoln and Kennedy.
“Bankers Hate Peace!”
source: http://themillenniumreport.com/2017/11/all-wars-are-bankers-wars-a-history-of-the-rothschilds/
Video Link
Mar 20, 2017 Why does US national debt and total debt only and always increase?
Showing stacks of physical cash in following sequence: $100, $10,000, $1 Million, $2 Billion, $1 Trillion, $20 Trillion. The faith and value of the US Dollar rests on the Government’s ability to repay its debt. “The money in the video has already been spent”
Video Link
May 21, 2013 Why the whole banking system is a scam – Godfrey Bloom MEP
• European Parliament, Strasbourg, 21 May 2013
• Speaker: Godfrey Bloom MEP, UKIP (Yorkshire & Lincolnshire)
Video Link
Why not just come out and say it? An obscure Conniving Cock Cutting Cult has somehow gained control of money and credit creation, and uses this power to their profit and advantage. Call it Joonomics……the occult pseudoscience of creating money and credit out of thin air, and then doling it out to their fellow Cock Cutting Cultists and various necessary gentile useful idiots, like the present pussy grabbing leader of the free world who operated for fifty years on free jooie money. Of course, it all comes to naught as every fiat currency in all of history has eventually returned to its intrinsic value, recycled paper, and the ersatz credit evaporated like a fart in a gulf hurricane.
we should come up with some kind of catchy name – instead of Federal Reserve maybe call it the Goldberg Reserve or the Shapiro Reserve
who decided it was appropriate behaviour for almost every govt on the planet to engage in irresponsible levels of borrowing and spending?
who benefits?
@ JLK
You are entangled in these highfalutin words of the pseudo science (economics), its sole purpose of which is to keep a deception in the realm of reality.
The State and only the State must issue money and has the wealth to back it up. If the individual issues money then the State becomes his employee and the people no more citizens but employees.
Agree, or call it the Rothschild Reserve, Nathan Rothschild said, paraphrasing ; I care not what puppet is placed upon the throne of England , the man who controls the money supply controls the British Empire and I control the British money supply.
The Rothschilds control the BIS the Bank of International Settlements ie the central bank of central banks and every central bank in the world including the FED which is as Federal as Federal Express.
Recommend the book the Creature From Jekyll Island by G. Edward Griffin.
Time to inflate the rich away, crash the whole economy and start from scratch.
I think everyone should understand.. but seemingly they don’t, that government is controlled by, serves the needs of, and would not exist at all if such government were any thing but the well fed puppy-dog of the 1% elites. Elections are weapons of mass deception; they are mass media promoted events, conducted against the human rights and needs of the masses. The two parties are 1% (elite) controlled, worse large percentages of the 1% are persons or entities who are vested or who control foreign interest.
Since 1789, it has been: Americans vs the cunning abilities and wealth of the elite.
The elite own the USA, its their corporation, they are its directors, elections only serve to confirm that the elite have chosen 527 persons popular with the masses, to serve in the elected positions.
Only 527 salaried, elected members of elitist controlled USA are authorized to vote on laws, budgets, wars, judges, department heads, top brass military, Ambassadors, Federal Bankers and the like. But even that restriction is protected from mistake or invasion by an innocent member of the masses, because the 527 elected are paid giant government salaries, afforded much fanfare, but serve only as conditional members of the clubs of the elite. Election winners are club members only until the next election and corporate chieftains are members of the elite clubs only as long as they hold those high inside positions. As far as the 340,000,000 are concerned only those elected count, but as far as the elected are concerned, only the elite count. An elected who refuses to beg each time a member of the elite offers a cookie, will be ejected at the next election cycle. As one person put it, cookies determine who will be returned to the peanut galley.
Google is said to block, hide or promote Internet User access to information; the structure of the Constitution blocks 340,000,000 citizens, access to the affairs of their government, all of the powers of government have been transferred to the 527 elected salaried few. One limited exception: vote qualified Americans[registered voter] may cast five each (P. VP, 2 Senators, 1 member of the House) votes that may help five candidates to obtain elected, salaried positions in the USA. Election propaganda is not about your five votes; elites have already selected the candidates as election eligible. What concerns the elites is election propaganda. EP must deceive the masses, into believing elections prove the masses are in control, it must develop a pledge of allegiance to a supreme USA, in deference to independence, self sovereignty and reservation of right to personal choice.
I really don’t think the economy is going to matter much to 340,000,000 voting class citizens; though I can see how the economy is all important to the elites and their supporters. What goes on in the economy is today a global thing, most Americans are unaware of global anything.
“Free America from the banking cabal , abolish the PRIVATELY OWNED FED and IRS.”
Yes, you are correct – as far as you go.
You appear to understand (have a familiarity with economics). Once abolished, what do we replace this criminal “banking cabal” with?
How do We The People maintain a healthy economic structure?
Specifics are needed.
For example: I favor a Nationalized banking system that would lend-credit at 0% interest to Private business – entrepreneurs.
In short, Capitalism, with some controls that separate money power from the political process.
There is more to this topic.
I repeat:
1. How do We The People maintain a healthy economic structure?
2. How do we/you structure your/our Shangri-La?
3. We must show the responsibility to honestly declare where we stand.
Citizens who critique (knock down), must also rebuild.
We cannot replace the crooked murdering Power Elite if we are afraid, or too lazy to paint/design the society we would prefer to live in. We must show that we are willing and able to take over (as in England & some other countries where the Opposition create a Shadow Government). These Shadow Governments (Corbyn, etc.), declare that they are ready to take the reigns/responsibility to govern – on a moment’s notice.
In his own way, Ron Unz attempted to take that route in California. I attempted it 18 years ago in Allentown. Ron Paul, Jesse Ventura, Dennis Kucinich, Cynthia McKinney, do I need a verb? I am not discussing only electoral efforts. The Founders of our Nation used another (legitimate and responsible and historically necessary) route.
Do you understand? an opposition must show that it is ready to take over and DO IT RIGHT, or it is not an opposition at all – merely wannabees clacking their gums. The people will not, cannot follow unprepared wannabees.
Or we can wait until after WW III.
Durruti alias Peter J. Antonsen
Indeed, alas,when banks are big enough, not rescuing is a disaster.
Charles P. Kindleberger, ‘A Financial History of Western Europe’, 1984, London, Boston, Sydney
The problem can easily be solved, divide banks in banks for payment systems, for common savings, and for speculation, at the same time preventing that any bank should become so big that bankruptcy becomes a national disaster.
The second measure to be taken is that no central banks exist that are not government property, just now just the USA FED, the Bank of England and the ECB.
War is too important to leave it to generals, banking is too important to leave it to bankers.
Alas since 1997 development is the other way round, through free movement of capital, globalisation and the euro.
Thilo Sarrazin, ‘Europa braucht den Euro nicht, Wie uns politisches Wunschdenken in die Krise geführt hat’, 2012 München
Yanis Varoufakis, ‘The Global Minotaur, America, Europe and the Future of the Global Economy’, London, New York, 2013
The nation state is the one and only institution that can protect ordinary people.
Thomas I. Palley, ‘Plenty of Nothing, The downsizing of the American dream and the case for structural Keynesianism’, 1998, 2000, Princeton
Because it is the easy way out, until the bomb bursts.
The misery began after WWII, the USA the only country with its industries not destroyed, so anyone wanted dollars, the currency that could buy anything.
So the USA created dollars, galore, especially after Nixon abolished the gold standard, out of thin air.
No American seems to be able to foresee the situation where the dollar is worthless.
Maybe Chinese do, they use their dollars to buy property all over Europe.
After WWIII the earth will be barren and empty.
Some bacteria may survive.
I for one appreciate these articles as disheartening as they certainly must be — the reveal of destructive practice and ethos is just too deep and wide to be anything but disturbing.
The issue here is not getting rid of banks.
It’s holding them accountable to real world basic math and prudent practices. It’s not allowing them to escape their errors, unless said escape is balanced to their clients — on the street.
It’s about breaking a cycle of insider trading and marriages between financiers and our appointed and elected leadership. That may mean challenging where we select our representatives from. The supposed “best and the brightest” has not withstood the test of time.
And it’s quite apparent that the rich do not have a lock on understanding how the economy works — to real word dynamics.
Thanks for asking and this should help with your answer. End global fiat banking aka counterfeiting money!
October 18, 2018 Central Planning By The Fed is a Total Failure…END THE FED!
The idea that that anyone is capable of “running the economy” is a pure fairy tale. Ron Paul discusses this very popular myth.
Video Link
ALL was LOST, with passage of the TARP speculator bailout act, SCOTUS Kelo v NLDC decision, and swearing-in of an Article-II-Ineligible, crypto-Muslim, Kenya-Native to the White House.
Yet the electorate gradually stripped Barack Hussein Obama, and his globalist enablers, of power. First in the House and then in the Senate, The Republic slowly rose from the ashes. The RINOS, Globalists, and Timid Republicans gradually began to return some sanity to the system.
And then, Donald Trump took the reigns, and has done great work, in spite of enormous obstacles and fierce opposition. Perhaps President Trump will allow imprudent bankers and speculators to fail.
Perhaps he will more actively, push them over the edge.
@ Durruti
Very good post. Nationalizing the banking system is a good start.
The banks must be traffic controllers not money owners. All government officials must show a list of things they own at election time and when they exit service must prove that their property has not been increased by not even a dollar, at the risk of heavy punishment.
Building a new economic structure requires strong foundations. Corruption among government officials must be faced with the highest punishment of the law.
Article 1 section 8 gives congress the power to coin money ie create money, therefore the FED is unconstitutional and was forced through congress in December 1913 by the Zionist banking cabal and since that time the U.S. has been under the control of the Zionist banking cabal which force America into perpetual wars for the profit of the Zionist banking cabal.
The privately owned FED should be abolished and the power to create money returned to congress where it was prior to December 1913 and also the Privately owned zionist IRS should also be abolished as both of these zionist creations have turned America into a zionist plantation with we goyim as slaves in the zionist NWO.
I thought this was a great article full of well researched content with the exception of the part about Austrian economics and libertarianism. I think one would be hard pressed to find an advocate of either that would describe the Euro Zone as libertarian or Austrian Economics. No libertarian would ever advocate for a total monopoly in banking, but rather for free and open competition. All central banks are correctly identified as fascist, but libertarian? These two terms are at opposite ends of an ideological spectrum. No true libertarian would advocate for less competition. With free and open competion fascist operators looking for secure government guaranteed monopolies disappear. A true Austrian system of banking would have easy entry and no government say. The quality of investments would determine where capital would flow and not be dictated from the central bank.
https://en.wikipedia.org/wiki/Buenaventura_Durruti
Durruti , what a nick . Durruti the Spanish anarchist , an evil man , ( 1896-1936 ). He left very bad memories in Spain . Durruti robbed everything and killed many people in many rural areas that he occupied , spetially in east Aragòn .
They say a ” stray bullet ” killed him , in the battle of Madrid 1936 .
This American Nation has endured both central & non-central banking systems for equal time spans, since adoption of our constitution. Presidents Washington & Adams authorized central banking, which was shuttered by President Jefferson. President John Quincy Adams centralized banking and President Andrew Jackson closed it down.
Central Banks can be constitutionally opened and/or closed, at will, by the citizenry & our elected representatives in the White House & Congress. There have been problems with both systems. But we can do as we wish, in the future.
If we choose to END the Federal Reserve Bank, we should recognize that sometime in the future banking will be centralized again. But that will not likely be a matter of concern to me.
The Austrian school fascist? Not at all. It is directly the opposite.
First, fascist economics is about having a few large government regulated players in every industry. That is exactly the opposite of the free market Austrian school that wants all comers. The Austrian school tolerates large dominating companies that arise from those who best serve customers but without government intervention to protect them such conditions tend not to last. New nimble players enter the market with new ideas and technology while fickle customers go different directions over time. This serves to undermine any monopoly that could arise in a true free market.
Second, libertarianism is about reducing sovereignty to the smallest unit possible, the individual. The eurozone is about moving in the opposite direction. The eurozone is part of the progression towards global governance. Libertarians also oppose government dictated or protected monopolies and cartels, which means they are in direct opposition to fascist economics and central banking.
You are too pessimistic. Many plant and insect species will survive, possibly even rodents. None of these will be smart enough to thank the USA for their dominance on the post-WWIII Earth.
“Durruti , what a nick . Durruti the Spanish anarchist , an evil man , ( 1896-1936 ). He left very bad memories in Spain . Durruti robbed everything and killed many people in many rural areas that he occupied , spetially in east Aragòn .”
Yipes!
For those interested: Start here:
https://en.wikipedia.org/wiki/Buenaventura_Durruti
https://www.bing.com/images/search?view=detailV2&thid=AMMS_309a068b79059346f7eddadf4c9ed247&mediaurl=http%3a%2f%2fupload.wikimedia.org%2fwikipedia%2fcommons%2fd%2fd0%2fDurruti-portrait.png&exph=1016&expw=759&q=buenaventura+durruti&selectedIndex=0&stid=7b39fd9a-b2ea-f181-ee2d-174f791cbb5c&cbn=EntityAnswer
https://theanarchistlibrary.org/library/joe-king-buenaventura-durruti
And a dozen more links.
Durruti’s letter to Soviet Workers is particularly poignant. In 1936, Durruti was invited to the USSR by Stalin. Durruti explained that he was busy at the moment -fighting Fascism, and therefore, wrote this letter (which the Stalinists never published). Just google around. you’ll find it.
Anarchists are not saints, but over the centuries we have attempted far more good (and committed far fewer crimes) than any other ism. Some of our people in America were framed, but died like true heroes (Sacco & Vanzetti). Joan Baez wrote a nice song memorializing them.
Anarchist Nestor Makhno is also worth study.
My major lesson learned from Durruti – is to drop the know-it-all sectarianism, and know when to unite. March Together Under Separate Banners!
Durruti died while defending the democratically elected Spanish Republic (with which the Anarchists had many differences). When called for help-by the Republican Government in Madrid, Durruti answered with a mechanized column of 1300 soldiers. Durruti died of a bullet wound he received (while at the front), in Madrid.
Onward to Lexington & Concord.
Rescue our Country!
Restore The Republic!
I guess we do.
There is something your group would need to understand too:
We, members of ignorant mass, would like to know in advance, what this new/shadow/whatever government is REALLY up to.
Some sort of written document. So we know what we are risking our way of life for, because the real change will be…..interesting.
And last, but definitely not least, can we (ignorant commoners) TRUST this new thing, your group? You know, promises and such. Been there.
All roads do point to some sort of …exciting…times. Will they be WW3 or something else remains to be seen.
It COULD be, he’s confusing several things, such as the fact that Otto von Habsburg supported the idea of a United Europe of sorts. And Habsburg was connected to Mises. Also, Mises had said that the Austrian fascist leader in the 1930s was better than Hitler – which of course was true. The Austrian fascists before the anschluss, after all, didn’t try to kill all the Jews – of which Mises was one.
h/t to Ryan McMacken from the Mises Institute for this.
In the same paragraph, he DEFENDS orthodox Keynesianism on bailouts and deficit spending.
He’s all over the place…a Marxist nut. Check out his Wiki page where he cites Paul Craig Roberts as a fan of his.
He’s also been briefly critiqued here today:
http://www.economicpolicyjournal.com/2018/10/is-austrian-school-of-economics-fascist.html?m=1#comment-form
Hehe…had I read this post before, I wouldn’t have written my comment 48.
Anarchists, a?
Good luck.
The EU parliament is not elected by the people of the EU, yet comrade Michael Kenny likes it.
he said:
“All EU law takes the form of an agreement between sovereign states which they can change at any time if they want.”
Yeah boy, we see how well Britain is doing trying to get out.
said:
” And Habsburg was connected to Mises. Also, Mises had said that the Austrian fascist leader in the 1930s was better than Hitler – which of course was true. The Austrian fascists before the anschluss, after all, didn’t try to kill all the Jews – of which Mises was one.”
fact: Hitler did not try to kill all the Jews either. You have no proof that he did.
http://www.codoh.com
– Righteous Jew, Murray Rothbard, from ‘Review of The Origins of the Second World War’, 1966:
“We, members of ignorant mass, would like to know in advance, what this new/shadow/whatever government is REALLY up to.”
Fair point!
Listen!!!
I and our little collective have not called for us to be placed anywhere in power.
We advocate the Restoration of an Old Government! Our – America’s last Constitutional Government, the Government that existed on the morning of November 22, 1963.
The newly restored American government will be faithful to OUR 200 year old Constitution, and to the people, our friends and neighbors. This government will not be able to restore President John F. Kennedy to life, but will have new elections – honestly conducted by our Free and Unbought Citizenry, and will honor all our martyrs John and Robert Kennedy, ML King, Malcolm X, and John Lennon (the best known of many victims of the Coup d’etat).
A Democratic Republic is like a soup. Sometimes it tastes better than at other times, but at all times it is nourishing, and this soup is superior to any Tyranny.
All who participate in this RESTORATION will benefit in ways not measured by silver or gold.
All Power to the People!
I am a die hard capitalist. I did not vote and agreed little with the last executive in office. But I found that opening quotation so devastatingly disappointing as to doubt its accuracy.
But if accurate and a reflection of the thoughts of himself and the previous and current presidents if said sincerely — this country is deep deep deep trouble.
The EU today is Soviet Union 2.0. One of the reasons SU broke up is that there were no mechanisms of exiting it. The same is true for the EU, so it is likely that the EU will break up. Its suicidal policies, like admitting numerous unqualified states from the former Soviet block (presumably to spite Russia: as the saying goes, I’ll burn down my home, so that my neighbor lives next to the ashes), ruining Libya that protected its borders more efficiently than all of its border guards put together, and then welcoming hordes of draft-age “refugees” (who looked more like an invasion army), speeded up its demise. Maybe the EU was a good idea, but the implementation was horrible (again, just like the socialism in the USSR).
Um…..
O.K.
This is a pub and this conversation could be interesting if kept short.
You know…..maybe changing the tone wouldn’t hurt. Not all of us are young men anymore. We’d appreciate, say, calm approach.
Had you said “our little collective” without “I”, let alone “I” first I would’ve been more amenable to persuasion.
Ah, that one. O.K. At least clarifies the path from Canada, through Mexico, Civil War etc. Sounds ……..yeah.
I see. King, Malcolm X etc. Even Lennon.
O.K.
Sounds reasonable.
Sure.
Well…thanks for the clarification.
Have fun.
Quite a few of the world’s most repulsive regimes came to life under this slogan. Makes one pause.
“fact: Hitler did not try to kill all the Jews either. You have no proof that he did.”
Slow down there, Lightning. I didn’t say that he did. Re-read the quote. It’s me quoting someone else. I clearly gave reference to this.
Which comes first, the State or individuals?
Talk about deception in the realm of reality…
“All Power to the People!”
Ok, let’s not go overboard.
laughing.
Yes, and writing down the loans of the deadbeats rewards the people who lied on their loan applications and lived above their means on borrowed monay.
The guy who carefully managed his life and finances got screwed. How do you ever have a bailout where there isn’t a screwer and a screwee?
you don’t think this was by design?
forcing third-worlders into Europe may have been the original intent of the creation of the EU – destroying Europeans by stealth
The FED prints a new hundred dollar bill for 12.5 cents.
Then it uses this “wet off the press clown bux” to purchase 100 dollars worth of Treasuries – that us rubes are on the hook for full value.
That’s right, the dollar is essentially backed by the taxing power of the US Government.
How totally disgusting – Obama sold out “Hope and Change” before the inaugural stands went up!
The Jews and their greed for money and power has destroyed America.
Think Peace — Do No Harm — Art
p.s. Trump does not even pretend.
He said, “Look, my loyalty is to my campaign donors not to the voters. Don’t worry; my loyalty is with you.” (Obama)
If he said it that way or not — that is what he did!
Like ALL politicians – Obama thought reelection from the minute he was first elected.
Think Peace — Do No Harm — Art
Let the rest of the world be blighted by the Rothschilde tyranny.
Happy pigs wallowing in the mud of their ignorance and subservience.
Us clear-eyed desperadoes of pessimism will no longer be tethered to the cocoon of lies if we can face the facts – straight no chaser!
The Constitution’s Five Monetary Rules
Read in conjunction with the Ninth and Tenth Amendments, and the obligation-of-contracts clause (Art. I, sec. 10, cl. 1), we can identify five monetary policies that are constitutionally requisite in the United States:
1. The basic unit is the dollar, a silver coin containing 371.25 grains of pure silver.
2. Only gold or silver coins, or currency backed by the same, are legal tender.
3. No state may issue coins or currency.
4. No one may counterfeit U.S-government-issued coins or currency.
5. Fiat money is forbidden.
This is the bedrock of the Constitution.
Rejecting this is akin to denying the resurrection of Jesus Christ and still calling yourself a Christian.
Hudson’s critique of the euro is substantially correct in strict economic/financial terms. Where he goes wrong is in his political/geopolitical understanding of things which is at the level of a trailer park in the Bible Belt.
Your reference was obviously not clear.
Next time I suggest the use of quote marks or the blockquote tool.
Cheers.
I’d extend it to:
Petrodolar and all what’s related to it. The most of world trade.
Or…US Government isn’t taxing just US citizens. It’s taxing most, if not all, of the world.
Or, on practical terms….challenge US dollar there and then we’ll see what happens.
Finally. Someone who understands.
Bless you!
For the boneheads on the room, societies also precede the parasitic institution known as government. But then, who’d firebomb whole cities and steal what happens to be left?
…the dollar is essentially backed by the taxing power of the extortion racket known also as the US Government.
” But then, who’d firebomb whole cities and steal what happens to be left?”
Or run the State indoctrination and propaganda mills that make it all possible to begin with?
Maybe I am not far enough into conspiracy theories, but I don’t think that was the intent when the EU was created. In fact, when it was just a Common Market, it worked for the benefit of members. However, as soon as non-elected EU bureaucracy was created, it went the way of all bureaucracies. Any bureaucracy is like cancer: it keeps growing and eventually kills the host. That’s what’s happening to the EU, as far as I can tell. I never lived in the EU, though, I visit Europe during vacations essentially like Disneyland: fine entertainment, but you can’t even imagine living there.
Gore Vidal against Banks and the War State.
Video Link
that’s how they start it
from what i’ve read the EU is enmeshed with the Coudenhove-Kalergi plan and also Vox Day pointed out that the EU building was designed similarly to the Tower of Babel iirc? there is some intentional symbolism
The ultimate writing down of loans to deadbeats hasn’t happened yet.
The US government currently has something like $ 20 Trillion in public debt enabled by minimal QE interest rates. In other words it is living above its means (taxation receipts) and has lied on its loan applications.
The loans were supposed to “rescue the US economy” when in fact they rescued Wall Street bubble speculators, + created new speculative bubbles + launched trillion $ ME wars and kept the $ trillion special interest pig trough full.
The “screwee” is of course the US taxpayer who is supposed to pay back the principal and interest on these “investments” made on his behalf. And the FED will laugh at that. Their friends have already spent the money and the guy with “the carefully managed his life and finances” has been left holding in the bag.
But Mr Carefully Managed Life still has a house and some savings. He’s just not aware that they’re going to take these as well in the economic chaos when he (his government) can’t make the interest payments.
All I am doing is showing that in any bailout there are winners and losers and the loser tends to be the guy that should have been something of a winner. When you write down the loan of the guy who lied on his loan application so he can stay in his house, you take away the possibility of a foreclosure and the ability of people who refused to lie about their income from buying that foreclosure for it’s true value.
Yes, the insolvent banks and brokerages should have been closed down – that is what the FDIC and SIPC is for. The problem is always that government won’t bite the bullet and do it the right way because some “expert” will always come up with a solution that pretends to fix things with less pain.
We saw the same thing with the S&L fiasco. I read that Jimmy Carter was given a report that said the S&L industry could be completely rolled up cleaned up for 15 billion dollars. However, it was a huge source of congressional campaign funds and nobody wanted to touch rolling up failed thrifts – especially in rural areas. Instead we got letting them expand into commercial real estate and other lending, ultimately resulting in a huge commercial real estate bust that took a lot of commercial banks along with them.
Forcing third-worlders into Europe was nothing like the original intent of the EU.
If the EU was founded by anyone, it was Jean Monnet, and in his autobiography “Memoirs” he tells the whole story. Out of interest, years ago, I took some notes on it:
I was initially a great supporter of Europe and the European project, and have lived and worked in different European countries. It does have a joint identity as a European Homeland based on its Latin and Christian history, and having resisted invasions from the Arabic Islamic south and the Asian nomadic east (Mongols).
The problem is, that the EU bureaucracy has been hijacked by corporate special interests (same as the US) who wanted access to the massive profits offered by outsourcing (world supply chains enabled by the digital revolution). They required the breaking down of the physical and financial barriers designed to protect Europe and its people/employment – and they had the money and lobbying power to do it.
If Monnet was alive today, he would see that his EU has been wrecked by global special interests, and he would understand the resurgence of nationalism.
“This pumped $4.3 trillion into bank reserves, enabling banks to lend to inflate prices for stocks, bonds and real estate. ”
Banks do not need ‘reserves’ to ‘lend’?
“As a by-product of QE, new central bank reserves are created. But these are not an important part of the transmission mechanism. This article explains how, just as in normal times, these reserves cannot be multiplied into more loans and deposits and how these reserves do not represent ‘free money’ for banks. . . .
Moreover, the new reserves are not mechanically multiplied up into new loans and new deposits as predicted by the money multiplier theory. QE boosts broad money without directly leading to, or requiring, an increase in lending. While the first leg of the money multiplier theory does hold during QE — the monetary stance mechanically determines the quantity of reserves — the newly created reserves do not, by themselves, meaningfully change the incentives for the banks to create new broad money by lending. It is possible that QE might indirectly affect the incentives facing banks to make new loans, for example by reducing their funding costs, or by increasing the quantity of credit by boosting activity.(1) But equally, QE could lead to companies repaying bank credit, if they were to issue more bonds or equity and use those funds to repay bank loans. On balance, it is therefore possible for QE to increase or to reduce the amount of bank lending in the economy. However these channels were not expected to be key parts of its transmission: instead, QE works by circumventing the banking sector, aiming to increase private sector spending directly.”
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
” . . . banking is too important to leave it to bankers.”
Especially when something like this occurs?
“As Axel Weber remarked, afterwards:
I asked the typical macro question: who are the twenty biggest suppliers of securitization products, and who are the twenty biggest buyers. I got a paper, and they were both the same set of institutions…. The industry was not aware at the time that while its treasury department was reporting that it bought all these products its credit department was reporting that it had sold off all the risk because they had securitized them…”
http://www.lse.ac.uk/lse-player?id=1856
“The root problem of 2008 was a failure to recognize that the highly leveraged money center banks had used derivatives not to distribute subprime mortgage risk to the broad risk bearing capacity of the market as a whole but, rather, to concentrate it in themselves.”
https://equitablegrowth.org/misdiagnosis-of-2008-and-the-fed-inflation-targeting-was-not-the-problem-an-unwillingness-to-vaporize-asset-values-was-not-the-problem/
Maybe people ought to drop the concept of “conspiracy theories” because it’s just another mindless method of dismissing appropriate questions much akin to the label, “anti-Semite.”. Whenever some fool uses the phrase “conspiracy theory,” I know that the person is either trying to hide something, exasperatingly ignorant, finds thinking painful, or some combination thereof.
I highly recommend questioning everything, especially powerful people and that which is labelled conspiracy theory.
“…they are the masters…”
Aw who cares what he sez? He must be a conspiracy theorist, an anarchist er anti-Semitic!*
*Sarcasm intended in case it isn’t obvious.
Speaking of Monnet, I know next to nothing about him, but some of the things he said prove him to be an interesting character.:
However, “interesting Character” may be an understatement…
Several comments in the Wikipedia article have piqued my interest…
The plot thickens…
The 2008 bailouts were managed with the interests of the elite in mind. The government gave the big banks TARP money to tide them over (instead of striking a hard deal and taking equity) while the Fed bought their junk mortgage backed securities and became technically insolvent itself.
The banks were allowed to claw their way back into solvency on the backs of the lower middle class by borrowing money for almost no interest from the Fed while charging double digits rates to those living paycheck to paycheck.
If the government forced Citibank to give up an 80% equity stake to taxpayers and held onto it for several years, how much could it have sawed off the national debt?
There was a lot of high-minded talk about moral hazard in the New York Times around that time, but I don’t remember any concrete proposals to strike the best possible deal for the taxpayers.
@ to all that read my coment.
A clarification is needed for the word “individuals”. It pertains to specific individuals that own the FED . T he word “people” characterizes the sum total of men and women that comprise the State, something that Americans do not have.
Patrick Henry tried but the Cabal from London fell full force upon him and silence fell. Kennedy tried one more time to create a State for the people, he failed also.
The stark reality is that Americans are employees of a company incorporated in 1876 in the state of Delaware under the name of UNITED STATES of AMERICA, Inc. It owns the palcel of land called District of Columbia, D,C, and has its own constitution and flag. We, the sheeple. are put in a deception box where we must accept the organization chart that they have made for us as of our own creation.
You are preaching to the choir. I always assume that propaganda is a pack of lies: nobody needs propaganda to impress upon people that 2×2=4.
My use of the expression “conspiracy theories” is tongue in cheek, if you will.
However, the EU (or, rather, its predecessors) were created for clear benefit of member countries. It became an impediment to European development when it outgrew its usefulness and accepted numerous unqualified vaudeville statelets. That’s when Brussels bureaucracy acquired power over the people and their elected (if we believe in it, which we shouldn’t) governments. This started the downward spiral of the EU that we are witnessing now. Maybe Europe was dying, anyway, but Brussels’ subservience to the Washington Politburo is speeding up its demise.
The road to hell is paved with good intentions
All it will really take for the next crash is for people to start spending less which will cascade into more unemployment with increased interest costs to trigger the downward spiral. That is why a debt based economy needs constant expansion, including constant expansion of the population to cover the interest costs.
That is not where the faultlines mattered. The resulting bundling of those products, actually few in number by comparison was not the problem.
It was the packaging of products well above their market value that the so called “honest joe” invested in and was repeatedly sold among firms at ever increased over evaluations that caused the problem. The careful manager as you claim, may not have asked his broker pertinent questions about the stocks he was purchasing — he merely noted the rise, and instructed his investor to make the buys. Or pension fund managers just followed suit without doing their homework on the actual valuation method and histories.
Home buyers who bought their homes via the standard best practices from banks that did not engage in profit fixing, extended lending, mortgage companies that did not engage in ballooning, etc. were not affected by events, unless their incomes were tied to the markets. And the problem was compounded by international and global banking systems all part of the Basel II lending schemas. Those bank have removed the power of local banking to communities.
If you think that this problem was caused by homeowners who bought properties they could not afford, you are drinking the cool aid offered by the banking, financing, hollywood, and washington dc, to cover their malfeasance.
The data is devastatingly clear — this is a top down and out issue years in the making long before the boom of 2000 valuations that is linked directly to stocks incorporating investment products on housing that had previously been barred or heavily restricted.
A friend of mine who works in the investment field, laughed and said, “Wait till you see what we are going to do next,” as if there was going to be some manner of recompense for attempting to hold them accountable.
And I believe her.
You are spot on target and here are all the thiefs and and their take. “It is easier to rob by setting up a bank than by holding up a bank clerk.” Bertolt Brecht
The Fed Audit
GAO (Government Accountability Office) report Of the Federal Reserve.
http://www.gao.gov/new.items/d11696.pdf
Just started reading this book late last night:
1) He writes way way too fast. Grand statements with no evidence. Perhaps the book is made for popular consumption, but it moves way too quickly for you to get a handle on his evidence.
2) Page after page of naming influential people in finance, influential organizations, all of which are Jewish in some way. Not worth remarking upon, apparently. His main target are rentiers, and the rentier class at the international level is overwhelmingly Jewish.
3) “The Eurozone was designed by rightwing politicians. It was basically a fascist plan, fascist as in the 1930s, fascist as in the AustrianSchool. ”
What??? The Austrian School is not fascist, first of all. I don’t think he knows what ‘fascism’ means. Second, Monnet and others were not Austrian in that sense. The Austrians like Mises also did not believe in destroying cultures, or that trade was the only end in life.
They accomplished this with “insurance” sold by woefully undercapitalized subsidiaries of big insurance companies, separately incorporated of course to contain the inevitable losses.
Just enough of a fig leaf to protect against fraud charges, especially if you have influence over regulators, politicians and the financial press.
@ AnonFromTN
The expression “Washington Politburo” excellent. You have escaped from the three dimensional box and you can see clearly the reality.
I am curious. Has anybody in our scientific establishment made a study on the composition of the homeless slice of our society. Is quite a large size now and somebody should have.
You misinterpreted what I wrote. I was not commenting on the cause of the debacle. I was only pointing out that if you decided to write down the loans on people who were willing to lie on their application, there would be no flood of foreclosures that would be available for purchase by people who would not lie on their loan applications. Those people would be losers because the price of houses would not likely correct in any meaningful manner.
Places like Newport Beach, California did have foreclosures and a price drop but it was nothing compared to places like Palmdale. Wealthy people from all around the world simply swooped in and scooped them up so that the downturn there was shorter in duration and many of those places have higher prices now than they did during the bubble while Palmdale is still 30% below it’s peak.
When the commercial banks (insured by the FDIC) got into the game, they had to have insurance in order to keep their capital requirements in line with established banking regulations unlike investment banks which have no such requirements.
Commercial banks do get auditied regularly. Banks have to maintain a healthy ratio of capital to loans (or other invetments) outstanding. If the asset is insured against, it needn’t be part of the equation. Treasury bonds and bills are also not part of the calculation as I recall.
I was referring to the “insurance” that was used to justify giving investment grade ratings to bundlings of highly risky mortgages.
It was the packaging of products well above their market value that the so called “honest joe” invested in and was repeatedly sold among firms at ever increased over evaluations that caused the problem. The careful manager as you claim, may not have asked his broker pertinent questions about the stocks he was purchasing — he merely noted the rise, and instructed his investor to make the buys. Or pension fund managers just followed suit without doing their homework on the actual valuation method and histories.
This is not true. You are assuming that something was overvalued simply because it ultimately failed. Interest bearing securities are priced based on the current interest rate and the perceived risk. Nothing will usually sell for more than a US Treasury bond of similar duration to maturity. You are assuming the broker got him to pay more (meaning have a lower interest rate) for it than it would normally get by somebody more sophisticated but that wasn’t the case. When they are purchased you have a plethora of bonds supposedly of various investment grades. The differences between every AAA rated bond available is small compared to the difference between AAA and AA rated bonds. Someone decides how much risk they will take for the extra income. The real problem was that they were not really AAA rated bonds as they were reported to be. The securities were rated by the rating agencies based on the normal default rate of normal mortgages. These mortgages were anything but normal.
Home buyers who bought their homes via the standard best practices from banks that did not engage in profit fixing, extended lending, mortgage companies that did not engage in ballooning, etc. were not affected by events,
Yes, they were just like everybody was affected. They paid more for their house because of the flood of buyers. They may very well still be underwater on the mortgage that they can afford and cannot get out of. They have lost the opportunity (and may never get it again, and I should know about this as it happened to me in the Carter double dip recession) to buy the house they really wanted in the area they really wanted to live in.
I am sure what you are saying is correct. These securities were rated by agencies like Moody’s and S&P and were rated on the underlying securities (mortgages). They took a pack of mortgages bundled them up and created tranches of varying rate by prioritizing the payout. The guy who got first dibs on the income stream had his tranch rated at AAA. They were the Collateralized Debt Obligations. This was the rating the people used to price these. The originators assumed through fancy artihmentic that they could take any income producing stream and turn it into securities of various rated levels just by prioritizing the payments. Obviously, the guy at the bottom could end up with next to nothing and (according to the “Big Short”) if only 26 percent of the underlying mortgages defaulted, the lowest tranches would be worthless.
I never read anything about insurance being part of the rating process. Since after the fact we learned that the rating agencies did next to no due dillegence and simply rated them the way the originator wanted so as not to risk losing future business, it doesn’t make sense that it would be part of the rating.
I believe the insurance that was created around these securities were the Credit Default Swaps which guaranteed the income stream in some way. Probably by taking possession of your CDO and paying you the payments owed through the combination of the partial income the CDO paid and the insurance companies capital.
Where things went crazy is when these insurance companies, so sure they had the game pegged, started selling CDS to anybody – even people who didn’t own the underlying CDOs. So multiple entities all had the same bet that some bond was going to default. The insurance company didn’t have enough capital to cover those bets.
The commercial banks by buying the CDS could ignore the risk associated with the CDOs in their posession in their capital requirements the regulators would monitor during their audits.
https://dealbook.nytimes.com/2011/03/02/through-the-looking-glass-with-ambac/
You’re right. I didn’t know about that.
I am not making any assumptions. Your internals concerning how the mortgages were packaged is key. That is, a buyer bought a package that was worth less than it was valued. An d you yourself delineate, triple a’s were packaged right along side AA or A’s valuated properties. So the buyer buys at 10, but its worth 5 or possibly less. The issue is not that a purchase was made at higher price. The issue is that the purchase was made at all. At best a violation of best practices at worst — fraud, because the sellers derivative formulas were made in full knowledge of what was in the formula. And for those further down the sales pipe, due diligence should have caused some concern.
So given your response, my comment is not false. we are in effect saying the same thing — I make no assumptions about whether the price paid was higher. Regardless of that — the sale price was above the valuation.
________
No. Plenty of banks nor mortgage companies engaged in risky sales. When I say not everyone was effected, I am talking home buyers who during the buyers market made standard mortgage deals with banks and institutions that did not engage in risky valuations.
Of course in general everyone was effected. But not every home owner or purchaser had those purchases at risk — in any manner. Especially those with fixed rates. Not everyone purchased homes/properties that were over valued.
The evidence is overwhelming that deregulation was crucial to enabling the downturn.
http://glasssteagallact.info/
https://www.investopedia.com/terms/g/glass_steagall_act.asp
That provision was in direct response to previous similar behavior — save that banks actually failed.
Basel I , Basel II
http://treasurytoday.com/2009/03/basel-ii-and-the-financial-crisis
Debts were cancelled every 7 years under Moses. The jubilee was different. It just made it so the tribal/family lands reverted back to the original house, debt or no debt.
US Government isn’t taxing just US citizens. It’s taxing most, if not all, of the world.
How does it tax the entire world? I know you are onto something. Expand please.
It prints money backed by US Treasury securities (yes, debt) that it purchases.
Yes it does. China buys it (treasury ) India Saudi japan buy and perk the money .That money is used by US treasury for spending or loaning to government Government then wages war agisnt China India Saudi or Iraq. Government also buys form Raytheon and other and flies those bombs and planes to other countries indulging to S China Sea or reminds India not to buy oil from Iran .
The system allows it Its not the value of the dollar but the system by which dollar is maintained as reserve currency.
Essentially dollar is Gold/Silver but only US can mine it and can do it for indefinite period .
You forget about reserve lending. Commercial bank X loans business Y money (doesn’t really matter that much what bank X’s marginal cost of capital is or at what rate it lends it to business Y– the spread can be quite small)
The bank then requires as a condition of the loan that business Y open a commercial checking acct. (or deposit into existing commercial checking acct.) at same bank using the new loan’s proceeds. If the Fed reserve requirement is 20% on demand deposits, to give a classic example, the commercial bank can lend out 80% of what it just loaned to make another commercial loan. Wash, rinse and repeat. “Create” “money”.
At least that’s the way it was ‘splained to me at by a Banking and Finance prof. at my second tier state supported university B-school in 1974.
“You forget about reserve lending.”
Does this ‘fit in’ with what the Bank of England says?
“As a by-product of QE, new central bank reserves are created. But these are not an important part of the transmission mechanism. This article explains how, just as in normal times, these reserves cannot be multiplied into more loans and deposits and how these reserves do not represent ‘free money’ for banks. . . .
Moreover, the new reserves are not mechanically multiplied up into new loans and new deposits as predicted by the money multiplier theory. QE boosts broad money without directly leading to, or requiring, an increase in lending. While the first leg of the money multiplier theory does hold during QE — the monetary stance mechanically determines the quantity of reserves — the newly created reserves do not, by themselves, meaningfully change the incentives for the banks to create new broad money by lending. It is possible that QE might indirectly affect the incentives facing banks to make new loans, for example by reducing their funding costs, or by increasing the quantity of credit by boosting activity.(1) But equally, QE could lead to companies repaying bank credit, if they were to issue more bonds or equity and use those funds to repay bank loans. On balance, it is therefore possible for QE to increase or to reduce the amount of bank lending in the economy. However these channels were not expected to be key parts of its transmission: instead, QE works by circumventing the banking sector, aiming to increase private sector spending directly.”
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
“Does this ‘fit in’ with what the Bank of England says?”
Damned if I know. All I know is that QE has never put any extra change in my pocket that I can concretely discern. Anyway, my undergrad B-school days were pre-repeal of Glass-Steagall .
———————————
“. . . the newly created reserves do not, by themselves, meaningfully change the incentives for the banks to create new broad money by lending.”
Conversely the newly created reserves don’t necessarily change borrowers’ incentives to borrow more either, do they?
Fair question and can’t answer it from top of my head.Not exactly my area of expertise so read it somewhere written by people who are into it. Wery good explanations.
I did save it SOMEWHERE in my “library” on my machines around.
Tried to find it but no joy (can’t say spent too much searching, weekend and such).
So…you’ll need to rely on your own Google-fu I am afraid.
That’s for the “taxing” part of Dollar hegemony (in pure monetary sense), but, I believe it’s even more important the overall hegemony which comes with that.
In essence…making (and breaking) rules of world economy as it fits US elites. Emphasis on “elites”.
“In essence…making (and breaking) rules of world economy as it fits US elites. Emphasis on “elites”.
U.S. elites?? You mean people like U.S.ers like George Soros? Not everybody who attends Davos is either a de facto or a de jure a U.S.er. Maybe the majority are; maybe even a majority are of founding stock. That would certainly be an interesting study.
Michael Hudson has stated the case very well but I think not simply enough. What we should all be cognizant of is THERE IS NO WAY UNDER THE PRESENT SYSTEM TO PAY DOWN THE DEBT. It’s impossible. ALL money in the western world is created with debt attached. For example say the Treasury needs a million dollars. They receive from the FED the million, for which they give us nothing, and in return the Treasury promises to pay the FED the million plus interest. Well it doesn’t take a genius to realize that if all money is created this way you can never pay off the debt. The whole thing compounds and the debt gets higher and higher. We may actually need even more debt because to have cash we MUST have debt. Now we could take away this function and should and go to a debt-less money system.
I particularly like how Hudson pointed out that the banks, and their FED buddies, own most every single productive money making institution in the US and probably the world. The multi-Trillions they gave to the banks at close to zero interest means they could buy anything for nothing.
Now the FED says or pretends that they are part of the government but they aren’t. They are private and they can call in loans or refuse to loan anytime they like. We should do a hostile take over of the FED and the banks and then WE would own everything productive in the economy instead of the banks. Follow that by making decent low risk banking rules and forcing bankers to pay their top employees some small multiple of their lowest paid employees. Like 20 times. Then we would see all these smart aggressive people moving into something more productive than ripping us all off. Banking should be reduced to a middle class, boring business like life insurance.
Commercial banks can also create so-called “inside” money, i.e. bank deposits – this happens every time they issue a new loan. The difference between outside and inside money is that the former is an asset for the economy as a whole, but it is nobody’s liability. Inside money, on the other hand, is named this way because it is backed by private credit: if all the claims held by banks on private debtors were to be settled, the inside money created would be reversed to zero. So, it is one form of currency that is created – and can be reversed – within the private economy.—
https://www.ecb.europa.eu/explainers/tell-me-more/html/what_is_money.en.html
Bank of England bulletin essentially says same thing.
but the glaring lapse is in terminating the discussion by saying “money is destroyed ‘ and not extending to the numerous new additions and risky developments – houses built , factories created, derivatives manufactured , interests added , and the ‘fractional reserve currency/deposits” generated already by the bank itself.
In today’s established order the Banks come first so they can prop up consumerism and convert home owners to homeless. The masters of the game explain it very accurately.
any link?
” receive from the FED the million, for which they give us nothing, and in return the Treasury promises to pay the FED the million plus interest. ”
though fed CAN BE”PRIVATE”, IT DOESN’T PASS THE [PRINCIPAL OR THE INTEREST OR THE PROFIT TO THE SONS AND DAUGHTERS OF THOSE WHO WON THE FED.
WHAT FED OWNS IS OWNED BY THE CITIZEN . NOT BY THE FED-OWNING BANKS.
QUESTION IS -DOES THE FED SEND THOSE MONEY FREE OR CHEAP TO THE BANKS AND HEDGE FUND OR OUTSIDE TO OTHER BANKS AND THUS ENRICH OTHER COUNTRIES/BANKS/FAMILIES.
There’s a political aspect to all this.
This is Venezuela’s gold and they want it back.
http://home.hiwaay.net/~becraft/FRS-myth.htm (1996)
The mathematical flaw section — doesn’t make sense to me — maybe it does to someone else.