Michael Hudson: The Crisis in Europe and the Machinations of the Rentier Class

This Boom/Bust show features a wide-ranging talk with Michael Hudson about the impact of the Swiss currency shock, the pending Greek elections, the effects of sanctions, and what the deteriorating Ukraine economy means for Europe. Some of Hudson’s observations will likely be novel to readers, for instance, how the rise in the Swiss franc will affect the Swiss economy, or why sanctions aren’t as bad for the economies subjected to them as most pundits would have you believe (note I’m not as sanguine as Hudson about the economic impact, but he’s got a strong case as far as the political impact is concerned).

The segment with Hudson starts at 4:00. The opening is about the Swiss shock, and you may want to watch that as well.

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    1. Yonatan

      If the Greeks make nice with the Turks, they may get a sweet deal on gas too. Then there are all the transit fees for gas to the rest of Europe. Plus, resolving the Greek/Turkey problem over Cyprus will remove legal complications regarding energy exploration around Cyprus.

      1. John Jones

        Turkey is never going to voluntarily remove their invading troops and settlers from Cyprus. The Turks said the other day they want 50 percent of the profits of the gas. Half for a country that invades half the island and had only 18 percent Turkish Cypriot population. Who should be the only Turks that have a claim to any gas profits. I think its time Turkey plays nice with Greeks for once and stops its colonial and genocidal mentality and attitude towards Greeks for once.

        1. lkl

          I agree with John. How the Turks have a reputation as almost European by some deluded, usually social liberal jet setters, is a testament to the strait-jacket of political correctness.Though the Armenian genocide is over, the Kurdish one continues. Turkey is a fundamentalist Islamic culture, always on the verge of democratic system destruction. It has mammoth corruption, a large impoverished, fast growing population. It’s main export is people (carrying their crazy nationalism), sex slaves and drugs to Europe.
          Turkey hasn’t changed, no matter how much the social liberal crowd calls it secular. It wants territory and denigrates foreigners. The psyche is so irrational, that it, though cognitive dissonnance, simutaneously bills itself as European and Islamic/Middle Eastern. The one-sided nationalism precludes the ability for second party perceptions. They cry racism that the EU isn’t expanded to them so they can suck more Euro wealth, but they don’t permit immigration and have large tariffs to protect crony businesses.

  1. Ned Ludd

    The end-game in Europe:

    Michael Hudson: And the United States hopes to replace Europe as an economic power and just lock-in Europe, even more, to essentially make the European Union just an extension of NATO, which is basically what the European Commission and the politicians are now.

    There seemed to be more robust anti-NATO sentiment in Europe in the 1980’s. Today, how many political parties still advocate exiting NATO?

    1. digi_owl

      In the 80s USSR was bleeding out in Afghanistan. Today the Russian bear is once more looming over the rest of the continent.

      1. Banger

        Looming? Are you serious? Other than oppose “Western” influence in Ukraine and elsewhere, Russia is not in the least been threatening Europe nor does it have an interest in undermining European power whereas the Anglo alliance appears to me and to Hudson and many others to be a more direct threat to Europe than the Russians could ever be if and only if you regard the average citizen’s interest as opposed to the Euro oligarchs.

        The only reason the U.S. has influence in Euro ruling circles (outside of bribery and threats and other nefarious practices) is because the Euro populace has grown increasingly uneasy with large Muslim populations and the U.S. has been able to leverage that to making appear that the “clash of civilizations” looks like the crusade that will unite the West–it “worked” after 9/11 in the USA by creating the GWOT which I believe is a phony Orwellian war but let’s not go there.

        1. James Levy

          Absolutely, Banger. The reason people wanted to exit NATO in the 1980s was that it was a suicide pact given MAD. Russia lacks the complete suite of logistical infrastructure to threaten anyone not immediately on its borders, and even there they could hardly put more than 50,000 men in the field and keep them there and properly supplied. Czar Alexander was in a better position to menace Europe 200 years ago. The idea of Russian armour pushing through Belarus, Poland, and Germany to the Rhine is beyond ludicrous.

          1. ambrit

            The same dynamic applies to Russia versus whoever as applies to Israel versus whoever, Nukes. If you don’t consider that a viable threat, what with counterstrikes and all, consider the Russian peoples tradition of endurance and long suffering.
            The Russians seem to be doing pretty well with a proxy force in Eastern Ukraine. They don’t have to take the whole place over, just neutralize it. Double Plus, they have their old ally, General Winter to assist in getting the point across to Europe.

      2. Ned Ludd

        The U.S. government destabilized a country on the border of “the Russian bear”, in order to draw it into a military conflict.

        Am I taking about July 3, 1979, or now?

        Zbigniew Brzezinski: According to the official version of history, CIA aid to the Mujahadeen began during 1980, that is to say, after the Soviet army invaded Afghanistan, 24 Dec 1979. But the reality, secretly guarded until now, is completely otherwise: Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention.

        The Soviet Union’s military intervention in Afghanistan was demonized, and “65  countries boycotted the Olympics as a protest against the entrance of Soviet forces into Afghanistan”. The CIA’s successful operation to destabilize Afghanistan – which induced the military intervention – was kept a secret for decades.

        Question: When the Soviets justified their intervention by asserting that they intended to fight against a secret involvement of the United States in Afghanistan, people didn’t believe them. However, there was a basis of truth. You don’t regret anything today?

        Brzezinski: Regret what? That secret operation was an excellent idea.

        Despite international condemnation of the Soviet Union for their military intervention in Afghanistan (to counter the secret U.S. operation to destabilize the country); European leftists were, back in the 1980’s, still anti-imperialists who campaigned for the demilitarization of Europe and withdrawal of their respective countries from NATO.

        1. sgt_doom

          And that was when there existed the secular-government/society of Afghanistan, where women worked, and the culture contained intellectuals, professionals and artists. (See Bleeding Afghanistan, by Sonali Kolhatkar)

          Then, in the late 1990s, an intrepid DIA analyst, Julie Sirrs, returned from Pakistan and Afghanistan with evidence of both an impending terrorist attack on US soil, and that the Taliban/al Qaeda were being financed and armed by Unocal and the CIA.

          The anti-Taliban leader of the Northern Alliance, the source of the terrorist attack warning, would be assassinated by two al Qaeda suicide bombers posing as journalists, on 09/09/01.

          1. Jackrabbit

            The first attack on the World Trade Center occurred in February ’93 so the US already knew they were a target.

            My understanding of the killing of the leader of the Northern Alliance was that it was meant to eliminate a gifted leader who opposed the (Al Queda-friendly) Taliban – not as retribution for revealing their plans.

            H O P

            1. Jackrabbit

              Partial Correction for both of us. Massoud had made a public warning of an impeding strike. But was his murder revenge or political assassination? Maybe both. From Wikipedia:

              On September 9, 2001, two Arab suicide attackers, allegedly belonging to Al Qaeda, posing as journalists, detonated a bomb hidden in a video camera while interviewing Ahmed Shah Massoud in the Takhar province of Afghanistan. Commander Massoud died in a helicopter that was taking him to a hospital. He was buried in his home village of Bazarak in the Panjshir Valley.[47] The funeral, although taking place in a rather rural area, was attended by hundreds of thousands of mourning people.

              The assassination of Massoud is considered to have a strong connection to the September 11, 2001 attacks on U.S. soil which killed nearly 3,000 people and which appeared to be the terrorist attack that Massoud had warned against in his speech to the European Parliament several months earlier. John P. O’Neill was a counter-terrorism expert and the Assistant Director of the FBI until late 2001. He retired from the FBI and was offered the position of director of security at the World Trade Center (WTC). He took the job at the WTC two weeks before 9/11. On September 10, 2001, John O’Neill told two of his friends,

              “We’re due. And we’re due for something big. … Some things have happened in Afghanistan [referring to the assassination of Massoud]. I don’t like the way things are lining up in Afghanistan. … I sense a shift, and I think things are going to happen. … soon”.

              John O’Neill died on September 11, 2001, when the south tower collapsed.

        2. /L

          The leftist grab of power April 1978 by PDPA (People’s Democratic Party of Afghanistan) was an rather unprepared ad hoc thing due to increased persecution by the gov. aided by Shan of Irans SAVAK. The big news papers like NYT reported it in quite positive way claiming it to have great public support in the big city’s. At least in in Kabul. The American ambassador wrote home that it would be in US interests to support the opposition but it would be at a very high price for the Afghan people. He was very right in the last part, more or less perpetual ongoing civil war for almost four decades.
          After Soviet implodes it was revealed that fractions of PDPA repeated sought for Soviet help but Soviet leaders was reluctant, they didn’t think the regime was stable enough and had to little public support all over the country. Probably US aid to the medieval clerical feudal landlords in the countryside was a factor.

      3. Jack

        “Today the Russian bear is once more looming.”

        Oh please. Anyone with a real understanding of the Cold War knows it was largely a Western, chiefly American, creation. Despite all the nightmare visions of Soviet armor pouring through the Fulda Gap, Soviet policy was mostly in line with traditional Russian policy; it was concentrated on defense. A proactive defense at times, but fundamentally defensive all the same. Meanwhile it was America going around launching coups and blowing up countries in the name of fighting Communism.

        The reality is that Russia has traditionally not been particularly expansionist or imperial. They’ve certainly never shown any interest in invading Western Europe. They may tend to be overly zealous about what constitutes ‘Russia’ and often unilaterally declare themselves head of the Slavic world, but in the end if you don’t screw with them, they won’t screw with you. Invade their Motherland however and they *will* break you, no matter how much blood it costs them. Russia has no interest in Finland or the rest of Scandinavia, they don’t even want all of Ukraine and they certainly have no desire to push into Germany and beyond. They do have an extreme strategic interest in Poland, but not because they actually want to own Poland itself. Not to be overly harsh, but Poland has proven itself time and again to be utterly pathetic and unable to hold its own in any conflict (they’ve been routinely getting their shit kicked in for about the last 600 years). This matters to Russia because Poland is the gateway through which Russia has been repeatedly invaded. If the Poles can’t be depended on to hold their own, maybe it would be better for Moscow to directly control the region, goes the Russian logic.

        Also, ‘the rest of the continent’. Russia spans Europe and Asia. It’s very much a country apart, and always has been. From the perspective of snooty Western Europeans Russia is the primitive, savage state on the fringe. Russia is constantly shifting back and forth between periods of taking pride in its unique heritage and periods of trying to suck up to the West by ‘out-Europeaning’ them. And in all times it is the shield of Europe, shattering Napoleon and defeating Hitler, and all the thanks it gets is endless scorn and derision. Frankly Russia would be better served just telling the rest of the world to pound sand, shutting themselves off and concentrating on their vast native resources.

        And anyone choosing to antagonize the ‘bear’ should be aware that only one group has ever successfully conquered Russia: the Mongols. And they did it through a combination of actually genuinely being the best fighters on the planet at the time (unlike the farce that is the US military. It’s very clear many in the Pentagon don’t want a war with Russia because they rightfully fear what the result would be), ‘Russia’ being a disorganized collection of petty princes at the time, and because they invaded through the backdoor, whereas every other (failed) attempt tried to come in from the front.

        Go ahead, attack Russia, and weep and scream in impotent frustration as their long-wave AA systems effortlessly shoot down all your ‘stealth’ fighters and their ECM shuts down all of your vaunted AEGIS cruisers, possibly before they deliver the coup de grace in the form of a Chinese made hypersonic missile sniping a giant hole in the side of your useless supercarrier. In the air they have better planes, close to the ground they have better helicopters, on the ground better artillery and infantrymen.

        1. Oregoncharles

          I beg to differ, at least about Russian history. They ARE an empire; a map showing the long, steady expansion from Moscow is deeply impressive – rings in a pond.

          You may well be right about their present attitudes. I see no sign of aggressive attitudes toward Western Europe, but they’re very aggressive on the fringe; ask Georgia. Indeed, this may well be the real reason for events in Ukraine: the Ukraninians,if they were not Russian-speakers, had every reason to be nervous and defensive. That doesn’t mean it was a good idea for the US to meddle – quite the contrary.

          Overall, it’s a mixed bag. Their present policies probably are mostly defensive – they’ve only just recovered from the collapse of the larger Russian Empire. But calling them un-imperial is absurd.

          1. Jack

            Alright, let me rephrase: there isn’t a traditional Russian culture of expansionism. They have expanded in the past because that’s what monarchs and kingdoms tend to do, but as far as I know there is no Russian counterpart to Manifest Destiny. They certainly never had much of a foreign colonial attitude.

            And Georgia started that war, and the Russian response was to go in, smash what passed for the Georgian military, and then withdraw. They didn’t even lay claim to the disputed region, which likely would been willing to join the Federation.

    2. susan the other

      The Berlin wall went up because we needed to stop the refugees into West Germany. We wanted to pour money into West Germany and make it a capitalist showcase. So we agreed to the wall. But it didn’t help us much because socialist governments were strong in Europe. They did not do business like we wanted them to. During the Cold War we printed money as extravagantly as we dispense QE. Stimulating our MIC in an attempt to make the Russians go broke. Kennedy complained that it seemed like there was “no stopping” the Russian economy. Then came Vietnam whereby we made ourselves go broke. But we kept our MIC economy going when it would have failed otherwise. After Vietnam we went hat-in-hand to China to establish some economic ties with them that would give us control but that has ended badly. Something there is that does not want to do legitimate business in this world. So now we are back to square one with Russia, isolating them and China as a block which we will oppose as we continue to make up our casino economics as we go along – as long as we can keep them out of our sphere. And the whole idea seems to be keeping the dollar’s image strong. That means keeping Russia at arms length from Europe as Europe is our biggest trading partner. Russia seems to have agreed to our demand for running a pipeline to Turkey and leaving it to the Europeans to run their own pipeline to Turkey if they want oil/gas. So that will tend to blow the EU budget, diminish their social spending, enrich their banksters, extort them into the TTIP and etc.

      1. Vatch

        “The Berlin wall went up because we needed to stop the refugees into West Germany.”

        That’s news to me. My understanding is that the East Germans built the wall with Soviet approval, because they were losing too many people to the West. Do you have documentation for your claim?

      2. Optimader

        “The Berlin wall went up because we needed to stop the refugees into West Germany…. So we agreed to the wall.”
        The Onion doesnt count as a source

        ” as Europe is our biggest trading partner. ”
        Couple year old data but the pecking order i believe remains the same Newest numerical data available at the us census if you want to look. As far as the”US isolating china” your kidding right?

        1. susan the other

          No I’m not. My point is that the US financial system has reached its limits. Actually it reached its limits decades ago, but nevermind. And it is only half way to its goal. Bad place to run aground, no? I honestly think that we want to relieve the pressure on the oh-so-important value of the dollar and the best way to do that is to force another “economic block.” That would be China and Russia with India (an impossible country to help) tacked on for good measure. Together they can form a competitive economic block which will actually be to our benefit because it is so much more expensive for us to try to float the entire world on US treasuries. Expensive and insane. We had to fake it with the Berlin Wall – and now we are gonna fake it again the the BRICS.

    3. norm de plume

      ‘There seemed to be more robust anti-NATO sentiment in Europe in the 1980’s’

      There was some quite robust anti-NATO sentiment in Iceland in 1949:


      Halldor Laxness’s Atom Station is a piquant souvenir of that time.

      Some recently discovered footage:


      which is strongly redolent of a rather more recent protest, against the bankster-serving government in 2008:


      Almost makes you want to live in Iceland. Cold though.

  2. gardener1

    Michael Hudson is greatness. He strips away all the high-handed jingoism and just lays out the barefaced facts without apologies.

    Viewers on youtube should also note the very interesting Boom Bust blog at the top of the feed on the right, an interview with the equally honest Yanis Varoufakis – “Why I am running for election in Greece on the SYRIZA ticket”, original air date: January 12, 2015. Well worth your time – https://www.youtube.com/watch?v=PbxZB6HYY8k

  3. Steven

    The immense stupidity of US foreign policy is just mind boggling. The reality is that it is a waning power and it has been ever since the end of WWII. The only way it could have preserved the relative power it enjoyed at the end of the war – a war caused in large part by the “they borrowed the money, didn’t they?” mentality of its ruling banker class – would have been to leave the world in shambles, the Empire of Chaos it appears to be trying to reestablish today. Organizing the world economy into a Grand Area designed to service the interests of the United States was a clever enough strategy.

    Where the problems started was in defining exactly what those interests were. The United States achieved its power and preeminence through its mastery of science and technology, the application of inanimate energy sources and machinery to the process of wealth creation. But its banker class apparently believed its own propaganda about being the world’s real ‘wealth creators’, that the technology to continue ruling the world could always be bought somewhere and need not be home-grown. With the rise of China it is finding out this is not the case.

    China has once again proved that the real source of national power is the ability to combine the dissemination and advance of human knowledge with the world’s supply of inanimate energy sources to produce real wealth – NOT, as Hudson puts it “Wall Street’s product”, DEBT. So what we are seeing is an increasingly desperate declining power, unwilling to come to terms with the rest of the world and accept its place in the scheme of things, increasingly resorting to “raw power” to cling to the global hegemony it inherited from the similarly deluded banker / Old Money-dominated ruling class that presided over the decline of the British Empire.

    The decision to resort to “raw power” rather than the rule of law is one this country should already be regretting.

    1. NYer

      Huh? China’s economic growth has been every bit fueled as much by DEBT as that of the US and other developed economies. Total debt/GDP is probably around 250-275% at this point, about the same ratio as the US.
      And China is sitting on about $3T in USTs, so obviously they had no problem being paid in DEBT for their exports.

      1. Ben Johannson

        Also, China’s private debt is likely well in excess of U.S. private debt. I’ve seen estimates in excess of 600% GDP.

        1. Steven

          Any idea who holds that debt, or at least the split between foreign and domestically held? Even if a large percentage is foreign-held, what are the creditors going to do if China doesn’t pay? Send their repo men? That’s a lot easier within rather than beyond the borders of the creditors’ native countries.

      2. Steven

        It is what you do with that debt that counts. If you use it for nothing more that gratuitous wars and fueling asset bubbles you will achieve the same results, though with modern weapons and war a little more quickly at least in the targeted country. I don’t really understand what the Chinese are up to at this point. By consenting to furnish slave labor and destroy the country’s environment so Wall Street and other Western financial centers could continue to peddle their “product” (debt), the Chinese put themselves on the receiving end of real wealth creating technology instead of the bombs the West had used during the preceding century to keep them (the Chinese) ‘down on the farm’. But they must surely have enough technology by now to do much better by their people and to clean up their act, so to speak.

        Unless the Chinese leadership has become infected with money sickness, the only purpose I can see in continuing to assist Western financiers in stripping their native countries of those countries’ real wealth is to insure the West has been completely d-clawed before it turns its attention inward. As for the $3 trillion, to play the West’s money games you need a stake. Paul Craig Roberts seems to think China has a large enough one now it could play its hand. Maybe it is just afraid to end the game.

        1. Paul Niemi

          China is supposed to have between 2.5 and 3 trillion in dollar foreign exchange reserves. A good question is, why keep the money? The reason is they need the money in reserve to defend the dollar peg of the yuan/renminby, which they use to ensure their exported goods will have a small price advantage. The currency peg, which started at 8 to the dollar has strengthened to near 6, but the managed peg has protected against sharp fluctuations. A large reserve of dollars is necessary to protect the peg against speculators.

          Now notice China has been buying a lot of gold, and filling up on cheap oil as fast as they can. The agreement with Russia to pay for oil and gas with yuan/renminby presumably uses gold as the guarantee of the value of the currency used in those transactions. Notice also that the value of the dollar, against a basket of currencies, has been rising, thus making loans in dollars to China more expensive to repay, and that represents about 1 trillion in hot money transfers. Notice also Xi’s anti-corruption drive, which is creating scapegoats. Notice the mountains of debt coming due from Chinese industries that have seen remarkable price declines in their products, from real estate development, and infrastructure projects.

          My concern has been that the lockbox China keeps its dollars in has holes. Only they know, if there is less inside than most assume. Where have the dollars come from that China’s newly minted billionaires have used to stash overseas and buy expensive foreign properties? We are seeing what happens when a small nation, like Switzerland, suddenly abandons a currency peg. Will forces beyond its control prevail on China to abandon its currency peg to the dollar? What would occur if that happened suddenly, as well? They have a tiger by the tail, in that the Chinese people expect a higher standard of living, given the hard work they have done to build a facsimile of a modernized economy. What if the government can’t keep that promise?

          1. Michael

            I agree with most of your comment. I learned this new peg as the Bretton Woods 2 system. I don’t know what China will do if the peg breaks but they will lose their edge in exports to other Asian currencies they peg to the yuan.

            A for domestic Chinese politics. I think most people overlook China’s population problem especially as it relates to the East West divide or the countryside versus the coast. Right now the coast is very wealthy and the countryside is poor. If things do not get better then it may turn into rebellion. I’m way out of date on these issues but a Google search will find a lot of solid articles on this topic. I really doubt that China will be able to take on global leadership. They have a lot of massive internal problems.

            On the other hand I wish the U.S. would get rid of Brez and his disciples. The U.S. needed an alliance with Russia to maintain its peak power but that did not happen.

          2. Yves Smith Post author

            The dollar FX reserves are not real assets. You need to think of them as an economic dead weight that they relied on instead of export subsidies, which would have been illegal under WTO. They cannot spend them domestically. They are useful only if China every has to defend the RMB from falling versus the dollar.

            1. Steven

              The Nobel Prize winning chemist Frederick Soddy was no fan of “the barbaric metal” (gold). But if memory serves he believed it might make sense to use gold to settle balance of payment deficits between nations. Whatever the advantages of having an international monetary system based upon reserve currencies, it would seem that a $3 trillion price tag for maintaining the “economic dead weight” required to defend a nation’s currency against speculative attacks is a bit excessive.

              A question. It would seem this fighting for the “exorbitant privilege” of ex nihilo reserve currency creation may be a principle cause of another phenomenon with a far higher cost to the global economy – world war?

    2. sgt_doom

      The immense stupidity of US foreign policy is just mind boggling.

      Sorry, but you got so many things wrong, dood!

      First, it ain’t stupidity, but worship of the demon of greed, virtually most of the moves, if not all of the moves, are by design: resource theft, and global economic warfare.

      You have to study and understand the WTO’s Financial Services Agreement (paying especially close attention to the Fifth Protocol) to grasp the economic part of the global warfare strategy.

      Within a year of the passage of NAFTA, over 90% of Mexico’s banking system became foreign-owned.

      The principal two prongs of the strategy: to accept foreign ownership of their banks, to accept credit derivatives fraud as valid financial instruments. (And always resource theft.)

  4. Banger

    Steven, I don’t agree with you on the “waning” meme. The U.S. showed its immense power by being able to get Europe to unite against Russia and support the coup in Kiev and succeeded in controlling press coverage of the neo-Nazi domination of the Kiev coup, the facts behind MH-17 (which I have no clue about other than the actions of Ukraine and all Western gov’t seemed, at the time, to be suspicious) and the rather gruesome war between the separatists in eastern Ukraine. Why the European ruling class believed it was a good idea to support a weak and corrupt government which threatens to suck up both USD and Euros for no good reason–like Europe needs another influx of Eastern Europeans into the West and North of Europe?

    Washington dominates Europe today over a decade after massive demonstrations against the Iraq War swept through Europe–today Europeans supported the disaster in Libya (largely unreported in the West) which has become a training ground for ISIL and other private military entities which, I believe, was probably the goal because the Washington is the capital of the Empire of Chaos. How and why Europe came to support this savagery is an interesting study that I hope people here will comment on as time goes on.

    My own pet theory is that the influence of mass immigration into western and northern Europe in particular has made native populations uneasy and fearful and since the Big Daddy in the world is the USA the credulous populace yearn for a strong and authoritarian hand to sort things out for them.

    1. TedWa

      As far as US power, I think it’s more a matter of “if we don’t hang together we’re going to hang separately”. They know they’re committing crimes left and right globally and their only safe haven is among other criminal leaders with similar intent. The intent, of course, not being democratic, but control. Create discord around the world and soon the ensuing chaos will make their claims about encroaching and imminent threats much more believable to the populous. Things like the mass immigrations and the fleeing of war-torn countries. Create chaos and through the media be seen as the only salvation. That probably sounds like a winning theory to TPTB since it’s worked so well in the past.

    2. Steven

      Real national power, the kind you can use without destroying yourself along with your competitor, comes from the mastery of scientific and technological knowledge and its application to an adequate resource base – above all of energy – for the efficient creation of wealth. The examples you give are examples of the U.S. ability to get the ‘leaders’ (SIC) of other nations to sell out their 99% so 1% can hang on to its US dollar denominated debt, (er, I mean ‘wealth’). In “Global Fracture” (GF), his sequel to “Super Imperialism”, Hudson catalogued efforts of European statesmen to break free of the dollar trap and the methods the US used to defeat those efforts. It has been a while since I read GF but as I recall Hudson concluded the main reason Old Europe reconciled itself to continue throwing good money after bad was fear of the Russian Bear with its much less subtle form of imperialism. (But back then it could have been a genuine fear the ‘Communists’ in charge of the former Soviet Union actually meant what they said about expropriating the expropriators.)

      I suspect the reason the ‘leaders’ of Old Europe are now so cravenly submissive is fear of their constituents if those constituents ever discovered they have been working for the U.S. for a half-century for nothing but Wall Street’s “product”, debt. (And that would be “debt that can’t be repaid (and) won’t be”.) The same goes, of course, for U.S. workers who have been paying into Social Security believing they were accumulating wealth with which they could support themselves rather than paying for tax cuts for their 1% and Great Games their leaders play for world dominance.

      1. Steven

        If my theory is correct, it kind of gives a new meaning to that right-wing political slogan “Freedom isn’t free”, doesn’t it?

  5. Banger

    Excellent commentary particularly on Switzerland–Hudson nails it there though I believe the government there has a record of being concerned with the needs and interests of the Swiss more than other European countries or at least that’s my impression.

    As for Greece, the assumption is that Syriza will win next week and if it does if will force some changes in the rest of Europe for sure. It’s interesting that Hudson is always saying that debts that cannot be repaid will not be repaid because the principal of sovereign loans is less important than the interest and the political control that bankers and countries ruled by bankers (the USA, for example) can wield. The “West” is not interested in getting its loans repaid because the U.S. and perhaps the EU can always print more money to prop of bad loans to banks but the power that finance gives Western oligarchs has to be very seductive. If Syriza attempts to chart an independent course it has to break off from Europe, change Europe (Syriza’s official position), or ally with other countries like the BRICS–though that alliance is still rather weak and inchoate.

    1. Ned Ludd

      I had the same thought about political control. By pressuring or luring political leaders to plunge their countries into debt, creditors such as the IMF can enforce austerity and neoliberal destruction on countries, and then punish any attempts (by Syriza or another party) to escape from the yoke of the financial industry.

      The goal is indentured servitude writ large, resulting from perpetual debt.

    2. Linus Huber

      “Switzerland–Hudson nails it there though I believe the government there has a record of being concerned with the needs and interests of the Swiss more than other European countries”

      This may be the result of the political system, namely the direct democracy that allows the citizens to vote on disputable laws, the inherent will of independence and the policy of not interfering in matters of other countries.

      His accusation against Switzerland that it accommodates illegal money (Switzerland has very strict anti-laundering laws) and serves as tax haven for the rich are however completely politically motivated, especially when using the USA as an positive example in this matter.

  6. Larry

    I liked the segment, though I did want to hear from Hudson what his idea is to stop the Swiss Franc from exploding in value after losing the peg. To me, if the Swiss want to do this in a reasonable way they should institute capital controls to stop foreigners from treating their currency as a safe haven of value. It’s such a small country, it simply cannot afford to have their currency explode in value like this if it’s industries and citizens are to carry on in a reasonable way. But perhaps the Swiss banks have far too much leverage for this to ever occur. I would think that the damage caused by this inflation would cause enough popular uproar to reverse the situation though.

    1. Banger

      Popular uproar in Switzerland? Hmm….

      I’m sure the waters were tested and agreements were made before this happened–the last things the Swiss want is instability.

  7. Jim Haygood

    Hudson gives a nice cynical laugh when asked if the IMF is helping Ukraine.

    No, he says. They’re gonna wreck it, so Soros can swoop in after the crash and buy it up on the cheap.
    ‘Smash and grab.’

    An IMF team is in Kiev this month. But payout of the next aid tranche is a totally political decision which will be made at IMF HQ in Vichy D.C. Not having paid up its increased quota, the US is going to face hard slogging to pry out more aid for our new best friends the Ukies. But Joe Biden, whose son is extracting some nice rents on the board of Burisma, is happy to do another couple of billion unilaterally from you and me.

  8. financial matters

    I think Michael Hudson nails it here. Candidly getting to the heart of our current global financial and economic dysfunction.

    “The value of the Swiss franc has nothing to do with goods and services. The only thing that it’s able to produce is tax evasion and the opposite side of the world financial crime.”

    It’s a good thing to have a strong currency but even better if it is based on the public good.

    1. jrs

      Is it ever? If it’s not tax evasion, it’s military dominance, or it’s getting most of one’s wealth from fossil fuels, or it’s driving ones’ neighbors into poverty (Germany) etc. And that’s how a country becomes a rich country.

      1. financial matters

        ‘Balanced’ would probably be a better word. That is what Keynes had in mind with the bancor.

        And trying to reduce fraud as much as possible.


        December 7, 2014
        By L. Randall Wray

        “Agreed with the sentiments but we must go further. Shut them down and investigate their leadership for crimes. Indict where there is evidence. Prosecute and convict as many as possible. And then incarcerate the guilty. Breaking up Wall Street’s banks is not sufficient. They should be shut down, and a stake driven through their evil vampire blood sucking hearts. Return to small, segmented banks and mutual saving and loan associations. They promoted the capital development of the economy.”


        Keynes understood the dangers of unrestricted cross country capital flows..

        “”Dismantling capital controls is one thing. But we have taken a full step again beyond that, to a world where capital is not only free to flow across borders but is actively and artificially encouraged to flow, lured by the offshore attractions of secrecy, evasion of prudential banking regulations, tax evasion and avoidance and more. Once again, Keynes would have been horrified”” (Treasure Islands by Nicholas Shaxson)

    2. Linus Huber

      “The value of the Swiss franc has nothing to do with goods and services. The only thing that it’s able to produce is tax evasion and the opposite side of the world financial crime.”

      His accusation against Switzerland that it accommodates illegal money (Switzerland has very strict anti-laundering laws) and serves as tax haven for the rich are however completely politically motivated, especially when using the USA as an positive example in this matter.

      Switzerland has a very robust industry, e.g. Novartis, Nestle, Swatch etc. etc. incl. a large number of medium and small sized companies.

      1. Jim Haygood

        Too many Americans accept the skewed logic of Fatca, which views holding any funds outside one’s own country as ‘tax evasion.’

        American expats, who need bank accounts to manage local expenses, now find themselves unwelcome when seeking financial services overseas.

        Since the principles of personal and financial privacy were never codified in the constitution, the US government has taken this as carte blanche to monitor every penny its lab rats citizens receive, save and spend.

        1. Linus Huber

          I fully agree with you. No wonder is the US Government with its interference and intolerable and patronizing implementation of rules that force other jurisdictions to adapt more and more disliked the world over. Do not misunderstand me here, I know many Americans and I like most of them except that I have difficulty in understanding their rather uncritical stance towards their own government.

  9. zn

    Another interesting blog on Greece is at Ian’s place:
    He says Greece should heavily nationalize, run guns, & use maritime fleet to strip mine the Med or threaten to do so among other things. He think Greece will be excommunicated & EU will literally attempt to starve it into submission as an example what may happen if Spain Italy et al gets uppity.
    It is good read.

  10. Hans Suter

    Switzerland besides wealth management (stolen and not) does quite successfully other things:
    (PwC Global Top 100, 20 Global Top companies with largest absolute increase in market cap:)
    8) Roche 14) Novartis 18) Nestlé

  11. Leslie Belden

    Thank you, Yves Smith! I believed I would never love again, until you brought me Michael Hudson. I feel as though a miracle worker has made the scales drop from my eyes.

  12. LizinOregon

    A lot of good stuff here. But did he really say that Greece should put it’s own population first over foreign banks like the US would? Yes Greece should, but when did the US do that? Not in my lifetime.

  13. Bernard Jenkins

    It is always encouraging to hear/read Michael Hudson calling “bullshit” on the world’s villainous greedheads. His sharp comment that Switzerland only produces “tax evasion” these days is a memorable update on Harry Lime’s sardonic observation in the Third Man about Switzerland’s 500 years of brotherly love, democracy and peace: “What did that produce?” Lime asked Holly, the rather naive journalist, “The Cuckoo clock.”

    Keep the hits coming, Yves…

    1. John Culpepper

      They produced state of the art timepieces, the computers of their day and also modern banking. It was the Bavarians who produced the cuckoo clock and Adolf Hitler.

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