Michael Hudson: The Shape of the Venezuelan Economy, from Chavez to Maduro and Beyond

Interview conducted by The Saker with Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is J is for Junk Economics. Cross-posted from Hudson’s site.

1. Could you summarize the state of Venezuela’s economy when Chavez came to power?

Venezuela was an oil monoculture. Its export revenue was spent largely on importing food and other necessities that it could have produced at home. Its trade was largely with the United States. So despite its oil wealth, it ran up foreign debt.

From the outset, U.S. oil companies have feared that Venezuela might someday use its oil revenues to benefit its overall population instead of letting the U.S. oil industry and its local comprador aristocracy siphon off its wealth. So the oil industry – backed by U.S. diplomacy – held Venezuela hostage in two ways.
First of all, oil refineries were not built in Venezuela, but in Trinidad and in the southern U.S. Gulf Coast states. This enabled U.S. oil companies – or the U.S. Government – to leave Venezuela without a means of “going it alone” and pursuing an independent policy with its oil, as it needed to have this oil refined. It doesn’t help to have oil reserves if you are unable to get this oil refined so as to be usable.

Second, Venezuela’s central bankers were persuaded to pledge their oil reserves and all assets of the state oil sector (including Citgo) as collateral for its foreign debt. This meant that if Venezuela defaulted (or was forced into default by U.S. banks refusing to make timely payment on its foreign debt), bondholders and U.S. oil majors would be in a legal position to take possession of Venezuelan oil assets.

These pro-U.S. policies made Venezuela a typically polarized Latin American oligarchy. Despite being nominally rich in oil revenue, its wealth was concentrated in the hands of a pro-U.S. oligarchy that let its domestic development be steered by the World Bank and IMF. The indigenous population, especially its rural racial minority as well as the urban underclass, was excluded from sharing in the country’s oil wealth. The oligarchy’s arrogant refusal to share the wealth, or even to make Venezuela self-sufficient in essentials, made the election of Hugo Chavez a natural outcome.

2. Could you outline the various reforms and changes introduced by Hugo Chavez? What did he do right, and what did he do wrong?

Chavez sought to restore a mixed economy to Venezuela, using its government revenue – mainly from oil, of course – to develop infrastructure and domestic spending on health care, education, employment to raise living standards and productivity for his electoral constituency.

What he was unable to do was to clean up the embezzlement and built-in rake-off of income from the oil sector. And he was unable to stem the capital flight of the oligarchy, taking its wealth and moving it abroad – while running away themselves.

This was not “wrong”. It merely takes a long time to change an economy’s disruption – while the U.S. is using sanctions and “dirty tricks” to stop that process.

3. What are, in your opinion, the causes of the current economic crisis in Venezuela – is it primarily due to mistakes by Chavez and Maduro or is the main cause US sabotage, subversion and sanctions?

There is no way that’s Chavez and Maduro could have pursued a pro-Venezuelan policy aimed at achieving economic independence without inciting fury, subversion and sanctions from the United States. American foreign policy remains as focused on oil as it was when it invaded Iraq under Dick Cheney’s regime. U.S. policy is to treat Venezuela as an extension of the U.S. economy, running a trade surplus in oil to spend in the United States or transfer its savings to U.S. banks.

By imposing sanctions that prevent Venezuela from gaining access to its U.S. bank deposits and the assets of its state-owned Citco, the United States is making it impossible for Venezuela to pay its foreign debt. This is forcing it into default, which U.S. diplomats hope to use as an excuse to foreclose on Venezuela’s oil resources and seize its foreign assets much as Paul Singer’s hedge fund sought to do with Argentina’s foreign assets.

Just as U.S. policy under Kissinger was to make Chile’s “economy scream,” so the U.S. is following the same path against Venezuela. It is using that country as a “demonstration effect” to warn other countries not to act in their self-interest in any way that prevents their economic surplus from being siphoned off by U.S. investors.

4. What in your opinion should Maduro do next (assuming he stays in power and the USA does not overthrow him) to rescue the Venezuelan economy?

I cannot think of anything that President Maduro can do that he is not doing. At best, he can seek foreign support – and demonstrate to the world the need for an alternative international financial and economic system.

He already has begun to do this by trying to withdraw Venezuela’s gold from the Bank of England and Federal Reserve. This is turning into “asymmetrical warfare,” threatening what to de-sanctify the dollar standard in international finance. The refusal of England and the United States to grant an elected government control of its foreign assets demonstrates to the entire world that U.S. diplomats and courts alone can and will control foreign countries as an extension of U.S. nationalism.

The price of the U.S. economic attack on Venezuela is thus to fracture the global monetary system. Maduro’s defensive move is showing other countries the need to protect themselves from becoming “another Venezuela” by finding a new safe haven and paying agent for their gold, foreign exchange reserves and foreign debt financing, away from the dollar, sterling and euro areas.

The only way that Maduro can fight successfully is on the institutional level, upping the ante to move “outside the box.” His plan – and of course it is a longer-term plan – is to help catalyze a new international economic order independent of the U.S. dollar standard. It will work in the short run only if the United States believes that it can emerge from this fight as an honest financial broker, honest banking system and supporter of democratically elected regimes. The Trump administration is destroying illusion more thoroughly than any anti-imperialist critic or economic rival could do!

Over the longer run, Maduro also must develop Venezuelan agriculture, along much the same lines that the United States protected and developed its agriculture under the New Deal legislation of the 1930s – rural extension services, rural credit, seed advice, state marketing organizations for crop purchase and supply of mechanization, and the same kind of price supports that the United States has long used to subsidize domestic farm investment to increase productivity.

What about the plan to introduce a oil-based crypto currency? Will that be an effective alternative to the dying Venezuelan Bolivar?

Only a national government can issue a currency. A “crypto” currency tied to the price of oil would become a hedging vehicle, prone to manipulation and price swings by forward sellers and buyers. A national currency must be based on the ability to tax, and Venezuela’s main tax source is oil revenue, which is being blocked from the United States. So Venezuela’s position is like that of the German mark coming out of its hyperinflation of the early 1920s. The only solution involves balance-of-payments support. It looks like the only such support will come from outside the dollar sphere.

The solution to any hyperinflation must be negotiated diplomatically and be supported by other governments. My history of international trade and financial theory, Trade, Development and Foreign Debt, describes the German reparations problem and how its hyperinflation was solved by the Rentenmark.

Venezuela’s economic-rent tax would fall on oil, and luxury real estate sites, as well as monopoly prices, and on high incomes (mainly financial and monopoly income). This requires a logic to frame such tax and monetary policy. I have tried to explain how to achieve monetary and hence political independence for the past half-century. China is applying such policy most effectively. It is able to do so because it is a large and self-sufficient economy in essentials, running a large enough export surplus to pay for its food imports. Venezuela is in no such position. That is why it is looking to China for support at this time.

5. How much assistance do China, Russia and Iran provide and how much can they do to help? Do you think that these three countries together can help counter-act US sabotage, subversion and sanctions?

None of these countries have a current capacity to refine Venezuelan oil. This makes it difficult for them to take payment in Venezuelan oil. Only a long-term supply contract (paid for in advance) would be workable. And even in that case, what would China and Russia do if the United States simply grabbed their property in Venezuela, or refused to let Russia’s oil company take possession of Citco? In that case, the only response would be to seize U.S. investments in their own country as compensation.

At least China and Russia can provide an alternative bank clearing mechanism to SWIFT, so that Venezuela can bypass the U.S. financial system and keep its assets from being grabbed at will by U.S. authorities or bondholders. And of course, they can provide safe-keeping for however much of Venezuela’s gold it can get back from New York and London.

Looking ahead, therefore, China, Russia, Iran and other countries need to set up a new international court to adjudicate the coming diplomatic crisis and its financial and military consequences. Such a court – and its associated international bank as an alternative to the U.S.-controlled IMF and World Bank – needs a clear ideology to frame a set of principles of nationhood and international rights with power to implement and enforce its judgments.

This would confront U.S. financial strategists with a choice: if they continue to treat the IMF, World Bank, ITO and NATO as extensions of increasingly aggressive U.S. foreign policy, they will risk isolating the United States. Europe will have to choose whether to remain a U.S. economic and military satellite, or to throw in its lot with Eurasia.

However, Daniel Yergin reports in the Wall Street Journal (Feb. 7) that China is trying to hedge its bets by opening a back-door negotiation with Guaido’s group, apparently to get the same deal that it has negotiated with Maduro’s government. But any such deal seems unlikely to be honored in practice, given U.S. animosity toward China and Guaido’s total reliance on U.S. covert support.

6. Venezuela kept a lot of its gold in the UK and money in the USA. How could Chavez and Maduro trust these countries or did they not have another choice? Are there viable alternatives to New York and London or are they still the “only game in town” for the world’s central banks?

There was never real trust in the Bank of England or Federal Reserve, but it seemed unthinkable that they would refuse to permit an official depositor from withdrawing its own gold. The usual motto is “Trust but verify.” But the unwillingness (or inability) of the Bank of England to verify means that the formerly unthinkable has now arrived: Have these central banks sold this gold forward in the post-London Gold Pool and its successor commodity markets in their attempt to keep down the price so as to maintain the appearance of a solvent U.S. dollar standard?

Paul Craig Roberts has described how this system works. There are forward markets for currencies, stocks and bonds. The Federal Reserve can offer to buy a stock in three months at, say, 10% over the current price. Speculators will by the stock, bidding up the price, so as to take advantage of “the market’s” promise to buy the stock. So by the time three months have passed, the price will have risen. That is largely how the U.S. “Plunge Protection Team” has supported the U.S. stock market.

The system works in reverse to hold down gold prices. The central banks holding gold can get together and offer to sell gold at a low price in three months. “The market” will realize that with low-priced gold being sold, there’s no point in buying more gold and bidding its price up. So the forward-settlement market shapes today’s market.

The question is, have gold buyers (such as the Russian and Chinese government) bought so much gold that the U.S. Fed and the Bank of England have actually had to “make good” on their forward sales, and steadily depleted their gold? In this case, they would have been “living for the moment,” keeping down gold prices for as long as they could, knowing that once the world returns to the pre-1971 gold-exchange standard for intergovernmental balance-of-payments deficits, the U.S. will run out of gold and be unable to maintain its overseas military spending (not to mention its trade deficit and foreign disinvestment in the U.S. stock and bond markets). My book on Super-Imperialism explains why running out of gold forced the Vietnam War to an end. The same logic would apply today to America’s vast network of military bases throughout the world.

Refusal of England and the U.S. to pay Venezuela means that other countries means that foreign official gold reserves can be held hostage to U.S. foreign policy, and even to judgments by U.S. courts to award this gold to foreign creditors or to whoever might bring a lawsuit under U.S. law against these countries.

This hostage-taking now makes it urgent for other countries to develop a viable alternative, especially as the world de-dedollarizes and a gold-exchange standard remains the only way of constraining the military-induced balance of payments deficit of the United States or any other country mounting a military attack. A military empire is very expensive – and gold is a “peaceful” constraint on military-induced payments deficits. (I spell out the details in my Super Imperialism: The Economic Strategy of American Empire (1972), updated in German as Finanzimperium (2017).

The U.S. has overplayed its hand in destroying the foundation of the dollar-centered global financial order. That order has enabled the United States to be “the exceptional nation” able to run balance-of-payments deficits and foreign debt that it has no intention (or ability) to pay, claiming that the dollars thrown off by its foreign military spending “supply” other countries with their central bank reserves (held in the form of loans to the U.S. Treasury – Treasury bonds and bills – to finance the U.S. budget deficit and its military spending, as well as the largely military U.S. balance-of-payments deficit.

Given the fact that the EU is acting as a branch of NATO and the U.S. banking system, that alternative would have to be associated with the Shanghai Cooperation Organization, and the gold would have to be kept in Russia and/or China.

7. What can other Latin American countries such as Bolivia, Nicaragua, Cuba and, maybe, Uruguay and Mexico do to help Venezuela?

The best thing neighboring Latin American countries can do is to join in creating a vehicle to promote de-dollarization and, with it, an international institution to oversee the writedown of debts that are beyond the ability of countries to pay without imposing austerity and thereby destroying their economies.

An alternative also is needed to the World Bank that would make loans in domestic currency, above all to subsidize investment in domestic food production so as to protect the economy against foreign food-sanctions – the equivalent of a military siege to force surrender by imposing famine conditions. This World Bank for Economic Acceleration would put the development of self-reliance for its members first, instead of promoting export competition while loading borrowers down with foreign debt that would make them prone to the kind of financial blackmail that Venezuela is experiencing.

Being a Roman Catholic country, Venezuela might ask for papal support for a debt write-down and an international institution to oversee the ability to pay by debtor countries without imposing austerity, emigration, depopulation and forced privatization of the public domain.

Two international principles are needed. First, no country should be obliged to pay foreign debt in a currency (such as the dollar or its satellites) whose banking system acts to prevents payment.

Second, no country should be obliged to pay foreign debt at the price of losing its domestic autonomy as a state: the right to determine its own foreign policy, to tax and to create its own money, and to be free of having to privatize its public assets to pay foreign creditors. Any such debt is a “bad loan” reflecting the creditor’s own irresponsibility or, even worse, pernicious asset grab in a foreclosure that was the whole point of the loan.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Redlife2017

    Wow. This is top notch stuff. I really hadn’t connected the wider picture of gold buying by the Chinese / Russians with why the US/UK may not be too keen to let a country take its gold. As a bit of context for the UK, Gordon Brown decided to sell half of the UK’s gold between 1999 – 2002. The impact of that is clearly still being felt.

    1. Rajesh K

      I think Michael Hudson is not the first one to say that there’s no gold left in America/UK. Many gold “bugs” have made that observation for years. If gold were to become money again … then God help America because by then the empire has lost all remaining credibility. The thought of going to McDonalds with a barrowful of “money” is just too scary to contemplate.

        1. Rajesh K

          Gold is gold. Usury is a human thing. Our current monetary system is not based on gold and yet here we are in America. Everyone up to their eyeball in debt. Yes we can sing and do group hugs and say that we will change, but I think it’s better to be prepared than not.

          1. Bill J.

            Gold is what we say it is. Its “value” is a mere construct. The problem with founding an economy on the “value” of gold is that gold is finite and must be dug, at massive environmental cost, out of the ground. This, as the world has already learned, is no way to support a growing economy which necessitates a growing money supply.

            1. Wukchumni

              It ain’t over until the fiat lady sings, and it’s been a good run for unlimited growth potential, which led to us despoiling this good earth in ways beyond imagine.

              1. Grant

                Endless growth isn’t a feature of a fiat monetary system; it is what is needed for capitalism to function well, it is a feature of capitalism. As Herman Daly has pointed out, a no-growth, sustainable economic system is different than an economic system based on endless growth that has reached limits in throughput and pollution generation. We need radically different institutions and policies to deal with a no-growth situation, I don’t see how a commodity based money makes an ounce of logical sense in the world coming for us. Maybe I am missing something. We should factor in ecological impacts, deal with limits to markets all together. Markets and national income and product accounts don’t presently do this. I also don’t think we can realistically deal with the environmental crisis without some form of economic planning at the national level. Financialization is a given if we hold on to capitalism as we know it, since the financial part of the economy doesn’t face resource and pollution limitations, whereas there are limits in regards to the real economy in that regard. A gold standard does what in regards to private banks creating credit money? We are reaching limits to growth in throughput and pollution generation (resource consumption and pollution generation is also highly inequitable), but the gold standard led us here too.

                But, if we were to have a commodity based monetary system, and we wanted the underlying commodity to be something of actual worth, instead of a shiny metal, shouldn’t we have something like a water standard? Seems that clean, drinkable water is far more valuable to us all than gold, regardless as to what Mr. Market says. Mr. Market is missing lots of ecological and social information.

                1. Wukchumni

                  Water* is too common to make money of, although generally fungible.

                  *not always: watching the price of an acre foot of water going from around $100 to a few thousand in the 5 year drought, was quite the education

                  1. Grant

                    That was the view of classical economists like Ricardo. Water and environmental services were so abundant that we don’t really place monetary values on the “gifts of nature”. He did claim things that weren’t true. Ricardian rent, for example, was based on his claim that soil couldn’t be destroyed. It is not abundant in many parts of the world though, and will be less so in decades ahead. Many parts of the Mideast will very likely not be habitable by the end of the century. Would it make logical sense for gold to be worth more than water there? Even if it was, it would just say to me that using market information alone doesn’t make tons of logical sense. And water is essential to life, agriculture, healthy human outcomes and healthy ecosystems. I know that neoclassical economists claim that they solved what is called Adam Smith’s “diamond water paradox”, but I don’t think they did at all. I don’t think that the monetary value of water captures its actual value, since we don’t and can’t price a wide range of environmental and social factors. We certainly can’t get the value of water by a bunch of subjective valuations. Gold may have this or that market value, but if the price of gold is worth a thousand times as much as water, that doesn’t mean it is a thousand times more important for us, the environment or human civilization. You and I aren’t forced to take these things into account when we buy stuff, since this information is missing in markets, and our capacity to take non-market impacts into account is based upon our knowledge of those impacts, which is almost always limited. Like I said, if we are to address the environmental crisis, we have to deal with the limitations to markets themselves, and the realistic limits of pricing non-market impacts. Water is clearly much more valuable and fundamentally important to life, our species and ecosystems than gold. A century from now, no one will be debating that, and hopefully people are around then to debate.

                    1. Wukchumni

                      If you monetized water, the Great Lakes would soon be Great Ponds, as market forces had their way.

                    2. Grant

                      I don’t think markets are appropriate for valuing things like water at all, we need more than market information to think about how much something is actually worth. That was Otto Neurath’s and Karl William Kapp’s argument in the socialist calculation debate in the early 20th century. I also don’t see the logic of basing any currency on a commodity in the times we are in. But, if we were going to base it on a commodity with actual value; water, forests and soils that sequester carbon, why not base it on stuff like that? Far more important than gold, silver or any other single commodity like that. I realize such a thing would be hard to do, if not impossible, but I also think that expanding or contracting the monetary base because of the availability of a single commodity like gold doesn’t make logical sense. If we are going to expand the monetary base, effective demand and if we are going to expand production, the consumption of resources and if that all leads to more pollution, then gold or some commodity should play no role in that determination. We should expand or contract based upon environmental and social information. The human economy is a subsystem of the larger system, which is the environment. Seems that it is too large relative to the larger system, so I don’t think we should determine how large the subsystem is based upon a single commodity. That is a 19th and 20th century thing that doesn’t seem to make sense. Daly, again, talks about the economics of a full world versus an empty world. We are in a full world, and the gold standard is a remnant of the empty world. To me, gold is just something that has a market value and something that you can invest in and make a profit on, potentially.

                    3. drumlin woodchuckles

                      If you monetized water, would the Great Lakes become the Great Ponds? Or would people with knowledge of explosives and pipelines and such keep preventing the water of the Great Lakes from leaving the Great Lakes? Thereby nullifying this putative value of monetized water in the case of the Great Lakes?

      1. veronius

        A barrowful of money – that conjures images of the Weimar Republic before the Nazis took over.

      2. Grant

        How would a gold standard work in a world going through an environmental crisis? How does basing public expenditures on any underlying commodity make sense with the massive amounts of investments that are needed to just mitigate what is coming for us, forget the radical changes needed to at least try to avoid the worst case scenarios? I realize that countries with lots of gold might want to return to the gold standard, it doesn’t mean it would make tons of sense, or that it would prove workable in the long run. I could see it contributing to countries not investing in lots of things they should. But the US has not used the power given to it in such a way that benefits most other countries and most of the world’s people, so I wouldn’t be surprised if a massive blowback came about soon. I know I am personally sick of our foreign policy, and I haven’t even been on the receiving end of our state violence, or the policies institutions like the IMF have forced on other countries.

      3. False Solace

        Nothing you buy at McDonalds needs to be imported from overseas. The “barrowful” implying hyperinflation would only be needed if the US had a bunch of debts pledged in gold or foreign currency, which it doesn’t.

    2. Wukchumni

      The Swiss did better than the Brits @ selling, as Gordon Brown managed to off it @ the lowest price in around 25 years prior and around 1/6th of it’s current value, while the gnomes of Zurich were sellers @ around the $400 per oz marker, for they got rid of 1550 tonnes of theirs just past the turn of the century.

    3. Colonel Smithers

      Thank you, Redlife.

      The sale was communicated to the outside world, so buyers were on notice, not the smartest move, but hey that was Gordon Brown, so what can one expect.

      According to reports:

      Most of the gold ended up in China, Russia and India, but some smaller economies, e.g. Bangladesh, bought, too.

      The sale was to get some London firms out of a pickle.

      Much, if not most, of the proceeds were invested in USTs, Brown’s way of paying homage to Uncle Sam.

      It’s not just Venezuela that wants its gold home. Loony left countries Germany and Switzerland want theirs, too. De Gaulle was right to do so in the 1960s and before withdrawing France from NATO’s command structure.

      1. Colonel Smithers

        I am going to Switzerland late this month and will ask their central bank officials about the gold repatriation and if they think their gold is there.

        1. Wukchumni

          Prior to 2000, Switzerland held 2,590 tonnes of gold, making the country the world’s 4th largest official gold holders. However, between 2000 and 2005, and again between 2007 and 2008, the SNB sold off a combined 1,550 tonnes of its gold reserves

          In October 2014, the SNB revealed that it had previously stored gold at the Federal Reserve Bank of New York but that this gold had been completely sold as part of the Swiss gold sales (see below):

          “Stocks that were once The US Federal Reserve (Fed) have been sold”


          1. Colonel Smithers

            Thank you.

            Did not the SVP / UDC start a petition a couple of years ago to repatriate their gold?

            1. Wukchumni

              Haven’t been following it, to be honest.

              Here’s a story that ought to be made into a film by Hollywood, they wouldn’t have to veer much off-script.

              The gold was stored in the main vault of the Norges Bank’s headquarters in Oslo. During the increasing tension of the 1930s, plans were made to make the gold more mobile. When the Second World War broke out, these plans were accelerated and the gold was packed into 818 crates of 40 kg, 685 crates of 25 kg and 39 barrels of gold coins, weighing 80 kg each: a total of 53 tons.

              When news reached the government in the early hours of 9 April 1940 that the patrol boat Pol III had been attacked and that enemy ships were approaching Oslo, orders went out to evacuate the gold to the vault in Lillehammer. Heavies from local businesses were used to load the gold onto 26 civilian lorries. The last lorries left Oslo hours before the Wehrmacht arrived.

              The gold stayed at Lillehammer for a few days before having to move again due to the German advance. It was loaded onto a train and travelled across country away from the German advance. Meanwhile, the Norwegian government and King Haakon VII were separately evading the German advance. Fallschirmjäger attempted to reach Lillehammer in buses to capture the dignitaries and gold, but were stopped by an improvised defence at Midtskogen. Norwegian troops from Jørstadmoen, including poet Nordahl Grieg, deployed to Lillehammer to guard the train.

              The train left Lillehammer on 19 April and arrived in Åndalsnes on 20 April, where British expeditionary troops had landed a few days before. Åndalsnes was bombed several times by the Germans. The train was undamaged and was moved to Romsdalshorn station, outside Åndalsnes. The British were informed of the gold, and agreed to evacuate it to Britain and then perhaps onwards to America. The gold was to be split between three ships. The first, the British cruiser HMS Galatea departed from Åndalsnes on Thursday, 25 April, with 200 crates


              1. The Rev Kev

                And only about ten tons of gold ever made its way back to Norway. The rest was sold in America.

        2. Colonel Smithers

          Former Bank of England deputy governor Paul Tucker is consulting in India and Switzerland this month. The locals should ask him if their gold is really at Threadneedle Street.

          1. Wukchumni

            Although in this age of wolfram jack, a cursory glance at the shelves, or even a weigh-in session wouldn’t tell you what you need to know.

            Alibaba is selling 24k gold-plated tungsten ingots, coins, and what have you. As tungsten has a very similar specific gravity as gold and worth a scintilla as much, it’s the perfect host for larceny, as it’s got the right heft.

  2. Ignacio

    This is quite an interesting post (Thank you L.) but much of its discussion is well above my pay grade. During Chavez, he turned to China for financial help and Venezuela is now indebted also with China which in turn wants to secure whoever stays in power. Venezuela has been repaying chinese debt with Oil and this resulted in reduced income to import much needed goods.

    Some of what it is discussed here about gold and US public debt is at odds with what I perceive through my limited comprehension of MMT.

    Venezuelas’ dutch disease has made this country a very weak target once oil prices crashed. One of my questions is if US debt-fuelled shale oil production that helped to keep oil prices low has been stimulated as a tool for foreign intervention rather than a plan to reduce oil imports.

    It is quite interesting this view about refining capacity, that I believe to be in excess of oil products consumptiom, and has very low profitability, but given the limited geographical distribution of refineries, serves as quite a powerful tool for foreign intervention.

    Finally I am also thinking on the poor role the EU does as a simple servant of powerful interests based in the US.

    1. Micah

      I’ll take a jab (could be wrong). Currency issued by the US government is sovereign and legal tender in US territory. The demand for dollars is tied to the legal system and taxes. Foreign, sovereign, entities are not US citizens/tax payers. If the US issues and send them a bunch of t-bills they are not compelled to accept the medium as a store of value. Right now, international finance and trade are tied to US dollar and its institutions, which causes a large foreign demand for the US dollar. As Hudson notes, by holding assets hostage and barring access the US is undermining the integrity (trust/value) of its system.

    2. False Solace

      Nothing seemed at odds with MMT to me. Some of Hudson’s discussion is what happens if the US, a huge net importer, loses its reserve currency status. Losing reserve currency status would result in very different trade and financial flows than we see today. None of that is incompatible with MMT.

  3. Bob Anderson

    Trump is the bad cop to Putin’s good cop. If they succeed in getting a latin side dedollarization, it would be huge victory for the anti-american/European oligarchs. A proxy war could trigger the wick.

  4. Wukchumni

    We’re at a very interesting juncture, very much the flipside to what went on in Liaquat Ahmed’s “Lords of Finance: The Bankers Who Broke the World”, which is quite the treatise on banking in the 1920’s and the last vestiges of the gold standard.

    A fabulous read and one thing that doomed the standard, was the USA had around 80% of all physical holdings above ground, not to mention the WW1 players aside from us, had willingly bankrupted themselves in sending all that glitters to us for more armaments. Countries such as Belgium, France & Germany had issued gold coins in a myriad of denominations pre-war, and not one coin was minted for use in circulation in between the wars in all 3 countries.

    As we’ve seen in Libya with HRC’s e-mails and the dodgy UK saying ixnay on retrieving your deposits Venezuela, despite being a barbarous relic relegated to another time, it’s still worrisome, the prospect of honesty having an uprising.

    And what’s interesting in both episodes, is the amount is trivial in amount of money. The various mouse cliques could bang out that much dough re mi on a keypad no different than the one i’m typing away at, in about 10 seconds flat.

  5. ex-PFC Chuck

    Good news for people in the Minneapolis area. The Hennepin County Library, which originally rejected my suggestion that they buy a copy of Hudson’s recent book, . . and forgive them their debts: Lending, Foreclosure and Redemption from the Bronze Age to the Jubilee Year, now has one copy of the book on order.

    1. JE

      Thanks Chuck! I’ve had “Killing the Host” out from them already and will put this latest one on hold at some point too.

    2. Charlie

      A couple months ago I went to Waco library to ask them to order a copy of it. I was surprised to find it was on order and I’d be 2nd in line. I am reading it now.

  6. The Rev Kev

    Nicaragua and Cuba will certainly want to help Venezuela as the Trump regime has already announced that these two countries are next on their hit list. I tell you, this has all the hallmarks of the same level of preparations as that for the attempted Turkish coup – amateur hour stuff. The desperation on Washington’s part to have an easy win is almost palpable but is being frustrated. This could make them even more reckless and try a military solution.
    What I find of concern is how long-established norms are being pushed aside for expediency’s sake. The UK refused to give back Venezuela’s gold when demanded so now trust in the UK’s financial reliability is now in question. How fast and loose will the UK be with the rules after Brexit? Other countries will take note. Washington selects a street thug, grooms him for years and then announces that he is the new leader without any local or international legality. They come out and say that they want Venezuela’s oil which will be payment for supporting the coup – along with Venezuela’s gold.
    This template could be applied to any country in the world and now as the US has stolen, errr seized, Venezuelan assets in the US, how confident are other countries in the honesty of Washington here. Maybe that is why the Russians have almost closed out their bond holdings and the Chinese are slowly running down theirs. You just never know if Washington may just freeze it for political reasons. Same with gold stored in the US. Playing fast and loose with the rules always has consequences.

    1. Colonel Smithers

      Thank you and well said, Kev.

      With regard to Brexit, one can’t expect this sort of strategic view from UK politicians or, frankly, bureaucrats.

      With the EU27 joining the US, it was a timely reminder that, just because the UK is crashing out of the EU, it does not mean that the EU27 will become progressive. The UK was often a convenient figleaf for the scoundrels on the continent.

      1. The Rev Kev

        Thank you Colonel. It will be interesting to see what the Swiss tell you about gold reparation and their confidence in the UK. I may be wrong but from what I have read, Swiss banking officials are reputedly humourless when the subject of the safety of their banking deposits arises.

        1. Ignacio

          Your point on the rules being broken, and precisely by countries that defined those rules is quite important. This is one of the most salient symptoms indicating that worlds’ order is changing. Globalisation as we know it is dead and we are heading to tumultuous times. These changes are speeding up. Just hope that this doesn’t end in an historical tragedy.

          1. Bob Anderson

            I see the opposite. Globalization is nearing its final stage. Global plutocracy and the factions are fighting it out. With Trump with the Erasian plutocrats side

  7. Wukchumni

    The last silver Bolivar coin was issued in 1965, a year after our last silver Quarter, and the former has around $2 worth of silver in it, and the hyperinflation math since all hell broke loose in the 80’s in Venezuela is something else, complete with a couple of name changes and zeroes by the score discarded from the old version, leading up to only more of the same old financial hell.

    Let’s put it in perspective, that 1964 or earlier dated Quarter would buy you a gallon of gas then, and now. (in terms of the value of the silver, currently $2.50) It’s worth 10x as much as it’s face value.

    That silver Bolivar coin would require somewhere in the neighborhood of 800 million Bolivars now, to purchase.

  8. Judith

    Michael Hudson’s advice regarding food sovereignty seems important for any country that may find itself in the crosshairs of the U.S.:

    “An alternative also is needed to the World Bank that would make loans in domestic currency, above all to subsidize investment in domestic food production so as to protect the economy against foreign food-sanctions – the equivalent of a military siege to force surrender by imposing famine conditions. This World Bank for Economic Acceleration would put the development of self-reliance for its members first, instead of promoting export competition while loading borrowers down with foreign debt that would make them prone to the kind of financial blackmail that Venezuela is experiencing.”

    La Via Campesina is an activist organization much concerned about the issues regarding food sovereignty.


    1. Colonel Smithers

      Thank you and well said, Judith.

      The UK scrapped its agricultural tariffs in the 19th century, similar to what some Brexiteers propose now, and condemned its farmers to a generation long depression and its population to near starvation in WW1.

      1. jrkrideau

        But it was necessary. Without the repeal of the Corn Acts and the Enclosures Act it would have been impossible to drive unemployed farm labourers and various small holders into the cotton factories as wage slaves. Nor to feed them once they were in the factories.

        1. Colonel Smithers

          Thank you.

          Unfortunately, it seems that way. In conjunction with the Highland Clearances, the industrialists had a big and cheap pool of labour.

  9. chas

    As with Ignacio, I’m having a good deal of trouble reconciling Michael Hudson’s MMT with Micheal Hudson’s article above, in terms of the long-term economic strength of our country (or any other single country).

    Unless the US economy became a “closed-system,” i. e., not borrowing from (or lending to) “foreigners,” and and not having much foreign trade.

    Any help would be appreciated.

    1. Anarcissie

      A sovereign power can print all the money it likes, and to make good on it, can fall back on the use of force. At least up to a point. A community of equal powers with no overall ruler, however, cannot use force, or can do so only at the high cost of a war, so some other means of maintaining the value of its money must be employed.

      1. chas

        The first one now shall later be last, when the times a-change, and then will the debt we owe to foreign creditors be used against us as we use it against them now?

        Or do we need a financial ‘closed system,” for MMT to work. Or am I missing something?

        1. Synoia

          One needs all trade defects denominated in Currency of the Sovereign.

          As this in only possible if the country is the US or runs a trade surplus, there are few Sovereign Countries on the planet.

          Ones I can name are The US, China, Germany, Russia, South Korea, Netherlands, Taiwan, Singapore, Italy, Ireland, Quatar, Saudi Arabia, Switzerland, Norway. Belgium, Malaysia, Indonesia, Poland, Denmark, Sweden, Saudi Arabia, Angola and Nigeria.

          A significant number of these are oil exporters.

          There are probably others with trade surpluses.

          The remaining 140 or so countries are not Sovereign under this definition, and are thus Vassal states.

          Vassals of whom do you suppose (Hint The IMF and World Bank make US$ loans)?

        2. Anarcissie

          To make MMT work, you would need the Gewaltmonopol — the government’s sovereign monopoly of original force, which is what the modern state provides. Then you can simply make the money you create be worth something. Between actually sovereign states, however, either a medium of exchange must be agreed to, such as a generally-accepted commodity like gold, or maybe one party can persuade the other to take its scrip because it can convince the other they can get something for it in the future. Of course there are many cases where nominally sovereign powers are not really sovereign, for example the present semi-colonial status of Canada and the EU with respect to the United States. The system doesn’t have to be closed, but it must be subject to the power of the money creators.

  10. Susan the Other

    Sorry about this one. Is it too crazy to think it was an international effort? The EU surprised me… so I think they musta got somethin’ outa this…. like Nordstream. Russia isn’t reacting much so they must be reasonably satisfied, and not only Nordstream, but a new partnership with the Saudis. Remember that Russian oil map showing Russia, Caspian, Iran, and the Gulf/Saudis? That looked like a future oil consortium. Then there is the new and improved “Eastern Mediterranean Energy Hub” for our endless entertainment; then Obama’s pivot with his shorts in a wad toward China, supposedly, but it clearly was toward South America. The good ol’ Monroe Doctrine. I see a coordinated pattern of behavior here. So I doubt anybody is trying to bring down the dollar – it’s just that the dollar really isn’t working too well. Maybe it isn’t fit for purpose and we actually need another SWIFT. The media portrayed this coup as a “non-violent” coup. We’ll see how non-violent it can remain. And remember too, Putin was Yeltsin’s chosen understudy and successor. Whatever.

    1. Jerry B

      ====Is it too crazy to think it was an international effort?====

      Not at all. I have recently started reading some of Susan Strange’s books including States and Markets and also Retreat of the State. Her Wikipedia page does a decent job of describing her views in a very concise way but in reading States and Markets any remaining naiveté I may have had after reading NC for the last 2 years was quickly erased. Must Reads.


      1. Susan the Other

        Yes, thanks. The Wiki on Susan Strange shows she was a veritable prophet. Globalization just got out of hand so quickly, even tho’ people like SS clearly saw it coming and now we’re frazzled trying to pick up the pieces. Makes sense of the newest recommendations from political economists to quit globalizing capitalism/finance/corporations and pull back to regionalism. Even in the EU regionalism hasn’t worked because there is no sovereign coordination and fiscal authority to provide adequate social services and welfare. So big problems all around. Oil is not the problem (except that it pollutes) – politics is the problem. Which points the direction for Venezuela – please, please take better care of your people – that’s what money is for.

  11. David(1)

    First of all, oil refineries were not built in Venezuela…[which] leave[s] Venezuela without a means of “going it alone” and pursuing an independent policy with its oil, as it needed to have this oil refined. It doesn’t help to have oil reserves if you are unable to get this oil refined so as to be usable.

    Paraguaná Refinery Complex (from Wiki)

    The Paraguaná Refinery Complex was created by the fusion of Amuay Refinery (started operations in 1950), Bajo Grande Refinery (built in 1956) and Cardón Refinery (started operations in 1949)…The Paraguana Refinery Complex is still the largest refinery in the Western Hemisphere…The complex accounts for 71% of the refining capacity of Venezuela and it belongs to the state-owned company Petróleos de Venezuela (PDVSA).

    According to PDVSA, Paraguaná processed 587 thousand barrels per day (MBD). 45% of these products were for export. Overall PDVSA processed 863 MBD in all of their domestic refineries. Additionally 149 MBD were received for processing by Venezuelan refineries.

    If the US is going to strangle the Venezuelan oil industry, they’ll need a blockade and/or sabotage.

    1. Joe Well

      Thank you for posting this comment. The idea that Venezuela lacked oil refineries confused me, too. I think Hudson is referring to the decay of those refineries which is either the result of sabotage by the opposition, mismanagement by the new managers, or more likely, both. I do not know if or how sanctions affected the industry. AFAIK, Venezuela’s refineries can no longer profitably do their work because of their rising costs from this “decay” and the falling price of petroleum.

  12. Synoia

    Second, no country should be obliged to pay foreign debt at the price of losing its domestic autonomy as a state: the right to determine its own foreign policy, to tax and to create its own money, and to be free of having to privatize its public assets to pay foreign creditors.

    Its good to discover MMT adherents are pushing into sovereignty and trade imbalances.

    To the above except, yes in principle, how would this be achieved? Currently imbalances in trade are used as a weapon to negate sovereignty.

    In the US and Canada, surpluses from state or provinces are “recirculated” at the Federal level to ensure a “region in surplus” does not damage “regions in deficit.”

    One of the EU’s weaknesses is that German and Dutch surpluses are not recirculated and they are used as weapons of impoverishment, for example on Greece and Italy — but not France.

    How would such a regime work for our whole planet?

  13. Matt

    This interview is nuts. I know this will get huge hate, and maybe I’m not left enough, but forced domestic food production and talking about a return to the gold standard? That’s crazy talk.

    The US is potrayed as the evil empire and Chavez and Maduro as populist heroes. Heck, China and Russia are portrayed as the saviours of the Western Hemisphere.

    I won’t go into detail to show every instance of Hudson’s unsupported assertions; there are too many and I don’t have the time. I will not say that military intervention in Venezuela is a good idea; it’s not. Period. But that’s not Hudson’s meandering point.

    Here’s the big problem (other than the gold standard thing): Venezuela could have built its own refineries. They did not. The US did not stop them. Their oligarchic ruling class grew fat off of US consumptions and didnt give a second though to the future. Hudson is right that the corrupt ruling (conservative) class is what prompted Chavez. The US took advantage. That is not an international plot to restore the Truman doctrine.

    But to say that Chavez expanded the scope of their economy is wrong. He expanded into inefficient areas that could not be supported and increased the price of goods produced dramatically. Furthermore, Venezuela does not have the resources, including food production capability, to support itself in isolation of the internatinal economy. Venezuela had problems before. Chavez and Maduro, in a relatively short period of time, made them worse.

    Now there is an international crisis. The US is, once again, pulling strings. Will this turn out well. Maybe, but past results indicate otherwise.

    Let’s not, however, pretend that the imperialist machinations of Russia and China are the key to success here. They have a hand in making this crisis happen, too.

    And, please, let’s not support Maoist rhetoric about Venezuela’s ability to grow enough food domestically. That wont happen now, and it didnt happen during Chavez’s terms.

  14. Steven Greenberg

    (held in the form of loans to the U.S. Treasury – Treasury bonds and bills – to finance the U.S. budget deficit and its military spending, as well as the largely military U.S. balance-of-payments deficit.

    There is no closing parenthesis to the above clause which makes it hard to completely understand what Hudson is saying. I know he is a devotee of MMT, so it is hard to reconcile what he is saying with his statement about how our deficit and military spending is being financed. This would seem to almost be a contradiction with MMT. The only thing I can think of is that MMT does seem to depend on the continued acceptance of the USA dollar as a world reserve currency. If that stopped being true, there would certainly be major ramifications on the economic policy options we have.

  15. RBHoughton

    In other words the lurch to the left with Chavas in Venezuela was the natural result of allowing the moneymen to take, take, take until the people had no stake in the country left to protect. Its the usual and probably inevitable result of the influence of a merchant-led government such as America’s on the rest of the world.

    It seems possible to cow dissenters with violence. We have just seen Macron give his population a ‘whiff of gunpowder’ which might keep them quiet but resentful for a while. There is another way but the people who have usurped the governments of Europe and North America seem incapable of adopting it, presumably because of intense pressure from the banks.

  16. Bradley Neunuebel

    A number of (what appear to be) inaccuracies here. Happy to admit I am wrong on any of the below, if that is the case.

    1. By imposing sanctions that prevent Venezuela from gaining access to its U.S. bank deposits and the assets of its state-owned Citco, the United States is making it impossible for Venezuela to pay its foreign debt. This is forcing it into default, which U.S. diplomats hope to use as an excuse to foreclose on Venezuela’s oil resources and seize its foreign assets much as Paul Singer’s hedge fund sought to do with Argentina’s foreign assets.

    The foreclosure is not forcing Venezuela into default in the sense of a lack of dividends from Citgo or access to bank accounts. The country had defaulted on payments before the USA froze access to domestic accounts. In reality, Venezuela has selectively defaulted on these payments, while staying current on others (see 2020 bonds held at the Citgo Delaware holding company). The U.S. cannot necessarily foreclose on foreign assets in a similar fashion unless it holds secured debt. I am not aware of such holdings, but I could be entirely wrong here.

    2. There is no way that’s Chavez and Maduro could have pursued a pro-Venezuelan policy aimed at achieving economic independence without inciting fury, subversion and sanctions from the United States.

    Not necessarily an inaccuracy, but extremely confusing. Fine, maybe for Chavez this is the case. But ignoring the inhumane actions and corruptions perpetrated by the Maduro administration is disingenuous. Example A: I would guess Maduro appointing an individual who has repeatedly harbored drug lords and facilitated the transfer of narcotics in the U.S. as the chief restructuring officer for the country’s debt probably angered the diplomats…..right?

    3. None of these countries have a current capacity to refine Venezuelan oil. This makes it difficult for them to take payment in Venezuelan oil.

    Rosneft currently takes payment in Venezuelan oil for their debt.

    4. Looking ahead, therefore, China, Russia, Iran and other countries need to set up a new international court to adjudicate the coming diplomatic crisis and its financial and military consequences. Such a court – and its associated international bank as an alternative to the U.S.-controlled IMF and World Bank – needs a clear ideology to frame a set of principles of nationhood and international rights with power to implement and enforce its judgments.

    The World Bank sponsored court ruled that Venezuela committed fraud with respect to its dealings with Canadian mining company Crystallex. If the conspiracy is that the U.S. controls this court, then that needs a whole new article (or a book)!

    5. Second, no country should be obliged to pay foreign debt at the price of losing its domestic autonomy as a state: the right to determine its own foreign policy, to tax and to create its own money, and to be free of having to privatize its public assets to pay foreign creditors. Any such debt is a “bad loan” reflecting the creditor’s own irresponsibility or, even worse, pernicious asset grab in a foreclosure that was the whole point of the loan.

    This may be my own political views talking but, it also is contrary to fundamental tenants of international insolvency law. It is not the responsibility of creditors to assess how prudent a loan might be from the perspective of a debtor. Remember, in many cases, Venezuela issued this debt. You cannot hold creditors responsible for an arms length transaction. The author completely diminishes Venezuela’s agency here.

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