Max Blumenthal and Ben Norton With Michael Hudson: US Coronavirus “Bailout” Is a $6 Trillion Scam

Yves here. I hope those of you who are podcast fans will add Moderate Rebels to your “must listen” list. If you don’t know their show already, get acquainted with this talk with Michael Hudson.

From the Moderate Rebels podcast of April 21

Facing the Covid-19 pandemic, the US Congress rammed through the CARES Act — which economist Michael Hudson explains is not a “bailout” but a massive, $6 trillion giveaway to Wall Street, banks, large corporations, and stockholders.

Max Blumenthal and Ben Norton discuss the enormous financial scam with Hudson, who reveals how the economy actually works, with the Federal Reserve printing money so rich elites don’t lose their investments.

MICHAEL HUDSON: Just think of when, in the debates with Bernie Sanders during the spring, Biden and Klobuchar kept saying, ‘What we’re paying for Medicare-for-All will be $1 trillion over 10 years.’ Well, here the Fed can create $1.5 trillion in one week just to buy stocks.

Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it’s not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea is that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose — not for medicine, not for schools, not for personal budgets, not for full employment — but only to give to the 1 percent.

People hesitate to think that. They think, ‘It can’t possibly be this bad.’ But for those of us who have worked on Wall Street, for 60 years in my case, that’s what the numbers show.

But you don’t have the media talking about actual numbers. They talk about just words, and they use euphemisms. It’s a kind of Orwellian vocabulary, describing an inside-out world.

(Intro – 1:58)

BEN NORTON: The world is suffering right now from one of the worst economic crises in modern history. Definitely the worst crisis since the 2008 financial crash. And many economics experts are saying that we’re living through the worst recession actually since the Great Depression of 1929.

Well joining us to discuss this today, we have one of the best contemporary economists, who is really well prepared to explain what has been going on in this global recession during the coronavirus pandemic. And specifically today we’re gonna talk about the $6 trillion bailout package that the US Congress has passed.

The Trump administration is basically taking Obama’s corporate bailout on steroids, and injecting trillions of dollars into the corporate sector. And today to discuss what exactly the coronavirus bailout means, we are joined by the economist Michael Hudson.

He is the author of many books. And in the second part of this episode we’re gonna talk about his book Super Imperialism: The Economic Strategy of American Empire. So that’ll be much more in the vein of kind of traditional Moderate Rebels episodes, where we talk about imperialism, US foreign policy, and all of that.

Michael Hudson is also a former Wall Street financial analyst, so he’s very well prepared to talk about the financial thievery that goes on on Wall Street. And he is a distinguished research professor of economics at the University of Missouri, Kansas City.

So Michael, let’s just get started here. Can you respond to this global depression that we’re living through right now amid the Covid-19 pandemic? And what do you think about this new bailout that was passed?


MICHAEL HUDSON: Well the word bailout, as you just pointed out, really was used by Obama and only applies to the banks. The word coronavirus is just put in as an advertising slogan.

Banks and corporations, airlines, have a whole wish list that they had their lawyers and lobbyists prepare for just such an opportunity. And when the opportunity comes up — whether it’s 9/11 with the Patriot Act, or whether it’s today’s coronavirus — they just pasted the word coronavirus onto an act, which should be called a giveaway to the big banking sector.

Let’s talk about who’s not bailed out. Who’s not bailed out are the small business owners, the restaurants, the companies that you walk down the street in New York or other cities, and they’re all shuttered with closed signs. Their rent is accumulating, month after month.

Restaurants, gyms and stores are small-markup businesses, small-margin businesses, where, once you have no sales for maybe three months and rent accruing for three months, they’re not going to have enough money to earn the profits to pay the rents that have mounted up for the last three months.

The other people that are not being bailed out are the workers — especially the people they call the prime necessary workers, which is their euphemism for minimum-wage workers without any job security. There have been huge layoffs of minimum-wage labor, manual labor, all sorts of labor.

They’re not getting income, but their rents are accruing. And their utility bills are accruing. Their student loans are accruing. And their credit card debts are mounting up at interest and penalty rates, which are even larger than the interest rates. So all of these debts are accruing.

The real explosion is going to come in three months, when all of a sudden, this money falls due. The governor of New York has said, “Well we have a moratorium on actually evicting people for three months.” So there are restaurants and other people, individuals, wage-earners, who are going to be able to live in their apartments and not be evicted. But at the end of three months, that’s when the eviction notices are going to come. And people are going to decide, is it worth it?

Well, especially restaurants are going to decide. And they’re going to say, “There is no way that we can make the money to pay, because we haven’t had the income to pay.” They’re going to go out of business. They’re not going to be helped.

The similar type of giveaway occurred after 9/11. I had a house for 20 years in Tribeca, one block from the World Trade Center. The money was given by the government to the landlords but not to the small businesses that rented there — the Xerox shops and the other things. The landlords took all of the ostensible rent loss for themselves, and still tried to charge rent to the xerox shops, the food shops, and ended up collecting twice, and driving them out.

So you’re having the pretense of a bailout, but the bailout really is an Obama-style bailout. It goes to the banks; it goes to those companies that have drawn up wish lists by their lobbyists, such as the airlines, Boeing and the large banks.

The banks and the real estate interests are going to be the biggest gainers. They have changed the real estate law so that the real estate owners, for a generation, will be income tax free. They are allowed to charge depreciation, and have other fast write-offs to pretend that their real estate is losing value, regardless of whether it’s going up and up in value.

Donald Trump says that he loves depreciation, because he can claim that he’s losing money, and gets a tax write-off, even while his property prices go up.

So there’s a lot of small print. The devil is in the small print of the giveaway. And then President Trump has his own half-a-trillion-dollar slush fund that he says he doesn’t have to inform a Congress or be subject to any Freedom of Information law. He gets to give to his backers in the Republican States.

And states and municipalities are left broke. Imagine New York City and other states. Most states and cities, have balanced budget constitutional restrictions. That means they’re not allowed to run a deficit.

Now if these states and cities have to pay unemployment insurance, and have to pay carrying charges on the schools and public services, but are not getting the sales taxes, not getting the income taxes, from the restaurants and all the businesses that are closed, or from the workers that are laid off, they’re going to be left with a huge deficit.

Nothing is done about that. There has been no attempt to save them. So three months from now, you’re going to have broke states, broke municipalities, labor that cannot, whose savings was wiped out.

As I’m sure you’ve reported on your show, the Federal Reserve says that half of Americans do not have $400 for emergency saving. Well now they’re going to be running up thousands of dollars of rent and monthly bills.

So the disaster is about to hit. They will not be bailed out. But no major investor, really will lose. You’ve seen last week, the stock market made the largest jump since the depression — the largest jump in in 90 years. And that’s because Trump says, “The economy is the stock market, and the stock market is the One Percent.”

So from the very beginning, his point of reference for the market and for the economy is the One Percent. The 99 Percent are simply overhead. Industry is an overhead. Agriculture is an overhead. And labor is an overhead, to what really is a financialized economy that is writing the whole bailout.

It’s not a bailout — it’s a huge giveaway that makes them richer than they ever were before.


BEN NORTON: Yeah and Michael, related to that — you mentioned that fine print is important. But I also have a kind of bigger question. And I don’t really know where exactly these numbers come from.

Officially the bailout is $2 trillion. Many media outlets reported it as effectively $4 trillion. But actually, according to Larry Kudlow — who is the director of the US National Economic Council, he’s the Trump administration’s kind of chief economist — Larry Kudlow is now saying that it’s actually $6 trillion in total, which is a quarter of all of US GDP.

And that includes $4 trillion in lending power for the Federal Reserve, as well as $2 trillion in the aid package.

So there is discussion of this aid package, but actually the aid package of $2 trillion is actually half the size of the $4 trillion that is given to the Federal Reserve.

What exactly is that $4 trillion that the Federal Reserve has? Is this some kind of slush fund, or how does it work?


MICHAEL HUDSON: No, the Federal Reserve was given special powers to create 10 times as many loans or swaps as others. The Federal Reserve represents the commercial banks and commercial investors.

Now here’s the problem: a lot of companies were issuing junk bonds. They were going way down in price, especially junk bonds for the fracking industry. The Federal Reserve says, “We’re going to be backed up by the Treasury. We can just create — as you know, Modern Monetary Theory — we can just create money on a computer, and swap. So we will, say, ‘Give us your poor.’ It’s like the Statue of Liberty: ‘Give us your poor, your oppressed,’ or Aladdin’s old lamps for new: Give us your junk bonds, and we will give you a bona fide Federal Reserve deposit.”

So the Federal Reserve has been pumping trillions and trillions of dollars into the stock market. That’s what’s been pushing up the stock market, the Federal Reserve. The bailout has gone to the stock market. As if the stock market got coronavirus! Stocks don’t get coronavirus! They don’t get sick on the virus! And yet it’s the stock market that’s going up through the Federal Reserve.

There’s also another $2 trillion dollars, $2 to $4 trillion that the US government has, over and above the $2 trillion that’s going to the people. So most of the calculations that have been published cite it as a $10 trillion bailout. Of which the newspapers, to avoid embarrassing Mr. Trump, only refer to the money given to the the wage earners. And they’re sort of embarrassed that the vast majority are given to the financial sector that doesn’t need a bailout, but that doesn’t want to lose a single penny from the virus.

So when you see the stock market recovered almost to what it was before the virus, while the economy is going down, you realize, wait a minute they’re saving the 1 percent, or the 10 percent of the population that own 85 percent of the stocks and bonds. They’re saving the banks. They’re not saving the people, and they’re not saving the economy; they’re not saving industry; and they’re not saving small businesses.

So it’s an amazing hypocrisy that the mainstream press is not discussing, which is why your show is so important.


MAX BLUMENTHAL: Yeah and here in Washington, DC, we got I think $500 million from the, I guess what you accurately describe as the stock market bailout. And that’s a lot less than a number of red states that are less populous than Washington, DC got. So there’s a massive shafting here.

And then the city has only been able to provide for certain parts of the economy. Undocumented immigrants, who do a lot of work here, got nothing from the city. Vendors, which are a big part of the informal economy in DC, even though they have to be regulated, got nothing.

And then you mention all of these sectors of the economy — young people, college-educated young people who are deep in debt, and therefore less inclined to spend — are getting shafted here.

So you have called for a solution — well I guess, knowing so many of those people, they contribute so little to the economy because they can’t; they’re just putting all their money into debt. So you have called for a debt jubilee.

You say that debts that can’t be paid won’t be, and this is the best way out.

Maybe you can explain to our viewers and listeners what that is and why it would be the best remedy?


MICHAEL HUDSON: Well here’s what happens if you don’t write down the debts that are just going to accrue in the next three months: If you don’t say, “The rents will not have to be paid, and workers will not have to pay the debts that mount up,” if you leave those debts on the books, and you make the workers liable to keep paying the student debts, and the other debts, and the mortgage debts, and the rents, then they’re not going to have any money left to buy goods and services.

When it’s all over, they’re going to get their paychecks, and off the top is going to be the wage withholding, and the tax withholding, and the Medicare, and if they don’t want to get kicked out of their houses, they’re going to have to pay all of this money that’s accrued while they’re not making an income.

So you’re going to have a shrinkage of the economy, a vast shrinkage. How can they afford to buy anything but the most basic necessities, the cheapest food, the necessary transport? Obviously they’re not going to buy the kinds of goods and services that are supposed to be part of the circular flow.

Economics textbooks say employers pay the workers so the workers can have enough money to buy what they produce. But the workers don’t spend their income only on what they produce. They spend most of their income on rent, on debt service, on taxes, on finance, insurance, and real estate. And this is the only part of the economy that is being enabled to survive.

So how can you have the superstructure of rents and debts, of insurance charges, on an economy that doesn’t have the income to buy goods and services? And if they can’t buy goods and services, you’re going to have the stores closing down, because people can’t afford to buy what the stores are selling.

You’re going to have a whole wave of closures. And you’re going to go down the streets, and certainly in cities like New York, or where I live in Queens, just outside of Manhattan, where block after block, they’re going to be “For rent” signs. It’s going to be empty.

And the only way to avoid that is for a debt write-down.

Now you’ve had this occurring for 5,000 years. I’ll give you an example that may be easy to understand.

In Babylonia, we have the Laws of Hammurabi, in 1800 BC. One of the laws says that when you would buy beer or other things, they would write it on a tab in the bar, in the ale house, and all the debts were owed when the harvest was in. You’d pay the debt seasonally.

Well Hammurabi said, if there’s a drought, or if there’s a flood, then you don’t have to pay the debts. Most debts were owed to the palace, and others.

The implied policy is that, “The reason we’re doing this is, if we don’t do that, then you’re going to have these debtors become debt servants, bond servants to the creditors; they’re going to owe their labor to the creditors; they’re going to lose their land to the creditors; and they won’t be able to work on public infrastructure projects; they won’t work for Babylonia; they won’t serve in the army, and we can be invaded; and they won’t be able to use their crops as taxes, because they’ll owe the crops as debts. So we’re going to write it down.”

So the whole idea for thousands of years, of every Near Eastern ruler starting his reign by writing down the debts, was to begin everything in balance.

Because they realized, just mathematically, debts grow at compound interest. You’ve seen the coronavirus increase at an exponential rate. That’s how debts accumulate interest, at an exponential rate.

But the economy grows in an S-curve, and then it tapers off. The American economy, the GDP since the Obama bailouts of 2008, the entire growth of the GDP has only accrued to 5 percent of the population. 95 percent of the GDP. But the population for 95 percent, the industry and agriculture, that’s actually gone down.

So we’re already in a 12-year depression, the Obama depression, that they like to call a recession, because most of the media are Democratic Party people.

But you’re going to have this recession turn into a genuine depression, and it will continue until the public debt, that is state and local debts, are written down; the mortgage debts written down; and the personal debts written down, starting with the student loans, the most obviously unpayable debt.

And the choice is, do you want to depression, or do you want the banks to be able to collect all the economic surplus for themselves? Well Donald Trump, supported unanimously by the Democratic Congress, says, “We want to protect the banks, not the population, not the economy. Let the economy shrink, as long as our constituents, the donor class, are able to avoid making a loss. Let’s make the loss borne by the 99 percent, not our donor class.”


BEN NORTON: Yeah, and Michael, you mentioned something, getting back to the Federal Reserve and understanding how this whole system works. I mean frankly it seems to me to kind of be a house of cards.

But you mentioned this idea of Modern Monetary Theory and just kind of creating money out of nothing. Can you talk more about that? You know this is a term that’s become more prominent, especially on the left: MMT, modern monetary theory.

There are socialists who argue in support of MMT and then there are others who are kind of skeptical of the whole notion that you can just print all this money to fund these social programs that you want to create, and that it won’t create inflation.

But at the same time, you and other people point out that that’s exactly how the economy already works. Where for instance, you want to fund a war, there’s never — you know frequently when someone on the left asks for universal health care or free public education, members not only of the Republican Party but many neoliberal Democrats often say, “Well yeah, where are you gonna get the money from?” And the response of some of the MMT supporters is, “Well we just fund the program, and we just create the money because we control the creation of the dollar.”

And we see that same attitude used actually by the Federal Reserve right now, but to bail out Wall Street. “Yeah we’re just gonna print” — they printed $1.5 trillion, and then just gave it, they just injected it right into Wall Street.

So does that not create inflation, or what exactly is happening economically there? I mean to me, it seems like a scam; it seems like totally a scam.


MICHAEL HUDSON: Since 2008, you have had the greatest inflation of money in history. And you have also had the greatest inflation in history, but it’s entirely asset price inflation.

You’re absolutely right: the money has gone into the stock market and the bond market, to support bond prices, meaning you’ve had the biggest bond boom in history. You’ve had a huge stock market boom. But consumer prices have gone down. So here you have an enormous amount of money creation, and consumer prices and real wages have been drifting down.

So they are really two economies. The question is, are you going to create money for public purposes by spending it into the economy, on industry, agriculture, and the goods and service production and consumption economy Or, are you going to put it into the financial economy?

Well the whole way of our banking system is that banks create credit. If you go into a bank and you take out a loan, you say, I’m gonna borrow $5,000 for something. The banker doesn’t go and say, let me see if we have any money to loan you; he says, okay I will write a loan on my computer. I will credit your deposit with $5,000, and you will sign this IOU, and we have an asset. And the asset is $5000, on which we’re going to charge interest on what we pay you.

So it’s just done by computer, on a balance sheet. And as long as money is created on a computer, the only cost is the electricity used to make that debt record.

Now the banks, when they make loans, 80 percent are against real estate. So they say, in case you can’t pay, you’re pledging your real estate – the home you’re buying, or the commercial building you’re buying, as collateral. So we’ll lend you up to 80 percent, maybe 100 percent, of the value of what you’re buying, and that’s the collateral we have.

So they lend against collateral. Well, if you lend the money against collateral to buy a building, or to buy stocks and bonds, which are the other collateral, then obviously this money you’re creating to buy houses, or commercial real estate, or stocks and bonds are going to bid the price up.

Banks don’t give loans for people who say, I want to go shopping and buy more goods because I need the money. That may be a little bit, that’s what credit cards are for, but that’s a small portion of the overall money supply. So banks don’t make loans to buy goods and services; they make loans to buy assets that obviously inflate the price of assets.

And the more money that you pay for houses that are rising in price, or medical insurance, or stocks and bonds, to make a retirement income for your pension fund; the more money you pay for houses that are inflating in price because of bank credit, the less money you have to buy goods and services.

So actually, the more money they create, the more consumer prices for goods and services fall. It’s the exact opposite of the usual theory.

On my website I have many articles about that, and I have something today in Counterpunchon that. It’s on how the economy works the opposite of the way the textbook says.

Now unfortunately the left-wing doesn’t really study finance and money much. The discussion of finance and money has been monopolized by the right-wing, so left-wingers think, they don’t realize that they’re picking up a kind of junk theory of monetary relations and debt relations that’s all picked up from the right-wing of the political spectrum.

It’s a kind of parallel universe. That’s not how the economy really works, but in a way that sort of is easy to understand. And it’s very easy to make an erroneous, oversimplified view of the world easy to understand.

And when it’s repeated again and again and again, in the media, the New York Times and MSNBC, people really think that, well, maybe that’s how the world works — more money is going to push up prices, so we better not push for it, we better go along with trickle-down theory.

And most of the left believes in trickle-down theory. The Democratic Party leadership is absolutely convinced, if you just give enough money to the top 1 percent, or 5 percent, or Wall Street, it’ll all trickle down.


BEN NORTON: Well of course the Democratic Party is not the left.

MICHAEL HUDSON: That’s right, but it pretends to be. And it has crowded out the left. You can see in the recent election primaries that its job is to protect the Republican Party from any critique by the left, interjecting itself in between the Republican Party and any possible reform movement.

BEN NORTON: Exactly.


MAX BLUMENTHAL: Well they stood up really strongly against the bailout — I mean what was it, 96 to nothing? And in the voice vote, I was listening to the voice vote last night in the House; I didn’t hear AOC’s voice against it.

MICHAEL HUDSON: They did a voice so that everybody could say, “Oh it wasn’t me!”

MAX BLUMENTHAL: No, no! So you mentioned that foreclosure king Steve Mnnuchin gets like a $500 billion slush fund. I haven’t heard much discussion about that. What will he do with this sort of opaque slush fund, and how will this — I mean it’s a leading question, but how will this kind of reinforce or consolidate inequality for the next generation?


MICHAEL HUDSON: Well gee, I hope he gives some of it to Kamala Harris, who was the attorney general who let him do all of this, and who thoroughly backed him and led the foreclosure, was the iron fist behind his foreclosure program. So I’m sure he’ll press for Kamala to be the vice president on the ticket.

The Democrats have a problem. How can they guarantee that they have their candidate win? Their candidate is Donald Trump. How can they make sure that they have such a weak candidate that he’s sure to lose to Donald Trump? And the choice is, we’ll get a vice president that’s so unpopular that they’re sure to lose.

Now it’s a race between Kamala Harris and the Minnesota lady.

MAX BLUMENTHAL: Klobuchar? The one who throws staplers at her staff. She seems very charming.

MICHAEL HUDSON: Uh, I don’t know about that. But my wife can’t even look at her on television. But I think that the pretense is that she’ll help get Minnesota, as if Minnesotans, where I’m from, are so dumb just to vote for somebody from there. But by getting Minnesota, they’ll lose the whole rest of the country.

So I think she’ll be the vice president, because that guarantees a Trump victory. And that will enable the Democrats to say, here — they’ll have the president they want, that is for their donor class, but they can say, “That’s not us; that’s the Republicans.” So that’s the Democratic strategy.

MAX BLUMENTHAL: Right, then they can raise loads of money for the “Resistance,” and all of the outside think tanks. And that was the old Republican, William F. Buckley strategy, is we’re better throwing rocks outside the building and raising a ton of money for the National Review than actually having to govern. And that seems like the Democratic strategy.

But I guess I was asking about how you see the economy transforming, because the Obama bailout sort of transformed it or consolidated the gig economy, where everyone has to work three to five jobs, and what was supposed to be a highly educated middle class is deeply in debt.

Where do you see it after this next tranche of stock market bailouts?


MICHAEL HUDSON: Ok, let’s look at three months from now. Smaller companies are going to be squeezed, because all of their expenses are going to go up. Small companies have had to run up debts, and they have all sorts of other problems, and their earnings, their prospective profits, are not going to look that good. Because there’s not going to be a market for the things that they sell, because of the debt deflation that I talked about.

So what’s going to happen? You’re going to have a bonanza for private equity capital. The liquid, the 1 percent that have access to bank credit and have their own equity capital are going to come in and pick up a lot of real estate that’s going to be defaulted on — just like they did after Obama evicted his constituency, the mob with pitchforks, and evicted them.

Blackstone will pick up more real estate. Big companies are going to pick up small companies. You’re going to emerge with a highly monopolized economy, much more centralized.

The important thing to realize about free-market economics and libertarianism, is libertarians advocate central planning, The Chicago School of monetarists advocate central planning; the free marketers want central planning. But the banks are to be the planners, not the government. They want to exclude the government from planning, except to the extent that they can take over the government, as Trump has done, and plan all of the income to be transferred to themselves from the rest of the economy.

So we’re going to have a much more centrally planned by a coalition of monopolies and the government. In the 1930s, that was called fascism.

MAX BLUMENTHAL: It’s what we call a “public-private partnership” or something.


MAX BLUMENTHAL: Just really quickly, and maybe we can kind of transition after this, but you mentioned Blackstone. I think this is one of the key components of the bailout. They own so much stake in so many of the companies getting bailed out. Can you just describe their role and what they are?


MICHAEL HUDSON: It’s appropriate that they were put in charge of bailout. So if they’re the largest company buying up defaulted real estate and buying, picking up the weak — it’s called moving assets from the weak hands to the strong — then they might as well be put in charge, because they’re going to be the company doing all the grabbing. So of course they’re in charge of it.

It’s called grabitization. That was the Russian word for privatization in the 1990s. So grabitization is I think a better word than public-private partnership. It’s not really a partner; it’s sort of a one-way partnership; there’s one subsidiary partner. It’s really financialization and grabitization.

MAX BLUMENTHAL: Right, just the looting of state assets.

BEN NORTON: Going back one step here, Michael, you were talking about the way that people should think about how the economy actually works. And I mentioned MMT. Can you kind of just walk through that again? Because you were talking about how actually, when the Fed creates — I mean really to me, as someone, I’m definitely not an economics expert, I just don’t understand really how this whole process works, because to me it just seems simply like, they’re literally just creating money and just giving it to banks, and corporate elites, and rich people.

I mean maybe that’s what it is. But I don’t understand, this is like the biggest scheme I can imagine, where the Federal Reserve is creating all of this money, printing — they’re physically printing money is my understanding. And then they’re just giving it to these banks, to bondholders. And then, but you said that what does is, instead of actually creating inflation, all that does is, if I understood correctly, it boosts the value of assets like real estate, while at the same time deflating wages and commodity prices.

So if that’s the case, then how should people who are advocating for socialized programs like Medicare for All, free public education, and maternity leave, and childcare, and all of these programs that the Bernie Sanders campaign and movement have been advocating for, how should we talk about the way to pay for all of those programs, if the reality of the economy is that the Fed is printing trillions of dollars, and then just giving that cash to banks?


MICHAEL HUDSON: Well I think the reason you’re having trouble understanding MMT is because what you described is what’s happening, but you think, “But that’s unfair!” And there’s a tendency to think, if it’s unfair —

MAX BLUMENTHAL: It’s not just unfair. It’s the biggest scheme I can imagine. There’s no other word other than just a con scheme.

MICHAEL HUDSON: Yes, and the brain recoils from thinking, “Can the government really be doing that to us?” Well, yes it can.

And just think of when, in the debates with Bernie Sanders during the spring, Biden, and Klobuchar keep saying, ‘What we’re paying for Medicare-for-All will be $1 trillion over 10 years.’ Well here the Fed can create $1.5 trillion in one week just to buy stocks.

Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it’s not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose — not for medicine, not for schools, not for personal budgets, not for full employment — but only to give to the 1 percent.

People hesitate to think that. They think, ‘It can’t possibly be this bad.’ But for those of us who have worked on Wall Street, for 60 years in my case, that’s what the numbers show.

But you don’t have the media talking about actual numbers. They talk about just words, and they use euphemisms. It’s a kind of Orwellian vocabulary, describing an inside-out world that they’re talking about.

They will buy stock; they’ll say we’re going to buy a million shares of Boeing; they’ll just write a check, and the check will be from the Federal Reserve, and Boeing will get the money. The Federal Reserve can create a deposit, just like a banker will write you a loan when you go in and borrow. It’s done on a computer – without levying taxes. The Fed can do the same thing.

Stephanie Kelton, my department chairman for many years at the University of Missouri at Kansas City, describes this. The University of Missouri’s website, New Economic Perspectives has a description of it. So if people want to google either her, UMKC, or what I’ve written, or Randall Wray at the Levy Institute, you’ll get walked through.

If you’re not already thinking in terms of balance sheets, which most people don’t, you have to sort of just read it again and again, and then all of a sudden, “Ah, now I get. It’s a ripoff! It’s created out of nothing. Now I get it.”

BEN NORTON: It’s just a house of cards. To me it proves the kind — there used to be this kind of very blunt orthodox Marxist view that the economy strictly follows politics, and it seems to me this is a case where the economy is just created by politics.

MICHAEL HUDSON: That’s true, and that’s not an un-Marxist position. Marx did distinguish between oligarchies and democracies, and finance capitalist economies and industrial capitalist economies.

MAX BLUMENTHAL: Right. And the $17 billion for “urgent national security measures” was straight into the pockets of Boeing, which had its 737 maxes falling out of the sky, and had been clamoring for this bailout for a long time.

I mean you saw 3M, the maker of these masks which are suddenly unavailable, gained a total exemption from lawsuits, if the masks that it mass-produced now somehow failed.

So all of these things stuffed into the bailout were what industry and finance had been clamoring for for years. And they finally had the opportunity to do it.

(Outro – 40:38)

BEN NORTON: All right, we’re gonna take a pause there. That was the end of part one of our interview here with the economist Michael Hudson. He is a Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri Kansas City, and of course the author of many books on economics.

You can find some of his work at We will link to that in the show notes. He has interviews with transcripts and articles.

You can also find some of his economics work and the work of some of his like-minded colleagues at the economics department at the University of Missouri Kansas City website. I will link to that as well in the show notes. You can find the show notes at

In part two of this episode, we’re going to continue our discussion of the house of cards that is the international financial system, the economic system. And in the second part we’re going to talk about his book “Super Imperialism: The Economic Strategy of American Empire.”

This is an incredible book. You know here at Moderate Rebels, Max and I frequently talk about the political and military side of imperialism. Michael Hudson just spells out, in easy-to-understand terms, how imperialism works at an economic level, how the US government and the Treasury, through the backing of military force, force countries around the world to buy US bonds, Treasury bonds, and how there’s basically just a con scheme where countries pay for their own US military occupation through buying US Treasury bonds.

Michael Hudson explains that all in really simple terms. And we also talk about the rise of China, and how China does pose a so-called threat, in scare quotes, to not the American people but rather to the hegemony of the US financial system — and the main financial instruments, the weapons that the US uses to maintain that hegemony, the International Monetary Fund, the IMF, and the World Bank.

And Hudson describes how, in his terms, the IMF, and the World Bank, specifically, are some of the most evil institutions that are really maintaining the American dictatorial, authoritarian chokehold on the global financial system.

If you want to support this program, Moderate Rebels, and the kind of independent interviews we do like this, giving a platform to some of these voices who you’re never going to hear in mainstream corporate media, you can go to Please consider supporting us. And definitely join us in part. See you soon.


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  1. Disaffected

    It feels like we’re continuously going over the same old ground here. Yes, this is how it’s going down, exactly how we knew it would go down, just as it went down before in 2008. The playbook is now well established and there are no surprises anymore to anyone who’s actually paying attention. I think we’re long since past the point of merely describing the process. Everyone who’s even remotely capable or willing to understand the process gets it by now, and yet, the $6T question remains: what is to be actually done about it? And no, I’m not talking about supporting lone wolf, easily derailed, putative socialist candidates for POTUS or similarly minded “reformer” bureaucrats. What? Crickets…

    1. jef

      What is not talked about enough, certainly not loud and clear, is the fact that because we, us Americans, have ignored or worse encouraged this destructive dynamic because it is happening to “other” people and now it is being used more and more on us. First they came for the________ but I didn’t worry because I wasn’t _______.

    2. Deltron

      There’s really only one thing left to do…take it to the streets…

      “You, telling me the things you’re gonna do for me…I ain’t blind and I don’t like what I think I see.”

      If the next three months go as Michael Hudson has alluded, then Occupy Wall Street will look like child’s play. You’ll have people who were living paycheck to paycheck who no longer have jobs or healthcare, receiving eviction notices, getting squeezed by bills coming from all directions, some of which will have lost loved ones. They will have reached their tipping point.

  2. Cynthia

    I know for sure that hospitals across the country are getting a significant bailout. However, the bailout has a definite “no strings attached” aspect to it. Which may explain the rather wide variation in how hospitals have decided how to use this money.

    For instance, my hospital decided to use its bailout money to give thousands of its employees so-called “COVID” pay so that they can continue to get paid despite not working at all. Needless to say, there is indeed a very good thing about this and other similar forms of medical Keynesianism: it keeps the local unemployment rate regarding hospital workers much lower than it would otherwise be.

    OTOH, a similar nonprofit hospital just to the north of me, both in terms size and function, as well as having an equally significant reduction in patient admissions due to COVID-19, has elected NOT to use any of its bailout money to keep its employees employed. That hospital is Huntsville Hospital. It has instead decided to furlough and even lay-off many of its employees.

    As to how Huntsville Hospital is using its bailout money, I can’t say for sure. Nor can anybody else, for that matters, due to its overall lack of spending transparency, which is very common among hospitals in general, BTW. Despite that, my guess would be that Huntsville Hospital is using its bailout money to pay for capital improvements. There’s probably a good side to this as well: it keeps the local unemployment rate regarding non-hospital workers much lower than it would otherwise be. Therefore, it too can be described as medical Keynesianism, though it is a more indirect and somewhat weaker form of it since hospital workers don’t benefit from it.

  3. lyman alpha blob

    The banks and the real estate interests are going to be the biggest gainers. They have changed the real estate law so that the real estate owners, for a generation, will be income tax free. They are allowed to charge depreciation, and have other fast write-offs to pretend that their real estate is losing value, regardless of whether it’s going up and up in value.

    First I’ve heard about this and would like to know more. Obviously this will help companies like Blackstone who I’m sure are already poised to grab real estate up on the cheap just like they did in 2008. But what’s to stop me from incorporating as Lyman Alpha Blob, LLC, and claiming the depreciation on my own home against the income from my employer so I don’t have to pay taxes either? I’m guessing there’s probably something preventing the little guy from doing it, judging by the crooks that write this kind of legislation.

    I do like the explanation of the two economies – one of inflating asset prices and another of decreasing prices for goods and wages. It makes for a very useful narrative. Essentially the rich can purchase everything from both economies, by the rest of us have no hope of purchasing anything from the rich economy. I mentioned the other day that the Fed purchasing assets to make the rich whole is essentially taking their cratering assets and replacing them at 100 cents on the dollar even though they aren’t worth that much. Their old money/asset that was losing its value is replaced by some shiny new cash. If those assets had been allowed to go bust, the wealthy would have lost much of their purchasing power. The value of assets in the rich economy would go down. And at the same time the value of the wages and savings of the 99% would go up. Letting the rich go bust creates a more equitable society. And that’s why it’s not being allowed to happen. We can’t have just anybody showing up at the Hamptons in the summer.

    And if Mr. Hudson is reading, is the book mentioned near the end the sequel to And Forgive Then Their Debts? I’ve been looking forward to getting that since you mentioned it was in the works a while back.

    1. Michael Hudson

      It was published in December 2018, and Martin Wolf of the FT cited it as a book of the year. It’s available on Amazon.

  4. The Rev Kev

    From Michael Hudson’s description of the effects of the CARES Act, it sounds like that in the months to come that the American economy will be effectively hollowed out to a large degree. How can you have an economy designed around consumerism if people do not have any money to spend on nothing but essentials? Isn’t that a description of a depression? That people only spend money on food because they do not have money for anything else? Sure the banks can go in and buy up all the real estate and business when it is all over but what will they do with it? Yeah, they may want everything to be a renter economy but who will have the money to fill those empty rentals and start up new businesses?

    1. Monty

      Don’t worry, after Aktion T4.5 is over, everything will be back to normal, and the economy will be stronger than ever!

    2. John Zelnicker

      @The Rev Kev
      April 24, 2020 at 10:24 am

      In five sentences you have the TL;DR of the post. Well done!

  5. ShamanicFallout

    Michael Hudson is gold in this interview- he tears away the mask and the whole narrative of the Democratic Party: “the job (of the dems) is to protect the Republican Party from any critique from the left’! And then: “Their (again, dems) candidate is Donald Trump. How can they make sure that they have such a weak candidate that he’s sure to lose to Donald Trump?” This is about the clearest distillation I have yet heard.

    But be careful who you say these kinds of things to- could really light the hair on fire on many a true Team Blue member. Even though they definitely need to start hearing it!

  6. Donny Downer

    This would be a great time for a general strike but how are you going to round up the entire flock and point them all in the same direction ?

    1. Philip Hardy

      You don’t need a general strike, with most people broke ( even before COVID 19) the economy is going to freeze, taxes will fail, the states will fail. The problem is that the government will have no-one to negotiate with to end it, unlike a general strike. The 1%? they will just want more lucre, and more punishment for the poor. Outside them, the democratic party? They’re in thrall to the 1%, the unions, they’re in thrall to the democratic party, civil society has rotted away. When the protests come, when the riots come, the government will have only one option, violent suppression, they have no one left to talk too! Then its all bets off whether there is 1991 collapse like the USSR or the USA becomes a blatant fascist police state, it all depends on how much belief in the system the small and mid level enforcers still have. It is said that there is a lot of ruin in a nation, the USA has been rotting for a long time now. Fascism itself is not an answer, it has high costs, poor growth, and high levels of graft (much like now), but it does protect the wealthy, for a while.

  7. a different chris

    Hudson is so good generally but this is jarringly wrong. I am sure it pleases all they hysterics on this blog, though:

    The Democrats have a problem. How can they guarantee that they have their candidate win? Their candidate is Donald Trump. How can they make sure that they have such a weak candidate that he’s sure to lose to Donald Trump? And the choice is, we’ll get a vice president that’s so unpopular that they’re sure to lose.

    Ok, I’m gonna try again to make this simple. Nancy Pelosi is 80 years old. The type of person that wouldn’t retire 15 years ago, who rules the House with an iron fist, is not the type of person that is gonna want somebody in the other party as the Top Dog.

    Schumer, same thing. Pretty much everybody who puts on the suit and goes the many extra miles to become an elected representative craves power.

    I’m not saying they want to do anything with it in particular. But the very fact that somebody “wearing a different uniform” has something, they want it.

    Watch a pro football game film. Watch a guy who was smiling and holding the National Championship trophy hand in hand with some other guy go and try to take his head off once they are wearing different NFL uniforms. This is the mentality you are dealing with.

    Not some eleventy-dimensional “we’ll just collect paychecks and not care” chess. The certainly do not care about the things they should. But they do care about what “color” the Oval Office is.

    Bernie didn’t lose, he got creamed. Behold the power of the Death Star. This is gonna be a popcorn popper in October.

    But I am seeing less and less how Trump’s style works as the actual sitting president. He is an frothing mouth attacker, not a stand-up defender, and he doesn’t seem to get that by definition this November he’s the one under attack.

    1. norm de plume

      OK, I’ll bite.

      1 Who on God’s green earth, provided they are not clinically insane, would actually WANT to take power at a time like this, particularly as it’s clear that, as a wise man once said ‘this sucker could go down’…
      2 Imagine Sleepy Joe presiding over a potentially disastrous next term (whatever he does or doesn’t do) – long term damage to the Blue Team means not as many Beltway sinecures down the track
      3 Team Dem liberal sinecures are far safer with the Orange Man in charge. He is the avatar of their hatred and contempt at one level but the guarantor of their oppositional perches at another. A ‘necessary evil’, a scapegoat and a locus of a sort of extended collective Two Minutes Hate as kayfabe kabuki. He is in sense vital to them right now

      While the ‘my team’ ethos exists in spades, I would suggest it takes a back seat at a time like this to naked calculations of personal circumstance. Individuals in the team can see that they are more likely to remain a team and to retain their privileges, and their power, by continuing to pretend they are the Opposition…

  8. cnchal

    Grabitization – let that roll around in your head for a minute. It makes perfect sense.

    My question is, in three months, when millions are evicted from their homes and businesses destroyed, are people meekly going to lay down and die or are they going to grab their guns and shoot the grabitizers?

    Yeah, the FED has a bazooka, but it only shoots trillions of fluffy digitally created money — like a friendly balloonish airbag in a crash — at the billionaires. When bullets start flying at them, can they absorb lead like they have been absorbing cash?

  9. flora

    Huh. I’ve heard for years from “the very serious people” that Prof. Hudson’s recommendation of a debt jubilee (for political stability reasons) just isn’t sensible or practical. Then this:

    The idea that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose — not for medicine, not for schools, not for personal budgets, not for full employment — but only to give to the 1 percent.

    Now it turns out, “the very serious people” do believe in a debt jubilee… for themselves and the 1%. (print money, give to 1% to pay off their debts. viola: debt jubilee.) But no debt jubilee for anyone else. Probably more austerity for everyone else.

    Thanks for this post.

    1. Nakatomi Plaza

      I was struck by that as well. It wasn’t two months ago that the debate over M4A was going on, and the question of cost was such a big concern. Now that Bernie’s gone, nothing. It’s like the issue never existed and we’re suddenly morally obligated to throw giant bags of money at all our problems without any consideration for how the money is spent and who gets it.

      No wonder they were so desperate to get Bernie out of there. He should have stayed in there until the convention, but he was shamed into quitting too soon.

    2. Philip Hardy

      There is an old saying; Socialism works until they run out of other peoples money. A second part has been added; Capitalism works until they run out of others peoples money to pay the debts.

  10. Susan the other

    There are certain estimates out there about how much money, in today’s dollars, the Great Depression, WW2, and the Cold War, all added together, cost us. Our big expensive effort to make the world safe for capitalism after WW1. It obviously didn’t work because the basic ideology is dysfunctional and blablablah. But it might be altogether better to let this shakeout shake itself down. Cheaper at least. War functions as a sort of clean slate, winner take all. Depression is a clean slate with fewer winners. The Cold War was interesting because we learned to spend money as necessary and live with inflation until just recently. It could be overpopulation and/or lack of resources; it is certainly complicated by financialization; and by climate change but it is a sea change. Reality dictates that if all the money goes to the hoarders they will have to start eating it. They are definitely selfish but they are not suicidal. It looks like they really have no place to go from here with their old ideology. No matter how much money they create. The final lesson is that money is not an economy. It also is not a planet. And we all know it is not politics, politics is at best a euphemism for a collection of policies – almost all of them bad. Like a massive global bad bank.

    1. Cynthia

      “Reality dictates that if all the money goes to the hoarders they will have to start eating it.”

      Reminds me of a verbal exchange that takes place between the tough-guy cop played by Charles McGraw and the female undercover cop disguised as a slain gangster widow played by Maria Windsor in the 1952 film noir “The Narrow Margin.” McGraw sneaks into the train compartment secretly occupied by Windor, who let’s know how hunger she is.

      He tries to get food off her mind by saying to her, “Why don’t you play cards or something.”

      She responds, “I can’t, I ate the deck.”

      At any rate, it’s a true gem of a film and I highly recommend it to anyone who enjoys watching classic noirs, as well as train films. First of all, the dialogue throughout the film is jam-packed with snappy comebacks and wisecracking one liners. Secondly, it is rather unusually how the femme fatale character transforms into the goody two shoes character, and vice versa. In other words, who you think from square one is the femme fatale actually turns out to be somewhat of do-gooder, but not completely. By contrast, who you think relatively early on in the film is the goody two shoes should have really been the femme fatale, but wasn’t after all. Not at all. Last but not least, the camera work is top shelf, which is a feat in itself given its bottom-of-the-barrel budget.

  11. karen

    It was probably a slip of the tongue, but Hudson is mixing up Blackstone (private equiteer and owner of a ton of real estate formerly held by households and small business) and BlackRock (the asset management behemoth who has been put in charge of the Fed’s secured asset buying program).

    Both are extremely problematic–but different animals.

  12. worm wood

    If, as Michael Hudson has previously argued, Federal Reserve spending is largely “captured” government spending and if in addition, that particular structure of power represents “commercial banks and commercial investors” how can that crucial lever of MMT, within the State apparatus, be anything other than another channel in our present network of corruption and coercion?

    In a broader sense, isn’t a Central Bank itself, the key institution which integrated the mechanisms and dynamics of financial markets into the practice of government?

  13. Portlander

    I remember a recent debate between Krugman and Wolff about Bernie and M4A, and Krugman said he was in favor of M4A and thought the “Socialism” schtick introduced unnecessary political baggage. Arguably, any unnecessary baggage would be too much, and maybe Krugman was right, given where we are.

    Is the same true about “Debt Jubillee”? I think the key idea is the write-down of debts that can no longer be repaid. I would add, it should be done in a way that doesn’t introduce moral hazard because, guess what, after Jubilee we’ll just start racking up new debts again. I would rather we write down debts selectively, hitting those that aren’t sustainable, and keeping those that are.

    Isn’t this just bankruptcy? Why “Jubillee,” which has all kinds of moral-religious baggage of indiscriminate 50-year whoopee affecting both good and bad debts?

    Now, Mitch McConnell thinks bankruptcy is just fine for cities and States (that’s government after all). He prefers bailouts to protect all those private sector zombies–more specifically, their investors– from the debt write-offs that are necessary.

    Instead of high-fallutin’ Jubilee talk, which seems to be indiscriminate, why not just let companies go bankrupt. That’s the old fashioned way of debt write-downs, and it is selectively applied only for those that really can’t sustain the debt.

    Don’t get me wrong. I love Michael Hudson, and I love the concept of Jubillee. I love the concept of Socialism. But it just seems that the Left has an unfortunate tendency of pushing unnecessary jargon into the conversation that often creates more confusion than it’s worth, and overlooks the tried and true within existing legal frameworks.

    Private sector zombie bankruptcy now! Federal relief for State/Muni debts now!

    1. Tom Bradford

      I concur with the Jubilee concept carrying all sorts of religious baggage – the ‘trespasses’ to be forgiven in the Lord’s Prayer is in the original Greek “opheilēma/opheiletēs” which are usually translated to debts/debtors. Moreover it inevitably causes bad feelings when those who worked hard and went without in order to clear debts see the profligate get off scot free.

      Here in (lightly socialist) NZ the problem is (hopefully) avoided by money being pumped in at the bottom so that people can keep paying rents etc, and will have the cash to pump into the economy once the lockdown is lifted, and a lifeline is being thrown to small businesses to help them over the hump.

      It’s all on a public register so’s people can see where it went, and challenge it – and complaints of misuse will be pursued:

      Oh, and I find it a bit jarring when Hudson talks of the Press giving Trump a pass on this to avoid embarrassing him, while Lambert in his comment under links castigates the Press for presenting Trump’s ‘inject yourself with bleach’ comments to make him look worse than it is. Which is it?

  14. David Carl Grimes

    None of this, except for the PPP loan fiasco, is getting any traction in the MSM. If it doesn’t, then we are just basically talking among ourselves.

    1. kirk seidenbecker

      Yes. But of course it is so – narrative control and obfuscation is, apart from the legal details and its monopoly on force, the number one function of the wealth defense industry. The classical economists actually made macroeconomic issues pretty easy to understand- they differentiated between productive and unproductive capital, earned and unearned wealth. The rot has been embedded within Western academia since the gilded age. The robber barons essentially set up economics departments to create the impression that their free lunch (economic rent) doesn’t exist, best exemplified by John Bates Clark.

      Any organized pitchfork protest would do well to have a precision focus on economic departments at universities, with a correlating economic systemic alternative, buttressed by MMT of course. Getting the MSM to actually cover something like that is another issue. So, unfortunately, this great platform/voice of naked capitalism is largely just another echo chamber. In the meantime, truth helps ease the pain of hope.

      “The revolution will not be televised” – Gil Scott-Heron.

  15. Bob Hertz

    Great post, and much appreciated.

    One rather small dissent from me:

    — bailing out the stock market does protect the rich, but it also protects middle class Americans with 401(k) plans. Not an all bad move as Prof Hudson implies.

    1. Dee

      But the privatization of all Public schools, and postal, and others has also negativly impacted ALL for workers, we have fewer to no power, or recourse compared to the OWned and operated, congress, courts, media, military and police……almost total capture of what WAS BY and FOR the PEOPLE!

  16. RBHoughton

    Too many words.

    I suspect a major defect in the American Constitution is the ability of citizens to form political parties. This ensures the country cannot be directed consistently. The man or men steering the ship of state will have one group saying left, left and the other group saying right, right, nothing can be done and the country flops from disaster to disaster, only protected by a venal press misrepresenting each mistake as a triumph. The thing keeping America afloat is the ability to print money which the people allow unrestrainedly although it halves purchasing power every generation. Its not a recipe for national longevity.

  17. Sound of the Suburbs

    What would happen if the international elite got taken in by a half-baked ideology?
    Sounds like globalisation.

    Where did it all go wrong?
    Do you remember how bad it was in the 1970s?
    Oh yeah, that Keynesian, demand side economics was terrible.

    Do you remember how bad it was in the 1930s?
    No, I wasn’t even alive then.
    They couldn’t remember the problems with neoclassical, supply side economics.

    What was neoclassical, supply side economics like in the 1920s?

    Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
    “a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”

    The problem; wealth concentrates until the system collapses.

    That’s what it’s like.

    1. Sound of the Suburbs

      OK policymakers.
      You obviously don’t remember.

      Austerity does look like a good solution when you use neoclassical economics
      Someone has gone back and had a look at what happened when they used austerity in the 1930s.
      “Austerity, the History of a Dangerous Idea” Mark Blyth.

      You were lucky.
      In Japan the effects of austerity got so bad the military started to assassinate the politicians.

    2. Sound of the Suburbs

      I used to be depressed working in advertising as I was just getting people to buy things they didn’t want in the first place.
      With the neoliberal ideology I am a “creative”, and feel really positive.

      Weaning them off this thing isn’t going to be easy.

    3. Sound of the Suburbs

      The University Of Chicago should have a dig around in their archives.
      This will bring it all flooding back.

      The US free market thinkers of the 1930s wanted to use the Chicago Plan to take away the bank’s ability to create money.
      To get meaningful price signals from the markets you need to take away the ability of banks to create money.
      Henry Simons wanted free markets in every other area, but he wanted the Government to create the money supply as he had worked out the problem with free markets that had occurred in the 1920s.

      Henry Simons was a founder member of the Chicago School of Economics and he had worked out what was wrong with his beliefs in free markets in the 1930s.
      Banks can inflate asset prices with the money they create from bank loans.
      Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
      “Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of “bank-financed inflation of securities and real estate” through the leveraged creation of secondary forms of money.”
      Real estate lending was actually the biggest problem lending category leading to 1929.
      Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

      Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
      “Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.
      This 1920’s neoclassical economist that believed in free markets knew this was a stable equilibrium. He became a laughing stock, but worked out where he had gone wrong.
      Banks can inflate asset prices with the money they create from bank loans, and he knew his belief in free markets was dependent on the Chicago Plan, as he had worked out the cause of his earlier mistake.
      Margin lending had inflated the US stock market to ridiculous levels.

      The IMF re-visited the Chicago plan after 2008.
      The IMF are sniffing around in the right area, they just need to work out what the Chicago Plan was really for.

      (Chicago Plan – Named after its strongest proponent Henry Simons from the University Of Chicago, a centre of free market thinking, then and now)

      1. rob

        great points,
        In the US,
        the “new” chicago plan is embodied in “the NEED ACT”
        The green party has a platform called “greening the dollar”.
        The green party are the only ones who are seeking to actually “change” the system. The bill proposed by dennis kucinich in 2011

        the hurdle is the fact that people need to hear about and fathom what something like this could mean.
        In the text of the bill, there are details as to expectations. The future may be unknowable.. but when faced with the history of our road to fiat… privately created… we need to start really planning to abandon a failed model.
        And since the idea of public money didn’t start with the chicago plan… but had people thinking similar things since ben franklin and the founding fathers, and what lincoln did with the greenbacks, even henry george(see above) in the 19th century,,, were only some of the voices for public money, created debt free… by the government, and not private commercial banks(like today with the federal reserve.)
        I also think it interesting that some two hundred some odd economists could agree that the federal reserve were “private” banking houses… and yet today, people still are told”the federal reserve is “the government”. as opposed to commercial banks doing the business of government.

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