Michael Hudson Talks About Almost Everything with Jonathan Brown

Yves here. OK, it’s lame not to come up with a better headline for this May Michael Hudson podcast with Jonathan Brown. But it’s very long and wide-ranging and even a Daily Mail-ish headline would not do it justice. So get a cup of coffee and dig in!

Michael Hudson, Shepheard Walwyn recording May 23, 2022

Part one: https://www.youtube.com/watch?v=XDo7HykYN9k

Part two: https://www.youtube.com/watch?v=I-xWgLertkg

Jonathan Brown 00:00
Michael, welcome to the podcast.

Michael Hudson 00:02
It’s good to be here. I’m looking forward to it.

Jonathan Brown 00:04
Michael, I think you have one the most extraordinary upbringings and journeys into economics. And I just wanted to give our listeners just some sense of how you got from being the godson of Leon Trotsky all the way to what I consider to be probably the most important economist in the world today.

Michael Hudson 00:23
There’s no direct causality there that could have been anticipated. I never studied economics in college, because I went to school at the University of Chicago. We know that there were some students at the university who were at that business school. They were such strange people that we never even thought of going near them, because there was something otherworldly about them, something abstract.
My degree was in German language and history of culture, because the head of the History of Culture Department was Matthijs Jolles, a German professor and translator of von Clausewitz, On War. And in at the time, my intention was to become a musician. And I had to learn German in order to read the works of Heinrich Schenker. In music theory, my teachers were German. And for the History of Culture, most of the books that I was reading were, were all in German. And the German professors were also heads of the Comparative Literature Department and other departments. That meant that I could take all the courses cafeteria style at the university that I wanted.
I had to go to work when I graduated. I went to work for a while for direct mail advertising for the American Technical Society, a publisher a block away from the university, and then went to work for Free Press that was headed by Jerry Kaplan, a Trotskyist follower of Max Shachtman. And he wanted to send me to New York to help set up Free Press there.
Soon after I came to New York, Trotsky’s widow died. And Max Shachtman was the executor of her estate. He thought I should go into publishing by myself. And I had already had the copyrights for George Lukacs, the Hungarian Marxist and I thought tried to get funding for a publishing company with Trotsky’s works and other works. I’ve been writing a history of music and art theory. And needless to say, I didn’t get any funding because nobody was at all interested in publishing the works of Trotsky. I even tried to get Dwight Eisenhower the write the introduction to his military papers, wouldn’t work. 4
I was urged to meet Terence McCarthy, the father of a girlfriend of one of my schoolmates, Gavin MacFadyen. He was the first English-language translator of the first history of economic thought that was written: Karl Marx’s Theories of Surplus Value (Mehrwert), reviewing the value theory of classical economics. Terence said that he would help guide me in economic thinking if I’d get a PhD in economics and go to work on Wall Street to see how the world works. But I had to read all of the bibliography in Marx’s Theories of Surplus Value. So I had to begin buying the books, and ended up working as a sideline with one of the reprinters, Augustus Kelly, who was reprinting many of the classical economists. He was a socialist. There were other dealers in New York: Samuel Ambaras, Sydney Millman. I began buying all of the 19th-century classical economic books that I could, since that was the only way that I could get copies.
I took graduate classes in the evening while working at a bank for three years, the Savings Banks Trust Company. It was a commercial bank, but was acting as a central bank for the savings banks that in America finance mortgages. All their savings are reinvested in mortgages. So for three years my job was to track the real estate market, the mortgage market, interest rates, the funding of mortgages, the growth of assets by the savings banks, all growing at compound interest. All the growth in savings in the New York savings banks in the early 1960s was simply the accrual of dividends. So you’d have a step function at dividend time every quarter, going up exponentially. There was hardly any new savings inflow. It’s as if you’ve just left a given amount of savings in 1945, and let the amount rise exponentially. All this increase in savings was recycled into the real estate market.
The New York banks wanted to extend their market so they couldn’t just keep bidding up New York housing prices. They won the right to lend out of state, especially the Florida. So my job was basically seeing that real estate prices were whatever a bank would lend. At that time, banks would not lend you a mortgage if the debt service exceeded 25% of your income. And you had to put up usually 30% of the purchase price as a down payment, but possibly 10%. So housing was affordable. You could buy a really nice house for you know, $20 or $30,000. Now, it costs $400,000 to buy just a one room apartment in a condominium.
I bought a house for $1 down – it was $45,000 total. I took out a mortgage from Chase for half the price, and the other half was a purchase-money mortgage. So it was easy. Anybody coul get a house in New York at that time. Housing was readily affordable.
After I finished my PhD courses, I changed jobs. My real interest at the time was international finance and the balance of payments. So I went to work at Chase Manhattan as their balance of payments economist. This was at a time when the balance of payments and even balance-sheet analysis was not taught in schools. It was very specialised. I realised that what I was taught, especially in monetary theory, had nothing at all to do with what I was learning in practice.

Money creation and debt deflation
In monetary theory, for instance, that was the era of Milton Friedman in the 60s and 70s. He thought that when you create more money, it increases consumer prices. Well, I thought that obviously was not how things worked. When banks create money, they don’t lend for people for spending. About 80% of bank loans in America, as in England, are mortgage loans. They lend against property already in place. They also lend for corporate mergers and acquisitions, and by the 1980s for corporate takeovers.
The effect of this lending is to increase asset prices, not consumer prices. You could say that money creation actually lowers consumer prices, because 80% is to increase housing prices. Banks seek to increase their loan market by lending more and more against every kind of real estate, whether it’s residential or commercial property. They keep increasing the proportion of debt to overall real estate price. So by 2008 you could buy property with no money down at all, and take 100% mortgage, sometimes even 102 or 103% so that you would have enough money to pay the closing fees.
The government did not limit the amount of money that a bank could lend against income. The proportion of income devoted to mortgage service that was federally guaranteed increased to 43%. Well, that’s a lot more than 25%. That’s 18% of personal income more in 2008 than in the 1960s – simply to pay mortgage interest in order to get a house. So I realised that this was deflationary. The more money you have to spend on mortgage interest to buy a house as land and real estate is financialized, the less you have left to spend on goods and services. This was one of the big problems that was slowing the economy down.
Well, it was obvious to me that rent was being paid out as interest. Rent is for paying interest. If I talked with various developers about buying buildings, they said, “Well, we try to buy our buildings without any money at all. The banks will lend us the money to buy a building, and they calculate how much is your rental income going to be? That rental income will carry how much of a bank loan at a given interest charge, and lend the money to buy it.” That is how real estate rent was financialized.

Democratization of real estate on credit means turns rental income into interest, not taxes
This meant that the role that had been played in the 19th century by landlords is now played by banks. In the 19th century, the problem was absentee landlords, the heirs of the warlords who conquered England or other European countries in the Middle Ages. You had hereditary rent. Well, now our rent has been democratised. But it’s been democratised on credit, because obviously, the only way that a wage earner can afford to buy is is on credit. For an investor you can buy whole buildings on credit.
Finance has transformed real estate into a financial vehicle. So that that’s what rent is for paying interest means. There’s a symbiotic sector, Finance, Insurance and Real Estate – the FIRE sector. It’s the key to today’s financialised economy. Most real estate tax in America is at the local level, because after the income tax was introduced, commercial real estate was made tax exempt by the pretence that buildings depreciate in value, as if they don’t in fact rise in price. The pretence is that they wear out, even though landlords normally pay about 10% of the rental income for repairs and upgrades to keep the building from wearing out.
Today in New York, and I’m sure in London too, the older a building is, the better it’s built. Real-estate developers have crapified building codes so that the newer the building, the more shoddily it’s built. They call shoddy buildings “luxury” real estate, meaning is built with really not very thick walls. I think the junkiest building in New York is Trump Tower, which is sort of the model of shadiness which they call luxury. It’s very high-priced.

The academic economics curriculum finds unproductive credit to embarrassing to acknowledge
While I saw the importance of finance and real estate, none of that was discussed in the university’s economics courses at all. The pretence is that money is created by banks lending to investors who build factories and employ labour to produce more. All credit is assumed to be productive, and taken on to finance productive investment in the form of tangible capital formation. Well, that that was the hope in the 19th century, and actually was the reality in Germany and in Central Europe, where you had banking becoming industrialised. But after World War I, you had a snap back to the Anglo-Dutch-American kind of banking, which was really just the Merchant banking. It was bank lending against assets already in place.

Classical economics as a reform program to free economies from economic rent and rentier income
I realised that the statistics that I worked on showed the opposite of what I was taught. I had to go through the motions of the PhD orals. and avoided conflict by writing my dissertation on the history of economic thought, because anything that I would have written about the modern economy would have driven the professors nutty. Needless to say, none of the academic professors I had ever actually worked in the real world. It was all very theoretical. So that basically how I came to realise that the 19th century fight for 100 years – we can call it the long 19th century, from the French Revolution, up to World War I, and from the French Physiocrats, to Adam Smith, Ricardo and Malthus, John Stuart Mill, Marx, Simon Patton and Thorstein Veblen – was the value and price theory of classical economics to quantify economic rent as unearned income.
The purpose of value and price theory was to define the excess of market price over actual cost value. The difference was economic rent. The essence of classical economics was a reform campaign – that of industrial capitalism. It was a radical campaign, because the basic cost-cutting dynamic of industrial capitalism was radical. It realised that in order to make Britain, France or Germany, or any country competitive with others, you had to get rid of the landlord class and its demands for economic rent. You also had to get rid of monopolies and their economic rent. You had to get rid of all payments of income that were not necessary for production to take place. The aim was to bring prices in line with the actual cost value of production, to free economies from this rake-off to unproductive investment, unproductive labour and economic rent – land rent, monopoly rent and financial interest charges. Those were the three basic categories of rent on which classical political economy focused.
To translate classical rent theory into practice, you needed a political reform, You had to get rid of the landlord class’s political power to block reform. It wasn’t enough simply to say that economic rent was not a necessary cost of production, not part of real value. The landlord class would simply say, “Well, what are you going to do about it?”
The proponents of industrial capitalism saw that the constitution of England, France and America required giving governments the power to pass laws to free economies from economic rent. in order to do that, they needed democratic reform of the political system. In England they needed to empower the House of Commons over the House of Lords. That effort led to a constitutional crisis in 1909 and 1910, when the House of Commons, Parliament, passed a land tax. That was rejected, as I’m sure you know, by the House of Lords. The crisis was resolved by saying the Lords could never again reject a Revenue Act passed by the House of Commons. That political reform was part and parcel with classi9cal economic theory defining rent as an unnecessary cost of production.
But where did this leave the interests of labor – the majority of the population? As a broad social reform, classical economics began to falter by 1848. You had revolutions in almost every European country. These revolutions were not fully democratic in the sense of they weren’t really for wage labour, which was the bulk of society. They were bourgeois revolutions, including land reform. They were all for getting rid of the landed aristocracy and the special privileges that the aristocracy held. But they were not very interested in helping consumers, and labour’s working conditions, shortening the workweek, shortening the workday and promoting safety. There was nothing really about public health, or public social infrastructure spending. So things began to falter by 1848.
But they still made progress through the balance of the 19th century. By the time World War I broke out in 1914, it looked like the world was moving towards socialism. Almost everybody in the 19th century, across the political spectrum, whatever you were advocating was called socialism.

Socialism and strong government as the program of post-rentier industrial capitalism
At the broadest level, socialism meant collecting economic rent and getting rid of the landlords and the aristocracy, either by taxing away rent or nationalizing land and natural monopolies, in hope that that by itself would create a viable industrial economy. you had libertarian socialism, Marxist socialism, anarchist socialism, industrial socialism and Christian socialism. Almost every reformer wanted that as a label. The question is, what kind of socialism were are you going to have?
That was what the aftermath of World War I was fought about. The fight was largely shaped by the Russian Revolution, which unfortunately went tragically wrong under Stalin and gave socialism and communism a bad name. But it still had a good name in England after World War II. And also in America in the 1930s, as a result of Franklin Roosevelt’s New Deal that saved capitalism by investing in public infrastructure.
I can give you an example of where pro-capitalist theory was in the 1890s. In the United States. The industrial interests in America faced a problem once the Civil War ended in 1865. They wanted to create an industrial society – ideally, a fair society with rising living standards. How do you do that without training people to administer such an economy? You need to train people in a university. You have to teach them how economies worked. But the main universities in America were religious colleges, founded to train the clergy. Yale, Harvard, Princeton and most taught British free-trade theory, which trivialized economic theory.
So the business interests and the government saw the need to teach reality-based economics. They saw that there was little hope in trying to reform the existing universities. Their economics departments – called moral philosophy – were unreformable. So it was necessary to create new universities. All through America, each state was given a land grant to enable it to create a new university and teach reality economics. They also would teach economic history and how the world actually works. Most of all, they would teach protectionist trade theory and how to create a society and economy that is more efficient than other economies?
Well, the first business school in America was the Wharton School at the University of Pennsylvania. Its first economics professor was Simon Patton, a protectionist. And he explained that if you’re going to make industrial products at prices that outcompete those of England, you need public infrastructure spending. You need as much of the cost of living as possible to not to be paid by the employers to factor into the price of their products, but to be paid by the government.
Patten cited public roads and canals to lower the cost of doing business. He also noted that every time you build a road or railroad, you’re going to raise the land value along these routes – and lower land prices for areas replaced by the now-more-accessible producers. You can simply self-finance the cost of these by taxing the rent. You also need public education, and that should be free so that you don’t have like today, to earn enough money to pay an enormous student debt – and receive a high salary to afford to pay that. If the government would provide free education, you wouldn’t have to pay workers enough to pay this student debt, so they wouldn’t need such high wages simply to break even.
Today 18% of America’s national income is from medical insurance. If you have a public health system and socialized medicine, as England had after World War II and as Bernie Sanders advocates today, then you wouldn’t have to pay workers a high enough salary to afford this enormous medical expense. England realised this already in the 1870s and ‘80s, when Benjamin Disraeli campaigned as a conservative for health.
So the movement towards public infrastructure towards government spending was led by the industrialists. It was they themselves who wanted strong government. The common denominator of politics from Adam Smith through all of the 19th century was to free economies from the unnecessary economic rent, to free them from unearned income, from the free lunch. To do that, you have to have a government strong enough to take on the vested interests – first the landlord class in the House of Lords, and then the financial class behind it.

Jonathan Brown 26:00
Well, just to clarify that, Michael, I think what you’re, what you’re saying is, I know in some of your writing you talk about the view of government or the public sector was it was a fourth means of production. So you got land, labour, capital and the public sector.

Michael Hudson 26:16
That was the term that Simon Patten used. Government infrastructure is a fourth means of production. But what makes it different from profits and wages is that if you’re a wage earner, you want to make as high a wage as possible. If you’re a capitalist, you want to make as high a profit as possible. But the job of public investment is not to make an income, not to do what was done under Thatcher and Tony Blair, not to treat public utilities, education and health as profit making opportunities. Instead, Patten said, you should measure their productivity by how much they lower the cost of doing business and the cost of living for the economy at large.

Jonathan Brown 27:03
And what that allows a country to do, so if you’re good at it, is to get together and ask how to educate our people, lower the cost of transportation so we’ve got we’ve got a mobile workforce, all those things. We can then start to compete against other nations who are ahead of us, who may have more expensive means of production, and we can maintain that advantage. We’re not stuck in a lower level of the economy where we’re basically working for someone else. We’re able to develop ourselves as a nation. And I guess the benefit of us doing it collectively is that we can minimise the cost, then use a natural monopoly power in government hands to provide efficient services across the board. Is that right?

Michael Hudson 27:46
Yes, but they went further. Protectionists in America said the way to minimise costs – and it may seem an oxymoron to you – the way you minimise costs is to have high-wage labour. You raise the wages of labour, or more specifically, you want to raise the living standards, because highly paid labour, highly educated labour, well fed labour, well rested labour is more productive than pauper labour. So they said explicitly, America’s going to be a high wage economy. We’re not like Europe. Our higher wages are going to provide high enough living standards to provide high labour productivity. And our higher labour productivity, shorter working day, better working conditions, healthy working conditions, public health, well educated labor will undersell that of countries that don’t have an active public sector.

Jonathan Brown 28:45
and Henry Ford being the poster boy for that approach, of doubling his employees’ salaries and so on.

Michael Hudson 28:53

Jonathan Brown 28:54

The fight against classical economics and its concept of rent as unearned income
Michael Hudson 28:55
Needless to say, the fight for the kind of democracy that will free economies from economic rent was not easy. By the late 1880s, and especially the 1890s, you had the rentiers fighting back. In America the fight was led by John Bates Clark. There was a movement, which today is called neoliberalism, to deny the entire thrust of classical economics. Clarke said that there is no such thing is unearned income. That meant that economic rent does not exist. Whatever a businessman makes, he is said to earn. Whatever a landlord makes, he earns – so there was no unearned income.
This came to a head around 1890 the Journal of Ethics. Clark wrote the first essay, and it was refuted by Simon Patton. There was a fight against the concept of economic rent by academic economics, especially in New York City at Columbia University, where Clark ended up, This is really the dividing line: You recognise that much of the economy is unearned income and you want to get rid of it. To do that, you have to pass laws that will tax away the unearned income, or better yet, you put land and other natural resources and natural monopolies in the public domain where the public sector directly sets prices. That was what Teddy Roosevelt did with his trust busting.

Jonathan Brown 31:13
Michael, I just want to say reading your work is something of a revelation. I’ve got a degree in economics for what it’s worth. And I would say the only valuable thing that I found from a getting a degree in economics is that I know, resolutely when an economist is talking bullshit. How do you know that? It’s when his lips move.

Michael Hudson 31:32
If it’s an economist, they’re talking bullshit – let me make it easy, right!

Jonathan Brown 31:36
And then the thing is, that reading your work, for example, going back to Thorstein Veblen, his work, which only made it into the mainstream when I was getting a degree in the 90s, was conspicuous consumption. It had nothing to do with absentee landlords or, and the profound importance of that, and then I’m looking in J is for Junk Economics, and you talk about the free lunch, and how Milton Friedman said that there’s no such thing as a free lunch. When you look at your work, you prove that actually there is, and that he’s having it! And you say, “Most business ventures seek such free lunches not entailing actual work or real production costs, and to deter public regulation or higher taxation of rent-seeking recipients of free lunches. They have embraced Milton Friedman’s claim that there’s no such thing as a free lunch”.
And you talk about: “Even more aggressively rent extractors accused governments of taxing their income to subsidise freeloaders, pinning the label of free lunches on public welfare recipients, job programmes, beneficiaries of higher minimum wage, when the actual antidote to free lunches is to make governments strong enough to tax economic rent, and keep the potential rent extracting opportunities and natural monopolies in the public domain.”

Michael Hudson 32:51
Veblen was indeed was the last great classical economist. He coined the term neoclassical economics. I think that’s an unfortunate term. When I went to school in my 20s, I thought neoclassical meant Oh, it’s a new version of classical economics. It’s not that at all. What Veblen meant was there used to be the old classical economics of Adam Smith, John Stuart Mill and Marx, all about economic rent and exploitation. “Neo” means there’s a new body of completely different, post-classical economics aiming to make classical economics obsolete. That is the new mainstream economics of today, trying to make itself “classical.” So Veblen he should have used the terms post-classical or anti-classical economics.

Jonathan Brown 33:44
Or even pseudo classical?

Michael Hudson 33:49
It’s antithetical, because the root of classical value and price theory was to isolate and define economic rents statistically. To deny economic rent is to deny the whole point of classical value and price theory. That is where economics became untracked.
Unfortunately, it became untracked largely by Henry George, who rejected classical economics and very quickly followed J.B. Clark and accepted his mushy value and price theory. Removing all elements the cost of production from value theory, analysing prices simply in terms of consumer demand and what people want, and not analysing what determines land and other asset prices, loses focus.
George became very popular as a journalist. He wrote wonderful journalism to expose the railroads in California as landlords, and he wrote a wonderful book on the Irish land question. But when he tried to talk about the whole economy, he didn’t want any competition. He said, in effect, “Economics begins and ends with me. Forget everything, Adam Smith and classical economics.” He’s sort of an early Margaret Thatcher. There’s no such thing as society or the economy. Only “tax the landlords.”

Jonathan Brown 35:35
What are you doing? You’re destroying my view of Henry George! He’s an early Margaret Thatcher? How, how could that possibly be?

Michael Hudson 35:47
Well, in two ways. The first way is that in the 19th century, in order to tax the land rent, you had to take on the most powerful vested interests of all: the real estate interests and the financial interests. But Henry George was a libertarian. He was for small government. He broke with the socialists, because he warned that socialism had a potential for authoritarianism. Well, we know that he was right in that warning, because we saw what happened in Stalinist Russia. But obviously, what you want is a government that is strong and democratic, and with enough authority to tax and regulate the vested interests. (That term is Veblen’s, by the way.) That was the ideal in America, but it needed a strong enough government so that Teddy Roosevelt could come in and be able to bust the trusts. The government was strong enough in 1913-14 to impose an American income tax that fell just on 1% of the population, almost entirely on economic rent, on land rent, mineral rent on monopoly rent of the big corporations. If you’re a libertarian, your government is too small to take on these vested interests. And you’ll never win. You’ll end up like the Social Democrats or like today’s Labour Party under Mr. Starmer, not able to be very efficient. So that was George’s first problem.
The second problem was when he said that all you have to do is tax the land and everything else will take care of itself. Well, as you know, he was nominated as a celebrity candidate by the socialist and labour groups in New York City in 1876 to run for mayor. They gave him their programme – safe housing, workers housing, safe working conditions, food laws that protect people from poison, like you don’t want to use chromium for cake frosting to make it yellow.
Well, George threw out the whole labour programme and said that there’s only one thing that mattered: If you tax the land rent, the cakes will take care of themselves, worker safety conditions will take care of themselves. You don’t need socialism; just tax land rent. Well, the word “panacea” came into popular use in the English language at that time, because George didn’t see the economy as a whole. That was a tragedy. He was great as a journalist describing rent and the machinations of the railroads. But once he tried to talk about the economy, without really describing how it worked as a system, saying there really isn’t any economic system, it’s just about land rent. That separated him from the other reformers.
By the 1890s you had many of reformers in America, who had been inspired by George’s journalism in the in the 70s and early 80s, including attacks on the oil monopoly and the Rockefellers. They asked what happened to George? Well, he became a sectarian. He formed his own party and said, we’re only going to talk about land rent. This diverted attention away from how the overall economy works. And if you don’t understand how the economy is all about providing a free lunch in one way or another, not only to landlords but to the financial sector primarily, then you’re really not going to address the interests of most of the population.
So his sectarian party shrank. Still, in the first decade of the 20th century you had followers of Henry George and socialists going around the country debating each other. They great debates, they spelled out the whole problem. I wanted to reprint all these debates somewhere, what both the socialists and the Georgists said: “One thing we can agree on is that society is going to get go either your way or our way. We’re talking about how is the future of the political system and the economic relations and taxes that follow from this system. How are they going to evolve?”
The socialists focused on labour’s working conditions, because these were getting worse and worse. In America the fight for labour unionisation got quite violent, and corrupt. The abuse of consumers, the growth of monopolies, all these were growing problems. The socialists focused on these problems – and decided to leave the discussion of rent to followers of George. I think that was very unfortunate, because George had pried the discussion of economic rent away from the classical value theory and its political dimension, which was socialist.
I find little interest in today’s socialist movement or the socialist movement 50 years ago about land rent. They are more concerned about international issues, about war, about almost everything except land rent. And today I find the greatest interest in rent theory as a guide to a tax system in the context of an overall economic system to be in China. So that’s really where the debate over how to keep the price of housing down by keeping the financial sector from trying to capitalise the land renl into a bank loan.
That’s a big fight in China today. It should have been also in Russia. Fred Harrison, in the early 1990s, brought a group of people including me over to Russia. We made two trips to the Duma and did everything we could to explain that Russia could have a great advantage to rebuild its industry into a productive economy. The first thing that it should have done was to keep housing prices down. It could have given everybody their houses, free and clear, without any debt. Of course, some places would be more valuable than others, but Russia would have had the lowest-priced economy in the world. In America, the rent can take up to 43% of a home buyer’s income.
Well, there was pushback from the Russians. They had no rent in a socialist economy. Ted Gwartney, an American real estate appraiser, walked down the streets of St. Petersburg with the local mayor, I think on a fall or winter days. He pointed out that one side of the street was very sunny. The other street was in the shade. That’s how the sun is in the northern latitudes in the winter. Most people were walking on the sunny side of the street. That means that if you’re going to have a store, whether it’s a bakery, a food store or a restaurant, the store on the sunny side of the street is going to be able to attract more customers. Their site has more economic rent than the dark side of the street. Same thing with buildings near a subway. They will be worth more than sites far away from transportation.
The mayor said understood the point, and asked how to actually make a land value tax so to collect this rent? Ted explained that St. Petersburg’s layout was much like that of Boston, where a land map was easy to make. It showed that there was a peak centre of values near the subway, with rents tapering off further away. He suggested to apply Boston as a scale model to St. Petersburg. Just plug in a few prices, and you have a land-valuation map.
Russia could have been a low-cost economy. It could have kept the oil and gas, Yukos, GazProm, nickel and platinum resources all in the public domain to funance investment in reindustrialization to become independent of the West. But as we all know, Ted and the people that Fred Harrison bought were completely overwhelmed by the billions of dollars that U.S. diplomats spent on promoting kleptocracy and shock therapy in Russia. Its officials and insiders worked for themselves, not Russia.
And it wasn’t only Russia that missed opportunities. I brought Ted Gwartney and his mathematical model-maker to Latvia, where I was Economic Research Director of the Riga Graduate School of Law. I was asked by the leading political party of Latvia, the Centre Party – basically the party of Russian speakers, with 1/3 of the population and votes – to draw up a model for how Latvia could restructure its post-Soviet economy and industry. Ted met with the tax authorities and housing authorities and explained how to use land rent as the tax base. They were amazed and said, “This is great. We can hire a separate appraiser for every single building. This will create a lot of employment”. No he said. He had been the appraiser for Greenwich, Connecticut, the state’s wealthiest city. He said, “We can do a whole city and about one week.” They couldn’t believe this in Latvia.
Around the time of his visit there was a meeting in Boston of the Eastern Economics Association. It was largely created by John Kenneth Galbraith to go off the economic mainstream. I think the Schalkenbach Foundation had a session on political critics of Henry George, so there were a lot of Georgists. Other people who came to the Eastern Economic Association meeting were socialists, including Alan Freeman who was the assistant to Ken Livingston, the Mayor of London. When everybody was having lunch after the economic meetings, I brought Alan over to sit down with Ted Gwartney. Ted explained what he did, and Alan said, “Oh, I’ve never heard of this! I’ve got to come and meet you some more.’ So he came to New York and we went up to visit Ted in Connecticut. He explained how to make a land value map. Alan said, “You should win the Nobel Prize for this! This is amazing! There’s nothing like this in England”
Ted explained that there are about 20,000 appraisers in America that do what he did. There are abundant statistics. Every city has a map of land and building appraisals: here’s the value of the building, here’s the value of the land. So smoothing out a land value map is pretty easy to do. Alan could hardly believe it.
Well, I went back to London shortly and met with Alan. It turned out that political pressures in England, especially from the Labour Party, led London to hire Weatheralls, a real estate company, do appraisals. So we never got to do our version of a real estate appraisal of London to calculate land rent.
But this is what all of the theories of the Physiocrats, Adam Smith, Ricardo, John Stuart Mill, Marx, Veblen, Alfred Marshall, all of them were focusing on. Yet this idea is so alien that from London to St. Petersburg, they don’t have any idea of how the simple concept can be done. The economics profession is in denial. It’s followed the idea that there’s no such thing as unearned income, everybody gets what they make.

The National Income and Product Accounts treat rent as a product, not a subtrahend
A byproduct of this value-free doctrine is how countries calculate their national income and product accounts. And if you look at the GDP accounts for the United States (and I’ve published a number of articles on my website and in major economic journals), rent is counted as part of GDP.
This is easiest to see in real estate and finance. The Bureau of Labor Statistics sends its employees around to ask homeowners what the rental income of their home would be if they had to rent it. If you were a landlord and rented yourself how much rent would that be? This appears in the NIPA statistics as “homeowners imputed rent.” That’s 8% of GDP. But it is not really income, because it is not actually paid. Nobody gets it. But value-free designers of GDP want to describe all of the income that landlords make as contributing to GDP. They say that landlords provide a productive service, they provide housing to people who need it, and they provide commercial properties to businesses that need it. Well, that’s not exactly how John Stuart Mill put it. He said that rent is what landlords making their sleep. So how can you rationalize how productive landlords are?
Another element of American GDP is financial services. I called up the Commerce Department where they make the NIPA statistics and asked what happens when credit card companies increase their interest charges. And where do penalty charges for late payments appear? Credit card companies in America make billions of dollars in interest a year and even more billions in fees, late fees and penalties. Most of the income that credit card companies make are actually on these fees and penalties. So where does that appear in that GDP? I was told, in “financial services.’ So the “service” of calculating how far the debtors must pay for falling behind in their payments. The typical charge 29%. That’s all counted as a contribution to GDP. But in reality it is a subtrahend, leaving less to spend on real “product.”
This raises the question of just what income and product actually mean. Well, this brings us back to what classical economics is all about. The “product” should be measured by what its actual necessary cost of production is. But there’s a lot of income over and above this necessary cost of production. Namely, economic rent, that’s unearned income. But the income and product accounts don’t say how much is “earned” and how much is “unearned” land rent, monopoly rent, natural resource rent, interest and financial charges. A classical economic accounting format would show how much of the prices for what our society produces is actually necessary, and how much is a subtrahend. Classical economists treat the land rent that you pay, interest charges and monopoly prices as a rake-off. So not all of your income is income equals “product,” because only a portion of that income represents a real product.
In America, the head of Goldman Sachs a few years ago said Goldman Sachs partners – a financial management firm – make more money than almost anyone else in America, because they’re the most productive. If you make a lot of money, by definition, you make it by being productive. That’s the false identity.

Jonathan Brown 55:25
That’s really the John Bates Clark idea that if you make the money, you’ve earned it. And it’s not just because you control the gate. You’re the gatekeeper to stop people and make them pay the toll. You’re the troll under the bridge, taking people’s money as they cross, which is essentially what financial economics is about.

Michael Hudson 55:48
Right. I have spoken with a number of political advisors, many of whom were followers of Henry George. They’ve described to me how political all of this definition of the economy is. A number of friends of mine have been trying to show how much of what the United Nations calculates as income and product is actually economic rent. Steve Keen, Dirk Bezemer and Jacob Assa are in this group. There are a number of others who do it. We publish in places like the Review of Keynesian Economics, Journal of Economic Issues and other not-mainstream journals. A lot of this was taught where I was a professor for decades, at the University of Missouri in Kansas City.
Our graduates had problems getting jobs, because in order to get an appointment at a university, you have to publish articles in prestige journals. The University of Chicago, the Milton Friedman boys, the Chicago Boys control the editorial boards of all these prestige magazines, just like they control the Nobel Economics Prize Committee. The prize basically is given to Chicago Boys every year for not explaining how the economy works. A precondition for what you call an economist, especially a Nobel Prize winning economist, is not to understand how the economy works. Because if you understand that, you’re going to threaten the vested interests that are getting the free lunch. You have to say there’s no such thing as a free lunch, everybody earns whatever they can get. Robbers and criminals like that idea. “Yeah, we stole it fair and square!”
Crime pays, and rent seeking also pays. You can get much more money quicker by extractive means – by rent extraction – than you can by investing in plant and equipment and developing products and marketing them and making a profit over time, and spending on research and development. That’s why in today’s United States, 92% of corporate revenue, called earnings, although not all of it is earned (that’s a euphemism) is spent on stock buybacks and dividend payouts, not on new capital investment.
So the way that the economy works today is no longer industrial capitalism; it is finance capitalism. Instead of Industrial Engineering, making society produce more with all of the environmental protection cost included, you have financial engineering, making wealth by increasing stock-market prices. Wealth is not achieved by earning it. You don’t save up your earnings and get wealthy. I think half of Americans are unable to raise $400 In an emergency. They have no savings at all. So for most people it’s very hard to save up money, especially if they have student debt, credit-card debt, medical debt and mortgage debt. After paying this, there’s really no income left to be saved. So you have the 1% of society, the rentier portion that had to pay income tax back in 1914, get getting huge amounts of income and the rest of the society getting less and less. The result is economic polarisation. The dynamics of society are financial and basically rely on rent seeking that has been financialized.
I’ll give you another example of the GDP. One of the problems that makes GDP statistics meaningless is depreciation, the idea that buildings depreciate. When Ronald Reagan came in, the real estate interests and their banks basically took over the government. Henry George and the Libertarians oppose central planning by elected democratic governments, and that leaves central planning to Wall Street’s financial interests. Every economy is planned, and if you don’t have a government strong enough to do the planning, then the planning is done by the financial sector and the real estate sector, and they were given free rein under Ronald Reagan.
Under Reagan’s 1981 tax “reform” you could pretend that if you buy a big commercial building, you can write off 1/7 of the entire costs every single year as tax deductible income. At the end of seven years, you change your ownership from one name to another name, and you start all over again. The same building can be re depreciated again and again and again.
Donald Trump wrote in his autobiography, he loves depreciation, because he said thanks to the pretence of depreciation, his buildings are all going up in value, but he gets to pretend they’re falling, and deduct all of that fictitious over-depreciation from his taxable income. It’s actually economic rent. But if you look at the national income statistics, you can’t find economic rent in them at all. I was able to piece it together by adding up what goes into economic rent: Real estate taxes are part of economic rent, and also interest payments, because interest is paid out of economic rent. But fictitious depreciation tax loopholes also should be there.
But nowhere in the national income statistics is a report of how much income real estate owners actually claim as depreciation. They haven’t done that because if they showed this, people would think, ‘Wait a minute, this is a giveaway. This is utterly unrealistic.” So they only put in a figure for how much they buildings are actually depreciating over a period of decades. So you have a fictitious national income accounting format that makes it impossible to calculate what land rent is – and that was the major focus of classical economics.
How are you going to get a statistical system that actually reflects this? Well, one associate of mine, Jacob Assa, has written a few books on this criticising economic rent. He worked in the United Nations here in New York until quite recently.. But as I said, our graduates can’t publish in the University of Chicago economic journals whose party line is that there’s no such thing as economic rent, just like there’s no such thing as society beyond “the market.”
I wanted to publish statistics on this and in 1994 the Henry George School in New York asked me to calculate what rent was and the land value. I found out that the value of land, the market price of land in the United States was twice what the government reported.
The government pretends that real estate prices rise mainly because buildings keep growing in value, even though they’re supposed to depreciate. They pretend that buildings grow in value by taking the original cost of the building, and multiplying it by the Construction Price Index. Whatever is left is reported as land value. Well, in 1994 the Federal Reserve reported that the land value of all of the commercially owned real estate in the United States was negative $4 billion. This is crazy. The statistics are drawn up by a methodology that the real estate interests lobbied for. When I calculated this, the Georgists in America got furious. They said that I was showing that land value and rents were much higher than they thought. They worried that this might lead people to want to tax real estate. Lowell Harriss of Schalkenbach explained that Georgists today represent mainly real estate developers, and that their major audience was local mayors, whose biggest campaign funders are the real estate interest. These Georgists called themselves “two raters,” wanting to keep overall real estate taxes unchanged (“revenue-neutral”) but shift the tax from commercial landlords onto homeowners by taxing land, not buildings – e.g., electric utilities, office buildings and other capital-intensive structures.
By representing the developers, Georgists proposed to save society by having the developers build up those slums, build up those vacant lots. Like George, they said that there was no need to worry about ecology or any problem except cutting property taxes for large real estate owners. You don’t need to worry about workers conditions or anything else. Let’s just give an economic incentive (i.e., a tax cut) to help contractors build up those vacant lots.
I was told if I published a new explanation of my statistics showing that most rent was paid out as interest, I could never have any relations with Schalkenbach and the Henry George school again. So I published them in a Harper’s Magazine cover story and have lived happily ever after.

Jonathan Brown 1:06:13
And was that “The New Road to Serfdom”?

Michael Hudson 1:06:22
Yes. I chose that title because the purpose of industrial capitalism was to free economies from the legacy of feudalism. And the legacy of feudalism was the landlord-warrior class collecting hereditary rent and the predatory banks that were not making loans for industry. None of the industrialists got their money to invest in banks. The inventors of the steam engine couldn’t get loans except by mortgaging their houses. Banks don’t lend money to create capital, only for the right to foreclose on it.

Jonathan Brown 1:07:02
This is all included in your in your latest book that just come out, The Destiny of Civilization: Finance Capitalism, Industrial capitalism, or Socialism, which I gather was a series of lectures to a Chinese University. Is that correct?

Michael Hudson 1:07:16
Yes. There were 160 000 viewers for the first lecture, and there’s a huge interest in this in China, because they realise that higher housing prices make them poorer and more highly indebted, not richer. What is pushing up housing prices in China is the amount of credit that banks will lend against the property. A land tax would keep housing prices down, because he rent could not be available to be capitalized into a bank loan. As China gets more productive and more prosperous, people obviously are going to be able to afford housing, which is how most people define their status. If a site gets more valuable because of public investment in transportation, or schools or parks nearby, that’s going to make it more valuable. But if you tax this rental income, then you’re going to keep the housing price down.
I think Fred Harrison and Don Riley wrote a book Taken for a Ride where they show that the money that London spent on extending the Jubilee Line increased real estate prices by twice as much along the line cost. London could have simply collected the land’s increase in rental value that this public investment created and made it self-financing. Instead it was a giveaway. They ended up taxing labour and business, and the effect was to increase Britain’s cost of living and hence the cost of production, which is why Britain is de-industrialising. It’s been de-industrialising because despite the attempts through 1909 and 191, to free itself from landlordism, the bankers have taken the place of the landlords. They are the class today that the landlords were in the 19th century. So we’re back on the revival of what really was feudalism – a rake-off by a hereditary privileged class.

America’s monetary imperialism coming to an end with de-dollarization
Jonathan Brown 1:09:47
I’m wondering where we go next. I want to get into the conversations that you started with the 1972 first edition of Super Imperialism. I know we had a third edition for fairly recently, with your prescience of the predictions in analyzing the situation for America, and how the balance of payments deficit was a result of U.S. expenditure by the military. Getting into the current manifestation of the de-dollarization challenge that seems to be accelerating through the Ukraine and Russia crisis, I wonder what background we need to give the listeners just to tell them about how that system works.

Michael Hudson 1:10:39
One of the things that most people don’t understand is money, largely because of the academic discussion confusing matters. Until 1971, countries running a balance of payments deficit would have to settle it either in gold or by selling off their industry to investors in the payments-surplus countries. Well, beginning with the war in Korea in 1950-1951, the U.S. balance of payments moved into deficit. The entire U.S. balance of payments deficit from the Korean War to the 1970s was a result of its foreign military spending.
By the time the Vietnam war was ending, the Americans had to sell its gold every month. Vietnam had been a French colony, so the banks there were French. As America spent more dollars in Southeast Asia, these dollars were sent from local French bank branches to their head offices in Paris. The Paris bank would turn over these dollars to the central bank for francs, and the central bank, under General de Gaulle, would cash in these dollars for gold. Germany was doing the same thing, using its export proceeds that were paid in dollars to buy gold.
So America’s gold stock was steadily going down, until finally it had to withdraw from the London Gold pool and stop making the dollar gold convertible. Back in 1950 when the Korean War began, the American Treasury had 75% of the world’s monetary gold. It had used this monetary power to control diplomacy in other countries. The basis of America’s political power was its gold stock.
Once they left the gold-exchange standard there was hand wringing. How was the United States going to dominate the world if it didn’t have gold anymore, if the military spending abroad had made it run out of gold? My Super Imperialism pointed out that henceforth when foreign central banks got more dollars, what were they going to use them for? Well, there’s only one thing that central banks at that time did: That was to buy government securities. So the central banks of France, Germany and other payment
-surplus countries would had little option except to by U.S. Treasury bills and bonds. Some of these were special non-marketable bonds that they couldn’t sell, but they were stores of value.
So the money that America was spending abroad was simply recycled to the United States. It didn’t mean that America had to devalue the dollar through running a balance-of-payments deficit, like today’s Global South countries do, or do or as England had to do with it stop-go policies, always raising the interest rates to borrow when its deficits threatened to force the pound sterling to depreciate.

Jonathan Brown 1:13:57
Michael, this insight was that was that when you were working at Chase Manhattan, and you were advising the State Department on what to do with the fact that they were having these balance of payments problem, because of military spending?

Michael Hudson 1:14:07
My job at Chase was to analyse basically the balance of payments of Third World countries and then of the oil industry. I had to develop an accounting format to find how much does the oil industry actually makes in the rest of the world. I had to calculate natural-resource rent, and how large it was. I did that from 1964 till October 1967. Then I had to quit to finish my dissertation to get the PhD. And then I developed the system of balance-of-payments analysis that actually was the way it had been calculated before GDP analysis. I went to work for Arthur Andersen and spent a year calculating the whole U.S. balance of payments. That’s where I found that it was all military in character And I began to write in popular magazines like Ramparts, warning that America’s foreign wars were forcing it to run out of gold. That was the price that America was paying for its military spending abroad.
I realised as soon as it went off gold in 1971 that America now had a cost-free means of military spending. Suppose you were to go to the grocery store and just pay in IOUs. You could just keep spending I you could convince the owner, the grocer to use the IOU to pay the farmers and the dairy people for their products. What if everybody else used these IOUs as money? You would continue to get your groceries for free.
That’s how the United States economy works under the dollar standard, at least until the present. This is what led China, Russia, Iran and other countries to say that they don’t want to keep giving America a free ride. These dollarized IOUs are being used to surround them of military bases, to overthrow them and to threaten to bomb them if we don’t do what American diplomats tell them to do.
That led already a few years ago to pressure to de-dollarize the world economy and make it multipolar, not simply an extension of the U.S. military, U.S. investors, mining and oil companies. The post-dollar aim was for other countries to keep their economic surplus among themselves to promote their own economic growth, instead of imposing IMF dictated austerity programmes to impose austerity so that they can pay foreign dollarized bondholders.
Just about everybody thought that it would take many years for China, Russia, Iran, India, Indonesia and other countries to get their act together and create an alternative. But this year the Biden administration itself destroyed America’s free ride for the dollar. First the United States grabbed Venezuela’s foreign exchange, then Biden grabbed all of the foreign exchange of Afghanistan, just confiscated it. And then a month ago he confiscated $300 billion of Russia’s foreign exchange reserves. He said, in effect, that we are the leading democracy in the world, and global democracy means that America’s military gets to appoint foreign president.
And so we don’t like the person you’ve voted in as president for Venezuela. We’re going to hire this little nitwit that we bought out, Juan Guaido, and appoint him president. To force you to accept this, we’re going to take away all of your gold reserves held in the Bank of England, and we’re going to give it to Mr. Guaido as our nominee for the bastion of democracy, to do what a democratic regime is supposed to do: hiring terrorist groups to kill all land reformers and labour leaders, to finance a neo-Nazi takeover like we did in Chile under Pinochet, and just like, we’ve done in democratic Ukraine with our funding neo-Nazis to fight against the Russians there.
This confiscation of foreign reserves and foreign money held in U.S. banks shocked the rest of the world. Nobody had believed that countries would actually grab other countries’ financial savings. If you go back to the wars in the 19th century, the Crimean War and others, countries would continue to pay their foreign debts. All this was ended by President Biden rejecting the international rule of law. He said that “We have a ‘rules-based’ order, in which we can make up the rules. Number one, we are exempt from the rules. Only you have to follow them. Number two, the rules or whatever we say.”
China, Russia and India would have taken years by themselves to denominate their trade in their own currencies. Biden’s money grab has impelled them to create a new economic order independently of the United States and Europe, whose euro and sterling are satellite currencies of the United States.

Jonathan Brown 1:19:54
So Michael, this is a crazy situation that we’ve got. Even If you have deposits in a bank, the deposits don’t really belong to you, but they used to be respected.

Michael Hudson 1:20:07
Well they belong to you, but they can be stolen.

Jonathan Brown 1:20:09
Yeah, but then they don’t belong to me, do they? They’re kind of mine, but not. Likewise, if I annoy the wrong person, I could have my car impounded, because I’ve just annoyed the local politician, which is essentially what’s happened to a Russian oligarch. Now, whether or not the oligarch deserved that $500 million yacht, obviously, they didn’t, but it was technically theirs. So what Americans are doing is showing that if you piss them off, they will take all your resources, which has happened in other countries, right? We’ve stolen it. The British did that, right? We appropriated resources and stole resources from other nations. If you want the best example of that, you can just go into the very beautiful British Museum and see all the artefacts that we’ve appropriated, one of which was a Rosetta Stone, which I know you write about.
So we’ve got this situation now that the Americans have declared the most profound economic war on Russia, threatening China that we can do the same. China’s got trillions of U.S. dollars. And one of the things that I don’t quite understand, looking at your philosophy and Super Imperialism, was in demonstrating that the Americans can have a free lunch by getting people to buy U.S. Treasury bonds. How is it that the U.S. dollar has gone up against all currencies pretty much other than the rouble since declaring war in Ukraine?

Michael Hudson 1:21:43
Europe has committed economic suicide, United States offered its leaders a lot of money in their offshore accounts, and make sure that their kids got free education in the United States. But in return, they would have to represent the United States, not Germany, France or other countries. The Americans have been meddling in European politics for years. European politicians do not represent their own countries. They represent the American State Department and American diplomacy. And they were told to lock their countries into the U.S. economy.
For instance, European businesses had a hope that Americans really hated. The Europeans hoped that after 1991, now that communism was over, they could invest in Russia to make money. They could sell exports to Russia and make mutual gains from each other. But the Americans wanted to make all the money off Russia for themselves, mainly by using the kleptocrats they backed to sell the natural resources that they grabbed to U.S. investors. The Harvard Boys wanted to make sure that rent-yielding natural resources were given the kleptocrats – who could only make their money in hard currency by selling shares abroad in the assets they grabbed, keeping their payments in England or the United States.
So they’ve asked Europe not to buy Russian gas, but to spend seven times as much buying American liquefied natural gas, and spend $5 billion to build the ports to accept this gas – while going without gas for about three or four years…let their pipes freeze… stop making fertiliser… Don’t feed your land will take it on the chin for America. Your standard of living is going to have to drop by 20%, but it’s all for American democracy. And the European heads said that’s fine.
America said that you Europeans are bothering the by trying to stop global warming. That’s a direct attack on a major arm of U.S. diplomacy, the oil industry. American companies control almost all the world’s oil trade. It’s the highest rent-yielding sector in the world. And it’s income-tax free. It’s a politically powerful, and as long as America can control the oil trade, it can talk to Latin American countries or African countries and say if they elect a leader that U.S. officials don’t like, it can impose sanction and stop exporting oil to them and freeze them out. They won’t get fertilizer, so the U.S. can starve you out. It can put a sanction on their food trade. Agriculture is Americans biggest trade surplus.

Jonathan Brown 1:25:14
That’s what they’re doing with the conflict in Ukraine to Russia, and also China as well. Are there other major sources of grain, wheat and rice?

Michael Hudson 1:25:26
Yes. But President Biden has blamed Putin for creating a world food shortage and threatening to cause a famine, because Ukraine can’t export its grain. Ukraine, at American direction, has put mines all over the Black Sea. So the Black Sea’s ports have mines around them. If a ship hits them, it’ll blow a hole in the hull and will sink.
As a result, if you’re a shipping company and want to transport grain, you have to get insurance, because if you don’t have insurance, then you’re in danger of going bust if your ship goes under. But no insurance company will insure it until the Ukrainians remove the mines that they put. You need minesweepers for that. Needless to say, Russia doesn’t want American minesweepers in, because they may very well attack as there’s a war on.
So you have the United States blocking Ukrainian grain exports, which was a huge export. You’ve had the American dollar area, the NATO countries, refusing to import food from Russia, which is the world’s largest agricultural exporter. This is creating a crisis for Global South countries, for Latin America and Africa.
Meanwhile, global warming is causing droughts that are reducing the harvest. The Green Party in Germany has a pro-war policy that is making global warming rise faster. By supporting military warfare against Russia, and U.S. military adventurism in general, they are becoming major lobbyists for the air polluters. The largest air polluter is the American military. The Green Party in Germany advocates fighting Russia more, providing it with more arms, and thus supporting the military that is now the largest new contributor to global warming. In effect, this means that Europe is willing to say, Okay, we are willing to have the sea levels rise another 10 feet, as long as we can help America dominate Russia.
Europe even is letting America keep the Trump tariffs on its exports, in place, so it can’t export more for America. It looks like Europe will have to de-industrialize, maybe we’ll go back to the 19th century and become a country of farmers. That basically is the situation that its subservience is imposing.

Jonathan Brown 1:28:49
I’d like to come back to the just what China and Russia can do, given their reserves. They understand they’ve got they’ve got lots of reserves of gold, and also large grain stores, China having the most as I understand it, but can you help me understand why all these nations around the world have U.S. dollar reserves in some form or other, most of it in bonds? Why is the dollar still increasing at this moment in time?

Michael Hudson 1:29:28
Because the Euro was going down. The Japanese Yen is going down. The Yen is the worst performing currency, because they’ve held their interest rates very low. Their aim is for banks to make money by borrowing low at low rates and lending to foreign countries at a higher rate. Europe is also keeping its interest rates low. The American Federal Reserve is raising the interest rate, and that is money from low interest rate countries. Capital from Europe and Japan is flowing to America.
Currency values are primarily set by relative interest rates and capital flows. They’re not set by the cost of production for imports and exports. They are not caused by trade, unless there’s a radical breakdown of trade. All these zigzags that you see are short-term capital movements. America tells other countries to keep their interest rates low, so that money will flow from their banks and financial to the United States to buy American securities that yield higher returns. As long as the Euro is a satellite currency to the dollar, it’s going to continue to go down. So the both the euro and the British Sterling are now moving towards $1 per pound and $1 per euro.

Jonathan Brown 1:28:49
That’s a short-term measure. The long-term measure is that countries have to start selling the bonds that they’ve got in U.S. currency. So long term, it has to come down. Is that right?

Michael Hudson 1:29:28
Yes. They’re going to hold each other’s currencies. Especially now that Russia is denominating its exports, in roubles instead of dollars. The American banks have lost the trade financing of the world oil trade, certainly Russian oil and agricultural trade. Instead of holding dollars, countries will hold rouble reserves to stabilise their currencies visa vie the rouble, China us holding rouble reserves, and Russia is holding Chinese yuan reserves. The balance will be held more in gold and some kind of assets without a liability attached to them. I think the logical direction in which this is moving is that the non-dollar countries will create their own version of the International Monetary Fund, their own World Bank, their own trade organization. So there will be one set of trade and financial and development organisations and military organisations in the U.S. and Europe, in NATO, that is, in the white countries, and another set of relations and the non-white countries that are actually developing while America and Europe shrink.

Jonathan Brown 1:33:06
So what’s your idea of how much gold China actually holds, because there’s the published numbers are really extraordinarily small aren’t they for an economy that’s so big.

Michael Hudson 1:33:18
I don’t know. Governments can hold gold not only through their own treasury, but through some subordinate agency. I no longer go into the financial statistics like I used to, because it takes a whole year to do a balance sheet that is comprehensive. All I know is that they saw how America simply grabbed Russia’s dollar holdings, and they don’t want the same thing done to them. President Biden has said China is America’s number one long-term enemy, and he wants to destroy the Russian economy first and then attack China after prying them apart. Obviously, China is reading the newspapers and wants to avoid that fate.

Jonathan Brown 1:34:16
The other thing that I find utterly remarkable, for example, is that Biden in his speech said that he wants to get rid of Putin. I think we was if it was a U.S. Defence Secretary or Secretary of State saying that he wants to arm Taiwan. If I ran China and I said I want to arm Mexico, or if anyone in South America wants any weapons then my doors open to you, I would expect the Americans to be very upset with that because I’m breaching the Monroe Doctrine. Can you help me understand, having been in the corridors of power, whether Chase Manhattan or the contacts you’ve got, how can how can politicians be so delusional to think they can say stuff like that without having a negative consequence?

Michael Hudson 1:35:18
Well you know who’s really upset by that? The Taiwanese! They say, Oh, they want to make Taiwan into another Ukraine, to fight to the last Taiwanese, just like the Ukrainians have been used. They see two choices before them. If they do arm and get weapons that can hit China, then China is likely to bomb them. On the other hand, I’ve met Taiwanese officials for 40 years, and many have said that their long-term hope is to be reintegrated. They want to be investors in China, but they want to merger under terms where they can be sort of like Hong Kong, able to have a merger that will make them prosperous too.
So Taiwan’s choice is between following the Americans and becoming the Ukraine of the Pacific, or joining with China. Given the fact that China is growing and America is shrinking, what are they going to choose? Well, I would imagine that that you will see a strong, peaceful integrationist movement with China. But China remembers that Chiang Kai Shek massacred the communists in 1927.

Jonathan Brown 1:36:47
So what are we looking at then, who is in charge, President Biden or other people?

Michael Hudson 1:36:56
President Biden is a front man. They’re all the front men for the faceless people in the State Department, the neocons who are controlling things. Biden has always been right-wing, just a corrupt party politician. He does what he’s paid to do. He’s unimaginative. He’s brought in some real Russia haters – people who have a visceral hatred of Russia because of their family background under the tsars or under Stalin. Blinken said that his family was Jewish and lost under the tsars, and maybe under Stalin. He wants to kill Russians because he’s so angry at what they did to his ancestors. That is the neocon mentality in a nutshell. It’s a crazy mentality.
The Federal Reserve and the Treasury officials say they were not consulted in the political moves that Biden and Blinken and the neocons are making. There is the kind of single-minded tunnel vision at work. They really are Russia haters and China haters. There is a lot of racism you’re seeing in New York, where it’s very dangerous for Asian women to take a subway. Almost every week, the lead news item is yet another Asian woman attacked or pushed in front of a subway. there’s a there’s a new race hatred in America. And they are treating Russians as the Ukrainians do, as if Slavic speaking people are a separate race.

Jonathan Brown 1:38:49
Extraordinary. So Super Imperialism came out, as I understand it, and was used by the State Department to figure out how to continue running their economics …

Michael Hudson 1:39:04
At first U.S. officials thought that going off gold was going to be a disaster. Herman Khan told me, “You’ve shown that we’ve run rings around the British Empire.” He hired me for the Hudson Institute, which is a national security institute, and brought me to the State Department for meetings and to Army War colleges and Air Force war colleges to talk about it. I guess I shouldn’t be surprised that the main people who wanted to learn how imperialism works were the imperialists themselves. I had thought that the anti-imperialists were going to be my main audience, but the imperialists really needed to know what was new.

Jonathan Brown 1:39:50
They took your book, Super Imperialism and they read it as a love letter, right.

Michael Hudson 1:39:56
Not a love letter. They saw it as a “how to do it” book. I was a technician.

Jonathan Brown 1:40:04
Right. And working for Herman Kahn, he’s a powerful guy that people don’t talk about so much anymore, but he was, he was extraordinarily influential at the time, right?

Michael Hudson 1:40:14
Yes, he had a great sense of humour. He was a great speaker. He was absolutely brilliant. He wrote a book on thermonuclear war, saying that even if there were to be a war, somebody would be left to survive. That made him one of the models for Dr. Strangelove in the movies. I would sit and hear Herman talk about military strategy, and was awed by how he thought it all through. He was a brilliant military tactician. He would bring me and sit down with generals, and they would explain things. I don’t have a good military sense, or any military training at all. He wrote that, personally, he wanted to be right under the first hydrogen bomb. He didn’t want to live in the post-nuclear world. But there would be some survivors somewhere. That made him notorious. He was so reviled for even having brought up discussion of the topic that needed to be discussed, that he wanted to have ideas that people liked. And that was the corporate environment study. That was what I was pretty much in charge of. I was the economist, he was the military. We had the same salary there.
We would go around the world disagreeing with each other. It would be like a show. He’d did talk about the world being a cup half full. I talked about the cup being half-empty, as he put it. I talked about the debt overhead, and how debt was growing and would ultimately stifle the economy. He talked about how productivity would be sufficient to pay debt, although productivity doesn’t necessarily give you the money to pay the debt. Productivity does not grows exponentially, but tapers off. As debt grows, any rate of interest is a doubling time. And it doubles quicker than the economy can double.

Jonathan Brown 1:42:24
And this is really coming back to one of your initial questions from Terrence McCarthy, which was to focus on productivity, wasn’t it?

Michael Hudson 1:42:33
Yes. And the idea was focusing on productivity, you realise that it all comes down to labour ultimately. How do you make labour more productive? How do you make industry more productive? You get rid of what is unproductive – and the unproductive overhead is rent. So how much corporate spending is just plain overhead? How much is unnecessary for corporate industry to take place? That line of questioning brings you back in the classical economics.
Marx is really the last great classical economist who pushed it all to its logical end. His contribution was to explain that just as the landlord exploits by taking rent, the industrial capitalist exploits labour by charging more for the products of labour than it costs to hire labour to produce. However, unlike the rentier, unlike the landlord, the capitalist uses this economic surplus value to expand production, to build yet more factories, to employ yet more labour. This is an expanding society, whereas the rent paid to landlords is a kind of exploitation that is pure overhead and shrinks industrial capitalism. That’s why Marx said that the political aim of industrial capitalism was to free society from the landlords, predatory bankers and monopolists. That’s why the Communist Manifesto‘s program begins with collecting rent for the public sector. You can tax the land as a transition to socialising it. That was the Communist Manifesto’s classical economics.

Jonathan Brown 1:44:26
You have these views, and yet you were still a valued member of the team at the Hudson Institute.

Michael Hudson 1:44:33
Yes, because I was explaining how the world worked. Herman and I disagreed so much, we were genuine friends. I liked him, and we couldn’t believe that the other would actually believe something so different. But we said okay, if the arguments that we’re having is the “big argument,” it’s going to determine where the economy is going. Either he’s right or I’m right.
This is like the debates between Henry George’s followers and the socialists in the early 1900s. It was going to be one world or another. What is the key to analysing the economy? Is it to focus on rent and finance, or on technological potential? My point is that technological potential can be smothered by so much overhead paid to the rentier class via the FIRE sector – finance, insurance and real estate – that there’s no money left to invest, no income left for wage earners to spend on buying the goods and services that they produce.

Jonathan Brown 1:45:48
And yet the technology sector in my opinion is actually the new monopolist. Instead of having a competition, in that sense they’re the new landowners. So Google is a spectrum landowner. If I want to host these videos, then I’ve got to negotiate or accept the terms of the landowner YouTube. I’m posting them there, but I won’t be making any money on it. Because I’m one of the serfs on YouTube.

Michael Hudson 1:46:16
This is the problem that China is dealing with in its own way. What do you do when Jack Ma and other IT specialists end up as billionaires? Well, China did not have an anti-monopoly group. It let 100 flowers bloom and let billionaires develop, but would then have them transfer their money to the government in one way or another. They haven’t done this in the way that Western economies do, by an anti-monopoly tax, but by a political consensus way.
In countries like Russia, I’m trying to get them to formalise this into a formally calculating the magnitude of economic trends. You want innovation to take place, you want people to make the fortune, but at a certain pointthey can’t somehow make so big a fortune that it ends up crashing the economy.

Jonathan Brown 1:47:37
But looking at your writing from the Byzantine times and the ancient Near East, is the importance of the leader of that particular economy or society was to make sure that no one got so rich that they could overthrow the leader, which is really what you’ve got with someone like Zuckerberg, the power that he was able to wield in the election, whether you agree with him or not, was extraordinary. And likewise, if you look at the fight that’s currently going on with Elon Musk and Twitter is to recognise that actually we want we want our people to own these resources that we pretend are private, but actually have tremendous social power.

Michael Hudson 1:48:24
Yes, they financialized politics in America, by the Supreme Court’s Citizens United rulin., Anyone can contribute as much as they want, if you’re a corporation. The rentier interests give to pro-rentier politicians to act as their puppets. The money goes for advertising airtime on television and the media to overwhelm all the people who normally would want to minimise the rentier class. So essentially, you’ve financialized politics in America much more than has occurred in Europe. But in Europe, it’s the right wingers who basically the control the press, commercial television and media. So if the media are controlled by the right wing with their own agenda, they frame the economic issues from the vantage point of the rentier class instead of from the vantage point of how an economy actually develops and grows wealthier in a fair manner.

Jonathan Brown 1:49:48
I know we need to need to wrap up. Just thinking about so that the scenarios for Russia and China currently. Everybody who are part of the original white economies Europe, realises that if they don’t side with America, they get overthrown. But also right now they have a short-term challenge that the Americans are going to let them starve because they’re stopping wheat exports coming through the European ports. But then you’ve also got Russia with resources, you’ve got China with grain resources. So there is a potential that when people start to starve, and you look at the challenges in Sri Lanka, with politicians being murdered and people running out of food, there’s a chance for China to step in and say, we can send you grain exports. And by lucky coincidence, because of the all the lock downs that China’s got right now, a lot of the world’s boats and ships are currently waiting outside ports in China.

Michael Hudson 1:50:54
[Missing part here] Computer chips are part of the problem. And that’s probably going to make them friendlier with Taiwan. Taiwan has the computer chips.

Jonathan Brown 1:51:03
And by your assessment, because Taiwan do not want to be another Ukraine, American actions are likely to accelerate the reintegration.

Michael Hudson 1:51:12
There’s a bell shaped curve, I haven’t met with Taiwanese in quite a few years so I don’t know, up to date what the dynamic is. But just by logic, you can see the international environment in which they’re operating. You wonder how they are going to calculate the plusses and minuses of the U.S. versus China? What economy do they want to attach themselves to so that they can get richer fastest?

Jonathan Brown 1:51:46
And also stay safe and not get involved in unnecessary wars. When you look at the tragedy in Ukraine, all these people dying through when you’ve got such a strong opponent in Russia, how can you go to war with them for any period of time?

Michael Hudson 1:52:07
Well, that’s what the world is divided into. The U.S. and European society is built on war. It’s the only foreign policy they have, because they don’t have an economic power anymore. They’ve de-industrialised and the rest of the world that is trying to industrialise and trying to feed itself. China, Russia, India, the Global South are the anti-war part of the world. So the world is dividing into two parts: a rentier part supporting finance capitalism is trying to impose it on other countries, to financialize China and Russia to make them put a Margaret Thatcher or Boris Yeltsin in charge of China. While they try to put their own candidates in charge, a General Pinochet, the rest of the world is trying to defend itself against this terrorism.
So the Western world that calls itself democracy is the terrorist military world. The nations that it calls authoritarian are any authority strong enough to control and tax the financial interests – that is, any government strong enough to regulate finance and real estate. Such an economy is by definition authoritarian as opposed to a democracy, where Wall Street and the financial centres are the democratically elected central planners. So what’s at issue is who’s going to plan society: the financial sector, or the people as in China and other countries.

Jonathan Brown 1:53:41
I think that says it. From a Western lens it’s a different type of democracy.

Michael Hudson 1:53:48
Yes. But democracy really means an economy run to benefit the great bulk of the population, who happen to be wage earners? Or is it going to be for the 1%? Is the economy run for on behalf of the 99% and the 1%? Well, the 99% need a strong government to run it in their own interests and cope with the counter-revolutionary policies, the neofeudal rentier policies of the 1%.

Jonathan Brown 1:54:22
Okay, so knowing China, then your take on its zero-COVID policy that the authorities are implementing in some parts of the country?

Michael Hudson 1:54:32
The more I read about long COVID here, the worse it seems. I’m 83 years old, so my wife and I have not gone to a restaurant since 2020. We haven’t even gone to our friends’ houses for dinner. We’re isolating ourselves. China has isolated itself at great cost, but it saved the population not only from having COVID itself, but from having long COVID. There are now a million Americans with long COVID. They also say that long COVID lowers your, your IQ by 10%. It’s almost as dangerous is inheriting a trust fund when it comes to impairing your IQ. It’s debilitating.
My webmaster in Australia and his family have COVID. So I’m very sympathetic with what China’s doing, even though it means that I can’t go there, because I’d have to be isolated in a hotel room for two weeks just to give a few days’ meeting – and then be isolated again when I come back. So China is making a huge effort not to sicken its population with COVID. And now of course, since the Russians have began to publish all their findings of the US bio-warfare labs in Ukraine that were designed to spread a COVID like diseases by migrating birds and bats and manmade aircraft over Russia. Now, they’ve reopened the question was COVID a US bio-warfare from the very beginning and the Chinese are looking at it and saying was it engineered? If the Americans are trying to engineer COVID to affect mainly Slavic population and the DNA signatures, could they have been doing the same thing against Asians. So all of this is suddenly opened up. The World Health Organisation has refused to devulge any of the USA biowarfare efforts, and the U.S. has stonewalled all efforts to find out about the bio-warfare. This is isolating America and Europe.
If American Europe is left with its current foreign policy, biowarfare and atomic bombs, NATO will be shunned by the civilised world. As Rosa Luxemburg said a century ago, the choice is between socialism or barbarism. NATO, Europe and America represent the new barbarism. The alternative is socialism. That is how the world seemed to be developing in Europe and America until World War I untracked everything. The rest of the world now has a chance to get back on track. I don’t know what’s going to happen in the West.

Jonathan Brown 1:57:47
Michael, as always, you always get more getting into your stuff than you expected. Are there any things that you’d like to say to our listeners, before we finish up,

Michael Hudson 1:57:56
I’ve probably said too much. And I hope you can edit out anything that’s embarrassing.

Jonathan Brown 1:58:01
I may get thrown off YouTube for publishing some of your comments. So you may have to go back and review a few of them. But as always, Michael, thanks so much your time what we’ll do is we’ll send a link to everybody for the website and also for the new book, as well which I think and those series of lectures when I was researching for this conversation were the single best economic lectures I’ve ever listened to – truly extraordinary levels of insight and real economics rather than theoretical or textbook stuff. So as always from ShepherdWalwyn, thanks so much for your time and for your contribution.

Michael Hudson 1:58:41
Well, if you transcribe it all in will be worth it. Brilliant, Michael.

Jonathan Brown 1:58:45
That’s that’s our promise 100%. So thanks very much.

Michael Hudson 2:00:05
Thanks a lot.

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  1. DJG, Reality Czar

    Hudson’s discussion of the zero-Covid policy in China is enlightening.

    And there’s this excellent display of wit:

    “There are now a million Americans with long COVID. They also say that long COVID lowers your, your IQ by 10%. It’s almost as dangerous is inheriting a trust fund when it comes to impairing your IQ.”

    This is not easy to take, but it is an assessment that is hard to disagree with:

    “If American Europe is left with its current foreign policy, biowarfare and atomic bombs, NATO will be shunned by the civilised world. As Rosa Luxemburg said a century ago, the choice is between socialism or barbarism. NATO, Europe and America represent the new barbarism.”

    Of course, that makes Hudson and me putiniani.

    Well worth the read, especially for the walk through the history of economics as taught in the U S of A, up top.

    1. SocalJimObjects

      Ah, but the NATO countries believe they are the civilized world. You can’t make those countries see otherwise.

    2. Bsn

      Yes, well worth the read. I wonder what else China is doing for it’s population re Covid. Here in the west, we employ repression of any measures besides the profit making vaccines. I can see that, especially in the U.S., people are encouraged to outright die or at least enjoy long Covid, but I can’t put my finger on exactly why. I wonder if China is promoting any preventatives? We putiniani are spreading the word among ourselves of Vit., Ivm, Hydroxyclor., zink, fresh air, etc. and I wonder if China is doing some of this. They have a tradition of what the west considers “alternative” medical treatments and preventatives. Does anyone know if they have a version of public service announcements such as “take your vitamins”,
      “build up your vit. D”, open your windows, etc.?

      1. Basil Pesto

        They do not waste time with Ivm as a preventative (don’t know about treatment among the infected in outbreaks such
        as Shanghai) for the same reason they are not currently wasting time and resources on vaccines, either sinovac or the mRNA products which they are licensed to manufacture: they are neither sufficient nor necessary to solve the problem.

        Otherwise I suspect health advice differs from region to region. Shanghai seems to struggle with advocating adequate
        masking and the clean air concept, for example. There have also been videos that have shown grandiose displays of outdoor fomite disinfection theatre. It seems quite variable.

    3. ChrisRUEcon

      Я Тоже Путиниянй …

      Hudson humorous turn of phrase deftly belies the harsh truth – China is going to have the least affected workforce post-pandemic. Can’t wait for to see how this manifests itself in the 2030’s …

    4. drumlin woodchuckles

      Does this mean that someone with a trust fund and Long Covid at the same time will have a 20% loss of IQ?

  2. Martin Oline

    Thanks loads for printing this out for us. The headphone jack on my computer is bad and I have to do Utube on the TV these days.

    1. Jeremy Grimm

      You can download mp3 versions of this post as a pair of podcasts available from the Shepheard Walwyn podcasts website. If you hit the button to subscribe to the Shepheard Walwyn publishing company podcasts these two podcasts with Michael Hudson come up at the top. [I was able to download without actually subscribing.]

      1. ex-PFC Chuck

        These are definitely in Must Read/Listen territory. Like just about about everything else Hudson writes and says.
        For those interested you can find the podcasts at these links:
        Part 1 Part 2

  3. Zod

    I’m generally a TL;DR type but this was amazing.
    A couple of conspiracy theory moments, but overall a real eye-opener – a blue/red pill opportunity. Thanks!

    1. Bsn

      Zod, yes, a good overview and eye opener. But what parts are “conspiracy theories”? No offense to you, but using the term “conspiracy” means literally nothing. It’s like using curse words in a discussion – meaningless and does not address anything.

      1. jsn

        Right, the function of every department of government that has security classifications is to conspire.

        You can debate the value of their aims, but the secrecy exists to conceal them so you hav to wonder about that.

        With the vastness of our secret government, if there aren’t actually thousands of conspiracies ongoing, people aren’t doing their jobs.

        1. rob

          I always avoid the term “conspiracy” because it brings out all the pavlovian responses in pretty much everyone, which means they will not hear a word you are saying.

          I do think the difference of what conspiracy is, is it is when people plan/act in some way that is “illegal”. People are convicted every day somewhere in the US legal system,for “conspiracy”…..of something.

          Our problem, lies in the fact that those who plan world domination, and personal enrichment, write the laws, and specifically DO NOT include what they do, and how they do it.

          that is why for a century now we have been run by establishment groups acting in unison, like the council on foreign relations, or ALEC; or any of the myriad groups set up like they are, and embedded in every facet of gov’t, law and culture and act …. yet operate where no law dares to go. We have people believing the federal reserve is just a “part of the gov’t”…
          people have been conditioned to accept the veil of immunity given by “the orthodoxy”

          Now, that the four year study at the university of alaska /fairbanks… about the collapse of world trade tower 7, provides evidence that that building was destroyed by demolition,and that the NIST theory is impossible and does not satisfy the record of what is known and shown.
          The rest of the official conspiracy theory that the gov’t has placed in the minds of the population, is so strong, people suffer from cognitive dissonance at even the prospect… but here we are…… conspiracies only happen when the gov’t says so… (snark)…

          Conspiracies, are just the particular crimes members get caught doing ,periodically.

          1. jobs

            Hard to believe the official WTC-7 story after watching “Seven”. The smoking gun for me was NIST’s unwillingness to publish the model data because “it might jeopardize public safety”. This argument makes no sense, because if their theory describing the collapse was accurate we’d have a potentially huge public safety issue with office fires in steel buildings, which should be addressed immediately. As this has not happened, that too suggests their theory does in fact not hold water.


  4. Carolinian

    This is great stuff and thanks for the post. Perhaps the biggest takeaway from the Hudson bio is that true learning comes through interaction with the world beyond the ivied walls. Or as my humble dad used to say, “nothing beats experience.”

    And that’s the exact opposite of our current world of silos and safe spaces. Earlier generations of Americans did things instead of staying buried in their computers. Eric Sevareid wrote a book about how as a young man he and a friend canoed from Minnesota into the far reaches of northern Canada–an amazing adventure. For individuals there was more risk. Now the whole world is at risk from our all too protected and privileged elite.

  5. Mikel

    Well-acquainted with MH’s economic teachings, but it is when the discussion turns to the machinations of power that it became most interesting to me. Like this:

    “Europe has committed economic suicide, United States offered its leaders a lot of money in their offshore accounts, and make sure that their kids got free education in the United States. But in return, they would have to represent the United States, not Germany, France or other countries. The Americans have been meddling in European politics for years. European politicians do not represent their own countries. They represent the American State Department and American diplomacy. And they were told to lock their countries into the U.S. economy.”

    Such a statement would suggest that the people of other countries could spot their “traitors” by where they or their offspring went to school abroad. But I would have to know a time frame for this phenomenon, because I have a hard time accepting that Europeans of more modern times would find “free education for my kids in America” a viable trade-off.

    I’ve said myself that one of the true signs of decline of America’s influence will be when those in other countries say, ”there is nothing worthwhile that the USA can teach me,” but I was thinking more of what economists refer to as developing countries.

    While I understand that many elite schools’ primary functions are networking for global elites and weeding out anyone who challenges the system, this statement may deserve an article of its own or more clarification or explanation of some kind.

    1. Acacia

      Can’t speak to the European outlook, but the Chinese have certainly been sending many of their kids to the US for élite pedigree education.

      The élite Anglo-American R1 universities probably have a lock on this for the foreseeable future, as university rankings depend heavily on number of publications (and who cites those publications), support for scholars to focus on publishing is easier with their vast endowments, and for the algos that crunch these ranking numbers publications in English end up counting more than publications in other languages, so the Anglo-American schools have an automatic advantage.

      Of course, as the US descends further into lawlessness and random violence, foreign elites will think twice before sending their kids abroad for prestige degrees.

      Anyway, I agree with your last sentence. As Prof. Hudson has apparently spent a fair amount of time in the Chinese academy, it would be interesting to hear his views on this.

    2. Yves Smith Post author

      Lavrov said (and maybe more than once) that leaders in other countries were threatened in a pretty thuggish manner to sanction the US. If they resisted, they were told, “You have money in US banks” or worse, “Your children are going to school in the US,” implying pretty clearly they were not safe.

      1. Tom Stone

        Threatening someone’s children is not wise.
        Coming from the USA it is a credible threat, I doubt many EU Politicians have forgotten about the murder of Abdul-Rahman Al-Awlaki.
        Or the casual way the US brushed off the “Collateral Damage”.
        So they nod and smile and say .”Of course we’ll do it your way, it’s the ONLY right way”.
        Because it is their child’s life at stake.
        And they will have a quiet word with their wife, their child, their relatives and their friends and allies.
        And they will in time serve a dish that is very large and very cold.

      2. HotFlash

        The Romans did something similar, if I understand it correctly. The children of conquered rulers were taken to Rome to be educated, well treated, well taught, and often lived with influential Roman families. If all went well, they were thoroughly indoctrinated Roman bureaucrats when they went home to rule, and in the meantime they were excellent hostages.

    3. CBBB

      I disagree with his take on Europe. Americans especially those on the left or those who push against the American mainstream tend to look at Europe through rose coloured glasses.

      Europe’s economic problems stem from that fact that they became addicted (under German pressure) to an economic model based to exports to generate employment and growth with persistent weak domestic demand. This is a model that automatically puts them in a hapless position — the recent rise in inflation aside, for the past 30-40 years it’s been a demand constrained world and the Germans needed the American consumer a lot more than the Americans needed the Germans.
      The European economic suicide Michael speaks of started 20+ years ago when Germany decided it wanted to go down the road of holding onto its manufacturing by being a low-wage producer and after 2010 when Germany wanted to force the rest of Europe into the same role. Despite many cuts the European welfare systems they are of course still far more robust than the American and this, as Michael says, do help keep costs of living constrained — but housing and rent prices have been soaring and Germany’s austerity mentality has meant under investment in things like transit with the public transit systems in decay.

      Basically Europe isn’t capitulating because some elites want free Harvard educations for their kids it’s that Europe is weak and they are weak due to their own decisions (a policy outlook in Germany which for 20 years didn’t look much further than “what will Volkswagen’s sales numbers be next quarter”)

  6. Gulag

    “Herman and I disagreed so much, we were genuine friends. I liked him and we couldn’t believe that the other would actually believe something so different.”

    This type of mutual respect along with a toleration and acceptance of profound differences in outlook is also dying in our country– a cultural tragedy perhaps of even greater magnitude than our ongoing economic catastrophes.

  7. Seattle Keith

    Interesting article. Just a couple of quick comments. Hudson is too much a prisoner of 19th century “classical economic” ideology. What may have made sense when a lot of people worked in manufacturing is mostly irrelevant now. Even talking about prices being excessive relative to the cost of manufacturing labor is faintly ludicrous nowadays. Additionally, we are at the end of the hydrocarbon era of cheap and abundant energy, the driving force behind industrial capitalism. Any prescription based upon 20th century reality will be disastrous.

    As for “long COVID,” I suspect that this may be a propagandistic mislabeling of one of the side effects of these dangerous mRNA genetic engineering concoctions. I also suspect that there is more to China’s “Zero COVID” policy than meets the eye. China, like the West, is increasing its means of internal social control. I believe that we are headed towards some form of global chaos and the various governments are taking steps to protect their elites from the consequences.

    1. Jeremy Grimm

      A couple of statements in the comment about the Corona flu near the end of this interview disturbed me:
      “… the Russians have began to publish all their findings of the US bio-warfare labs in Ukraine that were designed to spread a COVID like diseases by migrating birds and bats and manmade aircraft over Russia.”
      “The World Health Organisation has refused to divulge any of the USA biowarfare efforts, and the U.S. has stonewalled all efforts to find out about the bio-warfare.”
      I am not familiar with the Russian findings/claims about US bio-warfare labs in Ukraine. The much earlier claims and counterclaims about biowarfare labs in Wuhan left me wary of the entire issue — except that through claims and counterclaims — the existence of biowarfare labs remained largely unquestioned throughout the discussion. Does the WTO maintain a catalog of u.s. biowarfare efforts? Is the u.s. running biowarfare labs in efforts to design biowarfare weapons? If so, those labs must be closed down and all such efforts halted. I can understand efforts to defend against biowarfare weapons but not efforts to create them. The u.s. public health response to the Corona flu suggests any efforts toward defense are far from impressive … or else too top secret to risk sharing with the Populace.

      Your suggestion implicit in: there is “more to China’s ‘Zero COVID’ policy than meets the eye” and your reference to “social controls in China” strikes me as unfounded. The “social controls” used in China’s “Zero COVID” policy are not greatly different from methods used to control the spread of plagues going back to ancient times. I believe China can quite adequately exercise “social control” by a range of means without the drawbacks of ‘Zero COVID’ policy.

      1. Seattle Keith

        Jeremy Grimm: “The “social controls” used in China’s “Zero COVID” policy are not greatly different from methods used to control the spread of plagues going back to ancient times.”

        I believe that the historical norm was to quarantine sick people, not to lock down entire cities because a relatively small number of people test positive on the flawed PCR test. The social controls refer to the now widespread use in the cities of facial recognition along with other surveillance techniques. This, along with digital IDs and a social credit score, are modern means of social control not possible without advanced technology, hence, historically unprecedented. The use of questionable “emergencies” to enable autocratic executive authority is global in nature and suggests to me that the global 1% see control of the global 90% (not 99%) as a key component of power in the transition period we are now entering.

        1. Jeremy Grimm

          I am not sure that outbreaks of the Black Plague or outbreaks of small pox were handled by individual quarantine. In these times, outbreaks of avian flu or pig flu are often handled by measures far more drastic than quarantine of the sick.

          Surveillance techniques now in widespread use — facial recognition, digital IDs, web, telephone and mail monitoring, cellphone GPS and vehicle license plate tracking, computer hacking and other surveillance techniques I believe exist yet remain unaware of all provide historically unprecedented means for social controls. The use of questionable “emergencies” to enable exercise of autocratic executive authority is global in nature. However, there are many opportunities for declaring “emergencies” without a pandemic, and many good reasons to exercise autocratic executive authority in the event of a pandemic.

          I believe it is a mistake to count that last 9.99% or 9.999% as outside the control concerns of the Power Elite. The control methods used are different but control and Elite concern about it is not absent.

          1. Lambert Strether

            How England first managed a national infection crisis: Implementation of the Plague Orders of 1578 compared with COVID-19 Lockdown March to May 2020 Social Science and the Humanities:

            The current COVID-19 pandemic and lockdown in the UK have parallels with the first ever national management of epidemic infection in England, the Plague Orders of 1578. Combining historical research of the Tudor and Stuart periods with information sources and broadcast news as the epidemic in England unfolds in real time during lockdown, the areas of official guidance, epidemiology, social distancing and quarantine, financing measures, the national health service and fake news are compared. Then as now, limits on freedom of movement and congregation, social distancing and quarantine measures were applied for the sake of preserving life, loss of livelihood ameliorated by government loans and inconvenient opinions suppressed, and these suggest a commonality of organised responses to mass infection across times. Increased danger in certain necessary occupations and flight to second homes by the rich have been observed, health inequities uncovered and restrictions on being with the dying and burying the dead enforced. Wholly unprecedented in comparison with the past, when the wealthiest in a parish were taxed to pay for measures against plague, is the quarantining of the whole society and the financial package for workers on furlough to avoid mass unemployment. In the new normal after lockdown, people should be given more credit for sophisticated understanding than was allowed in past centuries, when fear and punishment coerced the majority to conform, and be allowed access to relevant information which will influence decisions about national and community life going forward after lockdown.

            1. Jeremy Grimm

              Thanks for the link. The entire issue of the journal that held it appears interesting and like the link was open access.

        2. Yves Smith Post author

          They did effectively lock down entire cities. Everyone who could left for the countryside and avoided people. Read Samuel Pepys.

    2. drumlin woodchuckles

      If you suspect that Long Covid may be a propagandistic mislabeling of the side effects of the mRNA para-vaccinoids, then you will probably suspect that covid itself will not leave any long term aftereffects on you if you were to get it. Would that lead you to lower your guard against getting it?

      I continue to think that Long Covid is a real thing based on what I keep reading about it and about the suggested mechanisms which all make sense to me. So I will continue to keep up my guard against getting it.

      Which of us is right? Let Darwin decide.

      1. Jeremy Grimm

        Some aspects of long covid and some of the side effects of the vaccines could both be caused through the same or similar means. I have heard enough reports of long covid symptoms acquaintances and friends and other commenters have experienced not to question the existence of long covid. Similarly, I have heard more than sufficient reports of vaccine side effects acquaintances and friends and other commenters have experienced. I remain unconvinced that the mRNA vaccines are as well understood as claimed. That makes estimating the risks they present as well as their effectiveness as the Corona flu evolves much more problematic than I am comfortable with. I got the first two shots, never stopped wearing my mask and avoiding as much social contact as I could, and remain hesitant about getting boosters in the present vacuum of what I regard as reliable information about them. I recall reading that the FDA’s pre-Corona test process for new vaccines took roughly four years.

        1. drumlin woodchuckles

          Given my age and co-morbidities, I decided that the risks of covid were worse than the risks from getting the mRNA para-vaccinoids. So I got Moderna X 2 and then the Pfizer Booster X 1.

          The fact that my workplace made it mandatory to get those things helped overdetermine the decision-making process.

          I still live a semi shut-in existence apart from work. I avoid gatherings of Typhoid Mary MAGAs, happy hollering students, packed PMC crowds in tight rooms full of stagnant air, etc.

    3. Yves Smith Post author

      Agnotogy, or as we call it, “Making Shit Up” is a violation of house policies. The vaccines are not “genetic engineering”. The articles that claim that are by people who have no idea what they are talking about and bioengineering types (people who actually do genetic engineering) laugh at the assertions, they are so shoddy. I’m not about to waste my time digging up their explanations.

      1. Mike

        Yes, they are genetic engineering. Definition was probably changed due to obvious marketing issues but just search mRNA prior to 2019 and you get lots of examples like this:




        I guess for our non M.D. discussions we’re talking semantics but mRNA technology is certainly not paralleled by conventional vaccine technology in terms of its wide ranging potential. Also however it is not paralleled by conventional vaccine’s great safety profile’s either….

  8. howseth

    Wow. This blew my mind: Great interview. Now to let this stuff sink in.
    Upon checking the given links to this YouTube recording of this interview (May 23 2022) the 2- parts have gotten 1300 views so far. Should be 130,000,000… Give people another perspective on the usual talking heads.
    I read the transcript version at Michael Hudson’s blog pages.

  9. lance ringquist

    we did not get a thatcher a reagan, nor a pinochet, we got nafta billy clinton.

    thank you mr. hudson for your take on henry george, i always thought he was a fraud and a con artist, and a dog whistler.

    1. Skippy

      Sorry but Bill was just a tool of others and that you make it all about him is kinda strange …

      1. lance ringquist

        he was a signal of things to come, just as thatcher. reagan, and pinochet were.

        although reagan may have wanted to do a lot, he could not. so if you do not like a thatcher/pinochet type because of what they did. then you better look at nafta billy clinton and what he did.

        because he did the same things. and as his economic advisor said, everything bill clinton did was pure economic nonsense, and made things worse, or created whole new problems, or something on that order. and none of them should ever be left off the hook.

        bill black wrote a article about nafta billys advisor right here on NC.

      2. lance ringquist

        letting those of the hook for what they did, yet expressing outrage at thatcher/pinochet and reagan, will not cut if with many. its why oliver cromwell chopped off a few heads, and no english king ever tried to do it again.

        so if you want to change things, you better know who did what to whom.

        lets remind everyone on how the GOP became the over whelming dominant party in america today: BRAD DELONG, bill clinton was a disaster, everything he did was complete utter economics nonsense that made things worse

        BRAD DELONG: bill clinton kept on pushing farther and farther and farther to the right with our policies, so that we’re actually to the right of the Republican Party’s own representatives in Congress

        he seems to have been cured of libertarianism, he says he was a shill, bill clintons economist comes clean: We were a disaster. Everything we did was a disaster politically. Economically, the left’s view of the world is a lot more accurate than ours was. So a number of our policies, presumably, really need to be changed, even just in terms


        “BILL BLACK: These guys know they’ve been the fool for 30 years, and they have tossed our lives down the drain. Brad is willing to say it. So they know how discredited they are. And thanks to Brad DeLong for having the intellectual honesty to say it in these blunt and colorful terms.

        But I can tell you this has been in the making for at least eight years, where Brad DeLong, based on new facts, has been shedding his ideology, or at least changing it dramatically. And we should all use that as a lesson, as well.”

        1. Skippy

          It started before Bill and his advisor was Rubin, not to mention the effects of the Chicago school and Milton, so basically there was a lot of fingers in the pie and both Dems and Rep have a multi decadal hand in shaping events.

          You will note in the last para above Mr Hudson pointing out ideology, Bill did not create this ideology, no one person did. So why would we want to pin it all on Bill and let all the others off the hook.

          1. lance ringquist

            but nafta billy did the most damage. when ever i hear its reagan and thatchers fault. i grit my teeth. either we name names to the disastrous policies which is what oliver cromwell, FDR and Truman did, or you end up with the most progressive president since FDR, nafta joe biden.

            what has happened to the world did not happen in a vacuum. crime is a ideology also, and if we catch criminals, we make them pay.

            there is plenty of blame to go around. so lets not demonize some, and let other perps off scott free.

            brad delong did the right thing.

            nafta billy clinton, tony bomb’em blair, gerhard shroeder and other fake lefties did the most damage.

            delong even stated that that damage will be hard to revese.

            so were thatcher, reagan and pinochet tools also?

          2. drumlin woodchuckles

            Because Clinton in particular was the President who figured out how to pressure and bribe and extort just enough Congressional Democrats to pass NAFTA and WTO membership for America and MFN for China to get these things passed. Republican Presidents set these things up but couldn’t get them passed.

            There is a saying that goes “ideas don’t work unless we do”. That means “ideas for bad” as well as “ideas for good”. Others created the ideologies which went into National Socialism in Germany but Hitler the actual historical actor at the right place at the right time was the one to actually get National Socialism into command in Germany.
            In the same way, the many people who co-created this Free Trade ideology couldn’t get it legislated and passed into power. Clinton was the one person who succeeded in getting it passed.
            So why would we want to pin it all on “all the others” and let Bill off the hook?

            1. Acacia

              So why would we want to pin it all on “all the others” and let Bill off the hook?

              …to not give Bill too much credit for the ideology, and put him in his place as the used car huckster that he is?

              Remember when Clinton got elected and there were actually people were trying to pass him and Hills off as some kind of intellectuals who read Foucault, et al?

              1. drumlin woodchuckles

                I remember the celebrations of Clinton the big thinker, Rhodes Scholar, etc.
                I wanted Harkin to get the nomination. But I didn’t get the Harkin I wanted.

                Can you show me in anything I wrote where i gave Clinton any credit for crafting or designing the ideology?

                Applying the ideology and turning it into achieved policy which is what Clinton did is unrelated to inventing the ideology.

                FDR didn’t invent the ideologies behind the various New Deal reforms. But FDR had the political knowledge and warfighting skills to arrange and co-ordinate the forcing of proto New Dealish ideologies into achieved and applied New Deal policies. Shall we dismiss FDR as the used car salesman “chosen” to “sell” the New Deal to the “unwashed”?

                1. lance ringquist

                  SO WELL SAID! crime is a ideology also. if you know someone who made their life, a life of crime, then you know they did not invent it, but they sure ran with it. and to let them off the hook whining it was just a ideology is a crime.

              2. lance ringquist

                they were the foxes in the hen house. and no real farmer would ever let them off of the hook.

                today they still have the spotlight, even after destroying americas 200 plus years as a manufacturing power house, which “HAD” the largest middle class the world has ever seen, capital markets that were the envy of the world, and a super power status.

                today all gone, but billy and hillary are every where still handing out nonsense with the respectability of office and of their intellect.

            2. lance ringquist

              BINGO!!! nafta billy clinton and his types ruined america and the lives of untold millions of people. i see no reason why we should ignore his part in all of this. his part was way larger than reagans ever was.


              “BILL BLACK: These guys know they’ve been the fool for 30 years, and they have tossed our lives down the drain. Brad is willing to say it. So they know how discredited they are. And thanks to Brad DeLong for having the intellectual honesty to say it in these blunt and colorful terms.

              But I can tell you this has been in the making for at least eight years, where Brad DeLong, based on new facts, has been shedding his ideology, or at least changing it dramatically. And we should all use that as a lesson, as well.”

              the war crimes trails after WWII did not ignore the leadership of the nazi party, who just initiated woodrew wilsons fascism.

          3. Skippy

            Sorry but the ideology is not all about any specific individual during the time line and if not Bill it would have been someone else. I’m mean Obama over saw the biggest wealth transfer in modernity, bailed out everyone that brought the GFC upon the nation/world, no one went to jail, and basically was just an extension of Bush Jr terms. So pray tell why all the focus on Bill Clinton during the entire neoliberal era and no mention of all the other actors.

            It’s just dumbing down the entire history of what occurred and why … oh look Squirrel .. Bill Clinton. Do we need to go back to – The True History of Libertarianism in America: A Phony Ideology to Promote a Corporate Agenda by Mark Ames and NSFWCORP

            Clinton did not start the corporatist agenda nor was he a intellectual driving force behind it, he was just the used car sales man that got the job of selling it to the unwashed. If you really want to take NAFTA to task why not go after the corporations/industries and their advocacy think tank sorts like ALEC et al.

            1. drumlin woodchuckles

              Why is there such a determination to erase Clinton from the history of how NAFTA etc. was actually passed?

              Brilliant intellectuals privilege ” the ideology” over crucial human actors at crucial hinge-points in order to privilege their own selves and their mastery of “ideology”.
              It reminds me of the Chomskies of the world who pretend Kennedy “doesn’t matter” because they are mentally unequal to the task of figuring out what Kennedy was doing that somebody wanted him dead for.

              If you want to destroy an “ideology”, you have to begin by destroying the people who symbolize that “ideology” in the world and you have to mobilize people to co-ordinate the mass hatred necessary to destroy those peoples’ personal legacy in the world. And in the case of Free Trade, that starts with seeking to destroy President Clinton’s legacy and dechievements in the world.

              I am not interested in forgetting or erasing the crucial guilty actors in order to validate someone’s “mastery” of “ideology”.

              And it is deceitfully counter-honest and anti-honest to claim that Clinton was “chosen” to “sell” it to the “unwashed”. He never did get it sold to the “unwashed”. It was his betrayal of the “unwashed” who never did accept Free Trade which finally drove them to abandon the Democratic Party to the point of letting it become the minority in Congress.

              And he wasn’t “chosen”. He chose himself and drove himself forward at keypoint after keypoint in his own grubby ambition. He certainly wasn’t groomed and advanced at every step the way Obama was.

              1. lance ringquist

                AGAIN, SO WELL SAID. letting criminals off of the hook, only encourages more criminals.

                nafta billy clinton turned a whole generation of women into a life of selling their bodies and meth, that alone was a crime.

                it was just one of many untold crimes the skippies of the world want us to ignore.

              2. skippy

                I see no determination to rub Bill out of the picture, but not to forget all the players, it seems a bit over the top to keep calling it Bills ideology when the ideology was there before him and after regardless of political camp in power.

                Personally I would focus on the corporatist funders of the neoliberal project, next is the economic propagandists like Milton Friedman/Samuelson and the whole Chicago School/Harvard boys synergies. Whatever political person at the helm during the entire period was just front house for everything else. Have you both forgotten that both parties want to privatize everything – social security, Health, Education, Roads, post offices et al.

                I hate to say it but your both coming off a bit bent and emotional about Bill Clinton concocted neoliberalism in his own head and forced it on everyone else, during and after his administration no less.

                The next thing you two will be telling me is he wrote the Powell memo, started FEE etc, was boss of all the industry advocacy think tanks in DC, and is personally responsible for all the economic policy choices since Orthodox neo classical economics became dominate.

                Lmmao what happened to the bygone years of pointing out Rayguns setting the whole stage and everyone after wards just fiddling around with the PR/Marketing optics for the unwashed to get their “Public Choice Theory” on with and then own the outcome …

            2. lance ringquist

              you did not answer my question, were thatcher, reagan and pinochet just a tool of others?

              and you would have made a great lawyer defending the nazi’s after WWII.

              it wasn’t their fault, it was simply a ideology.

              i have never said it was only billy. i have always said it was a combo of criminals. but billy was the top dog followed by empty suit hollowman obama.

              i grit my teeth when ever i hear it was reagans fault. he needs to be shamed also. but his role was minor compared to nafta billy clinton.

              nafta billy clinton stripped america of its sovereignty and civil society, surely a crime again the american people.

              1. Skippy

                To be honest you seem to be fixated on Bill and the Dem party and mumble about all the rest.

                “i grit my teeth when ever i hear it was reagans fault. he needs to be shamed also. but his role was minor compared to nafta billy clinton.”

                Historically this is just absurd because a whole cavalcade of wealthy special interests had been working tirelessly since FDR to roll back everything done during his tenure, forgotten the Business Plot/War is Racket already have we. So out of this entire period some seem to think it was all Bill Clinton’s idea and he alone had the power to force it on not only the democrats but the republicans too – he must be a time traveler no less.

                NC has go through all this for over a decade so please don’t engage in agnotology … its a site violation IMO.

  10. c_heale

    I think the single problem with this stunning analysis is that it doesn’t emphasise enough that we have moved from a world economy based on surplus, to one based on scarcity.

    We are heading back to the middle ages in terms of agricultural production, but with the added burden of a much larger world population, less agricultural land due to global warming and environmental damage.

    Imo this can only result in a world population crash. Starting in areas most affected by global warming.

    The rich elites are most dependent on having a surplus of resources. Their time is over. I think the word rich in future may mean having a family farm and getting through the year on food you can grow.

    1. David in Santa Cruz

      Spot-on comment about material scarcity in the face of a global population explosion. Another area that Hudson did not choose to address here is the effect of the population explosion on labor markets.

      Much of the work in manufacturing, agriculture, and even technology can be outsourced to a mobile international low-wage labor pool. U.S. labor markets are experiencing labor shortages because U.S. service workers are balking at showing up for Third-World wages, but U.S. customers will not accept services provided by non-English speakers not competent in the culture.

      This is why mini-Pinochets such as Powell and Summers are attempting to blame the current inflation on wages rather than looting by the financiers.

    2. Dave in Austin

      On: “… we have moved from a world economy based on surplus, to one based on scarcity”. I think we have three related curves to contend with.

      The first curve is world production based on material resources (not little gadgets; real commodities). Copper, phosphates, oil and corn can increase but only so fast at any given level of technology. And more production equals more pollution.

      The second curve is that of rising expectation. , As more people become economically middle class and almost everyone is on the internet the poor see “How the rich (meaning First World) lives” and they want it.

      The third curve is that of world population growth, which is coming down much faster than most people realize. But there is an 18 year lag- babies born in 2004 are turning 18 this year. And it is the 18 year-olds looking at the internet we have to contend with right now.

      So it seems to me that our biggest problem is how to avoid the consequences of systematic disruption in supply now (Covid China; the Ukraine War) while in the medium term (1-20 years) we deal the rising expectations of the 18 year olds, a population that will peak in 10-20 years.

      The good news is that because birth rates have come down, the population crisis is now a medium term problem. It will peak soon. Rising aspirations we can’t control. Economic disruption is the one factor we can control right now. We must try to avoid supply disruptions at all costs.

  11. Tom Pfotzer

    This is a great, great interview. Not just for the economics part, but also for the stories about Dr. Hudson’s personal development trajectory. That was fascinating.


    I’d like to ask you readers for some clarification and education, if you would consider sharing your views on this question:

    “What is the principle that demarcates helpful rentier-ism from unhelpful rentier-ism?”

    Context: suppose you’re a worker, you save some money, and you buy some production component, like a machine, or a farm, or a corner retail store (on a piece of land). You rent out that production facility (collect rents). Suppose you just invest in your own technical capacity, and “rent out” your brain as a specialist in something quite useful.

    You’re providing a service, a capacity, that others may use to create additional wealth. You save, take risk, do the work, acquire the capacity, and rent it out.

    The economy is replete with such examples, and that behavior seems to me to be “helpful” and generally “productive”.

    So, what is the point of demarcation – what actions or conditions come into play that make this rentier behavior unhelpful?

    Is it scale-efficiencies which lead to concentration? Regulatory capture (tax loopholes, for ex)?

    At what point does good, useful behavior go bad?


    I submit that it’s not rentier behavior that’s bad. We all do it, don’t we? It’s just a question of which production component we’re renting out. Brains, muscle, effort, real estate, equipment.

    What I conclude – partly from Dr. Hudson’s remarks – is that the renting-behavior “goes bad” when it is:

    a. concentrated in the hands of too few; the benefits of productivity aren’t widely-shared (participation) enough. (I see this as the most important imbalance to address)

    b. siphoning resources away from the creative-acts which create new wealth (new industries, technology and the like)

    c. distorting the costs of key production inputs (real estate, health care, for ex) causing the dependent production systems to lose international competitiveness; the production costs get too high, and therefore the nation that “over-rentiers” loses global market share

    Would you please share your views on “what’s wrong with rentier-ism”?

    1. hunkerdown

      “Rent” has a specific meaning in the context of economics. To conflate the technical and vernacular senses of a word is one common bad-faith argumentation strategy famous among US libertarians. Please don’t be like them.

  12. Susan the other

    So many tidbits in this interview. I wish Hudson would bring it all into focus – maybe his new book does – because he knows all the details. His expounding on the fact that he helped us establish a super-dollar in the wake of 1971, which effectively brought all the gold back to the US in exchange for US Treasuries, was almost funny. Because central banks all invest their “money” in the government bonds of other countries. So, we kept the dollar strong and vacuumed up all the gold that the EU had acquired redeeming their cold war dollars for our gold. And it was so simple. The pure simplicity of relative value, enforced by a powerful military, unconcerned by the utter contradictions involved. For instance, Herman Kahn pushed productivity and growth as the means to maintain power – productivity by cost cutting for profit – which we all now know led to offshoring our industry, decimating labor, destroying our own society. It was all flying blind. That’s our strategy. If mercantilism worked for the Dutch, then neoliberalism will work for us. Until it doesn’t.

  13. Hayek's Heelbiter

    Fabulousa as ever!

    ” The academic economics curriculum finds unproductive credit too embarrassing to acknowledge.

    (not “to”)
    Please delete if not an error or if fixed. Thanks

  14. orlbucfan

    Thank you for the read, Yves. Professor Hudson is 83? Yeowsirs! I’m simply……..flabbergasted. A lot of his interview echoed what I have learned and believed my whole adult life. I’m no economist nor banker/financier. I just love to read and learn, and had a family who encouraged it. Guess I was one lucky American.

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