Michael Hudson: A BRICS+ Bank: How Would It Really Function?

Yves here. Michael Hudson explains in detail why much of the discussion of countries in the so-called Global South wanting to create new currencies is fundamentally misconceived. What they want and need to create is a mechanism for settling international payments imbalances, and not a new currency. This is a very important clarification and I hope it gets the attention it warrants.

However, this is much easier said than done. Keynes’ bancor, which is typically cited as the model for this arrangement, would have imposed substantial restrictions on sovereignity. And I can’t see China readily signing for a system that would require it to limit its surpluses and face penalties if it didn’t. From Wikipedia:

Each item a member country exported would add bancors to its ICB account, and each item it imported would subtract bancors. Limits would be imposed on the amount of bancor a country could accumulate by selling more abroad than it bought, and on the amount of bancor debt it could rack up by buying more than it sold. This was to stop countries building up excessive surpluses or deficits. Each country’s limits would be proportional to its share of world trade … Once initial limits had been breached, deficit countries would be allowed to depreciate, and surplus countries to appreciate their currencies. This would make deficit country goods cheaper, and surplus country goods more expensive, with the aim of stimulating a rebalancing of trade. Further bancor debit or credit position breaches would trigger mandatory action. For chronic debtors, this would include obligatory currency depreciation, rising interest payments to the ICB Reserve Fund, forced gold sales, and capital export restrictions. For chronic creditors, it would include currency appreciation and payment of a minimum of 5 percent interest on excess credits, rising to 10 percent on larger excess credits, to the ICB’s Reserve Fund. Keynes never believed that creditors would actually pay what in effect were fines; rather, he believed they would take the necessary actions … to avoid them

Notice the initial bancor assumed a fixed, not a floating rate currency regime.

Having said that, one way to help reduce the amount of trouble that small economies get into is to restrict the ability of companies and substantial individuals to borrow in foreign currencies and to bar the use of derivatives and other means to get around those curbs.

I also have a quibble. Hudson argues that IMF interventions are to allow domestic elites to move their holdings into other currencies. In Latin America, they already hold most of their assets in foreign private banks, particularly Citigroup’s massive operation. Admittedly, only the very top elites will have most of their assets offshore, but they are also likely to have the most political clout.

Even though these crises do feature capital outflows when they get going, it’s also typical that what caused the bubble was hot money (as in foreign) inflows. Foreign central bankers have regularly complained to the Fed of the destabilizing effects of Fed interest rate moves, particularly increases, on emerging economies. These entreaties are always ignored.

Countries fight currency crises all on their own and come to the IMF when they run out of reserves. Currency crises do enormous damage to companies that use imported goods in a significant way, and countries that are not self-sufficient in food and energy. Critical imports like pharmaceuticals also become unaffordable. The knock-on effects are sudden drops in income all across the county and even riots. An estimated 1000 people died in riots in Indonesia during the Asian economic crisis.

The problem with the IMF, IMHO, is its addiction to austerity and crushing labor as part of its “reforms”.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization. Originally published in the Investigación Económica (Economic Research), produced by UNAM (Autonomous National University of Mexico)

This first week of October has seen U.S. interest rates soar to the 5% level on long-term Treasury bonds. That has made long-term Treasuries one of most attractive investment vehicles in the world, or even the most attractive.

One obvious result is that countries aiming to dedollarize their central-bank reserves would make an untimely decision move out of the dollar at this point. To avoid holding dollars in the form of US Treasury securities would mean holding foreign reserves denominated in a currency that is declining against the dollar. No other government is willing to make its currency so attractive to international investors (including central banks) by raising interest-rates so high.

At 5%, US bonds are the most secure and best investment around. There is a huge move into the dollar – and hence, pushing up its exchange rate against most other currencies. That has made it much more expensive for Global South countries to service their foreign debts denominated in dollars to the IMF, World Bank and private bondholders. If they try to pay these debts – which are now much more expensive in their own currencies – they will have to suffer austerity, and use their economic surplus to pay dollar-holders instead of using it to develop their own economies.

That strain imposed by international debt service is the most serious since the late 1920s – with the same refusal of creditor countries to see how today’s foreign-debt overhead cannot be paid. We have seen this before, in the austerity caused by Germany trying to pay its World War I reparations debts, and by England and France trying to pay their Inter-Ally debts despite the self-destruction of adhering to creditor demands.

The world refused to negotiate a write-down of these inter-governmental debts until the 1929 crash forced realistic observers to agree to the 1931 moratorium on German reparations and Inter-Ally debts. By that time the Great Depression was underway.

Today’s 5% interest rate threatens to destabilize the domestic US economy and federal budget just as much as it is increasing the cost of debtor countries servicing their foreign dollar bonds. A 5% interest rate on 30-year bonds means a doubling time in 14 years. (The Rule of 72: Divide 72 by the interest rate to get the doubling time.) For a 30 year bond, a million-dollar purchase will quadruple in face value, to $4 million by the time the bond matures in 2053, thirty years from now.

Think of the effect that this will have on the US budget by that time. A much larger share will have to be allocated to pay bondholders – most of whom make themselves tax-exempt, for instance by holding their savings offshore.

The world’s debtor countries, if not the creditors, are finally coming to realize that many government debts can’t be paid – except by throwing their economies into depression and austerity. That might be in store for the US economy too if it tries to tax the economy to pay creditors instead of simply printing the money.

Obviously there needs to be an alternative. It needs to beyond merely the first step of declaring a debt moratorium. A longer-term restructuring of the international financial system is needed, because the present system has become dysfunctional.

This recognition has been most explicit by the statements of China’s and Russia’s government. Although they are positioned to become creditor countries in the coming world realignment, they recognize the need to create a way for countries to run balance-of-payments surpluses or deficits without polarizing the international economy between creditors and debtors, creating a new split such as is now occurring.

At Thursday’s Valdai Club meeting in Sochi, Russia’s President Putin explained how he viewed the needed restructuring. Contrary to much discussion in the West, what is planned is not a “BRICS currency,” but something much more limited: a means of settling payments imbalances along quite different lines from those that have led to today’s crisis.

As far as BRICS is concerned, we don’t need to create a single currency, but we need to set up a settlement system, create financial logistics in order to ensure settlements between our countries, switch to settlements in national currencies, while understanding what is happening with our national currencies, and keep in mind the macroeconomic indicators of our economies. exchange rate differences, inflationary processes. …

I have already said, and many believe, that the Bretton Woods system is outdated. After all, this is not me talking, these are Western experts. It needs to be changed. Of course, it leads to such ugly phenomena as, say, debt obligations of developing economies, of course, this is the absolute, complete domination of the dollar in the world system. It’s only a matter of time before this happens.[1]

What is needed certainly is not a “new Bretton Woods.” The old Bretton Woods system was designed in 1944 by US planners first and foremost to break down Britain’s Empire Preference based on block sterling holdings (government reserves that could not be spent outside of the Sterling area) and the prospect of depreciation of the pound sterling. US planners consolidated American power by basing international monetary policy on the asset that the US Treasury held: gold, of which the U.S. held ¾ of the world’s monetary gold reserves by 1950.

Along with insistence on free trade and free capital movements (no capital controls or restrictions on how India and other British Empire countries could spend their accumulation of sterling reserves during World War II), the US “rules-based order” turned British sterling into a satellite currency. Having obtained British acquiescence, the US Bretton Woods proposals were imposed on Europe and other countries. Their fate has followed that of Britain’s domestic budget squeeze and “stop-go” austerity policies.

John Maynard Keynes proposed an alternative to holding dollars – something like an anti-Bretton Woods. His aim was to avoid US financial dominance by creating a fiat currency, the bancor. That was not a form of international money, but had a special purpose as an asset of “paper gold,” akin to what the IMF later introduced as Special Drawing Rights (SDRs) in response to the US Government itself needing a bailout as its foreign military spending pushed its balance of payments deeply into deficit during the 1970s war in southeast Asia. Bancors or SDRs could be issued to countries running balance-of-payments deficits to pay payments-surplus countries.

The Distinction Between a “BRICS Currency” and a “BRICS Bancor”

This is the problem that the BRICS+ and Global South countries are trying to solve today. The popular press has confused matters by referring to a “BRICS currency.” It is not a currency like the euro or the ruble or renminbi. It is not a currency that anyone could spend at the grocery store or to pay rent. It is not “money” as generally understood. It is not a currency that can be traded on foreign-exchange markets, and certainly cannot be bought by speculators (although they could gamble on what it might exchange for, something like betting on a horse race without having a horse or jockey in the race).

Domestic money, like the dollar or euro, ultimately derives its value from being accepted by national governments in payment of taxes or other transactions with the public sector. That makes such money fungible. Money in that sense can be thought of as a public utility. But providing such currency for a number of countries requires a common government, fiscal authority and legal system. If the currency is to be issued by a number of countries – like the euro – it therefore requires a political union empowered to allocate who gets how much of the currency. No such political foundation yet exists for the BRICS. In President Putin’s words, countries are “at different stages of development.” More to the point, their mutual trade and investment is nowhere near in balance at present. That imbalance is the major problem to be solved, just as it was in 1944-45. It is a balance-of-payments problem, not one of financing domestic government budgets and spending.

How can countries with chronic balance-of-payments deficits (like most Global Majority countries looking to an association with BRICS+) can run up debts to payments-surplus countries (like China and Russia), without being forced to impose austerity. How can inter-governmental debt be prevented from causing the problems that the US/Bretton Woods system and IMF “conditionalities” have created?

The first step has been a stop-gap of making swap agreements. That enables countries to settle for trade and investment imbalances among themselves with their own national currencies. The advantage is that there is no need to involve “hard line” creditors such as the United States, and to avoid the risk of US/NATO countries simply grabbing their central-bank monetary reserves as they seized $300 billion from Russia.

But the problem goes beyond simply avoiding the use of dollars and euros. A system of international finance needs to be created that does not impose austerity on debtor countries. That self-defeating policy simply makes it even more impossible to pay the buildup of foreign debts.

Why Do Governments Need International Reserves?

Most international payments occur on “capital account,” for foreign investment, lending, flight capital. But academic textbooks of international trade theory treat it as barter – as if money, currency speculation and flight capital are only a veil. If foreign trade and payments were in balance, there would not be any need for international reserves being accumulated. The books would be cleared. But international payments rarely are balanced.

What is now under discussion is how to denominate the financial claims that result from this imbalance. The buildup of international reserves is not a healthy economic sign if they grow faster than the pace of world trade. When these imbalances – not only of trade, but foreign investment, war-making, currency flight, speculation – rise and accrue interest year after year, they become increasingly unpayable. That is the situation in which the world finds itself today.

The vast majority today’s central-bank reserves are still foreign holdings of US dollar securities – that is, nominal US debt to foreign governments. The US Treasury did not “borrow” this money. Rather, they spent dollars into the international economy, headed by US military spending in an increasingly aggressive and belligerent way. One could think of foreign dollar reserves as their bearing the costs of US military encirclement of the globe. (This is the process that I have described in Super Imperialism: The Economic Strategy of American Empire.)

Most international payments occur on “capital account,” for foreign investment, lending and flight capital. If foreign trade and payments were in balance, there would not be any need for international reserves being accumulated. The books would be cleared. But international payments rarely are balanced.

As noted above, the present stop-gap solution is for countries to pay in their own currency, and for payments-surplus nations to accept this. But currency swaps are subject to their own problems. Not only governments exchange their currencies, but speculators not directly involved in exporting and importing. George Soros made his fortune mobilizing lenders to break the bank of England and force it to depreciate by outspending it at the currency poker tables.

The currencies of many countries seem destined to decline – imposing a loss on payments-surplus nations. This has become a problem especially with the euro. At the Valdai meetings, President Putin explained why the euro is unlikely to be one of the currencies into which BRICS+ countries hold as they dedollarize:

Do you understand what happened? The competitiveness of the European economy has fallen, and the competitiveness of their main competitor in terms of the economic component of the United States has increased dramatically, and other countries, including in Asia, have also increased. As a result of the loss of part of their sovereignty, they were forced to make decisions to their own detriment.

Why do we need such a partner? … we are largely moving away from the fading European market and increasing our presence in growing markets in other regions of the world, including Asia.

Among the BRICS+ countries, Argentina is a case in point. Its foreign dollar debt has grown largely by IMF sponsorship. The IMF’s main political function in US foreign policy has been to enable pro-American client oligarchies to move their money out of countries whenever there is a chance of a left-wing or simply democratic reformer being elected. Convert their Argentinean currency into dollars lowers the peso’s exchange rate. Without IMF intervention, that would mean that as the exchange rate falls, the wealthy classes engaging in capital flight receive fewer and fewer dollars. To support the currency – and hence, the hard-currency dollars that capital-flight actors receive – the IMF lends the right-wing government dollars to buy up the excess pesos that the client oligarchy is selling off. That enables Argentineans to move their money out of the country to obtain a much higher amount of US dollars than they would if the IMF were not lending money to the right-wing puppet government.

When the new reform government comes in, it finds itself loaded down with a huge foreign debt owed to the IMF. This debt has not been taken on in a way that helped Argentina develop its economy and earn dollars to pay back the loan. It is simply a result of IMF support of right-wing governments. And the IMF then tells the new government (whether Argentina or any other debtor) to pay off its foreign loans by lowering the wages of labor. That is the only way that the IMF recognizes for countries to “stabilize” their balance of payments. So the reform government is obliged to behave just like a right-wing government, intensifying the class war of capital against labor. The “cure” for their balance-of-payments deficits thus becomes even worse than the original disease, that is, its rentier oligarchy moving their money out of the country.

Recently, the IMF paid back part of one of these odious IMF loans. It did so with money that it borrowed from China. And China has been in discussions about raising its quota in the IMF to reflect its rising economic power. Yet US politicians have designated China as America’s number-one long-term enemy, and are seeking to expand NATO into the Pacific to ramp up military threats to China. The US/NATO war in Ukraine has been described as a strategy to destroy Russia’s economic ability to support China in the coming Cold War. And to support the West’s arms supply to fight Ukraine, the IMF has lent Ukraine seven times its quota – despite this large a loan being against the IMF rules, despite Ukraine being at war, and despite the fact that this loan obviously cannot be repaid. The Germans have helpfully suggested giving the $300 billion in confiscated Russian reserves to Ukraine to pay its foreign creditors and pay for more US arms.

It therefore seems quite obvious that the IMF cannot play a role in any BRICS bancor arrangement. But it also shows how hard it is to create an alternative economic system to the present legacy of World War II.

The most serious problem has not been discussed publicly. There is no way that a viable and resilient economy for Global South countries and their arrangement for central banks can take shape without repudiating the overhang of US dollar debt. This unpayably high foreign-debt burden is a legacy of US-sponsored financial colonialism. As long as this debt is kept on the books, countries will remain obliged to use their trade surplus and sales proceeds from selling off their property to foreign investors to pay their former colonial powers and post-colonial creditors.

When one talks of dedollarization and the creation of a BRICS+ bank, this is the kind of quandary from which they need to escape. The first need is to create a vehicle to handle the inevitable payments imbalances. At present, these are settled by debt obligations. A key feature of Keynes’s bancor proposal was that if chronic credits accrued to a payments-surplus country – and if their counterpart in chronic debts occurred in deficit countries – these imbalances would be wiped off the books. Keynes’s intention was to prevent debt imbalances from destroying the global economy as they had destroyed European economies in the 1920s.

There is no way that today’s international debt overhand can be repaid. That is as true for the United States as it is for Global South debtors. The US Treasury owes much more to foreign governments the form of their holdings of US securities than it can foreseeably repay. It has post-industrialized its economy, and has committed to spending enormous sums abroad, while its dependency on foreign imports is rising and its prospects for collecting its existing debt claims on deficit countries is looking shaky.

The past half-century’s foreign investment has taken the form of privatization of the public domain of debtor countries. This investment has not helped them develop, but has merely transferred ownership of their oil and mineral rights, public utilities and other assets. A viable international financial system requires productive investment such as China’s Belt and Road Initiative that can help countries prosper, not asset stripping.

Perhaps Islamic sharia law has a hint for a solution, in replacing debt obligations with equity arrangements (with buy-back agreements). If the plans being designed by China, Russia and other BRICS members work as intended, countries would be able to pay the investment sponsors out of the growth that would occur – not by imposing austerity as under today’s predatory financial “rules-based order.”

Dollar dominance will continue over Europe and other US satellites. Other countries that need dollar reserves for their trade and investment with the United States. Existing US trade can continue as it has. But what will be changed is a new basis for the international economy iself.

There will not be a new BRICS currency in the sense of a dollar or euro that could become a medium for trade, investment or international speculation. There will only be a mutual “currency of settlement” of payments imbalances among central banks joining the new system. And that system itself will be based on principles opposite from the financialized neoliberal model being promoted by the Dollar/NATO bloc. That is the real context for the current discussion of BRICS+ economic reform.

[1] Putin at Valdai Club Plenary Session, Karl Sanchez, October 5, 2023.

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  1. Weil

    Yves writes:

    “I also have a quibble. Hudson argues that IMF interventions are to allow domestic elites to move their holdings into other currencies. In Latin America, they already hold most of their assets in foreign private banks, particularly Citigroup’s massive operation. Admittedly, only the very top elites will have most of their assets offshore, but they are also likely to have the most political clout.”

    That is right. the food chain is vertical as is the control.

    In Ecuador, where I live, monies are sent to off shore banks, fiscal paradises (most in Dakota) and their own banks, as in the current president who has 134 off shore holdings in Florida alone, a bank in Panama and a bank in Ecuador.

    It is called the saqueo. the sacking and it is what is going on in Latin America now.

    The US is using libertarianism to protect their donors. Argentina is considering adopting the dollar and the upcoming elections will tell the story.

    Hudson contradicts himself as well, but this is a very complex issue.

    “Among the BRICS+ countries, Argentina is a case in point. Its foreign dollar debt has grown largely by IMF sponsorship. The IMF’s main political function in US foreign policy has been to enable pro-American client oligarchies to move their money out of countries whenever there is a chance of a left-wing or simply democratic reformer being elected.”

    That is the point. Dakota has replaced Caymans as the fiscal paradise and off shore banking center.

    The US is the biggest money launderer.

    “Convert their Argentinean currency into dollars lowers the peso’s exchange rate. Without IMF intervention, that would mean that as the exchange rate falls, the wealthy classes engaging in capital flight receive fewer and fewer dollars. ”

    And that is what is happening all over the continent now.

    “To support the currency – and hence, the hard-currency dollars that capital-flight actors receive – the IMF lends the right-wing government dollars to buy up the excess pesos that the client oligarchy is selling off.”

    “That enables Argentineans to move their money out of the country to obtain a much higher amount of US dollars than they would if the IMF were not lending money to the right-wing puppet government.”

    And the movement is the largest now in history. Next, the extraction economy will destroy the environments of these beautiful nations and nationalism and fascism will continue to rise as the working classes suffer more and more..

    US troops ar now in Ecuador and Peru. Why? To protect the dollar and assure multinational extraction of profits in face of China’s dominance over the Latin American counries..

  2. John k

    Seems vague.
    Mosler’ s view seems correct to me, that surplus countries would be better off with balanced trade. China might tax exports and use the funds to improve the safety net, eg free childcare and full income until women can return to the workforce to encourage women to breed, free healthcare and social security to reduce propensity to save while encouraging consumption, and a better solution for cities’ income.
    Best for the tax and inducements to be increased gradually to avoid large shocks as exporters shift more to satisfying internal preferences.
    Granted, while such changes would boost China’s standard of living while lowering inflation, importers would experience the reverse in the short term – but perhaps rising worker clout and income in the long term as such importers perforce make more of what they consume. Imo the us shifting mfg to low wage countries enabled financialization of the economy.
    While balanced trade would avoid payment imbalances on account of trade, the larger imbalances resulting from capital flows would remain – unless, perhaps, countries emulate China and controlled such flows.

    1. Tedder

      Mosler does not live in a socialist economy, so his musings apply only to the neoliberal, financialized West.
      Chinese workers enjoy a suite of social benefits from housing to education that frees them from the precarity of American workers who are high-priced because of their high “standard of living.”
      Consumerism is not a panacea for an economy and just increases energy use for little social benefit.

  3. Altandmain

    Yves – there’s a strange bug – all of the text is on Bold text currently in the comments.

    In regards to the first round of BRICS currencies, I suspect that what happens will be a series of compromises between the different BRICS (and future BRICS+) members. Each nation has different and at times, competing geopolitical interests. It’s not going to be a perfect system. But arguably, a compromised BRICS system is a better system than the current Western led system that is led by the US and the US Dollar. To me, the question is, will this help ordinary people? Clearly the US Petrodollar system has served people in the US that aren’t rich and people throughout the world very poorly.

    I agree though that the Chinese and other nations don’t want to give up their trade surplus. Manufacturing leadership has played a critical role in the rapid growth of China. With the manufacturing leadership comes the technical know-hoe to build up a nation. That’s why it has always been so critical. Likewise, other nations in the BRICS+ clearly want an industrial policy to build up their own nation’s manufacturing sectors. As for the US, the decision to outsource its manufacturing will go down as one of the biggest geopolitical mistakes in history, rivalling that of Napoleon and WW2 Germany’s choice to attack Russia (Or the USSR in the case of Germany).

    One observation – the 5% that Hudson notes for US Bonds offer is not worth anything, unless as an investor, your nation is willing to submit to US hegemonic interests. Otherwise they will freeze, if not outright steal your money. The idea that US investments are a good idea for the whole world has been flipped on its head.

    I think that there will have to be a transition away from the US more so because at some point, I think that the US will encounter a major crisis. Think something much worse than 2008. It’s inevitable and at that point, the existing regime in Washington will react in a manner even worse than 2008 and how they’ve handled the Russian SMO.

    1. Yves Smith Post author

      There was an unclosed bold tag in the post that weirdly did not affect the post but did the comments. Fixed.

      As for the 5%, US securities are still far and away the safest place to park money. A central bank or sovereign wealth is dealing in enormous positions. Are they going to hold Turkish lira? China has capital controls and vastly less liquidity. Russia due do conservative budgeting has only a smallish sovereign debt market and and therefore not suitable either. The big point of FX reserves is you need to be able to transact in size to defend your currency in the event of a crisis. Even mighty China has had to do that 2x in the last 6 years, once for months on end, to the degree the IMF nattered about how China could keep that up for only 18 months more. This is a real risk and the alternatives to the dollar are not fit for this critical purpose.

  4. TimD

    Good article. Most economic writing assumes that either international trade is balanced or economies are closed; because markets are so perfect they adjust out all imbalances. Nothing could be further from the truth, the US has had about 50 years of consecutive trade deficits and today it is a long way from having balanced trade, it is even farther away from generating the needed trade surplus to start paying down its debts. I am pretty sure Keyenes was leaning the way of balanced trade in the general theory, I will need to read some of his later material on trade balances.

    I am not sure if the US is unlucky or lucky to have had a trade partner like China. If China doesn’t purchase US debts or other assets like real estate and corporations, then the US dollar would have downward pressure on it and need to increase interest rates to attract capital. Which in theory makes the US economy more competitive. If China purchases US debts and assets, the US runs the risk of losing sovereignty as China tries to increase the return on its investments. Just like the US has done to countries all over the world. It seems to me that with Cold War II.0, the US is going to discourage China from putting money in the US and it will have to attract capital from other countries. Say hello to the new American interest rate regime where every 1% in interest rates will eventually cost American taxpayers $330 billion per year. I am not sure when this will lead to a more efficient US economy – but it will probably be in the long run.

  5. lambert strether

    > There is no way that a viable and resilient economy for Global South countries and their arrangement for central banks can take shape without repudiating the overhang of US dollar debt.

    So when the US sends in the gunboats, who sinks them? (Maybe not literal gunboats.)

    1. John k

      Countries with s300/400 missile defenses might be immune to gunboats, granted this still leaves the more subtle Nuland type diplomacy of bribes/assassinations/color revolutions, of course all in the name of democracy and us rules (dictates.)

    2. cousinAdam

      To quote (yet again) our esteemed guest blogger, “ Debts that can’t be repaid won’t be repaid”. While I’m hoping and praying for a Jubilee, I’m reminded of Presidential candidate H. Ross Perot’s admonition that “when the barn’s filthy, it’s time to roll up your sleeves and clean it out!” All the more reason to be long pitchforks ( manure forks, hay forks, sod forks….so many choices, so little time! /s)

    3. fjallstrom

      Around 2016 I was figuring that event triggering the end of the US empire would be when sendning in the literal gunboats against Iran or Venezuela was met with a hail of missiles sinking said gunboats. Today I would add drones. Hopefully it would not end in the US empire taking the world with it.

  6. Susan the other

    The world, the West included, needs a new settlement mechanism that is not “money” – that is, it is not fungible. Fungibility takes on a value of its own because it is so convenient. And so far it is unaccountable which is why money has landed us so deeply in debt not to each other but to the Natural World. Fungibility is definitely not convenient for Mother Nature, she is slapping her forehead and thinking, My god, how do I get rid of these humans – they are eating me alive – and they pay for it with pieces of paper. A new mechanism could easily be an electronic digit, an Eco. Based on the total assessed value of the planet as it fluctuates. The important thing about balancing settlements is not the intermediate balancing between nations but the total balancing of the environment. Not in money but in kind. The fastest way to debt poverty is to take from the environment, the eco-social environment, without giving back. AKA profiteering. (Think the US healthcare system.) When that happens there is no way to balance the primal, inherent loss. So then, giving back as the benefits emerge to balance the economy needs to be delineated as the first step – not the last step if there is anything left over after lavish profits, dividends, and bonuses. And if the natural debt is paid in this timely manner it will not (drumroll) accrue. Nor would the social debt accrue.

  7. Rubicon

    Here’s a purely common sense plan: instead of Chinese & Russian leaders sitting down to work out this “balance of payment” (that Hudson has talked about several times)…..
    INSTEAD each of those nations bring two of their top economists.

    Take those top economists and have the top Chinese/Russian economists explain all that to those economists.
    Then have those economists go home; sit down and explain the system to their politicians. After all not all politicians are that savvy about such issues..
    Just a thought.

      1. podcastkid

        The answers make more sense to me than the question. I don’t know enough. Could you translate the part in bold?

        Michael Hudson specifically asks that if this new system enables nations in the Global South to suspend dollarized debt and is based on the ability to pay (in foreign exchange), can these loans be tied to either raw materials or, for China, tangible equity ownership in the capital infrastructure financed by foreign non-dollar credit?‘

  8. James T.

    So it seems with so many of the discussions around the possible change of world trade to alternative currencies that we end up in the same place that it is just not possible. If you have enormous sums of money then the only safe place to keep is in the US and then work diligently to subordinate your fellow poorer citizens to US hegemony to maintain your wealth. Under this system there is zero chance of US default so the only option is just for countries to accept the rules based order and do their best to maintain some form of dignity while their populations starve. It seems to me just more debt for poor countries and more US dollars printed and just a matter of time until Russia and China along with the rest of Brics are put in their place and out of the way.

    1. fjallstrom

      Given what you write, and given the slow pace of the alternatives, I am starting to lean towards the view that the dollar will go when the US empire does, probably in a mutually reinforcing manner. Something like a big enough set back for the empire happens, calling into question its ability to enforce its will. A small run for the exit (any exit) starts, making it harder to finance the military, the coups and the assassinations necessary to uphold the empire, triggering a larger run, and so on.

      From this perspective, what BRICS+ comes up with could be massively important, not because it can outcompete the dollar, but because it might be the main exit capital runs towards, if it exists in a workable form and other exits are limited.

  9. eg

    I don’t see any solution that doesn’t employ aggressive capital controls. Maybe they’re not mentioned here because it’s assumed that they will be used?

  10. podcastkid

    I probably don’t understand this, but here’s the example I’m thinking of in my mind. It may be totally off. A deal is made where China builds some roads in the DRC, and most of the payment for the roads will be so many tons of Coltan. Under the Eco regime, however, the DRC can slice off some of this Coltan debt due to the mining’s debt to nature. If conflict erupted in the area, and the mining had to stop, then on the books you could make it: DRC owes China so many thousand Ecos.

    Instead of deriving Eco value (somehow) from total value of earth, why wouldn’t you base the value of the Eco on some ratio of its [whatever’s] value gold wise to how much greenhouse gas it would cost nature per each ton Coltan mined [or hundred barrels, or whatever]? You could slice off a lot per ton of liquified and shipped natural gas.

    I’ve probably got everything bass akwards, so I’m beg’n you go easy on me!

  11. Iris

    This could never happen, could it?

    The Great Taking: Have the global elite devised an elaborate plan to take everything we own?

    “In June 2023, hedge fund manager David Rogers Webb published a book titled ‘The Great Taking’.

    The book, one commentator said, describes a legal framework for the seizure of trillions of dollars of assets from public and private institutions and people. It includes primary sources and a reasonable narrative explaining how a powerful class can subvert society for their own ends.

    Webb wrote that his book is about the taking of collateral – all of it. In other words, we will own nothing.

    The end game of the current globally synchronous debt accumulation super cycle. This scheme is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass. Included are all financial assets and bank deposits, all stocks and bonds; and hence, all underlying property of all public corporations, including all inventories, plant and equipment; land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will likewise be taken, as will the assets of privately owned businesses which have been financed with debt. If even partially successful, this will be the greatest conquest and subjugation in world history.

    Private, closely held control of ALL central banks, and hence of all money creation, has allowed a very few people to control all political parties and governments; the intelligence agencies and their myriad front organisations; the armed forces and the police; the major corporations and, of course, the media. These very few people are the prime movers. Their plans are executed over decades. Their control is opaque. To be clear, it is these very few people, who are hidden from you, who are behind this scheme to confiscate all assets, who are waging a hybrid war against humanity.”

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