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Michael Hudson: [00:00:00] There’s recognition that commercial banking has become dysfunctional and that most loans by commercial banks are either against assets – in which case the lending inflates the prices of real estate, stocks and bonds – or for corporate takeover loans.
The economy’s low-income brackets have not been helped by today’s financial system. Here in New York City, red lining and a visceral class hatred by high finance toward the poor characterized the major banks. From the very top to the bottom, they were very clear they were not going to lend to places with racial minorities like the Lower East Side. The Chase Manhattan Bank told me that the reason was explicitly ethnic, and they didn’t want to deal with poor people.
A lot of people in these neighborhoods used to have savings banks. There were 135 mutual savings banks in New York City with names like the Bowery Savings Banks, the Dime Savings Bank, the Immigrant Savings Bank. As their names show, they were specifically to serve the low-income neighborhoods. But in the 1980s the commercial banks convinced the mutual savings banks to let themselves be raided. Their capital reserves of the savings banks, was just looted by Wall Street. The depositors’ equity was stripped away (leaving their deposits, to be sure). Sheila Bair, former head of the FDIC, told me that the commercial banks’ cover story was that they were large enough to provide more capital reserves to lend for low-income neighborhoods. The reality was that instead, they simply extracted revenue from these neighborhoods. Large parts of the largest cities in America, from Chicago and New York to others, are underbanked because of the transformation of commercial banks from providers of mortgages to emptiers-out, just revenue collectors. That leaves the main recourse in these neighborhoods to pay-day lenders at usurious interest rates. These lenders have become major new customers for Wall Street bankers, not the poor who have no comparable access to credit.
Apart from the savings banks, of course, you had the post office banks. When I went to work on Wall Street in the 1960s, 3 percent of U.S. savings were in the form of post office savings. The advantage, of course, is that post offices were in every neighborhood. So you actually had either a local community banking like savings banks – not like today’s community banks, which are commercial banks, lending largely to real estate speculators to capitalize rental apartments into heavily mortgaged co-ops with much higher financial carrying charges – or you had post offices. You now have a deprivation of basic bank services in much of the economy, combined with an increasingly dysfunctional and predatory commercial banking system.
The question is, what’s going to happen next time there’s a bank crash? Sheila Bair wrote about after the 2008 crash that the most corrupt bank was Citibank – not only corrupt, but incompetent. She had wanted to take it over. But Obama and his Secretary of the Treasury, Tim Geithner, acted as lobbyists for Citibank from the beginning, protecting it from being taken over. But imagine what would have happened if Citibank would have been become a public bank – or other banks that are about to have negative equity if there is a downturn in the stock and bond and real estate market. Imagine what will happen if they were turned into public banks. They would be able to provide the kind of credit that the commercial banking system has refused to provide – credit to blacks, Hispanics and poor people that have just been red-lined in what is becoming a financially polarized dual economy, one for the wealthy and one for everyone else.
Walt McRee: [00:04:10] Well, power in that realm, of course, lies with the banking cartel. They look at public banks as a threat. They hate competition of any sort, it seems.
Michael Hudson: [00:04:18] Of course it is a threat.
Walt McRee: [00:04:22] And even when we say, Michael, that we’re not going after the business you’re already doing because you aren’t lending to small, medium enterprises and so forth – we want to take on the infrastructure that you don’t want to fund, but they still are pushing back. How will we be able to get past that?
Michael Hudson: [00:04:40] I think you should say that of course you’re not going to take business away from them, because the public community bank or government-owned bank would not make corporate takeover loans or speculative derivative bets. It would not create the dysfunctional credit and debt overhead that has been expanding ever since 1999 when the Clinton administration changed the banking rules.
The problem is that the big commercial banks don’t want the productive kind of loans that public banking would make. For instance, the reason they didn’t want to extend credit to the Lower East Side or the Hudson Yards west side of New York was they wanted to sort of drive out their residents and gentrify it, by providing the money to the big developers who socially bulldoze these neighborhoods. Their policy is to kick out as many low-income renters or owners as they can, and replace them by raising rents from like $50 a month to $5,000 a month. That’s what’s happened on the Lower East Side from the time I first lived there to what rents are today.
There is a fight of the economy’s unproductive sector against people who want to use credit in a productive way that actually helps the economy. I think it’s a fight between good and evil, at least between the productive and unproductive economy, between economics for the people and economics for the One Percent.
Ellen Brown: [00:06:14] I wonder, though, if the Fed is going to even allow the banks to collapse again, with what they just did with the repo market. They can step in at any time to save anybody. I don’t know that Congress, even has a say in it. What do you think?
Michael Hudson: [00:06:30] I think that’s right. I’ve talked to Paul Craig Roberts and we discuss whether they can just keep on keeping these zombie banks alive. Can they keep the over-indebted zombie economy alive by the Federal Reserve manipulating the forward stock and bond markets to support prices? It doesn’t actually have to buy stocks and bonds beyond the $4 trillion it’s already put into Quantitative Easing. It can simply make manipulate the forward market. That doesn’t really cost any money until the big crash comes. So I think one should have a discussion over what President Trump says is a boom that that he’s created, with the stock market going up. Does that mean that the economy is getting richer? Are we fine with commercial banking the way it is, so that we don’t need public banking?
I think you have to expose the fact that what’s happened is artificial state intervention. What we have in the name of free market support of the banks is not a free market at all. It’s a highly centralized market to support the predatory financial sector’s wealth against the rest of the economy. The financial sector’s wealth takes the form of credit to the rest of the economy, extracting interest and amortization, while making loans simply to increase asset prices for real estate and financial securities, not put new means of production in place to employ labor. So you have to go beyond the public banking issue as such, and look at the political context. Ultimately, the way that you defend public banking is to show how the economy works and how public banking could play a positive role in the economy as it should work.
Ellen Brown: [00:08:14] Can you explain what you meant by forward lending? I mean, they don’t have to …
Michael Hudson: [00:08:19] It’s not forward lending, it’s buying long. For the stock market’s Dow Jones average, they’ll contract to buy all its stocks or those in the S&P 500 in one month, or one week or whatever the timeframe is, for X amount – say, 2% over what they’re selling today. Well, once the plunge protection team issues a guarantee to buy, the market is going to raise the bid prices for these stocks up to what the Fed and the Treasury have promised to pay for them. By the time the prices go up, the Fed doesn’t actually have to buy these stocks, because everybody’s anticipated that the Fed would buy them at this 2 percent gain. So it’s a self-fulfilling prophecy. We’re dealing with a government run by the banks and the creditor powers to artificially raise asset prices, on credit. This has kept alive a system that represents itself as creating prosperity. But it’s not creating prosperity for the 99 Percent. Public banking would aim at prosperity for the 99 Percent, not just for the One Percent.
Ellen Brown: [00:09:46] I’m writing about Mexico’s AMLO, who is now who has just announced in January that he will be building 2,700 branches of a public bank in the next two years. He’s expecting 13,000 branches ultimately, so it will be the largest bank in the country. His reasoning is just what you’re saying, that the banks have failed and have not serviced the poor. His mandate is to help the poor, and he can’t do that if they don’t have banking services.
Michael Hudson: [00:10:17] Is that national?
Ellen Brown: [00:10:18] Yes, all across the country.
Walt McRee: [00:10:22] “Loprabrador”, AMLO. So we know that a public monetary source is a public utility. Our vision is to create a network of local and state public banks. That leads us to the view that what we really need to be targeting is the Federal Reserve, to ultimately turn it into a publicly-owned entity. Is that folly or …
Michael Hudson: [00:10:55] I think the way to get people to support this is if they understand how the Federal Reserve was created. A few years ago I published an article in an Indian economic journal (I think it’s on my website), about how the Federal Reserve was created.[1]“How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street,” Economic & Political Weekly (India), May 7, 2016. Available on Naked Capitalism an michael-hudson.com. There was a fight by Wall Street led by J.P. Morgan. America had a central bank until 1913 – the Treasury. Until 1913 the Treasury was doing everything that the Federal Reserve began to do. The idea of creating the Federal Reserve was to take power away from the Treasury. The Treasury wasn’t even allowed to be on the board as an owner of Federal Reserve stock. The idea was to take decision-making away from Washington, away from democratic politics, and insulate the financial system from the democratic political system by turning control over to the corporate financial centers — Wall Street, Chicago, and the other Federal Reserve districts. They were the same districts as those that the Treasury already had divided the country into. Remember, these were the decades leading up to World War I when there was a social democratic revolution from Europe to the United States. A guiding idea was to democratize banking.
Wall Street very quickly developed a counter strategy to this. And the counter strategy was the Federal Reserve. You’re welcome to republish my article on your site. You and I both aim to reverse the counterrevolution mounted against classical economics and social democracy. The entity you’re talking about would probably be under the aegis of the Treasury. You’d be putting the economy back in the direction that the world was moving before World War I derailed these efforts.
You talk of nationalizing the Fed. I know people don’t like the word nationalizing. How about thing de-privatizing or de-Thatcherizing the Fed? You have to represent the Fed as having stolen economic and financial policy away from the public domain. It became part of the neoliberal project taking form in Austria in the 1930s. You’re trying to restore the classical economic vision of productive versus unproductive credit, productive versus unproductive labor, and public money as opposed to private money. These distinctions were erased by the censorial neoliberal counter-revolution.
It’s not that you’re radical, that these people had a radical revolution to carve away the financial system from democracy. And you’re restoring the classical vision of democratizing, re-democratizing finance and banking.
Walt McRee: [00:14:12] I want to thank you for saying that, Michael, because de-privatizing the Federal Reserve is so much more accurate and powerful. You’ll recall that we kind of exchanged a phrase when I said “institutionalized deception.”. I think that’s really important. But let’s say that prior to that, Stephanie Kelton gets in there, or somebody from the MMT crowd gets into a new administration prior to de-privatizing the Fed. Does MMT have a place to play or to emerge in that environment?
Michael Hudson: [00:14:55] Of course, and here’s the role: You can leave the commercial banks to do what they’re doing, but you’re not going to provide Federal Reserve credit for them to load down the economy with unproductive debt. The question is, if you’re going to create real community banking via a public banking sector, where will it get the money to lend out? How do we provide money to the red-lined areas of the economy to actually finance tangible capital investment and people’s living needs, not just predatory lending? The way that MMT comes in is much like the Chicago plan for one hundred percent reserves. These community banks will need Treasury-created depository credit beyond the deposits they raise in their local areas.
They need more money. MMT will provide credit to these banks in exchange for their loan originations of a productive character, on terms that borrowers can afford, with realistic mortgages also to build public housing. The new Fed that we’re talking about will be a major depositor and will provider of the capital deposits and reserves to the banks. Right now, it has provided $4 trillion of Quantitative Easing credit to the banks, not to put into the economy but only to inflate the stock and bond market and make housing more expensive. Wouldn’t it be much better to provide credit to community banks that actually would make credit available for productive economic purposes – and not for takeover loans, stock buybacks and asset speculation?
Productive credit was what everybody expected banking to develop in the late 19th century. Germany and Central Europe were leading the way. It was called Middle Europa banking, as opposed to Anglo-American banking. (I discuss this contrast in Killing the Host.) That was essentially following the classical model, as everybody expected banking to evolve prior to World War I.
Ellen Brown: [00:17:29] Cool. That’s totally what I also wrote about in my latest book. The Federal Reserve is where you should be getting credit, so you don’t have to borrow it from somewhere else. Everybody thinks this whole repo thing is so contrived. It’s re-hypothecated. One party owns the collateral at night, the other party owns it during the day. It’s all just bluff to make it look like they borrowed something that wasn’t really there. So let’s just acknowledge that all money is just credit. And like you say, if you have a good loan, a good project to be monetized, that’s the whole point of a bank. It will turn your future productivity into something you can spend in the marketplace. And the central bank is there to provide the credit.
Michael Hudson: [00:18:21] That’s right.
Ellen Brown: [00:18:22] Turn it into dollars.
Michael Hudson: [00:18:24] That’s right. My way of describing it is to look at history, to show that this is not a utopian idea. It is what made German and Central European banking so much more productive in the decades leading up to World War I. So we actually have historical examples of good banking versus bad banking. But the predators won in the end.
Ellen Brown: [00:18:53] Well, regarding this whole repo thing, one big problem we have with our public banks is the 110 percent collateralization requirement in California. How is a bank supposed to make loans if it has to use its deposits to buy securities – something safe and yielding low interest to back the deposits? It seems to me that what the big banks do – and I think we could do it, too – is to take those deposits and buy federal securities at 1.5 percent, and then they turn around and use the securities as collateral in the repo market, where they pay 1.5 percent. In other words, they earn 1.5 percent and they pay 1.5 percent. So it’s a wash. They get their money for free. I think we could do that, too. Or are only certain players allowed to play that game, and we can’t jump in?
Michael Hudson: [00:19:50] Well, you’re the lawyer. Of course they could do it. I think one of the things that you and other progressives have recommended is that the Fed should stop paying money to the banks for their reserve deposits. Stop giving them the free giveaway. If you want to say, “We’re against the largest welfare recipients in the country. They’re not the people you think. They’re the Wall Street banks. These hypocrites want to cut back Social Security to balance the budget. They want to cut back medical care and social services, and make themselves the only welfare recipients.”
Ellen Brown: [00:20:30] Right, agreed. But if we just stand on our high horse and say this has to change, nothing will happen. We could do it ourselves and just show what you’re doing in contrast to what they’re doing …
Michael Hudson: [00:20:44] You’re asking for symmetry. They’re making us carry a big load on our back, that they don’t have to carry. They’re loading the dice in their own favor. You want to unload the dice and stop the insider favoritism. You correctly represent the banks as being insiders. You have to say, “Look, these insiders are trying to keep a monopoly.” You could use the anti-monopoly legislation that’s been on the books since Teddy Roosevelt’s time. You have a lot of legal power to break up the big banks. You could treat them like I think they could treat the pharmaceutical companies if Bernie gets in.
Walt McRee: [00:21:44] Monopolies are being challenged by the shadow banking industry. New forms of payment exchange technologies seem to be eating away at that singular source of credit. What’s your prognosis for how that’s going to evolve? Will the big banks find a way to clamp down on that ultimately?
Michael Hudson: [00:22:05] Are we talking about cryptocurrency?
Walt McRee: [00:22:07] That would be one example, yes.
Michael Hudson: [00:22:10] Well,. you can’t stop people from gambling. People think that buying a cryptocurrency is like buying an Andy Warhol etching. Maybe it’ll go up in price if a large number of people want it. But basically, it’s junk. It’s very speculative. It’s certainly not stable. It goes up and down. One day there may be a solar flare that’s going to wipe out all the bank records for these things. But there is no way to stop people from doing something that seems to be silly or gambling. You certainly will not insure them. So you will not give them any protection against loss. You also will want to insulate the economy from having any transactions in crypto, in these alternative money things that pose a big threat of loss. They are not real money, because the government will not accept payment of cryptocurrencies as taxes or for public goods and services. The government will only accept specified forms of money. You can create any kind of swap or bet. If you want to create the equivalent of a racetrack on horses. You can do it, but that’s a financial racetrack. I think there may be taxes on racetracks. They were unregulated for a long time. But Hollywood movies showed that there’s a lot of criminalization going on there.
Walt McRee: [00:23:59] We were all amused, well, maybe a little wondering about Max Kaiser. Ellen and I and Tyson Slokum had some time with him over there just before you were at his Brooklyn studio, but Max is into Bitcoin in a big way, and he sees it as the new gold.
Michael Hudson: [00:24:20] He told me that a lot of people watch his show because they’re gold bugs or they are interested in Bitcoin. I think he’s tried to take a neutral view of it, certainly in our personal conversations. He’s not a gold bug and he’s not a Bitcoin or other bug. But he said that a lot of people want to find out about it, so he has guests on his show telling people, “Here it is, take your choice.” It’s part of the new speculative financial landscape, just like swamps are part of landscape for Florida real estate. So he’s going to cover the whole spectrum. Reuters produces his shows, and the audience wants to hear about this. So he talks about what they want to hear.
Ellen Brown: [00:25:20] I think he actually does promote Bitcoin. He’s heavily invested in it and he was one of the originals, so he’s obviously made a lot of money on it.
Michael Hudson: [00:25:29] Okay.
Ellen Brown: [00:25:29] I think he agrees that it can’t be a national currency. It’s too slow, too expensive, and too environmentally unfriendly. But like you say, it has been a good investment, just like fine art or something that, if people want it, the value goes up. Plus, there’s a big black market for it, for trading and things that you don’t want the government to know about.
Michael Hudson: [00:25:57] It’s a real phenomenon. I know people who benefited from Andy Warhol. So he saw the phenomenon and he seems to have made money, but when Steve Keen and I and others got together with him for a couple of days two months ago, the topic never came up in discussion.
But gold did. I wonder where the gold of Libya went, for instance. Apparently it was all taken and I understand the US gave it to ISIS. Hillary said it had to go to ISIS to act as our Foreign Legion. We gave them Libya’s weapons. Some of the gold must have just been taken by the CIA and State Department for dirty tricks for its black operations. Certainly, America wants to prevent any other country or large gold possessor from having enough gold to try to reinstate it as a means of settling balance-of-payments deficits. America runs a large military deficit, so at a certain point, the more money it spends abroad for its 800 military bases, the more gold it would lose. Just like in General de Gaulle’s time during the Vietnam War, although actually Germany was taking more gold than France. So America wants to keep the dollar at the center of the world financial system. That really was why it went to war with Libya, because Libya was one of the first countries to de-dollarize and move its currency toward gold. So you’re having a group of countries – Russia, China, Iran and others – add gold to their reserves instead of dollars. You’re having a de-dollarization move throughout the world to break free from the US ability to do what it did do Iran.
When Iran borrowed in dollars under the Shah, it used Chase Manhattan Bank as its paying agent. It put enough money into the account to pay its foreign debts service. But then the State Department told Chase to screw Iran and refuse to turn over the payment. Now that the Shah wasn’t running Iran, once Chase refused to turn over the payment and froze Iran’s account, that meant that Iran went into default on the entire dollarized foreign debt. It was liable for a huge amount of capital.
That was a warning for the rest of the world that no government could safely put its money in an American bank or an American bank branch, or in a British branch that would act as a subsidiary of the Pentagon. Because if you do, the bank can simply force you into default at any time, just like the US CIA can come in and use electronic weaponry to destroy your bank payment-clearing system. That’s why the threat of cutting Russia and China and other countries off from the Swift Interbank Clearing System led Russia to develop its own clearing system. With a flick of a switch it can begin to work anytime United States tries to cut Russia off from the SWIFT payments system. So you’re having the whole world de-dollarize very quickly. And right now the question is what Europe will choose. Are Germany and other countries going to become part of the de-dollarized system, or remain part of the dollar area?
This is part of the fight against using the IT chips and the communications chips from Huawei. Huawei did not put US spyware into the system. The United States says that if it can’t have a phone system and communications system that it can control by spyware and use to blow up your economy, your public utilities, your electrical systems, then you’re our enemy, because we feel insecure without this control. When President Trump said that Huawei was a threat to US national security, he meant that we don’t feel secure unless we have the power to destroy any economy that acts in any way that is independent of the United States – because you might do something we don’t like. This is the most aggressive concept of security that one could imagine. So of course the rest of the world is seeing its own national security as having a financial dimension. The financial dimension is to create a monetary and financial system that minimizes connections to the dollar except to the extent of having to buy and sell dollars to stabilize foreign exchange rate.
Ellen Brown: [00:31:31] There’s a lot of talk, even among central bankers, that we need to get off the dollar as a global reserve currency. But it seems to me that gold is also manipulatable. I mean, it’s not the ideal I had envisioned a system where instead of reserves being a thing, like dollars or gold that you can actually trade, it would just be a measure, like a yardstick. You would be able to compare one currency to another according to what you could buy with it. Like you’d have a whole basket of things that everybody uses in every country. And now that they report that kind of stuff, it wouldn’t be all that hard to get the figures and, you know, just compare and say, well, your dollar will be worth so many pesos in Mexico or whatever. That was my idea, but what do you think?
Michael Hudson: [00:32:27] That would meet one of the criteria of money, which is as a measure of value, but it would not do at all for international money. You have to have some means of constraint. In other words, suppose the United States continued to run another military budget deficit like it did in the Vietnam War. There is no way that you could use the balance of payments as a constraint on the policy of deficit countries, which are usually the military aggressors. The whole idea of going off gold was that under the gold standard no country can afford to make war, because if you go to war your currency collapses. In 1976, Herman Kahn and I went to the Treasury and – this is to answer your question. He put up a map of the world and said, “These are the countries – Scandinavia, Western Europe, the United States – that don’t believe in gold. They’re all politically stable social democratic countries. They have faith in government. No look at these others … here’s the rest of the world – India, South America, Africa and most of Asia. these are people that believe in gold. Why do they believe in gold, but not the Protestant cultural area? Well, they don’t have faith in government. They don’t trust governments. They want some option that is independent of government. Gold is not only to bribe the border guards if they’re escaping from somewhere. They want to be free of governments that have been captured by anti-democratic, predatory forces.”
He said if you tried to think of what you would make that is an alternative to the dollar that people could understand, well, for thousands of years, people have decided that gold and silver. (I’m sure that you could add platinum and palladium.) So they have been the ultimate means of settlement, and hence of international monetary constraint.
Gold isn’t to be used as money. It’s not to be used as a normal means of payment. What it is to be used for is as a balance-of-payments constraint on the ability of countries to run up chronic deficits that are mainly military in character. So I called our presentation “Gold: the Peaceful Metal.” Well, needless to say, the Treasury didn’t go for that, because they said that we had just explained how super-imperialism works via the dollar. So they didn’t go back to gold. We lost that argument.
Ellen Brown: [00:35:34] Isn’t the reason we went off gold standard, though, that there simply isn’t enough gold and that we wound up leveraging it, and …
Michael Hudson: [00:35:42] No, there’s plenty of gold. There wasn’t enough gold to pay for the military deficit. Every month the dollars we spent in Vietnam would be turned over to the banks in Indo-China. They were French. They’d turn the dollars over to Paris and General de Gaulle would turn in these dollars for gold. We had to pay in gold for the military deficit, which was the entire source of the US balance-of-payments deficits in the 50s, 60s and into the 70s. America went off gold so that it could afford to wage war without the constraint of losing its control over the international monetary system.
Ellen Brown: [00:36:29] We went after gold domestically because it didn’t work. I mean, you had to use fractional reserve lending …
Michael Hudson: [00:36:35] Yes, of course gold doesn’t work domestically. It’s certainly not an appropriate domestic money supply. I’m only talking about it for settlements among central banks internationally.
Ellen Brown: [00:36:49] But you said it’s not to be traded. But if you don’t, how do you settle your balance of payments?
Michael Hudson: [00:36:53] It can be traded. There is a market. And you began by saying, quite correctly, that gold prices are manipulated. Well, right now the US and the central banks are manipulating its price to keep it low, in the same way that they’re manipulating the stock and bond market by buying forward. Except in the case of gold, they’re selling forward. If they keep agreeing to sell gold at a very low price, people will see that if they can buy gold at this low price, why should they buy it at a higher price today, as the price will fall and be driven down. So, yes, gold is manipulated downwards today by the U.S. – essentially the plunge protection team acting internationally to keep the price of gold down to discourage other countries and populations from buying it is protection against collapse of the financial system.
So we’re back to the fact that the financial system is dysfunctional. In a functional financial system, you wouldn’t need domestic reference to gold. You’d have a domestic financial system that works fine without gold. Gold is what you have when the financial system becomes dysfunctional and there’s a breakdown.
Ellen Brown: [00:38:21] Well, it almost seems like you need some sort of global regulator. But that’s like a one-world government, which we all freak out about.
Michael Hudson: [00:38:28] You certainly don’t want a one world government. Right now all the plans for world government are neoliberal. They aim essentially to limit, to break up democratic government regulation of corporate business, mining and monopolies. The idea of a one-world government is to destroy any democratic government’s ability to make its own laws in the interests of labor or society. You would have a parallel government of wealth, government of property. It’s what the University of Chicago calls the Law and Economics regime. And this is, this is fascism on an international scale. And there is a wonderful book by Quinn Slobodian in 2008, Globalists: The End of Empire and the Birth of Nationalism, showing how these plans were developed by fascists in the 1930s and by the fascist promoters at the University of Chicago. The fascist promoters were people like Hayek and von Mises and the Geneva economists around the League of Nations. So when they say they’re anti-government, they’re really anti-democracy. They’re for an iron-fisted government by big business, big mining and big oil – and most of all, by big banks. That is the reason why people don’t trust an international government. It would be an international iron fist of fascism, the way the current maneuvering of the financial classes and the rentier classes and the neocons have arranged things.
Ellen Brown: [00:39:56] Well, I totally agree. It’s quite frightening. We want sovereignty for all our little nations, and even our little cities, states and so forth. But it seems to me, how do you get everybody to work together? For example, Venezuela has the debt problem that any country has that’s heavily in debt to foreigners, or to vulture funds or whatever. There’s not a universally recognized court that you can go to. And, you know, everybody agrees. It does seem like on some level we need some sort of collaborative effort where we all agree on the rules.
Michael Hudson: [00:40:33] Absolutely right. Now, of course, the United States would not recognize any international court. So, again, you’d have all the rest of the world belonging to the court, and the United States as the outlier. It’s like you’re the healthy body and we want to parasitize you. And it will not recognize the court. My Super-Imperialism reviews the history of this policy.
But you’re right: There should be a court that would recognize such things as odious debt for governments. Venezuela’s problem is that under the dictators that the Americans had installed by assassination and force, Venezuela had pledged its oil reserves as collateral for its international bonds. That gives a vested interest in the creditors to make it default and grab its oil reserves and its investments in the United States, the oil distributors it bought. So, yes, you do need a set of international rules for writing down bad debts. That means an alternative to the IMF. You need an anti-IMF. Instead of acting on behalf of the creditors imposing austerity on countries, you should create an organization representing society. And s the interest of society is to grow. Instead of promoting austerity like the IMF does, it would promote prosperity. Instead of financing the US government dollarization and giving US control, it would be part of the de-dollarization group.
So you’d have a pro-growth group of nations – of the world economy – using finance for growth and development with productive credit. You’d also have the United States providing predatory credit, austerity, cutting back Social Security, cutting back Medicare and having a polarizing economy that is shrinking and will end up looking like Greece or Argentina. The rest of the world would follow more productive and less oligarchic financial policies. That should ultimately be our global dream. But there’s been little preparation for that. The financial sector’s neoliberals have o put together an almost conspiratorial Law and Economics lobbying group to promote the Trans-Pacific Partnership and World Trade Organization rules blocking governments from imposing anti-pollution fines or regulating monopolies or closing tax havens. If you fine an oil company for polluting, the government is obliged under this international law to pay the oil companies what they would have earned if they would have continued to poison the environment. This is …
Ellen Brown: [00:43:41] Shocking.
Michael Hudson: [00:43:41] Definitely. This is an international deathwish.
Ellen Brown: [00:43:45] Agreed. Totally agreed.
Walt McRee: [00:43:47] We’ve been speaking with economist Michael Hudson. Our thanks to him for being on this program again. And you’ll be hearing more from Michael on future editions of It’s Our Money.
Walt McRee: [00:43:59] Well, that’s it for this edition of It’s Our Money with Ellen Brown. Thanks to our guests or sponsors, Public Banking Associates, and to you for listening. Be sure to check out Ellen’s latest writings on the economy and the changing world of money by visiting ellenbrown.com. And for more information on public banking, visit PublicBankingInstitute.org. For information on how local and state governments can obtain professional insight and council about public banks from key national experts, visit PublicBankingAssociates.com. I’m Walt McRee. See you next time on It’s our Money with Ellen Brown.
Notes
[1] “How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street,” Economic & Political Weekly (India), May 7, 2016. Available on Naked Capitalism an michael-hudson.com.
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“The fascist promoters were people like Hayek and von Mises ”
Yeah right. 😂
A flat out lie . Any serious student of Mises [not so much Hayek, perhaps], knows that he [Mises] vigorously, consistently opposed all forms of socialism [of which Fascism is a variant] throughout his entire professional career. He even devoted an entire book to it:
” Omnipotent Government: The Rise of the Total State and Total War” https://mises.org/library/omnipotent-government-rise-total-state-and-total-war
…..which almost exclusively focusses on [and systematically deconstructs/destroys] the German fascist model.
Hudson yet again ably demonstrates that he is just yet another demented economic halfwit. But what did I expect?
And so it goes..
No regards, onebornfree
An actual feudal system where people actually close borders and check on every foreigners would be better than whatever it is right now.
What is credit? Trust.
Why are some people denied credit? Because they (or those who they statistically resemble) have a history of untrustworthiness.
The last 40 years were a period of Peak Trust. What is belief in Open Borders and Universal Equality but the apotheosis of social trust? What are near-zero interest rates on 30-year IOU’s but an expression of utterly insane levels of social trust? “What, me worry that something during literally half my adult lifespan might change, such that I might not get the money I loaned returned to me?”
Our system went off the rails when it became possible to create the ability to enter the marketplace and purchase without first having had to produce anything. Central banking is an open violation of Say’s Law. Imagine if, instead of producers producing and then going to market to sell, literally everyone simply went to the central bank, which would loan into existence the ability to enter the market as a buyer? WHAT WOULD EXIST TO BUY? NOTHING! What the Fed creates (credit money) is literally nothing. It adds NOTHING to the market as a whole. It debases the value of production by crowding out the demand-creation of producing something with demand-created-out-of-thin-air. Credit creation unbacked by production constitutes a war on capital itself. Credit creation unbacked by real production is the gang-rape of producers everywhere.
Credit should only be created by producers, who could “credit” the next participant in the structure of production (essentially vendor financing) and as the product moved from layer to layer on its way to final sale, each time it was sold to that next layer each previous credit would be retired (repaid out of proceeds.) Credit as money would NEVER obtain seeming permanence, so it could never be pyramided in a Ponzi scheme. Unwise production (or producers) would reap immediate losses when their vendor financing returned less than the costs of production. Economic activity would be organic, balanced and boom-bust cycles relatively minimized.
Bonds (IOU’s) are an intangible asset. Starting at the bond market low of 1981, the price for debt rose, and because markets for intangible assets do NOT obey Econ 101 price models, the market-clearing quantity rose, too. A virtual galaxy of debt was issued and purchased by Pollyannas throughout society. Everyone is planning on collecting on those IOU’s someday, even as IOU’s counted as WEALTH drove price rises across all asset classes.
This mangled the economy, distorting economic demand toward industries where IOU-issued spending flooded in. Medical services (and insurance), higher ed, the welfare-state apparatus and the Military-Industrial-Complex, AND DEBT-FUELED CONSUMER GOODS all crowded out capital formation and personal savings. Most of what people think they own now is just other cross-linked IOU’s.
What happens when all those competing IOU’s are reconciled, such that we discover (1) credit-from-nothing for 40 years destroyed the creation of real capital (with which it competed) and (2) we find out just how much actual, valuable collateral still exists (and who owns it?)
We may be early in the process of finding out.
PS: If I’m right, the world is finally entering the Great Bondfire, where all those future promises to pay are burned to ash before our eyes, resulting in the largest collapse in “wealth” ever recorded. If so, we’ll eventually resume the use of the term, “Bail In” at banks, where bail-in’s are simply an accounting recognition that the depositors’ money was lent out to those who cannot repay, so it is GONE.
We’ll know when interest rates begin to rise. They can’t go much lower, and for each tick higher the capital value of the galaxy of existing debt declines by trillions of dollars. Once rates begin to rise (reflecting a loss of trust in buying long-term debt) and hit an inflection point, the rush for the exits will commence. Very little of existing IOU’s will remain after that runs its inevitable course.
Hayek and other libertarians do not like any government involvement .
If that’s what a democratically elected Gov does-getting involved with welfare and tax cut or tax increase-,then Hayek just has to accept the sad fact and not blame it on any fascism or totalitarianism
Asides that fact , we need to look into what Hayek has offered . Not a whole lot where government doesn’t come into picture either by forced or bribed diplomacy or military intervention abroad.
Equally true that all major inventions on which Microsoft Google Face book are based or Boeing or big pharama products so far invented, have public’s money as seed money and has used previous scientific foundations .
Do the public get anything back?
Who gives the monopoly through patent on products for 20- or 30 years ? Public representatives forced by bribes . Why do we have this concept even of patent? Who gives a rat ass to need of patent for progress when don’t give a rat ass to other intervention that can bring progress ?
Did Hayek ever offer any solution to possible monopoly after deregulation of industries in 70-8-s ? That monopoly now has destroyed services in airlines in cell phone services and many more areas.
Serfdom has come to US not through fascism or communism but through capitalism .
Ellen Brown: [00:18:53] Well, regarding this whole repo thing, one big problem we have with our public banks is the 110 percent collateralization requirement in California. How is a bank supposed to make loans if it has to use its deposits to buy securities – something safe and yielding low interest to back the deposits? It seems to me that what the big banks do – and I think we could do it, too – is to take those deposits and buy federal securities at 1.5 percent, and then they turn around and use the securities as collateral in the repo market, where they pay 1.5 percent. In other words, they earn 1.5 percent and they pay 1.5 percent. So it’s a wash. They get their money for free.”
Can you help us understand this please by providing some numbers or examples – that kind of explains how this works
I understand the bank borrows from other back over night and some of these banks might need Fed money to be able to loan to other or ask for loan from another bank
Once bank gets the money ,it can do various things including buying Fed securities and then use the same Fed security to borrow more
It makes no sense. I am missing something here . May be you can help
Thanks
If you think what Soros, Koch and the rest of the oligarchs practice is capitalism, I’ve a bridge to sell you.
You don’t seem to grasp that the US government has long been sold to the highest bidder, and those who bid the highest belong to a single identifiable group whose shared ancestry makes them untouchable. https://www.haaretz.com/jewish/meet-the-jews-shaping-the-2016-election-1.5367173
Who do you think owns and runs the banking system that created Americans’ debt peonage? Do you think it’s a shock that statute legislation makes their activities easy and profitable? Is that capitalism to you? Not to me. It is the definition of neo-feudalism, and we know who are our lords-of-the-manor, who turn our daughters into prostitutes (Epstein, et al) and pit their pets against those they rob (by making everyone work for the company, shop at the company store, bank at the company bank, save at the company investment firm, watch the company’s movies, listen to the company’s News Media, etc., etc.) in order to keep those they rob too occupied to realize who is raping them.
Hayek’s great contribution was to recognize the “information problem.” Reality (capital R) is infinite and unknowable. This is why those who promise to “Plan” economic prosperity are liars and fools, for they have the PRETENSE of knowledge, nothing more. As Mises irrefutably proved, it is IMPOSSIBLE to allocate heterogeneous resources in the absence of market prices. Trying to do so from the Top Down simply squanders scarce resources and impoverishes people (except those at the top, of course.) This doesn’t mean that wise stewardship should be chaotic and anarchic. It means that all interventions in markets come at a price, and that that price should not be minimized, papered over or LIED ABOUT. Lying is what socialists do, same as do oligarchs (or do I repeat myself.)
My ideal world would be of millions of small, homogeneous communities, each with a different set of accepted rules. Those who live in a particular community would agree to that list of explicit rules, and no one would be allowed to hang around and try to change the rules (or break them after having pledged to conform.) Those who wouldn’t behave would simply be ejected to find a community that would allow what they wanted to do. This way, people who want to do things I think are self-destructive and stupid could do them, just not next door or on my nickel.
Of course, those who insist on economic systems that are incompatible with human nature would probably all starve to death. Not. My. Problem, as long as they aren’t upwind when their corpses rot.
What ever it is , it’s not communism or socialism unless we are talking of oligarch’s nepotism through control of banks ,of fianncrd , media, and the university education consistent with propagating the ideologies behind the creation control and consolidation of the oligarch’s interest as Communism .
How did we get there ?
What part of our history should be challenged? What part of the nature dictation should be removed?
What part of the system should be destroyed?
What historical BS was used to start those plannings bad activities ?
How did we manage to influence people who find themselves hurt ?
These are the questions and those questions could be found in the study of post WW1 economy . But what made the changes possible , can be looked into ore WW1 context
“What part of the nature dictation”
should read as
What part of education , like Chicago School or Washington consensus should be thrown away ?
All Truth (capital T) starts with axioms we know to be true and reasons out from there. That yields enough to go on, but the Real World will always be a mysterious place. The notion that it can be reduced to a complex equation (or all important questions can be answered empirically) is a delusion of the first order.
All economics since the inversion of Say’s Law should be thrown out from the get go.
“Production precedes consumption.” In other words, if you want to enter the marketplace to consume, you must first produce something a willing buyer will trade you for, at a price received that is higher than the sum of all inputs.
Modern economists invert this to mean, If you build it then it’s product. That’s true idiocy. Real product can only be determined in a market of willing sellers and willing buyers.
Not if you live in a country of State Socialism which creates trillions out of thin air, which is the U.S, today.!!!
You idiot. I won’t even argue your points. Too boring and wrong. Like, little kid wrong. Hudson is so much smarter than you and then you dare presume to contradict him. Hardehar.
I suspect that you are not missing anything — its merely that the system is so corrupt that you can’t imagine how it can exist ?
Actually, i think the Fed loans out funds to banks & then the bank places any excess reserves back with the Fed, which then pays out interest to the bank greater than the interedt on the original loan. So its not really “a wash”, its a nice little “earner” for the bank….
“This is why those who promise to “Plan” economic prosperity are liars and fools, for they have the PRETENSE of knowledge, nothing more. ”
Of course, this point is true — but its posed as an absolute. No government can “plan” an entire economy — we know this from the failings of the USSR etc. But nor can economies be totally unplanned. The US is not an unplanned economy: its an economy planned by the 1% for the 1%.
Modern economies are “mixed”. There is coordinated planning between the public & private sector.
Sadly the US Gov’ has renounced its responsibilities to “plan”. Had the US Gov “planned” it would never have allowed key industries, knowledge & talent to be off shored to China. Such off shoring was a private plan by the 1% for the 1%. Worked well — for them.
Quibble: It’s an economy planned by planners bought by the 0.01%, for the exclusive benefit of the 0.01%.
Hoppe is irrefutably correct in his indictment of “democracy.” Every democracy will, by axiom, become politics sold to the highest bidders. Our “highest bidders” are all from the USURY industry, so of course the USA is a nice, open-air prison of debt peons.
There is no ideal system. Democracy is arguably the worst, because it has a lot in common with non-traditional vices. Traditional vices (drugs, booze, gambling, prostitution) have very visible downstream destruction, so, like a murderous tyranny (e.g., Stalin’s USSR or Pol Pot’s Cambodia) it’s very easy to say, oh–these are really bad.
Subtle, modern vices like video game, social media or porn addictions, don’t have such clear-cut downstream consequences, so they exist in a fog of rationalizations that let them spread like syphilis in a whorehouse. Democracy is “rentier” government, i.e., rule by temporary caretakers. Hoppe points out how renters’ behavior differs from owners’ behavior when it comes to exploiting the property in question. Democracy guarantees rulers who are short-run oriented (because they have power NOW, but not necessarily later) so they asset-strip while the opportunity exists.
Democracy infantilizes the citizenry.
What’s the alternative? Hereditary monarchy would probably be better. At least it would end the perverse incentives under which we now groan. At least the common man would see the state as something OTHER than an extension of his desires.
A synopsis of Hoppe’s view on this is here: https://mises.org/library/democratic-leviathan
I think a world of small-ish polities, largely hereditary monarchies, would offer a better balance of power than does our current system. As I said, I don’t object to all “planning” (e.g., some kinds of protectionism make perfect sense, as long as everyone acknowledges the costs.) I simply note that it’s a continuum, and a socialist state is pure idiocy, just as is an unfettered market where selling babies for barbecue would be allowed. People like to live in place where the rules are coherent. Some want different rules than others. I’d like to see a world where everyone gets what they ask for (and lots of them would get it good and hard.)
The 2-sd rule applies again, only in this case it’s at least 3-sd.
Imagine if you were playing Parker Brothers Monopoly(tm).
The banker offers to start loaning limitless amounts to other players (and to himself, because the banker IS ALSO A PLAYER!!)
Wages (in the form of passing GO) remain unchanged at $200 per cycle, but players soon learn to borrow against the value of their properties in order to buy others’ properties. The players who are most aggressive about this emerge as the strongest, and the prices of Board Walk, Park Place and Baltic go up 100%, 300%, 1000%.
IOU’s to the bank are also traded back and forth. But it’s all collateralized by the rather fixed number of properties on the board. Side-industries (off the Game Board) emerge, fueled by the ability of players to borrow limitless amounts from the Banker, who simply writes “You Owe Me $500” on blank strips of paper as a means of expanding the money supply (VIA CREDIT, which becomes “money” when it’s borrowed into existence.)
All this works because the players all tacitly agree to believe in the veracity of all those metastasizing IOU’s (hence, when they’re traded player-to-player or player-to-banker, they trade at near face-value…AKA a near-zero interest rate.) As the nominal price of properties skyrockets, the players all laugh and clap the banker on his back, congratulating the banker on his excellent idea of expanding credit.
What happens when it dawns on the players that either (1) there’s no way to actually service all those debts from Game Play or (2) the guy playing banker has conned them all into pledging 100% of the Game Board’s properties to the banker as collateral, and that the banker can foreclose on the debts and suddenly WIN THE GAME by owning everything?
This is central banking in a nutshell.
Adding complexity to an already far too complex system merely hastens blow out of distributions that are skewed fat tails and stressed to a breaking point of systemic failure. Greenspan purposely built a complex financial empire of asset inflation to replace Volcker’s fiscal prudence & macroprudential professionalism system wide.
Once Greenspan has locked in the asset inflation regime & deregulated Glass-Steagall Act it was off to the races on a credit card for the largest parasite in the financial empire governing by force.
On September 10th 2001 Donald Rumsfeld announced to the world that the ever incompetent Pentagon had misplaced $1.3 trillion USD of taxpayer money. On September 11th 2001 Donald Rumsfeld took part in a clandestine covert US Military operation to assassinate all of the principle investigators & forensic Chartered Accountants that were about to uncover the crimes taking place under Donald Rumsfeld’s directorship as Pentagon executive.
The USA has always been a system of fraud by stealth of US Military force thugsterism & all out fascist behaviour.
Great synthesis by Hudson IMHO.
RW
“In times of crisis, the securities exchanged in the repo market become more volatile, and the “counterparty risk” of trading repos (the risk that the bank you’re doing business with won’t be able to buy back their securities when the time comes) suddenly increases. Usually, counterparty risk in repos is close to zero, due to the short-term nature of the market. The upshot of all this is that when markets are volatile, otherwise solvent financial institutions may not be able to fund regular operations. That creates massive distortions in financial markets, and trickles down to consumers and businesses that rely on banks for credit.
So the Fed sometimes transacts in repos, lending banks cash overnight in order to ensure that the financial system remains healthy.
But after today’s announcement, observers on the left immediately balked at what they saw as the government giving handouts to banks instead of hard-working Americans. Alexandria Ocasio-Cortez, the beloved representative from New York, asserted that “the amount that the Fed just injected almost covers all student loan debt in the US.” “Why not bailout indebted students instead?” she implies. In the interest of correcting that misunderstanding, dear reader, I have decided to remain in Manhattan writing this blog post instead of buying canned foods and absconding to the countryside.
9
The Fed is not cutting a check to financial institutions.” https://www.nationalreview.com/corner/federal-reserve-not-cutting-check-to-banks/
Ah, what a joy it is not belong to the Orthodox Religion of Political Correctness/Identity Politics, and to have a place like TUR where freedom of speech and assembly are still valued.
Because, by not being a believer, and having TUR as a resource, you can see and say things that this fundamentalist theology stubbornly and intentionally ignores. So, with that in mind…
should read, “Blacks, Hispanics and poor Whites.”
And “Citibank”, “commercial banking system, “the wealthy”, “banking cartel”, should read
As opposed to “Jews” or “The Jews”, etc. An important detail worth pointing out to make clear that JSI has long since taken on a life of its own and won’t hesitate to throw other Jews under the bus in a nanosecond as collateral damage so as to protect its own trough (just as their Useful Idiot Shabbos Goys will do the same to other Whites, or Blacks to other Blacks and Latinos to other Latinos; you get the idea).
This is what gives more empirical content to the term “Hostile Elite.”
And yes,
Not only that, but in their psychotic arrogance, they hate any challenge to their authority.
Conspiracy Theory?
Who needs a conspiracy theory when you have
The Facts of Cultural History
The Patterns of Human Behavior and
The Reality of Current Events
all aligned like a Perfect Storm and staring us right in face?
Or, better yet, as I’ve said before, but will again because it’s worth repeating,
Is The Hostile Elite’s insane demand to be placed above criticism supposed to make us forget that they’re as imperfect as the rest of us, and, like the rest of us, just as capable of bad behavior?
The only difference being some of us are at least willing to own up to those imperfections and correct them, as much as that’s possible, through a process of continuous learning, change, and growth.
What is the point of recognizing the humanity of “The Other” if we’re not allowed to recognize the very imperfections that make The Other human?
By refusing to acknowledge the imperfections of other individuals and groups wouldn’t we be depriving them of their humanity?
Who in their right mind would commit themselves to denying that the human race is fucked up?
Goethe said reading The Illiad was enough to convince him of it forever.
And, in a way, wasn’t that the point of a Free Democracy*, that we learn to Embrace The Fucked-upness together? I mean, what else have we got better to do with our time?
Since JSI and their above mentioned Proxies who together comprise The Hostile Elite don’t hesitate to do it to the rest of us, is it right or just that they should then demand to be placed above criticism when it’s our turn to speak?
And wouldn’t their ability to silence us so that we can’t speak at all be proof of their supremacy?
Wouldn’t that proof expose and invalidate their claim of “White Supremacy”, totally discrediting them in the process?
Leaving those deadly questions aside, one thing is clear,
The fact of the matter is, we don’t need to ask for The Hostile Elite’s permission to care about our children’s future.
And make no mistake about it, it is all about the children.
Michael Hudson is right
And what is the difference in this case between Good and Evil?
The good know they’re imperfect, the evil don’t.
For this reason, and to use their own words against them,
*as opposed to Absolute Democracy; the book to read is Of Human Freedom by Jaques Barzun.
Those who indulge in the fallacy of misplaced correctness through their continued misuse of the word “Democracy” would do well to read that masterpiece.
This capitalism in a nutshell, and it is how the world has worked since the 1400’s when European nations began to form and international trading/banking took root. As a result, we are able to have nice things by way of a growing economy.
What do you propose to change this system that will enable the growth of the economy and ensure the flow of goods/services to consumers? Please be specific.
“What’s the alternative? Hereditary monarchy would probably be better. At least it would end the perverse incentives under which we now groan.”
There is a large assumption here. Who makes this decision as to who is a part of this hereditary monarchy? What is the criteria involved? What privileges do they maintain? Would there not be “perverse incentives” by way of the leader granting special privileges to his/her supporters, and thus sow seeds of jealousy and discontent? How would go about displacing people who prefer to remain where they live and how they are governed? What happens when citizens in this “ideal situation” (hereditary monarchy) become restless and angry at his/her rule? Do they have any recourse? How would their concerns even be addressed? Would there not be power plays and power vacuums as the result of that leader dying that could lead to chaos? How would the economy be set up between these various entities on a international scale?
I mean, have you even carefully thought this through given the myriad of questions I posed, rather than flippantly make this grandiose statement?
“At least the common man would see the state as something OTHER than an extension of his desires.”
How are you so certain? Is it not up to each common man and woman to make those decisions?
“I think a world of small-ish polities, largely hereditary monarchies, would offer a better balance of power than does our current system.”
“I’d like to see a world where everyone gets what they ask for (and lots of them would get it good and hard.)”
Would YOU be included here? Why?
Recurring problem is same . We don’t get any idea of economic or financial languages.
Michael Hudson and Ron Paul Mr Whitney and other have enriched the understandings but there is still lacuna
.
Michael Hudson or Ms Brwon can simply start with one simple hypothetical example that embraces public labor or wages , bank ,corporations ,Federal and stocks, bonds, bail out money ,leverage buy out so on . A good source will be appreciated .
One can’t argue with Brooking institute or National Review , New York Post or CNN or FX or WSJ or pundits one meets in various conferences or gatherings unless one has the definition inion s or the process involved .
I’m reminded of an Ausralian economist, a von Mises believer, who seemed to put ridiculous weight on Say’s Law as explaining all errors since FDR and Keynes. The way you put it is obvious BS. A potential producer doesn’t need to produce anything before entering the marketplace to consume. He can exchange one of the forms of money which he can derive from contracting to produce and deliver something.
Do you really not understand that?
Not surprised at all. During the 2008 crisis, some TV network hosted a round table with a small group of bank CEOs, and Vikram Pandit, CEO of Citibank was among them. Every answer he gave was total obfuscation and confusion, simply made no sense. I remember thinking back then that the guy was the biggest con-artist/buffoon.
Two CEOs before him, Sanford Weill who pushed for the repeal of the Glass-Steagall Act was an absolute crook. He was replaced by Charles Prince in 2002 who got Citibank deep into the financial crisis, and was replaced by Pandit the buffoon in 2007.
That’s a great explanation of how the US/Western economies work with respect to their out of control banking sector (i.e. how everything is finacialized).
The key point is that borrowing is encouraged and easy, Everybody does it, and the borrowed money generates economic activity/speculation that feeds on itself and creates bubbles. So “economic growth” based on almost zero interest rates is mostly illusory. Power filters towards the bankers who control the “Pump and Dump” cycle.
If money is free then a lot of junk properties and businesses will also be developed (ready to be abandoned and bankrupted in the Dump phase). The constant is that the debt remains, and the creditors (the 0,1%) extend their power over the remaining real assets.
Open question for Mr. Hudson or any other banking experts in the audience. From skimming this article and a few others like it on this site, I see a pattern of conspicuous avoidance of key topics.
I would appreciate some clarity on what seems to be a central issue of fraudulent banking, and that’s the dubious practice of “fractional-reserve” finance. Which of these two options occurs for (say) a $10 deposit:
A. Bankers turn the $10 deposit into a $100 loan (or treasury bill purchases)? That would seem like blatant counterfeiting. Reminds me of the “coin clippers” of old, when money was gold or silver. In the present case, fiat paper money is worthless… so it’s more like “chiseling” away the value of money. Which is probably why Big Gov’t planners hate gold—they haven’t figured out a method of alchemy yet.
OR… B. For every $10 deposited, the banker holds onto $1 and loans out $9.
Fed supporters insist this is what’s going on, but that seems unlikely for many reasons. Why settle for a $9 loan when you can legally loan out $100?
Can’t help but wonder if Mr. Hudson has ever addressed this core topic in any of those three books for sale that he inserted into this column. So much for Unz Review not allowing advertising. I guess that only applies to people who work in the private sector. Government subsidized, book-thumping *profiteers* get an exemption.
I’ve asked the same question to a couple bankers and think I know the answer. But I’m trying to get “official” verification from an academic source. I’ve looked around and can’t find anything definitive. Thanks
Along the lines of empty jargon in lieu of substance, I see that Mr. Hudson likes to throw around scary charges of people he dislikes being “anti-democracy,” the new heresy in the minds of some political activists.
Beyond that, I agree with the #1 comment on the foolishness of smearing libertarians as “fascists.” That only makes sense to a guy who works for the government and—shocking!—advocates total government control of banking and so much else. Seems like a bit of a conflict of interest that any decent person would acknowledge up front.
In any case, a related question for Mr. Hudson or any of his admirers:
Is there any aspect of life (agriculture, banking, communications, defense, education, employment, energy, healthcare, housing, race relations, retirement, etc.) where human beings can survive without massive interference from national or global authorities?
Let’s skip the fuss that it’s not true “socialism” unless we have 100% government ownership/control of everything. I know, I know… we can still choose our favorite brand of toilet paper and select Corn Flakes vs. Cheerios if we want. Great examples of human liberty.
Unless I’m missing something, a guy who is apparently 100% for National Socialism or Global Socialism shouldn’t be denouncing other writers/schools of much greater accomplishment… as being National Socialists. That seems both hypocritical and cowardly. How about advancing some logical argument once in a while?
And, no, I’m not a huge fan of Hayek, Mises, the U. of Chicago or any of the hardcore libertarian crowd. (Consistently bashing the government is a cop-out.) I just don’t care much for bomb-throwing ideologues that shamelessly promote a partisan agenda.
Thirty Year home mortgage is absurd.
Why the sharp thinkers do not question amortization tables is another twilight zone area.
1.onebornfree says: • Website
” . . . all forms of socialism [of which Fascism is a variant]”
That’s a bit of a stretch, isn’t it? Socialism is the opposite side of the coin to Capitalism, and Fascism is the ultimate manifestation of Capitalism. Fascism is not a ‘variant’ of Socialism but 180 degrees in opposition.
I agree there is at least one “demented economic halfwit” present here, but it isn’t Michael Hudson.
Fact: I just had some work done to fix my dishwasher. A snotty dishwasher tech charged 180 for one hour of work. Others I called wanted 300 for unblocking the hose.
Fact: I just shelled out $6000 for a new AC system and furnace. 4 guys came and did the work in 4 hours. I got quotes of 8K, 10K, and a preposterous one at 13K.
Fact: I had one electrical outlet grounded for 280 for 1 hour of work. Others wouldn’t work for less than 300, 600. LOL.
It’s definitely a credit bubble going on. But it’s not just benefitting the banksters. A credit bubble lifts all boats too.
Of course the answer to most (or all) of the problems is to abolish the FED and execute its European owners. But five (5) US presidents have been killed for threatening to do this. Trump is not about to be the 6th. Nor will Biden nor Sanders. This is more than not biting the hand that feeds you; its about not biting the reptile that will kill you.
Once you concentrate on supporting the productive, you start wanting to not support the non-productive. The biggest group of non-productive are the elderly. Not just directly, with Social Security, Medicare, and Medicaid; but they also provide the infantry for the 0.1%. “You’re destroying my retirement!”
You are soooo… brainwashed.
Putting it another way: In the 1980s they finished off the the American working class.
In the 1990s, with all that experience, they let the “Harvard Boys” loose on Russia and did the same thing.
Looting by Capitalism and looting by Socialism is like arguing the difference between cat shit and dog shit. How it is economically rational to have a private banking group handle the national money supply? How did it become okay to have the State run our schools when they have admitted without hesitation they are too stupid to run a medical system? Especially when we know the products of A will go on to staff and administer B?
John Gray was right in 1999 — The USA is dropping out of Western Civilization.
The fascist neoliberal lairs and their brainwashed minions from US. 🙂 Living in fascism for so many decades and they still don’t get it. I will quote my favorite ISGP:
“Neoliberalism itself started out as a lie.” https://isgp-studies.com/conservative-cia-network#hayek-and-friedman-neoliberalism
I am in the same boat. It seems the language is very clever and is filled with euphemisms to disguise treachery that would otherwise be unpalatable. Unfortunately, a concise understanding of finance is not provided in secondary schools or even colleges. That is apparently also by design — to prevent the revelation of the unpalatable mechanisms at work. In my own attempts to understand the essentials, I came across the following book:
Where Does Money Come From?
by Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson
The book is targeted to the layman, but is based on a freely-available academic article (PDF download link here ) by one of the authors (economist Richard Werner, who coined the phrase “quantitative easing”). The book is localized for UK readership, but universal in its application.
For the layman, I think it is of primary importance to understand how central banks operate and continue to operate (undemocratically, without oversight) and the detrimental effect their administrators have had on the world. Like Michael Hudson, Richard Werner is a strong proponent of decentralized banking and public banks. Hudson described above how central banks fought and won against public banks in the US. Currently in Europe, the European Central Bank is attacking public banks (particularly Germany, which has thousands of savings banks) through its negative interest rate policy (NIRP) — the ECB is methodically starving the savings banks of income until only the big commercial banks monopolies are left standing. There’s no other reason for such a policy — it is means of further monopolizing financial power. And because the savings banks are the sources of credit for productive GDP (i.e., small- and medium-size businesses), the result of ECB NIRP policy is that the local economies of EU countries are tanking. Of course the ECB is staffed (appointments) by a revolving door of big commercial bank-affiliated individuals.
I am reminded of an article with the photo of a University professor holding an apple, wearing glasses that made him look super intelligent and staring into the distance as if he were having a vision and promoting some new way of doing business based of course on his research. That is to say, “Look at me and hire me I have discovered something momentous”. This from a man who never ran a roadside corn stand. That was the first and last I ever heard of his crap. You are right Covinus. This dude needs to tell us how he will replace a system that has evolved over 600 years and how it will make our lives better. Until he can do this I am afraid we will all have to continue within the present system with slight modifications for our own personal way of doing things.
And boom, you just contradicted yourself so massively reality collapsed and the entire world now sees you wearing nothing but horse dung for clothes.
Funny, that was the same system laid out by Trotsky in his version of communism. Guess that makes you a commie bastard that needs to be shot for the betterment of our society.
And finally regarding your hero Hayek.
Crypto Jew confirmed.
Fact check: Libertarians are the problem.
Are you a jew? Only jews are benefiting off of the central banking system and only jews defend it. This is why jews get booted.
Look up the definition of fascism, and that is the American economy in a nutshell. Couldn’t happen without the earned income tax and the Fed. Libertarians will argue against both. However if you want to challenge any corporate entity, which has been created due the manipulative fiat money and tax laws , they will shape shift and cry capitalism. A spawn of a monster is still a monster. Private ownership and private sales are actual two tools of a free market.
At this point I wonder if capitalism is, or ever was, actually part of the free market. Debt isn’t growth, but just slavery. Look at the leverage king of Donald Trump and his presidency. He could never drain the swamp because he is a creation of the banking, business, government marriage . However there is some good news. We will be seeing a free market comeback with blackmarket sales of toilet paper and sanitizer.
Nice point about working for the company store—and being led by the nose via the same economics department. I gather Dr Hudson’s idea is to replace the grossly disproportionate ownership of America’s productive assets by Jewish “capitalist” interests with near total ownership of those productive assets by Jewish “socialist” interests, with title subsumed under the state to legally recognize already settled ownership interest.
Such fairness we’ll all enjoy under socialism. Socialists’ personal attributes, like the lovable Bern’s, guarantee it since they’re all such fine people whose only interest in power is that love of their fellow man they show by a preference for black leather trench coats.
I wonder if socialism is ultimately all that different from Misean/Rothbardian libertarianism, of herding the cattle for slaughter in the case of socialism, or atomizing society in the other, in both cases disarming resistance with the de rigueur Jewish calumny of blaming Jewish economic predation on Christian social teaching. Atheist socialists have nothing on Misean libertarianism when it comes to hatred of everything Christian, if Mises and Rothbard can be taken at their word. At the end of the day it may be that predatory socialism and implicitly predatory libertarianism aren’t all that different since they both serve the same Jewish interests.
Capitalism and Socialism are both creations of psychotic jews that serve no other function but to promote the theft of the lands, possessions and futures of native populations through debt, confiscations, genocides and ethnic replacement programs.
Libertarians will never close the borders nor expel any illegal immigrants since in their view, the filthy 2 dollars an hour blackish brown rapist is a better labor choice than the four dollars an hour white American. Whatever happens to white people simply does not concern Lolbertarians since all they care about is making a profit off of our extermination.
Socialists/communists are no better since in their eyes, everyone who is not white has a birth right to live a life in the lap of luxury paid for through the enslavement of white people.
Proof of this can be found in how easy Socialists switch over to being a libertarian the instant they get a job and find out how much they have to pay in taxes to keep the system going.
Thank you Michael for your insightful observations. WRT to the Fed purchasing equity index futures contracts to drive prices higher, is there not potentially an insider trading risk as only a few market participants are aware of who the buyer of the contract is. Put a whole new perspective on BFTD in my opinion.
Well said
Absolutely right. “Production precedes consumption” is a ridiculous concept that ignores a crazy little thing called DEMAND. Nothing gets produced if there’s no demand for it. Or at worst, the producer will be left with a surplus of exactly ONE of his products, since he won’t serial number 000002 until serial number 000001 is sold.
So bankers claiming that they’re responsible for enabling production is total BS. All they do is fuel a system set in motion by DEMAND. But that won’t stop them from skimming beaucoup $$$ off the top for pumping the gas, unfortunately.
Actually our society has benefited from a central banking system as we have experienced financial growth and technological innovations as a result. Pir consumer economy depends upon it.
Of course, it’s about those who abuse the system, which includes Jews and non Jews.
Shut up, Sambo.
Our paper currency represents nothing except trust that it IS worth something. Old paper currency stated, right on the note, “payable in gold”. Now it is only good for “all debts, public and private”, which means nothing, that is nothing tangible.
Richard Werner is better able to answer your questions, as he gets into minutia of how private banking works:
Private corporate banks don’t turn deposits into loans. Reserves are found post-facto, after the loan event. Loans create money. Banks are not reserve constrained. Banks are “capital” constrained, that is the quality of their capital, which is their “loans” or our debts.
https://www.sciencedirect.com/science/article/pii/S1057521915001477
Lower level bankers don’t know that bank money is created… they think they are loaning out existing money. Only people at the top of the pyramid know exactly how monetary mechanics work.
Here is Bank of England white paper, that explains ledger mechanics in detail. BOE put out this paper to correct all the confusion. Hope it helps.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
MMT is satire – a psychological operation the masters created to manage savagery and soothe the deep sense of financial distress spreading like an infection in the lower classes. As if the murdering, lying and thieving psychopaths that are the ruling class are going to let us in on the secret of the Fed. Writers like Hudson, Brown and Roberts know the propaganda value of associating the ruling class wih greedy rats. Therefore, the slaves must be “productive” or else it’s cruelty and the whip.
See, credit is good, but debt is bad.
Government interference in the economy is bad, unless it’s the enforcement of contracts – especially the enforcement of usurious contracts under a gold standard, then government interference in the economy is good.
Fiat money is bad, unless the government declares gold the only legal tender, in that case, that sort of fiat is good. Printing money is bad because it increases the supply of money leading to inflation, but mining gold is good because it increases the supply of money thus not leading to inflation.
True capitalism has never been tried!
Thus, Libertarianism is truth, because some Jew in Vienna 150 years ago said so. Pure logic. Fight me!
This is actually correct: Say’s Law does not apply to money, and although Keynes was mistaken about a great many things, he was right to focus on the demand for money.
“My ideal world would be of millions of small, homogeneous communities, each with a different set of accepted rules.”
And we would still have the same problems today. Hence our human nature to consolidate, squander, manipulate, and cajole. How do you propose this process even begin in earnest? Who sets these rules in that community? How would you address those individuals who refuse to move?What happens when the commercial rules of one society is not accepted by other societies?
Your “ideal world” sounds GREAT on paper, but would be virtually impossible to implement.
“Those who live in a particular community would agree to that list of explicit rules, and no one would be allowed to hang around and try to change the rules (or break them after having pledged to conform.)”
How would this pledge occur? Who would enforce this pledge? How would this process of determining these “explicit rules” even start? Must there be 100% buy in by the citizens there on everything?
“Those who wouldn’t behave would simply be ejected to find a community that would allow what they wanted to do. This way, people who want to do things I think are self-destructive and stupid could do them, just not next door or on my nickel.”
And what happens when people in your community believe the actions you take are “self-destructive and stupid”?
“Of course, those who insist on economic systems that are incompatible with human nature would probably all starve to death.”
According to Who/Whom?
“Not. My. Problem, as long as they aren’t upwind when their corpses rot.”
Actually, it’s EVERYONE’S problem. How does your preferred reality coincide with the messages in the Bible, Koran, and Torah about being your brother’s keeper?
Ellen Brown is hatching some sort of scheme to improve the quality of bank deposits (read reserves) using the repo market. It also doesn’t make sense to me, as the repo market is basically something like a Pawn Show.
For repos, you turn in some sort of finance paper, and get a short (or long term ) dollar loan from the FED. This FED action of backing up repos is a recent phenomenon, as non bank actors (shadow banks) have now been allowed access to the overnight market, which formerly was for banks only. The overnight market has long had a FED discount window, where bankers could go to get reserves at the last moment.
The 110% rule would imply that public banks in California have to have more than 100% reserves? I’m not a California public bank insider, so I am not sure of the rules they have to play by.
Hudson confirms that California public banks have different rules than private banks in this statement:
You’re asking for symmetry. They’re making us carry a big load on our back, that they don’t have to carry. They’re loading the dice in their own favor. You want to unload the dice and stop the insider favoritism. You correctly represent the banks as being insiders.
So, we can say definitively, there are different rules, and the dice is loaded.
Thanks for the recommendation
I just got the book on the kindle .
Did Hayek ever offer any solution to possible monopoly after deregulation of industries in 70-8-s ? That monopoly now has destroyed services in airlines in cell phone services and many more areas.
Hudson explains more on Hayek and the road to serfdom at link below: (Chicago School Economics was thoroughly neo-liberal Jewish propaganda by the late 1940’s)
https://michael-hudson.com/2008/07/a-black-agenda-report-the-fictitious-economy-part-2/
It is possibly moral logical and ethical to those and also scientific or “what the alternative” to those who as individual or nation has benefited from it for a while.
But without taking into externality cost -the huge burden on the 3rd world and imposed for so long in most diabolical and now in more subtle form – the admiration of capitalism started from 1400 AD will have to wait.
Capitalism is now under microscope in the West because the failures of the system is now obviously hurting everybody.
You are making Conspiracy revealers (is that a word?) like myself look bad. You are spinning yarns about MMT that aren’t true.
MMT is an attempt to explain how modern monetary mechanics works. If there is a psychological operation, it is the neo-liberal (((Jewish influenced))) Chicago School of Economics, not MMT school at UMKC. Chicago has long been an out-post for our friends to do crime-inc., especially after their immigration wave 1898-1926. Any thought construct that comes out of New York or Chicago should automatically be suspect.
MMT is mostly correct in their analysis, but with one major flaw. On this one flaw they can be rightly criticized. Their models conflate private banks with government.
MMT says that government is a sovereign issuer of credit. But, this is not true in our post 1913 private banker “money trust” world we now live in.
Government is a sovereign issuer of TBills, which in turn are monetized ultimately by the corporate private banking system. Government is only a sovereign issuer of public debts (Tbills are a debt instrument), not money.
Demand and consumption are completely different things.
It surprised me that Brown didn’t know the below, and it has surprised me further that no commentators have caught it, especially gold bugs.
What Hudson is referring to, is that goods trade external to a national economy is to be marked in gold flows. This was the situation post Bretton Woods up until Nixon closed the gold window in 71. Hudson is referring to the gold international trading standard, not gold used within a national economy.
Hudson is perfectly in alignment with an iron rule of economics: Goods flow between nations must balance.
Balance of payments got out of whack, because America deficit spent new dollars, and then these dollars went overseas, especially to fund Vietnam war. These dollars would work their way through indo-china, and finally recycle back to the U.S from France, Germany, England and others, to then demand American gold. So, it wasn’t a goods-to-goods exchange, and hence the iron law was abrogated. Returning dollars bought gold instead of U.S. main street goods, which then signaled to lower dollar exchange rate.
Other countries were unwilling to buy Oldsmobiles, Maytags, and the like from U.S. main-street, and wanted instead for their national labor to buy local made goods. France, Germany and others were correct of course, as the U.S. was no longer within the spirit of Bretton Woods.
There are other balance of payments methods that could be used, such as Keyne’s Bancor system, or Schacht’s Trading Bank System. Post Bretton Woods until 1971, Gold was used as an accounting method to mark international goods flow and to keep balance of payments… balanced.
The mercantile scheming that China does today, and what Wall Street Finance engages in, would not be possible with a gold trading standard.
“That’s a bit of a stretch, isn’t it? Socialism is the opposite side of the coin to Capitalism, and Fascism is the ultimate manifestation of Capitalism. Fascism is not a ‘variant’ of Socialism but 180 degrees in opposition.”
Like many here, you don’t know WTF you’re talking about, you clown!🤡
Hitler’s Nazi Party [fascist] was full-on socialist, [ie communism in disguise]. Hitler [a former communist] readily admitted that his Nazi party was almost entirely based on Marx’s ideas.
The full , official name of the German Nazi party was “The National Socialist Party” [or something close to that].
Now piss off and get your new brain installed , pronto, because anything you get will be an obvious improvement . 😂
No regards, onebornfree
Yes, my friend Richard Werner’s writings are a very clear explanation of how banking and credit creation works. Steve Keen also is good on this endogenous credit.
Hudson’s a bolshevik shabbatz goy, and
Ellen Brown is a paper-merchant. Here’s the Solution:
1) kill all Central Banks. Forever.
2) 100% reserve requirement: local banks must have 2 “dollars”….to loan a “dollar”.
3) all digital and paper currency backed by hard metal. Forever.
4) Jews go away. Just pick a direction. We’ll go the other.
The Money Deception What Banks and Governments Don’t Want You to Know Thomas Herold
Herold, Thomas. The Money Deception – What Banks & Governments Don’t Want You to Know
Found this good book –
first 40 pages explained well the Fed reserve , Financial houses , debt , credit and still evolving mechanics of the creators of all these – Bank or the old merchants of Gold who 4 centuries ago used to provide physical gold for trade at an interest .
If I take a pile of 50,000 of them down to the Ford dealer and point to a vehicle with a number less than 50,000 on the bottom line of the sticker, he has to give me the vehicle for the paper. If he refuses, I can legally force him to.
Gold is no more valuable than that paper. In fact, if you show up with 50,000 dollars worth of gold and tell the dealer you want that vehicle, he can refuse and you have no legal recourse.
Casting aspersions and ad-hominems is the province of losers. Except in your case, you have amply demonstrated your moniker is descriptive and correct: one born free-dumb.
All mixed economies have some form of socialism mixed in. Police, Fire-departments, Legal systems are all funded with tax dollars, and hence are socialist. A communist economy is completely command driven, and assumes incorrectly that all markets are inelastic. A lolbertarian economy assumes incorrectly that all markets are fully elastic. A mixed economy is the only type history has shown to work.
Here is Hudson’s comment – the one that most likely has wadded your panties:
Hudson, like just about everybody else, has stretched the word fascism beyond its original meaning. Usually Hudson drills bulls-eyes, but he is wrong in this case. Fascism is a mixed economy, where the government is voted into power, and hence represents its people. A fascist government has control over corporations and guides said corporations, including banking corporations.
In the quote above by Hudson, replace the word fascist, with corporatist – to then make it accurate.
Hayek and Von-Mises were pushing a neo-liberal agenda whereby the money power was owned by privateers, which ultimately becomes a corporatist economy, not fascist. Banking corporations are privately owned with stock holders.
The first thing Mussolini did was nationalize the banks in 1926, because insiders within the bank were voting absentee stocks, and swinging the market to their benefit. Privateer bankers were taking rents and unearned income by manipulating the markets. If Hudson is against rent-seeking, then he would be for Fascism, but to say that would be touch the third rail.
Fascism is actually a response to the excesses of finance capitalism. National Socialism of Germany NSDAP, was a response to the excesses of finance capitalism.
Bolshevism, by contrast, was funded into existence by finance capital out of Wall Street and London.
Since finance capitalism won in WW2, then the winners get to write history.
Usually Hudson is pretty good at setting monetary history correct, but when it comes to Bolshevism, the Jew, and Fascism … then he is not going to go off the reservation.
I have said this before, and many times about Hudson. He is not going to touch the third rail. Get used to it.
The so-called fascist promoters at the University of Chicago, were for the most part Jews, who were operating their typical usury schemes.. So, it is kind of laughable to call them fascists….. Corporatists or corporatism is more accurate. The Jew is against fascism, because it limits his rent scheming.
Regarding comment #39 (attack on a good entry by dc.sunsets):
How did this one slip past the Moderator?
Gotta love those liberal intellectuals… always elevating the conversation. Seems like a clumsy attempt at fighting imaginary “fascism” with the real thing.
How much gold is held in reserve in every central bank in the world? I bet that it doesn’t come anywhere close to the surpluses generated by the major exporting countries in one year. Do you really think Germany, Japan, and China want to close their factories for months because the Americans have run out of gold? Do you really think they want American tourists to stay home because there is no gold for their dollars? What happens when those countries have all the gold and nobody else can buy from them?
All those silly economic theories made sense when there was next to no cross country exchanges. Only in rare cases did the (extremely high) extra cost of shipping and importing something overcome the willingness of people to use what was available locally.
Casting aspersions and ad-hominems is the province of losers.
These are honorable people who are trying to get to the bottom of things. Do they make mistakes? Yes, all of us -do … including you.
Thanks for this info and other good posts!
Yawn.
The gold trading system marks goods exchange extra national (outside of a nation’s economy) that are in transit at that moment in time. It is not held as bank reserves. It is held as a “pile” that grows or shrinks, and the growth or shrinkage of the pile then signals for exchange rate changes.
In other words if goods exchange between nations is perfectly in balance, then there is no gold flow to satisfy the imbalance. The piles of gold in each country remain the same size. Gold flow in this case = zero. Nobody is gaining, and nobody is losing.
Hudson is correct, there is enough gold for a gold trading standard. There would be no SURPLUS of goods exchange as you postulate .. surplus in exports is today created by Mercantile countries like Germany and China. Gold trading system forces nations into goods balance.
The point of a gold trading system is to limit mercantilism AND to limit “super imperialism” of finance deficit spending, where the deficit spend goes over-seas to pay for war or military bases.
Hudson is exactly right. Read again what he said – posted below. You will have to buy and read his book super-imperialism to fully understand the mechanism.
Our society has not benefited by allowing jews to transfer the wealth of the nation to themselves. They have used the wealth to push every nasty idea under the sun. You are delusional.
Sounds like real bills – the second most liquid asset that can be held that self limiting. But they are based on honest contracts. First you need an honest system of mutual obligation and trust.
Labour was once needed, not only to buy goods and services, but because its (labour) savings were needed for R&D and enterprise expansion.
Enter the parasitic bank that has inserted itself between every single transaction since banks are the fictional originators of “money”. Producers and entrepreneurs have a new master. Labour is no longer needed other than being an input cost.
I agree that currency is used to buy things and is, in everyday life, much more expedient than a .99 pure gold coin because we understand and agree to the currency’s assigned value. Yet I maintain that in a dystopian future where governments and currency systems have failed, the gold coin retains value (as barter) when the currency does not.
Check out the futures (Internet) Dow tonight (Sunday).
https://www.marketwatch.com/investing/future/djia%20futures
Opened 175 points low, fell 1000 points in ten minutes and has been shut down for the last 4 hours.
I ain’t no rocket surgeon but this looks like a bloodbath to me. It looks like “the verge” and “collapse” just converged.
+1. He’s also a cuck’s cuck.
“Our society has not benefited by allowing jews to transfer the wealth of the nation to themselves.”
Our society includes Jews and non-Jews. Furthermore, there is a series of transactions that take place, one of them being how our money goes into a bank. That institution then invests our wealth to provide loans which are used to stimulate our economy.
“They have used the wealth to push every nasty idea under the sun. You are delusional.”
I would look in the mirror. You won’t like what you see.
Banking and oil are not the only feudal estates..privatized government goodies like water companies, sewer companies, electric companies, street making and fixing companies, bridge builders, shipping companies, and network providers. to name just a few.. In each case the feudal estate derives from a rule of law or a government contract.
The greatest feudal estates are patents and copyright monopolies. So the feudal system is no longer
within one of the 206 nation states, but across all of them.. and the feudal estate no longer includes a few million people the power of the rule of law that established these feudal estates covers all 8 billion humans.
When you look in the mirror, you see a cuck.
All very nice, but who gets the loans and what are they used for?
For some time now, the main stimulus to the US economy have been loans fed into various forms of speculation (stocks, bonds, corporate share buy-backs) rather than anything to do with the real economy.
You can call this “investing our wealth” but it’s really destroying it. The loans will never be repaid. The money just evaporates along with the stock values.
There’s also the stimulus of indebting the US public for the $ trillions directed to the elephantine MIC and “Defence” sectors. They run America’s many wars with this “investment” evaporating (or rather exploding) to leave behind a trail of broken countries and no prospect of repayment either.
Problem is not 50,000 in possession or exchanging it for the car. Problem is that the bank has made a killing by giving that 50,000 dollars . Problem for the car dealer is same. All the money he invested in the dealership was also issued by the bank and bank made a killing .
Now Treasury will get some back form the sale when you buy the car with 50,000. You pay sales tax that goes to the city .But that money is also issued by the bank and it has charged service fee on that
Dealers will pay US treasury the tax which the government will use to pay back the interest on the money that it has borrowed from the Fed.
Dissolve Fed. Let the citizen’s elected Government take over these functions
those who cannot Name the Jew
have no honor. They
refuse to deal with (((fundamental causation))). Instead
they peddle snake oil.
“Anyone I dont agree with is Hitler!”
That is the right wing meme mocking leftish retards for claiming anyone who thinks differently from themselves is litteraly Hitler. I’m right wing by the way, conservative and proud of it, but that don’t equate with me wanting to allow capitalism to run rampant.
And of course there’s a call for censorship of a comment pointing out the flaws in their arguments
And this is the true hallmark of libertarians and communists. The eagerness to kill the first admendment to silence critics is something they agree on 100 percent.
No wonder the last libetarian meeting was a homo circus of degeneracy when they are as mentally crazy as the far left.
The kind of guy who would take the last name of his wife’s boyfriend.
THEY CAN’T TOUCH THE THIRD RAIL
Get with the program.
It is up to you to decode the language, or listen to somebody like myself who can. ANYBODY who is in the public eye, has to be very very careful .. otherwise they will be doxxed, or even killed.
You are asking public people to put their lives at risk. Are you willing to do the same to yourself and your family?
The usurer god of Moloch has no mercy, and is the most brutal of all gods.
As Hudson says, ultimately it is a battle of good vs evil, and his truth telling wads the panties of rent seekers and usurers everywhere.
Also, stop with the aspersions and ad-hominems, it is not helpful.
Jimmy my Boy, is that your riposte ? Well just to be sure and just for you I went back and checked and the answer is no, I am not a Jew…..not yet (LOL). I hope this pleases you and we can now be friends again and put some logic on the table. Lets look at it.
-Population of the world 7.8B
-Number of Moslems 1.8B
-Number of Catholics 1.2B
-Number of Buddhists 0.5B
-Number of Protestants 0.8B
-All other 3.5B
Included in all other is the number of Jews worldwide. They number around 17 Million
So take 7.8B and deduct 17 million and that is the number of NON JEWS who also benefit from the Central Banking and Worldwide Banking System.
If you ever went to the bank for a mortgage, a car loan or a credit card, you Jimmy, are also benefiting from the Central Banking System (CBS). So do and will your relatives, dead, living and yet to be born. Your bank accounts benefit from the system and contribute to it.
The company you work for benefits from the CBS. If it needs capital it must borrow to maintain operations, expand or survive or you will be unemployed.
If you go to Disney land, look at a movie, look at a TV show you also benefit from the CBS just like the Jews. You also benefit the Jews as they run most of the entertainment industry. So will you stop indulging in these Jew supporting activities ?
Money goes where money can be made and men are drawn to the places where money is made. Lets say you are looking to upgrade your career. Two people offer you a job. One is a Catholic who will pay you a salary of $50,000. The other is a Jew who will pay you $70,000. Your employment contracts are the same and have been reviewed by a lawyer. Which job will you accept ?
A miniscule number of people in the world are Jewish (17 million from 7.7 Billion) so to assert Jews benefit from it and defend it is absurd. There are thousands of Non Jewish banks and they borrow and lend from whoever will increase their worth whether Jews or an animist African dictator looking to start a Safari resort. If there is one bit of wisdom I can give you for free it is this: There is no emotion or religion in a dollar bill !
Maybe the system is fair, maybe it is unfair but we live in a free world Dude and you dont have to participate in the game or the system at any level.
Its all well and good for the “thinkers” to come up with the latest version of Utopia but try unravelling the financial system as it exists and you are asking for chaos.
Money goes where money can be made and transcends race religion and creed….as well as your notions and perceptions of how the world should work !
The real bills system failed. There was no legal way to examine the bill and see if goods matched bill purchasing power.
My moniker is MEFOBILL, which was a bill system. Only in this case the bill was legally examined and compared to goods produced, ergo it was superior to a real bills system. It overcame the flaws of real-bills doctrine.
Reichsbank ultimately issued new Reichsmarks to discount mefobills, and in this case any interest paid due on the mefobill fluxed outward, putting general purchasing power into the money supply.
In other words, it was good money because it was non usurious and improved the commons, labor, and industry.
Libertarians cherry pick history to self-confirm their narratives. This is called a-priori reasoning, and is a logical fallacy. Real bills do not confirm lolbertarian market worshiping economics as being valid.
Money’s true nature is law.
Money is general demand pay to the bearer. If you hold a $100 dollar bill up in the air, people’s eyes will follow.
Moloch is the real god of money, and has become a religion. Usury is a fire in the mind, where man thinks wrongly that money can make money.
This making of money from money, when money is sterile has consumed the mind of man, which in turn is making him malfunction.
The malfunction of man, when driven by the exponential of compounding interest, it to rape the earth to turn it into goods and goods into prices, where prices are in monetary terms. Man is reduced to a monetary laboring unit.
Your screed can be boiled down to, yep Moloch is operative, so lay down and take it good and hard.
The truth of things is that money ultimately is law, and law can have morality encoded in advance.
There are two iron laws that pre-date the great religions:
1) Don’t foul the water
2) Don’t regulate life with usury
The whole reason Nixon went off the gold standard was because there wasn’t enough gold in Fort Knox to maintain the dollar at 35 dollars to the ounce. In your fairy tale world, the US would have had to stop buying European goods and Americans would have to stop traveling to Europe on vacation.
Is this better than what we have now? Or is it just better to ignore all these numbers and continue as we have been doing, from a real world perspective?
The problem with this whole nonsense is that the Europeans DO NOT have to buy anything from the US if they don’t want to. Now if we had a fantasy world (like that imagined in comparative advantage fantasies) where the only country that could make and sell something was the country that invented it then there would be plenty of goods that could only come from the US and we would not have trade deficits. However, nothing is stopping anybody from producing things that originated elsewhere so it all comes down to labor costs and government policies on trade.
I question the idea that our trade deficits are mainly military. Our biggest exports are military equipment. That is where we actually have a trade surplus. Our trade deficits are in consumer goods like cars, TVs and all that junk from China and SE Asia.
Yet I maintain that in a dystopian future where governments and currency systems have failed, the gold coin retains value (as barter) when the currency does not.
When we get there martial law has even failed and all your gold is worth far less than my AR-15 and it’s full 10 round magazine.
I am amazed that people read too much into these moves. It is simply the wolves on Wall Street feeding on the sheep who bought into this rising for no reason market. They were probably massively short and used this as a way to fleece the public.
Everybody should understand one thing before entering the stock market – that it is scam where the rich legally steal from the middle class. That doesn’t mean the average guy can’t make money. It just means he has to know what he is getting into.
Think about how fast the insiders made money in this versus how long it takes buy and hold types to make money. Now think about the money made on options and index futures trades. Puts were probably so cheap you could buy them for next to nothing.
Every market can be manipulated all you need to do is stampede the herd.
Not a fairy-tale, you are simply ignorant of the facts.
The U.S. was deficit spending on the Vietnam war. The dollars would flow through indo-china and ultimately end up in a French, German, or English Central Bank.
Once there, the bankers had no use for the dollars, so said dollars recycled to the U.S. to buy gold.
The buying of gold then signaled the dollar was in imbalanced goods trade, and that it should be lowered in exchange value.
Nixon was incensed by this because he felt that America was shouldering the burden for war, and to Europe’s benefit (to fight communism), while Europe was backstabbing.
Nixon went off of the gold standard in 71, and DARED the Europeans to buy American goods.
They didn’t. Why? Because there is no way it is palatable to put your own labor force out of work, to supplant your labor with american goods.
Instead, the world moved into a floating exchange regime, and a Tbill economy.
Instead of buying gold, or American mainstreet goods, those European (and other) economies holding excess dollars, bought TBILLS.
This TBill economy morphed in 1973 to become the PETRODOLLAR/TBILL economy.
Kissinger, a CFR agent, signed the agreement with Saudi, to price oil in dollars.
Today we have a Tbill/Petrodollar/Dollar as reserve world economy.
All of this came about because iron laws of economics are not adhered to. ALL FOREIGN TRADE IS ONLY BARTER. ALL FOREIGN TRADE MUST BALANCE.
Metal isn’t money.
Moloch ?? If you wish to deal in fairy tales and parables from the bible that is your choice. I dont have a clue as to the point you are trying to make as your thinking and reasoning seem to be at odds with each other and contradictory from one point to the other.
In any case whatever is your choice and however you choose to live is your business.
I dont bemoan the world as it is, try to change it or wish it were different. I dont fight it ! Good or bad, fair or unfair it matters not to me. I am not the morality police. I dont care whether Jews, Arabs, Blacks or East Indians benefit from, exploit the system or behave in any way they choose.
I study it and try to use it and benefit from it. I have no intention of living a life of penury and self sacrifice to prove I am a worthy and righteous being.
Thus, if someone wants to borrow money from me they must pay interest (usury) and if I own land with resources I can exploit then I will do so to increase my wealth. When I put my money in the bank I want interest. Anything else is living in a world of dreams, fantasies and hallucinations
If we lived according to your definition of how the world should be we would be using dogs to pull our belongings, naked or dressed in skins, eating grubs and leaves and living in houses made of brush.
If a man wants to live like that he must be either a saint or a complete savage. The majority of people in the world are neither including the Pope, the Head Rabbi and the Mullah ! Neither am I .
There is a need to acquire dollars in a Floating Exchange World, where dollars are reserve.
That need?
To acquire FX to then protect your currency from raiders.
Also, dollars buy oil, and oil is a portable form of energy useful for transportation, chemicals, and in general is critical for any economy.
You are absolutely right !. When my holding in Paypal broke support I sold the position including call options for a 100% gain. This money I invested in put options that were pennies on the dollar. These have increased 1000% from the stock’s high.
These were cashed out today and I have bought Paypal stock again along with long term call options (LEAPS) which are very cheap. Market up or down money can be made with little effort. Market drifting ??? I wait to see the direction of the thrust
This is not a recommendation to UNZ readers to invest in Paypal. It is to demonstrate that the “system” flawed and “manipluated” as it seems, fair or unfair and as it is claimed to be can be utilized by ANYBODY.
As I just mentioned to Mefobills, I dont really care how things should be. I look to see how I can benefit from things as they are. Every man should live as he pleases but who wants to live in a hole in the ground to point out life is unfair and predators abound. We have to fight for our own piece of meat just like every other animal on this planet !
You are an example of the “average” person, who looks around and imagines things because you have a dearth of knowledge. You then fill in the “blanks” with your imagining.
Our trade deficits (I’m American) exactly correlate with public debts. The U.S. creates public debts, which creates new dollars, and these new dollars are used to balance trade. (Dollars flow from U.S. to balance inflows of goods.)
The dollars go overseas and are held as reserves, or are recycled to buy TBills.
Saudi, for example, takes its excess TBills and holds then in entrepot off shore banking locations like Panama.
Excess dollars can and do return back to the U.S. to buy MIC goods instead of main-street goods. Why? Because security arrangements, especially NATO countries, must buy X amount by law.
Globo-homo uses the dollar as its “world currency” as dollars are good in dollar zones everywhere.
Sometimes I welcome our coming AI overlords, because humans in general can be hoaxed with false narrative, that they accept unquestioningly.
I was merely pointing out that it is gold which seems to have no intrinsic value (whatever that means) and the paper dollars that do. Actually, I was pointing out that what gold bugs think is just as dumb as anything economists think.
As for your dealership example, there is nothing inherently wrong with borrowing money as long as there is sufficient collateral in case of default and the bank has sufficient reserves (generated from past profits) to cover any shortfall.
In fact, intelligent borrowing is a sign of good business stewardship. Borrowing to expand production in the face of increased demand when the return is sufficient to repay the loan quickly enough would make a lot of sense.
This used to be the case before the S&Ls got in trouble and Reagan freed them and let them compete with commercial banks. More competition and less regulations meant long established criteria for lending went out the window.
All you need to do is return to those days of strict lending standards. Some will argue that it will slow the “growth” in the economy. Of course, it does, but we never had the type of boom-bust cycles we are seeing now.
There is a difference between the trade deficit and our budget deficits.
Our trade deficits (I’m American) exactly correlate with public debts. The U.S. creates public debts, which creates new dollars, and these new dollars are used to balance trade. (Dollars flow from U.S. to balance inflows of goods.)
Total BS. The public debt is created when the government spends more than it takes in. That debt can be bought by anybody. There are auctions all the time for that debt. It isn’t created to balance the trade deficit. I used to own Treasury bonds and bills. They buy it because it is in their interest to keep the system as it is going and they have nowhere else to put it.
The U.S. was deficit spending on the Vietnam war. The dollars would flow through indo-china and ultimately end up in a French, German, or English Central Bank.
The deficit spending on Vietnam was for military equipment that was built in the US. The money stayed in the US. The money that went outside the US for the war was insignificant – pay for conscripted servicemen and some that went to South Vietnam.
The trade deficit was due to things like cheaper Japanese steel, German cars, Japanese electronics, French wine, Italian suits, and European and Japanese cameras and American tourists (Europe on 5 dollars a day).
See Godley’s sector equations, they describe how public and private debts work.
Or, take it up with Hudson and tell him where he is wrong in his book “Super Imperialism.”
Of course some deficit spend public debt circulates in the U.S. economy. It is the fraction that spills overseas, stimulating overseas economies, causing inflation there, and then recycles back home to buy gold instead of goods. (It bought gold before Nixon closed the gold window.) Hudson has shown how that the overseas fraction is related to balance of payment as a function of war.
The overseas fraction is now due to trade imbalance and payment on over 100 overseas bases, and those dollars return to buy TBills, not goods.
TBill debt is bought today because we now live in a TBill economy, which I described earlier. As soon as the world is de-dollarized, our TBills will not be NOT desirable. Anybody can still buy them, but at a much lower price and higher interest rate.
We probably need to institute some sort of training in our schools. Hudson wants to start training new economic students starting them out with balance sheet mechanics. I believe he is right, and you are a perfect example of somebody who can probably learn, but has to un-learn false notions first.
There is never a bond collapse, because the FED instructs its TBTF banks to make ready. The money will be created on the FED’s keyboard to buy the TBill Bonds. Money is made ready in advance of Tbill purchases, whether you are there to buy them or not.
Public Debt, created by Deficit Spending, is also called raising the Debt Ceiling. This mechanism, injects new dollars into the production side of the economy. It does it by making new TBills, which are then monetized.
The TBills are exogenous (outside the banking system), meaning created by Treasury, and they are bought with endogenous (within the banking system) Federal Reserve Notes created by the private banking system. The TBills are monetized, and this new money then is available to balance trade deficit.
The future is put into hock.
Good God. Do you understand the difference between an identity and an equation?
Likely not.
Lolbertarians are just as mentally unhinged as communists and refuse to accept that their world view is just as destructive to nations and cultures in both the short and long term.
Just try and ask one of them how the 2008 financial crisis was not a result of Libertarianism when the Chair of the Federal Reserve of the United States from 1987 to 2006.(Alan Greenspan) was a fanatical objectivist/libertarian who deregulated the banking industry thus allowing them to not only get “too big to fail” but to also engage in toxic debt trading that lead to the 2008 financial crisis and trillion dollar bailout.
The really funny thing is how, right after the shit hit the fan and the economy went belly up in the bowl globally, Greenspan effectively decided he was done running the fed and just walked out the door leaving his shit all over the floor for someone else to clean up.
I’m not a fan of monarchy, but Hoppe’s works are well worth reading even if one disagrees with his conclusions. An interesting take on (and critique of) liberalism and capitalism from an unusual perspective. He is a lot less libertarian than most libertarians, and when I say that, it’s meant as a compliment.
Would YOU be included as a cuck? Without question.
Surely there are better options than hereditary monarchy. There is no guarantee that the son of a good leader will be a good leader, and it risks creating a social class cleavage over time. One should have to earn the right to rule.
A better idea is to select people from a young age from the general population (based on genetic markers I would suggest) and then put them through a rigorous training to be future rulers, with the best being selected, perhaps by some council of elders who know the candidates personally. This would not be too far from Plato’s idea of the ideal state in The Republic.
The Federal Reserve must be completely eliminated because it is a vicious cancer. America must tell the private bankers America’s debt is canceled, must retrieve the deposits of ordinary people and place those deposits in new public banks. America can create its own Constitutionally authorized money backed by gold and silver, even if it has to retrieve the stolen gold and silver from the private bankers.
How would you characterize Gaddafi’s use of Libyan oil to benefit the people of Libya? Bernie doesn’t have a clue wanting to tax when all the nation’s natural resources belong to all the nation’s people.
Hungary had a constitutional kingdom, where the king was elected. Said king had to follow the constitution and the law.
It lasted almost 1000 years. If they hadn’t sided with Germany in WW1, it would have continued probably to today. Punishment applied to Germany was also applied to Hungary, in Treaty of Trianon.
During Hungary’s governorship period, it was essentially the same Kingdom system from before, but with a different name.
Hereditary monarchies don’t last due to the “idiot son” problem.
The hens are clucking, and some are even running around headless.
The debt money system is one of double entry ledgers, all of which are connected to each other.
So, bank credit as money tends to be an accounting identity. It is accounted for on ledgers.
The best way to think of things is ledgers incrementing and decrementing, with liabilities and assets marked up and down. One person’s liability is another persons asset.
You can then write equations that represent this action. If a debt instrument is bought by Saudi and goes to Panama, then an equation could show its movement. In ledger terms, since the system is connected, you wouldn’t need to do that.
Maybe there is some sort of decoding ring that Lolbertarians use, because they make a lot of claims that don’t comport with observable reality.
Calculator built up a towering straw-man, to then knock it down.
Nobody, including Hudson, Brown et al, want you to live in penury. Making claims like that comes from an overactive imagination. This is how man goes to war, where mob mentality is created – through emotion that has no basis in fact. It is essentially a feminine characteristic, and why many women and feminized men are terrible choices for leadership positions.
The production system of any industrial economy is enormously productive, if it is harnessed correctly. This makes everybody wealthy. Examples in history: Canada 1938-1974, U.S 1868-1913, NSDAP Germany.
NSDAP Germany had no great depression, because they injected purchasing power into productive sectors of the economy. Meanwhile, debt ridden western economies, were in “debt deflation,” also called depression.
With regards to Moloch or Mammon, that has long been part of the cannon of religion. Also, the article discusses good and evil, which are religious concepts.
Calculator has a typical way of thinking, where he has been brainwashed, like most Western people.
First of all interest on money is not necessarily usury. Usury is a power relation, where somebody – usually a creditor, is trying to take from a debtor. Usury can be “takings” in the form of money, or goods. Usury today is generally hidden, as increases in prices.
When Benjamin Franklin spent new money into the commons, to then make extra money available so people could pay their loans to the state bank, that would be NOT USURIOUS, even though there was interest on the loans. How? Money was made available in money supply so people could make their payments, and not be harvested during a depression. Or. Schacht’s Mefobills were not usurious, as interest paid on them fluxed outward from Reichsbank, into German economy adding purchasing power.
If Calculator the brainwashed, owns land and improves it, that is not outside of nature. If he sells his land and improvement brings a higher price, then great. Usury is outside of nature, it is generally some sort of scheme where your pockets are picked, and you are a powerless victim.
My reasoning is perfectly consistent. Average people immersed in clown world, don’t know down from up, and when they hear something consistent and logical, they don’t know what to do.
The last thing this or any country needs is more “trained” economists. We have been listening to these morons for 50 years and where has it gotten us?
Once again, the trade deficit and the budget deficit are two different things and not connected in any real way. Yeah, Yeah, Yeah, some moron connected them in his book, that must mean its true. Economics is not a real science.
If China found something to spend those dollars on other than T-Bills they would. That is the only connection. They are not allowed by the US government to do things like buy American companies that are considered strategically important, so besides oil and iron ore, what else would they spend it on?
Not a libertarian, at least not anymore, but it’s ridiculous to blame them for the financial collapse.
1. Greenspan is not a libertarian, no matter what he describes himself as. A libertarian director of the Federal Reserve is about as ridiculous as a Trotskyite describing himself as a conservative.
2. Fannie Mae and Freddie Mac were two federal programs designed to give houses to minorities with cheap loans. The “subprime” loans were loans to pimps and drug dealers that had no hope of ever getting a loan under normal circumstances until the government bullied, bribed, and cajoled the banks into loaning to them.
3. Deregulation alone wasn’t enough, regulatory capture on a large scale was required to pull this off… But regulatory capture was baked into the cake with Fannie and Freddie. Massive piles of federal dollars chasing a sector that’s normally treated as untouchable means that ratings agencies and regulators are given huge pressures (financial and social) to let slide what would normally never pass. Just like violent black criminal behavior is politely ignored, so was financial irresponsibility covered up on their behalf.
The crash came when the public figured out that even supposedly safe assets were poisoned with exposure to fraudulent loans.
You continue to amaze with your “normal and average” incorrect false worldview. You are yet another brainwashed dupe.
Of course most economists are trained with false ne0-liberal economics. The schools pump out these types constantly. The people involved here, Hudson et al, are HETERODOX economists.
Hudson is a classical economist, critical of the same people you are conflating to him. Earlier he mentioned Steve Keen, who wrote the book, “Debunking Economics.” You are making yourself look stupid.
You are on a thread, where the people involved are questioning trained neo-liberal economists, and it flew completely over your head. Get with the program or be quiet.
And yes, most people know the above too. Big reveal on your part. China can spend on dollar zones around the world, buying up assets. Where did they get those dollars? Mercantilism where we (private bank system = FRN’s) supply the dollars China use in exchange for trade in goods imbalance. China can choose to recycle into TBills, or buy on dollar zones.
Your strategic argument also falls down, because things fall through the cracks.
Most people who are even dimly aware, know that antiobiotics production has been outsourced to China.
2. Fannie Mae and Freddie Mac were two federal programs designed to give houses to minorities with cheap loans. The “subprime” loans were loans to pimps and drug dealers that had no hope of ever getting a loan under normal circumstances until the government bullied, bribed, and cajoled the banks into loaning to them.
Libertarian BS. I read this crap at Lew Rockwell. Freddie and Fannie had strict policies toward loans they purchased and assembled into bonds UNTIL Wall Street got into the game and bought anything that moved. Ever hear of the term “conforming” loan? That was one that met strict standards for documentation and loan to value ratios.
Initial sub-prime and Alt-A loans were reasonably well managed where the higher interest rate compensated for the higher default rate. Wall Street started buying them with less and less regard for the underlying loans because they believed in their ability to structure the bonds they were creating. As more Wall Street firms got into the game standards for what they will buy collapsed and the game at the banks and mortgage brokers was to make and sell them as fast as you can and keep the money rotating.
Since it was so seemingly profitable, Congress let Freddie and Fannie get into the game. At the end, a report by the Fed showed that both of them held less that 20% of the total outstanding crap loans.
It was the “free market” that created the mess, Freddie and Fannie were late to the dance.
Freddie and Fannie were started during the Great Depression and had no problems until Wall Street got into their game. There is a simple idea that free market types NEVER seem to understand. More competition does lower prices, it also lowers standards in some businesses such as the financial services industry. This has the curious effect that anybody who voluntarily leaves the business makes it better for everybody else still in it. It has all the wrong signals for the correct operation of a business. So everybody is waiting for the other guy to leave first.
Meanwhile, people react (sarcastically) to the unroyal sufferings of ‘Harry Markle:’ https://www.youtube.com/watch?v=fIJdGy2cQes
Reflect pretty well on the thinking of the ‘liberal’ woke celebs.
https://www.urbandictionary.com/define.php?term=woke
It is fascinating that I can discern US Americans commenting here by their complete lack of understanding of basic economics, even basic political history or distinguishing features of even fascism or socialism
Such breathtaking ignorance cannot be found anywhere else among readers of articles like this one
Others agree with you:
MarkinLA, you are obviously intelligent and interested in this subject, but you still have big gaps in your knowledge base.
First of all, the Community Reinvestment act went after banks that red-lined, and this then opened up the field for NINJA (no income no job) type loans, to people who normally wouldn’t qualify.
But, you know red-lining is racist. So.. government pressure definitely. Ultimately, what happened is minorities and blacks lost their homes, so they got screwed.
With regards to Wall Street, that scheming was mostly by creating 601SPV’s at TBTF banks. These special purpose vehicles were designed to buy mortgages from origination banks, then tranche the mortgages into MBS type securities. This was a rehypothecation event. The action of 601 SPV was to shift risk from origination banks to the TBTF banks. Most people may remember that as soon as you got a loan, it was on-sold, so local originators did not have skin in the game.
More scheming by wall street crowed was Graham Leach Blily act, which undid Glass Steagal. This then allowed Wall Street to attach risk to the the real economy, as barriers between investment banks and commercial banks came down. Also, insurance got in on the game, to insure sub-prime mortgages.
Your premise is correct, based on the evidence, that the free market will not regulate itself, especially in finance. The entire housing bubble was a sophisticated rent extraction, or even usury mechanism.
This is a case where soft headed liberals wanted to use the finance system to help out blacks and minorities, while predators in Wall Street wanted to game the system for some lucre.
I tried to find something on SPV’s created to get exact dates, and it looks like much of it has been scrubbed from the web. We do live in an age of universal deception, especially when it comes to money.
Be specific when leveling charges. Otherwise, it is just a specious allegation, without merit.
The Russiagate saga continues: https://www.thegatewaypundit.com/2020/03/breaking-exclusive-crowdstrike-and-their-pr-firm-now-distance-themselves-from-russias-link-to-wikileaks-huge-development/
The new development features a naked Mr. Mueller, (yuck), a naked Dm. Alperovitch (yuck), and naked Ms. Clinton (SOS!)
https://turcopolier.typepad.com/sic_semper_tyrannis/2020/03/why-is-crowdstrike-confused-on-eleven-key-details-about-the-dnc-hack-by-larry-c-johnson.html#comments
The weasel: https://www.crn.com/news/security/crowdstrike-co-founder-dmitri-alperovitch-leaves-to-launch-nonprofit
The victim:
The courageous journalist:
In other words, “no”.
Here is a specific accusation from me on behalf of many UNZ readers:
YOU ARE A DUNCE !
Mefobills you need to stop eating Bat Soup !
There are some people that cannot be reached.
It looks like Calculator and Beefcake are among those types. You can pound them with observable and verifiable facts and data all day, and they won’t budge.
It takes too much to man up. It takes too much to re-write what they think they know.
It is almost like Hitler’s concentration camps, where people were “concentrated” to be re-educated, was a good idea. The human brain is defective, it needs an emotional shock before it can re-write.
Mark in LA is on his way, but is critical of people like Hudson, Brown, Werner, Keen. These are economists and people- who actually are circling above the target.
I am seeing normal group dynamics, where any crowd has its village idiots, and some who are further along on the path.
Thanks Anamaria.
The Russiagate saga is also a subset of finance capitalism, where five-eyes countries are all connected economically.
String pullers within these countries benefit by their plutocratic paymasters, who in turn are benefiting by “globo-homo.”
Globo Homo is one world government, with one world money. The world money is private bank credit issued at debt, and corporate system tied together with reserves and other linkage points.
Essentially, the power is to issue new debt instruments, to then create credit and control debtors. Bank credit as money can swim through the networked system to find its debt instrument anywhere in the world. Usury gained from the system is used for compromat, and to fund narratives through owned media.
I am critical of our (((friends))) because religion factors into this construct, especially tikkun-olam. But it is not repairing of the world, it is the opposite.
Anybody who exposes their mechanisms, or threatens their power, will be persecuted.
It’s people who think that accounting identities reflect causal relationships, that are beyond reach.
Just a note for calculator: “troll” doesn’t mean someone you disagree with or dislike.
The deficit spending on Vietnam”
That was financed by outsiders . This outsiders came to claim the gold . They did not want dollars or treasury anymore .
In the context of the money system, bank money (bank credit) comes into being as accounting entries.
It is ledger entries that create bank credit. The debt instrument you sign (which comes from nothing) is the bank’s asset. The bank credit they create is their liability.
On your ledger the bank money is your asset, while your debt instrument is your liability.
OK? This is pure accounting and creation, hence it is an accounting identity.
You can wave your hands all you want, but it doesn’t change the nature of this type of money..
The causal relationship, is that you showed up to a bank to become hypothecated. The power relation is you subordinate to your creditor.
I can tell you’re a fanatic.
Beefcake, I’ve already labeled you as somebody who cannot be reached. Based on the evidence, I believe this is accurate. Or as the Russians would say, “Non- agreement capable.”
You hit the troll button, and make ad-hominems and that is about it.
But, I do appreciate counter points, even though you are provably wrong about things. A foil is useful for teaching others. In your role as a foil, you have inadvertently made yourself useful.
Spoken like a true fanatic.
When I think of Mefobills I also wish abortion could be retroactive
I disagree with him and dislike him because he is stupid and I have zero tolerance for fools. I look to this site for ideas and meaningful commentary. Mefobills is a blathering idiot and TROLL is the word I prefer to use rather some others that come to mind.
Neither the Calculator nor Beefcake can be reached and the reason is very simple. We have IQ’s of 200 and you have an IQ of 002. So far the only observable and verifiable facts that have come to our attention is that you are a nutball as very little of what you say makes any sense.
The only defective brain on this site is yours and it has been subjected to many emotional shocks. Starting with your obviously difficult birth I Imagine forceps could not be used to extract you as your head was too small. Later when it developed to normal size your Doctor must have been astounded that there was nothing inside. How can a miserable human specimen live without a brain. Alas, Mefobills we dont really know but you are living proof that nature produces some mysterious creatures. That is why you write and re-write and re-write but you never seem to attain that state of re-right. If Hitler’s concentration camps existed I would even readily volunteer to be an inmate confined to solitary just to avoid reading the shit you write.
Mark in LA I am confident is now on his way to San Francisco looking for an unemployed economist turned street Hobo who will “circle” above you making you and your opinions a target and anxious to dump an intestinal bomb load of last nights handout of pepperoni pizza right right onto the Mefo.
This is normal group behaviour when intelligent people like us meet village idiots and ignorant buffoons like you.In any case you will be honoured to know I have printed your highly enlightening comments and am keeping them close to my toilet in case I run out of bathroom tissue.
We hope you will not stop writing nonsense, after all where else can we all be entertained for free by Mefo the Clown
He was not a real libertarian.
Real libertarianism hasn’t been tried yet Lol.
The fed is not a capitalistic institution despite being private owned and run.
Do you even listen to yourself?
We have IQ’s of 200
And yet somehow you act like a ten year old child online. Hell, the last time I saw someone throw out that argument it was on youtube from two tweens arguing over the abysmal cartoon series Rick and Morty.
This is normal group behaviour when intelligent people like us meet village idiots and ignorant buffoons like you.
So your normal “high IQ” behavior is acting like little kids screaming at each other on a playground because no one wants to play with you?
If Hitler’s concentration camps existed I would even readily volunteer to be an inmate confined to solitary just to avoid reading the shit you write.
Or you could take the easy solution and unplug your PC from the power outlet thus sparing us the annoyance of seeing you whine about your “high IQ” and good genes, when you can’t even convince your own “high IQ” party leaders that betting on the faggot drag queen horse for presidency is a dumb deal.
Yawn.
The professor is SPOT ON — as he has always been. This particular exploitative system has been around for only about four decades, which is not much of a time-span at all. And yet it is already breaking up. That is inevitable when the deluded wealthy forget their duty to society and start believing that ‘Greed is Good!’. For another useful perspective on this very topic, you may also read:
https://medium.com/@naresh.jotwani/globalization-nuts-bolts-48021c190e27
Brilliantly edifying because it distills the confusion of complex events down to the true simple causation dynamics:
What’s with the name ? Amon was the commandant of the concentration camp in the Schindler List movie. Are you some sort of wannabe freak. Could you not come up with a better handle ? How about Doofus ? And what is this thing between you and Mefobills ? Are you one and the same person or are you two like the Mayor and his muscle men they just caught in South Beach.
Yes, I suspect they are testing whether Corona can be transmitted through gay sex.
Jacob Shiff was one of the people assisting in the establishing the Federal Reserve.
Who was the leader of the coupe, the attempt to overthrow the government by impeaching TRUMP, none other than Adam Shiff.
The fact that Wikipedia states that they don’t know if Adam is of the same family tells me he is, definitely.
They’re part of the same tribe, that’s for sure.
Amon, also spelled Amun, Amen, or Ammon, Egyptian deity who was revered as king of the gods.
So much for the high IQ creed when even a low breed human like me knew this bit of information.
And what’s with your fixation on Nazis?
Are you a Jew?
Are you done chatting with yourself?
I am still amazed that someone who brags about having a high IQ in the 200 range can’t come up with better insults than the type little children use when playing League of Legends.
Not my fixation ! YOU were the one to choose the name. I was just astounded that anyone would be stupid enough to choose such a handle. Anyway I dont care care about all the spelling variations. You can entertain yourself with your ancient Egyptian fantasies.
You could have called yourself A MOM or A MOMMY to properly reflect your feminine side and get in touch with your inner girl. I just have one question….
Now people say AMEN when they are kneeling. Do you say Amen when you are kneeling ?
Dude you are too sensitive and emotional. Nobody on this site cares about your homo thing. Give us instead a history lesson on the Egyptian God thing. We are all interested in learning about Amon or whatever he is called. We await your wisdom Oh Exalted One.
But Dummy dumb, if you did not have a fixation on Nazis, you would not be screeching about me being one based solely on an internet pseudo name that has many meanings and which is used on a political website monitored by the corporate state.
Oh, so you do swing that way. No wonder you put all your faith into the faggot gay horse party to make your world magically better.
I don’t worship Jews and their false god. Maybe it makes you feel better to kneel down before your bed so you can pray to a long dead Jew to apologize for some long gone crime committed by Jews before they were chased out of their homeland for the first time in human history.
But me, I have no original sin and thus I have nothing for your kind to control me with.
I am FREE
Said the gay guy with multiple accounts and a fixation on homos and trannies.
All your accounts keep calling everyone else gay, but I do think it is just you projecting your own flaws onto everyone else just like any good indoctrinated goy would do in defense of their semantic homo masters.
200 IQ my behind…
Are you done playing hide the baloney with Mefobills?
NO. Up until our recent nonsense where we have deficits so large that they cannot possibly be handled by public auctions, the debt was handled by periodic auctions of Treasury Bonds and Bills (usually every 3 months). The government trades YOUR dollars for it’s debt and then spends that money. The vast majority of the debt was purchased by banks and brokerages authorized to buy in the auctions. Then they sold off pieces to their retail customers.
This is how a Treasury auction works. The government announces the coupon rate for the Bonds and how many will be floated (30 and 10 year). The Bills are in denominations of 10,000. There is what is called a dutch auction. The allowed bidders (people like Solomon Brothers) tell what price they are willing to pay and how much do they want. The guy giving the best price to Treasury gets to buy all he wants. The next highest bidder gets to buy all he wants. This continues until the entire Bond offering is sold. The only difference is that retail investors can go to Treasury and request to buy from the auction. They do not bid – they get the price the highest bidder gets. So after all the retail, the bidders pick up their chunks on down the list until the offering is sold. Some brokerages get left out. During that time there was never any auction where there wasn’t at least twice as many bids as there was Bonds available.
On Bills they are set for periods of less than 2 years and are in 10,000 chunks. The bidders tell what price they will pay for that 10,000. This effectively determines the interest rate. Again retail investors can buy from Treasury but do not bid they also the price the winning bidder got.
I use to buy and sell Treasury and corporate bonds when the interest rates were falling and you got not only the interest on the bond but the appreciation when the market interest rate at sale was less than the interest rate at purchase.
You think Americans didn’t have enough money in the US economy to cover these auctions and needed foreign money? The deficit was created by buying American made military goods for the war and LBJ’s social programs. None of that money left the US.
The trade deficit is where the gold comes in. People in the US bought goods from foreign countries or traveled there and exchanged currency. Those dollars were shipped back to the US and gold was demanded in return and we had to comply to maintain 35 dollars to an ounce. They could have bought our debt if they wanted to but didn’t but them not doing it was irrelevant as far as financing the government’s deficit.
Pure BS . Keep on drowning yourself with the elaborate but irrelevant description.
In retrospect, the gold rush cracked the keystone of the world financial system, and the weakened structure collapsed three years later. The basis of the system was an open‐ended commit- ment by the United States to exchange gold for dollars at the 1934 price of $35 an ounce. Other countries undertook to buy or sell dollars to maintain their own currency values in a fixed relation to the dollar.
For a time, the system worked smoothly. The only flaw in the ointment was gold. As long as the dollar was as good as gold, people were willing to hold dollars. But when, in an atmosphere poisoned by Vietnam, American economic policies were viewed with doubt or distrust, gold could be demanded for greenbacks.
The mechanism was the London gold market, in which bullion dealers convened twice a clay at the Rothschild’s banking offices. The market was fed by the gold pool, a grouping of eight central banks, led by the United States, that had agreed in a premature panic surrounding John F. Kennedy’s election in 1960 to supply gold bullion from monetary reserves to meet the net demand of speculators, hold the price at $35 and preserve the interrelated system of gold and currency values.
https://www.nytimes.com/1978/03/12/archives/of-vietnam-and-gold-and-the-cauldron-of-68-1968.html
Now America ( from 70s) USA holds oil instead of gold . This is better . People have to use this new “ gold” and by pressure threat bribes , USA has forced OPEC to go with this .
Budget deficit would have been in hundreds of trillions if oil were not sold exclusively in dollars .Dollar would have been little more stronger than peso .
Why the Hell can’t these smart-asses who come up with these fabulous theories explain their acronyms for the ordinary reader?
It’s interesting to compare w/the interwar gold exchange standard system, where the pound and dollar were reserve currencies, pyramiding off gold, while other national currencies pyramided off the two reserve currencies. It was put in place to bail out Great Britain, who arrogantly refused to acknowledge their drastically weakened financial position after the Great War and pretended they could still exchange the pound at its pre-war rate. The result was the bubble of the 20’s and subsequent crash. After WW2 Britain couldn’t pretend they were anything but the Americans’ bitch, so only the dollar served as the world reserve currency.
I came back after a Hiatus.
It looks like the village idiots made fools of themselves.
Amon made good observations about the childishness of the people I labeled, people who only confirmed their label by subsequent behavior. Some others were triggered and piled on.
You can pound some people with facts day and night, and they irrationally and stubbornly refuse to accept what is placed right in front of them.
It takes fear, threat of death, or some sort of existential crises to get weaker minded people to let go of their precious and wrong shibboleths. The Corona virus is also making many people examine what they think they know, and to reject false notions.
Economics is also political economy, and politics includes the human animal. One can see why Hitler created concentration camps, to then concentrate the minds of what were mostly brainwashed communists of that day. They (including many Jews) could only be re-educated when in crises, when jerked away from their comfort and forced to re-evaluate.
By contrast, communists just killed dissidents who would not conform. If village idiots were ever given power, they would behave implacably and without reason, because they do not have reason – or much in the way of compassion.
The price of bank credit was held artificially low in the 20’s to then allow France and England to re-acquire the gold they lost to America during WW1.
FED historians have admitted this.
The artificially low FED interest rates, and also allowing banks to hold wall street stock on their balance sheets was responsible for the bubble of the 20’s.
Additionally, average laboring people bought wall street stock with new borrowed bank credit, pushing stock prices into a bubble. This bubble was the roaring 20’s, which was mostly empty calories of finance created bank money.
When the bubble collapsed, it created a “balance sheet recession” also called great depression.
Yes, Great Britain kept telling itself it was a great power post WW1, and did exchange gold at pre-war rate, but this was not the main cause, but an additional cause.
Also, post WW2 Great Britain kept telling itself it was a great power, and kept making bombers instead of making white goods, to then sell to the Sterling Zone, who held Sterling debts.
Some people refuse to see what is right in front of their eyes, including the British who could not accept the new reality.
Britain became America’s bitch, when they accepted a dollar bailout loan after WW2. The dollar bailout loan allowed sterling zone conversion, so America then sold white goods to those zones rather than the British.
In other words, the former sterling zones (Egypt, India, and other former colonies that operated with Pound Sterling) would now accept dollars in exchange for their sterling debts.
Lolbertarian economics does not describe the world, and usually omits facts to make its case. J is for junk economics.
I actually agree with a lot of this, esp. the point about artificially low interest rates. Ironically this sounds a lot like the business cycle theory of the Austrian school, which I think has some merit (but also some definite flaws). (Many but by no means all libertarians have some affinity for the Austrian school.). To me the various issues are ultimately tied to fractional reserve banking, which is state-sanctioned theft by the (finance) capitalists.
Ignored.
The CRA (1977) mandates that the mortgage loan portfolio of each national bank proportionally reflect the demographics of the bank’s locality under the commercial death penalty of loss of certificate of authority.
Practically no enforcement was initiated by the Federal Reserve System during the Act’s first ten years.
About 1987-88 a gay white male couple resident in one of the few integrated neighborhoods then left in Detroit became outraged at Comerica Bank for failing in the maintenance of its branch building on the commercial strip bordering their neighborhood to the standards the bank displayed at suburban branches.
Both lawyers, one reputedly the son of a federal judge, the couple dug in and finding the practically dormant CRA realized Comerica was susceptible to its death penalty.
The pair had their fun with the Detroit national banks over the next two or three years as each in succession begged the gays to allow its survival because standard prudent banking practice was so far from the Leftist fantasy mandated by the CRA. The gays were obviously fueled by rage based on envy in their perception of the normal white family men who they saw as running these banks.
Eventually after Comerica committed to a $40 million loans extension to the minority community and the other banks made concessions, the catty couple tired of playing with the mouse and went on to careers in the City of Detroit Law Department. But on their way out of this initiative, they were contacted by what appeared to be a local grassroots group from the black east side of Detroit who wanted to learn their CRA strategy in order to take the program national through a chain of similar community groups in other big cities. The fellas obliged and thought nothing more of it as they put their CRA initiative in their rear view mirror – that is until over a decade later when the Obama phenomenon exploded nationally and all his “work” in Chi came into the national spotlight. Only then did the pair recognize the significance of the name those black east side Detroiters used for their group -“ACORN” – the national organization founded and operated by a “white” Leftist radical who then used the CRA strategy to bring Obama to prominence in Chicago.
After these radically unsound underwriting changes were imposed upon the Detroit banks to their detriment as well as the devastation of their soon-to-drown new class of overextended debtors, FreddyMac and FannieMa had to change their regulations to accommodate what the law had forced upon the retail banks, and eventually Wall Street lurched in to design securities which bundled these uncollectable debts into marketable securities sold to the unfortunate.
As an aside, that these two Detroiters had no way of knowing that their activism driven by outrage against normal would result in the election of a US President (in addition to the destruction of the finances of countless black families and near ruination of the US economy) can’t be said of simultaneous efforts of a native Detroiter who grew up 60 years earlier five miles south down the next side street immediately west of their residence, Tom Ayers. To learn about the Ayers facilitation of BHO’s election find the narrative by Tom Ayers’ mailman then read Jack Cashill proving Tom’s Lefty murderous son Bill ghostwrote “Dreams from My Father” which the Left used to ‘establish’ the candidate as intellectually elite regardless of how he sounded.
As a second aside, the destructive mortal rage of these gays toward ‘the system’ had me thinking for decades thereafter that the brainpower behind the Left’s relentless attack on the white Christian family man was provided by homosexual whites. But then, fortunately, I read Kevin MacDonald’s Culture of Critique and learned the accurate truth as to (((who))) is behind all this destruction (including promotion of homosexuality).
@ Steve Penfield
Fractional Reserve Banking is a myth.
Money is created by the Private Banks when they make a loan. The Borrower signs a Loan Agreement, the bank does not sign .
The Loan Agreement becomes a Financial Security ,,which the bank uses to credit funds to the Borrowers a/c,
The funds are ultimately credited by the Central Bank.
See the Bank of England website which states this clearly, ‘Loans create Deposits’
Banks do not require Reserves to make Loans. they just need a Borrower, with or without collateral,as we saw with the sub prime crisis.
Good job, but with one minor quibble.
The Central Bank is the FED in the U.S., but other private banking systems work similary.
Private banks create money at debt.
Private bank has your new debt instrument as their asset. You acquire new federal reserve notes from private bank as your asset.
Private bank has its FRN’s issued as its liability, while your debt instrument is your liability.
At the Central Bank level, they connect to the private bank via the reserve channels.
Central Bank and Private bank also have connecting double entry ledgers. For example the FED can quantitative ease a private bank and take a TBill out of said bank’s reserves, and then swap in FRN’s. Dollars are the FED’s liability and the private banks asset. TBills were the private banks asset, and were swapped for a new asset (the dollars).
So, the FED does backstop private banks with asset swaps and other tricks, but ultimately the guarantor of the private banking system is the taxpayer.
FED cannot create new purchasing power by “Crediting” and stuff it into a private bank’s reserves, they can only swap finance paper. MBS for FRN’s , TBills for FRN’s, etc. Double entry ledger mechanics determine what can be done.
Remember TARP? That was actual purchasing power taken from the taxpayer and given to the private banking system.
One addendum:
The FED can hypothecate 10:1 apparently with Treasury inputting new TBills or some sort of paper from the taxpayer…..
I’m not sure how the Federal Reserve Ledger works in this case. The FED has to be making a loan to itself, probably using one of its TBTF banks as a proxy to then hypothecate. Normally, the FED does not hypothecate.
I would change Naomi’s quote to the FED system has the power to leverage.
https://www.tomdispatch.com/blog/176684/tomgram%3A_nomi_prins%2C_an_all-american_urge_to_offer_corporate_welfare