Debt Deflation and the Neofeudal Empire, by Michael Hudson - The Unz Review (Text ony)
Hudson [intro/music] (00:02):
that you pay for debt service to a bank isn’t spent back into the economy. The
bank bond holders are basically the 1% of the economy. They’re rich enough that
they’re not going to take all this extra money they get to buy more goods and
services. They’ll buy shitty trophy art, Andy Warhol junk.
the dumbest economic Nobel Prize winner? [Paul Krugman?] Paul Krugman. That’s
right. He was given a Nobel Prize for not understanding what money was. If he
would have understood it, that would’ve excluded him from getting the Nobel
Ginter [intro/music] (01:26):
let’s see if we can avoid the apocalypse altogether. Here’s another episode of
Macro and Cheese with your host, Steve Grumbine.
And this is Steve with Macro N Cheese. Today, we are bringing on none other
than Michael Hudson. Michael Hudson is the president of the Institute for the
Study of Long-Term Economic Trends (ISLET), a Wall Street financial analyst and
distinguished research professor of economics at the University of
Missouri-Kansas City, UMKC, and author of “J is for Junk Economics,” “Killing
the Host,” “The Bubble and Beyond,” “Super Imperialism: The Economic Strategy
of American Empire,” “Trade, Development and Foreign Debt,” and of “The Myth of
Aid,” amongst many others. And without further ado, let me just say thank you
so much for taking the time to be with us today, Michael.
to be here. And I look forward to it.
some very troubling times and one of the things that has jumped out at us,
you’ve been a longterm proponent of having a debt jubilee, and as we’re
watching the crushing economic conditions that are being brought around based
on the pandemic and lots and lots and lots of malfeasance that has gone on
forever, it seems like a debt jubilee might be the most important thing for
regular people that we could even think of at this point. Can you tell us a
little bit about what a debt jubilee is and your research behind that?
what my research basically is about is that the debt has grown so rapidly for
the private sector, that if you don’t write down the debt, if you insist that
all the mortgage debt and credit card debt and student loan debt be paid, then
you’re going to have almost a constant depression. It’s called debt deflation.
And I described that in “The Bubble and Beyond” and “J is for Junk Economics.”
problem is that as people owe more and more debt service, they have less and
less to spend on goods and services and so they’re not able to buy what they
produce, and so employment shrinks and the economy shrinks. And part of the
problem is not simply the growth of debt, but what the debt is for, and in the
textbooks debt is supposed to be for productive purposes. The myth is that it’s
for building factories and means of production and increases everybody’s
prosperity, but that’s not what debt’s about. That’s what maybe stock issues
are about, but it’s not what debt is about.
debt is issued in the form of mortgages and they’re lent to real estate and the
effect of real estate debt – making credit, loosening the credit terms more and
more, lending more and more against properties, higher proportions, lower down
payment, lower amortization rates – is that property prices are inflated.
Housing prices are inflated. Commercial real estate prices are inflated.
is being created for all the wrong things. It’s been decoupled from the economy
at large, and it’s being taken on for things that really used to be considered
public services like education. Used to be that all economies provided
schooling free as a public service because they realized that education is how
you increase productivity. But now, more and more, education is just to get a
job sort of like a union card.
getting a degree is a kind of criteria, has to be gotten. And even worse,
getting an education is sort of like buying a house, just like a house is worth
whatever a bank is going to lend against it. And as banks lend more and more
money to people to buy houses, they’re lending more and more money to finance
education as education has been privatized. So what you have is that in order
to get a job, you have to get an educational degree. It’s a criterion.
means you have to go into very heavy debt and you have to go so deeply into
debt that you don’t have any income left to pledge to the bank, to get a
mortgage loan, to buy a home of your own. And the whole problem just crowds out
all other forms of spending. The same thing occurs with medical debt because
public health is not a social service here.
no public health because it’s been privatized and it’s been privatized on terms
where if you get sick, there’s a high probability if you’re not wealthy that
you’re going to have to declare bankruptcy. Especially when I think half of
Americans reported to the Federal Reserve that they can’t raise $400 in an
emergency. Well, $400 won’t even cover the cost of getting a COVID test here in
New York these days.
can imagine the problems that people have, especially when they lose the job.
So people lose the job, if they’ve borrowed to buy a house, they’re falling
into arrears. Already mortgage arrears have been rising in the last six months.
If you’re a renter and you can’t pay the rent, you’re in danger of being
evicted. And the problem of homelessness is looming for sometime in December or
I’ve discussed about a jubilee is that if you don’t write down the personal
debts, I’m not talking about mortgage debts or business debts. The jubilee left
all of the commercial business debts in place. They were only the personal
debts. And the logic for that was if you don’t write down the personal debts,
way back in antiquity and Judaic times, and even before in Mesopotamia, if you
didn’t write down the debts of cultivators who couldn’t pay because of a flood
or disease or whatever problems were caused during the planting season, then
they’d fall into bondage to their creditors.
they fell into bondage, they couldn’t pay their taxes anymore. They’d owe their
labor to the creditors, and they couldn’t work on corvee work to build basic
public infrastructure, and they couldn’t serve in the army. So almost all the
rulers of antiquity realized that if they didn’t write down the debt, number
one, they’d create an oligarchy that would use its power to overthrow them, as
occurred in Rome, or they’d find the population falling into bondage and next
time they were attacked by another city, the population would go over to the
side of the attackers who would promise to cancel the debts.
was the original jubilee. The jubilee today is basically writing down debts
that can’t be paid without imposing bankruptcy and poverty on the population.
Most of the attention has been paid to third world debt. And there’s a basic
principle I think that should be written into international law: if a country
cannot pay its foreign exchange debt without causing unemployment, without
changing its society, without selling off its infrastructure, forfeiting it to
creditors to pay the debt, then the debt’s considered a bad loan.
jubilee basically is based on writing off the bad loans and making the lender
responsible for lending money that cannot be paid. Such loans are basically
fraudulent. In the case of third world debt, I can guarantee you, having worked
for years at Chase Manhattan Bank as their balance of payments analyst, I saw
that countries could not afford to pay the debt except by either borrowing the
money to pay, which they did either from the banks or from the government, or
privatizing and selling off their national infrastructure. And that is
basically a violation of national sovereignty.
debt system has been transforming the politics of international trade and
international investment. And it’s transformed democracies into oligarchies
throughout the world. And if there’s a debt deflation in the United States,
which looks pretty much in the cards right now, it’s going to leave our economy
looking like that of Greece.
Greece, maybe 10% of the population had to emigrate and neoliberal countries
like Latvia over 25% of the population have had to emigrate to find work. And
they’re the younger people and the economy’s left aging very rapidly, and the
society is being torn apart by creditors’ demand for payments under conditions
where this demand for debt service destroys the domestic market, destroys
employment, and drives the population either to emigrate, or to get sick and
die, or to commit suicide.
ask you a question. I’ve watched a lot of your older stuff, especially knowing
that you’re one of the early MMT stars. I’ve seen so much of you from UMKC and
so forth. What would be an MMT answer to a debt deflation scenario here? How
might MMT step in and adjudicate this or inform us if you will, of solutioning?
How could we maybe message that?
good ways and there are bad ways of doing it through MMT. To me, the bad way
would be the way that Donald Trump just did it over the summer. He gave grants
to… the $1,200 grant that he gave to all the Americans. The pretense was that
this $1,200 was going to be used to buy goods and services and to help keep
them afloat and to revive the economy. But most families used it to pay down
the credits were put into their bank account. And if they had an overdraft,
whether for a credit card where the rates go up to 29% or whether they were
just overdrawn in the bank account with overdraft fees, the money that was
given – created by the government, simply by printing it electronically – it
all ended up with the bank. So the wage earners that received this money simply
were intermediaries to give the money ultimately to the banks, the same effect
you could have done simply by wiping out $1,200 from everybody’s debt who owns
course, that would have penalized the banks and the government basically is run
by the banks. So what you’ve seen under Donald Trump is nightmare MMT. You have
MMT being created, not to spend into the economy, not to create new
infrastructure, creating jobs, not to support labor, but to buy stocks and
bonds to support the 1%. This is a perversion of MMT, the assumption and
advocacy of Randy Wray and Stephanie and her whole gang has been, “Well, the
government can run a budget deficit to spend money into the economy.”
finance is not the economy, the stock market, the bond market, and the wealth
market. Basically you can think of it as the finance insurance and real estate
sector. The FIRE sector is external to the economy. It’s something else. It’s
the economy of the 1%. And most of the MMTers come from a background where
we’re for the 99%. But Donald Trump is probably the leading MMTer in the
country, in a far more powerful position than Stephanie Kelton or myself, and
he said: “I’m all for MMT. You’ve convinced me. We can create all the money we
want. I’m going to give it to my campaign contributors, the 1%.” That’s
Yeah, that is. My goodness. I love the way you put that too. So can you
describe what debt deflation actually means?
used to be that when you would buy a house – when I bought a house in the 1960s
– banks would lend you enough money and you had to put down 20 or 30% of the
down payment yourself, and they would calculate the mortgage so it would absorb
no more than 25% of your income. So they would say, Well, you’ll have to live
within your means. Find a house that you can afford to buy and we will give you
a mortgage, up to the point where – the debt service and mortgage rates were
about 6% back then – it absorbed 25% of your income.
So it was
sort of a standard idea that at least if you were a white person… Black persons
were not allowed to buy. They were not allowed to get loans. They were
red-lined. But if you were not a Black person, you were able to borrow enough
to buy a house with 25% of your income. Well, by the time that Obama sort of
oversaw the bank bailout by 2008, the Federal Housing Agency would permit banks
to lend up to 43% of your income.
just imagine if instead of paying 25% of your income, you had to pay 43% of the
income. Then that leaves much less money available to pay taxes, buy food, buy
goods and services, and pay your credit card debt and your student debt, and
pay for other things. So the idea is that the more you pay in debt service and
the more you pay for a mortgage or for your rent, the less you have to pay in
goods and services. And the money that you pay for debt service to a bank isn’t
spent back into the economy.
bond-holders are basically the 1% of the economy. They’re rich enough so
they’re not going to take all this extra money they get – this interest and
fees – to buy more goods and services. They’ll buy maybe trophy art and Andy
Warhol junk, but they won’t spend it into the economy. And so all this money is
sucked out of the production and consumption economy and siphoned off into the
wealth economy, into the financial market economy and to finance and real
we as a nation be able to address, if you will, this situation of debt
deflation… And most people truly have no idea what’s going on in the macro
economy. It doesn’t ring true to them. They just think as a household budget
and they think, Hey, I don’t have enough money in my bank, better get a loan,
or whatever. How do we message something like this?
think that this is catastrophic because each time there’s a hiccup in the
economy, we realize just exactly how frail we are. Just exactly how exposed to
ruthlessness we are. You think we’ve substituted, not necessarily truths about
the economy to explain away things that we don’t fully understand. How do you
think messaging this needs to happen?
that’s the big problem because what we’ve been discussing is what classical
economics used to be all about in the 19th century, Adam Smith and John Stuart
Mill and [Alfred] Marshall and Thorstein Veblen were all talking about – at
that time the problem wasn’t so much debt, it was landlords – and David Ricardo
pointed out that if you keep making the laws favoring the landlords, then all
the money that the economy makes is going to be charged by the landlord as
rent: as agricultural rent, as housing rent.
said, this is like the Wagnerian Ragnarök. It’s the end of the economy. It’ll
grind to a halt when all the money ends up in the landlord class. And so Smith
and Ricardo and Mill and Marx, and the others all discuss the concept of
economic rent as unearned income. And they realized that the aim of what they
thought that industrial capitalism was going to do was to get rid of the whole
legacy of feudalism.
going to get rid of the landlord class either by taxing away the rent or by
simply nationalizing the land and charging whatever the rent was worth. And
most governments were taking over education and providing it freely or on a
subsidized basis. They were taking over public health. And this is the
conservatives that were doing this in England. It was the conservative prime
minister, Benjamin Disraeli, that said health is everything; you have to have
that. So there was an idea that you didn’t want to create health monopolies to
be privatized. You didn’t want a landlord monopoly.
didn’t want pharmaceutical monopolies or all of the other monopolies. You
didn’t want monopoly rent or land rent. And they also saw credit as being
basically a public utility. And the idea was that if credit and banking was a
public utility, then banks would lend for socially worthwhile purposes like
China lends money to create factories and to put in place the whole last 30, 40
years, takeoff that has enabled it to catch up and overtake the United States.
War I changed all of that. And after World War I, instead of banking being
industrialized industry was really financialized. Banking followed the
Anglo-American practice of lending only against collateral. It lends to buy
stock, it’ll lend corporate raiders money to take over a company and then pay
the creditor by emptying out the company pension fund, squeezing labor,
downsizing, and breaking up the company. It’ll lend people to buy real estate
at higher and higher prices.
unlike in Ricardo’s day, instead of the landlords getting all the money from
people paying for housing, rent is for paying interest. And the banks get all
the money for housing that landlords used to get. So we’ve democratized
property, and home ownership, and even commercial building ownership, but we’ve
democratized it on credit. And so today’s creditors play the role that
landlords played in the 19th century.
entire 19th century, all of classical economics fought to get rid of landlord
rent, and fought to get rid of monopoly rent, and fought to make credit
productive, not unproductive. And all of that failed and was replaced by a very
predator-oriented economics curriculum, where they don’t discuss debt or money
at all. When we were at Kansas City, I think we were the only university, maybe
Colorado also was teaching Modern Monetary Theory.
And when I
had to go to get my PhD at NYU, they said, no, no, it’s completely impossible
for banks to create credit. And there was a wonderfully famous interview that I
bet your listeners have heard. It’s a debate between Steve Keen and, uh, the
Nobel Prize winner… blocking it out… Who is the dumbest Economic Nobel Prize
Krugman. That’s right. He was given a Nobel Prize for not understanding what
money was. If he would have understood it, that would have excluded him from
getting the Nobel Prize. But he insisted that the banks could not create
credit. And Steve said, “Wait a minute, when you go into a bank and you take
out a loan, the banker will add something to your account and you’ll give the
bank an IOU. So the bank’s balance sheet will balance, but the bank didn’t have
this money before. It just created credit.”
Krugman said he never heard of any such thing. Well, obviously he inherited so
much money that he didn’t have to ever go into a bank, just lived off whatever
he had. But the whole interview just shows the ignorance that was being taught
in most universities. And it was just the most wonderful debate… It was like
Bambi meets Goliath. And so students can’t really go to a university and find
out what the role of debt is in the economy.
when we’re trying to do statistics. I had a group that is doing a statistical
study of debt and rent and the health service in the economy, and the figures
from the Federal Reserve don’t make any sense at all. The statistics for the US
and the Federal Reserve say that for poor people, the middle class, the upper class,
nobody pays any more of their income today for rent than they did in 1980.
figures are fake and they’re fake because real estate lobbyists and the bank
lobbyists behind them have gotten in charge of perverting the national income
accounts – the GDP accounts – to conceal how much debt service there really is.
It’s almost impossible to get accurate debt service figures. And they’re
instance, if you pay money to a credit card and, you know, they’d normally
charge maybe 17%, but if you fall behind, even if you fall behind in your
electric bill and you’re downgraded, your interest rate goes up to 29%, but
this is not reflected in the interest figures published by the Federal Reserve
and the GDP account. They’re called “financial services.”
banks charge you a late fee, that’s considered providing a service and that’s
added to the GDP. The GDP is growing by the banks providing you a service of
having to pay them 11%. And that’s maybe 4 or 5% of GDP growth. And it gets
even worse. 8% of the GDP is implicit homeowners’ rents. In other words, if you
bought a home, you’re asked by various government agencies, well, if you had to
pay rent for your house, how much would you have to pay rent?
needless to say, as housing prices have gone up, so have rents. And people have
said, “Well, yeah, it used to be, I would have had to pay maybe a thousand
dollars a month for this house, but now I’d have to pay $3,000 a month in this
market.” Well, all that is added to GDP. No money has changed hands. So there’s
a lot of fake GDP in almost all of the growth.
I can say
all of the growth, and more, of US GDP in the last 10 years has been fictitious
growth. It’s financial returns, it’s capital gains treated as rent. It’s
monopoly rent. When you’re charged more for your cable service, they say, well,
okay, GDP goes up: the cable service is charging you more for their monopoly
and their monopoly’s worth more.
these changes to make it appear as if the economy is growing. And so people are
asked, well, who are you going to believe the statistics or your eyes? And they
say, Oh, I’m a scientist. I believe the statistics, not my eyes. They’re just
big fools. Gotta believe the statistics. They’re professionals. They have Nobel
Prize winners saying that they’re all professionals.
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Bill Black and Patrick Lovell and Eric Vaughan come on here to discuss the
documentary series that they created called “The Con,” that talked about the
liars’ loans and the incredible amount of corruption that is in the banking
industry, it’s in the mortgage industry, that really is these JP Morgan’s and
the Jamie Dimon’s and all the rest of them. “Too big to fail.”
listening to it and watching the death and destruction that it causes, the
suicides and so forth, it is so repulsive and revolting to me that this is not
like number one, that we’re going after in general. Obama prosecuted absolutely
no one. Bill Clinton actually went ahead and got rid of Glass-Steagall. And we
have not had any champions – in forever – that have actually stood on this,
short of people like Bill Black, and yourself, of course, and all the rest of
the folks that got their eye on the prize here.
my question to you is this: in talking with Georgists and others, the concept
of a land value tax seems to be the type of thing that would do away with this
rent-seeking behavior to begin with. I know that this is probably one of those
things that there’s just not an appetite for, but it seems like a solution, at
least part of it anyway, to this problem. What are your thoughts on a land
that is exactly what Adam Smith was for. It was what John Stuart Mill was for.
Every classical economist was for a land value tax because they said the
natural form of taxation should be the rise in real estate prices. And if you
do not tax it away, then this rent is going to be available to pay the banks.
And who should get the benefit of land prices going up?
New York City built a new subway system on Second Avenue, rents went up by
maybe $5 billion all along the upper East side. The values of land went up so
much that the city could have built the entire subway system just by taxing the
increased land value that it costs. So all of classical economics was a
justification of taxing away land rent, along with other economic rent. So what
happened about a century ago, 1890s?
went to school, they were still teaching the history of economic thought, but
now the history of economic thought has been excluded from the curriculum. So
people have no idea of what Adam Smith said. People are told, you know, by the
New York Times, and the Wall Street Journal, and the press, that Adam Smith and
the classical economists were for free markets.
they were for was for a market free from economic rent, free from monopoly
rent, and free from usury and predatory finance. So the whole history of
economic thought has been rewritten and turned upside down to make it appear as
if it’s the exact opposite. And the idea now for the last hundred years, taught
in every university that’s financed by the 1%, is that there’s no such thing as
economic rent; that everybody earns whatever they get.
the people who make the national income statistics don’t have a category there
for economic rent. We’re talking about, for instance, the late fees from the
monopoly of credit creation that credit card companies have. That’s considered
GDP. If landlords raise the rents and people have to pay more for housing,
that’s called an increase in gross national product because the increase in
product is equal to the increase in rent. But classical economics said rent is
a free lunch.
production. It doesn’t help the economy. It is simply a transfer payment from
wage earners and renters to property owners and employers. And what they’ve
done is essentially the whole fight against classical economics has been to
prevent the logical conclusion of classical economics that led right into Marx.
And most of the founders of MMT all came out of the Marxist tradition because
that was the classical economic tradition.
the tradition of Adam Smith and John Stuart Mill and the other critics of rent.
And of course, Marx pointed out that employer exploitation of workers was a
form of rent exploitation, too. And the fight against Marxism was also a fight
against all of classical economics. So, it’s like it’s all expurgated. And
people are given a false idea of the history of economic thought and therefore
a false idea of economic history.
they’re not given a statistical accounting format that describes how the real
world operates and how the economy is shrinking for more than 90% of the
population, and it’s only growing for about 10% of the population. The 10% is
getting richer so fast. And the value of Andy Warhol junk is considered to be
so great that it compensates for all of the decline of living standards of the
can imagine, the 90% knows that they’re in trouble, that’s why they take
tranquilizers. They know that they’re being squeezed. They know that it’s
harder and harder to pay the rent. They know that their debts and arrears are
mounting up, but they blame themselves, and they don’t blame the system. And so
what you need is a reality-based economics that shows them that the problem is
in the system, not in themselves,
appreciate that. I look down at Puerto Rico and I look at Detroit, even
Harrisburg, Pennsylvania, where I’m at, and you’ve seen vultures come through.
They’ve basically allowed these places to become feudal states and there are
vultures ripping them apart and tearing them up for any value that they have.
And you talked about a new feudalism in one of your recent writings. And I’m
curious, what does that mean right now? Can you describe feudalism and how it’s
kind of like a modern version of that right now?
basically means “your money or your life.” It means that in order to get the
means of self-support, in order to make a living, you have to give the entire
economic surplus to the landlord or the money lord or to the employer. And
there are a number of ways of locking people in. It used to be that under
feudalism, you were literally a serf tied to the land. You couldn’t move.
the land was sold the cultivators living on the land, the serfs, were sold with
it. Well, once they got rid of feudalism, really by the 18th and 19th century…
In today’s world, people can afford to live wherever they want, but wherever
they live, they have to go into such deep debt to the banks to buy a home of
their own or to the landlords to pay the rent, that they don’t have any money
left over for subsistence.
feudalism is where all of the growth in the economy accrues just to the small
1% layer at the top, not for the economy at large. It’s an economy run by the
elites. And there are various ways of locking it in. In addition to land
ownership and credit creation monopoly, now you have the public health system
locking it in. And the reason right now that there’s such a fight by the
Democrats and by Biden against public medicine and socialized medicine, or
single payer, is because they need for privatized medical insurance locks
workers into dependence on the employer.
complain about their job or they make a union, they’re fired on the spot. And
if they’re fired, they lose their health insurance. And if they lose the health
insurance, not only do they have to pay a fee, which I think in America, it’s
about $6,000 to $12,000 a year for health insurance, but they are subject to
being wiped out if they get sick.
cannot afford to complain about the job. If they’re fired or complain about the
job and lose it, then all of a sudden they can’t pay their monthly credit card
bill, and their credit card rates go up from 19% to 29%. So they’re completely
at the mercy of the creditor class and the privatized monopolies such as
healthcare. It plays the role today that the landlord class played in England
and Europe in the Middle Ages.
I was a fervent Bernie Sanders supporter. I worked my tail off to do anything I
could to educate about his platform. And I see that he had the most votes in
Iowa. He won New Hampshire, handily. Crushed Nevada. And then all of a sudden
you saw the Chris Matthews of the world losing their mind and talking about Brownshirts
and crazy assassinations and stuff in New York City’s Times Square, whatever.
look at the rabid anti-public purpose media, anti-public purpose servants. I
cannot process it that this could possibly be: they just don’t know any better.
They’re just ignorant. This seems like a coordinated, intentional suppression
of the people. And I ask myself daily, is there a way of even voting ourselves
out of this mess? Because Biden was what, fifth in Iowa? I don’t even think he
placed. He did terrible in New Hampshire and then Clyburn and the gang all
consolidated, wrapped themselves together, put the thumb on the scale, and all
of a sudden Bernie was out and we’re stuck with Biden and Kamala Harris, quite
frankly, who didn’t even get a single delegate the entire time she ran.
wanted her. But here we are staring down the barrel of a neoliberal, actually
right-of-Reagan candidate on the Democrat side in Joe Biden, and the lady who
literally laughed about arresting poor parents for truancy. And to see the
video is so gruesome, it’s so depressing. Is there any way we, the people, can
vote our way out of this or do we really need to look at sustained nonelectoral
direct action? I know you’re an economist and I know this may not be your area
of specialty, but I am curious, what do you think our course of action is here?
actually it is my area of specialty. I was an advisor to Dennis Kucinich.
the problem. The reason you cannot vote your way out under the current system
is that there’s a two party system in the United States, and it’s basically the
same party with a little ethnic difference between them, but economically it’s
the same party and there cannot be any alternative to this monolithic – we’ll
call it the Republican Party with Democratic cheerleaders – there cannot be any
progress made until you break up the Democratic Party.
became apparent not only when they cheated Bernie Sanders out of the nomination
four years ago, but this time, when Obama came up and stacked the deck and did
everything he could to organize a stab in the back against Sanders. And Bernie
Sanders showed himself to be a social democrat. And he said, “Well, I’d rather
help my own career by helping the Democratic Party. It’s a gang, but I’d rather
be a gang member than take on the gang.”
he’s dropped all of his support for public healthcare. He’s dropped all the
social views and he’s joined the Democratic gang. What I would have liked to
have seen him do, would be to say, “I will not support the Democratic nominee.
I realize that it is awful to have to elect a Republican again, especially a
Republican like Donald Trump, but no progress can be made until we remove the
current Democratic Party leadership and take it over and make it a labor party.
And we cannot do that until they realize that they will lose every single
election until they give up and join the rest of the Republican Party.”
America were like Europe, we would have a parliamentary system and new parties
could get on the ballot, and the Democrats would be very much like the Social
Democrats in Germany with maybe 6 or 7% of the vote, or like the Tony Blair
Labourites, all sort of shrinking into nothing. But as long as the political
system is controlled by only two parties, then the job of the Democrats is to
make sure that the Republicans always get in or, as Obama put it, work across
that’s just what Biden has said. He said, “I’m going to work with Republicans.
We’re going to have harmony. I’m going to work across the aisle.” Meaning he
basically should be seen as the right wing of the Republican Party as is
Harris. And they can call themselves Democrats, but it’s basically Republican.
Without replacing the Democratic Party… Bernie Sanders realized there’s no way
he could really start a third party and win.
think he was correct in that. I assume that he made the correct political
decision because of the way you can see how the Green Party has been kept off
the ballot in many States, by the Republicans and Democrats together. They’ve
gimmicked the system so that a third party can not even get on the ballot
significantly. And until you change the electoral system and either make it a
parliamentary system, or you break the two-party, which is really a one-party
monopoly, you’re not going to be able to have an alternative to Wall Street
running the economy.
whole idea of government now – basically Wall Street has taken over the
government. I know that Bill Black has talked about bank crime and financial
crime, but the new motto is if the banks do it, it’s not a crime. It’s like
President Nixon saying, “when a president does it, it’s not a crime.” Well, now
the banks say, “if we do it, it’s not a crime.”
Obama invited his campaign contributors to the white house, he said, I’m the
only guy standing between you and the mob with pitchforks. He said, when you do
it, it’s not a crime. And that’s what you’re faced with. And it’s becoming,
really, a kleptocracy. Maybe I should use kleptocracy instead of feudalism. But
then most wealth under feudalism was all made by grabbing the public domain,
and the big prize in grabbing the public domain is to grab the banking system
and the right to create credit.
That is a
great analysis. I was listening to hear whether my heart could get in line with
that, and it’s right there with you. I watch people that I know and love and
care about, and they really do believe that the only way to do this is within
the Democratic Party. They assure me that the old guard is dying out and we’re
going to take over and you know what? Maybe that’s true. All I know is…
true, because I’m 81 years old. I was sitting in meetings in the 1950s when
people were saying that. And some of the labor leaders would say, why is it
that they think we should automatically vote Democratic? There must be an
alternative. And people were saying, “No, there are only two parties. It’s one
or the other.” And so you’re in the situation you are today. It’s the same
argument that I’ve heard for 60 years.
there’s nothing new under the sun. And really at the end of the day, you know,
I sit there and I think nothing feels right. It’s all gaslighting. It’s all
false hope. And it’s all false perspectives from the banking industry. And when
the banking industry has literally captured government and you see that Wall
Street has captured our elected leaders and you see that everyone that goes out
there is captured.
really captured. They were front men from the beginning. They were brought up
as front men. I mean, Obama had a long history of being a front man. If you’re
looking at what he did in Chicago, tearing down the Black neighborhoods,
essentially gentrifying for the wealthy real estate families that introduced
him to Robert Rubin, who said, “That’s our guy. He can fight against his voters
and they’ll still vote for him. He’s the guy we want.”
sort of nurtured him: “Let’s put him in the Senate right away. Let’s give him a
speech at the convention. He’s a good speaker.” And so they sort of nurtured
him. They didn’t have to capture him. He wanted to be captured. He was that way
hole gets deeper and deeper. I watched recently Movement for a People’s Party
had a convention. They had Chris Hedges and you had Cornell West and Nina
Turner and a few others – the former Bernie folks. But they all in unison
basically said, “we’re voting for Joe Biden.”
left this weird feeling like: wow, that’s not exactly how I envision a third
party working. And then on the flip side is I’m interviewing Margaret
Kimberley, I’m interviewing Ajamu Baraka, I’m interviewing Glen Ford, all these
folks from Black Agenda Report.
Glen Ford’s wonderful. He gets it straight.
And you listen to this and how can we live in such a bizarre world where very
smart people are still thinking, somehow or another… Is it the Democratic Party
itself, or is it the system in the United States that allows for this duopoly
largely the system. You have to be very smart to make a very big mistake. You
have to be so smart that you can rationalize away reality before your eyes and
create a huge complex system where reality just sort of shrinks into a little
corner on the left. Dumb people can’t reason that way. And they can just say,
Hey, the economy is in trouble.
think most people who have to work for a paycheck realize that they’re being
squeezed, but that’s not what the politicians say. You know, “hope and change.”
We’re going to change. And of course their real job is to prevent change and to
smash hope. But of course, we’re in an Orwellian rhetoric period, where “hope
and change” means no hope and no change.
to Steven Keen not long ago, and we talked about the climate crisis. And of
course he’s been going after Nordhaus here recently with all the propaganda and
the gaslighting his work has pushed forward. And you’re watching as coastal
communities are dissipating and we’re watching drought and fires in California
and hurricanes in the East and all kinds of disruption everywhere. And you
think about what…
talking about an increase in GDP, you realize?
people get sick, this is a huge increase in GDP this year in medical services.
The economy’s becoming more profitable. And all the fix up of the fires, that’s
all added to GDP.
just amazing. There’s a guy named Phil Lawn, who’s in Australia. I’m not sure
if you know Phil, but he’s got this Genuine Progress Indicator…
he’s trying to use as a means of evaluating the real benefit of economies. And
he’s somebody who actually believes in negative growth as opposed to growing.
I’m just curious, what are your thoughts on what a fair way of measuring real
economic output and its benefit?
Steve Keen talks frequently about the soil, basically, and all the extract from
the environment, and everything that goes into the economy. It’s far more than
just the dollars and numbers on a balance sheet. It’s the energy consumption.
What do you think is the right way of measuring?
this was done in the 1840s in the United States. And in my book, “America’s
Protectionist Takeoff,” I have at the appendix, the origins of the Department
of Agriculture. And it was formed by Northern protectionists to show the degree
of soil depletion resulting from plantation agriculture in the South, the
degree to which cotton and tobacco planting depleted the soil, forcing an
abandonment of the soil, and moving constantly westward, grabbing Indian lands
and essentially Andrew Jackson genocide.
wanted to include soil the depletion in the GDP. And they were going to do it
under Harrison who, in 1848, unfortunately died rather quickly. So the Patent
Office report came out with an idea saying if you’re going to measure national
output, you have to measure the cleanup costs, the costs of replenishing the
soil, the cost of replenishing the environment for all this. And the whole idea
of environmentalism and ecology was developed by the Americans in the 19th
in the textbooks now. Literally, all of this has been expurgated. But obviously
if you included in the national statistics, disease and destruction and the
costs of oil pollution, you’d see that to make just a few million dollars for
an oil company, they’ll cause a billion dollars worth of environmental
pollution, global warming, rising sea levels, and all of this. If you took into
account what economists call externalities, you’d find that indeed the world’s
economists call that externality. And of course it’s not really an externality,
because it’s real. It should be internal. It should be part of the model. But
economists say, if it doesn’t show that the 1% are saving society, it’s
external to the analysis. We’re only looking at what the rich people do that
helps society. We’re not looking at what the rich people do that hurts society
because that wouldn’t be economics anymore.
I want to
finish with this thought and get your take on it. Stephanie Kelton oftentimes
will say, it’s not a matter of, can we afford it? Of course we can afford it.
The question is, can we resource it? And this is a resource issue as well, even
though there’s political constraints in terms of whether we can resource these
great programs. The reality is is that beyond whether or not the government
says it’s okay or not, there is an ecology there. There is a resource
sounds to me like this should very much be included in the national or the
international discourse, because we all live on one planet. What would you say
to a public that is just trying to get by and eat right now, in terms of how to
measure prosperity through understanding the resource constraints and so forth?
How would you message that?
have to be a number of economic measures. There’s no one measure of growth. On
the one hand, you can measure the economy’s flow of income. On the other hand,
you can measure the economy’s growth in personal wealth. And on the other hand,
you can have a separate set of accounts for – here are the externalities of
growth. Here’s how much wealth we’re going to lose, and what it will cost us to
clean up, or to build dykes like they have in Holland, to prevent the water
level rising and just flooding the cities.
to have a number of different accounts for different purposes. And if you keep
trying to make one-size-fits-all, then it’s not going to work. But the 19th
century, basically the classical economists, had it right. They divided income
into productive and unproductive income, socially necessary income – wages and
profits – and what was unnecessary – rent and interest. And essentially, that
approach led them to promote democratic reform in order to get rid of the House
of Lords and other Upper Houses of Parliament that were blocking land taxation
and were blocking progressive reform.
that was what economics is all about. The classical economists were reformers.
They were revolutionists because they said industrial capitalism is
revolutionary. Industrial capitalism is going to get rid of feudalism. And
instead feudalism has made an upsurge, but the landlords sold out, put their
money into finance, and now they’re the financial class, not the landlord
class. So you have to teach people to look at the economy as a system, not as
this sort of tunnel vision idea that they teach in economics courses today. You
really need a new discipline.
outputs, tools, and techniques. I mean, it’s all right there ITTO’s are a great
way of, for me… I’m a project manager by trade and all the people that know me
will laugh at me afterwards that I found a way to slip that into the interview.
But this to me is a really important thing. It is a system and I love what you
I do want
to say on the air, our friend Tuan Nguyen had been a fan of yours, had
oftentimes asked me to see if I can get you onto our show. We also have a
another person, who goes by a pseudonym named “TheCanMan Can,” and he has been
begging me to get you on. And I just want to say, after all this time, what a
joy it’s been to have you on. You’ve been amazing, and I really appreciate the
time you spent with me.
been a fun discussion.
can we find more of your work, Michael?
I have my
own internet address, Michael hyphen Hudson dot com [michael-hudson.com] and I
have all of my articles and interviews that I do, right there. So if you just
google Michael Hudson, you’ll see my picture and it’ll put you pretty quickly
into michael-hudson.com, and you can see all of my articles, going all the way
I can’t tell you how much I appreciate this. I hope we can do it again real
look forward to it.
Folks, this is Steve Grumbine with Michael Hudson from Macro N Cheese, telling
y’all to have a great day. We’re out of here.
credits [music] (51:31):
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