See this where Michael Hudson discussing China's economic issues:
Use word-search to locate Everglade. It illustrates how China has dealt or will be dealing with debt. It's a completely different method to the one USA uses. Thus thinking US and China would collapse in tandem doesn't seem likely to me.
Another reason why China is not buckling under US trade sanctions/pressure is that they are diversifying internal economy and investing in global South via BRI etc.
Note: Had to drastically cut down on number of words in this post, so transcript in the link is better i.e. parts below are for illustration only ...
Super Imperialism: The economic strategy of American empire with economist Michael Hudson
BEN NORTON AND MAX BLUMENTHAL∑OCTOBER 19, 2021
BEN NORTON: Hello, everyone, this is Moderate Rebels live. Iím Ben Norton. As always, Iím joined by my co-host, Max Blumenthal. And today we have back one of our most popular guests, one of our favorite guests, Professor Michael Hudson.
People probably know who he is. He is a prominent economist, a very unique thinker. He has written several books not only on economics, but also on history and human society. Heís an expert on balance of payments, and debt, and a lot of topics. And today weíre going to talk about a new edition of his book that was just published.
We actually had Professor Hudson on over a year ago to talk about his legendary book Super Imperialism. He actually just published a new edition of it. You can see here, Super Imperialism: The Economic Strategy of American Empire.
And he just published the third edition. It just came out. So we wanted to have him on to talk about why Professor Hudson updated this book that he published back in the 1970s. This is now the third edition.
The second edition was published in 2002 or 2003, at the beginning of the so-called War on Terror. And I think itís pretty appropriate, Professor Hudson, we can begin with this Ė I think itís pretty appropriate that your first edition of Super Imperialism was published after Richard Nixon took the dollar off of gold in the early 1970s.
And then the second edition was published after 9/11 and the beginning of the War on Terror, which represents a kind of new phase of imperialism. And then finally, your third edition here was just published, and your new edition encompasses the new cold war.
The final chapter talks about the increasing economic competition between the US on one side and China and Russia on the other side. And you talk about the move toward a ďde-dollarized multi-polar economy.Ē So can you talk about the differences in the editions and how they reflect the changes in US super imperialism, the system that you described back in the 1970s?
MICHAEL HUDSON: Well, the first edition was published in September of 1972, 13 months after President Nixon took the dollar off gold. And everybody was worried that, oh, without gold, how are we going to control the world? How are we going to control Europe? Because weíre losing all the gold.
Because the entire balance-of-payments deficit in the 1950s and the í60s and early 70s came from military spending. And they thought that if you had to lose your gold stock, which was the source of world power, as a result of military spending, how can you control the world?
Well, what I wrote was that there was a new means of controlling the world and going off gold had actually locked in Americaís control, because now that it had forced other central banks not to buy gold, what were they going to do? All they could do was recycle the dollar surpluses they were getting into U.S. Treasury bonds. Because thatís what central banks bought; they would buy Treasury bonds.
So then what I said was that all this deficit coming from the military spending abroad is going to be recycled to the United States by central banks who have to recycle their money into dollars, otherwise their currencies are going to go way up, and that will price their exports out of the market, and itíll make their economies basically overvalued.
So to keep down the value, they buy U.S. dollar securities, and America would not let some by big companies; it wouldnít let them buy anything important, only U.S. Treasury bonds.
So the irony is that the larger the balance-of-payments deficit became, the more money was recycled into financing the U.S. budget deficit, which also was largely military.
Well, I thought that this was going to be a warning to other countries. And indeed, there was a very quick Spanish translation and Japanese translation. But the main purchases, as weíve talked about a year ago, were the CIA and the Defense Department.
Immediately Herman Kahn hired me to the Hudson Institute and gave a very large grant for me to explain to the government how imperialism was working. And the U.S. government used this as a how-to-do-it book.
Well, it went out of print, and Pluto Press offered to make a new addition, but it had hundreds and hundreds of typographical errors, and I didnít like the reset. And I was going to live with that until I began to work in China, 10 or 15 years ago, and the Chinese government wanted me to do a new version to upgrade it as a key to how they can de-dollarize.
And from their point of view, they want to see how they can decouple not only from the United States, but from the West. They donít look at there as being any competition between China and the United States, certainly not industrial competition.
The United States decided it was going to de-industrialize, because its corporations could essentially hire cheaper labor abroad than they could hire in the United States.
The United States has got so debt-oriented and so privatized. Since the Reagan Revolution, the American economy was Thatcher-ized, and that made it a high-cost economy.
The cost of housing has gone way up. The cost of medical insurance has gone way up. The debt burden has gone way up. And America has now priced itself out of the market.
So China and Russia look at America as an object lesson, as how do we avoid here having the dynamic that occurred in the United States. It doesnít have anything to do with capitalism versus socialism or other isms. It has to do with the basic dynamics of debt.
And China realizes that, ok, weíre going to do make our economy productive in the way that the United States and Germany did in the 19th century. Itís a mixed economy. And as a mixed economy, weíre going to have the government provide the basic utilities at a subsidized rate, instead of letting them be privatized, so that we can have a low-priced economy.
And the most important public utility to China, as it was to Russia, is to keep money creation, banking, and credit in the public domain.
So right now, youíve seen the problems and the news about the Chinese company [Evergrande] getting into trouble. And in America, if the largest real estate corporation like BlackRock were to go under, that would bring down the banks; it would bring down everything. It doesnít doesnít have a ripple in China, because the the debts are owed to the government, and the government can simply write down the debt.
It can decide what to do, to protect the home buyers who put money into buying apartments low. It can tax away the land rent to prevent the housing from being essentially financialized. So China is trying to de-financialize its real estate, de-financialize its industry.
Itís not a rivalry with the United States; itís a rejection of the whole neoliberal structure that the United States has put in place.
And what I discuss and Super Imperialism is how the World Bank and the International Monetary Fund were created as a means of imposing a neoliberal, anti-government structure on the world to prevent other countries from regulating their industry or from regulating their agriculture.
The function of the World Bank basically was to make Third World countries, the Global South, dependent on the United States for their food supply, by only funding export agriculture, export plantation crops, not growing their own food.
The function of the IMF was to use debt leverage to force other countries to impose austerity on their populations, and to essentially say we will control what government you have, because if your government does something that the United States officials donít like, weíre just going to raid your currency, force of austerity on you, and youíll be voted out of power.
So essentially, the United States, what it calls the international organizations, as if this is a world organization, is actually a very nationalistic tool of the United States to distort the agriculture and industry and commercial development of other countries, to serve U.S. interests and specifically U.S. financial interests.
And the mode of control, obviously, is not military anymore; itís financial. And Super Imperialism is about how America is different from European colonialism by controlling the world financially and covertly, politically, not by military force.
And yet all of this requires an enormous subsidy of foreign countries that are now decoupling from the dollar and no longer giving America the free ride that it has been getting since 1971, when all governments could do with their balance-of-payments surpluses were to buy Treasury bonds.
Now theyíre buying gold. Theyíre buying each otherís currencies. Theyíre doing everything except holding dollars. And thatís the big change in the world.
So when the Chinese ask me to rewrite this book for their audience Ė and I spend a lot of time with China Ė I thought, well, Iím going to fix up Super Imperialism; Iím going to re-edit it; Iím going to include some episodes that I didnít include before; and Iím going to show how the framework of international relations has been transformed in a way that isnít being discussed in the press.
BEN NORTON: Professor Hudson, you said something there that, not necessarily to push back, but to complement your analysis, you said that itís no longer about military domination, but financial. I would say itís both, and that they are kind of two sides of the same coin that reinforce each other.
One of the points that you make throughout the book is that the U.S. military occupies many parts of the world, including it has occupied Japan since 1945, Korea since the 1950s, the early 1950s; there are troops in Germany and many other countries.
So the US military presence clearly in Afghanistan and Syria right now and Iraq, itís still a huge part of it, but complementing that, you point out in your book, is that those U.S. military occupations are essentially paid for by the country that is being occupied by the U.S. military.
Can you explain how that works? And how that that scheme Ė you keep calling it in your book, again and again, a free lunch, that the U.S. has a free lunch; it has accomplished an economic scheme that no other country was able to accomplish. Can you explain how that still operates today?
MICHAEL HUDSON: Well itís not that the country that is hosting the troops is paying; itís the payment-surplus countries in general. Itís Saudi Arabia; itís Germany; itís the prosperous countries that are paying.
Hereís what happens. And hereís what happened during the Vietnam War. And hereís what was not in the Vietnam Papers that McNamara asked for.
When the United States spent money in Vietnam, or when it spends it now in the Near East or the 800 military bases it has, these dollars go into the domestic economy. And when youíre in Japan and Korea, what do you do? You turn these dollars, you make an export, you get the spending Ė you turn it in for domestic currency to your central bank.
The central bank now ends up with these dollars that are thrown off by American military spending. And what is the central bank going to do with the dollars? Well, central banks Ė America told Japan already in the 1970s, when Japan was basically funding, 22 percent of the entire U.S. budget deficit was funded by Japan in 1986.
And America said, look, weíre not going to let you buy any major company. Weíre going to let other, former whisky sellers, the Seagram people buy DuPont, but we wonít let you buy DuPont, because youíre Japanese.
Weíre not going to let you buy a company. You can buy Rockefeller Center, and lose a billion dollars on it. You can buy a Pebble Beach golf course. But really, youíre going to have to take the money that youíre getting in Japan for the US exports, and youíre going to have to invest it in Treasury bills. Otherwise, weíre going to impose punitive tariffs against you and weíre going to do something you donít like.
Because remember, you Japanese, youíre the yakuza, youíre the crooks that we put in power to fight the socialists to make sure Japan didnít go socialist. Youíre the gangs. Youíre going to do what we say.
And Japan did exactly what the United States told them to do, recycled its auto export earnings and electronic exports to help finance the US balance-of-payments deficit and the US budget deficit simultaneously.
So it was Japan, Germany, France, other countries that ended up with all these dollars that are spent abroad.
For instance, the money America spent in Vietnam, because that was French Indo-China earlier, the money was all sent to French banks. And General de Gaulle would turn in the dollars being thrown off by the army in Vietnam to buy gold every month, much to their embarrassment. Germany did the same thing with this dollars.
So basically, America wants the ability to say we have one power, we can wreck your economy. If you donít do it, we say, we can make you look like Libya, we can make you look like Iraq, and we can tear you up. We can make you like Afghanistan.
We have one power. We donít have economic power. We donít have productivity. We donít have competitive power. But we can destroy you, and weíre willing to destroy you, because otherwise weíre going under.
And weíre not going to feel safe unless we have the power to destroy you and prevent you from having the power to fight back and protect yourself.
So it can only do this if it can control the financial system that recycles all of this military spending abroad in the United States, otherwise America would have to either print the money or tax its corporations and people, which would make it even more high cost.
So America essentially has painted itself into a corner as a result of its military spending. It has lost its industrial advantage. It has lost its international competitiveness. And the only thing that it has left to do is the power to destroy, if other countries donít essentially surrender their economies to control by the US, pretending to be objective and non-nationalistic by saying, weíre not controlling you, the the World Bank is controlling you, the IMF is controlling you, the international organizations are controlling you.
But itís a double standard. And my book shows how this double standard has perverted these seemingly international organizations into nationalistic arms, basically, of the Defense Department and State Department.
MAX BLUMENTHAL: Professor Hudson, you write in Super Imperialism about how the United States, coming out of World War Two, was facing a balance-of-payments problem. It had a surplus and it managed to resolve this problem through a cold war, in which it moved into deficit spending in order to promote foreign export markets and world currency stability.
I wonder if you can expound on that and maybe take us into the new cold war and the economic rationale for a very different United States, arguably a declining empire that has agitated a new cold war.
MICHAEL HUDSON: Well, in 1944 and 1945, it was apparent that the war was going to be over, and the United States had gained power since World War One, essentially by staying out of war and by building up its own industry.
So the United States essentially structured the post-war world so that it would increase its economic power. And indeed, from 1945 to 1951, the United States increased its balance, its gold supply, to three-quarters of the worldís gold, monetary gold, all in the United States.
Well, this was a problem for the US, because Europe and other countries said, well, wait a minute, weíve been on the gold standard now for a century, but weíre not going to be impoverished if you can have all the gold, but weíre going to go in a different standard.
This is what the discussion between John Maynard Keynes and the American Treasury was all about at the end of World War Two. Europe said if youíre going to have all the gold and control the money, weíre not going to operate without money, weíre just going to go off gold. Thatís how we de-dollarize, by going off gold, and the dollar was as good as gold.
So the United States then decided to go to war in Korea, and the Korean War, from 1950 to 1951 onwards, every single year, the balance-of-payments deficit got worse and worse, and the entire balance-of-payments deficit was military.
So American military spending was actually welcomed by other countries because they said, oh, now we donít have to create a new monetary system and go it alone. Now we can still earn enough dollars that we can finance our own economic growth. And they were amenable to staying in the American economic orbit.
BEN NORTON: Professor Hudson, sorry to cut you off really quickly, but I just want to underscore a point that you make in your book that I think is crucial to understand this transition youíre talking about.
You say in the book that, before World War Two, and immediately after World War Two, around that time period, from the 1920s into the 1940s, the U.S. was a global creditor.
But then the point you make is that after the Korean War, when the Cold War began getting hot, and the U.S. began waging these these proxy wars against the Soviet Union and China and other socialist and communist forces, in Korea and Vietnam and other parts of Southeast Asia, your argument is that from the í50s on, the U.S. went from being the global creditor to the global debtor, so a major shift.
MICHAEL HUDSON: Yes. The difference is that the American debt to foreign countries is a debt that it never expects to pay, because how is it going to pay? The debt is owed by the U.S. government to other governments.
BEN NORTON: In the form of treasuries, Treasury bonds.
MICHAEL HUDSON: Treasury bonds. Yeah, exactly. And this debt is basically created by military spending. So America has been able to control other countries by issuing its money.
The debt that America has is the money of other countries. The central bank reserves that they hold in dollars in Treasury bonds is counted as their monetary reserves for their own economy.
So just like the American dollars you have in your pocket are technically a debt of the U.S.
Treasury, these dollar bills or five dollar bills or 50 dollar bills, nobody expects them to be repaid, because if they were repaid, they wouldnít be any more money.
BEN NORTON: And no one can force the U.S. to repay them because of the U.S. military. So at the end of the day, the reason that the U.S. can have this global debtor status is because no one can invade it.
MICHAEL HUDSON: That was the case until recently. Well, you know, itís true that the United States cannot repay its debt because it doesnít have enough gold to repay. And itís not going to repay in the way that Latin America or other countries repay, by selling its industry.
Itís not going to pay its foreign debt by saying, ok, why donít you take that Amazon? Why donít you take General Motors? Why donít you take Boeing? You know, weíll pay by giving you the industry just like weíve made you countries give us your industry when youíre in debt.
America simply isnít going to do that. But other countries donít have to ask to get repaid for their dollars. They can say, ok, weíre not going to hold dollars. So China has decided we want to just minimize our holdings of dollars, except for what we need for trading on the foreign-exchange markets to keep the exchange rate stable.
Russia is avoiding dollars. Iran is the avoiding values. Obviously, Venezuela is avoiding dollars, because anything that Venezuela holds, the U.S. can simply grab their accounts.
So other countries are afraid to have their gold in the United States. Even Germany has said send us back the gold that we have on deposit at the Federal Reserve. We donít trust you anymore. Give us our gold.
Everybody is dumping the dollar, and nobody wants to be repaid. The dollar now is like a hot potato, and nobody wants to hold it except pliant satellite economies of the United States that donít want to upset the United States because of the power, bribery power if nothing else, that the United States has over European politicians, Asian politicians, all the overt support that the United States can wield.
But other economies are just dumping the dollar. And so all these dollars are being turned in to hard currency, each otherís currencies, gold, each otherís industry, real economic means of production.
And so now weíre winding down the whole free-lunch system of issuing dollars that will not be repaid.
Itís as if youíre going to the grocery store and you give them an IOU and then they ask, well, you know, you ran up a bill last month and you owe us 50 dollars. We have your IOU.
And you say, well, you give this IOU to your dairy suppliers, or your vegetable suppliers, just use it as money, weíll pay someday. And somehow your IOU that you got something for just gets used as other peopleís money.
Well, thatís what the United States does on a global scale.
BEN NORTON: Professor Hudson, another point that that you addressed recently, a few minutes ago, also in your book you call food imperialism, is the role of the International Monetary Fund, the IMF, and the World Bank in trying to make other countries dependent on U.S. food exports.
In the new chapter, in your updated Super Imperialism book, you refer to this as ďU.S. food imperialism versus a new international economic order.Ē So can you explain your argument?
MICHAEL HUDSON: Well, the World Bank ideally was supposed to make loans for other countries to earn dollars. In other words, so they could buy American exports of things. But the most central element of American diplomacy for the last 80 years has been to promote U.S. farm exports.
So the World Bank did not make any loans to Chile or Venezuela or Latin America to increase their own food supply. You have to buy your grain and your basic food from the United States.
We want to develop your agriculture, but we will only develop export crops because you are a tropical country that can be exported, that we canít grow in the United States, palm oil or whatever, coffee, bananas.
Weíre going to promote plantation crops, not food supply, so that countries have become more and more dependent on the U.S. for food. And that means that the United States can do to other countries what it tried to do to China after Maoís revolution.
It can say, well, you had a revolution, we donít like. Weíre going to put sanctions on you and weíre not going to export any more food to you. Now, you can starve if you donít reject Maoís revolution and thank Chiang Kai-shek.
Well, Canada broke that. Canada said, well, if America wonít sell you the grain, weíre going to sell you the grain. So that that broke it.
Other countries are now realizing in order to be independent and prevent the U.S. from ďYour money, or your lifeĒ threat, theyíre all growing their own food. Theyíre all being independent.
The United States two years ago, more than two years ago, thought that it was going to really hurt Russia by putting sanctions on agricultural exports to Russia, and said, boy, now youíre going to suffer.
So all of a sudden, the Baltic countries couldnít export cheese or other things to Russia. What Russia did was say this is the most wonderful thing that has happened. Now we can develop our own agriculture.
Russia is now producing its own cheese, that it used to get from Lithuania. Russia is now the largest agricultural exporter in the world, and displaced the United States.
So the result of the United States trying to hurt Russia and make it a dependent has actually forced Russia to become independent in food and immune from the U.S. food threat.
It still has the food threat over Latin America. And thatís why when Hillary went down to Honduras and the Honduran president [Manuel Zelaya] wanted to develop Honduran agriculture, immediately Hillary had a coup díetat, had the army take over in a coup díetat and establish a dictatorship that promised the United States not to grow its own food, but to remain dependent on the United States.
So the United States could feel secure, secure that it could starve Honduras to death if Honduras didnít do what it wanted, and was dependent on the U.S. for food.
Thatís the kind of food strangulation that the United States has sought through every country. And it has used the World Bank and the IMF and the international banking system to impose sanctions, and to only make loans for industries and agriculture and sectors that do not compete with the United States, but actually end up serving the U.S. economy as inputs.
So other countries are turned into economic and trade satellites of the United States. Thatís the aim of the U.S. control of the World Bank, the IMF.
And thatís why the United States will not join any organization in which it does not have veto power. It insists on being able to veto any policy of other countries acting in their own interests independently of the United States, or in ways that do not actually enable the United States to be the main beneficiaries of foreign countriesí growth.
MAX BLUMENTHAL: Thatís what we call the ďrules-based order.Ē
MICHAEL HUDSON: Right. Thatís exactly right.
MAX BLUMENTHAL: We make up the rules, and order everyone around. Mafia rule.
And ironically, after Hillaryís sort of instrumentalized coup in Honduras, her husband Ė or right before Hillary entered the State Department, her husband had apologized for destroying Haitiís indigenous food economy, basically its ability to produce rice, so that they would import rice from his home state of Arkansas.
So yeah thereís a certain irony there. We also saw, in WikiLeaks cables, Hillary go down to Haiti and demand that they cancel a massive pay hike of sweatshop workers from something like 37 cents an hour to 45 cents an hour, which is consistent.
Weíve also seen the release of Meng Wanzhou, I guess she is the CFO or COO of Huawei, a Chinese tech firm. And I think this is relevant to the conversation here.
A key facet of the U.S. great power competition with China revolves around tech. And you write how, you describe how in the post-war period, the U.S. sought to foster dependency not only with food, but also with military wares and specifically technology.
And now you have a situation where the U.S. is being outpaced by China in 5G and demanding that the U.K. ban 5G.
So what is happening here? How will the U.S. fare in a world where it can no longer foster dependency on its own technology? And what will it do to remedy the situation?
MICHAEL HUDSON: Well when you say technology, what you really mean economically is economic rent, monopoly rent. And America cannot compete on the basis of cost for industry. It canít compete in a profit-making industry because there arenít profits.
You canít make a profit if your labor costs, and your economy, and your transport costs, and your health costs are so high. But you can make a monopoly rents.
And the function of technology for the United States is to make other countries obliged to pay anything that the the large information technology and high tech companies can charge.
So the technology sector is really a monopoly sector, and it wants to keep it monopolized. The problem is that no country for the last 5000 years has been able to keep a monopoly.
You remember that maybe 3000 years, 2000 years ago, China had a monopoly in silk. And then Marco Polo and Catholic priests brought back silkworms to Italy and began the Italian silk. I guess that was 1000 years ago.
So you can try to get a temporary monopoly on technology, like from Google or from Apple, but ultimately, you canít really prevent other countries from doing it. So the United States essentially has not been doing much innovation.
Letís take IBM as an example. IBM was really the first high-tech company that was made a monopoly, but it wasnít very imaginative. It had to be told by insurance companies to go and begin making computers in the late í30s and to develop it.
By the 1960s, IBM was using about $10 million a year to buy back its own shares. And Google and Amazon are spending hundreds of billions of dollars every year now to buy back their own shares, not to invest in new technology, in research and development, in developing new technology and 5G technology, and the other technology that China is developing.
But when China is a mixed economy, the public and private sector together, when it is trying to develop the technology sectors that are the mirror image of Google and other things, like TikTok replacing Facebook, theyíre doing it much better because theyíre not trying to make capital gains in stocks.
The purpose of technology, to China, isnít to increase the price of the stock in the companies that make it. Theyíre trying to lower the cost of production and develop new technologies to develop their technology better.
So obviously, China is getting a lead. The United States has made a policy decision: We donít need a lead; all we need to do is establish a monopoly rent. And let China get way ahead of us. Let it be more efficient. Let it be more lower cost. Let it be more modern.
As long as we have enough satellites in Europe and Latin America, and in Asia, to promise only to buy U.S. goods, theyíll buy high-cost, less efficient, American 3G or 4G technology, and let China and its Belt and Road Initiative countries develop 5G.
So weíre really having a technological divergence in the world. America, living in the short term, wants to have high-priced, hit-and-run, very quick profits for Facebook and Google and the others, while Chinaís trying to look at the long run and develop an actual technological economy that will create a new non-dollar trading and currency area, that will be independent of U.S. Threats.
And America in 10 years can tell China, well, we are not going to let you use Facebook or Google anymore. China can say thatís fine. We have our own systems. They work much better. Weíll go our own way.
BEN NORTON: Professor Hudson, thereís another really interesting part of your book Super Imperialism, well you talk about this throughout, but specifically one of the arguments you make is that one of the primary U.S. economic competitors after World War One, well, during and after World War One, and then leading to World War Two, leading to the end of the British Empire, was England, was Britain, the British economy.
Can you talk about how essentially the U.S. helped to collapse the Sterling Area? And for people who donít know, explain what the Sterling Area is, how the U.S. helped to collapse that.
And then also, the point you make in the book in the last chapter, is how the U.S. did something similar to another so-called ally, to Japan, how in the 1980s, the U.S. basically waged a kind of economic war against the Japanese economy, which permanently crippled it.
Japan had had been one of the largest economies in the world, and it has never really, truly recovered from that. So can you talk about how the U.S. has waged economic war not only against its adversaries, but even so-called allies like Britain and Japan?
MICHAEL HUDSON: The number one U.S. enemy has always been its closest friend, its closest rival. It fought against England, and then France.
And they were getting a free lunch through the Sterling Area and the Franc Area in the following way: Englandís colonies had to do their banking in England. They had to keep the savings in England. The government had to keep all of its revenues in England.
So when World War One broke out, England simply told the government, give us a gift of all of your money. Mass famine in India, mass starvation, because England just grabbed the money that India had in sterling.
Well, during World War Two, there wasnít much international trade, and so raw materials producers Ė India, Argentina, and other countries Ė had maintained close connections with England. And there werenít many consumer goods to buy. Countries had to be self-sufficient.
But India, Argentina, and the Sterling Area countries had to keep all of their money in sterling.
The United States insisted that, number one, that sterling balances that were held by India and other countries be allowed to be spent outside of sterling. You couldnít tie the sterling balances to say they have to be spent in England.
And that was what the sterling balances were before. England says, ok, youíve got a lot of savings here in England in sterling; you have to spend that money on British goods and British companies. You have to keep within the English economy.
Not only did the Americans say, first of all, no country can limit its spending to say you have to keep the money in your former colonial power.
But it insisted as a condition to lending England the British Loan Ė in 1944, England was desperate by the last year of the war. It needed food. It needed supplies. It needed industry.
And America said, weíre going to make you a loan, called the British Loan, but as a result, youíre going to have to keep your own pound sterling at five dollars a sterling. Youíre going to have to keep it at a high price.
Youíre not going to be able to devalue it in order to compete with us. And England, as a result, from 1945 to about 1950, had to take this huge overvalued sterling, so that there was no way that English companies could compete with American companies.
And America was able to undersell England and grab the Indian market, the Argentine market, the market for almost all the countries that had been within the Sterling Area, and undersell it.
So America had essentially gained control of Britainís domestic financial policy by insisting that this policy be set in Washington, not in London.
The U.K. is seeing record gas prices, too. And global supply chains are what we would call verkakte.
And I donít know if you want to address that, but the U.S. economy is just seeing massive, massive amounts of workers being financially disempowered, a downwardly mobile middle class, endless printing of money, and more wealth for this very Ė I mean, itís not even the 1 percent; itís like the 0.1 percent percent Ė and itís beginning to plague Biden through inflation.
MICHAEL HUDSON: Well that is happening, but not in the way you described. The Federal Reserve has hardly spent any money into the economy at all.
MAX BLUMENTHAL: Well in the banking sector.
MICHAEL HUDSON: Itís printing trillions and trillions of dollars, more money, more essential credit than ever before, but all of this credit has gone into the stock market and the bond market and the packaged loan market.
Itís all gone for assets that the 1 percent of the economy hold. It has financed asset price inflation, not domestic inflation. The domestic inflation is something that comes not from an increase in the money supply, but from supply shortages.
And this is a result of the neoliberal management philosophy that corporations have. In order to increase their reported profits, they have cut costs wherever they could. And one way they found of cutting costs is to minimize inventories.
80 years ago, every company would have enough inventory on hand so that if there was an interruption in its imports, in its raw materials, in the supplies that it needs, it has enough to get by.
But the corporate managers said letís have something called just-in-time inventory. That is, if we need a part, weíre not trying to order it six months in advance and hold it in a warehouse; weíll just pay for it that day and order it.
And all of the companies together in the United States thought, the economy is going to shrink, we donít need any inventories, because everybody is going to be poor. They thought they were going to be poor, because they were making the economy poor, by predatory practices that they were following.
They were getting rich by impoverishing the economy. They thought the economy couldnít buy what they produce, so they didnít need any inventories. Well, all of a sudden, they ran out; they depleted all of the inventories.
And there were huge, huge orders, in China, in Asia, in Japan, in Korea, for electronics exports, for chips, for everything else.
And now you see, the price of shipping has multiplied tenfold. It costs 10 times as much to ship a container from China to New York today than it did a year ago.
So what is happening is a shortage from just the neoliberal, really socially incompetent management of American corporations.
Other companies throughout the rest of the world have tried to, they keep inventories; theyíre not having this problem. This is unique only the United States is not. Itís not people are richer and have so much more money; itís that thereís a shortage.
In the case of housing, which has gone up Ė itís the most rapid increase, over 10 percent in the last year, thatís essentially because BlackRock has said, the era of rising into the middle class by getting home ownership is over.
Our ideal here at BlackRock is the 19th-century ideal; really, itís the 14th-century ideal. Itís the landlords. We want to turn the American economy away from a home ownership economy into a renterís economy.
And if we had BlackRock and our fellow landlords can monopolize the control of housing, and bid it all the way, we all of a sudden will have a monopoly in housing costs. We can raise it 10 percent this year, 10 percent next year.
And the banks are going to lend to us to buy out all of this real estate at 1 percent or 2 percent, and theyíll charge 3 or 4 or 5 percent to other people.
All of a sudden youíre going to have a concentration of home ownership in the hands of large corporations. And the middle-class ideal of home ownership is going to be squeezed out.
The other major growth is in pharmaceuticals and medical care. Itís way up, medical insurance, 10 or 15 percent.
The one thing that corporations in America are willing to fight to the death for is to prevent socialized medicine, to prevent public health. Because they realize if we can prevent public health in America, then workers, the American population is going to have only one way of getting health care and avoiding the threat of bankruptcy if they get sick.
And then the price of gas and also oil just skyrocketed recently. And now thereís a huge demand in Asia, and largely because countries in East Asia have for the most part recovered from the coronavirus pandemic.
So now Europe has a huge shortage of gas and oil, and theyíre of course blaming Russia, and theyíre doing all the typical things that they do.
But the irony is that itís the same kind of short-term neoliberal philosophy that youíre talking about, where the bankers who run the European Commission said, we donít need contracts; we donít need long-term deals; we can just buy everything short term every single day by day or week, week by week in the spot market.
MICHAEL HUDSON: Well, I think youíre talking also about the Nord Stream Two pipeline that the Germans and the Europeans were blocking.
So when a European politician said we would rather all starve in the dark than have to buy from the Russians, what they mean is, we would rather take the bribes that weíre getting into our bank accounts from the Americans.
We would rarely get the high prices and all of the support from the Americans, and let our 99 percent of the population starve, so that we can get rich off what the Americans are paying us to starve the Europeans of energy and freeze in the dark, just so that Russia wonít get get the payment for this.
So obviously, Russia is thinking, well, it can now sell all the gas that it wants to China. At some point, itíll decide, if Europe doesnít want to buy our gas, if itís not going to open the Nord Stream Two pipeline.
The pipeline is all there. All they have to do is open the pipeline, and the price of gas will come down.
MAX BLUMENTHAL: I wanted to go back to some comments you made earlier about the U.S. and Japan and how the U.S.ís best allies are often it often get treated as its worst enemies.
This kind of reminded me of the AUKUS deal and France. The former French ambassador to Washington, I think his name is Gerard Araud, commented that after this deal, where France was basically stabbed in the back Ė it had what, like I donít know the dollar sum,
BEN NORTON: Over $60 billion.
MAX BLUMENTHAL: Over $60 billion in diesel subs to Australia. And the deal was canceled after it was inked, apparently because the U.S. just stepped in with more advanced nuclear subs.
And Araud said we need to return to a de Gaullist policy; we need a neo-de Gaullist policy.
I wanted you, professor, to weigh in. Just give us your thoughts on AUKUS, on the deal, what it signals for the new cold war, but also for U.S.-French relations and the U.S. treatment of Europe.
And maybe you could remind us what happened when de Gaulle tried to collect on what he was owed.
MICHAEL HUDSON: Well, the English language is an enormous language, and itís always expanding the words. And one of the new terms that is come into the English language about two years ago, a year or two ago, was a translation from the Russian: non-agreement capable.
In other words, just like a Trump wrote the bestseller The Art of Breaking the Deal, thatís become the American policy: we can break any deal we want, because we can make our own reality.
Thatís what the neocons said: We make the deal, but we can make our own reality.
So the United States, and Australia Ė U.S. satellites would have a deal with France to say weíre going to buy a submarine. But the Americans could say, wait a minute, buy our submarines, because we need our companies would rather make profits in dollars than have you order something from France that will make profits for French companies.
So without telling France at all, it told Australia, just break the deal. And Australia essentially Ė it is not well known, but the prime minister actually lives in a basement of the Pentagon in Washington.
MAX BLUMENTHAL: I thought they just kept his brain there in a jar.
MICHAEL HUDSON: Well it is in a jar.
MAX BLUMENTHAL: What exists of it, anyway.
MICHAEL HUDSON: At any rate, Australia has never been known to do anything that America or London didnít want.
Well, once Australia actually elected a socialist prime minister, and all of a sudden the British representatives said, no, youíre not allowed to elect anyone the queen of England doesnít recognize; you have to cancel the election.
And they did. They didnít say we want to be free of England. They said, oh, ok, who should we elect? And America told England to tell Australia to elect.
So Australia is hopeless.
But at any rate, this led France to say, we have been double crossed again. We want to look at, just like Germany, we want to look at making better deals with Russia.
We can see that one part of the world is growing: China, Russia, the mixed economies, not the oligarchy, the financialized economies. So theyíre shifting.
And when you say what happened to de Gaulle Ė well, in May, I guess, was it  Ė de Gaulle had been cashing in the dollars he was getting from Americaís spending in Southeast Asia, he was cashing them in for gold.
So America, the CIA, bragged that it had organized the big May riots in Paris. And the riots led to de Gaulle being replaced by a more left-wing party that was thoroughly under the control of the United States.
So obviously, the French are worrying, ok, if we try to follow a policy of turning east, of turning towards Russia, China, and the mixed economies, with active governments instead of banks, America is going to try to do to us what it did not only to de Gaulle, but it did to Italy after World War Two, getting rid of the communists; Greece after World War Two, assassinating the communist leadership; essentially just coming and in every country, trying to interfere and meddle in elections.
So theyíre trying to prevent the United States from using the Green Party in Germanyís turn, following the U.S., with a very nationalistic anti-Russian, pro-American position.
So Europe is realizing, breaking away from dependence on the United States, breaking away from letting the United States have all of the European surplus, and telling us to freeze in the dark and to impoverish ourselves, just so that U.S. neocons can create a world Ė breaking away is not going to be a pretty sight.
Theyíre going to do to us what Hillary did the Honduras, and what and what Obama did to Libya. And we have got to be prepared for that.
But at a certain point, we we just get tired of surrendering. At a certain point, we just canít live this way anymore.
And thatís the point at which Europe is maybe five years away from realizing.
BEN NORTON: Well, thatís a good image, and I think itís important to stress that point, that these policies that Washington carry out abroad always come back home, they always come back home.
And just wrapping up here in the last few minutes. But that this actually reminded me, Professor Hudson, have you heard of this book by this French executive, Frederic Pierucci, who wrote this interesting book called The American Trap: My Battle to Expose Americaís Secret Economic War Against the Rest of the World?
Itís a very interesting book. This guy Frederic Pierucci, he was previously was an executive at the French transport company Alstom. And the U.S. government accused him of so-called corruption. And he was kind of the first case of like a Meng Wanzhou, before Meng Wanzhou, a few years before her.
He was arrested actually in the United States, and he was held as what he claimed to be an ďeconomic hostage.Ē And this is the beginning of this campaign we now see against Alex Saab from Venezuela, Meng Wanzhou from China, and also thereís a North Korean businessman whom the U.S. is trying to imprison.
And whatís interesting is the Washington Post did a story about this book. Hereís the Washington Post article; itís titled ďAn unlikely winner in the U.S. trade war: A French businessmanís book about his battle with the DOJ.Ē And hereís the translation of The American Trap.
So I havenít read this book; I want to get a copy of it. But essentially, from the summaries that Iíve read about this book, The American Trap, he argues that the U.S. has been carrying out a kind of economic war against French companies, in the same way it carried out those policies you explained against Japanese companies in the 1980s.
MICHAEL HUDSON: Thatís probably true. I have not heard of the book; nobody sent me a copy. I donít know about it.
But it seems that thatís the American modus operandi. It tries to prevent any real competition.
People talk about the Thucydides problem as if thereís a competition. The United States wants to prevent any competition.