Why the IMF Meetings Failed

And the Coming Capital Controls “Coming events cast their shadows forward.” – Goethe What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost? This is the game that is being played today. The outflow of dollar credit into foreign markets in pursuit of this financial strategy has bid up asset prices and foreign currencies, enabling speculators to pay off their U.S. positions in cheaper dollars, keeping the ...

Who Wins?

While Labor Unions celebrate Anti-Austerity Day in Europe, European Neoliberals raise the ante: Governments must Lower Wages or Suffer Financial Blackmail Most of the press has described Europe’s labor demonstrations and strikes on Wednesday in terms of the familiar exercise by transport employees irritating travelers with work slowdowns, and large throngs letting off steam by setting fires. But the story goes much deeper than merely a reaction against unemployment and economic recession. At issue are proposals to drastically change the laws and structure of how European society will function for the next generation. If the anti-labor forces succeed, they will break up Europe, destroy the internal market, and render that continent a backwater. This is how serious the financial coup d’etat has ...

America’s China Bashing: A Compendium of Junk Economics

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It is traditional for politicians to blame foreigners for problems that their own policies have caused. And in today’s zero-sum economies, it seems that if America is losing leadership position, other nations must be the beneficiaries. Inasmuch as China has avoided the financial overhead that has painted other economies into a corner, nationalistic U.S. politicians and journalists are blaming it for America’s declining economic power. I realize that balance-of-payments accounting and international trade theory are arcane topics, but I promise that by the time you finish this article, you will understand more than 99% of U.S. economists and diplomats striking this self-righteous pose. The dollar’s double standard gives America an international free ride For over a century, central banks have managed ...

That $50 Billion Infrastructure Plan

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Obama's Thatcherite Gift to the Banks As published on Counterpunch I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War’s Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee – cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain’s notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees – guaranteed for the banks, who lent the money that banks and property owners used to pay in ...

Is the Economy as Broke as Lehman Was?

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The Angelides Committee Sidesteps the Mortgage Fraud Issue What is the difference between today’s economy and Lehman Brothers just before it collapsed in September 2008? Should Lehman, the economy, Wall Street – or none of the above – be bailed out of bad mortgage debt? How did the Fed and Treasury decide which Wall Street firms to save – and how do they decide whether or not to save U.S. companies, personal mortgage debtors, states and cities from bankruptcy and insolvency today? Why did it start by saving the richest financial institutions, leaving the “real” economy locked in debt deflation? Stated another way, why was Lehman the only Wall Street firm permitted to go under? How does the logic that Washington used ...

Australia’s Needless Foreign Borrowing

Michael Hudson and Shann Turnbull* (First published via Prosper Australia, written during Michael's recent Oz tour.) Confronted by the global financial crisis that is burying foreign economies deeper in debt deflation each month, Australia needs to protect itself – indeed, to liberate itself from as many costs and risks as it can. Fortunately, many of its costs and risks are unnecessary, merely a result of the inertia of old ways of thinking. 
Australia has the means to protect its growth and to keep more of its income at home. But if it is to remain immune to the GFC meltdown, it must escape from the risky environment of foreign financial dependency. This requires new arrangements to take account of the rapidly changing character ...

Trouble in Europe, China

Based on an interview with Eric Janszen of iTulip April 10, 2010 On April 10, 2010 I caught up with Michael Hudson and he was in rare form. Readers know that my personal view is that much of the right wing of the political spectrum doesn’t know what the problem is and all of the left wing, while nailing the problem, doesn’t know how to solve it. No one is too left wing or too right wing to get an interview here. Interviewer (EJ): Thank you for your time this morning. Hudson (MH): Glad to be here. EJ: It’s been a while since I’ve interviewed you so let’s have a wide-ranging discussion today. I want to include your Thursday Financial Times article on ...

Hudson – Today's Financial Times Article on the Euro Debt Bomb

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This is an edited version of The Coming European Debt Wars. Greece is just the first in a series of European debt bombs about to go off. Mortgage debts in the post-communist economies and Iceland are more explosive. Although most of these countries are not in the eurozone, their debts are largely denominated in euros. Some 87 per cent of Latvia's debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. Read more at the Financial Times

Latvia’s Cruel Neoliberal Experiment

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Latvia is being devastated by two global wars. On the geopolitical front is the Cold War’s coup de grâce. Neoliberals have managed to de-industrialize Russia and the rest of the former Soviet Union, persuading parliaments to dismantle government support for economic renewal. The “Washington Consensus” has backed a policy of giving away public enterprises and land to a newly minted oligarchy of insiders, and helped them sell shares to Western investors. The ensuing economic wreckage has helped avert future military rivalry to U.S. hegemony. Western investors are waging their own social war of finance and property against labor. Initiated by the Chicago Boys in Chile in 1973, sponsored in Britain by Margaret Thatcher’s Conservatives after 1979 and by Ronald Reagan’s Republicans in ...

The Coming European Debt Wars

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Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive.  Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87% of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private-sector debts to foreign banks, not to finance a domestic budget deficit as in Greece. All these debts are unpayably high because most of these countries are running deepening trade ...