Super-Imperialism at the Pentagon

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picture: Tilo Gräser / Sputniknews Germany

An interview on Sputnik News – January 23rd.

text / interview: Alexander Boos / Sputniknews Germany
Professor Hudson, in January you warned in Berlin at the Rosa Luxemburg Conference, about the still “dangerous” US financial imperialism. The US uses “financial weapons“, you said. Can you explain that briefly?

After World War II, the US created the World Bank and the International Monetary Fund IMF. These instruments were created as essential control mechanisms to control other countries financially. This became particularly apparent after the US abolished its gold-standard in 1971. Since then, the US has always sought to force other states to hold their own currency reserves in US dollars. That means that those governments must then obtain the money through the US Federal Reserve. To make it clear: You buy US government bonds, most central banks do not buy stocks or companies, they buy government bonds. At least that was the case until recently.

Dollars have been pumped into the world economic cycle for a long time, also to finance the military spending of the United States. As a result, the private sector is in a fairly difficult position. So briefly stated: The US military spending is pumping a lot of dollars into foreign economies. Those central banks are told by the FED, they should hold these dollars, including central banks of Europe, central banks of the Third World, China and such. Then – in turn – to buy these US government bonds, the buying central banks then lend exactly those dollars back to the US Federal Reserve. In effect, these states are actually financing the US military budget. As you can see, this is a circular cycle. So: Foreign countries are paying the US military budget. This is the common unipolar policy of the United States.

Is this the reason why the US government leads so many wars worldwide?

The United States lost almost the entire stock of US state gold during the Vietnam War. The problem: Keeping a war going is very expensive. The key is to balance the expenses. The limit is the balance of payments. In principle, the US has created all this about its own balance of payments deficit.

How can the US now entertain its huge global military apparatus? They can only do that if the dollar value does not go down. That’s why the US has always been about keeping other countries from exchanging their dollars for gold. Therefore, the US saying: “Please just hold the dollars, okay? Thank you. Or invest in our US Treasury bonds.”

Basically, the US has often told the European Union (EU): “Do not create your own deficit in balance of payments. Please do not create so many euros that the Euro will end up being a rival to the dollar. We only want countries that hold the dollar.” That’s a kind of tribute. These countries therefore finance the US balance of payments deficit.

You write in your publications that you recognize a kind of “New Cold War” raise. Will the danger of war rise in the near future?

A danger of war is not yet an actual war. But other countries like China or Russia want to become more independent from the dollar. The position of the US: “You use our dollar – and you submit to our rules.” US banks then can impose sanctions because it is the US currency. Or simply demand or freeze the money.

The principle of US foreign policy is, they must control all other countries of Earth through the dollar. To prevent governments from doing anything that goes against US global interests. This principle has recently been made clear by US President Trump. So, the United States is basically driving governments like Russia and China to “de-dollarize” themselves. Also to protect against the US aggression and their “bubble economy”.

The New Cold War, which is currently being fought, is basically a financial war. Protected by sanctions and by the US military and appropriate threats. Just think of it: The US is stationing rockets in Germany and Europe and Washington wants to let Europe and Russia destroy each other, so to speak. NATO no longer defends the EU.

This brings me to my next question: What kind of future do you see for the dollar as world currency?

The dollar will no longer be the currency for countries that want to develop independently of US interests. The dollar will not be the future reserve currency for either Russia, China or many developing countries. Financial actors will only use the dollar for minimal operations: currency exchange, short-term stabilization. But that would be it. 

I see that the rest of the world is moving more and more towards gold. Or bilateral solutions: Two economies doing business in their respective national currencies – the dollar thus remains outside. Let me make that clear: Under US regulations, you can not buy US companies with dollar. Not even a US gas station because that supposedly endangers “national security”. On the other hand, Americans are allowed to buy just about anything outside the US with their dollars. That’s why they artificially create so many dollars. To buy European industries and infrastructure. Other countries are also noticing: It’s asymmetrical and pretty unfair. They just want to get rid of the blackmail and exploitation of the US dollar.

You had already referred to the US decision of 1971 to break the US-Dollar from gold standard. Could you explain the ratio of gold to the US dollar?

Each country’s balance of payments deficit has, in principle, reasons that lie within the military budget. Prior to 1971, any country with such a deficit had the ability to convert its reserves into gold, thereby minimizing the deficit. At the time of the Korean War, the United States had about three-quarters of the world’s monetary gold.

They used the precious metal to propagate a world economic system based on the gold standard. With the Korean War then began to reduce the current account of the United States. Out of a surplus was the known deficit. By 1971, countries like France under De Gaulle or Germany had replenished their gold holdings and generated surpluses. But the US had less and less gold. They lost their own gold. 

At that time, many observers thought that meant the end of US military spending. But the US government found the following solution and put pressure on the other states: “Instead of keeping your gold, you just have US dollars in your national reserves.” After 1991, the US convinced the new Russian government to hold a lot of US dollars. To cover domestic financial problems with the ruble. So, instead of using Russian state finances to push its own domestic economy, Russia bought dollars.

The goal was to make the US the financial center of the world. Other states should pay for the adventures of the US government. A form of tribute, very similar to what the Roman Empire once did. Rome also received tribute payments from its provinces, including Asia Minor, Greece and others.

This is true. How would you describe Russia’s role in today’s world monetary policy? The Russians are buying lots of gold …

Yes, they are trying to get rid of the dollar.

Russia recognizes: “If I hold US dollars, in whatever form – whether in US bonds or US debt – the US government could sanction those dollars any time. As I already explained. That means that the US could blackmail the Russian Federation via all US dollars in Russia. Literally. So Russia is considering whether it wants to support the aggressive US foreign policy on the dollar. Hence the will of Russia to reorientate itself.

I would like to talk about China as you work, research and teach there. How would you rate the new economic giant China and what do you think about the rumors that China may soon introduce a gold-backed Yuan? As kind of a new world reserve currency.

China is following the same policy strategy that once made the United States rich back in the 19th century. China is a mixed economy. That’s logical. Every successful state economy has centralist points – be it in state-subsidized infrastructure or in the public sector. The key to China’s success can be found in the fact that the financial system is controlled by the central government (in Beijing, editor’s note). So, if China’s central bank lends money to a Chinese company that is insolvent, the Chinese central bank can decide: “We’ll just settle the debt like that.” China will then prevent this ramshackle company from being hit by US financial interests or “locusts.” So those Chinese companies cannot be bought.

China is independent from the United States and the dollar. The countrie uses its foreign trade surplus through exports to push its own development, rather than indirectly subsidizing the US economy. Of course, that upsets the politicians in Washington. So the US has responded: “Let’s try and slow down the Chinese economy as best we can.” (trade sanctions, editor’s note)

But China – and also Russia – remain cool and steadfast. They are more or less returning to the time before 1971, at the time of the Vietnam War and before that. The goal of the two governments: A return to the old gold standard. If such would be actually introduced, the United States would be finished in no time. Especially the US military empire. Of course, Russia and China are looking for alternatives to the dollar as a worldwide means of payment.

Your book “Financial Imperialism” also influenced Adam Tooze when he wrote his book “Crashed”. Derived from this: Is the EU still so depending on the US economy today or do you see changes in this area?

What I learned from sources in the US Treasury is this. The US, in short, simply pays off European politicians and policymakers. So the US does not need to start a war with Europe. This can also be regulated by bribing the politicians in the EU. I was told that German and French politicians are the most easiest to bribe. There are whole books on that topic, also about Italian politics.

This was the reason for the surveillance of the mobile phone of Angela Merkel by US services. The US must ensure that no top German politician does anything that violates US interests. The US does not control the EU via industrial corporations, but through direct control of EU politicians. Also through the media which manipulate public opinion. The US action against the Nord Stream 2 pipeline frustrates German industrialists. The natural market for gas there are Germany and Russia. Both economies complement each other perfectly. This would be a logical step, also for the economic growth of both economies. But the US is trying to prevent that, even to isolate Russia.

Why is your book “financial imperialism” still up to date in its analysis today?

Because it illustrates the historic change in the world monetary system and shows how the end of the US gold standard helped building a global control system without any real justification. I have shown that the IMF and the World Bank have since been de facto extended arms of the Pentagon (the US Department of Defense, editor’s note). I think most of them were sold in China. It was only published last year in German translation in Germany. The book describes how the EU, Russia and China ended up in the “economic trap”, laid by the US. It also tries to find ways out of it and solutions.

I read that the Pentagon and the CIA had also developed great interest in your book.

Yes. When I released the first issue of “Super Imperialism” in the early 1970s, the largest order – over 2,000 copies – came from Washington. More specifically: From the Pentagon and the US State Department. I was hired by these institutions to explain to them how the US plunders other states over its economic policies. They had initially thought that the end of the gold standard would be a disaster. Instead, I showed them how that enabled the US to further develop its global strategies.

I wrote the book with the aim of informing other countries how to break away from US policies. Instead, the US state apparatus itself was, for the most part, part of my readership. The CIA and the US diplomats wanted to use my book as a guide to how to control the world through the US dollar.

Why has the book never received the hoped-for attention from the Left in the US?

I think nowadays left-wing parties are barely talking about economics and economic contexts anymore. This also has to do with the infiltration of these groups by forces from neo-liberalism. The social democratic parties in Europe are no longer fighting for economic justice. They also no longer ask the workers question. It truly needs a New Left, which concentrates again more on the economic logic.