Gold as the Peace Currency

By Permalink

Recorded June 8, 2023

Karl Fitzgerald: Welcome everyone to another Patreon Q&A session. Great to have you here. And as always, we’re with Professor Michael Hudson, author of so many books, so many podcast interviews, you name it, he’s out there telling us what’s going on in the world and it’s great that we get to have this sort of behind the scenes discussion with Michael.

Good to see questions coming through on the Q&A feed already. And Michael, John Shriner asks, how is it possible that a 72 foot cube of gold appears to be ruling the world?

Michael Hudson: It doesn’t rule the world. Why would anyone think it rules the world? It’s how it’s treated. That is the key it’s an institution, it’s not just a commodity, no commodity rules the world.

KF: Yeah, so in terms of ruling the world we have a democratic practice but in France, it seems like a lot of executive orders are being passed by Macron. What do you see happening in France at the moment, that is a dangerous trend.

MH: Macron always knows what to say politically, to reflect what he thinks the voters want that has nothing to do with what he’s doing it all or what he will do. There’s a total disconnect between what he promises, and what he’ll do. He’s a demagogue through and through totally in the hands of the United States, hoping somehow that people will trust him so that he can sell them out to the people who pay them and support them.

Yes, well what about my current statements that Europe should never be a vassal of the US, how, how is this adding to the de-dollarization movement. It’s thoroughly opposing it because he’s trying to put himself in charge. I said that you should de-dollarize that Europe should be independent of the United States. So if you can make me the honest broker, then I can sell Europe out to the United States, I can be another head of NATO, and I’ll be France’s Tony Blair.

Don’t trust a word that Macron says any more than French voters have trusted him which is why you have all of the demonstrations throughout France in the last few months. It’s nice to hear – it would be a fantasy, but he’s not the person to do it. And you might as well have Annalisa Baerbock say the same thing, and you know that she’s going to be another Tony Blair.

So this is what the, the demagogues do. America always coaches foreign politicians to talk about independence from, from the United States, but always turn west towards the US in practice, the opposite of Ed Nauer. Ed Nauer in the 1940s would, in the early 50s, would always speak of pro US pro England, but he was always turning east.

Well, German leaders since and European leaders have done the opposite. And in terms of de-dollarization, there’s been more discussion of Saudi Arabia, and joining BRICS is up to 19 countries interested now. How are you monitoring that? I think that’s a wonderful thing. That’s a prefatory to a realignment.

The problem is that if Saudi Arabia really became independent America would simply seize its US Treasury holdings and stock holdings here, just like it seized Russia’s holdings. So it’s linked to the United States, financially and militarily. So we’re talking about dual citizenship there, it wants to get the best of both worlds.

I think it’s realizing that the US economy is headed towards a dead end and it. It would like to begin to disinvest, and moving toward the BRICS is its first movement towards disinvesting in the United States.

KF: And what about Venezuela? They had their money stolen. Is there any potential legal pathways they can take?

MH: No, the United States controls the International Criminal Court. When we talk about de-dollarization, it’s not simply moving out of the dollar into foreign currencies. It’s creating a whole alternative set of world institutions, an alternative to the International Monetary Fund, somehow out of the BRICS Bank, an alternative to the World Bank. And there’ll have to be an alternative court to the International ICC, Criminal Court, in order to somehow get a response.

At some point, other countries will have to be willing to blacklist England or other countries that hold on to foreign currency on behalf of Venezuela, through this new court that they’ll create, they will simply confiscate equivalent amounts of British wealth and turn it over to Venezuela.

KF: How does America still have influence at the ICC when they barely recognize it?

MH: What American officials tell me is little white envelopes filled with $100 bills with money. The European politicians are very bribe-able. They’re utterly corrupt. And if you look at the criminal court’s treatment of the Malaysian airline shootdown and other cases, you realize how utterly corrupt the judges are there.

The United States, it’s very much like the United States appoints our own Supreme Court justices. You engineer them, you prepare them, you make sure that these are guys who will always rule in your favor. And you end up getting a court that looks like a New York landlord’s court or the New York City courts, you know, utterly corrupt.

KF: Anonymous asks, how do you think de-dollarization will impact the domestic US economy and why? What’s the timeframe on that?

MH: No one can tell because we’re talking about a process that’s going to take at least a decade. It’s not simply a decision to say, okay, we’re going to sell our dollars and we’re going to buy gold. We’re going to trade in each other’s currencies and we’re going to hold Chinese currency, Russian currency, Iranian currency instead of dollars. You need to create a whole different international trading system, a whole different set of …. how do you settle balance of payments, imbalances. How do you create a kind of paper gold through the New BRICS Bank that’s something equivalent or similar to what John Maynard Keynes supported in 1944. The bankers credit that’s going to be given so that when there is an imbalance, for instance, if China runs a balance of payment surplus in building ports or roads or infrastructure in Africa, how are you going to be able to do that?

How are you going to be able to settle this without somehow using the kind of debt leverage that the International Monetary Fund uses to impoverish member countries?

KF: Yes. Well, that interview you did with observer.com was interesting seeing that China is basically eight or nine years away on current trajectories to sell out on treasury bills. What impact will that have?

MH: It won’t have much domestic impact at all because the government can simply—the Federal Reserve can simply buy whatever China sells. So domestically, there will be zero monetary impact.

There’s no difference between a foreign government holding a treasury bill or the Federal Reserve simply creating it.

The impact will be on the balance of payments because if foreign countries, especially China, sell their U.S. dollar holdings, then these dollar holdings that are basically what fund the balance of payments deficit, and the balance of payments deficit for the United States is mainly military spending.

The dollars that China and other countries hold have their counterpart in all of the 800 military bases that the United States has all over the world. All the balance of payments deficits go basically for military spending. And so the dollar standard is really a system of indirect taxation of foreign countries through their foreign banks by having them keep their savings of their foreign currency funds, their central bank funds, to keep [give] their savings and loans to the United States to finance its military spending, to surround them with the military so that if they do anything the United States doesn’t like, like joining the BRICS Bank, America can immediately buy it.

America can immediately do to them what it’s been doing to Venezuela and Iran and other countries that it tries to wreck.

Once they’re free of the dollar, America can’t use dollar manipulation to wreck their financial markets and disturb their economy, and America has only one dimension of foreign policy.

That’s as a wrecker. It can bomb, it can assassinate, it can pull the plug and sanction companies to countries to prevent them from getting basic needs and raw materials to disrupt their supply chains. It cannot contribute to their growth. It is only a destructive force in the world today.

If you de-dollarize, you remove the single major ability of the United States to be a destructive force, just as when other countries created an alternative to the SWIFT bank clearing system that disabled America’s ability to pull the plug on computers and screw up all of their banking accounts. Other countries are trying to protect themselves from America’s ability to destroy their economy, which is the primary dimension of American foreign policy. Shocking how we’re financing our own oppression, those who live outside of America.

KF: So what sort of increase in US military spending will be required to maintain these military bases? How many – 800 around the world? How much higher expenditure do you think there’ll be?

MH: Well, they don’t need to have any expenditure if they simply grab all of Saudi Arabia’s savings, all of Europe’s savings. It depends. There are many ways of doing it. If you’re a robber, you don’t have to use your own money. So America is trying to get NATO to spend a lot. Germany is willing to double its spending on NATO. So America is trying to get foreign countries to pay for this. And that’s why countries like Germany exist, so that America doesn’t have to pay to destroy other countries. They have the Stockholm syndrome. They identify with the kidnappers themselves. So we can’t possibly answer that.

KF: Shomgosh asks, will global economic statistics start to lose accuracy as more of the global South countries stop sharing critical data with the IMF? What incentives do ECC, China, Russia have to give anyone an accurate tally of bilateral trade volumes?

MH: Every country needs to know its own economic statistics. The problem is not sharing the statistics. The problem is that the statistical accounting formats that are promoted by the World Bank, the IMF, and by the sort of neoliberal economics are not the kind of accounting statistics that you need really to run your economy.

The whole idea of GDP and the national income and product accounts includes financial overhead, rentier overhead, monopoly rents as overhead, waste as overhead. In order to really develop their own economies, they need to have an alternative format to report. And if they would develop an alternative form of national income accounting, then they could track it much better and they wouldn’t have to make this artificial U.S.-sponsored national income accounting that says that all this financial sector, the overhead, the debt service, the increasing housing prices, actually doesn’t add anything to real accounting.

If you bring the economy of production and consumption to real economic output, it’s all an overhead. And if you do that and break away from this idea of GDP and you break out military spending and all of the other basically non-capitalist forms of spending, non-economic forms of spending, then you’ll have something completely different. So just for its own use, every country needs to, of course, you have to measure the volume of your trade. Of course, you have to measure what you spend and what you get.

The question is whether you consider this spending to be productive or unproductive. You need to reintroduce the central concept of classical economics, which was the distinction between productive and unproductive labor and earned income and unearned income between profit and rent, as you and I have spoken about so often.

KF: We have, we have. So as more countries de-dollarize and BRICS grows in value, do you think there may well be more debt defaults, the sort of Argentinian move of years ago? And what impact will that have in terms of the confidence of international trade?

MH: Well, I’m against any debt default. I’m for debt repudiation. Default means that the fault is by the debtor. The fault is [instead] by the creditor. The fault is by the IMF for making junk loans and political loans to support dictatorships and immediately pull the plug whenever there is a left-wing party.

The fault is between the IMF and the World Bank that have made loans conditional on a fallacious economic theory that if you only keep fighting labor, if you only keep reducing your living standards, if you only will prevent labor unions and lower wage rates, then you’ll be more competitive. And of course, that is what has prevented other countries from growing.

The World Bank says, if only you will stop trying to feed yourself domestically and make export crops and compete with each other to make plant plantation crops and get rid of family farming and let larger foreign-owned plantations take over your agriculture to make crops that do not compete with American grain, American corn or American soybeans. Then you will have the foreign exchange to pay your foreign bondholders. All of this is odious debt.

So I’m for these countries simply creating a new international bank, repudiating their dollar debt and saying we cannot pay the dollar debt because the NATO sanctions on Russia have prevented us from paying. The United States has prevented us from paying the dollar debt by increasing the price of oil and energy, by increasing the price of food, by increasing the price of fertilizer, by blocking Russia’s fertilizer exports to us. And the creditor nations have an obligation to enable the debtors to repay the debts.

But the debtors can’t pay the debts because of the protectionist and anti-socialist right-wing policies of the United States. These debts should be wiped out. They should be repudiated. And that should be the number one aim of the new BRICS Bank, to create enough of an alternative credit so that other countries do not have to depend on dollar loans from the IMF, World Bank, Treasury and the American officials with these envelopes of $100 bills to buy off their politicians. Basically, that’s what real de-dollarization is.

KF: Well, we better get you a meeting with the CEO of this new BRICS organization, hey? Well, maybe they can listen to these discussions.

MH: I don’t need to say more than what I’ve just said. It’s pretty obvious.

KF: Karl Sanchez wanted to talk about Asian debt cancellation. Yeah, come on through, Karl. Where are you?

Any questions via chat on screen? That would be good. Yeah, and a big hello to all our Patreon supporters. Great to see you here. We’re getting through these questions.

We had a bit of blowback, Michael, on your gold issue.

John Shriner says, ‘I respectfully disagree. All nations are accumulating as much gold as they can. It appears gold and diamonds are valued assets by the ruling elite, whether institutions or commodities. How much more important is gold going to be as de-dollarization and uncertainty unfolds?’

MH: Right now, it’s the main alternative to the dollar until such time as the BRICS Bank creates an artificial currency, and until such time as the mutual currency swaps go as far as they can. If you’re looking for an alternative to what do all nations agree upon?

Well, you have for the last 2,000 years, nations all agreeing that gold is something you’re willing to take because gold isn’t purely an asset. It doesn’t have a debt associated with it. If you hold a dollar, you’ve made a loan to the United States Treasury that spends it on military. If you hold gold, there’s no liability to it.

Now, in 1973 or 74, Herman Kahn and I went to the Treasury Department in Washington, and Herman made a map of the world. And the map had two sets of countries. One where the countries that believed in gold, and they’re pretty much all of Eurasia today. They’re the global south countries. They’re the global majority countries.

Then who are the people that didn’t believe in gold, that believed in government money? Well, they were the NATO countries.

They were the Protestant countries of Western Europe and the English-speaking countries. These were the countries that had faith in government, and the rest of the world did not have the faith in government, especially NATO governments that were running the international monetary system.

My argument was that gold is a peaceful metal, because if you had to settle in payments in gold after 1971, when President Nixon took America off gold, then every year that you continued to fight in Southeast Asia, every year that you continued to spend militarily abroad, America would lose the gold cover for the dollar.

America would lose the gold, and the military spending would drain the country of gold, and it would have nothing left at all. I think that would have been a wonderful alternative. I would have preferred that the gold exchange standard was kept precisely because it would have limited America’s capacity to run up the debt and the Treasury Bill standard.

That’s what my book Superimperialism was all about, explaining just exactly that, how America had used gold to control the world when it had 75 percent of it by 1950. Once it began to lose gold, it perceived that it was losing its military power and its diplomatic power. So that is the great benefit of gold, to limit any country’s ability to run a military deficit that would force any country off gold, as has happened again and again in history.

So I certainly think gold is important as a constraint. That doesn’t mean that gold runs the world. That was the question. Did gold run the world? No. The way that governments treat gold is what runs the world.

When America treated gold as something that other countries shouldn’t buy, you should only make your loans to the U.S. Defense Department and the Treasury. That was one way of treating it.

Now we’re seeing a different way of treating it, as an alternative to the dollar, so that they can simply hold an asset that is not a loan to the United States.

KF: Okay. Well, talking international and BRICS, would the New Development Bank avoid compound interest? And that gets me thinking, Michael, what would be the top three or four best practices they should adopt for a fairer world?

MH: Well, there’s really no way of avoiding interest. The much better way was what you had in the ancient Near East for 3,000 years, which is what I’ve described in ‘and forgiven their debts’. The interest is a charge for money, and under certain circumstances, it should be charged.

The problem is when compound interest accumulates, it tends to accumulate faster than the ability to pay. And when the debt overhead becomes top heavy, the debt should be canceled. So you let interest be charged, but you wipe it out at the point where it becomes problematic. And when running into debt is not a choice by the debtor, but the debtor is forced into debt by things like a drought, or a crop failure, or a natural disaster, or in America, having to get an education, or having to get medical care, or just having to live where you can’t afford even to break even without running into debt.

That kind of forced debt should be canceled. So the question really is not how you handle interest, but how you handle the ability to pay debt, and whether debts should be paid, and which debts should be paid.

Certainly commercial debts were always paid, even in antiquity.

In the Bronze Age, commercial debts were left intact to be handled. It was the unproductive debts, the personal debts, and other local debts that were wiped out. That’s what the discussion should really be about.

KF: Well, Karl Sanchez asks, in a related question, what sort of narrative should be said regarding credit and debt that overturns the establishment narrative? And this is something you’ve obviously championed, and you’ve partly answered in that last question.

MH: No, I’ve spent the day on the third volume of my History of Debt, The Tyranny of Debt, and I’ve spent the day on the Crusades of the 12th and 13th centuries. It was really the Crusades that brought debt back into being. If you look at when the Crusades began in the 11th century, the Christian church, like the Muslims, had denounced usury and interest charges throughout their history.

It was the military spending by the Crusades that led the papacy to say, well, we need to create Christian banking to finance the wars that we’re sponsoring, the war against the East, the war against France, the war against Germany, the war against Spain, the war against everybody.

You had Rome being the America of its day, a war against everybody to take over, and you needed debt to finance it. And so within the next five centuries, you had the creditor class evolve from being on the outskirts of society, Jewish or alien money lenders or merchants with their spare money, to by the time of 1515, when the Medici Pope, Leo X, essentially said there’s no such thing as usury anymore in practice. Creditors can charge whatever they want.

You had the banking families, the Medici, supplying popes, and money lenders in England and other countries were joining the upper aristocracy to administer government. So it was really the Crusades and the military wars that the Vatican sponsored, mainly against Christians.

People think the Crusades were against the Muslims, but they were against Christians who were unwilling to let Rome take away all of their money, to let Rome appoint the bishops to have their church revenues sent to Rome for Roman projects, Roman luxury, Roman spending instead of domestic spending.

It was the Crusades really that ended up finally after 1515 and leading Martin Luther and others to break away with the Protestant reaction. And when I’d begin to write this book on the history of debt, I didn’t realize exactly how critical the Crusades were to all this.

So I’m providing a different narrative to show how debt was already in the 13th century.

You had the Vatican demands for austerity being the International Monetary Fund of its day, insisting in austerity that England bankrupt itself, strip its churches, strip whatever gold they had to finance the war against Germany, the war against France, the war against Spain, the war against everybody almost that wasn’t a fiefdom of the Pope. And you had the evolution of debt being owed to foreigners, foreign bankers imposing austerity.

You had exactly the same dynamic that you had in the 13th century that you have in the 20th century under the IMF. That’s the interesting thing. That’s the narrative that I’m working on now, and I’m hoping to finish the book this year.

KF: Right. Yeah. Well, that’s Jamie Brown’s question. She’s talking about how fascinated she is with this whole topic. “I’ve fallen into an obsession with this facet of Hudson’s work, and I’m interested to know what’s coming next with this series of works.” So you’ve kind of answered that, but Michael, how on earth do you find all this information sitting in Forest Hills, New York? Are you in a museum? How do you uncover this?

MH: I began to write this book in around 1982, so I began it 40 years ago, and I postponed writing it. I realized that I didn’t want to write about the modern debt problem until I’d explained how money and debt and land tenure and rent actually originated, and that took 25 years of working with the head of a Harvard University group, essentially getting a group of colloquial participants to write an economic history of the ancient Near East, and how it evolved into how everything changed in classical antiquity, and civilization essentially got rid of kings and replaced them with financial landowning oligarchies, and how to get back to a more reasonable thing today.

So I’ve been writing these books for many years. The problem that’s been taking me time this year, it’s taken me six months just to write the first three chapters of the book on the Crusades because so much new work has been published since the 1980s when I began to write it, so much more information on who were the creditors, who were the debtors, what was the effect on land tenure, how were debts paid out of rent, what were the effects on losing property and property ownership with credit.

All of this has really been rewritten in the last 10 or 20 years, just like the history of Rome and Greece was rewritten and took me longer to write The Collapse of Antiquity than I’d originally envisioned in the 1980s.

KF: And is that coming through academia or new authors?

MH: Academia. I have my academic articles on it, and in another month all the academic articles I’ve written on archaeology and economic history are going to be sent to the typesetter for the Temples of Enterprise.

And that book will be out this year, I expect, probably in November or December.

So that’s another thing, about 13 articles that I’ve written on the major work on the origins of money, origins of interest, origins of land tenure and rent, origins of privatization and debt cancellation, and the organization of land tenure as a tax policy. All those articles will finally be out by the end of the year.

Many have been out in colloquia that are out of print. The publisher that Harvard had published the first two volumes, they didn’t have too good distribution. We went to another publisher who was a one-man shop and he died. And so in the last week, really the last week, we sent two of the volumes, volumes three and four. Debt and Economic Renewal in the Ancient Near East will be reprinted soon.

Creating Economic Order, the British Museum meeting that we had around 2000 is going to be reprinted. So all of these original works that I did 20 years ago or more are finally being made all available now.

KF: How rewarding that is. Mr. Sanchez says, and we’re going back to the interest topic, either you have interest or you don’t. A set fee for a loan could replace interest, but when that was done, the fee was demanded up front. Is there another way to do that?

MH: Of course. It really is a rip off to demand the fee up front. It doesn’t happen that way. It doesn’t have to be organized that way.

The important thing is to realize there are two different kinds of interest bearing loan. One is a productive loan for commercial purposes, and one is borrowing money in order to make a financial profit.

If you’re borrowing from the Federal Reserve to buy a stock or a bond or real estate, then of course you have to pay interest and you pay it out of it. And if you can’t pay the interest, you lose your equity.

It was this availability of money for basically predatory purposes to buy assets that has been wrecking the American and European economies. That’s part of the problem that the creditors and money in the Western civilization has ceased to be a public utility. It’s become privatized and has been used by an oligarchy and taken out of the hands of government.

In China, by contrast, the Chinese government decides what are we going to create money for? Do we want to do what American banks do and create money for people to borrow at 1% to buy up Chinese enterprises and then raise the prices and make China as debt crippled as the United States is?

Or do we want to use our money to finance actual means of production, actual new construction of housing, actual production and consumption instead of financial speculation? Most Western credit is a mortgage credit or credit to buy stocks and bonds or to buy financial assets. That’s the problem with privatizing banking systems. That’s the argument for avoiding it, that is to treat money as a public utility to be used for public purposes. So instead of financializing industry, as you’ve seen in the United States, you’re industrializing the financial system as China has done.

KF: Michael, we have some fascinating people on this call. Great to see so many questions coming through in the webinar chat, lots of vibrant discussion. But Rachel Sotos asked a very interesting question here. And please, if anyone wants to come on screen and discuss with follow up questions, feel free to come through. And our friends at Real Progressive, who are our background hosts here, will get you on.

So Rachel says, I’m curious to know your possible thoughts regarding how Greek antiquity gender politics intersected with debt relief, or more precisely, the lack thereof. I think of several points that might be relevant. The Lydian origin of coins used by the prostitutes to save for their own dowries, the role of women in Athens before Solon, with more economic power. Delphi, I would like to think, was something more than an ancient Davos. It was a cultural center, a space of sanctuary that hosted many cities. At a broad level in Athens, we see the advent of a virulent brand of patriarchal metaphysics. Is this patriarchy at the core of the greedy Western refusal to practice debt relief?

MH: It’s very hard to make a straight connection there. You’d have to look at everything as a system. In my Collapse of Antiquity, the very first chapter, I deal with Delphi and Delos. These were indeed Davos-like centers. They were the gathering points offshore, where you could have the Phoenician and Syrian traders meet with the domestic economy, the domestic leaders.

They developed a whole kind of economic system. You could say it was the IMF of its time. They developed the practice of debt, charging interest was brought via these centers. The temples were used as commercial outposts and had been used that way in the Near East for thousands of years.

When the Near Eastern traders began to move into the Mediterranean, they established these commercial outposts on the islands as religious centers, as judges, and created the ideology, the economic ideology of the time. I don’t know of any connection really with the gender issue. I know most of the classical historians who’ve written on this, and they haven’t been able to find any either, so they tell me.

KF: Yes, Michael. Well, it’s a layer of analysis we men are guilty of, aren’t we? It permeates through so much. But Rachel, the rest of her question was, she says, no return to the mother is possible. Finally, is there nothing positive in the ancient debt relief protests in the West?

MH: If I remember, in Miagra, the populace did not wait for a jubilee, but rather stormed the temple and smashed the tablets themselves. Where? In Miagra. Megara, sorry. Oh, yeah, that very often happened, and it happened right down through the Roman Empire. It was normal to storm where the mortgage debts were kept. That occurred in the Middle Ages too. It occurred in medieval England when they would storm the houses of bankers and burn them down. That’s always been a popular means of debt cancellation.

KF: Yep. Okay, let’s switch tack a bit. Canada’s population is the most debt leveraged in the G7, sixth in the world. OECD says they’re on track to become the next Greece. Yet people love to tout how stable Canadian banking is because it’s not like the US. Nothing to worry about. Meanwhile, since just last year, we see a 30% jump in mortgage amortizations of 35 plus years. What do you say about this? Why are people under the impression the Canadian economy is so stable?

MH: That’s because the Canadians are so amazingly passive while this bank takeover has occurred. Canada used to be one of the most progressive banking and monetary countries in the world. But after about the 1960s, the banks took over.

I spent quite a few years working for the Canadian government trying to fight against the bank takeover, especially when the bankers were trying to convince Canadian provinces to borrow in Swiss francs and German marks at a lower interest than the Bank of Canada would create money to create in dollars.

I said, this is crazy. If you borrow Swiss francs or German marks for spending domestically in Alberta or Manitoba or the other Canadian provinces, these foreign currencies are turned over to the Bank of Canada. And the Bank of Canada has to print the money anyway, the domestic money, because Manitoba and Saskatchewan don’t spend Swiss francs and German marks.

Well, if you’re going to have the Bank of Canada creating the domestic money anyway, what do you need the Swiss and the German creditors for? Well, there was a stormy meeting and the bankers said, well, you need us as honest brokers. I said, you have got to be kidding?!! You’re not an honest broker. You’re deceptive. You’re very self-interested. You’re trying to bankrupt, to make money for yourself, to make a few percentage points as a commission. You’re willing to wreck these provinces.

And what I said was exactly correct. This was in 1979, 78, and the government published my report, Canada and the New Monetary Order, when the provinces borrowed, the Canadian dollar was worth more than the American dollar. And after, largely because of the war, military spending, the Canadian dollar plunged against the dollar, way down to 80 cents to the dollar, and it plunged much more against the German mark and the Swiss franc. And so the provinces had to pay 30% more, just as the foreign exchange cost of borrowing in the hard currencies had increased.

And all of that was just so the banks advised them to do it, just so they could make a few points. And then they brought a Jesuit priest in and he said, but Professor Hudson, you’re advocating that the government create money. That way is to the gas chambers. You’re sending us to the gas chambers and absolute craziness.

The church was 100% behind the bankers, against the government, saying the bankers should be running the country, not the government. The government is evil. That was official Catholic policy at that time. And they’d given me a landed immigrant status. I left Canada in disgust at the inability of Canadians to fight back.

That’s the Canadian personality problem. I must say, they’re not fighters. It’s a different …. if you look at what they’re …. they had an identity crisis at that time in Canada. And their identity crisis was, do we call ourselves wasps, white Anglo-Saxon Protestants, or white Anglo-Celtic Protestants? That’s their identity crisis. There are more important things to have an identity crisis about.

KF: Good to see you fired up, Michael. There’s always a few hidden stories that come out in these discussions from your various interactions at higher levels.

Yeah, let’s delve into this one from Shelly Abraham, a topic we love to talk about, good old affordable housing problems. How would you devise financing a system to build starter housing with government collaboration? Would removing the mortgage interest tax deduction factor in?

MH: Yes, the best way to lower housing prices is to tax, instead of having people having to borrow from the bank to bid up housing prices, you have to tax the land value. If you tax the land value, the rent will not be available to be capitalized into a bank loan and increased by the bank. So the way to hold down housing prices has to do with the tax system. Karl and I have often spoken about this.

Adam Smith, John Stuart Mill, Marx, the first line of the Communist Manifesto, all were for a land tax so that the land value underlying housing and agriculture and commercial property is the natural tax base. And if you privatize this economic rent, then you create the landlord class that classical economics of the 19th century spent a century trying to get rid of and developed value and price theory in order to isolate economic rent so that economic rent would not be an element of the price of houses. This is a long, complex discussion, but it’s something that I’ve written up on quite a bit and Karl’s written on quite a bit.

KF: Yes, we had plenty of good discussions on my Renegade Economist podcast for years and years. But yeah, that land tax acts as a counterweight to mortgage debt. And in a way, what it does is channel the rising locational value away from the banks and towards government so that we can have a tax cut on our productive activity, on our income. And that sort of de-levers the whole speculative orientation of our economy, doesn’t it, Michael?

MH: And that was the whole central point of classical economics. The whole 19th century was that fight to deprivatize land rent, along with other forms of economic rent, monopoly rent and natural resource rent and financial monopoly rent.

KF: Yes, yes. Well, you know, it’s just staggering reading your work on the Near East and so forth, you know, in the new book, Collapse of Antiquity, on the role of assassination and how that kept people in line. You know, thankfully, none of that has happened, talking about land rents and land taxes. But the trauma this must have caused society, Michael, can you, do you get an understanding of how that played on people’s minds over generations and generations? This inability to talk out about, you know, this incredible, what should be a public resource in money creation and how instead that privatization has been kept within the elites only.

MH: Well, if you look at Guatemala in 1953, America’s policy has been to assassinate any political leader in the southern hemisphere that advocates land reform. That’s its official policy. There was a wholesale murder of land reformers in Guatemala, and the official policy of the United States from the World Bank and from private banks, including, I’m told, Chase Manhattan, before I joined it, was that everywhere where there was land reform, there was an anti-American government, therefore America has to fight land reformers.

The assassinations that occurred century after century, for five centuries throughout the Roman Republic that I describe in classical antiquity, is now the foreign policy of the United States throughout the global south country. So that’s still concerning. And the same kind of passionate hatred of preventing economic rent in land has been applied to financial rent in banking and currency.

That’s why the United States attacked Libya and destroyed its leader, tortured him, and stole all of Libya’s gold. Libya wanted to have an African gold-based currency instead of the dollar, and the United States said, we’re going to send in a French group, I think it was French, to kill Gaddafi, and we’re going to just support ISIS there and the Islamic groups to take over and destroy it.

America has said that any country that tries to de-dollarize and have an alternative to the dollar is our enemy, and we will do whatever it takes, including assassination, to stop it. Well, they’re not able to do this against China. They’re not able to do it against the large group of countries that the BRICS are putting together to return to our original discussion.

And finally, you could say that the motto of BRICS is no more Libyas, no more Guatemalas, no more ability of the United States just to kill everybody who doesn’t agree with them. This was the Roman policy, and the fact is that people who don’t work for a living, people who make their living by robbery, by a free lunch, by economic rent, by being a landlord, by inheriting money, they’re willing to kill for this right, the privilege to live in this way.

But the people who are actually producing the income and the output to pay these rentiers are not willing to fight. It’s the exploiters that are willing to fight, not the exploited. That’s one of the big political problems throughout history.

And the Romans did fight, but there were not enough of them to win. Their policy was to walk out, just to leave Rome, to emigrate. And that’s usually what you’re seeing today. The whole immigration crisis in the United States now on the Texas border is because America has wrecked the Latin American countries, and all they can do is leave, is emigrate to try to get to the United States.

The immigration crisis is caused by the United States destroying their economies and giving them no alternative if they want to live but to leave the countries that America has destroyed. And America won’t let them in. Just like America won’t let countries that are in debt to it pay the debts by exporting their goods to the United States or replacing American agricultural food exports by growing their own food.

KF: Russia recently demanded the US government explain the political assassinations of the 50s and 60s, since they’ve never been told the truth. What’s your comment on that?

MH: It’s not the government’s job to tell the truth. Of course they haven’t been told the truth. That’s what governments do.

KF: Yeah. Yeah. And I noticed over in the chat, in defense of China, Florencia Shade says, FYI, the Trotskyists are making a comeback in Canada, armed with Professor Hudson’s monetary knowledge, because we are sick of this shit, so don’t count us out yet.

MH: Okay. I don’t know what they’re doing. But good luck.

KF: Well, what about the Indian population having surpassed China? Can they team up in a constructive way to replace the US’s economic domination?

MH: The US will always have a role, but we’re talking about real independence. We’re not talking about a system of one set of countries that’s dominated by another set of countries that are exploited. You could say that the whole of Eurasia, the whole BRICS, the whole non-NATO world has run away from the West.

Western civilization has failed, basically. Its model has failed. The United States economy is a failed state. Other countries have run away and done their own. It’s not that they’re breaking away from US domination.

They’re trying to create, not replicate a dominant system where there will just be somebody else doing the exploitation. They’re trying to create a truly new international economic order.

KF: Very good. Okay. What have we got next? Yeah. What are Trotsky’s main points that could be applicable today?

MH: Trotsky didn’t really write much about economics. He was basically a cultural critic. Wonderful culture, problems of life, literature and revolution. He was a great military leader, and especially he was a great intuitive political analyst. His political writing is wonderful. His biography of Stalin is wonderful, and of Lenin, but he didn’t really have an economic theory.

His approach to economic relations was basically political in character. The only economic theory he had was that of combined development, and that is it said, well, other countries, Russia, for instance, do not have to go through all of the stages that the West went through on its way to capitalism. We can simply avoid the whole traumatic interlude between feudalism and socialism and go directly to a socialist form based largely on technology, on how do you electrify the Roman economy.

Lenin relied largely on Khrushchevsky for the electrification program. Lenin said communism is electrification plus workers’ control. Essentially, the fact that Trotsky wrote so eloquently as really a journalist on politics meant that his followers really did not spend much time on economic analysis.

That’s one of the problems that the financial analysis, the analysis of economic rent, and the history that we’re talking about, value theory, rent theory, monetary analysis, tax policy, these are discussed mainly on the right wing of the political spectrum, not on the left wing of the spectrum.

What is the result is that the left wing parties throughout the NATO countries are neoliberal, and basically what used to be the social democratic parties, the labor parties, have moved to the right wing, just like the Democratic Party is the right wing party in the United States, the war party, the military party, the neocons. That’s one of the problems, is that the left has not really followed Marx’s economic analysis. They’ve become purely political and left the economic and financial analysis to the right wing.

KF: Do you think that’s a problem with the programming of economic language?

MH: It’s been so off-putting that it’s pushed the left towards important topics, but not structural, such as identity politics. Identity politics means every identity except being a wage earner.

If you can get people to think of their identity in terms of gender, in terms of race and ethnicity, you can divide and conquer, and they won’t think of themselves as wage earners and rent payers and debtors, and they won’t think of themselves as an economic identity.

Identity politics is a right wing, anti-progressive, basically deceptive theory to prevent people to think economically. It’s to impose a set of blinders on people, blinders against any kind of economic analysis. That’s called divide and conquer strategy.

KF: Back to the East, did the philosophies of the East negate the need for debt relief in its antiquity that was practiced in West Asia?

MH: What’s the question?

KF: Did the philosophies of the East negate the need for debt relief in antiquity…. what was practiced in West Asia?

MH: The whole philosophy was for debt relief, and all of the Roman historians and Greek historians all were for that, from Socrates to Livy and the Roman historians, Plutarch. That’s what my books are about.

KF: Michael, let’s get into it. We’ve got a few more minutes to go. We’ll go for about another 10, but I would love to hear your explanation of the tendency of the rate of profit to fall, Marx’s great theory.

Can you explain to us how that has played out over time?

MH: I have a whole article on that very topic in The Bubble and Beyond. The rate of profit is widely misunderstood.

What Marx said was the important thing to look at if you’re analyzing an economy or a corporation is to look at cash flow, at what accountants call EBITDA, earnings before interest, taxes, depreciation, and amortization. Marx said as production becomes more capital intensive, capitalists have to make not only profit but they have to recover the original cost of their capital investment. That is depreciation.

Depreciation is going to rise as an element of cash flow. Marx was really the patron saint of financial accounting. He developed the concept of financial accounting by distinguishing profits from depreciation and interest and the other forms of cash flow that a capitalist enterprise receives. So it’s an accounting concept. It doesn’t mean that capitalism is going to run down. Just the opposite.

Marx said the falling rate of profit means an increasing capital investment ratio for the economy, and we’re all for it. You have to realize that as economies invest more in capital means of production, in factories, in machinery, in bridges, in infrastructure, the return to the private investors, if you’re a capitalist, is going to have to include this investment cost as well as the profits on this investment.

Unfortunately, in order to understand this, you have to read Das Kapital. That’s sort of not permitted among most left-wingers.

The great problem that I have in talking to Marxists is they refuse to read volume two on capital. They insist on reading just a popular summary of what Marx said politically. There is no understanding whatsoever that what Marx is talking about was a technical financial analysis.

Well, when I went to work on Wall Street, the leading economists of almost every bank that I worked with all had a Marxist background because we’d all read volume three and volume two of capital, and that’s what gave us an advantage over the business school people.

But now that the left has turned to identity politics, they don’t read essentially the financial analysis that Marx elaborated into a whole national income analysis and was the basis of his idea of what an economic system was all about. And does that transfer across from the industrial sector into this financialized, speculative, mind-seeking woe? Especially.

Donald Trump said that what has made his fortune is depreciation because the accountants have written the depreciation rules so that every time a building is sold, its value is attributed more and more to the cost of the physical building, not to the land.

So essentially, the real estate lobbyists have tried to say property is all really the building. It’s all the bankers and the landlords who have created this.

The problem was that by 1994, if you looked at the Federal Reserve flow of funds statistics, the Federal Reserve had a statistic for the value of all the corporate-owned real estate in the United States. The value of land was minus $4 billion.

In other words, we would give you $4 billion if you were willing to take all of the land in the United States for yourself. That’s how depreciation is treated in the statistics.

One of the problems in dealing with statistics is not only understanding a realistic sense of economic categories, but realizing the distortions and the falsification of statistics that is a product of the lobbying that has made America’s national income accounts useless as a reflection of actual economic strength and prosperity.

KF: The whole property data gold rush drives me absolutely mad that we have this geospatial technology where we can analyze at a granular level what is happening in communities. But all that data has been generally privatized in many Western nations and CoreLogic out of California, multinational, owns so much of that data, whilst owning a lot of climate-related environmental data, putting the two together to figure out where the next cities are going to be in another 20 to 30 years.

Michael, how have you seen that control of data influence the way we understand economics play out?

MH: Well, that’s what my book, J is for Junk Economics, all about.

Economics is public relations for the rentier class.

Orthodox neoliberalism is basically to teach you that the way to get rich is to be a rentier, to increase housing prices by going into debt to bid them up, to make money financially by stocks and bonds, and not to do blue-collar labor, not to do industry, but just to live as a rentier on a trust fund. So if you believe that inheriting a trust fund is the way to get rich, well, that’s the way that the people who designed the economic statistics have gotten rich, but it’s not really the way for the rest of the economy to get rich.

For that, you have to go back to classical economics, which is why it’s no longer taught in the economic curriculum. To get a degree, you no longer study the history of economics, because as Solomon Fabrikant, one of my professors, the head of the National Bureau of Economic Research, told me, if a theory is no longer taught, it’s because there’s a Darwinian evolution and it’s no longer appropriate.

And so as economics has moved to today’s degree of perfection, we no longer have to deal with ideas that have been dropped, like economic rent, like the idea that landlords don’t work for a living, like the idea of interest in bankers and debt services, economic overhead. Well, needless to say, when I had proposed to write my dissertation on concepts of productivity, I realized that I couldn’t work with that professor.

KF: Okay. Okay. A good friend, Virginia, here from the Macro and Cheese podcast, and Real Progressives, asks, yesterday I met a woman from National Single Payer, an organization promoting a national health service in the US. She insists the program will need new taxes to pay for it.

A trigger for MMT is, like me, I told her that taxes do not fund federal spending. She said, de-dollarization will hurt the US economy, therefore the US will not be able to do MMT anymore, meaning the US won’t be able to print money without a progressive taxation plan. Michael, what are your thoughts on that?

Would a single payer health plan really require new taxes?

MH: Well, let’s put it this way. Right now, the United States spends 18% of its GDP on healthcare. That’s higher than any other country. Life expectancy is going down. Almost all the medical measures are going down. Obviously, the less expensive a health system is, the better the economy will be.

Of course, that was Bernie Sanders’ argument for trying to say that healthcare should be a public utility. The purpose of a public utility is to minimize the cost of basic needs, not maximizing. If you privatize healthcare, then you maximize the cost of healthcare because you make it a profit-gaining opportunity for the insurance companies, for the medical profession, and you do just the opposite of making an efficient economy.

Obviously, making healthcare a public utility and public would help. There’s no direct linkage at all with MMT and money creation or de-dollarization. It’s sort of a standalone thing. If you do have de-dollarization, then you’re going to depend much more on MMT, just as Donald Trump financed his military spending. Dick Cheney said, the government can create whatever money it wants. Deficits don’t count. We can go to war and spend whatever we want. These are sort of separate dimensions that have to be looked at as part of an overall economic system.

KF: Yes, okay. Well, we’ve get lots of questions via Patreon. I’m getting a lot of messages to you, Michael, people wanting financial advice.

MH: No, I don’t get financial advice.

KF: Of rising interest rates. Is there any advisors you can recommend, anyone to read? How do people find their way forward when so many financial advisors are part of this two-dimensional economic framework that only looks at labor and capital and doesn’t consider monopoly?

MH: Well, you can’t find your way forward. The only way is to spend the time to understand it. And if you can’t become a financial specialist full time, then just put your money in the safest place you can and don’t try to make money by being a financial player, because people who do spend their full time on it are going to beat you.

KF: Yep. Okay. Okay, well, let’s see. Rightio. Okay, last question. Wow. Okay, here we go.

Anonymous attendees asked a heap of questions today. It’d be lovely to hear who these people are, because it’s been nice, you know, Michael, seeing you establish relationships with various Patreons through this new channel we have.

Lesbian, lifelong leftist here, re-identity politics, gender ideologies, destroying all our left groups, women’s groups, LGB groups, public schools, parents taking their children out and more. Having been in this community all my life, my experience is that this is not an organic movement, but a brilliantly effective strategy, unfortunately.

MH: I think that’s quite right. They’re being used. The frustration that they’ve had by all of the prejudice against them has been mobilized to make them more concerned with that than their identity as a wage earner and debtor and renter or a mortgage victim. So that’s the whole idea. It’s a distraction.

KF: Yeah, well, hopefully Adam Curtis in one of his brilliant documentaries is going to dissect that for us.

But yeah, Michael, thank you so much and thanks to all the listeners. Apparently we’ve got to keep an eye out for the new Rules podcast, which has an explosive end to it, thanks to Michael, your contribution. So we’ll get that up on the website when the transcript’s through.

But yeah, thank you once again, Patreons. It was fantastic having this capital stream to help us when we were hitting 6,000 visitors a day recently. And so, yeah, your support helping Michael pay his editors and graphic designers and so forth, it’s really appreciated. And yeah, we’ll look forward to discussing these topics and more with you in September. What will have happened by then?

MH: Who knows? Nobody can tell. I feel like a stand-up comedian doing these quick answers.

KF: Yeah, no, goodness me, we should do a count on how many questions there are, but you flew through them. Well done, buddy. Okay. Thanks. See you all.

Thank you, Michael.

MH: How do you think it went?

V: Great.

MH: As always, if Carl Sanchez is still here, maybe he can put the link. Oh, Carl, I love what you’re writing, as I said, I noticed what you wrote today or… Maybe you can put the link of that podcast in the chat again.

V: He did it at the beginning, but… Some people are asking for it, or you can put… You could have made your own appearance, if you would have pressed, you know, he could have put the viewers on and I could have said hello and seen what you look like.

MH: Yeah, people have got shy coming on screen, haven’t they?

V: Yeah. Well, no, I think it’s my fault, I think I have to unlock them or something, but nobody asked. …. Okay. So, but you seem to really enjoy these. So you would seem to enjoy doing it, Michael.

MH: Yes. Sure. I always get ideas. I’m basically a talker more than a writer. Well, you certainly write enough. Well, I get ideas when I talk more clearly. When I write, I have to rewrite and that’s the problem. I can talk much faster than I can write.

V: You know, they said Christopher Hitchens was able to write without rewrites. He could write in complete eloquent paragraphs. Did you know him?

MH: I met him once. I met him when he was transitioning from left to right. Right after 9-11. And he said something that struck me as weird. And a few weeks later, I realized, oh, he had completely switched sides. Left-wingers do that. Well, not all of us. Not all.

KF: Well, MIchael, you’ve got to write a blog post for BRICS. What are the top five principles they should adopt? We’ve got to get you immediately.

MH: You have to ask me the question. I can always answer the questions, Karl. That’s why when you and I were doing the talk shows, if you ask a question, I can answer it. I’m not good at deciding what question to answer because all of a sudden I’ll begin talking about the Crusades or something long ago.

KF: Yeah. Yeah. Well, this sort of push to… To build a movement of academics and reformers, yeah, we need to get you in front of the New Development Bank because it’s such a powerful opportunity to get in there as this is all happening. So yeah, let’s do some back and forth and I’ll send them an email and see if we can get you a meeting there. With whom? With the BRICS Bank. Here we go. There’s Flo from Canada.

Flo: Oh, the Canadian Trotskyist over here. What Trotskyist group? Socialist Action.

MH: I don’t know it. There’s a few as you would expect.

F: Okay. We’re gaining members and, you know, Marxism is back on the menu.

MH: Okay. Good. We’ll see what we can do. I mean, it’s definitely an uphill battle, but… All my old Trotskyist friends are dead of old age.

F: Well, we have quite a few seniors in our ranks and they’re training up the new generation at the minute.

MH: Well, that’s good. What city are you in?

F: Terrace. Terrace. I used to live in Vancouver, but now I’m in Northern B.C., so it’s a small town north of Prince George. But housing is just unbelievable. The labor unions brought me to Vancouver a few years ago and just explained to me how corrupt the whole system was there, especially about housing and the banks are getting rich off the high housing prices there.

MH: Yeah. I mean, it’s awful.

F: I work now as a legal advocate, poverty law, so taking on landlords and just seeing waves and waves of people becoming homeless and it’s really sad. It’s exactly like what you were saying, that the costs of, you know, keeping up with the debts and the cost of living, it’s people are really starting to drown now. I mean, and there’s no end in sight. So the Minsky moment approaches, if you ask me.

MH: Yep. He was a Trotskyist, basically.

F: Really? Minsky? Minsky was? Yes. His mentor was Maynard Krieger, he told me, at the University of Chicago. And Maynard was the vice presidential candidate for the Socialist Party in, I think, 1940. He was often over at our house talking. And Minsky said that….. Maynard introduced him to capitalism. And many of the Minsky’s followers don’t downplay his Marxism. But certainly, Alan Minsky, his son, is one of the leading people in the progressive Democrats trying to push them in that direction.

V: Wow. If anybody else wants to turn on their camera, just raise your hand so I can see you.

KF: Well, isn’t it sad going to America and seeing how Third World it is in many states, many cities?

F: Well, I haven’t been to America in a while. But I mean, it’s not looking so good here, too. People think there’s only homeless people in the big cities, but it’s literally everywhere. That’s right. There are towns in the U.S. where the only work is drug dealing, meth labs, prostitution, and the occasional legitimate jobs as bartenders and auto mechanics. Where does that fit into the GDP?

MH: Thank you. I just had a big, long discussion with Bill Black yesterday about that very thing, that fraud is where fortunes are made. That’s how you make money. That’s the growth industry. And I don’t even count that in GDP. If they counted fraud, we’d be way ahead of everyone else. Sure they did. They incorporate finance into GDP. Finance. But not the fraud that we are talking about. Yeah.

F: Well, you know, in the housing market, too, I’ve heard it’s like, you know, the money laundering issue is massive, and the underground economy through the housing market is just a black hole, I mean.

MH:I was driven around Vancouver by the former head of Schakenbach, a follower of Henry George, who showed me all the houses. We had to look and look. He finally found a house that was only a million dollars, and it was simply a shack on a highway. And that was the only one that he could find that was good.

F: Oh, it’s crazy. And now they’re raising the interest rates, right? But the housing prices aren’t going down, really. Like not enough. That’s right. That’s right, because you can buy it for all cash now. Oh, yes, that too.

KF: And this very thing is, Michael, that rents keep increasing now, and it feels like a combination of Airbnb, holiday homes, and this wretched corporatization of the rental market through rental-backed mortgage securities.

F: Is that happening in Australia, too, Karl, the Airbnb takeover?

KF: Oh, yeah. Airbnb, yeah. There’s a town, a major tourist town about 20 minutes from me, where there’s 98% Airbnb rentals to 2% long-term rentals.

MH: In Los Angeles, it’s no longer for vacations. It’s monthly, and there are houses that people just rent them for a year at a time at these highly, highly inflated rental rates. In New York, they have a dual-tax system, one for owner-occupants and one for people who, landlords, rent out. There are 61 apartments in the condo I live in, and because we live here, we pay a lower rate than people who buy it to raise the rents.

KF: The thing that worries me is no one’s really talking about Airbnb as a land-banking strategy. Hold it for two years, get the interest-only loan, have tourists pay off half of the mortgage, recover the rest, and then flip it in a couple of years, and that’s what the properties brokers are advising is a way to get in the door.

MH: That’s it. And the banks end up with all the money. Renters for paying interest, that’s the key. Renters for paying interest. Renters for paying interest. Unfortunately, the land-taxers don’t see that the bankers are now running the show, not the landlords. That’s part of the democratization of property ownership. They’re a century behind. And land taxes here, of course, are tax-deductible at the federal level.

KF: It’s a beautiful equation, but it feels like 20-plus years of, well, 40 years of neoliberalism is really mounting up now, and this homelessness issue. Soon we’re going to see Frederick List’s concerns of the uber-elite having to spend more and more on mercenaries to protect themselves. That’s where we’re going. It’s already there.

MH: Virginia, maybe you can get me on one of the shows for America is a failed economy, a failed state.

V: Okay, let’s do it. Let’s do a webinar. Yeah, figure one out. And if you ever want to join a Canadian podcast webinar situation, we do a lot of those. And I’d love to reach out to Radhika, too. I know she’s in Manitoba.

MH: Yeah, Radhika. We’re doing a lot of good work together. Absolutely. I really appreciate it. Most of our work is with the Chinese. Radhika is not an MMT-er, however. So she says things that make my hair stand on end, but she’s very smart. We don’t have a problem. Once we sit and we talk together, we always end up in agreement. So she’s against some of the MMT, the way that some of the MMT-ers use their politics.

V: Right. I told you.

MH:Donald Trump is the leading MMT-er, so of course she’s not a Donald Trump MMT-er. She’s just careful about what you’re going to create the money for, that some of the MMT-ers don’t pause to ask. And of course, that’s really the key. You don’t want it to be hijacked by the right wing. And that’s her concern.

V: Yeah. I mean, Flo and I and Jonathan and a few of us at Real Progressives are struggling with that, with combining MMT with class analysis, because all those wonderful people at UMKC tend to be very kind of too squishy, too friendly with the Democrats.

MH: Well, Bill Black is very clear. Bill Black is fabulous.

V: Yes, that’s true. Randy Ray’s pretty clear, but I think that Stephanie decided we’ve got to get the basic principle of MMT really clear, and we’re just going to try to get something that everybody can agree on to get this basic principle there. And so she had a reason for being so highly focused when she was working for Bernie and for the Democratic Congress.

MH: Sure. So she had a tactical reason for doing that. But of course, she realizes that there are all the other dimensions, but she doesn’t want to alienate various… There’s a whole group of us. So my job is to be the left winger. Her job is usually to give the first speech to explain the principle, and then I follow her as the number two to say, here’s the politics of it. That’s what we did in Europe. That’s what we’ve done in New York. That’s usually how we do it.

V: Well, let me ask you, Michael, because I sometimes think there’s a divergence almost in… To me, it’s almost a little bit parallel of atheism as an idea versus atheism as a movement, like an ideological movement. I see that similarities in MMT.

It’s like there’s MMT, the technical analysis, and then there’s MMT, the political movement as it coalesced. And that has specific ideologies and tactics attached to it, which, yeah.

MH: Yep. That’s the problem. Well, I mean, there’s an additional problem I run into, which is a lot of people that, I guess, come into it cold and don’t have a lot of background knowledge will hear some of the explanations that you do on the Geopolitical Economy Report, for instance, and they will get confused between distinctions that you made very clearly on one video that you did solo with Ben Norton, that one that I love that you dragged Paul Krugman on, but that difference between the domestic purchasing power of the dollar and the balance of payments issues, people get those very confused.

V: And I think sometimes you guys tend to jump back and forth from talking about one to the other.

MH: The one thing that the MMT-ers don’t talk about is the balance of payments. That’s caused more problems. They just don’t get it. They think, why does America have bonds that are held by foreign governments? And they don’t realize that the foreign governments have the money, and they need to place it somewhere.

America is not borrowing from them. It’s giving them a place to hold the money that they get all the money, the dollars that we spend militarily on their borders. They just don’t get it. It’s really hard. I won’t name names, but I’ve had quite a few arguments with MMT-ers trying to get them. And it’s like, when you get an idea, it carves a route in the mind and the water flows along that route. And that’s really the problem.

V: Now, wait a minute. You’re confusing me. You’re confusing me.

MH: There are MMT-ers saying that the U.S. is borrowing money, borrowing dollars. They imagine that America is borrowing dollars from China and Russia, and we don’t have to. We can just print the dollars.

V: I’ve never heard that.

MH: Even Stephanie says that. I’ve been asked that often on MMT questions. True blue MMT-ers will ask that. And they just don’t get it. Because Stephanie says that the debt is basically somebody like China parking those dollars in a safe place, which is the Treasury.

V: Yes.

MH: There are some MMT-ers that don’t get that, that speak for MMT. So the question is, not everyone who speaks for MMT understands it.

V: I see. I see. I think you should name names.

MH: I do too. Okay. I’ve got to go eat.

KF: Thank you so much, Michael.

MH: It’s always a pleasure.