Krugman, China and the role of finance.

Here’s the quandary that the U.S. economy is in: The Fed’s quantitative easing policy– creating more liquidity so that banks can lend more – aims at helping the economy “borrow its way out of debt.” But banks are not lending more, for the simple reason that a third of U.S. real estate already is in negative equity, while small and medium-sized businesses (which have created most of the new jobs in America for the past few decades) have seen their preferred collateral (real estate and sales orders) shrink. How can banks be expected to lend more to re-inflate the economy’s asset prices while wages and consumer prices continue to drift down? The “real” economy as a whole therefore must shrink. What has made the argument over Fed policy so important over ...

Dollar War in Detail

Eric Janszen, Interview with Dr. Michael Hudson 6 November, 2010 Janszen (E): What I’m noting, starting with the gold crisis over the last few weeks, and the public nature of some of the complaints that we’re hearing out of Brazil and China and the front page of the Financial Times, we seem to be heading into a pretty serious currency crisis. Hudson (H): Yes, the currency crisis is caused by what’s called Quantitative Easing (QE) – flooding the economy with credit, and specifically Ben Bernanke’s and Tim Geithner’s threat to create another $1 trillion worth of new Federal Reserve credit over the next twelve months. The Financial Times reports that all of the last $2 trillion the Fed created has gone to the BRIC countries (Brazil, Russia, India and China) and to Third ...

Russian TV, the G20 and US dollar diplomacy

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Michael was interview on Russian TV yesterday by Lauren Lyster. Watch the 10 minute clip here. There is no possibility of agreement at the upcoming G20 summit because the U.S. is declaring financial war on other countries, believes American economist Michael Hudson. The U.S. has been pushing China to revalue its currency – at a time when Washington has been pumping billions of dollars into its economy – a move viewed by other countries as an attempt to deliberately weaken the greenback. The issue of exchange rates is expected to be one of the toughest discussion points at the G20 summit in South Korea later this week.