Maurice Strong : “In order to save the planet, the group [GIM] decides: Isn’t the only hope for the planet that the industrialized civilizations collapse? Isn’t it our responsibility to bring this about? This group of world leaders [GIM] forms a secret society to bring about an economic collapse.”…………………………
“When I was in Norway one of the Norwegian politicians sat next to me at a dinner and said, “You know, there’s one good thing that President Obama has done that we never anticipated in Europe. He’s shown the Europeans that we can never depend upon America again. There’s no president, no matter how good he sounds, no matter what he promises, we’re never again going to believe the patter talk of an American President. Mr. Obama has cured us. He has turned out to be our nightmare. Our problem is what to do about the American people that don’t realize this nightmare that they’ve created, this smooth-talking American Tony Blair in the White House.”
I’m Bonnie Faulkner. Today on Guns and Butter, Dr. Michael Hudson. Today’s show, “Guns, Finance and Butter: Finance is the New Mode of Warfare.” Dr. Hudson is a financial economist and historian. He is president of the Institute for the Study of Long Term Economic Trends, a Wall Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri-Kansas City. His 1972 book, Super Imperialism: The Economic Strategy of American Empire, is a critique of how the United States exploited foreign economies through the IMF and World Bank. He is also author of Trade, Development and Foreign Debt: The Myth of Aid and Global Fracture: The New International Economic Order. Today we discuss the crisis of the economy in the United States, the jobless recovery, the debt ceiling debate, default in China. We also talk about the economic crisis in Europe and financial warfare against Greece. Michael Hudson, welcome.
Thank you very much, Bonnie.
Michael, I read the in the newspapers that the great recession, so-called, has long since ended but that unemployment remains stubbornly high with only a measly 18,000 jobs created in June. I believe the term that was coined some time ago is a jobless recovery. What is a jobless recovery?
We call that a depression. And the economy is going worse and worse. That’s why today the stock market is down 160 points. The financial sector realizes that the game is over. The financial interests from America to Greece, Ireland and Europe are all insisting that governments pay off the bad bank loans that they’ve taken onto their balance sheet by increasing taxes and pushing the economy into a depression. In the United States, president Obama has bought the idea that the only way of getting recovery is to cut wages by about 30 percent and he’s doing that in two ways. At the Federal Reserve he’s empowered the Federal Reserve Chairman, Bernanke, to lower interest rates, flood the economy with money, QE2, $600 billion have flown out of the country, to push the dollar down. When you push the dollar down the main victims are consumers because oil prices and raw materials prices and machinery prices and shipping all have a common cost.
When you’re devaluing the currency what you’re devaluing really is the price of labor because all the other costs are globally fixed. So Obama believes that reducing the prices of American labor in foreign exchange is going to make the economy more competitive. At the Treasury Department you’re now seeing him argue over how to reduce the budget deficit and he is doing what nobody really imagined the change was possible when he was elected president. He’s actually moved to the right of Michelle Bachman and the Republican party. Michelle Bachman on television recently has pointed out that she was against TARP, the giveaway to the Wall Street interests.
I remember the very last presidential debate between Mr. Obama and Mr. McCain. It was on a Friday night and McCain had just gone back to Washington to say that he supported the bailout of the banks. And in the debate, everybody avoided even discussing the bailout. And then later Mr. Obama said that in order for there to be a recovery the banks had to avoid losing a single penny. And in fact, what’s happened today was all made pretty clear even before Mr. Obama was elected by the appointees he made – the sort of right-wing economic appointees, Tim Geithner, the bank lobbyist and the Secretary of the Treasury, Larry Summers, financial pusher of bank deregulation and getting rid of the Glass-Steagall Act as his chief advisor, and of course Rahm, who was pushing the interests. So the Obama administration kept the Bush administration by giving $13 trillion of giveaway to the banking sector. Now, all of this has pushed the government way into deficit and the question is, how do you get the money back?
People would have thought before Mr. Obama was elected that he’d get the budget back in balance by now beginning to reintroduce progressive taxation by taxing wealth and by using the taxes on finance and the very rich to fund what he’d promised – a public option in the public health program and protecting Social Security. Over the weekend he’s come out against this. He wants to lower Social Security, to cut back Medicare, cut back Medicaid, especially the payments to the poor, and you realize that now if you look back on that last debate he had with John McCain before the election in 2008, he and McCain were bidding for the campaign contributions that are what politicians do. And the way that you get campaign contributions, if you’re any politician, is you deliver your constituency to your campaign contributors.
The biggest campaign contributors are Wall Street and the real estate sector, and these are the contributors that the Democrats and the Republicans are all vying for and indeed, Mr. Obama’s main contributors were these large Wall Street interests and those are the people that he’s going for now and he’s delivering his constituency, namely the people who voted Democratic, and he’s delivering them to Wall Street and he’s showing his philosophy by saying, “Well, we have to make sure that bankers don’t lose money; employees lose money.”
Now, over the weekend, yesterday in the New York Times, there was an interview with the head of the FDIC, Sheila Bair, whose five-year term just expired last week. Now that it’s expired she can begin to tell the stories. And she told the story of how one meeting with Obama after another he’d make promises to her, promises that he would try to prevent the mortgage crime that was occurring, to prevent the fraudulent subprime mortgages, to make a bank regulation to prevent criminal activities. She said in every case she’d go to his big speeches and an hour before the speech she’d be given a copy of it and he took out everything that he’d promised her and it was all rewritten by the big bank contributors.
The important thing is that now Ms. Bair is saying look, people said that there would’ve been a meltdown I you didn’t give all this 13 trillion to Citibank, to AIG and to Goldman Sacks but the fact is that we at the FDIC wound down Washington Mutual. Our business is winding down bad banks. Citibank could have gone under and all the other banks and the depositors wouldn’t have lost. They would’ve all been insured because there were plenty of bank assets. There weren’t enough assets in Citibank and AIG to pay the gamblers and the big players, the wealthiest one percent. And she said in every case they were told the wealthiest one percent can’t afford to lose a penny.
So that’s when Mr. Obama said, “OK, to make these gains, to save the financial sector from losing money, we have to make employees pay. We have to make them pay through more Social Security taxes instead of making the higher brackets pay, we have to pay by cutting back Medicare. We can’t charge the pharmaceutical companies by actually bargaining with them like they do in Canada; we have to let them set the prices with no argument. And he’s sort of made an accommodation with the Republicans to solve the problem.
The problem is, how can he, Mr. Obama, who’s pledged to represent his constituency in the Democrats, how can he move way to the right of where George Bush is at? Well, the only way he could do this would be for the Republicans to move even further to the right. So the Republicans have accommodated Mr. Obama by pushing the crazy wing of their party, the Tea Parties, Michelle Bachman, the Alaskan Governor Palin, and they’ve come with such a crazy, intransigent, right-wing attitude that now Mr. Obama can move way to the right and essentially still triangulate and say, ‘Look. I’m better than these guys are.’ And he’s hoping that people will vote for him just because he’s not as bad as the Republican Tea Partyists.
Well, the reality of course is that there are not going to be many people showing up to vote on the Democratic side and it’s quite possible the Republicans would get in. And the one silver lining for the Republicans winning in 2012 would be at that point the Democratic congress would find its backbone again, once it’s in opposition, and would say no to the Republicans trying to push the policy that Mr. Obama is now trying to push.
Well, you asked about the economy. The economy’s going under because Wall Street and investors realize that it’s a done deal. That Mr. Obama is going to succeed in pushing the economy much further into a depression. We need the depression in order to cut living standards and labor by 30 percent. We need a depression in order just to lower the wages of America and to have an excuse – of course, a depression is going to make the budget deficit even larger and the solution to the depression has already been written up just like the invasion of Iraq was all written up before 9/11 the solution is going to be that the government is going to sell of its land, whatever is in the public domain.
The American government is going to look just like Greece and just like Ireland. They’re going to be told, ‘The states can’t pay, there’s no federal revenue to share with Minnesota or Wisconsin or the city of Chicago. They’re going to have to sell off their roads, sell off their streets, sell off their infrastructure, sell off their public utilities, sell off their business. The government will sell whatever it has, the Postal Service, to essentially buyers who will now borrow the money from the banks making a huge new market for banks and investment bankers, in privatizing and cutting up what used to be the public domain and turning it over to the wealthiest 10 percent of the economy. So people realize yes, the class war’s back in business. We’re going into a depression. We’ll buy back all these stocks after they go but meanwhile, the game’s over. Let’s grab what we can and just bail out. And that’s what’s happening now.
What is your assessment over the current debate in Washington concerning the raising of the debt ceiling? This debate seems to be taking place between the Obama administration and the Republicans without much input from Democrats.