Friday 29th of March 2024

you've been robbed, you're being robbed and will be robbed by the dollar hegemony.....

Margaret Flowers: You’re listening to Clearing the FOG, speaking truth to expose the forces of greed, with Margaret Flowers. And now I turn to my guest, Michael Hudson. Michael is the president of the Institute for the Study of Long-term, Economic Trends, ISLET. He’s a Wall Street financial analyst and a distinguished research professor of Economics at the University of Missouri, in Kansas City. He’s also the author of numerous books and recently updated his book, “Super Imperialism: The economic strategy of American Empire.” Thank you for taking time to speak with me today, Michael.

Michael Hudson: Well, thanks for having me on Margaret.

MF: You’ve talked a lot and written a lot about dollar hegemony and what’s happening now with de-dollarization. Can you start out by explaining to my listeners what dollar hegemony is and how it has benefited the wealthy class in the United States?

MH: Dollar hegemony seems to be the position that has just ended as of this week very abruptly. Dollar hegemony was when America’s war in Vietnam and the military spending of the 1960s and 70s drove the United States off gold. The entire US balance of payments deficit was military spending, and it began to run down the gold supply. So, in 1971, President Nixon took the dollar off gold. Well, everybody thought America has been controlling the world economy since World War I by having most of the gold and by being the creditor to the world. And they thought what is going to happen now that the United States is running a deficit, instead of being a creditor.

Well, what happened was that, as I’ve described in Super Imperialism, when the United States went off gold, foreign central banks didn’t have anything to buy with their dollars that were flowing into their countries – again, mainly from the US military deficit but also from the investment takeovers. And they found that these dollars came in, the only thing they could do would be to recycle them to the United States. And what do central banks hold? They don’t buy property, usually, back then they didn’t. They buy Treasury bonds. And so, the United States would be spending dollars abroad and foreign central banks didn’t really have anything to do but send it right back to buy treasury bonds to finance not only the balance of payments deficit, but also the budget deficit that was largely military in character. So, dollar hegemony was the system where foreign central banks keep their monetary and international savings reserves in dollars and the dollars are used to finance the military bases around the world, almost eight hundred military bases surrounding them. So, basically central banks have to keep their savings by weaponizing them, by militarizing them, by lending them to the United States, to keep spending abroad.

This gave America a free ride. Imagine if you went to the grocery store and you just paid by giving them an IOU. And then the next week you want to buy more groceries and you give them another IOU. And they say, wait a minute, you have an IOU before and you say, well just use the IOU to pay the milk company that delivers, or the farmers that deliver. You can use this as your money and just you’ll as a customer, keep writing IOU’s and you never have to pay anything because your IOU is other people’s money. Well, that’s what dollar hegemony was, and it was a free ride. And it all ended last Wednesday when the United States grabbed Russia’s reserves having grabbed Afghanistan’s foreign reserves and Venezuela’s foreign reserves and those of other countries.

And all of a sudden, this means that other countries can no longer safely hold their reserves by sending their money back, depositing them in US banks or buying US Treasury Securities, or having other US investments because they could simply be grabbed as happened to Russia. So, all of a sudden this last week, you’re seeing the world economy fracture into two parts, a dollarized part and other countries that do not follow the neoliberal policies that the United States insists that its allies follow. We’re seeing the birth of a new dual World economy.

MF: Wow, there’s a lot to unpack there. So, are we seeing then other countries starting to disinvest in US dollars? You’ve written about how the treasury bonds that these central banks buy up have been basically funding our domestic economy. Are they starting to shed those bonds or what’s happening?

MH: No, they haven’t been funding our domestic economy because the Federal Reserve can create its own money to fund the domestic economy. We don’t need to borrow from foreign countries to fund our economy. We can print it ourselves. What the dollar hegemony does is fund the balance of payments deficit. It funds our spending in other economies, our spending abroad. It doesn’t help our economy, but it does help us get a free ride from other countries. The more dollars we spend in making a military base, all these military expenditures get turned over to the local Central Bank that turns and sends them back to the Federal Reserve or deposits them in US bank accounts. So, it’s the international free ride we get, not a domestic free ride.

MF: Okay. So are we seeing countries now, since this past week, starting to move their assets back to repatriate them because I know for Afghanistan, a big problem is that most of the government’s money was outside of the country and that has been used as a weapon against Afghanistan by seizing those assets and not allowing the Central Bank of Afghanistan to have them. Are we starting to see other countries repatriating their money and gold?

MH: Well, figures are only available at the end of each month, reported at the end of each month and then there’s a two-month delay, so we don’t have any idea what’s happening. But I’ve been talking to people all over the world in the last few days and the consensus is that everybody is now deciding the only place, certainly if you’re China or Russia or Kazakhstan or you’re in the Eurasian orbit, South Asia, East Asia, you realize, wait a minute, if all we have to do is something like Allende did in Chile or all we have to do is refuse to sell off our industry to American investors and they can treat us like they’ve treated Venezuela. So you can imagine that everybody’s watching this and there’s an expectation that as a result of the war in Ukraine, that’s really America’s NATO war, that this is going to create a balance-of-payments crisis throughout the whole Global South as their energy prices go up, oil prices soar, food prices are going to soar and this is going to make it impossible for them to pay their foreign debts unless they go without food and energy. Obviously, this is a political crisis. That is, the only result can be to split the world in two.

MF: You’ve been writing about this happening. You’ve written that the de-dollarization has been happening relatively quickly in recent years. So, are we now we’re now just seeing the end result of that? I mean, people said it could happen quickly. Is that exactly what we’re seeing right now?

MH: Yes, and nobody expected that it would happen this quickly. Nobody expected that it would be the United States itself that ends de-dollarization. People thought that, well, most of the sales of my book describing this super imperialism were bought by the Defense Department and they looked at it as a how -to-do-it book. And I was brought down to the White House and the Defense Department to explain to them how imperialism works.

I had expected that maybe China, Russia, and other countries would say, “We don’t want to give America free rides.” And yet it was the United States itself that broke all of this, by grabbing Russia’s reserves right after it grabbed Afghanistan’s and Venezuela’s reserves.

Nothing like this has happened in modern history, even in the 19th century wars. In the Crimean War in the mid-19th century, Russia, England and Germany, everybody kept paying the debts to the countries they were fighting against because the idea is that debts were sacrosanct. And now, all of a sudden, not only are debts are not sacrosanct, but countries can just grab foreign savings. I guess the problem began after the Shah of Iran fell and the United States grabbed Iran’s money and refused to let it pay its bond holders and started the whole war against Iran for trying to take control of its own oil resources. So, all of a sudden, the United States grabbing this has ended what everybody thought was an immutable morality.

MF: So that was in 1979 that the Shah fell in Iran and, and over the last number of decades, the United States has been increasingly using economic warfare against countries through what people call sanctions, but they’re actually, illegal unilateral coercive measures, has that been kind of driving and setting the stage for what is happening today?

MH: Yes, the International Monetary Fund has operated, basically, as an arm of the Defense Department. It’s been bailing out dictatorships, bailing out Ukraine, lending money to countries whose client oligarchies America wants to support, and not lending any money to countries that America doesn’t want to support, like Venezuela. So, its job is basically to promote neoliberal policies, and to insist that other countries balance their payments by undergoing a class war against labor.

The conditionality that the IMF insists upon for foreign borrowing is that countries devalue their currency and lower their wage rates and pass anti-labor legislation. Well, when you lower the currency’s exchange rate, what do you really lower? Food prices are set in dollars internationally, raw materials prices are, and prices for machinery and many goods. The only economic variable devalued is domestic labor (and domestic rents). The IMF has been using this kind of junk-economic free-trade policy as a means of keeping the wage rates in the Global South down. You could say it’s a financialization of an ultimately military conflict to promote neoliberal ideology.

MF: And you mentioned the lowering wages and things like that. And this is actually done because it’s favorable to US investors and US business, right? I mean, the World Bank actually has an index, the cost of doing business index, that helps inform large corporations about laws that countries pass that make them more favorable to businesses to come in.

MH: It’s even worse than that. The central aim of the World Bank is to prevent other countries from growing their own food. That is the prime directive. It will only make loans for countries to earn foreign currency and it has insisted ever since about 1950 that countries that borrow from it must shift their agriculture to plantation export crops to grow tropical crops that cannot be grown in the United States for environmental and weather reasons. And the countries must not grow their own food and must not undertake Land Reform or small family-based farming. So, it insisted on foreign-owned agribusiness in large plantation agriculture. And what that means is that countries that have borrowed for agricultural loans have not been loans to produce their own food. It’s been to compete with each other producing tropical export crops while being increasingly dependent on the United States for their food supplies, and for their grain. And that’s part of the corner they painted them into that is going to be creating such a world famine this summer.

MF: I definitely want to get into that as well as the energy situation and the climate crisis, but before we do that, I just want you to comment quickly on how this has also been driving countries to seek alternatives. The United States removed Russia from the SWIFT system, which is the international mechanism for doing trading and finance. It threatened China if they didn’t denounce what was happening with Russia and Ukraine to kick them out of the SWIFT system. So, this hubris of the United States is also kind of driving countries away to seek other alternatives, right?

MH: That’s the whole point. Well, fortunately they’ve been threatening to kick Russia out of SWIFT for the last two years. And so, Russia and China have been putting in place an alternative system. So, they almost pretty smoothly are shifting over to using their own currency with each other instead of using the dollar. And that’s part of what has ended the dollar standard and ended dollar hegemony.

If the way you have dollar hegemony is to have other countries deposit your money in your banks and handle their oil trade with each other by financing it in dollars, but all of a sudden you grab all their dollars and you don’t let them use US banks to pay for their oil and their trade with each other, then they’re going to shift to a different system. And that’s exactly what has ended the dollar hegemony, as you just pointed out.

MF: So, let’s get a little bit into where things are headed with this new situation, a rapidly changing situation. It may be hard to say what’s happening, but you talked about a food crisis this summer. Can you talk a little bit about more about that and does the conflict in Ukraine feed into that?

MH: Well, as President Putin and Lavrov have said, the fighting in Ukraine isn’t really over Ukraine at all. It’s a fight over what shape the world will take and whether the world will be unipolar or, as it now appears, multipolar. The US, for the last year before it began to escalate attacks on the Russian-speaking Ukraine, was trying to block Europe from, and especially Germany, from buying Russia gas and oil.

There are three pillars of American foreign policy that base American power. The first pillar is the oil industry. That’s the most powerful industry next to banking in the United States. And United States throughout the 20th century, along with Britain and France, have controlled the world oil trade.

 

 

READ MORE:

https://www.unz.com/mhudson/us-dollar-hegemony-ended-abruptly-last-wednesday/

 

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of not joining the US military......

 

By Tom Mullen

 

 

Four weeks ago, I predicted, “American taxpayers are going to be regaled with propaganda about the need to increase military spending in reaction to Putin’s invasion and accede to even more troops deployed overseas.”

Right on cue, Gen. Tod Wolters, U.S. European Command chief, did precisely that.

“I think what we need to do from a U.S. force perspective is look at what takes place in Europe following the completion of Ukraine-Russia scenario and examine the European contributions, and based off the breadth and depth of the European contributions, be prepared to adjust the U.S. contributions. And my suspicion is we’re going to still need more,” he said.

Following the Ukraine-Russia scenario? So, once the Ukraine-Russia war is over, in which zero American soldiers fought, American taxpayers should pay for even more soldiers deployed in Europe to…what? Not fight again?

This isn’t to say American troops should fight in the Ukraine-Russia war, even though it was started by the U.S. State Department. It’s an acknowledgement that they cannot fight in the Ukraine-Russia war, as Joe Biden has so far retained the mental capacity to realize.

The rationalization for this would be to deter Vladimir Putin from invading the territory of a NATO country in the future. But Putin is never going to do that for the same reason Biden is not allowing U.S. troops to be involved in Ukraine. Nuclear powers cannot go to war unless they are ready for the war to end with a nuclear exchange. Period.

Thus, as I argued at the beginning of this conflict, the conclusion to draw from the past four weeks is a dramatic cut in U.S. overseas deployments. Warehousing hundreds of thousands of troops overseas that will never be used for any legitimate purpose is simply a dead weight loss on the U.S. economy.

If Joe Biden insists Americans suffer food shortages in order to signal their virtue in futile sanctions on Russia for its supposedly “unprovoked” invasion of Ukraine, then they should respond to him by demanding the overseas military government jobs program – because that’s all it is at this point – be eliminated to help ease the pain.

But what can average Americans do about this? Congress will appropriate the funds for more military spending and, no matter whom they elect president, that president will continue to deploy troops overseas.

Well, for everyone who styles themselves “politically incorrect,” believing they are tougher than the “snowflakes” who can’t bear to hear hard truths, here is some truly politically incorrect talk.

Warning: Saying something half the country will applaud you for, whether it is the liberal or conservative half, is not “politically incorrect.” Telling a truth no one wants to hear is truly politically incorrect. If you don’t want to hear that, stop reading now.

Stop joining the military. Stop encouraging your children to join the military. Stop crowing to the world about how proud you are your children joined the military. We need the military cut drastically, now more than ever.

I can already hear the rationalizations. So, let me address the most common.

“I didn’t join the military to fight unconstitutional wars; I joined to defend the Constitution.” Sorry, this excuse doesn’t hold water. The U.S. government has been fighting unconstitutional wars for almost eighty years at this point. Its record during this century alone is enough that no reasonable person can possibly believe they will be deployed to defend the Constitution.

That’s especially true because the Constitution is not under threat from any foreign power. Not even if the military were cut in half. Not even if it were cut by two-thirds. Want proof? Russia’s military spending is one tenth that of the U.S. on an annual basis. Why is their constitution still intact?

No reasonable person can believe joining the military in 2022 will result in them being deployed to do anything other than more of what the U.S. military has been doing for our entire lives.

“But the military is already stretched to exhaustion.” Yes, this is true. The military is stretched to exhaustion because the government has it doing all sorts of things that harm rather than “serve” U.S. taxpayers. Take away the personnel and U.S. presidents won’t have that choice.

“If people stop joining the military, they will just start drafting soldiers.” Fine. Let’s get to that point and talk about civil disobedience then. Massive movements have formed around vaccine mandates, wrongful police shootings, and controversial public-school curriculums. Whatever one thinks about any of those causes individually, they all pale in comparison to mass murder of foreign populations that never attacked the United States.

wrote a few days ago that Americans are not ready for the reality that will set in when much of the world ceases to use the U.S. dollar as the world’s reserve currency. There are plenty of painful corrections in the domestic economy that are inevitable – zombie jobs that but for government spending underwritten by monetary inflation wouldn’t exist.

Disbanding the worldwide standing army would be one of the least painful corrections to bear. Not only would the net economic loss be eliminated, but hundreds of thousands of military personnel serving no useful purpose overseas would be freed up to do productive work here at home.

It’s hard to blame an eighteen-year-old for joining the military, especially when, on one hand, the government has made it so economically attractive with perks like free college and, on the other, when all of society tells him or her it is a fine and noble pursuit.

America needs to get back to its founding attitude of suspicion of standing armies. John Adams sought political favor by trying to outmaneuver Congress in taking credit for disbanding the entire army. His successor Thomas Jefferson was re-elected in 1804 based on cutting taxes and paying down the national debt after cutting military spending (mostly the navy as the army was already gone) by over 90 percent.

Americans have derived no benefit from eighty years of foreign wars. So, while we’re facing reality, let’s knock off the reflexive, “Thank you for your service.” No American taxpayer has been “served” by any of these wars.

Counter to the government’s propaganda about “freedom not being free,” Americans have become poorer and less free because of the military mischief they have allowed their government to get them into.

Before resorting to eating bugs, as their elites suggest, Americans should take foreign policy into their own hands by ceasing to join the military, discouraging their children from doing so, and ceasing to perpetuate the falsehood that Americans are freer because of the wars its government has fought.

 

 

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

 

 

READ MORE:

https://tommullen.net/featured/a-grass-roots-foreign-policy/

 

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