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September 5, 2024

KARL FITZGERALD: Welcome everyone to another Quarterly Q&A Gathering here with Michael Hudson’s Patreon supporters. We are so appreciative of the support that comes through for Michael and it’s really helping behind the scenes.

Michael, one of the reasons this is happening is because you know that this support is so important because of Amazon and the commissions they’re charging on your books. Do you want to just give us an overview of what’s happening there and how that’s affecting the pricing of their competitors?

MICHAEL HUDSON: Well, this year has really seen a total monopolization of the book trade. Ever since I started publishing, maybe 10 or 15 years ago, with Lightning Source and now with the people who took over Ingram, I was allowed to set the commission that I was giving, and I always set the commission at 20%. And no problem. Most of my books were sold on Amazon, and also a few others and everybody accepted them.

But now, Amazon and other companies have driven so many other distributors out of business that I was told by Ingram that I had to increase the commission that I automatically gave to 40%.

Now that doubled the commission that I had to pay. And that means that there’s not really much left for me at all, as the publisher or author of the books.

And in fact, Ingram said that if I wanted to get on their strong promotional group where they go to bookstores, I had to give a 52% commission. Well, as you can imagine, after paying for the 50 to 40% to 52% commission, after paying them for the printing costs that they do for the print on demand, after paying them for their cut for over and above the commissions to the customers, the commission that they get, I can’t even figure out what that is by looking at it. And there’s hardly anything left for me to cover the cost that I have to pay for the book typesetters and for the book jacket designer, and for the copy editing and proofreading. So I basically end up with hardly anything for the books.

I did not increase the sales price of the earlier books, but just essentially when they moved up from 20% to 40% of the commission for themselves off the top of the retail price, obviously, that just left not much for me.

So I realized, well, what am I doing this for? I’m not doing it to make money, I’m doing it because I want to spread the ideas that I’m saying. I would really love to have a whole group of people sort of organized together to promote the ideas I’m doing.

And I noticed that in the late 19th century, over the United States, there were a lot of Henry George clubs, for instance, and people read his Progress and Poverty and decided to have clubs to discuss it all. I think there must have been a few clubs for other authors, too.

I wish there was some kind of discussion group we’d have today. Well, I guess this is the discussion group for my group, but it’s not like clubs. What I would really like to have is a think tank with computer people able to make regular charts, regular statistical forecasts, statistical analysis to show how much of the GDP is really economic rent, not product at all.

What would a real economic profile of the economy look like? What does the profile of debt and debt arrears and non-payments and defaults look like?

It used to take me an entire year to do just one set of statistics. The first time was for the U.S. oil industry in 1965, and then for the U.S. balance of payments, I spent a year at Arthur Anderson. And that was when I was doing everything by hand, giving it to the chart people to do.

Now it’s all in Excel, and I’m not proficient enough in computerized drawing and computing. I can walk other people through what to do. We can sit down, we can look at the statistics, and I can say, here’s what I put together.

But I really need a group of collaborators, preferably all over the country or all over the world. I don’t know any other way of popularizing and getting the points that I’m trying to make about debt, about taxation, about the reason why the economy is polarizing so drastically, and about economic history, except by this.

So all I can do is meet with people like you guys and the few internet programs I’m on. I just finished a long internet show with Nima, “Dialogue Works”, and we had Richard Wolff on that. Richard and Nima and I often do shows together between an hour and an hour and a half, because each of us have our own follower groups, and what we say is complimentary, and we’re trying to bring people along.

Robinson Eckhart is also someone I’ve done a number of talks with, and we’re planning some more big talks on economic history. I need more people like that, and obviously the ideas I’m saying are spreading, but they haven’t institutionalized themselves yet. And without institutionalizing ideas, you can’t make it actually into a political force of one kind or another. And that’s what we have to do.

I have more of a political force in China than I do in any other country, ironically. And because of COVID and the airplanes, I stopped taking airplane flights, so I’m sort of stuck to working just by Zoom or by the internet, as I’m doing right now.

So publishing, I’m a victim, along with all the other authors, in the fact that publishing leaves hardly anything for the creative people, much as in Hollywood or music writing and composition. It’s this way, right across the board, for any content providers.

The monopolists have controlled the platform, and once you control the platform, you just squeeze everybody out. So they’re essentially working voluntarily, unless they want to be a celebrity on the popular media or TikTok, and my celebrity days are over.

KARL FITZGERALD: Well, a few people would dispute that. There’s a huge fan base out there that love these videos, so great to see that feedback coming through. Flo says on the chat that we need Hudson Institute 2.0, and I noticed Virginia from our friends at The Real Progressive saying, isn’t this a form of rentierism? And what I am wishing is that someone knew Jeff Bezos’s ex, Mackenzie Scott, who’s giving away millions of dollars at the moment in one of the most incredible philanthropic efforts around the world. So, yeah, it would be lovely if one of these videos led to a philanthropist turning up to support your work, Michael.

MICHAEL HUDSON: Well, I watch some of my colleagues having to spend almost all the time that used to be their creative time raising money.

For instance, the most popular literary magazine in the country for the last 15 years has been Lewis Lapham’s Quarterly, and he died a few months ago. And before he died, he was just being worn out trying to spend all of his time raising money, especially he was, I think, 88 or 89, five years older than I am, and he just didn’t have the energy to raise money anymore.

And in our age bracket, a lot of our colleagues who were his contributors just were dying off and dried up.

Similarly with Democracy Collaborative in Washington that had been backing a lot of my statistical research into GDP and national income analysis. That founder just got too exhausted to do it anymore. All of his time was in fundraising.

So I have a choice. Either I can fundraise or I can continue to do all of the talks and the writing I’m doing, and I’m focusing entirely on talks and writing. So if anybody else wants to try to raise funds, they’re welcome to do it, but I can’t.

KARL FITZGERALD: And so in terms of commissions over time, can you explain what the long-term commission rate was across music, across publishing?

MICHAEL HUDSON: It was usually, well, 20% was sort of the lowest. And for one of my books, for my trade theory book, somehow they, I don’t know who did it, but somebody pressed the 52% give that I had to give as the commission, and of course I actually lost money on every book that I sold the way that I’d priced the book as low as possible so as many people could buy it. So I think 20% was normal.

Many of the small bookstores charged 40% discounts. But the academic presses uniformly, like Harvard University Press, would only give 20%. Only the big trade publishers that did like a million copies of books would give 40% because they made up in volume what they did.

But now the publishers, whether it’s Amazon or any other group, will not accept academic publishers anymore unless they give this high commission rate, the proportion of the sales price. So that squeezed the budget of a lot of university presses and a lot fewer books are being published today because it costs money not only to do the physical printing and the typesetting and the proofreading of a book.

Especially the proofreading. I’m pretty sloppy as a typist. And some of my books before were written with a lot of typos. I send transcripts of what I’m doing to Karl to put up on my site, and he has great fun telling me all of the typos that I’ve made and the work that he’s had to do to clear them up.

I can’t be a good typewriter. I read and I remember what I thought I wrote, and what I read is what I imagined that I wrote instead of what’s actually on the page with the typos all in them. So all of these things you really need.

The books that I tried to do through a left-wing publisher, Pluto Press, were just disasters. They didn’t have any proofreader. They had a very ugly typeface putting it in. They had awful book design covers and almost no distribution. So I realized that I couldn’t work through left-wing publishers.

My friend David Graeber had exactly the same experience, and he decided, we both decided, we would only work through trade publishers who actually were able to pay the commissions that they promised, small as they were.

And so David got me to a big trade publisher in Germany, but Germany is sort of dead now and they don’t want to publish any more of my books because they say the publishing situation there is so drastic that unless they’re going to sell half a million copies of my book, there’s just no market to break even there.

So we’re moving into, I won’t say a dark age, but there’s a darkening that’s happening. Sort of like what you have in the eyes that makes everything look grayer, yellower.

KARL FITZGERALD: Matthew Conners asks if Monthly Review Press is a possibility for book publications?

MICHAEL HUDSON: Absolutely not. It is so… Its writing is so ugly, so unreadable, that friends of mine who’ve had their books published by them, I’ve asked them to send it to me to read it on the screen, and even though my eyes get bleary-eyed looking at the screen, at least I can make the print larger.

My wife looks at me squinting as I’m trying to read the teeny, teeny print that they do in order to lower the cost by printing more books, and the typefaces they have are so cute and stylish and ugly, quite apart from the fact that I never did get along with Sweezy very well. I got along with his colleagues.

But we go for different audiences. I’m going for the educated audience. He’s going for a much more populist audience. I think once he said they really want incarcerated people, they want to get the incarcerated market in. We’re just totally different personalities, saying totally different things, writing about different things with different political views and different political backgrounds.

KARL FITZGERALD: Okay, seeing lots of good chats coming through and questions in the Q&A panel. We’re going to ask questions via that Q&A panel, but we really want to see more of Michael’s Patreon supporters on screen.

I’ve invited Matthew Connors to come up because he has asked a brilliant question via the Patreon page on Palestine. Matthew, come on in.

Matthew Connors: In the question I put on the Patreon site, I’m trying to just look to the future with this awful genocide in Palestine. And the idea of just the forced evacuation of people as always, I finally understand this. I’m ashamed that I’m this old before I really started to understand what’s been happening for these decades. But the idea of having a plan to be able to force people out and the whole idea of the Sinai, the Philadelphia corridor into the Sinai, the refugee camps that were first talked about as new cities being built by Egypt. And I know that Egypt is an absolute mess economically. They’ve been going through just cuts to anything that supports a living standard for people for the last three administrations, I guess, going back.

So how realistic is it that the United States and Israel will pull off this ability to force Egypt to allow the creation of refugee camps in exchange for debt relief? That was the first question I’m able to form. I have lots of other questions.

MICHAEL HUDSON:The word you use for debt relief, what they’ve offered is an IMF loan to make them even further in debt. It’s not debt relief, it’s loading them down with even more debt. That’s the only thing they’re offering. They’re not offering any debt relief at all, just more IMF loans. That’s all I know.

I don’t have any insider information or any particular knowledge of what’s happening in that part of the Middle East. I am a Middle East specialist up to about 800 BC. But after 800 BC, I just haven’t been following matters that much.

I do listen to Judge Napolitano and the guests that he has, and read the Moon of Alabama. Those are the sources that I have.

I lost any ability to understand Egypt after the so-called Arab Spring, organized by the National Endowment for Democracy, when the population rose up against Mubarak and ended up installing his designated successor, Sisi, in there. Egypt is just a total extension of whoever is president of the United States, in this case, Biden, which means Netanyahu.

Egypt is a satellite of the Likud Party, basically. It’s whatever the Likud Party is going to do under Netanyahu, that’s going to be the position of Egypt and the other people there. I don’t see there’s any solution.

I understand that President Putin has visited Iran and other countries and convinced them to essentially follow the policy that he’s following against the Ukrainians. In other words, don’t retaliate now. Time is on your side, and the other side is self-destructing. He believes that the internal strains on Egypt are going to erupt in another kind of an Arab Spring, hopefully that this time the CIA and National Endowment for Democracy is not able to control the outcome and will have a real Egyptian leader after the fashion of Nasser.

They hope to strengthen Saudi Arabia. Certainly, there’s no chance of Saudi Arabia going back to anything like the Abraham Accords, but there’s really nothing to be done. It’s as if the Palestinians are going to be all martyrs for what ultimately will be the collapse of foreign non-Islamic forces in the Near East from Iraq, Libya, Syria, or Iran.

But I don’t see a solution happening in the short term. Iran is not going to bomb Israel. It’s obvious that the US and Israel are trying to spur Iran into a violent reaction so that now you can have the Americans come in with all of their heavy bombing and do to Iran what they did to Iraq and to Libya. And that’s leading these countries to hold back, just as NATO is trying to spur Russia into fighting back over Ukraine.

They’re very similar US tactics in both cases. And in both cases, Putin has a strong logic for letting the internal strains of NATO, Egypt, and the whole right wing, including Israel, just dissolve from within, as you’re seeing right now with the general strikes in Israel. That’s my only observation that I can make.

Matthew Connors: Well, I’m sorry to continue. Thank you very much so far. So BRICS, I know it’s not a panacea. It’s not big enough. The bank is not endowed well enough to really be an alternative yet to IMF and other kinds of funding. But I don’t assume it was Sisi who was all behind Egypt joining BRICS. I assume that was maybe in spite of him. But being in BRICS, does that at all give us reason to think that they can withstand US pressure to let themselves.

MICHAEL HUDSON: No, I don’t think there’s any trust of Sisi there. I don’t know how close that association is going to be. I haven’t heard anybody in BRICS even mention Egypt. So I think it’s like Argentina applying to BRICS. They may want to send delegates there just to try to slow it up if they can or to be sand in the gears. But I can’t see anything active. Egypt is so deeply in debt that it’s just too big a burden.

The BRICS Bank doesn’t need any money in the first instance at all. If it’s done like the BRICS bancor, it can create its own intergovernmental credit. And the BRICS Bank would be simply for intergovernmental loans for balance of payments purposes. But that would have to be done with qualifying countries. And I don’t see how Egypt can meet any economic qualification for anywhere.

And until the BRICS policy calls for a general repudiation of debts to the dollar and euro area, I don’t see how the governments are going to have enough money to spend on internal infrastructure. And I don’t see China saying, well, you know, since you have to use all of your money to pay your dollar debts, I guess we’ll have to give you all the money. Well, that would just mean that China ends up paying their dollar debts. And I just don’t see that happening.

KARL FITZGERALD: Karl Sanchez asks that BRICS Pay seems like the replacement financial plumbing for SWIFT and the BIS. All that is needed now is the Bancor definition and a method to manage exchange rates in relation to Bancor on an ongoing basis. What’s your take on that?

MICHAEL HUDSON: The problem isn’t really exchange rates. The problem is the debt. An exchange rate no longer represents the real value of exports, because an exchange rate for country is set not only by the balance of trade and commodity goods and services, but the demand for a currency in which to pay debts. And as long as there’s a huge demand for dollars to pay the debts that are denominated in dollars, other currencies of the debt-paying countries are going to depreciate against this because they’re throwing their currency on the market for dollars. And by their currency going down, that means the price of their labor and raw materials and local resources are going down.

The effect of paying debts is to make the exchange rate, and hence the market prices of exports and imports, diverge further and further from their intrinsic value or purchasing power parity equivalent.

And unless countries realize this, they’re not going to have a workable BRICS system. And the problem is that the BRICS countries don’t have anyone really who studied balance of payments specifically, and they don’t understand the workings of the foreign exchange markets and how they’re affected by debt service.

Most of their economists have been trained in the United States, or some in, let you could say, England or Europe, that just reflect U.S. neoliberal training that doesn’t recognize the role of debt service as influencing exchange rates or even the cost of production, not to mention the relative income distribution of countries.

And so if you leave finance out of the model, out of the consideration, if you think that countries simply exchange in a market that is basically barter, and they call it the barter terms of trade, then you don’t realize that most trade is actually not barter.

We’re not in the Stone Age anymore, and that wasn’t barter even in the Stone Age. They’re not educated to understand what the problem is. And I’ve had a lot of problems in China and other Asian countries trying to explain this. I had more success in Malaysia explaining this.

What I talked about at the beginning of this show, that what I need is sort of a general movement that will be based on the analytic principles that I’m saying, trying to explain the principles that debt and credit are of key importance, and the difference between land rent and economic rent is unearned income compared to profits and wages. The classical distinction between earned income and unearned rent is critical, and that’s left out of not only the curriculum today, but in the West, there’s no longer the history of economic thought, not to mention economic history.

So it’s as if what I’m saying is just alien to most of the participants and the officials who are in charge of making the policy for these countries.

[Karl Sanchez] Relative to what you were saying before [Richard Wolff] came on in your show with Nima the other day, and talking about the unit, and how the unit is probably, as I think, is some sort of masquerade to go ahead and mask what exactly is being planned to be announced in October in Kazan, as to what the BRICS are going to do with their system. It seems like the question was supposed to be framed in relation to the short video I sent by the German that you looked over, or at least I’m assuming you looked at, based on your reply, that talked about the BRICS pay. So the whole idea of that, it was like, okay, well, this guy doesn’t really know what’s going to happen, because nobody’s said anything about how it’s going to work.

MICHAEL HUDSON: Well, what Karl’s talking about is a show that I did last week with Nima on DialogueWorks. I just did another show today for an hour and a half on the US debt on a similar thing. Nima had asked me precisely about what is this so-called BRICS bank, and he had got this public relations release by apparently the BRICS that seemed to be based on a right-wing libertarian von Misean-Hayek anti-government model, wanting to make a kind of BRICS Bitcoin that would make billionaires out of the individuals that seem to have designed this and offered to, on a consignment, to plug it into BRICS and let the BRICS use it and bid it up in price, making them as rich as [Sam Bankman-Fried] was, and the description of the, they call it the unit, the description of that and the description of the BRICS bank was so un-understandable that I figured if I can’t understand it, there’s a reason why I can’t understand it, and that is they don’t want anyone to understand it because it’s crypto, because there’s something they don’t want you to understand.

Who designed this? Who’s getting the profit from it? What is the money paid into the BRICS crypto currency? What’s it going to be invested in? Will it be invested in gold or just will it follow the price of gold? Who’s going to be in charge of investing?

I wasn’t able to make head or tail of it, and when I see a financial proposal by people talking about crypto, I think, I just suspect it’s not that they don’t know what they’re doing, it’s they don’t want you to know what they’re doing. So I just, I thought that can’t possibly be really, I would hope, what Russia, where it was basically worked out or the BRICS are trying to do, and I read in your blog that you think this was just a diversion, that somehow they just don’t want to tip the hand and let people know.

I would like to believe that, but I don’t know anyone who’s working for BRICS who has the knowledge to put together a system as sophisticated as what John Maynard Keynes proposed at the Bretton Woods Conference that, of course, was opposed by the United States.

So I’m in the dark, and until we know how they’re going to invest the proceeds, if they need any proceed., The kicker is that the BRICS currency was supposed to be bought and sold by private traders, private exporters and importers, and used as their savings. That means for everybody. In other words, let’s make it another Bitcoin speculative currency.

Well, that’s exactly what you don’t want for the BRICS. What the BRICS need is some kind of intergovernmental financing arrangement. Right now, it’s sort of a glorified trading in each other’s currency, possibly with some kind of a price reference as currencies shift around.

But again, you’re not going to be able to have any price stabilization that will not cause losses by some creditors or some debtors unless you deal with the fact that their dollar debt problem is bad. And if you’re going to de-dollarize, you have to de-dollarize the debts denominated in dollars. And I don’t see any discussion at all of that.

[Karl Sanchez] Yeah, that’s definitely a big problem. I see that too. In trying to build this sort of a system, it seems like maybe the first step would be to go ahead and establish a non-dollarized commodity market.

MICHAEL HUDSON: Well, you can do that just by not using the dollar. You can do that when Saudi Arabia and China trade each other’s currency.

The question is, what are you going to do when one country accumulates the currency of the other country? What are you going to do when there’s an imbalance of trade? All of this works very well just for the equivalent of a barter deal when it’s a bilateral trade. But what are you going to do?

You have to think of all of this as a financial system. And I don’t know who’s taught to think in terms of financial systems anymore. There was something called systems analysis when I was in my 20s. But that was 70 years ago, 60 years ago.

[Karl Sanchez] Don’t go too far.

MICHAEL HUDSON: Time flies.

[Karl Sanchez] The central bank digital currency idea of using that as a specific type of a bank or that would work between the central banks, and that would be their transmittal unit. But then you still have the issue of trying to go ahead and deal with imbalances. So you need some sort of a regular governor type of a situation where the BRICS bank institution could go ahead and take that on.

But again, who’s going to go ahead and do that along with the other functions of the bank?

MICHAEL HUDSON: Well, I don’t think it’s a digital currency. When you go to your bank, that’s a digital currency. SWIFT, the bank clearing system to send money from one bank to another, that’s digital.

It’s a cryptocurrency. And crypto, you don’t have a clue as to what’s happening. That’s crazy.

The one thing you need if you are a central bank acting on behalf of the governments who are members of the organization is it not be crypto. It has to be quite out in the open. You have to know what the balances are. And crypto doesn’t do it because it’s crypto.

[Karl Sanchez] Right. Yeah, I wasn’t implying that the central bank digital currency should be crypto.

MICHAEL HUDSON: (Unclear). I mean, anything is digital.

[Karl Sanchez] Everything’s digital. Your debit card is digital. It once was a new and improved type of term, but now it’s commonplace and that’s how it is.
[Pablo] Escobar puts lots of faith in Glazyev, the Russian economist who works for the European Economic Union. I don’t know, from what I’ve read from him, he doesn’t seem to be well-versed either. I think that the whole problem is what you’ve put your finger on, is that the whole issue of debt just hasn’t ever been taught for so many years. And it’s been erased out of the system academically.

So you need to have established a school, if you will, just to go ahead and teach this one fundamental in order to go ahead and get the people who are the treasurers of governments. That’d be the first cadre you’d want to go ahead and teach would be those people.

MICHAEL HUDSON: Well, how do we organize a group like that? That’s the question. Yeah. How do we institutionalize that?

[Karl Sanchez] So, yeah. So I agree with what the goal is there. How do we go about doing it? That’s all the other big thing.

And then the problem is also that there’s a whole, a rather large battery of people out there with lots of money that don’t want us to do that.

MICHAEL HUDSON: Yep. Right. They’re like sterile fruit flies or mosquitoes that are let into the environment just to distract attention.

[John Chadwick] Michael, I wanted to thank you, by the way, for giving some good advice a long time ago, about gold was a good investment. I got rid of my financial advisor, and I said, just give me all my money. And I invested most of it in gold. And then I kind of lost my nerve and then went to some of it in the in the stock market. And now in hindsight, I should have stuck 100% with gold.

But this is a question. It’s somewhat like an investment question. But it’s what many of us are faced with, especially people in their 40s, or younger, you know, you live near a big city, you can’t afford a house, it’s just ridiculous, right? And you have extra money. You know, you have savings. And then you look at the different options of where can you invest?

And you listen to some investment show like this David Lin, and you constantly hear financial people and you know, they don’t give any of the perspective that you’ve given, especially, I think only once I’ve heard someone mentioned debt, consumer debt. It’s just none of none of the ideas that you talk about are there.

So I guess we’re, we’re, we’re always discussing, well, what do we invest our money in? We know that the stock market is very unstable at this point, and you can have a huge crash. You know, we talked about Bitcoin, and Bitcoin is based on nothing, like nothing is backing it up whatsoever, right?

And then the other thing was, well, you can hold on to it and wait till the crash. But you know, things aren’t going to bounce back, like they have done in previous crashes, according to everything I’ve heard from you, especially with, you know, and no one mentions deindustrialization, practically.

So the only thing that really came to mind, that’s what I’d like you to comment on is, if you’re in the thing to invest in would be something that has good future demand from China, or any of the countries that are growing, and that you can invest in without being penalized, right, without worrying about being penalized.

So if it was an Indian ETF, that was all about things that China was buying, then that might be a good bet, or something, a country in South America, that had something like, you know, Colombia is growing. And, well, Brazil is, you know, the socialist countries, right? Like, we have kind of more hope in the socialist countries, growing than we do have anyone else. That’s, that’s the jungle, right? That’s growing.

So I guess, you know, we have to say something to, you know, like you, I could raise my Patreon membership with more good advice, and so could a lot of other people. So, you know, I guess a shout out to other people to appreciate the advice and information you give, because it helps them make great, great decisions. And, you know, we’re all in favor and supportive of what you’re doing.

MICHAEL HUDSON: Well, you’re sort of lost if you’re looking for something China is buying. There’s really only one thing that China is buying, or would like to buy in America, and that’s politicians. So I think if you can invest in a politician, that for some portion of what China will pay to buy him or her, I think that would certainly be a growth industry.

But even if you get something that China wants to buy in the US or maybe even the Western Hemisphere, the United States will sanction it and prevent the US from selling it to them.

For instance, China wanted to buy Intel computer chips. And so the Intel company was the recipient of, I think, $10 billion of support for President Biden’s attempt to spur computers here, and was all set to build a big factory out in Colorado or some Western city.

And until now, it’s just announced that it’s teetering on bankruptcy because the government prevented it from selling to the Chinese market, because there are enemies. And if you give China anything it wants, then it must want them for some hellish purpose that is not that of the United States.

So Intel said, well, our market was 30 or 40% in China. And by banning China, instead of being able to qualify for this $10 billion that you were going to give us to build a factory, now we can’t build a factory because we’re broke, because we can’t sell to China anymore. So I don’t know how you can solve the problem of buying something that China wants to buy, particularly.

If there is something that it wants to buy, it realizes that the United States is treating it like a deadly enemy, and it better produce it itself or have it produced in friendly countries that are not going to be very amenable to American investment.

So I think you better stick with 10-year government treasury bonds.

[John Chadwick] Yeah, yeah. Well, we have something similar here in Canada, GICs.

But I guess, do you have any guess on when this great, they call the financial or the stock market almost an inverted triangle, right? And it’s, or a bubble as you and Radhika were talking about it, as to when this might collapse, because what I still see is, is that gold will certainly still continue to go up, especially after, because you have all this liquidity, it has to go somewhere, right? All these people in the stock market, and, you know, because he, like you said, since Obama bailed the big banks in 2008, there’s all that money. And when people get spooked, and when the bubble bursts, liquidity has to go to somewhere.

So, you know, and all of the other information that you’ve given us on, you know, the de-dollarization, and I hear places, reports, it’s going slowly. But I also, you know, look at, well, look at Russia, look how fast de-dollarization went after the Ukraine war started, right? So, it can go very quickly. And you, with all these, there’s so many events happening, right? With repossession of Russian assets, and, you know, the Venezuelan gold and all these things. And then the Saudis aren’t selling oil anymore to the US. So, they have all these treasury bonds that they want to get rid of. So, you have so many incentives all over the place that now there’s so many reasons for the de-dollarization to continue.

And it’s just a matter of when this kind of takes off, right?

MICHAEL HUDSON: Well, liquidity can go into outer space. What appears to be liquidity is so heavily debt leveraged that once there’s a break in the chain of payments, the whole house of cards will come down.

Now, every crash has always been the result of some particular firm making a bad investment. Very often, it could be a rogue trader for the firm. And the rogue trader will have made a huge bet and pulled the firm down. That’s what’s happened for the last maybe 150 years.

So, there’s no way of foretelling when an accident is going to happen. All you can say, the economy is more and more accident-prone. We don’t know when, but you better figure out a scenario for what is going to happen when the highly debt-leveraged stock and bond holdings all have to be written down.

It’s not going to make the private sector investments very attractive.

[John Chadwick] Fair enough. I think I’m going to personally stick with much gold and some GICs and just hope for the best, I guess.

KARL FITZGERALD: Excellent. Thanks, John. Good work. We’ve got some great questions here in the Q&A, and [Sanyal Bazu] has five or six I want to try and get through here, Michael.

So, will military Keynesianism be sufficient to provide a cushion for the US economy for a number of years as the US drains Europe?

MICHAEL HUDSON: Did you say Keynesianism?

KARL FITZGERALD: Yeah, military Keynesianism.

MICHAEL HUDSON: I don’t understand how. How on earth? You’re having a financialized economy. You’re having exactly everything that Keynes warned against. Keynesianism is the euthanasia of the rentier. What you’re having is the coronation of the rentier. So, I don’t see any Keynesianism at all.

You’re having an impoverishment of the wage-earning class and the consumers and a crowding out of corporate investment, corporate profits, and wage income for debt service. So, I don’t see where Keynesianism is anywhere.

And certainly, you can’t call the war-spending military Keynesianism. That’s a travesty. So, no, I don’t see any hope of Keynesianism at all. It’s a bygone world.

KARL FITZGERALD: Really, I’m surprised. With the $1 trillion US military budget, much of that expenditure in marginal seats throughout America, I would have thought that was a pretty reasonable call.

MICHAEL HUDSON: They can call it Keynesianism, but Keynesianism was not just a gimmick. It was a whole system of logic. It’s true that he said you could simply build pyramids to employ labor, but the military spending is much worse than building a pyramid because at some point, you’re going to have to use these weapons, and that’s driving the whole rest of the world away.

That’s catalyzing the break between the BRICS countries and the NATO West, and that is not going to be good for the American economy. It’ll leave the NATO West and America just isolated, and I don’t know how they can rebuild their own industrial capacity, even from scratch, without confronting the debt issue.

They don’t have enough money to pay their debts and to finance new physical investment in productive capacity. Physical investment in capacity and employment takes time. Paying your debts is immediate, and the financial sector and the corporate financial officers live in the short run, not the long run.

KARL FITZGERALD: Well, I just can’t believe American debt. What’s it at now? $34 trillion or something? How much longer is this con going to go on, Michael? When is it finally going to be called out, and will a Jubilee be an automatic reaction that’s pulled off the policy shelf there in the Pentagon or wherever?

MICHAEL HUDSON: It won’t be a matter of policy. Nobody’s going to voluntarily say, gee, Michael Hudson’s explained the logic for a Jubilee, and we want to reindustrialize.

There will simply be bankruptcy, and it’ll be like 1931, two years after the depression, the stock market crash of 1929. Finally, the Allies and Germany got together, and they declared a moratorium on German reparations and inter-Allied debt service to the United States, and essentially that moratorium just became, in effect, the debt cancellation.

So it won’t be an issue of policy. It will be just, there’s no money to pay.

It may be a policy on the part of the BRICS that are deciding, we don’t want what’s happened to the West, having its industrial economy ground down to nothing. We don’t want that to happen to us.

But the West is not going to take that policy, because the Western economies are run by the financial sector.

That’s how the nation-state was created in the 17th and 18th century, as a means of assuring the international banking class that, unlike royal debts that would continue to go bankrupt when the kings couldn’t pay out of their royal budget to pay their creditors, nation-states have the power, being democratically representative, of pledging all of the income that they had.

Holland, England, those are the leading examples, and the nation-state, fiscal state, you could call it, was created as a vehicle to serve the financial sector as a debt-collecting intermediary.

So international policy isn’t set by nation-states anymore. It’s set by the financial sector that doesn’t really have a policy. What passes for economic analysis is the cover story for how they would like people to believe economies work, is sort of the narrative to justify itself. But they certainly don’t have the ability to analyze how to create an economic policy that benefits the economy as a whole, instead of the financial sector, whose aim is to extract income from the economy as a whole.

So I see the debt cancellation as in the 1920s happening just through bankruptcy.

And do you remember what the Secretary of the Treasury, I think from Pittsburgh, Mellon, said? Liquidate everything. Liquidate factories, liquidate debts, liquidate people. I don’t know if he added that, but liquidate everything. That’s their version of the jubilee year.

KARL FITZGERALD: Okay. Well, [Sunil] asks, is there a derivatives Ponzi scheme that sits on top of the debt pyramid and how does that work?

MICHAEL HUDSON: It works like a horse race. People take a bet as to which way currencies or interest rates or stock prices or bond prices are going to work. And you pay to get an option to sell or to buy at a given price. And essentially, there are all these bettors and somebody is going to make the wrong bet.

And in derivatives, they’re almost always made now by parties that have nothing to do with the direct buying and selling of a commodity like it used to be 100 years ago. But they’re financial betting instruments and they’re financed on credit by debt.

And if you bet wrong, like AIG bet when it went bankrupt and had to pay Goldman Sachs in 2008, prices that Goldman Sachs set all by itself, well, then that can pull the whole system down. It’s like you’ve bought a stock that’s way overvalued and suddenly plunges like the stock market crash of 1929.

And there were plenty of derivatives. In effect, back then, they were called “puts” and “calls”. And a derivative is sort of an elaborate put and call of a betting scheme that is highly financialized. And they’re cross betting. You’ll try to get one bet. If something goes up here, then something else will go down there. And you try to get cross-derivatives often so that if you lose on one derivative, you’ll make money on other derivatives. And there will be some arbitrage margin in between that you can make money for.

That has nothing to do with the productive economy whatsoever. It has to do with, you almost have to be insider dealing to be able to play that game, or a company with large enough, tens of hundreds of billions of dollars to manipulate the market, to actually come in and just, if everybody thinks a stock will go down, you put in $10 billion to bid it all up. And that’s called a short squeeze.

People will say, here’s like Intel. It’s going to go under. Let’s sell the stock short. It’s sure that its stock price is going to go down now that they say they’ve lost the China trade. Well, there are a lot of people that sold it short. So now you’ll get a company, a group of private capital companies that come in. Let’s all buy Intel stock and force it up. And all of a sudden, the speculators that have sold Intel short will be squeezed, and they’ll have to cover what they’ve done, the bets they’ve made. And if they bet enough, they’ll bring down the whole institution, therefore.

And the word for this kind of short selling on Wall Street used to be, “he who sells what isn’t his’n has to pay or go to prison”. Well, that’s going to happen at some point when there’s a break in the chain of payment. And if one party in all of these derivatives and speculators and brokerage companies can’t pay, it reverberates all down the financial supplies chain. That’s what we’re seeing, or would see in a crash.

KARL FITZGERALD: Okay, well, [Sunil] takes us into conspiracy land here. Do you believe that there’s some significant parts of the oligarchy, Davos, the Bilderbergs, who want to find ways of creating massive population decline, i.e. through virus development, even as Nelson Rockefeller, Boris Johnson and Elon Musk have large families?

MICHAEL HUDSON: I don’t see any sign of a conspiracy, but then I wouldn’t be invited to sit in on such a conspiracy. This isn’t conspiracy, that’s national policy.

The policy is to decline the population. Look at what the CDC here is doing about COVID, saying it’s just like a cold. Well, a lot of people are getting long COVID, you know, just essentially making them tired all the time. The third largest cause of death by men in the United States is prostate cancer. And yet, that’s the easiest form of cancer to cure. All you need to do is every two years, you get a PSA test, a blood test, it’ll show, you know, whether you have prostate cancer.

In America, they’ve stopped giving tests to people. Once you turn 75, you’re advised, well, it’s so slow growing, if there is any cancer, you’ll die of natural causes before the cancer gets up.

Well, that doesn’t happen for 10s of millions of Americans. Well, I mentioned this as an example to Nima a few months ago, and he said, he works out of Brazil. He said in Brazil, every man, every male is required by law, every two years to have a PSA test. And if you have that every two years, then it’s very simple if you have a PSA test, and it shows you have cancer, you take some pills, it’s easy, you may have to have a biopsy, and some radiation treatment, easy to cure.

That’s not the case in America. So you have prostate cancer for men, you have COVID for many men, you have a number of epidemics that people are worrying about now like monkeypox and bird flu and all sorts of things.

So it’s not a conspiracy. It’s very explicit policy. And I remember in the 1970s, there was all this pressure by the Club of Rome, that was saying that the planet cannot afford to have a billion more people, we’ve got to have policies to stop it. And certainly that’s got, as you said, the big foundations are all into, how do we limit the population, and all that. And it looks to me like one way to limit population is to deprive it of proper medical care.

And that’s what the CDC, the Center for Disease Control in the United States is for to make sure that people do not avail themselves of medical to proper medical care, not wear masks. At McDonald’s hamburger chain, I think Oregon has banned people, customers wearing masks inside the McDonald and more and the right, my neighboring counties in Long Island here in New York, I think put laws up for vote for banning masks in their territory. They said, well, who may wear a mask? Well, crooks may wear masks. Well, shoplifters may wear masks. So you can’t have people wear masks.

Well, if you don’t have the anti-COVID mask, you can just imagine there’s no protection against COVID or any other virus. So how on earth can you explain the policies of the United States and other countries?

And I must say that China also has not acted very strongly against COVID. There was a historic lockdown that really created a crisis. Almost my entire Chinese publishing team has long COVID. The heads of the team, the types that are all sorts, they’ve all got COVID in trips to Beijing or other Chinese cities, or simply by having food in the dining car on the speed train in China, taking off your mask and eating in a restaurant can give you a long COVID.

So certainly China wouldn’t be part of this conspiracy. I can’t imagine. And yet it’s so it’s a worldwide phenomenon.

KARL FITZGERALD: Yeah, Michael, I don’t know, I’m going to challenge you on this because through the UK, New Zealand, Australia, Canada, we’ve all had record immigration programs. And when George H.W. Bush announced the New World Order, I’ve always wanted to ask you this, what do you think he meant? Because for me, what I see is that post globalization, as we exported all our pollution to China and Asia. The model became about big property, big infrastructure and big debt. And underwriting all that was the easiest trick in the economic playbook. And that is to pump your economy full of people so that there’s a downward push on wages and an upward push on land rents. And here we have 30, 40 year olds looking like they’re going to be stuck renting for the rest of their life.

So I kind of feel I’d love to hear you tease out this this change away from manufacturing base. And you know, you often talk about the finance side of things, but infrastructure, population, these sort of things are also significant factors.

MICHAEL HUDSON: Yes, they certainly are. I can’t make sense of policies that don’t seem to make sense at all. Not only George H. W. Bush, but it was Jimmy Carter, just before Reagan, that wanted to press for immigration, especially via Mexico, into the United States, because he wanted that explicitly to break labor union power, and lower wages. So certainly there was that design.

And that was discussed very openly in the 1970s. I mean, I sat in on many discussions, saying that and it was anti-labor.

So yes, I think many policymakers segregate what they’re focusing on just in one particular tunnel vision area, and they don’t think of the entire overall system.

When you put it into the context of an overall system, it doesn’t make sense or it’s confusing. How can they do these so contradictory things? Well, they don’t think in terms of systems.

So we’re dealing with a kind of anarchy, again, because economic theory is not organized as systems analysis, looking at the overall economy and its interactions.

[Flo] I wanted to ask if you had heard or read about Jeffrey Sachs has a new article out. And he was just on Breaking Points, which incidentally, I’ve been trying to say, I think you should try and get on there because they have a massive audience.

But yeah, talking about his experiences, immediately post Soviet Russia, like 1990, I guess he was there. I wasn’t aware that, you know, he was mentioning he has a background in international finance and economics.

And so he was there trying to help out, is his way of saying it. He said he’s a social democrat, and was trying to sort of advance some Keynesian ideas, even was advocating for some debt Jubilee, or debt cancellation in Africa and stuff.

And it just reminded me, I know that you’ve spoken about your experiences there as well. You were you were around around the same time, right, when 1990 1991? So yeah, I just like to get your your thoughts on that time, what kind of what you learned if you ever ran into Jeff Sachs.

MICHAEL HUDSON: I was taken by one of President Nixon’s consulate economic advisors into Jeffrey Sachs his office, but he wasn’t there. And I said, he’s hardly ever there. He really just works in the United States following things.

Jeffrey’s been giving wonderful, wonderful speeches recently, all over the place. And you can see when he does his YouTube interviews on Judge Napolitano, for instance, you can hear him getting angrier and angrier and angrier. He realizes that he’s been taken.

And he really believed the neoliberal ideas that he was promoting [in the early 90s]. Remember, it was Sachs that destroyed Yugoslavia, that viciously tore it all apart on under the IMF, to deliberately break it apart so that the Tito and Serbia could not extend credit to the rest of Yugoslavia and make it uniform. So Sachs was the butcher of Yugoslavia.

But he really believed what he was doing. He didn’t mean to be a butcher. He was just a mad killer.

And then he went to Russia and thought he could be all it needed was to be a butcher again. And then he realized that somehow, he woke up and said, you know, I’m looking at what I did. And I was a butcher. Oh, my God, I’m so sorry. The United States told me that they were going to help and give Russia enough food, so that when I butchered them, they’d get a lot of good meat out of it. And we didn’t get good meat out of it.

So he’s essentially doing a mea culpa now for all of the things that he’d done before. And he realizes that he was just the front man for being naive for believing what he learned in school and economics courses in school, the IMF craziness that all goes back to David Ricardo and the bullionists and the 1810s. Basically, the idea hasn’t changed ever since then.

So he’s giving wonderful talks. An apostate to the previous religion is always the most intense supporter of the new religion to which he’s joined. So I’m not criticizing him for Yugoslavia anymore. I like what he’s saying. He’s lived it down.

And because he was dealing with all of the actual diplomats and the high politicians, he’s able to tell the truth about, here’s really what happened. I was there. Here’s what they told me. And I made this mistake and this mistake and it was awful. But this is what we’ve created. And they’re trying to destroy the world now.

That basically is what he’s saying, especially in the last few weeks, not only about Ukraine and the US but about Israel, about US, China, about US military policy everywhere. So what he’s writing now is certainly worth listening to and reading.

[Flo] Yeah, absolutely. It was, it was a really interesting interview. And one part, I guess that took me a bit of back when he was surprised. I can’t remember now which politician he was talking about. But you know, maybe it was Yeltsin or the finance minister, but they went into a meeting with the Americans. And, you know, Jeff Sachs was saying, Oh, it’ll be fine. You know, they’ll, they’ll write down the debts, or you can pause the debts and stuff like that. And then the Americans said, No, we’re not going to give you any grain shipments, we’re going to cut that off if there’s any lateness in your full interest payments and stuff like that. So they were very hard, hard lined about it.

And then he makes this kind of interesting connection to the current situation with Russia and Ukraine, and how Putin, even back then, even after all, you know, these negative experiences, when Putin came to power, he was still pretty pro-Western. And that, you know, and I’ve heard this before, too, that, you know, Russia has kind of been more of an unwilling or more begrudging, I guess, partner to the BRICS, like they were pushed out more than anything else.

So yeah, I just like to get your thoughts on that. And when you were there, were you in Russia, you know, advising people and or consulting? Were you giving a different sort of advice from Sachs?

MICHAEL HUDSON: Yes, totally. I gave three speeches before the Duma, and wrote a number of articles for the Russian Academy of Sciences. I urged a land tax for Russia, say, look, you’re giving away the natural resources, you’ve given away the monopolies. I wanted to first of all, give everybody their own house that they’re in. Don’t make them borrow money to buy it. Give it if you have a house, distribute it all to the people. Don’t just give it to the 1% and the crooks.

And America said no, only give it to the crooks. Because what the Americans realized was that if you give all the property to the crooks, how do they get the money for it? They have to sell it to us buyers on the stock exchange, and that’s what made Russia the leading performing stock exchange in the world.

Well, I said, you’ve already given away Norilsk Nickel, and the nickel companies, the [Yukos Oil Company] and all that. But you can still save everything, impose an economic rent tax, a resource rent tax, or a land tax if you’ve given away a lot of property and the luxury buildings – do a land tax.

That way, you will collect everything that the kleptocrats had stolen and taken into their own legal possession.

So it doesn’t matter if they’ve become the legal owners of oil, or nickel, or buildings, the land tax can capture this all for the government as their natural fiscal base.

And politicians like Vyacheslav Zelensky kept bringing me back to address the Duma on this, but then Yeltsin and his American advisors manipulated the election. So he didn’t get reelected to the Duma. And I no longer had sponsors there, although the Russian government, at least the Academy of Sciences, kept publishing my articles.

So but obviously, I was only one voice, I wasn’t institutionalized. I went with a group of people there. And it was just a few of us.

It was organized by a British Georgist, Fred Harrison, he put it all together. He almost became an alcoholic in the process of having to keep up with all of the vodka drinks that were necessary to get everything arranged. So he did his best. But there was no institutional backing for what we were doing.

[Flo] Sounds familiar.

KARL FITZGERALD: I’m going to flick over to a question from [Robert Seigert] that fits into this. Can you introduce some of your relationships with policymakers in China? You were once at the People’s University in Beijing. What was that like? How receptive were Chinese officials to your thinking? And I suppose it would be interesting to hear you compare that to the Russians.

MICHAEL HUDSON: Neither are very receptive to my thinking. And I think the reason is, my students and also the professors that I know, in China told me that almost all of the officials around President Xi and the upper Communist Party were all trained in the United States.

And so since what I was saying was so different from what they learned in the United States, that you had, I guess, in the early 1980s, late 70s, you had Milton Friedman go to Shanghai, and convince them, well, you have to let “100 flowers bloom” and, you know, you’ll never, you know, Chinese are creative people, let them all develop.

And that’s when President Deng came in and had the opening, you know, black cat, white cat, it doesn’t matter as long as they catch mice. And you had Shanghai as assigned a proto financial center, a neoliberal center, gain a lot of weight in China, because of that.

And the counterweight was basically Beijing. A number of professors have had me lecture their students and talk to the Central Committee, and etc. And they will follow particular suggestions I have, like you have to, you have to tax and limit the export of rare earth elements, you can’t just give them away for the cost of labor, there’s an economic rent that you should be charging, they can get that.

But when it comes to my overall economic system, especially when I mentioned volume two and three of capital, they’re not quite happy with talking about debt. And they look at volume three as, well, look, we have our Marxism, you have your Marxism.

And I could see that the reaction that I gave, I think, in one of my first visits to Peking University, didn’t go over.

My friend, David Harvey, gave a speech saying the same thing, you’ve got to go over volume three of Capital, you’ve got to tax the land rent. Otherwise, if you don’t tax the land rent, you’re going to have as China gets more and more prosperous, people are going to put a bid up on the price of land, and the younger Chinese are going to have to borrow money from the banks to buy land. And all of this money is going to be paid to the bank, instead of using it to pay the tax, and people are going to make money in China by free lunch in financial ways, not industrial ways.

Well, they were not very receptive to that, or to my discussions about federal local relations, where local localities, I think I’ve said this before, on our discussion, localities have to raise money for their public services by selling land to developers.

Well, that was, that’s not a very good idea. Because although China owns all the land, how is it going to tax the land’s rent, the concept of land rent is sort of alien to the 21st century.

This was the central discussion of the entire 19th century, all of classical economics, the Physiocrats, Adam Smith, J.S. Mill, Marx, and it’s poof, everybody, there’s no concept, they think that land is capital, they don’t get that rentier income, whether land rent, monopoly rent, or interest, is not profit, that land and monopoly rights are not a factor of production, they’re a choke point.

And you can get a choke point and charge rent that you get in your sleep, as John Stuart Mill said, but it’s not really a factor of production.

Well, it’s very hard to get this concept across to people who have been trained in the United States or Europe, and have not been familiarized to classical value theory, where rent is the excess of market price over intrinsic cost values. The distinction between intrinsic cost value and market price just doesn’t appear in modern economics. How can I discuss a policy without bringing up this whole history of classical economic thought and political economy that was a whole system that people used to think in terms of and create the narrative in terms of.

You’ve had the neoliberals create their own narrative that finance is going to make you rich and you can get richer quicker by de-industrializing and just dropping industry just like nobody wants to be a manual laborer anymore. You want to be a manager, a professional managerial class or a financial manager.

Well, that’s how countries are made. There’s no distinction between a national economy and budget and a private economy and budget.

KARL FITZGERALD: Michael, with that 19th century fervor around monopoly rents and this widespread recognition that applied labor onto land produces capital, the formation of the American Economics Association in 1885, I’ve not seen enough of your writing on that particular development and how that led to land and monopoly rents being shoved under capital as a subset of capital, and we went from a three-factor analysis of land labor capital and down to a two-factor analysis. What do you know about the role of the Ivy League universities and some of those land banking families behind the start of that American Economics Association?

MICHAEL HUDSON: Well, I wrote a whole book about that, America’s Protectionist Takeoff, where I show the different regional economic tendencies of the American School of Political Economy and the first economist, economics professor at the first business school, Pennsylvania, was Simon Patten, and I’ve talked about him in all of my writings. I’ve written long articles about him and published them in, I think, the Journal of Economics and Sociology before.

Simon Patten essentially said that the Americans around John Bates Clark and Columbia University tried to deny any distinction between rent and profit, saying there was no such thing as unearned income.

Patten explained the problem there, and Patten was trained in Germany. All of these founders of the American Economic Association had been trained in Germany, that basically was a social democratic economics, and Patten said that you need a fourth factor of production, and that’s public infrastructure.

The function of infrastructure, canals, public education, health, wasn’t to make a profit like today. It was to provide a basic public service, number one, so it would not be monopolized, and you could provide it at actual cost or preferably on a subsidized basis or free, like education, health care.

The role of public infrastructure wasn’t to make an economic gain or profit. It was to lower the cost of living and hence the cost of production, the cost of employing labor, so that you would leave more of a leeway for industrial investment and profits to take place. Industrial profits were assumed to be reinvested in more capital and more hiring and expanding the economy.

That was what distinguished the American school from all the European free market people that were basically pro-financial analysts.

So yes, I discussed that in America’s Protectionist Takeoff and in my articles about Simon Patten, and in my book Killing the Host, I think, gets into this again.

KARL FITZGERALD: Yeah, you do have a section on that.

Just to finish off this section, [Sunil Bazu] did ask, can you explain how land rent works? I own a big home, but I have a school teacher’s income, and I worry I would have to sell up if this was implemented.

MICHAEL HUDSON: Well, David Ricardo, chapter two of Ricardo’s Principles of Political Economy and Taxation, explained it, gave the classical explanation of land rent.

Land rent is what a land owner charges over and above the cost of production on the land, and land has no cost of production.

So a landlord may put a building on a land, and the rent attributed to the building is the profit. But over and above the building, most of the property’s value is actually the land price, and that rent is what, as Mill said, landlords make in their sleep.

The recipient of land rent, as opposed to a real estate developer that actually builds buildings, is not a factor of production. It’s an external survival of feudalism. It’s purely a rentier burden paid to the heirs of the warlord conquerors of Britain or other European kingdoms.

And there was no social or economic reason for rent, because it doesn’t reflect a cost of production. And the rentier, the recipient of rent, does not play a productive role, but is simply extractive of income earned by the economy at large.

So read Ricardo’s chapter. He states it very clearly.

Or any history of economic thought. A good history of economic thought, we’ll talk about Ricardo, if it was published before 1950.

KARL FITZGERALD: And I’ll just say, Sunil, from my understanding of your question, what happens is that there’s a giant tax shift off the productive sector of the economy and onto monopoly rents, with land raising about 55% of government expenditure and other forms of monopoly rent, also funding the rest of the budget expenditure.

So it’s quite a unique take that instead of playing the monopoly board game and making our siblings cry, we should be actually taxing the monopolists. And they would be crying as society is freed from all this tax paperwork, all this compliance.

You know, there’s 125 tax points in Australia, and only 10 of those taxes raise 90% of the revenue. So there’s a lot of unnecessary compliance and tax deadweights applied to the economy. And that’s why when we talk about land rents, particularly post-global financial crisis, all of the major tax reviews in England, Australia, and New Zealand all said that this was the best way to actually reduce this boom-bust cycle that the land element really drives.

MICHAEL HUDSON: Well, the question is, if it’s a good policy, why is it not adopted? And the reason is that the rent, we no longer have a hereditary landlord class. Anybody can buy land, or anybody can buy a home or an office building, but wherever you’re going to buy it, you have to borrow from a bank. And the recipients of rent now are the mortgage bankers, and rent is paid to the mortgage banker instead of to the landlord class.

And the landlord class that was under attack and successfully overcome in the 19th century, which was a long flight to remove the landlord’s control of parliament in England and politics elsewhere, the landlord class has been replaced by the banking class. And so it’s the bankers that receive the rent and are using their political influence in the same way that Britain’s House of Lords used to do to prevent a land tax.

The bankers are preventing that by saying, wait a minute, if you tax the land now, the land rent is already pledged to be paid to the bank as a mortgage, and we’ll go under. Do you want us to go under?

Well, that’s one of the problems that China’s dealing with now. How is it going to solve the problem. Real estate prices are collapsing. How is it going to solve the problem of creating a viable real estate market with a land tax without driving the banks under? That’s the problem facing the 21st century.

KARL FITZGERALD: Mark Batko asks, is Trump’s idea to raise tariffs a loose cannon concept, or will it actually be effective? You’ve done plenty of work in this space.

MICHAEL HUDSON: The question is effective at what? It will drastically raise the price of consumer goods for the United States. Imposing a tariff on goods that have to be imported from China, like rare earths, or germanium, or gallium, or items like that, will increase the revenue of the U.S. Treasury for tariffs.

I recommend to China that if Trump increases tariffs by 20%, China will impose an export tax of 40% on its exports to say, well, we know that if the U.S. Treasury makes money off American imports from China, you will use that money to pay for the military surrounding of us and to militarily attack us. That’s what you’ll use the money for. Why should we export to you to make money for your government to have the money to increase the military industrial budget? We’re raising our export tax to you for 40%, and at some point, we’re just going to say, you don’t want to buy from us? We’ll just stop. You’ll go cold turkey, see what happens to your economy then, and to your budget, and to your ability to surround us with military bases and attack us. That’s what I’m suggesting.

KARL FITZGERALD: Lovely.

[Karl Sanchez] I just wanted to make a couple of observations. There was a question about what happened with Russia. When Putin came in, one of the first things he did was to make friends with China. He signed a friendship pact with China in 2002. It’s only blown up to become their joint strategic partnership today. It’s huge. That’s the first thing he did.

Another thing that isn’t as clear as to when he did this, but there was a time in there between 2002 and 2010 when he got in touch with India. Russia, and India, and China formed the RIC. That’s the core of BRICS, which of course was B-R-I-C first, and then South Africa got added to it.

The evolution of that organization is important to understand for the geopolitical implications of it, not just then, but also today, because a lot of people think that Modi’s not playing along and things like that.

Well, that’s not true. Modi’s doing his own independent thing, and China and India are actually mending their fences, which is a good thing.

The thing that right now is happening that’s bad is what’s happening with India and Bangladesh and Pakistan. Those are two areas that are hot spots, and then there’s Myanmar. Then you have the Philippines within the ASEAN rattling everything in the South China Sea for the United States. So, those issues.

On the issue of what happened with the curriculum of political economy in the United States and its teaching, Upton Sinclair wrote a book about that. It’s called The Goose Step. It was self-published, nobody would touch it, and it was published in 1923. And he explained how the wealthy families in the United States, who were all on the interlocking chairmen of the board for the Ivy League universities, all decided that they would go ahead and eliminate political economy as a subject. It wasn’t going to be taught anymore. Neoliberalism and the Bates idea that all income is earned is going to be the mantra.

So, that started essentially at the beginning of the 20th century before the Fed got taken over by the banking cartel.

MICHAEL HUDSON: It was formed by the banking cartel. Right, right. From the beginning, it was quiet, yeah. That’s a good book. At the same time, Meyer’s History of the Great American Fortunes is the other great book about that topic.

[Karl Sanchez] Now, that’s one I didn’t know about, so I’ll have to add that to my list.

The last point I wanted to make was that in my research with regards to Russia recently, there was an interesting meeting with the head of the largest public bank in Russia. And in the process of that, I got curious to go ahead and look up the listing of the top 10 banks in Russia. So, three of the top 10 banks are public banks. And those three public banks have more assets than all the private banks in the top 10 combined, which I thought was a very interesting fact.

GG: And the number one private bank is the number one bank assets-wise. And actually, it has more assets than all the private banks combined, just by itself. The Sberbank, you mean? No, no, no, it’s not. It’s the… Never mind, we can… It’s the one whose name I can’t pronounce right at the moment. It starts with a P.

Anyway, that issue is that, okay, so we want banking to be public. Our public banks, so we don’t…

MICHAEL HUDSON: That’s China’s great advantage. It doesn’t have to borrow from a bondholder class because when you set up the Bank of China initially, there weren’t any wealthy Chinese financial class to lend money to government, so it just had to print the money itself.

[Karl Sanchez] Right, so what’s interesting with the system in Russia right now is that the central bank raised the prime rate up to 19%, which is insane, right? Well, guess what? These other public banks have much lower rates that are these special concessionary rates for mortgages, 2%. 2% mortgage, okay, and it’s very popular, so they’re going to extend that program.

And so just because the central bank’s doing one thing doesn’t mean that there’s not other stuff that’s happening there that’s really pumping the economy. Why is the economy growing at 5%? How can it be growing at 5% if the prime rate’s 19% people ask?

Well, it’s because the central bank really isn’t doing the financing. It’s these other banks that are priming the investment streams.

MICHAEL HUDSON: That’s right.

[Karl Sanchez] And then there’s the publicly held corporations that also have their own revenue streams that are also doing the same thing. And now today, there’s the Far Eastern Economic Forum that happened, well, it’s already finished, but there’s a lot of talk about what’s trillions and trillions of rubles in investments that’s going to come out of that whole affair. So who’s really booming?

Well, the Chinese, they’re continuing to roll. The Russians are the ones that are booming. And the Russians are going to be the prime mover with their integration of ASEAN and into BRICS and the Far Eastern Economic Union. Once that whole thing gets rocking, you can forget about the heartland. The heartland is going to be in the sole possession of the Eurasians.

Now, the United States is continuing to go ahead and try and upset all that by its shenanigans in Pakistan and Bangladesh and Myanmar and the Philippines. But otherwise, everything else is on the periphery and nobody has anything.

The Japanese are shot. Their population is in a really drastic decline.

Australia and New Zealand are too far removed geographically. And plus, their interests are to join the ASEAN and those other Southeast Asian countries and economies.

So what’s going to happen?

MICHAEL HUDSON: Well, as you pointed out before, we don’t know what’s going to happen at the BRICS meeting. We’ll have to watch it unfold. They’re reinventing the wheel as they go along. They’re not using the whole intellectual analytic apparatus that the classical economists of the 19th century developed, but they seem to be redeveloping logic along similar lines. I’m trying to do what I can to introduce the classical economic categories as a way to think.

I have no idea at all what the individuals there are going to be doing on their own. I don’t have much personal contact with them and they don’t with me. So all we can do is watch.

[Karl Sanchez] Yeah. Well, the last little item is that debt forgiveness, writing them down, happens in Russia as a matter of policy to the regions. The central government loans them money for investment and development. And instead of them having to pay it back, they write it off.

MICHAEL HUDSON: The question is whose debts are they going to forgive? And what will they do to the people who are supposed to be the recipients of these debts if they’re banks? How will they remain solvent throughout the economy? Everything is connected to everything else. I have no way of knowing how they’re conceptualizing their economy.

[Karl Sanchez] Yeah. In this case, it’s government to government debt.

MICHAEL HUDSON: Right. Well, that’s what I’ve been talking about in the various meetings that I have, speeches and all the interviews.

KARL FITZGERALD: Thanks, everyone, so much for another insightful discussion. We haven’t covered any ancient history in this discussion, which is most unlike us in terms of way back in time. But I love this quote of yours, Michael, in a recent interview with Robertson Earhart.

The ale women providing beer were part of a palatial or temple public utility, as the British word pub recognizes.

I love that little piece. I thought we’d end up there.

So another insight on how debt was localized back in the palatial times. Thank you. Thanks, everyone. We’ll see you again in early December for another Q&A gathering.