Michael Hudson > Quotes

“When other countries run sustained trade deficits, they must finance these by selling off domestic assets or running into debt — debt which they actually are obliged to pay. It seems that only the Americans are so bold as to say “Screw the world. We’re going to do whatever we want.” Other countries simply cannot afford the chaos from which the U.S. economy is positioned to withstand as a result of the fact that foreign trade plays a smaller role in its economy than in those of nearly all other nations in today’s interdependent world.

Using debtor leverage to set the terms on which it will refrain from causing monetary chaos, America has turned seeming financial weakness into strength. U.S. Government debt has reached so large a magnitude that any attempt to replace it will entail an interregnum of financial chaos and political instability. American diplomats have learned that they are well positioned to come out on top in such grab-bags.”
― Michael Hudson, The Bubble and Beyond

“The United States thus achieved what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. Government. Against dollar-deficit regions the United States continued to apply the classical economic leverage that Europe and Japan were not able to use against it. Debtor economies were forced to impose economic austerity to block their own industrialization and agricultural modernization. Their designated role was to export raw materials and provide low-priced labor whose wages were denominated in depreciating currencies.

Against dollar-surplus nations the United States was learning to apply a new, unprecedented form of coercion. It dared the rest of the world to call its bluff and plunge the international economy into monetary crisis. That is what would have happened if creditor nations had not channeled their surplus savings to the United States by buying its Government securities.”
― Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance

“Whom the gods would destroy, they first make mad.” And if they would destroy economies, they first create a wealthy class on top, and let human nature do the rest. The acquisition of power soon leads to its abuse, to economic and social hubris. By seeking to protect its gains, perpetuate itself and make its wealth hereditary, the emergence of a power elite locks in its position in ways that exclude and injure those below. The wealthy indebt them, shift the tax burden onto the less powerful, and turn government into an oligarchy.”
― Michael Hudson

“A false alarm is sounded that government budget deficits will increase consumer prices — with no discussion of how private-sector credit deflates economies. The problem is that credit is debt — and paying debt service to bankers and bondholders (and various grades of loan sharks) leaves less income available to spend on goods and services. So debt deflation is today’s major problem, not inflation.”
― Michael Hudson, The Bubble and Beyond

“But money doesn’t work in the sense that labor or tangible capital expends
effort to produce commodities. Credit is debt, and debt extracts interest. Financial salesmen who promise investors, “Make your money work for you” actually mean that society should work for the creditors — and that means for the banks that create credit.

The effect is to turn the economic surplus into a flow of interest payments, diverting revenue from tangible capital investment. As the economy’s reproductive powers are dried up, the financialization process is kept going by easing credit terms and lending — not to produce more goods and services, but to bid up prices for the real estate, stocks and bonds being pledged as collateral for larger and larger loans.”
― Michael Hudson, The Bubble and Beyond

“Popular morality blames victims for going into debt – not only individuals, but also national governments. The trick in this ideological war is to convince debtors to imagine that general prosperity depends on paying bankers and making bondholders rich – a veritable Stockholm Syndrome in which debtors identify with their financial captors.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“When foreign military spending [bombing Korea and Vietnam] forced the U.S. balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in U.S. Treasury bonds, as if these still were “as good as gold.” Central banks have been holding some $4 trillion of these bonds in their international reserves for the past few years — and these loans have financed most of the U.S. Government’s domestic budget deficits for over three decades. Given the fact that about half of U.S. Government discretionary spending is for military operations — including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries — the international financial system is organized in a way that finances the Pentagon, along with U.S. buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.”
― Michael Hudson, The Bubble and Beyond

“Ideally, a fair and equitable society would regulate debt in line with the ability to be paid without pushing economies into depression. But when shrinking markets deepen fiscal deficits, creditors demand that governments balance their budgets by selling public monopolies. Once the land, water and mineral rights are privatized, along with transportation, communications, lotteries and other monopolies, the next aim is to block governments from regulating their prices or taxing financial and rentier wealth. The neo-rentier objective is threefold: to reduce economies to debt dependency, to transfer public utilities into creditor hands, and then to create a rent-extracting tollbooth economy. The financial objective is to block governments from writing down debts when bankers and bondholders over-lend. Taken together, these policies create a one-sided freedom for rentiers to create a travesty of the classical “Adam Smith” view of free markets. It is a freedom to reduce the indebted majority to a state of deepening dependency, and to gain wealth by stripping public assets built up over the centuries.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“The motivation for taking on debt is to buy assets or claims rising in price. Over the past half-century the aim of financial investment has been less to earn profits on tangible capital investment than to generate “capital” gains (most of which take the form of debt-leveraged land prices, not industrial capital). Annual price gains for property, stocks and bonds far outstrip the reported real estate rents, corporate profits and disposable personal income after paying for essential non-discretionary spending, headed by FIRE [Finance, Insurance, Real Estate]-sector charges.”
― Michael Hudson, The Bubble and Beyond

“In contrast to Ricardo’s expectation that banking would retain its early focus on international commerce — and hence,on industrial capital formation to provide foreign markets with British exports in exchange for raw materials — banking has found real estate to be the key, along with its traditional market in creating monopolies and trusts. Some 80% of bank loans in the United States and Britain are mortgages, and consequently they account for 70% of the economy’s interest payments.”
― Michael Hudson, The Bubble and Beyond

“The Godfather, Part III (1990): Vincent Mancini: Don Lucchesi, you are a man of finance and politics. These things I don’t understand. Don Lucchesi: You understand guns? Vincent Mancini: Yes. Don Lucchesi: Finance is a gun. Politics is knowing when to pull the trigger.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Ponzi austerity schemes, just like Ponzi growth schemes, necessitate a constant influx of new capital to support the illusion that bankruptcy has been averted.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“In fact, they are not taught in any university departments: the dynamics of debt, and how the pattern of bank lending inflates land prices, or national income accounting and the rising share absorbed by rent extraction in the Finance, Insurance and Real Estate (FIRE) sector. There was only one way to learn how to analyze these topics: to work for banks. Back in the 1960s there was barely a hint that these trends would become a great financial bubble.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Neofeudalism: Much as warlords seized land in the Norman Conquest and levied rent on subject populations (starting with the Domesday Book, the great land census of England and Wales ordered by William the Conqueror), so today’s financialized mode of warfare uses debt leverage and foreclosure to pry away land, natural resources and economic infrastructure. The commons are privatized by bondholders and bankers, gaining control of government and shifting taxes onto labor and small-scale industry. Household accounts, corporate balance sheets and public budgets are earmarked increasingly to pay real estate rent, monopoly rent, interest and financial fees, and to bear the taxes shifted off rentier wealth. The rentier oligarchy makes itself into a hereditary aristocracy lording it over the population at large from gated communities that are the modern counterpart to medieval castles with their moats and parapets.”
― Michael Hudson, J IS FOR JUNK ECONOMICS: A Guide To Reality In An Age Of Deception

“Surprising as it may seem today, classical ideas of creating a free market were to be achieved by “socialist” reforms. Their common aim was to protect populations from having to pay prices that included a non-labor rent or financial tax to pay landlords and natural resource owners, monopolists and bondholders. The vested interests railed against public regulation and taxation along these lines. They opposed public ownership or even the taxation of land, natural monopolies and banking. They wanted to collect rent and interest, not make land, banking and infrastructure monopolies public in character.”
― Michael Hudson, J Is for Junk Economics: A Guide to Reality in an Age of Deception

“When the volume of debt has grown as large as national income or GDP, and when it bears an interest rate (typically 5%) above the economy’s rate of growth (typically just 1% to 2%), then all the growth in national income is taken by the creditors.”
― Michael Hudson, J Is for Junk Economics: A Guide to Reality in an Age of Deception

“This unique ability of the U.S. Government to borrow from foreign central banks rather than from its own citizens is one of the economic miracles of modern times. Without it the war-induced American prosperity of the 1960s and early 1970s would have ended quickly, as was threatened in 1973 when foreign central banks decided to cut their currencies loose from the dollar, letting them float upward rather than accepting a further flood of U.S. Treasury IOUs.”
― Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance

“John Stuart Mill was called a Ricardian socialist because classical economists were moving toward reforms they themselves characterized as social – and hence, as socialist. Most reformers referred to themselves as socialists of one kind or another, from Christian socialists to Marxist socialists and reformers across the political spectrum. The question was what kind of socialism “free market” capitalism would evolve into.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Oligarchy: Rule by the few, usually the richest One Percent. In Aristotle’s political theory, oligarchy is the stage into which democracy evolves, and which ends up becoming a hereditary aristocracy. “The essence of oligarchic rule,” wrote George Orwell in Nineteen Eighty-Four, “is not father-to-son inheritance, but the persistence of a certain world-view and a certain way of life ... A ruling group is a ruling group so long as it can nominate its successors ... Who wields power is not important, provided that the hierarchical structure remains always the same.” The word “oligarchy” has been applied to Russia’s kleptocrats who obtained natural resources and other assets under Boris Yeltsin, most notoriously in the 1994-1996 “bank loans for shares” insider deals. It also applies to Latin American and other client oligarchies that concentrate wealth in the financial and propertied class at the top of the pyramid. However, U.S. media vocabulary defines any country as a democracy as long as it supports the Washington Consensus and U.S. diplomacy.”
― Michael Hudson, J IS FOR JUNK ECONOMICS: A Guide To Reality In An Age Of Deception

“Just as the drivers in Gatsby and Bonfire responsible for crashes left others to bear the blame, so the One Percent seeks to shift responsibility onto the financial victims (“the madness of crowds”). Governments are blamed for running deficits, despite the fact that they result mainly from tax favoritism to the rentiers. Having used FICA paycheck withholding as a ploy to cut progressive tax rates on themselves since the 1980s, the One Percent blame the indebted population for living longer and creating a “retirement problem” by collecting the Social Security and pensions. This is financial warfare – and not all wars end with the victory of the most progressive parties. The end of history is not necessarily utopia. The financial mode of conquest against labor and industry is as devastating today as in the Roman Republic’s Social War that marked its transition to Empire in the 1st century BC. It was the dynamics of debt above all that turned the empire into a wasteland, reducing the population to debt bondage and outright slavery. Livy, Plutarch and other Roman historians placed the blame for their epoch’s collapse on creditors. Tacitus reports the words of the Celtic chieftain Calgacus, c. 83 AD, rousing his troops by describing the empire they were to fight against: Robbers of the world, having by their universal plunder exhausted the land … If the enemy is rich, they are rapacious; if he is poor, they lust for dominion; neither the east nor the west has been able to satisfy them. … To robbery, slaughter, plunder, they give the lying name of empire. They make a wasteland and call it peace. The”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“The book received a wider review in the business press than in academic journals. A few weeks after the U.S. publication I was invited to address the annual meeting of Drexel-Burnham to outline how the new Treasury bill standard of world finance had replaced the gold exchange standard. Herman Kahn was the meeting’s other invited speaker. When I had finished, he got up and said, “You’ve shown how the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.” He hired me on the spot to join him as the Hudson Institute’s economist.

I was happy enough to leave my professorship in international economics at the New School for Social Research. My professional background had been on Wall Street as balance-of-payments economist for the Chase Manhattan Bank and Arthur Andersen. My research along these lines was too political to fit comfortably into the academic economics curriculum, but at the Hudson Institute I set to work tracing how America was turning its payments deficit into an unprecedented element of strength rather than weakness.”
― Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance

“The euro and the ECB were designed in a way that blocks government money creation for any purpose other than to support the banks and bondholders. Their monetary and fiscal straitjacket obliges the eurozone economies to rely on bank creation of credit and debt. The financial sector takes over the role of economic planner, putting its technicians in charge of monetary and fiscal policy without democratic voice or referendums over debt and tax policies.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Bank-friendly writers and lobbyists fostered a myth that the economy needed its investment banks to remain solvent to keep the economy functioning. But many former officials, including Bair, SIGTARP‘s Neil Barofsky, and Reagan Administration budget director David Stockman, rejected the claims that public guarantees for reckless bank loans was needed to protect insured depositors. Retail savings and checking accounts were never threatened by the bad gambles that banks made. But this myth had to be promoted in order for Paulson, Geithner Bernanke and other bank protectors to persuade Congress to overrule Bair and make government (“taxpayers”) pay. Their aim was to save the banks from being nationalized, and to protect bankers from being prosecuted for fraud or reining in the exorbitant salaries and bonuses they had given themselves. No attempt was made to change the system that had led to the crash. If”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“The disabling force of debt was recognized more clearly in the 18th and 19th centuries (not to mention four thousand years ago in the Bronze Age). This has led pro-creditor economists to exclude the history of economic thought from the curriculum. Mainstream economics has become censorially pro-creditor, pro-austerity (that is, anti-labor) and anti-government (except for insisting on the need for taxpayer bailouts of the largest banks and savers). Yet it has captured Congressional policy, universities and the mass media to broadcast a false map of how economies work. So most people see reality as it is written – and distorted – by the One Percent. It is a travesty of reality.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Recognizing how most great fortunes had been built up in predatory ways, through usury, war lending and political insider dealings to grab the Commons and carve out burdensome monopoly privileges led to a popular view of financial magnates, landlords and hereditary ruling elite as parasitic by the 19th century, epitomized by the French anarchist Proudhon’s slogan “Property as theft.” Instead of creating a mutually beneficial symbiosis with the economy of production and consumption, today’s financial parasitism siphons off income needed to invest and grow. Bankers and bondholders desiccate the host economy by extracting revenue to pay interest and dividends. Repaying a loan – amortizing or “killing” it – shrinks the host. Like the word amortization, mortgage (“dead hand” of past claims for payment) contains the root mort, “death.” A financialized economy becomes a mortuary when the host economy becomes a meal for the financial free luncher that takes interest, fees and other charges without contributing to production.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“To enable lending to proceed when the IMF’s sustainability criteria were not met, its bureaucrats designed the “systemic risk waiver.” It was a model of circular reasoning that might well be taught to philosophy students. “Severe debt crises all carry the risks of systemic spillovers,” notes Schadler. The global financial system was deemed to be endangered if a debt payment was missed or a haircut imposed on bondholders, because “confidence” was threatened. Any haircut for bondholders might cause panic and “contagion.” So it doesn’t matter what IMF economists say regarding debt sustainability. The IMF is committed to preserving “confidence” at all costs – confidence that the troika will lend governments enough to pay their bondholders and speculators in full (but not pension funds). The systemic risk waiver means that no bondholder should lose. Labor and taxpayers must pay for the losses from risky loans, or else there will be “contagion.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“Debt leveraging is a major reason why the United States and Britain have lost their industrial advantage. Debt-inflated costs for housing, education and other basic needs have priced their labor out of markets abroad and at home.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“A return to classical bank policy would deem loans fraudulent and annul debts when creditors do not lend with any reasonable calculation of how the debt can be paid in the normal course of economic life. Loans made without such a calculation should be considered predatory. The natural check on such behavior is to permit mortgage debtors to walk away from their homes, free of the debts attached to them, letting title revert to the banks that over-lent.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“The aim of predatory lending in much of the world is to obtain labor to work off debts (debt peonage), to foreclose on the land of debtors, and in modern times to force debt-strapped governments to privatize natural resources and public infrastructure.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy

“finance was to become a public utility, situated in the public domain or at least alongside a public banking option. Instead, the past century’s expansion of predatory credit has been reinforced by de-taxing interest, land rent, financial speculation, debt leveraging and “capital” (asset-price) gains.”
― Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy