3 Jul 2011 RT
Michael Hudson is President of the Institute for the study of long-term economic trends.

[Is the failure of American banks a symptom of a larger problem that’s causing other countries to decouple themselves from the dollar?]

The reason they are decoupling is because the United States owes $4.5trillion to foreign central banks. It’s running a chronic trade deficit and a military deficit. Money managers on Wall Street have taken the $600bn of bailout money abroad [!]. You have capital flight by the very people who are bailed out financed by the Federal Reserve itself.

[An interesting fact: Mr Hudson used to work as Chase Manhattan’s balance of payments economist. This makes what he says here even more relevant] —

Every Friday we’d sit and look at the Federal Reserve’s reports on the gold cover of the dollar. And it was going down and down and down. And you could see in advance that the dollar was going to have to close the gold pool. That’s what my books were about. And we are in the same position today. The war spending forced us off gold in 1971. And now, we have been giving IOUs to foreign governments. But foreigners are now saying that the US has destroyed its industry they are asking if they will be paid back. It is so highly indebted an economy. Americans pay on average about 35 to 40% of their income on housing (mostly for mortgage costs), 12% for social security, another 15 to 20% in taxes. So before they buy any goods or services at all Americans have to pay the financial sector over two-thirds of their income no matter how little their paid. They’re already priced out of the world market. Foreign governments see that.

There are 800 military bases of the Pentagon…

Conservatives and libertarians scream this is socialism. They think it’s low cost. But every single industry that is privatized from railroads to roads to telephones to water has raised the costs of privatization substantially. They pay enormous interest, enormous executive salaries, huge stock bonuses. Government doesn’t have these costs. Privatization raises the prices for education, for Medicare. They are turning the American economy into a toll booth economy….(read more)

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Michael Hudson: A Scholar Analyzing Bank Bailouts, the Gold Standard, and the US Dollar

Michael Hudson, an eminent economist and historian, has made noteworthy contributions to the understanding of financial systems, bank bailouts, the gold standard, and the US dollar. With a deep focus on the intersection of economics and politics, Hudson provides valuable insights into these key areas.

One of Hudson’s primary areas of expertise is studying bank bailouts. He believes that the government’s role in rescuing troubled banks is often a misguided approach that favors the interests of wealthy financiers over those of the general population. According to Hudson, these bailouts are largely responsible for widening income inequality and creating a system where financial institutions can take excessive risks, knowing that they will be rescued by taxpayers when they fail.

Hudson argues that a more effective alternative to bank bailouts is the concept of “debtor’s jubilee” – a proactive measure to relieve the burdens of debt on struggling individuals and households. This approach would involve forgiveness and restructuring of debt, allowing the economy to recover more swiftly and sustainably. By advocating for this alternative, Hudson seeks to challenge the prevailing narrative that preserving the stability of large financial institutions is key to economic prosperity.

Additionally, Hudson has conducted extensive research on the gold standard and its implications for economic stability. Unlike some economists who view the gold standard as a symbol of stability, Hudson highlights its drawbacks. He argues that tying currency to gold restricts the government’s ability to respond flexibly to economic crises, as it limits the amount of currency that can be issued. Moreover, Hudson suggests that the gold standard often leads to deflationary pressures, benefitting creditors while burdening debtors.

Furthermore, Hudson has examined the role of the US dollar as the global reserve currency. He contends that the ongoing dominance of the dollar gives the United States significant advantages in the global financial system. However, he warns that this dominance can be a double-edged sword, as it fosters inequality and encourages a policy of infinite debt expansion. According to Hudson, the status of the dollar as the world’s reserve currency generates a constant need for foreign countries to accumulate US Treasury debt, leading to imbalances in the global economy.

Hudson’s work challenges traditional economic theories and provides alternative perspectives on important financial topics. His analysis suggests the need for comprehensive reforms that address the shortcomings of the current system. By offering thoughtful critiques and viable alternatives, Hudson aims to foster a fairer and more equitable financial framework that benefits society as a whole.

In conclusion, Michael Hudson’s scholarship on bank bailouts, the gold standard, and the US dollar delves deep into the roots of global economic systems. Through his research and analysis, he sheds light on the flaws of prevailing practices and presents alternative approaches that prioritize societal well-being. Hudson’s contributions continue to influence and shape the economic discourse, urging policymakers and society at large to critically examine and reform the existing financial framework.