MEDIA ROOTS —“And the diary of this story is to try to
reclaim the vernacular narrative and try to change this phenomenon right now. This is our time while we’re here in this
time-space continuum. And we have an
obligation to our children and people before that are not here yet to rectify
these situations. And that’s what this
show is about.” —Mickey Huff
Mickey Huff, Director of Project Censored, and co-host of KPFA Radio’s The Morning Mix with Project Censored, gave a speech entitled ‘Diary of
a Scapegoat’ at Oaktown Indie Mayhem (OIM): Diary of a Scapegoat Art Show on
.
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Mickey Huff, Director, at Project Censored; Diary of a Scapegoat at Oakland Indie Mayhem.
MEDIA ROOTS — Recently, Max Keiser discussed, on RT, the MF Global pillaging scandal, the USA’s eighth largest bankruptcy, and how the Occupy Movement has remained largely silent on the potential rallying-call issue due to a lack of financial literacy. Fortunately, Max Keiser, Dr. Michael Hudson, Dr. Richard Wolff, and others have been speaking at Occupy Movement convergences. Perhaps, in the USA, we may learn to head off the banker fascism austerity now looming over the Eurozone. Media Roots considers the benefits of our increased collective interest in the dynamics of political economy and international relations, impacting our global regions. In this spirit, we present the second broadcast from Pacifica Radio’s Guns and Butter, featuring excerpts of the introductory remarks from radical economist Dr. Alain Parquez at the recent Italian Modern Monetary Theory Summit in Rimini, Italy, February 2012.
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GUNS AND BUTTER —“Real wages will collapse. And what we have in mind is a total collapse of the share of labour income in the French society and how to get that by the Treaty of Maastricht and the creation of the euro system.” —Dr. Alain Parquez
“I’m Bonnie Faulkner. Today on Guns and Butter: Alain Parquez. Today’s show: The Birth of the European Central Bank: Its Real Agenda. Alain Parquez is Emeritus Professor of Economics, Ist Class, Université de Franche-Comte at Besancon, France; Faculty of Law, Economics and Political Science. He has written extensively on monetary policy, crisis theory, and economic policy, including articles and books on the impact of austerity measures, which he believes are the cause of the world crisis. He is currently writing a book on the general theory of the monetary circuit and its economic policy implications.
“Today’s show features introductory remarks by Alain Parquez at the first Italian grassroots economic Summit on Modern Money Theory in Rimini, Italy, February 2012, produced by Italian journalist Paolo Barnard. The five speakers were Stephanie Kelton, William Black, Alain Parquez, Michael Hudson, and Marshall Auerback.”
Dr. Alain Parquez (c. 2:00): “Yes, when I look at this audience, I am ashamed to be French because such an event would be impossible in my own country for two reasons. The government would have tried to forbid it. And the economy and society is in such a stateof total disaster that people, even young people, are completely despaired. So, again, Italians are the sole hope of Europe. [Applause]
“Contrary to what happens in France, you try to fight the total coup d’état which has been planned a very long time ago, and enshrined into the European monetary union. I shall try to explain that the so-called ‘sovereign crisis’ of sovereign debt is a lie. [Applause] But it has been carefully planned by those who build the European system. What they had in mind was the creation of a new totalitarian social order destroying democracy, all kind of social legislation. And now the new treaty imposed by our French president, who makes Berlusconi a saint, deprived the states of any kind of sovereignty, imposed permanent deflation. So, yes, my colleague was right [reaching over to UMKC Professor W.K. Black, seated to his left]. You are what the European ruling-class is afraid of—mobilisation of the people. They want to rule by fear and ignorance. And, at least, thanks to Paolo and thanks to you, there is hope that fear and ignorance will defeat what should be deemed techno-fascism, which is the existing tradition of the European monetary union. So, thank you and hail Italy. [Applause]
(c. 6:23) “Well, I am here to speak of a very dark and tragic story. You already understood that the euro is a monster, contradicting all the rules of both modern money, modern economy. So, the problem is why is such an absurd system exists at all. I was told that in your country, like in mine, some people believe that if we get rid of the euro, Italy or France should be back to the state of the poorest part of Africa—Zimbabwe. But the real economy in the Eurozone is already in the state of Zimbabwe. For instance, some short data on France because the French invented and imposed the Eurosystem a very long time ago. In France, the true amount of unemployment is around 60% of the active people, which is obviously enormous. And we have a true rate of inflation of 7% or 8%. So, we don’t have full employment and we don’t have price stability. It means that all official data in Europe are lies.
(c. 9:38) “So, I shall start my true speech by a quotation from the Chief Executive of the French Ministry of Finance—by the way, is a monk of the Order of Santo Benedict and the Chief of the French Opus Dei; and by the way the European Commission is entirely controlled, like the French government, by the Opus Dei. So, I try to discuss with him. He told me, ‘Yes! The French economy is dead, but not enough.’ He told me, ‘Professor, you should understand why the European system exists. What we want is to destroy, forever, the people. We want, forever, to create a new kind of European people, accepting sufferance, poverty, which couldaccept wages lower than in China.And it will be the core of my intervention.’
(c. 11:50) “The Eurosystem was never planned to be a monetary union. It was not even planned as a neoliberal agenda. The neoliberal economics, American style, was and is still completely ignored by the ruling European elite. What you think that even for the leader of the French Socialist Party, President Obama is a Marxist.
“So, what is the euro? A new totalitariansocial order, which was planned a long time ago in the interwar period and completed by the regime of François Mitterrand. In the new order, there will be no more sovereign state. The state has to vanish, at least the state rooted into democracy, parliament, republic. In the new order, power should be entirely transferred to those who deserve it, which means some elite capitalist class technocrats enjoying absolute power of control.”
Bonnie Faulkner(c. 14:49): “You’re listening to economics professor and author Alain Parguez at the Summit on Modern Money Theory in Rimini, Italy. Today’s show: The Birth of the European Central Bank: Its Real Agenda. I’m Bonnie Faulkner. This is Guns and Butter.”
Dr. Alain Parquez: “And, in the first part of my interventions, I shall try briefly to explain the story of the planning of the European monetary union. It started in the interwar period in the most reactionary, traditionalist, part of the French ruling-class with some support from an Italian philosopher, Julius Evola, the very one who accused Mussolini of being too soft to the people and who accused Adolf Hitler of being too soft on poor people.
“In a second part, I shall try to explain that the so-called sovereign debt crisis is obviously an event who never happened in history. But such a crisis has been carefully planned by the architects of the European system. What they had in mind was to privatise the state. And since they believed that the state, at least the state with democracy was always wasting real wealth. It’s obvious that the state being forced to borrow money, the state debt should be looked at as bad debts and, thereby, the state should be completely enslaved to the so-called bonds market, which is exactly what is happening now.
(c. 18:37) “In [the] last part, I shall try to prove that there is not the least way of amending the system because as a social order it has its logic. And those who control the system will never accept any kind of change, especially, any kind of intervention of the European Central Bank. Only, indeed, if those interventions aim at increasing the banks’ wealth. So, the sole possibility of saving the European society is to get rid of that system. The private sector, capitalist sector, in Europe is now dead. To quote Michael Hudson, ‘[few public] leaders of the capitalist sector are no more interested into the real economy. They are rentiers.’ So, European capitalism is dying. [Gross Domestic Product] is for five or six years, in France, minus 3% or 4% a year.
(c. 21:12) “As for the euro, it’s as I wrote, thanks to an invitation by my colleague Stephanie Kelton, a long time ago, on false money, Iwrote an article ‘False Money Against the Real Economy.’ And, indeed, it destroyed the real economy. But first let us, briefly, explain the origin of such an absurd system. There are two stages into the planning of the Eurosystem. The first in the interwar period and during 1940-1943. And the second stage, the achievement of the system was, I must say, the masterwork of the regime of François Mitterrand. So, we start in the mid-‘30s with people like Schuman, Jean Monnet. Schuman wrote that in 1927 we need to create Europe as a new order rooted into tradition saving Europe from decadence. Decadence for the poor Europeans means socialism, revolution, Protestants, Jews, Marxism, free access to health and education, abortions, homosexuality, etcetera, etcetera.
(c. 24:19) “And which is extremely interesting, for the early poor Europeans, what they wished was a system completely opposed to the United States society they hated. And the European elite was more hating the United States society of consumption, shopping malls, than they hated USSR. And now it is exactly the same. So, what was required to build Europe, to abolish the state, to force a permanent deflation by squeezing and squeezing public expenditures. It could help to transfer the power to a super-class of technocrats on a supranational scale. But for those early Europeans, what meaned Europe? It mean a condominium between France/Germany and a colonial empire, including Southern Europe and Eastern Europe. They were absolutely explicit on this problem.
“But how could we suppress the state? By depriving the State of any power on money. All of them were fanatical followers of Friedrich Hayek, the most right-wing Austrian economist of that time. So, Europe should rely on a supranational currency, entirely controlled by a sovereign central bank enjoying absolute power to ration the state. Indeed, there, finally, what they wished was to impose a future European currency, as a super-gold standard—”
Bonnie Faulkner (c. 28:35): “You’re listening to economics professor and author Alain Parguez at the Summit on Modern Money Theory in Rimini, Italy. Today’s show: The Birth of the European Central Bank: Its Real Agenda. I’m Bonnie Faulkner. This is Guns and Butter.”
Dr. Alain Parquez: “—of the Treaty of Maastricht, was written by a French economist François Perroux in 1943 with the full support of a treaty passed between the [white] government and the French [Ponant] regime of that time. And the new treaty, which has been decided by President Sarkozy and Madame Merkel, is exactly the blueprint of François Perroux 1943.
“Those people were against the traditional gold standard because they believed that the gold standard had not allowed a total abolition of the power of the state to spend. So, Europe should be a super-gold standard. So, it was a first stage. But, for some time, the European project was maybe in the backwards because all of his supporters were more Hitlerian than Adolf Hitler himself.
“So, we had to wait. The regime of Francois Mitterrand, I could speak on this question because I had been conscripted by the Chief Advisor of Francois Mitterrand, who by the way was a fanatical right-winger hating the modern world, hating the United States, a monarchist, who said, ‘I hate the poor.’ So, Jacques Attali was, de facto, the Prime Minister of France. And Attali was in charge with a lot of former Marxists, turned to supporters of the new regime, of drafting a more sustainable version of the Eurosystem. But they had in mind the same vision: We must destroy shopping malls, consumption. Shopping malls were, for them, a pure infamy. People should accept to be poor.
(c. 33:18) “I remember debates at the secret commission who was in charge of the campaign of Mitterrand. Mitterrand had to win the support of the then-Parti Communiste. France had a communist party; now, no more. So, I was charged to write some modest [condition]; I would say modern money programme. But Attali was asked by those who funded [the] Mitterrand campaign. And who [were] the major funders? The Chase Manhattan Bank and two other American banks. But we never gave you money to get a programme of full employment. Attali said, I have the commitment of our dear future president, as soon as we could, we will destroy, we will cut, we will deflate the economy.Real wages will collapse. And what we have in mind is a total collapse of the share of labour income in the French society. And how to get that? By the Treaty of Maastricht and the creation of the Eurosystem.
“I shall end this intervention by emphasising, first, the lies. It happened that I was quiet close to Francois Mitterrand. He was some long time ago, some boyfriend of my mother before the war. My mother told me, Francois lies so well that he could believe that he is for the people. So, Francois Mitterrand during the sole debate on the Treaty of Maastrichtdared to say, answering a question from a student, I can swear there is not the least independent central bank in the Treaty of Maastricht.
(c. 37:28) “The second point. The core principle of the European treaties was the privatisation of the state, was to oblige the state to borrow money by selling bonds to private banks. So, the state, like any corporation, but a corporation with a very pure reputation had to beg money to banks at the rates of interest decreed by banks. So, finally, the Treaty of Maastricht and the following Growth and Stability Pact, a very weird name. The true name should have been Destruction and InstabilityPact. So, the true world they had in mind was that, finally, the State will be completely enslaved to private banks. And, so, will be obliged to cut and cut and cut expenditures. And it is exactly what happened. And, finally, lies continue. To be brief, the share of state debt in the assets of major French/German banks is below 5%. Banks are losing money, not because of state debt, but because of the total collapse of the real economy.
(c. 40:50) “And, second point, I am horrified when people say, Oh, poor banks. The Greek government lied. But it is absurd; everybody was aware of the true state of the Greek economy. 90% of the Greek debt is held, like the Italian, by French and German banks. So, everybody knew. And, by the way, what is happening now sought to the new treaty is—if it is, indeed, finally endorsed—a total abdication of states, of fiscal policy, and any kind of social policy. And, indeed, the dream of the new order will be achieved.
“So, now, the problem of rulers of the system is how to maintain the control of society; of this, they are afraid because there is no debate. Official economists in Germany, France, most European countries, are completely corrupt. If I dare say, they are official prostitutes financed by grants of institutions; so, they never debate the infamy and collapse of European system. Thank you. [Applause]”
Bonnie Faulkner (c. 43:47): “You’re listening to Economics Professor and author Alain Parguez at the Summit on Modern Money Theory in Rimini, Italy. Today’s show: The Birth of the European Central Bank: Its Real Agenda. I’m Bonnie Faulkner. This is Guns and Butter.”
Dr. Alain Parquez (c. 44:08): “You see, let me allow, for a while, [to differentiate] the European Central Bank and banks because, ultimately, who has created the ECB? Who is imposing the European Central Bank policy? The states themselves. Even if the European Central Bank decided to finance state expenditures, the French Government and the German Government will say no. They absolutely are rejecting any kind of policy of saving the economy. Everybody knows that.
(c. 45:14) “First, the European Central Bank is a weak oligarchy of 17 central banks de facto ruled by the French Central Bank and by the German Central Bank. But everybody also knows that the central banks of France and Germany never do anything without the full advice, consent, and support of the new axis ruling in Europe—Paris/Berlin. Thereby, it is exactly the same for banks; governments from France and Germany imposed policies of detritions all over Europe. And now the economy is in such a state of disaster that we need an enormous increase in expenditures. So, it is much more than a job guarantee programme when the majority of the population is forever unemployed. So, my solution is let us support any movement to get rid of the euro. There is no other way. Give back full monetary sovereignty to the states. [Applause]
(c. 47:25) “I was told that this event is for the Chair of European Commission, an abomination; and your prime minister was asked to prevent it. At least, the luck for Italy is that you have a weak state, whereas in France we have a very strong state.
“Second point, I do think that what is at stake is to impose a change of politics, people accepting—as learned audience—are living in a world of lies. And you are absolutely right; the share of labour income, including pensions in France/Germany is at its lowest level since the interwar period or the Nazi period. In France, in the span of 20 years, the share of labour income collapsed by at least 30% or 40% percent.And, yes, more and more people are committing suicide in France because of labour conditions. People who are still employed are living in firms who are more and more acting as some kind of Soviet forced-labour concentration [camp]. Never have people been so productive. The productivity in France/Germany [and] is in Italy, one of the highest in the world. But, at the same time, real wages collapsed and people are not aware of this scandal.
“But now, in most parts of France, the shopping malls are empty. A large part of the country is going back to some kind of middle age, an [item] for Germany. And this is a scandal, [of which] we must try to make the people know the truth, to oblige the media to reveal the true situation. Everybody knows that the euro is grossly over-and-over-valued. The euro rate of exchange is maintained by a lot of artefacts, including permanent swaps with the Federal Reserve System.
(c. 51:49) “And now, some thought of France and Germany to get an inflow of dollars from Saudi Arabia and even China. So, the real value of the euro is absolutely nothing. After all, Italy, like France, always survived and prospered in a global environment. Without the euro, Italy was a highly competitive country, as Marshall [Auerback] said. And, so, if I could assure you that Stephanie [Kelton] was right, the euro can’t survive, only if Italy decides to remain in the system. All major banks in France and Germany are already trying to compute the effect of the end of the euro system. It is a dying system. So, the effect could be a benefit for Italy if it retains its monetary sovereignty, reconstruct the economy.
(c. 54:08) “The very option of the United States of Europe had been rejected since the start because those who intended to abolish the state at the national level did not intend to create a state at the European level. We’ve reached a state of the society where the sole option is to leave the system. And, by the way, banks do not want to be reimbursed. It is a point I should address more. The French and the Germans created a system, installing some kind of eternal debt for European people. What banks want is income. And if Italy decided to leave the Euro, the system would collapse. The real value of the euro is nothing. And it is a fact that France and Germany, and mainly the French, are afraid of this point.”
Bonnie Faulkner (c. 55:55): “You’ve been listening to Economics Professor and author Alain Parquez. Today’s show has been: The Birth of the European Central Bank: Its Real Agenda. Alain Parquez is Emeritus Professor of Economics Ist Class, Université de Franche-Comté at Besancon (France); Faculty of Law, Economics and Political Science. His main academic title is that of Docteur d’Etat Es Sciences Economiques, Université de Paris 1. He is a member of the Eastern Economic Association in the United States. Courses he has taught during the last eight years include, Principles of Macroeconomics, Theory of Economic Policy, Financial Economy, International Economic Relations, and Theory of Distribution. Visit his website at www.neties.com. Or google: Alain Parquez. Visit the website for the first Italian Summit on Modern Money Theory at www.DemocraziaMMT.info.
“Guns & Butter is produced by Bonnie Faulkner and Yara Mako. To leave comments or order copies of shows, email us at [email protected]. Visit our website at www.gunsandbutter.org.”
Transcript by Felipe Messina for Media Roots and Pacifica Radio’s Guns and Butter
MEDIA ROOTS —With the reverberating excitement around the recent Italian Modern Monetary Theory Summit 2012, which is shattering
orthodox and right-wing economic
dogma in the Eurozone with common sense and offering the post-Shock Doctrine Occupy Movement intellectual tools to strengthen its activism, Media Roots takes a look at the work of one of the
grassroots Summit’s featured speakers, particularly for younger readers and others. This may be old news for some; yet, younger generations benefit when elders convey, celebrate, and affirm important works of radical thought in the public domain.
In 1972,
Dr. Michael Hudson published, what Terence McCarthy called, “The most important
work on imperialism since Lenin.” As
Bonnie Faulkner, host of Pacifica Radio’s Guns and Butter, indicates regularly
when she airs Dr. Hudson, “His
1972 book, Super
Imperialism: The Economic Strategy of American Empire is a critique of
how the United States exploited foreign economies through the IMF and World
Bank.”
Indeed; encapsulating the book’s analysis, the publisher writes:
“Never before has a bankrupt nation dared insist that its bankruptcy become
the foundation of world economic policy; that, because of its bankruptcy, all
the nations what their economies transferring its bankruptcy to themselves,
stultifying their industries, and paying tribute to the beggar.”
“Effectively speaking, the United States has compelled the older nations of
the West to pay for the overseas costs of the US war in Asia. Whatever they may
desire, the central banks of Europe had no choice but to continue to except the
paper dollar equivalents annually created as the domestic and overseas deficit
of the United States increase. Otherwise, the whole of shaky structure of the
world monetary system will collapse into rubble. America has succeeded in
forcing other nations to pay for its wars on a systematic basis, something
never before accomplished by any nation in history .”
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MICHAEL
HUDSON — In 1949
the United States held three-Quarters of the world’s gold; by 1960 it had
become a debtor nation. And yet, the United States has built history’s most
powerful and affluent empire. Its techniques for world domination remained, at
first, the conventional devices of the economic superstate. In recent years,
however, the United States has sophisticated its strategy to the point here,
although fallen into serious debt, it has retained and even expanded its
dominance. The United States has pioneered a new form of imperialism in which
the assets of its competitors have been employed for American ends. The or now
calls the tune for the creditor.
Terence McCarthy, in his Introduction, calls Hudson’s analysis of the Debtor
superstate “one of the most important books of this century. It is the first
work to synthesize the new and different form which capitalist imperialism has
assumed since Lenin wrote.”
Michael Hudson teaches international and monetary economics at The New
School for Social Research, Graduate Faculty. He has published articles in
Ramparts, the Journal of International Affairs, Commonweal, Cross Currents and
the Review of Social Economy, in addition to specialized monographs on
balance-of-payments theory and accounting. He has worked as a
Balance-of-Payments analyst for the Chase Manhatten Bank and for the accounting
firm of Arthur Andersen, and as a senior economist for the Continental Oil Com.
In addition, he has lectured at the Institute for Policy Studies in
Washington, D.C, before the National Association of Business Economists in New
York, and elsewhere throughout the United States. He is currently writing a
history of international trade and investment theory, and a study of the
economic origins of the American Civil War.
GLOBAL RESEARCH — First
written in 1972, it was updated in a 2003 edition that’s every bit as relevant
now – thus this review focusing on Hudson’s new preface, introduction, and
detailed account of the book’s theme.
He revisited it in his 2008-09 Project Censored award- winning article
titled: “Economic Meltdown – The ‘Dollar Glut’ is What Finances America’s
Global Military Build-up” in which he explains the following – the
“inter-related dynamics” of:
— “surplus (US) dollars pouring into the rest of the world for yet further
financial speculation and corporate takeovers;”
— global central banks “recyl(ing) these dollar inflows (into) US
Treasury bonds to finance the federal US budget deficit; and most important
(but most suppressed in the US media),”
— “the military character of the US payments deficit and the domestic
federal budget deficit.”
In other words, the global “dollar glut” finances US corporate
takeovers, speculative excesses creating bubbles and global economic crises,
America’s reckless spending, foreign wars, hundreds of bases worldwide,
“military build-up,” and culture of militarism and belligerence
overall at the expense of democratic freedoms, beneficial social change, and
human and civil rights.
MEDIA ROOTS —Dr. Michael Hudson calls it “a financial grab of infrastructure” by banking and financial elites; some call it the new world order; others use less provocative descriptors. This class warfare being waged by the world’s ruling-class against the U.S. working-class has been described as a “financial coup d’état” by Catherine Austin Fitts and others. But make no mistake; the ruling-class is stripping the world’s working-class of rights, livelihood, and dignity. And one of the centrally relevant concepts is Modern Monetary Theory (MMT).
In the most recent broadcast of Pacifica Radio’s Guns and Butter, entitled “There IS An Alternative To European Austerity: Modern Money Theory (MMT),” Dr. Michael Hudson and Dr. Stephanie Kelton are featured from their presentations at the first annual grassroots Italian MMT Summit, held from February 24-26, 2012 in Rimini, Italy. The event was organised by Italian investigative journalist Paolo Barnard.
Notable concepts discussed include: defining money and money creation, distinguishing between sovereign and non-sovereign money, fiat money, the euro, the difference between central banks and commercial banks, deflation and inflation, the dangers of the gold standard, and much more. Dr. Hudson scientifically discusses how the world’s ruling-class is destroying sovereign economies and subjugating their governments. Dr. Kelton bucks Euroamerican orthodox economic theory by proposing approaches to full employment and price stability, notions my economics professor refused to even consider. (When I pressed him on it, he said that’s when things get bloody.) Well, when might equals right, the world’s working-class must inform itself to counter ruling-class fallacies and their dire consequences for humanity. The shackles will begin to fall away once the people recall the consent of the governed, question the legitimacy of authority, and realise they can decide what is money, debt, and democracy.
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GUNS AND BUTTER —“But if governments are not allowed to create their money, then all of the credit the economy needs is created by the commercial banks. And when the commercial bank credit creation leads to debt deflation and the government cannot finance the deficit to pay the interest then the commercial banks say: Alright, sell off and privatise your infrastructure. This is what we’re seeing in Greece today, in Ireland. You’ve seen it in Iceland. What you are seeing is a financial grab of infrastructure that is taking place by the ability of commercial bankers to prevent the central bank from creating credit.” —Dr. Michael Hudson
“I’m Bonnie Faulkner. Today on Guns and Butter: Stephanie Kelton and Michael Hudson from their introductory remarks at the first Italian grassroots economic summit on Modern Money Theory in Rimini, Italy, February 2012. Today’s show: There IS An Alternative To European Austerity: Modern Money Theory (MMT).
“Stephanie Kelton is an Associate Professor of Economics at the University of Missouri, Kansas City, Research Scholar at the Levy Economics Institute, and Director of Graduate Student Research at the Center for Full Employment and Price Stability. She is Creator and Editor of New Economic Perspectives. Her research expertise is in Federal Reserve operations, fiscal policy, social security, healthcare, international finance, and employment policy.”
Dr. Stephanie Kelton (c. 2:02): “Good evening. Buonasera. Good evening. [Applause] I am overwhelmed, [humbled,] and I am inspired. [Mariarca [Terracciano]’s story was so poignant. Like so many times in history, it takes a woman to stand up for what she believes in, to question what is wrong, and to try to affect change. In the United States, 150 years ago, like here today, we lived with an oppressive system. Ours was slavery, yours is the euro. In the United States, it was a woman named Rosa Parks, who stood up during the Civil Rights Movement when blacks were told they were not equal. They needed to dring from different water fountains and sit at the back of the bus and go to different schools. It was this woman who stood up and finally said no. And it sparked a revolution.] [Note: Supplemental text from video footage.]
“The system today isn’t working for you. And it isn’t really working for us in America. But the problems are different—and the same. And we want to talk with you for the next couple of days about the common problems that we all face and the unique challenges, that you face here in Italy and throughout the Eurozone. It is fantastic to see so many people willing to come out to listen to economics and political economy for two days. And we hope that at the end of the two days we can help you all understand that this is not your problem; this is not your fault; and there are solutions and there are ways out. There is an alternative to what you’re dealing with today. It’s not a hard alternative. But it’s going to be hard to convince others to make the changes that will lead to better lives, better possibilities for all of us in the future. Thank you so very much for spending time with us, and for reading what we do, and for taking the time. And thank you so much to Paolo Barnard for making all of this happen. We are so humbled by this turnout and by your interest in what we do. Thank you. [Applause]
Marshall Auerback: [During this actual panel session, Marshall Auerback follows Dr. Kelton’s introductory remarks, archived here (c. 25:00 into the video), although Mr. Auerback delivered his remarks in the Italian. This segment was edited out of the Guns and Butter broadcast.]
Dr. William K. Black: [During this actual panel session, Dr. William K. Black follows Mr. Marshall Auerback’s introductory remarks, archived here (c. 26:50 into the video). This segment was edited out of the Guns and Butter broadcast due to time constraints.] “Welcome. You are every banker in Europe’s worst fear. [Applause] Look around you. Take pictures. Send them to at least 20 people. Ask the media, ‘We’re here. Where are you?’ Everybody in this room knows the truth of an old proverb: It is better to live one day as a lion, than a lifetime as a pecora. Some of you may know that it was Signor Pecora, who you sent to America and helped us deal with our Great Depression. And Judge Pecora put the fear of god in all of the biggest bankers in America. And, now, the sons and daughters of Pecora, that are here in Italy, will do the same. We did not come from America or Canada or France because these countries know the answers. Most of our countries are in disaster, too. But this is because, in the case of America, we have forgotten what worked. And what worked, was again, all of you people who knew the lesson of another proverb: Steal a little, go to jail. Steal a lot, become Prime Minister [Applaus], or the head of the central bank, for all of Europe. So, we will talk over the next couple of days, not simply why we’re in this disaster, but how to fight like smart lions against the fraudulent bankers and their crony politicians, who caused this crisis and now want to destroy your sovereignty. God bless Italy.”
Dr. Alain Parquez: [During this actual panel session, Dr. Alain Parquez follows Dr. Black’s introductory remarks, archived here (c. 31:25 into the video). This segment was edited out of this Guns and Butter broadcast due to time constraints, but was included in a later broadcast.] “Yes, when I look at this audience, I am ashamed to be French because such an event would be impossible in my own country for two reasons. The government would have tried to forbid it. And the economy and society is in such a stateof total disaster that people, even young people, are completely despaired. So, again, Italians are the sole hope of Europe. [Applause] Contrary to what happens in France, you try to fight the total coup d’état which has been planned a very long time ago, and enshrined into the European monetary union. I shall try to explain that the so-called ‘sovereign crisis’ of sovereign debt is a lie. [Applause] But it has been carefully planned by those who build the European system. What they had in mind was the creation of a new totalitarian social order destroying democracy, all kind of social legislation. And now the new treaty imposed by our French president, who makes Berlusconi a saint, deprived the states of any kind of sovereignty, imposed permanent deflation. So, yes, my colleague was right. [Reaching over to UMKC Professor W.K. Black, seated to his left.] You are what the European ruling-class is afraid of—mobilisation of the people. They want to rule by fear and ignorance. And, at least, thanks to Paolo [Barnard] and thanks to you, there is hope that fear and ignorance will defeat what should be deemed techno-fascism, which is the existing tradition of the European monetary union. So, thank you and hail Italy. [Applause]”
Dr. Michael Hudson: [During this actual panel session, Dr. Michael Hudson follows Dr. Alain Parquez’s introductory remarks, archived here (c. 36:30 into the video). This segment was edited due to time constraints, but this segment is included later in this broadcast (see c. 19:10 to 23:03 of this radio broadcast).] “We are all overwhelmed to see how many people are here. [Applause] If I would’ve known there’d be more than 10 or 15 people, I would’ve worn a suit. Our message is very simple. And that is why it is threatening. From Margaret Thatcher to President Obama, you were told that there is no alternative. And we are here—and will spend the next two days—telling you that there is an alternative. And we will spell out what the alternative is.”
Paolo Barnard: [During this actual panel session, Italian journalist and producer of this event, Paolo Barnard’s remarks in the Italian, partially archived here (c. 42:00 into the video) follow Dr. Hudson’s introductory remarks.]
Dr. Stephanie Kelton (c. 4:05): “I’m gonna introduce you to the basics of Modern Monetary Theory in four parts. Modern Monetary Theory is a revolutionary way to think about the way a modern capitalist economy works. The first part of the talk this morning will focus on money. It’s an essential part of the argument. You have to understand the difference between what we’re going to call a sovereign money and a non-sovereign money. This afternoon we’ll focus on the function of finance, another essential part of Modern Monetary Theory. It is the key to understanding how a modern economy can achieve what has for so long been unthinkable: full employment for all people with stable prices. Tomorrow, we’ll talk about the international economy and the way that the domestic economy is related to what happens in the rest of the world. We’ll question the conventional thinking about deficits and debt. And we’ll focus specifically on the future of Italy.
(c. 5:22) “So, let’s begin with the first lesson. What is money? All money exists as an IOU. It’s a debt. When we say, ‘I owe you,’ we mean two people are involved in every monetary relationship. The ‘I’ is the debtor. The ‘U’ is the creditor. I Owe You. IOUs are recorded in what we call themoney of account. The money of account in Australia is the Australian dollar. The money of account in the U.S., the U.S. dollar. The money of account in Japan, the Japanese Yen. In Britain, the British pound. In Italy, the Euro. Do you see a difference? You will by the end of this talk.
(c. 6:21) “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes. I will read a brief quote from Keynes who said:
“‘The age of chartalist, or state money, was reached when the State claimed the right to declare what thing should answer as money of account. Today, all civilised money is, beyond the possibility of dispute, chartalist’—state money.
“A sovereign government defines the money of account. A sovereign government imposes taxes, fees, and other obligations to be paid to be paid to the state. A sovereign government decides what it will accept in payment to itself. And sovereign government chooses how it will make its own payments to others. Most governments in the world today choose their own unique money of account. And they issue their own unique currency. One nation, one money, is the rule in almost every corner of the world today. U.S. dollars, bills and coins. Mexican pesos, bills and coins. British pounds, notes and coins. Most governments also require that taxes be paid in a currency that the state has the exclusive power to issue. These currencies are sovereign money.
(c. 8:50) “As long as the state has the power to enforce its tax laws, the people will need the government’s money. The currency will have value. People will work to sell things—goods and services—to the government in order to get government money. Whatever the government accepts in payment to itself becomes the ultimate, ‘definitive,’ money in the economy. It is the only way to settle a debt. You must use government money. We can imagine in any economy a hierarchy of money. But not all money is created equal. The most acceptable money sits at the top of the pyramid. Those are the IOUs that everyone accepts and everyone must accept. Those are the IOUs that are ultimately needed to pay our debts. Those are the government’s IOUs. The rest of us can go in debt, issue IOUs, but our debt is not as good as government debt. It’s not as acceptable. It can’t be used to pay for things.
(c. 10:25) “In the U.S., the hierarchy looks like this: The government’s IOU—the United States dollar—sits at the top of the pyramid. It is a fiat currency. The United States government is the monopoly issuer of the U.S. dollar—the only entity on the planet that can legally create the currency. The U.S. government taxes in dollars. It spends in dollars. And it controls its own currency. Why is this important? What are the benefits of issuing your own currency? They are extraordinary.
(c. 11:19) “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do.
(c. 12:18) “Think about what the hierarchy would look like under a gold standard. Many governments operated under gold or silver or both for some period of time in our world history. Under a gold standard, the government promises to convert its currency into gold. In that situation, what sits at the top of the pyramid is not the state’s currency, but the gold reserves. This means that the government must be careful about how much it spends. If it spends too much of its own currency, it can jeopardise the entire system because it may not be able to convert currency into gold as promised. You have to limit your spending and limit what you do with your policies. Governments operating under a gold standard do not have sovereign currency.
(c. 13:24) “In a similar way, a country that fixes its exchange rate to another country’s currency the way Argentina and Russia and others have done do not issue a sovereign currency. They must be careful about how much they spend. They must defend the reserves. If you promise to convert your currency into another country’s currency, you might go broke. You can run out. How do you get the other country’s currency? It requires trade surpluses to earn the other country’s currency. You become dependent on the rest of the world and their economic wellbeing to sustain your own wellbeing. The hierarchy in a country that operates fixed exchange rates places someone else’s currency at the top. You also lose control of your interest rate—something that’s crucial to retain control of—if a country is going to have a sustainable debt and full employment.”
(c. 14:49) “The euro is not a fixed exchange rate system, but it’s not a sovereign currency either. It’s an exceptional case, an unprecedented experiment where the currency is divorced from the individual nations themselves. The euro is effectively a foreign currency to you. All 17 governments that use the euro are not issuers of the currency, but usersof the currency. They lack the powers that a sovereign issuer has.Japan, the United States, the U.K., Canada, Australia, these are sovereign issuers. The euro is not a sovereign currency. Governments that adopted the euro must borrow the currency. They must pay whatever the bond markets require. They can run out of money. And they lack the policy space of a sovereign issuer.
(c. 16:09) “If you imagine the hierarchy for a member of the Eurozone, such as Italy, you see the relationship between the government and the currency is different. Italy does not issue the currency that it uses. It is an essential point—money matters. A sovereign government should be in control of the currency that sits at the top of its pyramid. If it gives up control of the sovereign currency, it also gives up the power to set reasonable policy in its own country. It hands over that power to the bond markets who, ultimately, decide how much can be spent—what can be done.
(c. 17:12) “Abba Lerner was an economist, a contemporary of John Maynard Keynes. He saw this very clearly. He said:
“‘By virtue of the power to create or destroy money by fiat and its power to take money away from people through taxation, [the State] is in a position to keep the rate of spending in the economy at the level required [for full employment].’
“The problem with the euro is that it cannot be created at will. The governments must go out and get euros from someone else. They’ve sacrificed their ability to conduct sensible economic policy in every nation […] and the effects are clearer now than ever. Thank you. [Applause]”
Bonnie Faulkner (c. 18:33): “You’ve been listening to professor and research scholar, Stephanie Kelton at the Summit on Modern Money Theory in Rimini, Italy.
“We next hear from financial economist and historian Michael Hudson. Michael Hudson is a Wall Street financial analyst and distinguished Research Professor of Economics at the University of Missouri, Kansas City. Today’s show: There IS An Alternative To European Austerity: Modern Money Theory (MMT). I’m Bonnie Faulkner. This is Guns and Butter.
Dr. Michael Hudson (c. 19:10): “We are all overwhelmed to see how many people are here. [Applause]
“Our message is very simple. And that is why it is threatening. From Margaret Thatcher to President Obama, you were told that there is no alternative. And we are here—and will spend the next two days—telling you that there is an alternative. And we will spell out what the alternative is.
“What we are seeing now is a fight for what is going to be the rest of the 21st century by creating a new kind of class, a new class much like the invasions of Europe a thousand years ago. A thousand years ago, invaders from the north and from Italy would grab land and grab public utilities by military means. But today—ever since the United States went off gold in 1971—aggressors can no longer afford military war. So, what you have today is a new kind of a war. It’s a financial war. You can get by privatisation and financialisation what armies used to get by force of arms. This is not the class war that people spoke of a hundred years ago. It is a financial war. And it is a war that classical economists warned against.
(c. 20:51) “300 years of classical political economy sought to get rid of landlords and bankers. A hundred years ago people spoke of technology. Nobody believed that the vested interests could fight back. But they did fight back in the way that parasites do in biological nature. I’ve read in the Italian newspapers—coming over on the airplane—that people talk about parasites. And people think about parasites, as taking the host’s energy and lifeblood. But, in biology, the smart parasites do something else: They take over the brain of the host. They make the brain think that the parasite is part of the body, to be protected.
(c. 21:53) “In America, President Obama and Treasury Secretary Timothy Geithner, say the economy cannot survive without bailing out the banks, without bailing out the debt, without making the gamblers and the cleptocrats whole on what they have taken. The production economy, the consumption economy, the real economy is being sacrificed to the financial sector. But matters don’t have to be this way. There is an alternative. And we will be spelling out the alternative in the next two days.
(c. 22:36) “We’re overwhelmed that so many of you are here. We’re excited. And we will do our best to explain to you that there are many alternatives. And then it will be your turn to carry the fight on. [Applause]
(c. 23:03) “I’m going to elaborate in a different direction from what Stephanie has said. I’m going to discuss the difference between central bank credit, or money, and commercial banks. Central banks create money, you can say. And commercial banks create credit. The last three years since September 2008 have seen the largest money creation and credit creation in history in the United States. And, yet, prices have not gone up at all. That is, consumer prices have not gone up since 1980. Wages in the United States have drifted downwards for 30 years. And consumer prices and commodity prices have been stable. But there has been an immense inflation; the largest bond market price increase in history has occurred, as interest rates have fallen from 20% to only one-quarter of 1% today. What has gone up is the price of real estate, the price of bonds, the price of stocks. So, the result is that the value of wealth—and most wealth is held by the wealthiest1% of the population—wealth has gone way up relative to wages. The result is a new kind of class war, as I said last night. It’s not the typical kind of class war between employers and employees. It’s a war of finance against the economy.
(c. 25:10) “Under industrial capitalism, the idea was that credit would be created productively to fund capital investment that would employ labour. That is not what is occurring today. When commercial banks create credit, it is create claims on wealth. It is create mortgage debt. It is create corporate debt. It is to create personal debt, and student loans, and credit card debt. This is what makes commercial bank credit creation different from the central banks’ creation of money.
(c. 26:00) “When central banks create money, they do so for a long-term public purpose. They fund government spending and capital investment and public infrastructure. In most countries in the world, public infrastructure, roads, communication systems, railroads, water and sewer systems have all taken a capital investment that is larger than all the manufacturing capital investment. In the United States, the value of New York’s real estate, alone, is larger than the value of all of the plant and equipment in the United States. The result is: The textbooks that are taught in the United States ignore this difference that we have been talking about. There is a formula, MV = PT. It means an increase in the money supply increases the price level. But the price level that the textbooks talk about are only consumer prices and commodity prices. Nowhere in the textbooks do you find a relation between the credit supply and asset prices, real estate, stocks and bonds. And, yet, 99% of the credit spent in the United States economy is spent on these financial claims. Every day an amount equal to the entire year’s gross national product passes through the New York monetary clearinghouse and the Chicago Mercantile Exchange. The vast amount of payments are within the financial sector. And, within the last ten years or so, all of the growth of bank lending is to other financial institutions.
(c. 28:17) “In the textbooks there are happy pictures about banks lending to industry to build machines and factories with a smokestack coming out and employing labour. But this is a fiction; this is not what occurs in practice. All of the increased capital investment in the United States economy comes from the retained earnings of corporations—not from banks. Banks do not lend to bring new capital investment into existence. They lend against mortgages, against capital in place, against real estate, against assets that already exist—not to create new assets.
(c. 29:14) “So, when we talk about government money. We talk about government spending that is, indeed, to spur the economy, to spur economic growth, to spur new investments. The function of government investment and government central bank money creation is very different from the private banks. The government money is, indeed, debt, the lira that you have in your pocket are debt. Paper currency is debt. But it’s debt that nobody ever intends to be repaid because, if government currency is debt, than to repay it would mean that you would not have any currency left in the pocket.
(c. 30:00) “The commercial debt is expected to be repaid; and it bears interest. And, as this commercial debt has grown—the mortgages, the bank loans to companies, the corporate raiding debt—this has loaded down the economy with an enormous debt overhead. The more money commercial banks lend, the more interest has to be paid to carry this debt overhead. And the problem is that money that is spent on paying banks debt cannot be spent on goods and services. So, the result is that when commercial banks create debt, you have a diversion of income away from spending on goods and services—to pay debt service—and that is known as debt deflation. And when debt deflation proceeds as long as it has today, we move into a late stage of finance capitalism, which is the debt deflation stage—the austerity stage. And that’s the stage that Europe finds itself in today.
Bonnie Faulkner(c. 31:21): “You are listening to financial economist and historian Michael Hudson at the Summit on Modern Money Theory in Rimini, Italy. Today’s show: There IS An Alternative To European Austerity: Modern Money Theory (MMT). I’m Bonnie Faulkner. This is Guns and Butter.”
Dr. Michael Hudson (c. 31:38): “There is a political aspect to all of this technical discussion of money. The political aspect is if governments create money, then they’re creating a mixed economy—a mixed economy of private and public capital investment. This is what made all of the countries of Europe and the United States rich. The government investment in the public infrastructure that has been able to be supplied to the economy at cost; so, you get to drive on most roads for free; you get to use this huge capital investment in infrastructure for free. But if governments are not allowed to create their money, then all of the credit the economy needs is created by the commercial banks. And when the commercial bank credit creation leads to debt deflation and the government cannot finance the deficit to pay the interest, then the commercial banks say: Alright, sell off and privatise your infrastructure. This is what we’re seeing in Greece today, in Ireland. You’ve seen it in Iceland. What you are seeing is a financial grab of infrastructure that is taking place by the ability of commercial bankers to prevent the central bank from creating credit.
“And this is a vast new bank loans. Most of the infrastructure that is being purchased—the water and sewer systems, real estate—is all being bought with borrowed money from the banks. So, that, first of all, the commercial bank political strategy is to block the central bank from creating money. And then saying the governments need to borrow from the commercial banks and need to pay interest to the commercial banks, instead of issuing interest-free debt. And then, to pay the commercial interest, they have to sell off the infrastructure. And the result is that bankers today are able to seize the property that in the past it took a military invasion to seize.
“So, what you are seeing today is a new kind of warfare. It is a financial warfare against the entire society, not only against labour, but against industry and, most of all, against government. And a tool in this warfare is to convince people that government money creation is going to be inflationary. You have all seen in the last 30 years here in Italy that your prices have not gone up much; your wages have not gone up much. And what has gone up is the price of your houses, the price it takes to buy a house—that you have to take on a lifetime of debt in order to get a place to live. In America, students have to take a decade of debt to get an education, in order to get a job, instead of the government financing education freely, as was the ideal a hundred years ago.
(c. 35:14): “In the textbooks, it is as if the economy operates without debt and on a barter basis. The reason they don’t discuss what we are discussing here today is that they don’t want you to realise that there is an alternative to commercial bank credit creation and a power grab. The Belgian poet, Baudelaire, said that the devil wins at the point where society believes that he doesn’t exist. The financial sector wins at the point where you don’t see that the prices that the banks are inflating are asset prices—real estate prices, bond and stock prices—and that the role of commercial banks is to increase the power of wealth over the rest of society, over labour, over industry, to create a new ruling-class of bankers that are even more heavy than the landlords that were criticised in the last part of the 19th century.
(c. 36:29): “For 200 years, classical economics sought to purify industrial capitalism from the carryover of feudalism. And these carryovers were the private land ownership of a hereditary aristocracy and commercial banks that had held governments in debt and then foreclosed and exchanged their debts for monopolies. In Britain, this is how the trading companies were formed, the East India Company and the Bank of England with its monopoly, and in the United States you had similar creations of monopolies through the railroads that became the largest landowners through land grant. What Balzac wrote in one of his novels was that behind every family fortune was a great theft, often an undiscovered one. And, yet, modern economics treats all of the theft, the capital transfer, the transfer payments that are occurring today, as if it were all productive, as if all income is earned. Every government in the world now prints National Income and Product Accounts that say that rent is earnings of landlords and interest is the earnings of bankers. In the United States, the financial sector has 40% of all reported corporate earnings. So, you have this shift of the economic surplus shifting away from industrial capital that’s invested in new plant and equipment—to hire labour—to finance capital that is lent out. And the interest earned by the banks is lent out again. And the result is an exponential growth, which Americans called the magic of compound interest. The growth of compound interest is so large that it is much larger than any government’s ability to pay. And, so, the result has to be default. And the default position that Europe and America finds itself today is the point at which the financial sector makes its grab for assets and takes for itself the public domain, the public enterprises, the roads, the broadcasting systems, the ports and the harbours. And that is what is happening today. And the difference in privatising these assets is that when you privatise the roads and the infrastructure, the ‘buyers’ have to pay interest; they pay dividends; they pay exorbitant executive salaries; they pay financial fees to the underwriters; they offer stock-options to the management. And then they raise the price of these public services to the highest rent extraction that they can charge. The economy is turned into a toll booth opportunity. Toll booths are placed on the access to housing, the access to roads, the access to telephone systems, the access to credit for the money that you use by credit cards in payments. And, all of a sudden, instead of paying for the cost of operating an economy, you’re paying for the privileges of people—the financial sector and what used to be called rentiers—that are simply charging whatever they can get and siphoning off the wealth into their own hands.
(c. 40:54): “So, in the United States, the real economy of production and consumption has actually declined over the last 30 years. All of the growth in the economy is overhead to the rentier sector—to what we call the FIRE sector: Finance, Insurance, and Real Estate, which now should include the legal system and the monopoly system. So, almost without the textbooks or anyone noticing, what used to be analysed as industrial capitalism has turned into finance capitalism. And this finance capitalism has not been the kind of finance that was imagined a hundred years ago. It is not financing of industry. It’s financing of economic parasitism and overhead. And all of this is presented as if the way to get rich is to go into debt—to borrow—to buy assets that are being inflated in price. When your real estate and your public enterprises have risen in price, this is not because they’ve actually grown. It is because a house and a property is worth whatever a bank will lend. And as the lending terms have been loosened, you’ve had this huge inflation in asset prices that is way beyond the ability of the economy to pay. Foreclosure time arrives and, so, financial capitalism turns into a bubble economy because the only way that banks can avoid default and a break in the chain of payments is to lend more money.”
Bonnie Faulkner(c. 42:52): “You’re listening to financial economist and historian Michael Hudson at the Summit on Modern Money Theory in Rimini, Italy. Today’s show: There IS An Alternative To European Austerity: Modern Money Theory (MMT). I’m Bonnie Faulkner. This is Guns and Butter.”
Dr. Michael Hudson (c. 43:13): “In America, the Obama Administration’s policy has been described as having to borrow your way out of debt. If people can’t pay, the idea is to continue to borrow the money from the banks; and you simply add the interest onto the debt. This is how Latin America financed itself during the 1970s until, finally, it couldn’t pay; the debts had to be written down.
“Now, the end of this shift away from government central bank money creation to commercial bank credit creation is that there has to be a bankruptcy—a debt write down. The basic premise underlying my analysis is that a debt that can’t be paid won’t be. All of the Wall Street analysts I know realise the debts can’t be paid. The political question is how won’t they be paid. Will they not be paid by letting the banks foreclose? One quarter of all American real estate today owes more money on the mortgage than it actually is worth. That means one quarter of homeowners—almost ten million people—could walk away from their property and come out ahead on their balance sheet. Donald Trump would walk away. Certainly, Goldman Sachs walks away from bad investments. But individuals are told that their debt should be paid, that only the debts of the rich don’t have to be paid. Only the debts of the 99% to the rich have to be paid. And there’s a shift in the understanding of how the economy works.
“So, the way to get rich today isn’t really to borrow money and buy a property that you hope will rise in price because when the price collapses—as they have today in America, Spain, Ireland, England—when the price crashes, the debts remain in place. And there’s the negative equity that occurs. This is the point at which property is transferred from debtors to creditors. So, that the way to make money today is to get the 99% of the population into debt to the 1% of the population. It’s not really to borrow. Never in history before was there any temporary period where people thought that the way to get rich was to go into debt. They were tricked into that by junk economics when Alan Greenspan told American homeowners: Borrow against the value of your house; treat your house like a piggy bank; and sustain your living standards that your wages are no longer paying for.
(c. 46:25) “So, while the American workers have to pay to send their children to school and to get an education to pay for what used to be publicly supported, you’ve had the banks, all of a sudden, financialise education, financialise the public sector, and even financialise the public sector and the corporate sector. The stock market in the textbooks is presented as a means of financing industry and providing equity capital—that’s not debt—that is a means for industry to make investment and hire labour. But that’s not what has occurred for the last 30 years. The stock market has become a vehicle for corporate raiders and management buyouts to borrow money to buy a company to calculate how much a company makes to pay the profit to the bankers and to be able to buy a company just like a real estate investor would buy a building.
(c. 47:45) “When a real estate investor, whether it’s Donald Trump in America or Italian and European investors, want to buy a commercial property; they calculate how much rent it will yield; they bid against each other. And the winning bidder is whoever is willing to pay the most rent to the banks to get the mortgage to buy the property. That’s what’s called using other’s people’s money. But it really isn’t other people’s savings. It’s freshly created money the banks create on their own computer keyboards. And they can create this freely by writing a bank account for the borrower; and the borrower signs an IOU, whether it’s a mortgage debt or a personal debt to pay off at interest. Now, the banks say that this is not inflationary; only government money creation is inflationary. And, yet, there’s no reason why the government can’t go to its own computers in exactly the same way that commercial banks create credit. The question is: Why should the government be called inflationary by creating money and commercial banks not be called inflationary when they create credit when you’ve seen that the banks are inflationary? They make their money by getting people to pay all of the rent or all of the corporate profits hoping to come out with a capital gain.
“And in the United States the corporate raiders and the leveraged buyout companies make a capital gain by cutting wages, by downsizing the labour force, by outsourcing it to other countries, and, especially, by seizing the pension funds and using the pension funds to pay off the bankers and write down the debt, so they have more equity.
“A few years ago in Chicago, where I grew up, Sam Zell, a real estate operator, borrowed the money to buy the Chicago Tribune. He looted the employee stock ownership plan. He used the money to pay the creditors that leant him the money to buy the Chicago Tribune. He began to fire the staff. He sold off Chicago Cubs, the baseball team that the Chicago Tribune owned. And then, even so, he mismanaged the company so badly that the company went bankrupt, wiping out the employee stock holders. They have brought a case of fraud against him claiming that they have had their money stolen. President Obama recently gave a speech saying there is no fraud; it’s all legal; that’s the ‘free market.’ The free market has been redefined to be free for the financial sector to grab, to misrepresent, and to do the things that Mr. Bill Black is going to be talking about in his talk.
(c. 51:29) “So, when you talk about the fraud that has, essentially, become the basis for making financial money, you have that as the new economy without anybody saying it. I don’t know any textbook that talks about how the way to get rich is to steal money. The way to get rich is to borrow money to buy a property that’s going up in value and make the economy shrink and grab property from the public domain. Why is it that French novelists like Balzac and poets like Baudelaire understand the economy better than what Nobel prizes are given in the textbooks that are written today? Why would one go to movies and drama, rather than a textbook? [Applause]
(c. 52:27) “What we are trying to do in this meeting today is to give you a new view of how the real economy works today and teach reality economics, instead of the parallel universe that you have in economic textbooks. At the beginning of Paul Samuelson’s textbook—which is used to indoctrinate students in the United States—he says that the criterion of economic theory is whether its axioms are consistent. This is what I was told when I studied literature in college. If you’re reading a novel, you have to suspend disbelief. You have to believe in the science-fiction or the characters that the author writes and imagine that it’s all consistent. You know when you go to a movie and after you come out of a thriller, or a mystery movie, you think, ‘Wait, a minute. There’s something wrong with that picture. They forgot how it happened.‘ What Mr. Samuelson did not say was that these assumptions have to be realistic. So, instead of learning how the economy operates, students are told how a parallel universe might operate on a different planet, if there were no government, if there were no fraud, if the entire economy operated on barter, if there was no debt, and that everybody wanted to help everybody else, that nobody inherited money, that everybody earned all of the income and wealth that they have. The reality is the opposite, but it seems to be talked about only in novels these days.
(c. 54:27) “Whenever you have a misunderstanding of reality year after year, decade after decade, and now for a century, when a false picture of the economy is painted you can be sure that there is a special interest benefiting. A false picture of reality does not happen by nature; it is subsidised. And the banking sector has subsidised ajunk economics that is taught in the universities, broadcast from your newspapers, mouthed by the politicians, whose election they sponsor, to try to make you believe, that you’re living on Mars in a different kind of a world—instead of the actual country that you’re living in—and to pretend that there is no financial class that is trying to grab what belongs to the public at large. This is what ends up with a difference between central bank creation by the government with the government aims of economic growth and full employment, as compared with commercial bank credit that aims at economic shrinkage, at austerity, at lower wages, at lower output, so that it can do to you what the commercial banks are doing to Greece, to say give us your ports and your land and your tourist areas and your water and sewer systems, so we can charge you for water and sewer. And we can take the money that you had expected to get in pensions and we can scale it down, so that we can pay ourselves.
(c. 56:10) “This is what it took an army in times past. And today it’s done without an army, as long as you will be passive and believe the science-fiction of the world that banks are painting. Thank you. [Applause]”
Bonnie Faulkner (c. 56:38): “You’ve been listening to financial economist and historian Michael Hudson. Today’s show has been: There IS An Alternative To European Austerity: Modern Money Theory (MMT). Dr. Hudson is President of The Institute for the Study of Long Term Economic Trend, a Wall Street financial analyst, and distinguished Research Professor of Economics at the University of Missouri, Kansas City. His 1972 book, Super Imperialism: The Economic Strategy of American Empire is a critique of how the United States exploited foreign economies through the IMF and World Bank. Please visit the University of Missouri, Kansas City New Economic Perspectives blog at www.NewEconomicPerspectives.org. Visit the website for the first Italian Summit on Modern Money Theory at www.DemocraziaMMT.info.”
Transcript by Felipe Messina for Media Roots and Guns and Butter
“‘Debt Deflation in Europe and America with Dr. Michael Hudson. European banking crisis causing a constitutional crisis of the European Central Bank; Germany; the myth of Social Security in the US.; bank balance sheet recession; food, fuel and climate crisis; the super congress; debt deflation; FHA lawsuit against the banks; criminalization of the financial sector; Modern Monetary Theory; the coming lost decade; debt cancellation.”
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Also consider the Guns and Butter broadcast from June 22, 2011, entitled “Global Insurrection Against Banker Occupation.” This is the KPFA broadcast summary:
“‘Global Insurrection Against Banker Occupation’ with Max Keiser. Financial occupation of Greece; IMF Greek Memorandum; financial terrorism; controlled demolition of European economies; asset grab; lawsuits against bankers and government; Pirate My Film, including crowd funding and copyright free media; new European funding facility in the planning stage; global bank; coming housing collapse and banking disaster; devaluation of the dollar; the wild card.”
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Also consider the Guns and Butter broadcast from June 16, 2010, entitled “Europe’s Financial Class War Against Labor, Industry and Government.” This is the KPFA broadcast summary:
“‘Europe’s Financial Class War Against Labor, Industry and Government’ with Dr. Michael Hudson. Economic crisis in Europe created by predatory lending; European Central Bank stranglehold on the Eurozone; the Euro; foreign banks decimate Greece’s social structure; Marx’s industrial capital versus fictitious capital; Latvia as a model for the rest of Europe; Hudson’s financial and fiscal plan for Latvia; the Cold War and its ruinous effect on progressive economic thought.”
MEDIA ROOTS — Some view democracy as something we’re losing with the two-party dictatorship shredding the U.S. Constitution under a post-9/11 pretext of national security, as transnational corporations assert their will over sovereign states. Others assert democracy is a good idea yet to be realised, given the Electoral College has always been a ruling-class fail-safe against true democracy. Post-OWS, we recall the days of the robber barons, cyclic, like today’s fascist banksters.
In a recent article, economist Dr. Michael Hudson offers a long view over millennia of humanity’s struggle for society free of tyranny and oligarchy. History, indeed, repeats itself until the masses educate one another and advance toward collective liberation. Inequality may be one of the fundamental pillars of injustice. But debt is its bedrock.
“Nearly all leading Syndicalists agree with the Anarchists that a free society can exist only through voluntary association, and that its ultimate success will depend upon the intellectual and moral development of the workers who will supplant the wage system with a new social arrangement, based on solidarity and economic well-being for all. That is Syndicalism, in theory and practice.” —Emma Goldman, February 1913.
Messina
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MICHAEL HUDSON — Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.
Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.
Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts [1]. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.
By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.
This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.
MEDIA ROOTS — With the reverberating excitement around the recent 
