Michael Hudson: What really is at issue is whether all debts should be paid, or not? I think that there should be an international rule that no country should be obliged to pay its debts to the wealthy One Percent, especially to a creditor class that prefers to hold its domestic wealth offshore in foreign currencies. No country should be obliged to pay its bondholders if the price of paying means austerity, unemployment, shrinking population, emigration, rising suicide rates, abolition of public health standards, and selloffs of the public domain to monopolists. To make matters even worse, the privatizations demanded by the IMF and World Bank, for instance, will sharply raise the prices for what had been public services, transportation, water and sewer, communications, and telephones.
There should be principle that the domestic people should come before foreigners. But the guiding principle of the IMF, World Bank, and the United States the opposite: namely, that no nation should put its own interests first. Instead, every nation is told to put the interests of international creditors first, even when the cost is impoverishment, dependency, mass poverty and deindustrialization. This is what globalization really means today. It’s an international imposition of class war by the creditor One Percent against labor and the indebted 99 Percent and their governments.
The madness of this was spelled out over 2000 years ago. In Book I of Plato’s Republic you have Socrates arguing against the idea that all debts should be paid. He asks, what if you borrow a weapon from a crazy person, and he asks for it back. Should you give him a weapon if he’s likely to hurt people?
This applies to creditors in general: Should you pay off debts if the creditors are going to use their money to impoverish society and reduce people to debt dependency? That’s what the Republic is all about. We’re still dealing today twenty four hundred years later with the same issue.
The issue is: what should come first: the people’s welfare, or that of creditors?Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
Argentina back on the debt train
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University
Funny -- Shows more about economics and ideology than Argentina.
ReplyDeleteNo mention of what is peculiar to Argentina: how Argentina finances their real estate in USA dollars and pays their employees in pesos, while their economy is dependent on cyclical commodities and investment. Argentina is a perfect example of why it is important to have a floating, non-convertible, fiat currency, poster child case for explaining MMT.
cyclical commodities and investment based in dollars!
ReplyDeleteArgentina, like several other South American countries, shifted left during the 2000 commodities boom, which peaked just before the financial crash of 2008. After that, Argentina began to burn through its foreign currency reserves in order to keep buying imports.
ReplyDeleteBy 2010, Argentina went from a trade surplus to a trade deficit, which caused economic pressures to start rising. On 27 Oct 2010, leftist president Néstor Kirchner died, and was replaced by his wife, Cristina Fernández de Kirchner, who tried to continue the leftist and anti-imperialist policies of her late husband. However Argentina’s trade deficit continue to worsen, and with it, Argentina’s economic problems. By 2014 these problems caused Cristina to fall out of public favor. The public became ready to listen to neoliberal lies.
As Argentina’s trade deficit continued to worsen exponentially, Mauricio Macri (a neoliberal) took the presidency on 10 Dec 2015. Macri immediately imposed austerity and privatization on the Argentine masses, and took a $50 billion IMF loan, thereby plunging the nation into severe foreign debt. Macri also launched a campaign against the Iranian and Venezuelan governments, plus a campaign to support Israel and its atrocities.
And still Argentina’s trade deficit continued to explode.
As a neoliberal, Macri’s every solution to the problems caused by austerity is more austerity.
By late 2016 the Empire was praising Macri for having crushed the Argentine masses into poverty and debt slavery. Macri became the darling of celebrity has-beens like the Rolling Stones rock group and U2.
Meanwhile Macri, being a neoliberal, distracted the masses from their poverty by pushing things like feminism and same sex marriage, so that the masses would fight each other, rather than unite against their neoliberal slave masters.
Under Macri, Argentina’s trade deficit has reached a catastrophic USD $10 billion, while its foreign debt is over USD $50 billion. This means severe austerity and foreign debt, plus runaway privatization.
And it continues to get much worse every day.
If your nation’s currency is not accepted outside your nation’s borders, then a trade deficit leads to foreign debt, which leads to austerity, which leads to more foreign debt, and more austerity, and more debt and austerity. Argentina’s economic trajectory is unsustainable. Conditions are approaching those of Greece.
If you think I exaggerate, it is because the Empire's corporate media outlets are not reporting on this.
“Hudson graduated from the University of Chicago (B.A., 1959) and New York University (MA, 1965, PhD, 1968)”
ReplyDeleteArt degree....
Hi Konrad,
ReplyDeleteThe conservatives are full of themselves over Venezuela saying that socialism doesn't work, but look at Argentina, which has implemented extreme capitalism? A disaster.
@ Kaivery: Brazil is also disaster, having followed the same path as Argentina from progressive populism to extreme neoliberalism.
ReplyDeleteAgain, the corporate media outlets remain silent about this. They tell the Anglo-American masses what to think, and the masses obey. The masses, following Bernie Sanders' words, call Hugo Chavez a "dead communist dictator."
"Raising interest rates for the US economy means that the dollar’s exchange rate will rise against foreign currencies. It’s going to take many more pesos or other third world currencies to service their dollar debt."
ReplyDeleteIs the thorn in his side of the arguement.
"Raising interest rates for the US economy means that the dollar’s exchange rate will rise against foreign currencies. It’s going to take many more pesos or other third world currencies to service their dollar debt." via Footsoldier
ReplyDeleteThen isn't it interesting that on ethical grounds alone the debt of a monetary sovereign, being inherently risk-free, should yield no more than 0% minus administrative costs (i.e. NEGATIVE*) to avoid welfare proportional to account balance? And that includes demand account balances at the Central Bank too.
So how about we eliminate welfare proportional to account balance, i.e. for the rich, and then Argentina and other countries can use properly priced dollars to pay their debts and buy US goods and services?
*Except for individual citizen** accounts at the Central Bank which should be negative interest free up to, say $250,000, the current US deposit insurance limit.
**Since individual citizens, as opposed to banks and other large users, have an inherent right to use their Nation's fiat up to reasonable limits on account size and transactions per month.