2026.09.03
Karl Fitzgerald: Welcome, everyone, to another Hudson Roundtable where our Patreon supporters join Michael here to ask any question, to delve into Michael's immense back catalogue of work.
One of the difficulties of holding discussions with Michael is that the news keeps catching up with the arguments he made decades ago: debts that can't be paid, economies hollowed out by rent extraction and governments protecting creditors at the expense of citizens. These are no longer warnings from the edge of economic debate. They are the structure beneath the daily news.Let's see where we end up today.
Michael, the big news of recent has been the Dutch Central Bank. They've just shifted 86 tons of gold from North America to London, explicitly citing geopolitical unrest and crisis preparedness. Does this tell us that monetary sovereignty now depends not merely on what reserve asset a country owns, but where it is held, under whose law and through which trading system it can be assessed in a multipolar economy ? Will money cease to be universal and become a network of politically trusted custody arrangements?
Michael Hudson: When I first read the headline and the very brief notice, it said Holland is moving its gold to London. And I thought, why would they move it from Holland of all places to London ? Only later did it come out that they're moving their gold from the New York Federal Reserve to London. Then, oh, I get it.
You could call that projection. Just as the EU has been grabbing the gold of everyone it doesn't like, like Russia's 300 billion in Euroclear, Iraq's gold or Libya's gold or whoever ended up with that. They thought, what if America is going to begin grabbing our gold now that Trump is getting so annoyed at what Europe is doing ? If we somehow make peace with Russia, then that's going to drive them crazy.
If or when Trump says NATO has to spend all of the expenses... and then NATO finds out probably at the end of this winter or whenever the next election comes, Merz out of power, Macron out of power, and the British Labour Party out of office. I hate to say power. That Europe is going to do something America doesn't like. It may try to act independently. So Holland made the first move in taking its gold back.
A few years ago, I got requests from German journalists. This is when Germany asked, can we have our gold back from the New York Federal Reserve also ? America kept hemming and hawing and said, well - you know - we don't really have the - it takes a long time - there's so many tons of gold, it's hard to transport it. And I kept asking them, does Germany have the gold back from the United States ? And where is it put ? Nobody could explain that.
If the Dutch asked for their gold just in the last few days and they got it back so quickly, how did they get it back so quickly ? And what about Germany and other countries ? And why did they do it; what's their story?
According to the Wall Street Journal and today's news, they moved their gold to Britain because that's where the London gold pool was. That's where the gold market is. And they say, central banks are making their money. They're leasing their gold to gold dealers. And that's how they make their money. They're renting it out, and it's with an option to rebuy it at a given price.
I think the worry of certainly Holland and maybe other countries is: wait a minute, what's going to happen if the central bank leases its gold to a gold dealer and the gold dealer then leases its gold or sells its gold to other parties, the other parties go broke, and all of a sudden the central bank can't get its gold back ? And they say, oops, sorry, the company got wiped out. All of a sudden, the government will be in a very embarrassing position of having to lose its gold by having leased it all out or renting it out or selling it forward and having to make a delivery or whatever shenanigans the banks are doing.
I think that the Dutch realize that there are so many technicalities and leveraging and just opaque transactions with this gold in the New York Federal Reserve that maybe the New York Federal Reserve won't let any politicians come and look and see if the gold is still there ? They won't even let them in Fort Knox to say, is the gold still there?
I think that there's just general queasiness. Everybody wants to pull back the gold, on the maxim that if you don't actually hold the gold, you don't really own it. You can't leave it in Singapore. You can't leave it somewhere else. You can't leave it with a gold investment company. You can't leave it with a gold mutual fund. What if these intermediaries go broke ? So, they're taking it back.
Apparently, they seem to have got it back. At least nobody's complaining. But I hope someone from Holland gets to visit the Bank of England and say, is this really our gold there ? Is there a separate storeroom you have ? It just shows the lack of trust that Europe has in the United States.
This suggests that there are talks among the Europeans. What are we going to do when Macron and Merz and the British establishment, the war advocates against Russia, are voted out of office for being so unpopular ? What's going to happen when so-called right-wing parties take over - for the left don't seem to be playing much of a role now ? What happens when there's a change in our policies and we may be in the same boat that Venezuela or Iran or Russia are in ? So this is just, I won't say the canary in the coal mine, but it shows that they're preparing for any kind of chaos at a level that they couldn't imagine before, except in Hollywood scripts.
Karl Fitzgerald: One of the concepts that's starting to come through is whether Washington is privatizing dollar hegemony through stablecoins. Usually, when we discuss de-dollarization it's nations moving away from U.S. reserves. But dollar stable coins could spread Treasury-backed dollars directly through other countries outside traditional banking systems. What do you think, Michael, of this growing trend that Trump and his family are well and truly behind?
Michael Hudson: Already in the mid-1960s, when I worked for the Chase Manhattan Bank, we discussed something like this.
The CIA and the State Department and the banks realized the fastest growing economic sector in the United States and most other countries is crime. And it really should have been recorded in part of the GDP analysis.
Way back in the 1930s, Roy Ovid Hull wanted to include crime in the GDP. But Christian moralists overruled him and said, well, that's not quite right. So a lot of things that were crime then became decriminalized, including money laundering. But they don't overtly have crime.
The criminals who have not had their criminal activity legalized through the small print are using cryptocurrency. Cryptocurrency is serving the role that the offshore banking centers did. They're serving the role that Switzerland did until the 1960s. The dictators all over the world, drug dealers, criminals moved their money to Switzerland where they didn't ask any questions.
Then came the offshore banking centers. The United States asked Chase Manhattan, in addition to other American banks: will you set up affiliates in the Caribbean countries so that the criminals can put their money in your branches in these countries, and then you will then send the money that the criminals put into, or whoever wants to use an offshore banking center will put in these branches and send them to your head office. That will be a major balance of payments inflow to the United States, the world's criminal capital, to help balance our international payments that at that time, the Vietnam War and other military spending pushing us into deficits.
Now the criminals don't have to go hire a lawyer and put things all the way through the Cayman Islands or the Dutch West Indies or all of the other centers. They can buy the stablecoins. And Trump has said, this is wonderful. People who want to conceal their ownership and have privacy from the Internal Revenue Service and other groups can now simply buy stablecoins, all of which have to be invested in short-term Treasury bills.
The difference in buying a stable coin vs the U.S. Treasury bill is if you own the U.S. Treasury bill, you get the interest, which I think it's like 3.5% now. But if you conceal it, then you give up this interest. All you own is a claim on the equivalent principle of the U.S. Treasury bill. The stablecoin company, the cryptocurrency company, gets to keep all the interest for itself, assuming it doesn't take the money and embezzle it. Apparently, people are willing to make a huge sacrifice of interest, just so that they can have privacy.
You can imagine what kind of people would want to make or be willing to make a trade-off like that, but that's it.
Trump wanted to get into this whole business, and so he's trying to promote his own stablecoin, hoping on the patriotism of the MAGA people and his Republican supporters to think, if Trump has his own stablecoin company, then it must be a good, sound investment, not realizing that investors in Trump's properties have not done very well over the course of his life. He's sort of preying on the ignorant faith of his followers.
I don't know whether this is a good thing or not. Presumably, the Treasury is supposed to end up with money that otherwise would have been in the accounts of people who make very bad political choices and have very bad judgments and probably would not have done very good things with their money anyway. So, yes, it's privatizing really the ownership of the cryptocurrency and the ownership of the Treasury debt. Instead of the Treasury simply printing the money, it issues bills and it pays interest on it to whoever wants to either buy the bills or buy crypto coin variants that are invested in the Treasury bills.
Karl Fitzgerald: Well, at least the money changes are a little bit more obvious these days rather than hidden through various entities.
Michael Hudson: Every few months, the Treasury and Federal Reserve would have statistics broken down by specific countries, on U.S. assets and liabilities. And they'd have U.S. bank liabilities to foreigners, U.S. bank liabilities to other banks, U.S. bank liabilities to their own branches. From it you could find out the U.S. bank liabilities to their branches in, and you'd make a whole list of all of the offshore banking centers, Panama, Lagos, Nigeria, the Cayman Islands. It was all pretty clear to find out.
You could find out the flow of criminal capital into the United States, including from Swiss banks and other traditional centers. You could calculate that.
You can't really calculate, as far as I can see, the stablecoin balance of the investment in Treasury securities because the financial sectors made sure that there's not going to be an oversight of the cryptocurrency. That's what part of the 2024 election was all about. Are you going to have oversight of the cryptocurrency or not ? It's much more opaque now than it was before, and it's much harder for a statistician, as I used to be, to follow.
Karl Fitzgerald: Yeah, I was talking about the owners of the actual money creation machines. But let's move on. Matt Connors asked a question about how the U.S. had held the price of gold steady, and you've written about that before, Michael, far below its current value. Did this become unsustainable ? Is this similar to U.S. manipulation of oil markets?
Michael Hudson: Yes, they did it by manipulation. I think that Craig Robert explained it to me, and he was the Under Secretary of the Treasury under Reagan.
The United States would sell the price of gold short. That means, we promise to buy gold at such a price or to sell gold at such a price. Because they have a promise to trade in gold at a very low price, then people would say, why should we pay a high market price when the Treasury is going to sell us this gold, make an agreement to sell us at a given price?
The Treasury would keep playing the forward market. They were able to afford that for a long time, until finally the demand for gold, including by foreign central banks, got so large that it was impossible for the Federal Reserve Bank of New York or the Treasury to sell gold short to keep the price down.
So yes, it was market manipulation that did it. And the central bank would do exactly what Holland has been worried about. The central bank would say, okay New York Fed, how do we make money from our gold ? We can increase the supply of gold. The laws of supply and demand mean a higher supply is going to keep down the price. We will lease the gold, as I said, to the gold dealers. All of that leasing, all of these purchases and the sale of gold, did not involve the physical transfer of gold. It really meant gambling on the price of gold, making a bet. And it was the price of gold that was the key, not the actual transfers of the gold itself at the time.
This system worked until people finally said, we want not only a guaranteed purchase or sale of the gold, we want the physical gold actually to change hands. That's where it became completely beyond the ability of the U.S. Treasury, and Central and New York Federal Reserve, to handle.
Karl Fitzgerald: Good. Some great questions coming in. If anyone wants to put their hand up and come on screen, that'd be great.
Michael Hudson: Yes, I want to hear the questions.
Karl Fitzgerald: Yeah, Konrad has a huge question here. I'd love him to ask on screen, but Kimberly's got another one relating to gold, wondering whether it's becoming no more trustworthy as an asset than crypto now, or has this always been the case in reality?
Michael Hudson: The question is: when you talk about holding gold, in what form do you hold the gold ? Are you holding gold and saying, I bought a gold mutual fund so I have a share in the gold mutual fund... I guess I have a share in owning the gold held by the mutual fund. Who knows what the mutual fund's doing with the gold ? Is it holding the gold and is it leasing it out?
You just don't know. Holding gold indirectly, holding the right to own gold somewhere else, isn't the same thing as actually holding the gold. You can hold the gold physically in your home, but then you could be robbed. You could hold the gold in a bank vault, but banks have been known to be robbed.
You could hold it, and many people are holding their gold in Singapore. Let's hope that Singapore survives and it's all very healthy and safe in a bank in Singapore. Hong Kong is now setting itself up as one of the safest places to hold gold because as China is linking its currency to gold, Hong Kong is the natural place for this to take place.
When you talk about the safety of holding gold, it all depends on how you're holding this gold. As I said, even if you have physical control of it at home, is it in a safe ? Is it under the mattress ? I mean, how much safety is there in today's world, even if you hold something ? There are degrees of safety, degrees of risk, and the more transparent and clear you know where the gold is and in what form it is, the lower the risk is going to be.
Karl Fitzgerald: Good. All right. Here's Matt Connors.
Matt Connors: Yeah, on this subject of gold and this idea of people having gold bars under their bed or in their wife's closet, like Robert Menendez did before he went to prison. We're talking about social collapse. If the regular currencies aren't working and you thought you needed to have gold to have wealth that survives the chaos of a certain amount of social collapse, then I immediately start thinking about people leaving, going across a border. You're not carrying gold bars with you across a border.
Do I understand that having it physically is different than having a share of something ? I have this picture of people all rushing to a building in the middle of social collapse, expecting that there's still a guard on duty who's going to let you in and get to your gold; you start going a little crazy about it.
These doomsday kind of scenarios, they sounded kind of crazy a while back. They don't seem quite as crazy anymore. So people are just like imagining all kinds of chaos and then something else gets established and their gold still has value. Is that the only way this makes sense?
Michael Hudson: Interesting that you brought up the border guards. Back in the 1960s, Herman Kahn made a quip. Why do people want to buy gold so much ? Well, it's to bribe the border guards.
But you mentioned a bar of gold. How are you going ? Is the border guard going to want the whole bar of gold ? Then you don't have any anymore.
Already two decades ago, German and other European gold dealers were selling whole one-ounce gold coins. You can imagine a one-ounce coin, gold, now almost $5,000. But they also had little plastic envelopes. Here's one-tenth of an ounce or a hundredth of an ounce. How are you going to pay gold ? You can't pay a gold bar and cut it up into little pieces.
So the gold companies have very carefully weighed out little postage stamp-size gold leaves, and you use the gold leafs to pay. At least then you can use it to buy a meal. If you go to the border guard, you can say: this is all I have, these few gold leaves. If he doesn't search you.
You really don't want to be at the mercy of the border guard who may want to take all of your gold or a very big part and leave you with nothing. Once you have to carry it physically with you, it's not the safest way to hold gold. Even if you don't have to leave the border, but you say, I'm worried about social chaos at home and I don't want to get into the social chaos of other countries... If there's social chaos here in America, there's going to be chaos elsewhere. You don't need to cross the border here, I hope.
But how are you going to pay for your groceries or something else ? You need gold broken down into very teeny little pieces, not gold bars. Of course, if you want to save large amounts of your money, you save it in the form of gold bars or more likely just the gold coins. If it's coins, you know that e.g. it's one ounce. Iif the gold dealer that you buy it from has it in a plastic envelope with his stamp on it, assuming the counterfeiters don't get into the act, then at least you have something that can be transacted for its value.
If you think, in the event of chaos, what am I going to buy with a one-ounce gold coin that's worth $5,000 ? That's more than the average meal would cost for most people. How are you going to do that ? The payment problem in gold remains, even if you have it physically.
Karl Fitzgerald: Okay. Usually there's a follow-up from you, Matt. Any further questions ? On mute?
Matt Connors: I'm only asking about gold because that's what we started with. I mean, cans of tuna fish are a more valuable currency to have in my house right now than slivers of gold. But that's my dark humor. You can only get so much at Costco on one trip or whatever. But I'll leave gold aside. It's fascinating. Gold is fascinating, but that's not my main line of questioning tonight. And I don't want to dominate here. I'll come back with another question later.
Michael Hudson: Okay. Certainly right now, there are runs in stores for various things. Plastic wrap is something there's a run on. There's going to be cutbacks in anything made out of oil. The plastics that wrap everything in the stores, that's going to be something that's very hard to do. Plastic bags, I don't think there are going to be that many baggies.
Governments are going to decide what they're going to be using plastics for. One of the rare things that are not going to be available are going to be things made out of plastics or oil. If you're going to hoard something scarce, gold isn't something you can actually use. That's why it's good as a monetary commodity: because there are not many things you can use it for, apart from teeth and gold plating windows to keep the heat out. Are you going to think what's going to be in short supply ? Food, canned foods, that's certainly something worth getting. Basic needs.
Karl Fitzgerald: Excellent. Glenn in the chat, a recent Patreon supporter. Good to have you here. Glenn asks, what about the sovereignness of currency ? Are we starting to see a realization, Michael, that after all these years of you talking about this concept, many nations are really starting to recognize this secret subsidy they've been handing America's imperial objectives?
Michael Hudson: The sovereignty of currencies. What do you mean ? You mean using their own money instead of U.S. money?
Glenn Lingle: Is that in relation to gold ? You were talking about gold at that point, that it's getting replaced. Anyway. I was just replying to your comments on gold and what's going to happen to the so-called sovereign dollar, per se, or sovereign currency. Every nation.
Michael Hudson: The big context for even having this discussion is that China, Russia, and Iran are going to set up their own international banking arrangements for just such an occasion. The discussion about sovereign currency and the relations between currencies of balance of payment surplus countries and deficit countries, creditor countries and debtor countries.
There was a very detailed discussion in 1944 between John Maynard Keynes and the United States about how we are going to restructure the monetary system of the post-World War II order. The United States said, the U.S. dollar has to be the foundation of all of this because we have 50% of the world, or 75% of the world's gold in 1945. And the dollar is convertible into gold, fixed rate, $34. So you'd better denominate all of your trade in it, and this is to have a stable currency for all of this.
Keynes pointed out that essentially other countries are going to have to use their savings and their budget deficits and their balance of payment surpluses to lend to the United States to hold the dollars or to hold gold.
Keynes said, what we therefore need is an international bank that will have debits and credits simply as a bookkeeping, an accounting system. The accounting system can be based partly on gold, and partly on the currencies of member countries. The accounting system means that you don't have to turn over your balance of payments to the United States government, which is rich enough already. In fact, Keynes was opposed and the U.S. raised its gold proportion from 75 to 80% of the world's gold.
How are we going to get countries into this ? Well, he worked for the British Treasury at that time. And the Treasury said, we've had to agree to free trade. We've had to agree to dismantle the capital controls. There's not going to be any currency, foreign currency area, any empire preference anymore. All the money that India and British colonies have earned during the war from all of their exports that they've sent, sold to the Allies, now they, you know, we'd hope that they'd all be tied to having to be spent in Britain to employ British industry and British labor. But now, under the U.S. rules, they can be spent anywhere. And anywhere means the United States, because that's the dominant power.
Britain tried to oppose this, but the United States was in the driver's seat.
What we're seeing as the world moves into depression at the end of this year is going to be something like a peace agreement at the end of a whole war. What we're seeing is the way in which World War II was settled, its coming to an end. The whole world trade and monetary system that was put up by the United States is now being rejected mostly by the United States itself.
That was what its own National Security Strategy report said last December: that the rules that helped the United States once it was an industrial power and exporter, and once it held most of the world's gold and was a creditor, no longer exists. The U.S. is now the major world debtor. The government is the debtor, and there's no way that it can pay its debts.
Imagine what's going to happen this autumn, let's say November and December. Oil prices are going to go up, food prices are going to go up. How are countries going to afford to pay this and also pay all of the foreign debts that they owe ? Countries are sort of like 40% of Americans are. They're living paycheck to paycheck as it is. Their balance of payments is almost forcing them to go into debt to the IMF or the U.S. government in a swap agreement of sorts, or they're going to have to sell their monetary reserves.
They're going to say, here's our choice before us. And if they're a democracy, they can't say, give the first priority to paying our bondholders and foreign creditors and the foreign bankers and put our domestic spending second. They're going to say, the oil crisis started and caused primarily by Biden's war on Russia and Trump's war against Iran has caused such a crisis in world oil and fertilizer and food that our companies are in the same position that Germany's industrial firms were - unable to afford to stay in business and keep employing their labor at today's energy prices because there's no market to make a profit once the energy prices soar. So there's going to be unemployment.
Countries are going to have to say, how are we going to enable our households to heat their homes and light them ? How are we going to subsidize our key businesses to keep open and not shut down ? They're going to have to say, we have to make a choice. They're going to want to declare a moratorium on the debts they owe, sort of like what occurred in the 1980s, when Mexico defaulted. You had the Latin American debt write-down, and the Brady Plan essentially wrote them down. An individual country really can't do that. They'll have to band together.
I can imagine that with China. You had this discussion at the Shanghai Cooperation Organization meetings that just ended, and went directly from there to the Eastern Economic Association meetings in Vladivostok for Russia. Putin said at both meetings, we're going to be working to create a BRICS bank. Well, it really won't be a BRICS bank. What they call a BRICS bank is really going to be an arrangement between China, Russia, and Iran to provide credit to other countries to cope with the oil crisis and the food crisis.
Since that's caused largely by the United States preventing Russian and Ukrainian food exports and preventing Russian and Iranian oil exports, obviously the dollar area is going to be the isolated area. So you're going to see that kind of isolation.
That requires all these countries to say, we're arranging some sort of a bank. And, it's too long to go into now, but I have a whole chapter in Superimperialism about the debate between Keynes and the Americans. I talk about that pretty much in my daily interviews, in my weekly interviews on the internet on the various sites that I'm on. That's going to be really what you have to follow now.
What kind of international credit and debt arrangements are there going to be ? Because the money of the future is going to be some sort of credit and debt arrangement that is going to try to keep the sovereign right of countries, and that was your question. It will be denominated in their own currency, even though the value of the debt or the claim, if they're a creditor country, is going to be denominated in this artificial currency that'll be very much like Keynes's bancor.
*** The United States and opponents of China, the Cold Warriors, are saying, isn't China going to act just like the United States ? Isn't it going to weaponize the credit system and say, now that we're the creditor, we're going to take you over ? China has to provide assurances that it is not going to do this.
Russia and Iran are going to have to say, yes, we're going to give you credit for the oil that we're selling. And we're going to have an account in this international bank, but we're not trying to use credit as a means of taking over your industry and assets at distressed prices.
This was Keynes's desired assurance: that this system would not be exploitative as when a creditor country ran a constant balance of payments surplus, as China looks likely to do, with countries that fall further and further into debt and run up deficits that lead them to be chronic debtors, the polarization of debts at the top and claims at the top and debts at the bottom will be wiped out. Just an automatic moratorium process. That's what happened finally at the end of World War One's inter-allied debt and German reparations.
In this case, they're going to build the moratorium on bad loans, loans that have been made that the credit that the debtor countries cannot pay will be wiped off the books. That's really the key. The speech that I gave on Vladivostok yesterday, I think Karl is going to be putting it up on my website soon. I go into this in more detail. So my long answer will be in what Karl posts.
Karl Fitzgerald: Very good. Glenn, go ahead.
Glenn Lingle: In your reply, you said that the U.S. can't pay its debts. The MMT people would have you believe otherwise. I don't know if you're in that camp. Can they pay their debts that are their bonds that are denominated in dollars ? And what's preventing that ? What's the flaw here ? Or what's the deal?
Michael Hudson: They can always pay dollars. If you go to the Treasury and say, here's a bond and I want money for it: the U.S. can simply pay dollars.
But it can't pay in the way that other countries have to pay. It can't pay in a tangible asset. It's not going to pay in the form of giving other countries ownership of its companies. It's not going to give them stocks. It's not going to give them gold. It's not going to give them anything else. It just says, well, it's $40 trillion dollars that the government owes. There's no way that we can earn the money to pay you.
We can try to do what Donald Trump does and demand tribute, but that's all that we can do. So, sorry, we can't afford to pay you. They just use this as IOUs among themselves.
We're the unique country. We don't have to pay our debts. But there are many dollar bondholders and banks that are debtor countries. They have to pay their debts. Other countries have to pay their debts to the creditors. Only we don't have to. That's what a free lunch is. That's what was called America's exorbitant privilege
If America can only pay its debts by printing more dollars, the Americans can use these dollars. But how can a foreign country use these dollars ? What will it be for ? The exchange rate of the dollar, if America actually tried to pay just in dollars, not bonds, the exchange rate of the dollar would go way down, and that would cause inflation.
Technically, the government can only pay in dollars, but what gave the dollar its use as an international currency before was the agreement to pay in gold. That hasn't existed, as you know, since 1971. There's no way that other countries can enforce payment on the United States. The United States can say, if you really want to get paid, we'll just grab Holland's gold that we have here. Well, now it can't do that, it can't confiscate other countries' gold.
Karl Fitzgerald: That's basically the problem at work.
Michael - Konrad asked a good question here. It's a bit of a long one but let's go with it.
"Taxation by a currency issuer, from my understanding, cannot fund the issuer's spending, because money is a liability of the issuer and tax bills themselves are the issuer's asset. But once the tax bills are settled, the financial asset of the user is erased simultaneously with the liability of the issuer. In other words, tax bills destroy money, the issuer's financial liabilities. From my understanding, all public spending creates money and all taxation destroys money from the balance sheet angle of the money issuer.
Professor Richard J. Murphy writes that the government never spends taxpayers' money and the government creates every single penny it spends. Would you agree with him and other MMT proponents?"
Michael Hudson: Yes, the government doesn't need to borrow money.
Karl Fitzgerald: Yes. Thanks, Glenn. But it's good to get into this currency issue. I think what Michael's saying is, prepare for a new change in the global order to be formalized. Will that happen in the next few months or not ? That is very interesting. What did you think of Konrad's question, Michael?
Michael Hudson: Paying taxes means that you have less money in your account than you had before because the money goes from your account into the government account. You define the money supply as bank deposits. In that sense, yes, paying taxes absorbs the private sector's bank deposits. Running a deficit spends money into the real economy.
But governments don't have to borrow the money. Suppose that it's tax time. You go to the bank and say, all the money that I'm earning, I'm spending on food, on housing, medical bills. Let me borrow $20,000 to pay my income tax this year. The bank will say, okay, you'll sign an IOU with whatever collateral you have and we'll credit your account with $20,000 so you can pay the Treasury. So the bank will create the money to pay the Treasury the money, the tax money to finance the government budget.
**** Why can't the government itself be the banker for itself and say, we don't have to tax these people. We can create our own money. We can do just what the commercial bank does. And in fact, that's just exactly what the U.S. government did in the Civil War. It printed greenbacks.
When World War I began, observers in Europe and America all said, World War I can't really last more than a few months because war is very expensive - the European belligerents are going to run out of money and they can't afford to fight anymore. What actually happened ? They all began printing their own money because there wasn't enough money in the private sector to lend to the government. They created their own money.
There's no reason that what governments have done in wartime in the past, they can't do in peacetime. That's basically the MMT principle.
Karl Fitzgerald: Except if you're the EU.
Michael Hudson: Except you don't need a war for it.
Karl Fitzgerald: The EU borrowing restrictions, do you think in a new monetary order that it would be lifted so they have more flexibility throughout the EU to create their own currency?
Michael Hudson: What do you mean by borrowing restrictions?
David Ricardo tried to impose that on other countries outside of Britain. He said, no, you can't have any paper currency at all. The creditors have always wanted to not have a paper currency. They wanted to keep money scarce in their own hands so that people would have to pay them interest in order to get access to money to live and especially to wage wars. This was bullionism, and this imposed deflation on countries in the same way that the International Monetary Fund's austerity plans impose deflation on countries that come and try to borrow from it.
But countries don't need to do that at all. They can simply print their own money and declare it legal tender, just like Europe has done ever since the Bank of England was created in 1694. It was all founded on 1.2 million of government war debt as its foundation. The foundation of money in all of the central banks from Europe to the United States is government debt. So, of course, the governments can use debt as the backing of the money supply.
But it doesn't have to only back the money of the central banks to provide the commercial banks. It doesn't have to only be the money of commercial banks. It can be the government money itself. Is that clear ? I know if you haven't walked through the balance sheet, like Randy Ray usually walks the students through the balance sheet, and that's really the way that you can make it clear for yourself by doing the actual accounting.
Karl Fitzgerald: The EU has fiscal limits where member states are expected to keep government deficits below 3% of GDP. But there's no need at all for that.
Michael Hudson: That's supposed to be to prevent countries from going to war. But Europe now says, Germany now says, we used to want to be fiscally responsible, but now we want to go to war. So now we've changed it. Now it has to be 5% of GDP. We're raising the contribution to NATO military spending to go to war with Russia, to make them atom bomb us. If we're going to make Russia bomb us back into the Stone Age, we need to have 5% of the GDP, all of the economic growth, devoted to war. Otherwise, Russia will not destroy us and we can't self-destruct, which is what our objective is and what we've been moving, trying to do for the last century.
Karl Fitzgerald: There's a tension there we could explore between what the ECB can do and what individual nations can. But let's get to Ina's question. Does historical cost accounting act as a break on rentier income by refusing to book asset price inflation as earnings ? Is that why China kept it post-IFRS adaptation?
Michael Hudson: Much simpler. When China had a revolution, the landlords fled and the wealthy classes fled because it was very hard to be a very rich man after Mao's revolution. So how was the government going to fund its operations ? It created its own money. It didn't have an alternative. It was pretty much forced to develop MMT itself.
As the Chinese Revolution continued, it did not let an independent financial class emerge. Of course, people could save and acquire money, but the money creation and the allocation of credit was completely different in a country like China from the United States.
In the United States, money is created by the banks and provided to the private financial sector that uses it to make money financially by the stock market or the bond market or by buying real estate. Banks will use this money creation, 80% of what they lend, to lend to real estate, and they keep raising the debt to asset price ratio. The more they lend to real estate, the more they inflate prices.
Money creation in the United States inflates prices - not consumer prices, but asset prices. It inflates real estate prices, stock prices, and bond prices, as it did with the Obama quantitative easing after 2009. They created the biggest bond market boom in history, way from very high rates down to just a fraction of a percentage point.
That's the big picture. If you let the banks create money, they create it to buy assets, not to fund actual means of production. As the economy is financialized, to bid up real estate prices and to financialize the economy, instead of managing the economy to produce more, you deindustrialize the whole process.
That's why the West is deindustrialized by being financialized as opposed to China, where the banking system does not make money for corporate takeovers or money to buy control of the government to say, why don't we privatize and sell off China's public infrastructure that it's put in place and just privatize it and create monopolies to extract monopoly rent. The whole purpose for which credit and money are created in China are non-financial in character, in contrast to the West.
Karl Fitzgerald: Very good. Todd asks a question about your upcoming book,
"Michael, and how you talk about the Catholic Church starting international banking to conquer countries that were not Christian. To make this work, banking must be private. And he reads that fascism is the solution for socialism and communism.
If this is all true, did the Roman Catholic Church support Hitler and Mussolini to stop the spread of socialism ? I see the same happening here in America with the socialist ideas growing. Trump is going more and more fascist. Where is all the church's wealth stored since the Crusades ? And when is the new book coming out?"
Michael Hudson: The new book has just been typeset a few days ago, and we're now doing the index for it. My editor, Ashley Damon, is doing the index. He says it's going to take until the end of September. At that time, we send the index to be connected to the text of the book. It's already 450 pages, so it's going to be a long book. Then we'll send it to the printers and the printing company.
It'll be available on Amazon. It'll be available on wherever books are available. Karl is helping me improve my website. You can order copies directly from the website, and we can have them mailed to you, so that you don't have to go through Amazon, which takes 40% of the list price. We can do it much more much more easily than the publishers that go through. Karl can explain to you probably better than I can because he's organizing it.
Karl Fitzgerald: Unfortunately we can't sidestep Bezos. The monopoly he has on physical books is immense, as we know. But if people buy the e-books, the digital books, Michael will actually make more money from those than he does from the print.
Michael Hudson: Can we have print on demand, through either Spotify or something else, then send it?
Karl Fitzgerald: We could, but it will cost a lot of money to run that bookshop and the economics of it don't really stack up.
Michael Hudson: In other words, people are going to have to buy it on Amazon if they want a hard copy.
Karl Fitzgerald: That is right.
Michael Hudson: That's what's happened. The private bookstores have all gone out. The only company, Lightning Source, which I was using for a long time, was bought out by a private capital company, Ingram. They make me give 40% to where they sell at Amazon. I have to give them a percentage.
I hardly make any money at all on the hardback books that I sell anymore, because the actual content producer gets hardly anything now. There doesn't seem to be any way around that. I can't get a large trade publisher to publish any of my books, because they always have someone come in and blackball it at the last minute and say, wait a minute, this isn't our ideology. This is going to be offensive to some readers. This sounds socialist or whatever their complaint is.
For example, Yale University had contract agreements to publish two of my books, Forgive Them Their Debts and Killing the Host. At the last minute, one of their editors said, Oh, we can't do this. We're changing the whole plan and cancelling it. Same thing with Nation Books. It was supposed to be a left-wing publisher, but it was then bought out by a company that they hinted was held by George Soros and other liberals, and they didn't like the thought of criticizing the financial sector.
I really don't have access to large publishers that are set up to have books reviewed and sent out to mail copies. Even though Martin Wolf cited my last two books, his book of the year, for Financial Times, I have not been able to have an alternative to selling it through Amazon.
Karl Fitzgerald: That's why your support on Patreon is so important, because Michael really should be earning serious money, but it's so hard as an independent publisher.
Steve Keene put out his latest news this week, and he's having troubles as well financially. It's a challenge for anyone who's trying to challenge a system.
Can we get back to Todd's question, which is brutally to the point, Michael ? How do you feel about that, that line that perhaps the Catholic Church were supporters of fascism to stop the socialist bandwagon coming through?
Michael Hudson: The Catholic Church was very reactionary in the 1930s, but then you had liberation theology, and I was a part of that.
My first book was published by the Catholic Church, and of all things, by the right-wing of the Catholic Church. The Myth of Aid became one chapter of my Superimperialism. The Catholic Church sent me all around the country to discuss debt cancellation and land reform, especially as I was urging land reform out west for Native American reservations. They used my advocacy of land reform throughout Latin America and land taxation. They were my first, my major supporters under the two good popes.
But then you had the two popes from hell, the Polish Pope, and the German successor.
Now, it looks like you have a pretty good pope from Chicago, like me, a White Sox fan. So in the Catholic Church, there's a very broad curve there of what they do.
You can't really say it was Catholic. It was fascist. Certainly not now. Fascism has always been basically sponsored by the financial sector and by the wealthy classes against any thought of socialism. It's always been an anti-labor movement and a popular movement trying to generate hatred. At least people who take Catholicism seriously want to be part of supporting world peace, not war. The Catholic Church has not, since the Crusades, been as promotive of war, as the Judeo-Christian churches are or the Protestants are in today's times.
Matt Connors: You've several times mentioned real economy, financialized economy, which to me really would help pull a lot of ideas together, very overarching themes to a lot of your work in my estimation.
In the United States right now, we're hyper-focused on the economy and on debt. There's this appetite for taxing the rich. There's a ballot initiative in California that I don't fully understand. People are being interviewed about it. But to my viewing, none of it talks about the real economy versus the financialized economy. It seems to me like people are getting excited about something that's just going to leave the entire system completely intact. Not unlike Scott Bessent doing his little manipulations, and then two days later, the bond market gets back to where it was.
We could tax 5% from these billionaires and maybe keep food stamps going another six months, whatever. We're a mathematically innumerate country, if that's the right word. You know, illiteracy for writing, innumeracy for understanding numbers. I think you could go on the street and you could tell people that more money is spent by food stamp recipients on lobsters than by the U.S. Navy. And they would say, Yeah, that's really something we got to stop.
People don't have a sense of scale, but the scale of these numbers is now so hard for people to grasp. Here we have this idea going around, tax the rich is our solution, tax the rich.
I'm not saying we can tax our way out of anything, but what would be a political program that got at the financialized economy ? Is it the capital gains business ? Are we looking to break into inherited wealth ? I'm rambling on here a little bit, but the same way that you were part of, you know, 15 years or so again, raising the consciousness of 1%, 99% in a way that has stuck. People need to not worship these bankers as if they're doing something productive.
Am I missing something ? What's a political platform, an argument that would raise people's consciousness about the fact that these are vampires, these are parasites. Again, not saying that then we're going to have elections and we'll fix it.
Michael Hudson: I get your question.
The question's not a mathematical question. It's classical economics.
I consider myself a classical economist. The key is the vocabulary. The vocabulary of everyone from Adam Smith to Ricardo to Mill through Marx, the entire 19th century, classical economists talked about value and rent theory. They defined value as the cost of production. And they said that's really what determines price.
**** Why though is price so much higher than value, the cost of production ? The excess of price over cost value is economic rent.
For instance, the paradigmatic excess of price over rent was land rent. That's what Adam Smith, Ricardo, Mill, the entire 19th century said. What is threatening to prevent Britain and other countries from becoming industrial competitors in the workshop of the world is the high cost of production. How do we minimize the cost of production ? We have to minimize the cost of living of the labor that industrialists have to afford.
If the labor we employ has to pay high economic rent, either for high food prices because of agricultural protectionism for Ricardo, or high real estate prices, as became the case increasingly in the 19th century, then we're not going to be able to compete with other countries anymore because we're going to have high-priced labor.
The solution is to tax rent. Instead of leaving this rent to be collected by a hereditary aristocracy that as John Stuart Mill said collects rent in its sleep, we will tax away that rent because land doesn't have a cost of production. It's not an element of value. It's an element of price if you privatize the ownership of this rent. If instead the increased land value is paid as the basis of taxation, and that was the basis of British politics and all of the classical economists of the 19th century, then you'll have a low-cost economy.
There are other kinds of rents that we want to keep down, like monopoly rents. Beginning in the 13th century, 14th century, you had international bankers go to kings and say, you want to borrow money from us to go to war against each other. The British kings wanted to go to war against France. The French kings wanted to borrow to go to war against England. They told England, you can create trade monopolies. We the bankers will help you organize these trade monopolies and you can let us take the money you raise from the trade monopolies.
This is what developed into the East India Companies of Europe and all the trade companies, the South Sea Company, Mississippi Company, and you can use this as collateral to borrow from us. The monopoly rent will pay the interest on what you borrow. And Parliament doesn't have control. They can stop you from levying taxes on the economy and their income and their wealth, but they can't stop you from creating your own trade monopoly. That's how the royal system works.
The classical economists said, we'll get rid of anything that is a natural monopoly, whether it's foreign trade, or transportation is a natural monopoly, communications are a monopoly. We're going to keep that as a public service. As the Americans explained, public infrastructure is a fourth factor of production. The aim isn't to make a profit, it's to supply its services below cost.
The whole idea of capitalism was revolutionary. It was to bring prices down to the actual cost of production, to the value of production, by freeing the economy. A free market meant no more landlord class, no more land rent, no more monopoly rent. They were getting to the point of saying no more interest and financial fees as rentier income.
You can explain to the public and the students in economic classes, and you can do this in high school or certainly in college, and say the whole fight looked like this: that the whole West, Europe, the United States in the 19th century, fought to free economies from economic rent and bring prices in line with value.
What really should be taxed is not the wealth that's made if somebody builds a factory or builds their own business and makes a profit by employing labor, organizing labor, organizing the supply of raw materials, the purchase of machinery, developing a market.
Marx had a whole discussion of this in volume three of Capital. He said, how do we treat profits as in what we would now call a GDP account ? Marx said, these profits are earned. Profits are a part of value because, under the capitalist system, the capitalist is rewarded for his role in playing a productive role in organizing the productive process. The industrialist capitalist is not like a landlord, not like a monopolist, and not like a banker. The capitalist is not a rent recipient. He makes profits, and profits are an element of value and therefore part of the cost of production as opposed to real estate monopolies and finance sector.
I think if you explain this basic concept as it was explained in every book... Adam Smith, John Stuart Mill was clear. Marx wrote it all up, but not in the clearest form. But there were many popularizations of books through the 19th century. This is what everybody understood at that time. It's all been wiped out by the counter-revolution mounted by the finance and real estate sector working together to oppose this concept of classical economics: there's a difference between price and value.
Everybody can know that prices can be higher than value. How ? You give them the intellectual tools to conceptualize what is unearned income and what is earned income. You want to tax unearned income. You don't have to tax labor, because if you tax labor, then the employer is going to have to pay his workers enough money to pay the taxes. You don't need to tax labor. You don't need to tax industry for its own cost of production, but only for the unearned rentier revenue that may occur as corporate industry is turned into really a financial holding company and is financialized, as you've seen occur in the deindustrialization that's occurring in Europe and the United States, really since the 1980s, since Margaret Thatcher and Ronald Reagan. All of this was just a rehash of the Austrian economics in the 19th century.
Matt Connors: Thank you for that. One very quick follow-up. I've heard you say in the past that you want to assemble a team that could have people understand GDP better to be able to separate what's real from what's not real. Is that a project that will get off the ground or that you've gotten off the ground?
Michael Hudson: We haven't done it yet. It has usually taken me an entire year to make every big balance sheet that I've done. I focused mainly on the balance of payments because that's my field.
I'd have to work [on it], once I'm writing a book, sort of not a history of economic thought, but an analysis of GDP and how to make national income accounts. There can be a very rough statement of what I do. I want to set the industrial sector, production and consumption on the one hand. I want to isolate finance, insurance, and real estate as the fire sector on the one hand. That's easy to do from the existing national income and product accounts.
Then you can take the natural monopolies. You can take the oil industry separate. You can take the mining industry and separate that. Once you get into other monopolies, it gets harder and harder and harder. We don't have the resources to go look at a company by company basis.
How do we treat Alcoa or the aluminum companies ? The best you can do is make a very rough segment into what sectors of the economy are obviously rent recipient sectors that we can isolate in the national income and product accounts. Finance, real estate, insurance, oil, mining. I don't know if you probably can't do information technology. I don't know because I don't know if the GDP, the national income accounts have broken down that much.
It depends on how deeply you can get into the actual statistics to say, this is what we actually produce. This is the portion of the gross national product account that's product. And all of this other growth that we've added to what we call GDP isn't product at all. It's all a return to economic rent. It's finance, insurance, and real estate, mining, and oil.
Karl Fitzgerald: So it's a massive project.
Matt Connors: That sounds like an exciting book. Any help you need, hopefully you can ask for it.
Michael Hudson: I'd need someone to sort of just take a look and go through the national income and product accounts and see what they could do. It has to be somebody who knows Excel, to be able to make a time series of this. Because they keep changing the category line numbers, it's very hard. I've worked with very quick Excel workers before, and I've gone down to Washington and maybe spent a week there and done a lot with them. But somebody's been paying them a lot of money. I didn't have to pay them.
I don't have any money. I'm not making really any money at all from the books anymore. I just don't have the revenue to pay them. It'd have to be someone who looks and sees how relatively easy it is to segregate these sectors. The question is, how far back in time can you extend these accounts ? That depends on how much effort you can put into it, trying to find similar categories.
Karl Fitzgerald: Michael, it would take an entire year of my time for me to do it.
Michael Hudson: And I wouldn't be able to write my books. I'm writing my books instead. And the books have the concepts that I've just spelled out.
I'd need somebody who can actually do the statistical work that at the age of 87 years old, I can't do. I just don't have a year to spend on that.
Karl Fitzgerald: Yeah, we do have a team coming together, but we need a bigger team with a bit more finance to be able to deliver an analysis of economic rents in the US.
Michael Hudson: All the people that I've worked with have had trouble raising money for any of their work that provides an alternative to the current way of organizing society. There don't seem to be any billionaires with a social conscience anymore, like they're doing.
Even I think Paul Newman was largely keeping Lapham's Quarterly going. Lapham spent the last year of his life trying to raise money, and it just took all of his time. And it's something that can't be done. It has to be a group getting together and working together.
Karl Fitzgerald: Michael, the most recent study of national economic rents has come out of Canada. A website there called Commonwealth.ca found that national economic rents were around about 15% of GDP, which seems a little bit low for me. When I did it in Australia, it was about 24%. But the economic textbooks always tell us it's only 2 to 3%, so don't bother looking at it.
That's what neoclassical economics did to classical. When we moved into neoliberal economics, that sort of ushered in the new world order and this privatization agenda and this sort of free lunch for the 1% that just continues unabetted. For me, we're dealing with language again.
Michael Hudson: Imagine if rents were only 2%. Then you wouldn't have needed Adam Smith. You wouldn't have needed David Ricardo. You wouldn't have needed John Stuart Mill or Marx or any of the economists. Why was the whole fight, political fight of the 19th century over economic rent ? It wasn't over 2%.
The question is, what is economic rent ? It's not only what is labeled as land rent, it's monopoly income. They call it profit, but it's not profit, it's rent. Interest is rent, financial fees, late fees, and penalty fees on credit cards that are even larger than interest. That's economic rent. You need the concept of what economic rent is.
Since World War I, the whole anti-classical doctrine denies that economic rent exists. If you go to school and take an economics course and you're taught just what you said, Karl, that economic rent really doesn't matter, then you're not using the word rent in the same way that classical economists said. Rent is the excess of price over value across the board in the three major ways that I said: land rent, monopoly rent, and financial interest and fees.
Karl Fitzgerald: One of the other ways they've kept this story hidden is through the home ownership statistics. Throughout the West, they've said that about two-thirds of adults own their own homes. So, as a property-owning democracy, we've been reasonably successful, and there's no way politicians can act to push prices down because that will hurt them at the ballot box.
You, Michael, alerted me to some incredible research from the Federal Reserve Bank of Minneapolis, where they found that the whole basis of this understanding comes from a misinterpretation of a census question that counts the number of people per dwelling on the census night. Any adults living in that home are considered owners, even if it's your 19-year-old daughter or your 80-year-old father who's moved back in with you, they're considered as owners. Instead of it being 65%, I think they found it was 53% in reality.
I did the same statistical analysis in Australia, and 67% is what's popularly quoted, but really it was 51%. And over four census, that trend has been revealed. Even in Singapore, the country that's often quoted as having the highest ownership levels of somewhere around 92%, is closer to 77%.
Michael Hudson: Let's spell it out. What that means is that the 90-some percent are families that live in whole families, that live in homes that they own. But that doesn't mean that the residual is landlords, because you're double counting.
The question is: is this property a value of land ? What extent or area of land is privately owned, i.e. what's the landlord-owned and absentee landlords, and what is owner-occupied ? At least in the U.S., you can say how much of real estate is the equity ownership of property in the United States, and how much is debt. And equity ownership of the whole real estate sector has gone way down, so that it's the banks that actually have a claim on the largest element of the value or the price, I should say, of this property.
The Federal Reserve then breaks it down by income cohort. You can see that as the income of families go down, their equity ownership in their home shrinks to almost nothing at the bottom of the scale because all of the value of the property is essentially owned by the bank.
Karl Fitzgerald: That's certainly the case, that a smaller proportion of people are owning the home outright, and even baby boomers are retiring into greater debt and are trapped in big homes because if they try and move, they're now paying current prices, which is actually beyond the equity they've built up in their homes.
As all these inefficiencies are within the housing market, we've heard a lot about the inefficiencies in the monetary system today, balance of payments. It is the battle of the ages for the everyday person to understand how monopoly controls their economic freedom. And that is what Michael's work is so powerful in helping us understand.
As we get towards the end of this quarterly edition of the Hudson Roundtable, I wanted to finish with Christo's excellent question here, where he asks about your book, Forgive Them Their Debts. The point is made that some debt cancellations, for example, Zedekiah, are done for cynical reasons like maintaining a population's loyalty. In the US, once the current dispensation breaks in a more fundamental manner, might the next regime be set up by whoever's first to the punch, by whichever faction under the current dispensation recognizes that a debt cancellation is the pathway to the next power structure?
Michael Hudson: The advantage of a debt cancellation isn't simply that it wipes out debts, it wipes out the savings, the wealth of the 1% or the 10% that are the creditors for these debts. And it's the wealthy class that controls the economy.
Instead of calling it a debt cancellation, come right out and say it. It's, for the wealthy family, a wealth cancellation. It's a financial wealth cancellation because that financial wealth is what for other people are the debt cancellation.
The one thing you don't want to wipe out, for instance, is the real estate debt. This'd leave the absentee landlords in control. This is what the third century BC revolution in Sparta was all about. Sparta wanted to cancel the debts, and by canceling the real estate debts, the real estate owners that owed a lot of money on it all of a sudden owned all the property that they'd bought for a few pennies down and the rest from borrowing. You don't want to create an absentee-owned landlord class.
The only way that you make sense to cancel the debts is to make sure that the land rent which was paid to the banks will now be paid to the government, not to a private creditor class. That's really the key. A debt cancellation has to go hand in hand with a classical tax reform, exactly on the lines that Adam Smith and John Stuart Mill and the whole rest of the classical economists said. It has to go with a rent tax to essentially socialize economic rent instead of letting it become the basis for the whole financial superstructure that's based on rent, not profits.
Karl Fitzgerald: Can you comment a bit on how the taxation of rent price above cost value brings down cost of living and doing business and specifically the cost of housing ? I would say, Konrad would say, by taxing away the incentive for rent squeezing. But is there more to it?
Michael Hudson: Sure. If you all of a sudden impose a rent tax right now, then the banks would all become insolvent because the banks have deposits. The deposits of the banks, the liabilities to their depositors and to other bondholders, is all based on their revenue largely from various forms of economic rent, land rent, monopoly rent, and financial interest charges.
You have to realize that a debt cancellation means you get rid of the existing banking system and all of the big holdings. You'll do what Germany did in its monetary reform after World War II. Everybody got to keep a minimum necessary bank balance that they had, but not huge bank balances. All the financial wealth was basically wiped out. That's what you have to do.
In a debt cancellation, you can't isolate debt from the whole rest of the economy. It has to go hand in hand with an overall fiscal restructuring and a whole new financial system that is going to be based on having productive credit to actually finance means of production, not make unproductive lending. For that, you have to understand the classical distinction between productive and unproductive credit, productive and unproductive spending and labor, and the whole vocabulary that was developed over the whole century that's just been erased from the economic curriculum these days.
Karl Fitzgerald: You could also say that if you taxed rent, you could reduce the number of taxes. Here in Australia we have 125 taxes, with 115 of them raising just 10% of revenue, so we could reduce them back to about 20, 25. That tax adds to prices. [With reform], that will come off prices.
The tax that's raised off land can in Australia be at least $400 billion a year, whereas banking profits are only $40 billion a year. That closes the loop, and we channel the payments away from bank interest and towards subsidizing taxes on our income and sales. Basically, removing those taxes tightens that payment window up, which at the same time not only raises revenue but improves economic behavior in that all of those blighted properties, vacant blocks of land, have to start earning an income. They'll then either rented out or sold on the market, pushing supply, that crucial word we always hear, supply onto the market, which pushes prices down.
The other big advantage of these types of taxes is it's the one tax you can't hide. So in terms of deadweight costs, it actually adds to the efficiency of the economy. It tightens up, and foreign investors have to contribute to the land they own property in.
Michael Hudson: It's necessary to explain to the people that, yes, we're now going to tax the land, but you're not going to have to pay the interest that you're having to pay. The reason you're having to pay so much for your home is that much of your home is the mortgage debt that's attached to it. We're going to wipe down the debt, but we're going to tax the real value of the rent of location that's going to be set by the marketplace. We're going to really move to a market economy that's not financialized and distorted by the bank credit system. And now that we can tax the land, we can reduce your own income tax. And we can reduce, as you say, Karl, all these other taxes.
That's how we have to present it to the people. But you have to tell them, they have to think of how the economy works. The economy is an economic system, and people don't realize that it's part of a system. They think you can segregate it layer by layer.
Karl Fitzgerald: With this story, we can split the right wing. That is the most powerful element of it. We have to help those small business owners understand this because they're the ones who can call the rentiers to account, perhaps easier than us radicals.
Michael Hudson: I love this back and forth. In a way, you're showing me what's really important that needs to be discussed, which is what I'm doing. If any of you really want to begin working on this value, price, and rent: I can send you the chapters that I'm working on, or I can submit them to Karl to send to you to coordinate how we can begin to use the national income and product accounts to segregate them.
Matt Connors: I just came on to say goodnight to Michael. You had an amazing interview on Nima's program today. I hope everybody checks it out, discussing the Shanghai Cooperative Organization.
Michael Hudson: Thank you.
Karl Fitzgerald: Lovely. Well, thanks to all the Patreon supporters here, and thanks to everyone who supports Michael in whatever way they can with comments on YouTube, with sharing the work. It's the battle of the ages, what we're discussing here.
Michael Hudson: This is really my main aim to support right now, not the sale of the books, alas.
Karl Fitzgerald: Thanks, everyone. We'll see you in early December. Good work, all.
Transcription and Diarization: scripthub.dev
Editing: Ton Yeh
Review: Karl
Photo by Vitaliy Shevchenko on Unsplash