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Michael Hudson

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

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Book:The Bubble and Beyond
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“Strange as it may seem — and irrational as it would be in a more logical system of world diplomacy — the dollar glut is what finances America’s global military build-up. It forces foreign central banks to bear the costs of America’s expanding military empire. The result is a new form of taxation without representation. Keeping international reserves in dollars means recycling dollar inflows to buy U.S. Treasury bills — U.S. government debt issued largely to finance the military spending that has been a driving force in the U.S. balance-of-payments deficit since the Korean War broke out in 1950. [...] “China National Offshore Oil Corporation go home” is the motto when foreign governments try to use their sovereign wealth funds (central bank departments trying to figure out what to do with their dollar glut) to make direct investments in American industry, as happened when China’s national oil company sought to buy Unocal in 2005.[...] So Europeans and Asians see U.S. companies pumping more dollars into their economies not only to buy their exports (in excess of providing them with goods and services in return), not only to buy their companies and commanding heights of privatized public enterprises (without giving them reciprocal rights to buy important U.S. companies), and not only to buy foreign stocks, bonds and real estate. The U.S. media neglect to mention that the U.S. Government spends hundreds of billions of dollars abroad — not only in the Near East for direct combat, but to build military bases to encircle the rest of the world, and to install radar systems, guided missile systems and other forms of military coercion, including the “color revolutions” that have been funded all around the former Soviet Union.”

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Book:The Bubble and Beyond
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“The United States thus achieved what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. Government. Against dollar-deficit regions the United States continued to apply the classical economic leverage that Europe and Japan were not able to use against it. Debtor economies were forced to impose economic austerity to block their own industrialization and agricultural modernization. Their designated role was to export raw materials and provide low-priced labor whose wages were denominated in depreciating currencies. Against dollar-surplus nations the United States was learning to apply a new, unprecedented form of coercion. It dared the rest of the world to call its bluff and plunge the international economy into monetary crisis. That is what would have happened if creditor nations had not channeled their surplus savings to the United States by buying its Government securities.”

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

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“The book received a wider review in the business press than in academic journals. A few weeks after the U.S. publication I was invited to address the annual meeting of Drexel-Burnham to outline how the new Treasury bill standard of world finance had replaced the gold exchange standard. Herman Kahn was the meeting’s other invited speaker. When I had finished, he got up and said, “You’ve shown how the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.” He hired me on the spot to join him as the Hudson Institute’s economist. I was happy enough to leave my professorship in international economics at the New School for Social Research. My professional background had been on Wall Street as balance-of-payments economist for the Chase Manhattan Bank and Arthur Andersen. My research along these lines was too political to fit comfortably into the academic economics curriculum, but at the Hudson Institute I set to work tracing how America was turning its payments deficit into an unprecedented element of strength rather than weakness.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“Private investors traditionally had been obliged to take losses when debtors defaulted, but it became apparent that the U.S. Government was not about to relinquish its creditor hold on the Allies. This intransigence obliged them to keep tightening the screws on Germany.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“But instead of U.S. citizens and companies being taxed or U.S. capital markets being obliged to finance the rising federal deficit, foreign economies were obliged to buy the new Treasury bonds being issued. America’s Cold War spending thus became a tax on foreigners. It was their central banks who financed the costs of the war in Southeast Asia.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“These rules meant that, unlike Britain, the United States was able to pursue its Cold War spending in Asia and elsewhere in the world without constraint, as well as social welfare spending at home. This was just the reverse of Britain’s stop–go policies or the austerity programs that the IMF imposed on Third World debtors when their balance of payments fell into deficit.”

MonetarySuper ImperialismDollar Debt
Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“When other countries run sustained trade deficits, they must finance these by selling off domestic assets or running into debt — debt which they actually are obliged to pay. It seems that only the Americans are so bold as to say “Screw the world. We’re going to do whatever we want.” Other countries simply cannot afford the chaos from which the U.S. economy is positioned to withstand as a result of the fact that foreign trade plays a smaller role in its economy than in those of nearly all other nations in today’s interdependent world. Using debtor leverage to set the terms on which it will refrain from causing monetary chaos, America has turned seeming financial weakness into strength. U.S. Government debt has reached so large a magnitude that any attempt to replace it will entail an interregnum of financial chaos and political instability. American diplomats have learned that they are well positioned to come out on top in such grab-bags.”

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Book:The Bubble and Beyond
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“These acts recall the 1971–72 “Chicken War” between America and Europe, and the grain embargo that quadrupled wheat prices outside of the United States. It was this embargo that inspired OPEC to enact matching increases in oil prices to maintain terms-of-trade parity between oil and foodstuffs. The “oil shock” was simply a reverberation of the U.S. grain shock.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“The United States is in deficit on raw materials account, but is unwilling to limit its industrial expansion correspondingly. It is in surplus on farm products account, but is unwilling to limit its agriculture accordingly. The peoples of developing countries therefore are to be turned into the instrument through which the otherwise untenable U.S. economic process is perpetuated.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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“The easy kind of liberalism, with its hope for ready-to-hand technocratic solutions to social problems, has led them to support the major way in which liberal institutions among backward peoples can be prevented from evolving. Their support for higher living standards for all has been exploited into de facto support of the oppressive and militarist regimes in backward countries. That indeed has become the purpose of the Malthusianism promoted by the World Bank and the government of the United States. American liberals have been its unwitting allies, and thereby the allies of the world’s most reactionary regimes.”

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Book:Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
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