iTulip Interview: Dr. Michael Hudson - Parts I & II of IV

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iTulip Interview: Dr. Michael Hudson - Parts I & II of IV (Free)

Eric Janszen interviews Dr. Michael Hudson on the FIRE economy, the dollar, asset inflation and deflation, and the economic growth ratchet.

Michael Hudson is a Wall Street financial analyst and Distinguished Research Professor of Economics at the University of Missouri (Kansas City). He has written or edited over ten books on international finance, economic history and the history of economic thought, and has been an economic adviser to the U.S., Canadian, Mexican and other governments and United Nations agencies, as well as to international corporations and money managers. He is president of the Institute for the Study of Long-term Economic Trends (ISLET). His books have been translated into Japanese, Spanish and Russian.

As an advisor to the White House, State Dept. and Defense Department at the Hudson Institute, and subsequently to the United Nations Institute for Training and Research (UNITAR), he became one of the best known specialists in international finance.

Dr. Hudson is former balance-of-payments economist for the Chase Manhattan Bank and Arthur Anderson. In 1989 he organized the world’s first third world debt fund for Scudder Stevens & Clark (an offshore fund). He continues to conduct statistical research for financial and non-profit institutions, most recently for the Robert Schalkenbach Foundation and the Levy Economics Institute.

Michael Hudson is president of the Institute for the Study of Long-term Economic Trends (ISLET) in New York and London. Among his books on the politics of international finance are Super Imperialism - New Edition: The Origin and Fundamentals of U.S. World Dominance, and Global Fracture: The New International Economic Order. He formerly taught international economics at the New School for Social Research, Graduate Faculty (1969-72), and has traced the development of international trade and financial theory in Trade, Development and Foreign Debt (Pluto Press, 1993. He is editor of the ISLET assyriological colloquia on Debt and Economic Renewal in the Ancient Near East (CDL Press, 2002), Urbanization and Land Use in the Ancient Near East ((Harvard: Peabody Museum, 1999), and Privatization in the Ancient Near East and Classical Antiquity (Harvard 1996).

In 1984 Dr. Hudson joined Harvard’s Peabody Museum to design a program in the financial origins of civilization. He has edited three colloquia in this program: Privatization in the Ancient Near East and Classical Antiquity (1996), Urbanization and Land Ownership in the Ancient Near East (1999) and Debt and Economic Renewal in the Ancient Near East (2002). A fourth volume on the Origins of Money and Account-Keeping in the Ancient Near East is in preparation.

Background Reading

• Saving, Asset-Price Inflation, and Debt-Induced Deflation
• New Road to Serfdom

Part I (Free - 11:38)

1. The Finance, Insurance, and Real Estate (FIRE) envelopes the Industrial Economy and operates independently
2. There will be a "break in the chain of payments"
3. Hyper-inflation is a form of debt deflation
4. A break in the chain of payment can lead to commodity price deflation
5. Insiders get their money out before the event, in the case of the Soviet Union by means of money laundering
6. Others are able to buy bonds denominated in a foreign currency

Part II (Free - 10:28)

1. How a bread in the chain of payments may occur
2. The resulting economic dislocations will have no relationship to the dollar
3. The current dollar hegemony may be unseated only by an economic, political, and military break with the U.S.
4. A variable tariff that allows trading partners to not recycle dollars to prevent local currency appreciation can re-balance the system
5. No nation has ever repaid its foreign debts in full... ever

Part III (iTulip Select Subscribers Only - Available here)

1. Credit derivatives are the most likely cause of a financial system crash.
2. No one can hedge the risks posed by asset deflation except by selling inflated assets.
3. October 1987 is the model for the next financial crash.
4. The larger the debt, the bigger the debt deflation. Expect a long, slow economic crash.
5. The U.S. will not repay its foreign debt.
6. Hyperinflation of the dollar, if it happens, will be a political and not an economic or monetary event.
7. Since the time of the South Sea bubble, financial bubbles have been created by governments in order for governments to dispose of public debt.
8. The U.S. government wants to exchange social security claims for stocks so that stocks can be inflated and then allowed to crash, to wipe out the entitlement liability.
9. Most corporate balance sheet growth over the past few years is fictitious capital, what used to be called 'watered costs.'
10. The U.S. corp. sector is fragile due to excessive use of debt and leverage for the past several years.
11. There will be a huge asset grab and reimbursement.
12. Hardly any money is spent on goods and services, rather, 99.9% of monetary payments are for assets.
13. There will be mass defaults on mortgages and losses of houses to people with ready cash.
14. The banks will allow people to stay in their houses, payments owned will be added on to the mortgages, and debt will go up without any money changing hands.
15. US housing debt will mimic the 1970s Brazilian compound interest curve.

Part IV (iTulip Select Subscribers Only - Available here)

1. The future will not be "business as usual."
2. The global economy is likely to experience a financial system crash caused by a revelation of fraud or some kind of financial accident.
3. The main source of risk, the derivatives market, is so non-transparent that once there is a break in the chain of payments no one knows how it will wind up until after the dust settles.
4. As finance now dominates the economy, this crash will have serious economic and political consequences.
5. Political leaders who are expecting it may exploit the resulting turmoil. Unfortunately, the bad guys tend to plan better than the good guys, who tend to react ad hoc.
6. Russia and China are developing a competing economic and political block which will play a significant role in the future global economy and polity.

Previous iTulip Select Interviews:

• Jim Finkel, CEO Dynamic Credit - Parts I and II

Upcoming iTulip Select Interviews:

Rick Ackerman
Martin Mayer
Paul Tustain

Upcoming iTulip Select Book Reviews:

Debt and Delusion: Central Bank Follies that Threaten Economic Disaster (Deluxe Edition)

America's Suicidal Statecraft: The self-destruction of super power