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March 19, 2016

How the US destroying the lives of millions

Scott Stockdale

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The United States is breaking up the global order established after World War II that allowed a country or official agency that was owed money by another country to go through an international court and enforcement system to collect from its debtor, according to Michael Hudson, President of the Institute for the Study of Long-Term Economic Trends, a Wall Street financial analyst, and Distinguished Research Professor of Economics at the University of Missouri, Kansas City.

In an interview with Dr. Hudson, broadcast on Guns and Butter in February, 2016, Dr. Hudson said the IMF and the World Bank were part of that enforcement system, but now they’re saying: “We’re not going to be part of that anymore. We’re only working for the U.S. State Department and Pentagon. If the Pentagon tells the IMF it’s okay that a country doesn’t have to pay Russia or China, then now they don’t have to pay, as far as the IMF is concerned.”

Dr. Hudson said that as long as the U.S. has veto power in the IMF, its delegate can veto any loan to a country that owes money to the United States, that the United States doesn’t wish to support. But it has no objection for the IMF making loans to U.S. satellites such as Ukraine, that has a $3 billion loan to Russia coming due.

He explained that this is part of the U.S. plan to hurt Russia economically, so it will capitulate to the U.S. Strategy.

“The New Cold War strategy is basically an attempt to force other countries to privatize their economies to follow neoliberal policy. The aim is to open their economies to U.S. corporations and U.S. Banks ... All of a sudden it’s become clear that the IMF is not an international institution for global economic performance. It’s an arm of U.S. Cold War diplomacy, one that’s moving far to the right very quickly under the Obama Administration.”

In the same way that the British, the Americans and the French insisted in the 1920's that Germany could pay any amount of reparations, if it would tax its economy enough, the Western banking system, the World Bank and the IMF are using the same strategy with many debtor countries in the world today. However, their is an important twist: Dr. Hudson said these financial institutions know that austerity won't work, but they have a plan B.

“They (IMF officials) know very well – and the staff has made it very clear – that austerity doesn’t enable a country to pay its foreign debts. Austerity makes countries less able to pay. That means they will need to borrow even more.

“Then the IMF comes in with its number-two punch: The number one punch is austerity. The number two punch is to say: ‘Well, I guess our program didn’t work. What a disappointment. [But it shouldn’t really be a surprise, happening again and again.] You now have to begin privatizing your industry and natural resources. Sell off your land.’ They tell other debtor countries essentially what they told Greece over the last year.”

In what seems eerily similar to loansharking – only this is perfectly legal – Dr. Hudson said the IMF knew Greece couldn't repay the money the IMF was lending it in 2010, but President Obama went to the Group of Twenty meeting and said that if Greece didn't pay the French and German bondholders, the American banks had made huge bets and would go under – and so would big European banks who were counterparties. Dr. Hudson said the IMF policy was to save the banks, not Greece.

“It was deemed preferable to break up Greece, even if this meant breaking up Europe. That was the tradeoff: the banks vs. the Greek economy ... That’s the enormous asymmetry of the egotistic the U.S. stance. It’s naked greed. They’re willing to smash the IMF, Greece and European integration just so Goldman Sachs and the Wall Street banks that had made bets that Greece would pay wouldn’t take a loss.”

After lending Greece the money, the IMF began demanding Greece follow an austerity plan in 2010. Dr. Hudson said that when this didn't work, the IMP joined with the rest of the Troika (the European Central Bank and European Union) in 2015 to demand that Greece agree to sell off its islands, sell off its ports, sell its water systems, sell everything in the public domain.

He added that after that demand had been made on Greece in the summer of 2015, it was Ukraine’s turn.

“The number one punch against the Ukraine by the IMF was to impose austerity on the pretence (its junk economics) that Ukraine could pay its foreign bondholders with income taxed out of its domestic economy. When this made things worse, the World Bank and USAID came in.

The U.S.-appointed finance minister fingered the agricultural land, gas rights and other natural resources that Ukraine could sell off to American and European investors – but not to Russians.”

Dr. Hudson said the problem with the U.S. modus operandi of “Save the banks, not the economy” is that the volume of interest-bearing debt grows exponentially. In other words, its a bottomless pit.

“Any rate of interest is a doubling time. So the debt is going to grow and grow exponentially. That obliges debtor countries to impose deeper and deeper austerity. And every economy that you impose this austerity on is going to react like Russia or Latvia or Greece. There’s going to be emigration, a decline in the birth rate, a rise in the death rate and a spread of disease. There’s going to be a shrinking market as the debtor economy is torn apart”

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