The Weaponization of Economic Theory

ilene's picture

This is an excellent article by Michael Hudson. The very end is a powerful commentary on the neoliberal ideology, defined in Wiki as "based on the advocacy of economic liberalizationsfree trade, and open markets. Neoliberalism supports privatization of state-owned enterprisesderegulation of markets, and promotion of the private sector's role in society. In the 1980s, much of neoliberal theory was incorporated into mainstream economics." 

This doctrine has been used to shift power, money and other resources to the members at the very top of our society, with great support from the non-top who have been successfully misled into thinking they are supporting an equitable system. It's not, at the very foundations. If you read nothing else, read the final section in which Michael explains why neoliberalism is a weaponization of economic theory - a "doctrine of power and autocracy combined with deregulation and dismantling of democratic law" - aimed at replacing the government's power to protect the people with an oligarchic power to oppress them. It is not about free markets and free trade, as the terms were traditionally used by economists. It is about central planning by financial centers, and it requires deregulation and a tax structure favoring banking and financial institutions, and their major customers, real estate interests and monopolies. We have that now.

Michael argues that "the result is a doctrine of financial war not only against labor but also against industry and government. Gaining the financial power to indebt economies at increasing speed, the banking and financial sector is siphoning resources away from the real economy. Its business plan is not based on employing labor to expand output, but simply to transfer as much of the existing flow of revenue as possible into its own hands, by capitalizing all such revenue into interest payments, on loans collateralized and pledged to creditors." In his conclusion, Michael compares our state to the economic polarization characterizing ancient Rome before its ruin. ~ Ilene


The Weaponization of Economic Theory

Courtesy of 

Europe’s three needs: a debt write-down, a real central bank, and a more efficient tax system 

Brussels Talk, Madariaga College, Governing Globalisation in a World Economy in Transition, June 27, 2012

What can Europe learn from the United States?

First, the United States – like Canada, England and China – have central banks that do what central banks outside of Europe were created to do: finance the budget deficit directly.

I have found that it is hard to explain to continental Europe just how different the English-speaking countries are in this respect. There is a prejudice here that central bank financing of a domestic spending deficit by government is inflationary. This is nonsense, as demonstrated by recent U.S. experience: the largest money creation in American history has gone hand in hand with debt deflation.

It is the commercial banks that have created the Bubble Economy’s inflation, from North America to Europe. They have recklessly lent mortgage credit and other credit far beyond the ability of domestic economies to pay. A real central bank can create credit on its electronic keyboards just as easily as commercial banks can do. But central banks do not create credit for speculative purposes. They do not make junk mortgages based on “liars’ loans” (the liars are the banks, not the borrowers), based on fictitious evaluations by crooked appraisers, and sold fraudulently to investment banks to package and sell to gullible Europeans, pension funds and other customers.

In short, there is no need for the present austerity. If Europe acted like the United States, it could bail out the banks.

But would this be a good thing? My second point is that there are good reasons not to fund a dysfunctional debt overhead, financial and tax system. It is preferable to change these systems.

In the United States, Paul Krugman has urged the Federal Reserve to simply lend banks an amount equal to their bad loans and negative equity (debts in excess of the market price of assets). He urges a “Keynesian” program of spending to re-inflate the economy back to bubble levels. This is the liberal answer: to throw money at the problem, without seeking structural reform.

The Bank for International Settlements (BIS) disagreed last week in its annual report. It said – and I believe that it is right – that monetary policy alone cannot solve an insolvency problem. And that is what Europe has now: not merely illiquidity for government bonds and corporate debt, but insolvency when it comes to the ability to pay.

In such circumstances, the BIS explains, it is necessary to write down the debt to the amount that can be paid – and to undertake structural reforms to prevent the Bubble Economy from recurring.

The Canadian postal workers union has an informal slogan: “A job that’s not worth doing is not worth doing well.” I might apply this to Europe by saying that a badly structured economy is not worth subsidizing or saving. It should be made well.

This entails, for starters, writing down the debt overhead. That is what created the German Economic Miracle of 1948: the Allied Monetary Reform that wiped out debts over and above minimum working balances, and wages debts owed by employers to employees. It was easy to write down debts that were owed to Nazis. It is much harder to do so when the debts are owed to powerful and entrenched institutions – especially to banks.

Take the case of a Greek debt writedown. This would hurt the Greek banks first and foremost, and also more innocent German insurance companies and banks.I have a modest suggestion as to how to handle this. First, let the Greek banks go under. They helped stymie the Greek government’s attempt to stop tax evasion and money laundering. They have been described as co-conspirators and corrupt. Of course their depositors should be made whole by a standardized, public bank insurance scheme. But bank bondholders and stockholders, and even non-insured depositors, are another matter.

As for the German institutions, if a Greek Clean Slate pushes them into insolvency, the German Government should do what the U.S. Federal Deposit Insurance Corp. (FDIC) is empowered to do: take them over, make all the depositors and policy holders whole, and operate these institutions as a public option – either temporarily or permanently.

The alternative is austerity and debt deflation that will leave European markets shrinking, living standards falling, and turn Europe into what U.S. Defense Secretary Rumsfeld has said so often: “Old Europe,” as if it is too late to be saved. Any discussion of the U.S. economy necessarily involves the global context. So it is necessary to discuss not only domestic U.S. developments, but also relations with Europe and the BRICS countries.

The most important dynamic is financial. A continued decline in real estate prices, coupled with local government debts, has led to debt deflation. As personal and corporate income are diverted to pay debt service, spending on new consumption and investment goods is cut back. Sales and employment opportunities are falling off, especially for new entrants into the labor force. Major categories of debt cannot be repaid in Europe and the United States, except by foreclosures transferring property to creditors. Short-term financial aims overshadow the long-term adjustments that ultimately will be needed: debt writedowns in the public and private sectors. The alternative to this “business as usual” scenario is for the U.S. and European economies to look increasingly like the Baltics – austerity aggravating economic shrinkage.

The U.S. Government as well as European governments have taken bad bank debts onto the public balance sheet. This is not a problem for the United States, whose Federal Reserve can simply create the credit to roll over its debt. But for Europe, public debts simply cannot be paid under current central bank constraints. Instead of changing the central bank rules, the European Union is willing to plunge the continent into depression and economic shrinkage.

U.S. Austerity and deeper Negative Equity

The U.S. economy is free of the monetary constraint that Europeans impose on themselves. The Federal Reserve does what central banks are supposed to do: monetize government deficit spending by buying public debt. However, the increase in new government debt creation has not been mainly to finance deficit spending to increase economic activity and employment, to invest in rebuilding the nation’s infrastructure or providing states and cities with the revenue sharing that in the past enabled them to balance their local budgets. Instead, the government has created debt in an attempt to re-inflate real estate markets back toward Bubble Economy levels. The idea was for the economy to “borrow its way out of debt.”

In practice, there was not much hope of success. The banks sent the $800 billion of Federal Reserve’s Quantitative Easing (QE2) in 2012 abroad, mainly to the BRICS economies in the form of interest rate and currency arbitrage. The banks’ idea was to earn their way out of their own negative equity, but not by lending to a real estate market whose prices continue to decline. This is forcing more properties into negative equity – and that leaves the banks themselves in a negative equity position. So there is little new lending for real estate, to consumers, or to business. Markets are being shrunk by debt deflation.

States and cities also face a shrinking tax base, and many are subject to constitutional requirements for balanced budgets. The path of least resistance has been to underfund their pension plans – which have fallen far behind, especially inasmuch as most plans assume an 8% annual rate of return. This rate – assuming a savings doubling time of just nine years – has become even more fictitious today than it was a decade ago. So some localities have taken risks and lost – with their loss being the counterpart to earnings by the largest banks on derivatives.

The bottom line here is that the U.S. economy is not in a position to “borrow its way out of debt.” The outlook thus is for a similar austerity to that of Europe.

Financial fraud has been effectively decriminalized in the United States. In a nutshell, people have lost trust in the banks – and the financial sector itself mistrusts its fellow institutions. So the non-bank money market funding has dried up for business, and individuals are afraid to invest in the stock market.

President Obama retains his progressive rhetoric, but actually is neoliberal. (His Senate mentor was Joe Lieberman who helped him go for the money and choose Rubinomics advisors.) Mitt Romney pretends to be a right-wing extremist, but seems reasonable on economic policy. However, he may feel under pressure to support right-wing Republican lobbyists in the Congressional leadership. Even if he does, there will not be much difference from the Obama administration. The U.S. situation thus is much like that of Britain under Labour party leadership in recent years: centrist or even left-wing rhetoric on social policies, but neoliberal financial policy favoring the banks.

BOTTOM LINE: Neither the U.S. nor European economies can “grow their way out of debt.” Their debt deflation will worsen, and their budget deficits will widen.

The U.S. Political Outlook

As in Europe, there is little alternative from the ostensible left – from the Democratic Party, the labor unions and allied interests. President Obama seems likely to win this November’s presidential elections, and he is a neoliberal – probably more so than the Republican candidate Mitt Romney.

The common backers of the Republican and Democratic Parties – mainly, Wall Street and real estate interests – realize that a Democratic President is in a better position than a Republican to neutralize Congressional or Senate opposition to scaling back and privatizing Social Security and Medicare. Democratic politicians are more likely to counter Republican proposals along these lines than proposals put forth by their party’s own president. The situation is much like Tony Blair out-Thatchering Britain’s Conservatives in trying to privatize British rail and tube infrastructure and promoting the Public-Private Partnership plan. This is essentially the Rubinomics position supported by the Democratic leadership.

Many voters simply will stay home, so Mr. Romney may have a chance to win, based on support in the South and the West – and even perhaps some Midwestern swing states. In either case, the 2013-16 administration looks like it will be a bipartisan neoliberal austerity.

From the U.S. vantage point, Europe is a dead zone. It looks to me like financial and fiscal self-destruction.

There would be some hope for progress if the financial crisis was used to clean up bureaucracy and shift the tax system off the cost of living and doing business to a land tax on economic rent. This would prevent a new real estate bubble from developing, by holding down the “free” site value that could be capitalized into bank loans. This would lower the cost of housing, and also free employment from taxation. And it could go hand in hand with reducing the size of the Greek bureaucracy, for instance.

But I don’t see this happening in Europe. So financial austerity is likely to aggravate the budget deficits rather than help them. European economies are likely to grow “surprisingly” less than forecasts suggest, and news media will report this as “unanticipated slowdown” “to everyone’s surprise” and so forth.

The likely political reaction in Europe is likely to be a nationalistic opposition to relinquishing government power. But this opposition is likely to come more from the right than from the left of the political spectrum. This is what is so striking about today’s political situation both in Europe and the United States: the failure of the left to provide an economic alternative, and of the right to reform the tax system and corruption.

BOTTOM LINE: The U.S. trade balance may improve as consumer budgets are squeezed, limiting imports, and as domestic shale gas cuts import demand. But capital inflows are unlikely to increase. And until interest rates begin to rise, capital outflows will continue (much as was the case in Japan after 1990). The U.S. is thus suffering a “Japan syndrome.”

Increasing global fracture into regional blocks

Instead of international “cooperation,” I see a regional rivalry among blocs polarizing between the U.S.-centered NATO bloc and the BRICS, expanding their influence. Europe looks pretty much left out, as its markets are not growing and it is not a prime investment area. The BRICS countries are likely to start erecting capital controls against easy-credit policies in the United States funding a takeover of their assets.

Financial flows and capital flight are putting upward currency pressure on the BRICS at the expense of the euro and the dollar. If the euro does not decline against the dollar, it is largely because both currencies are equally weak together and share similar problems. Both economies will shrink, leading to more insolvency for real estate and also for government budgets. This Euro-American shrinkage is likely to spur moves in China and other BRICS to rely more on growth of their internal market. China’s wage levels are likely to rise, prompting production to aim more to satisfy domestic consumer demand than foreign export demand.

The main problem for China is that one of the first expenditures of families with rising revenue is to buy autos. The government’s response is to invest more in public transportation, and is likely to impose an environmental tax. More dispersion of urban centers is likely in order to minimize transportation costs – and more infrastructure spending in general.

Capital controls are likely, and also a denomination of foreign trade and investment in BRICS currencies rather than the U.S. dollar or euro. This tendency will accelerate if U.S. and European military policy continues to expand into Asia and other regions. As matters look at present, U.S. military diplomacy will focus more on trying to recover influence in Latin America, including privatization of key infrastructure to buyers (on credit) who will engage in rent extraction, adding to the price level. The result of debt deflation is thus to raise the cost of living and doing business for much of the economy, squeezing labor and commerce alike.

These policies are likely to be characterized as “muddling through.” This means postponing what looks like the inevitable end game: a large write-down of government debt, a shift away from the dollar as global currency (quite possibly with a re-introduction of gold to settle balance-of-payments deficits). Diplomatically, these changes will constrain U.S. military spending, while pressuring Europe to re-orient its geographic focus if it is to resume economic growth and pull itself out of a feedback of debt deflation, unemployment and even emigration.

The neoliberal challenge

The term “neoliberalism” misrepresents and even inverts the classical liberal idea of free markets. It is a weaponization of economic theory, kidnapping the original liberal ethic that sought to defend against special privilege and unearned income. To classical economists, a free market meant one free of unearned income, defined as land rent, natural resource rent, monopoly rent and rent-extracting privilege. But to neoliberals a free market is one free from taxes or regulation of such rentier income, and indeed gives it tax favoritism over wages and profits.

Neoliberalism and neo-conservatism are complementary doctrines of power and autocracy combined with deregulation and dismantling of democratic law. The aim is to replace government power as used to protect the people with an oligarchic power to oppress the people.

Today, the neoliberal aim is to cripple government power, enabling a free-for-all for the financial sector. Protecting civil freedoms are also heavily signposted, but the high price of legal representation is a barrier for most. A doctrine primarily of the financial sector, the aim is to un-tax banks and financial institutions and their major customers: real estate and monopolies.

Neoliberalism is a doctrine of central planning, which is to be shifted from governments to the more highly centralized financial centers. This requires disabling public power to regulate and tax banking and finance. As a transition, ideological deregulators such as Alan Greenspan and Tim Geithner have been appointed to the key regulatory positions in the United States.

The result is a doctrine of financial war not only against labor but also against industry and government. Gaining the financial power to indebt economies at increasing speed, the banking and financial sector is siphoning resources away from the real economy. Its business plan is not based on employing labor to expand output, but simply to transfer as much of the existing flow of revenue as possible into its own hands, by capitalizing all such revenue into interest payments, on loans collateralized and pledged to creditors.

The effect is no more democratic than the Roman democracy, which arranged voting by “centuries” headed by the largest landowners – essentially an acre-per-vote, to make an analogy. In the U.S. case, votes are bought not by land as such, but by dollars – mainly from the financial sector. In the end, to be sure, most dollars come from rent extraction.

The result must be economic polarization, above all between creditors and debtors as in Rome. So the end stage of neoliberalism threatens a Dark Age of poverty/immiseration – most characteristically, one of debt peonage. And just as Rome’s creditor class and its predatory imperial expansion brought down the Roman Empire and reduced it to mere subsistence, so the combination of neoliberalism and neo-conservatism today seeks to globalize itself, spreading austerity even as it brings technological progress to sovereign debtors.

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Fiat Money's picture

"The WEAPONIZATION of Finance," excellent, Ilene, thanks for that.   Actually, it is the "same old story" - see for how the Anglo/British _connected elites_ used the POWER OF GOVERNMENT to SEIZE property from the Irish (Irish Catholics in particular) - leading directly to,  creating, the Irish Holocaust, which was no inadvertent "famine", but was a systematic effort,  by the British elites,  to drive the Irish off their properties, steal their foods, export those foodstuffs to England... and cover-up the 2-6 million famine deaths that resulted as a result of "Irish stupidity" "making themselves dependent on a single (potato) mono-crop." 

    Also,  check out Dr. Hudson's landmark radio interview with Bonnie Faulkner, where Dr. Hudson PREDICTED back in 2009 that the Giethner, Bernanke, Summers (orszag, jacob lew, et al ) "Obama change" crew  would CONTINUE the Bush-o-nomics ASSAULT on the American economy (actually a no-brainer: Geithner & Bernanke were two of the top pooh-bahs who WRECKED the economy under eight years of Cheney-Bush Republcn misrule) in his "Obama's REPUBLICAN [style] CLASS WAR PRESIDENCY"  (and related stories on that page, including "The Bernanke Appointment: Be Afraid, Be Very Afraid")

       Also  see Ryan Grim's "PRICELESS: How the 'Federal' Reserve BOUGHT [off] the ENTIRE ECONOMICS PROFESSION"  at HuffingtonPost - also from 2009.

When people say "It's the 1% vs the 99%" they are incorrect... because EVERY college and university in America, their entire non-science departments (i.e. all the "liberal arts" professors, faculty, staff... AND STUDENTS) are IN BED with the kleoptocracy elites -just as "the major media" are - neither the JOURNALISM, FINANCE, ECONOMICS, LAW, or criminal 'justice' departments DARE to look in to how much 'money'  ($$) the 'Fed' has printed over the years - 'money' that goes EXCLUSIVELY into connected bankers' coffers;  'money'  that DEVALUES  EVERYONE ELSE's savings, pensions, salaries, wages,  etc.  (Although if you timed it right, you did benefit from rising housing prices.)     "The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."  (cont'd)

SHRAGS's picture

The 1948 currency reform is covered  from page 86 in The Age of Inflation - Jacques Rueff.


sethstorm's picture

Businesses that use uncertainty to justify not hiring would definitely fall in this category.

disabledvet's picture

i KNOW i have an answer to this question but it is still the question that must be answered for this article not to be considered part of the "usual" lunatic fringe. Namely "by what means is the Repression to be made?" and most importantly "will it work?" by which i mean "will the Repression achieve its intended result?" I KNOW the former...and believe i KNOW the latter as well..."but we all await your response" lest all that is be told is total nonsense.

kevinearick's picture

It’s pretty simple.

If Statey does something you don’t like, remove the tax base pump.

When Statey behaves better, turn the pump back on.


You care about direction, inductance and capacitance, and propulsion, voltage, current, and resistance, when you re-prime.

geno-econ's picture

All fiat empires last only 2-300 years and then collapse because of debts created by politicians, monarchs , dictators, lenders  and religeous zealots alike .  Eastern Orthodox empire lasted 1,300 years with reliance on trade, barter, precious metals and complete subserviance.  Where do we go from here after a collapse ? Only difference in time is highly developed technology base , but with much larger world population and dwindling resource availability. Perhaps another Ice Age would solve the problem

Element's picture

Here's some asymmetric weaponised economic theory:


Hormuz Strait closure bill backed by more than half of Iranian MPs
Published: 20 July, 2012, 20:07
Just over half of Iran's parliament has backed a draft law to block the Strait of Hormuz, threatening to close the Gulf to oil tankers in retaliation against European sanctions.
­Lawmaker Javad Karimi Qodoosi, who drafted the document, said 150 of parliament's 290 members had signed the bill, describing the strait as "the world's lock" to which Iran holds the key, the lawmaker said.
And even though the final decision lies with Supreme Leader Ayatollah Khamenei, and the parliament does not really get to influence foreign policy, the move would lend significant political support to a possible decision to close the Strait.
A heavy Western naval presence in the Gulf and surrounding area is a big obstacle for any attempt to block the vital shipping route through which 40 percent of the world's seaborne oil exports passes. Qodoosi dismissed this obstacle.
"From a military standpoint, the power to close the Strait of Hormuz is 100 percent there … if we close the Strait of Hormuz, no country will be able to open it", the lawmaker said.


Once more into the breach and maddening squalls of slaughter and blood-lust ... for ... well, ... for ... the zionist global-banksterism project ...

Fuck yeah!

Sambo's picture

Converting private debt to public debt is insane. The result is more encouragement for a system that is run by reckless individuals (money players) who are sure to bring upon us the demoralising dark days of misery, confusion and despair that the world witnessed in 2008-09.

anonnn's picture

Re:Neo-liberalism as weaponization----

From an earlier post:

   "A glaring tell of the orchestrated plan was the forcing-out of Broooksley Born in mid-1990s from her U.S. regulatory post, when she identified the coming, global threat and and attempted to regulate the run-amok derivative markets.

What that plan is [not was] and its objectives are unknown, to me at least. Yet the the outlines of a plot to destabilize and create chaos to enable establishment of global control are apparent. Smacks of police-planet tyranny.

 Defining the problem as Michael Hudson does in this essay, will suggest to others a solution."

IMO, Michael Hudson is among the best and brightest who empower others to act effectively for the common good. 

honestann's picture

The Federal Reserve does what central banks are supposed to do: monetize government deficit spending by buying public debt.

This is pure, unadulterated, psychopathic, predatory-authoritarianism.  This guarantees government can and will grow without limit, and completely swallow up anything and everything good, honest, efficient and productive.  This insane prescription also leads to world government, where every individual on earth has zero place to run, hide, escape the most virulent predators that mankind has ever known.

Shove it, author.

The solution is to disband all:

predators DBA government
predators DBA central banks
predators DBA corporations

As long-standing fundamental law correctly indentifies, all organizations are fictions ("fictitious entities").  All that exists are real, physical human beings --- real, physical goods --- and the real, physical universe they are part of.  That the vast majority of human beings can no longer focus much of any attention on reality, and instead spins and tangles endlessly with the endless abstract fictions spun by predators, is the reason human beings are finished.  If humans do not get real, and very, very soon, humans truly are finished.  And unless humans do get real in short order, and reject the predators and endless fictions that thwart and destroy everything good... then good riddens to these grossly misguided apes.

taeonu's picture

"In short, there is no need for the present austerity. If Europe acted like the United States, it could bail out the banks.

But would this be a good thing? My second point is that there are good reasons not to fund a dysfunctional debt overhead, financial and tax system. It is preferable to change these systems."


Did you just stop reading after that part and just scroll down here to rant?  Hudson is pointing out the job of a Central Bank not condoning what they do.  He goes on to explain that in the quote above and the rest of the article.

New American Revolution's picture

Agreed.. wtf is this bullshit, or better yet, wtf, this is bullshit.   A central bank's duty is to police the banks under their supervison for insolvency, and if there is a crisis, provide the TEMPORARY liquidity to prevent their contagion to the rest of the banks, after which they must liquidate those insolvent banks prior to a crisis IF THEY ARE DOING THEIR JOB, and after the crisis if they have screwed up by allowing the insolvent banks to spread their poison.   This is the only purpose that central banks can provide.  If they excede this authority, it is because they have been taken over and compromised by their memeber banks.

Element's picture

Or as David Irving called them, "... the traditional enemies of the truth ...".

His job is basically to rip apart the predator's fiction, so people can see through to the real.

Oppressed In California's picture

"This doctrine has been used to shift power, money and other resources to the members at the very top of our society, with great support from the non-top who have been successfully misled into thinking they are supporting an equitable system."


Spoken like a true Communist.

putaipan's picture

what arm chair critics of dr. hudson allways fail to regard is is his cocommitant tax policy- a return to a 'rentier/land' tax,  his prosicutions of crimes- vis a vis bill black, and forgivness of 'odious' debt.

Spacemoose's picture

the author of the article seems to believe that if we we adopt his recommendations, we can then continue to consume more than we produce in perpetuity.

Spacemoose's picture

double post.  note to self: must get checked for parkinsons ...

Observer's picture


mudduck's picture

Comparing the USA to the Roman empire? Is that because being a superpower now for almost 100 years is like being a superpower back in the day for almost 1000 years? Maybe more like the Ottoman empire.

Davalicious's picture

You have missed the point. Law makers in Ancient Rome skewed laws to favor the land owning class and brought so many slaves (immigrants) to Rome that a huge unemployment problem was created for Romans. Sound familiar?

Catullus's picture

Hudson is a quack.  Plain and simple.  There's no flow of thought to this.  It's more ramblings from a crack-pot. 

He doesn't think the deficit matters.  He doesn't think the sovereign debt crisis is real.  He thinks it's a figment of the "neoliberal" or banking elite meme. 

It's typical conspiracy theory nonsense.  It has a couple of facts interspersed into a rambling of nothingness. 

Tell me again how the Fed doesn't create inflation.  Tell me how it's only the commercial banks fault.  Tell me again how the banks (and not governments) create legal tender laws.  Tell me again how banks without the explicit force of law create a central bank with a legalize monopoly to create money. 

The result is a doctrine of financial war not only against labor but also against industry and government. Gaining the financial power to indebt economies at increasing speed, the banking and financial sector is siphoning resources away from the real economy. Its business plan is not based on employing labor to expand output, but simply to transfer as much of the existing flow of revenue as possible into its own hands, by capitalizing all such revenue into interest payments, on loans collateralized and pledged to creditors.

Yes.  Go after the usurious sinners!  The man is living in the 12th century.

q99x2's picture

Don't know what rock they've been keeping you under. The big banks own the FED.

antisatan's picture

I prefer to phrase it as, the same private banking cartel that owns most big banks also owns the privately held Fed.  To me it's not big banks owning the fed, but rather they all answer to the same masters.

Again posting lewis vs us, its forgotten by most.

Catullus's picture

But only the government forces you to use the Federal Reserve Notes. 

Try getting a bunch of your buddies together to create your currency and see how well that works out for you. 

Disenchanted's picture



Correction...The big banks own The Fed, most corporations, and the government.


"The Weaponization of Economic Theory"


Isn't that what this was bascially about? 


Silent Weapons for Quiet Wars


brief excerpt:


Apparent Capital as "Paper" Inductor


In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. It is therefore an economic inductance instead of an economic capacitance, and if balanced in no other way, will be balanced by the negation of population (war, genocide). The total goods and services represent real capital called the gross national product, and currency may be printed up to this level and still represent economic capacitance; but currency printed beyond this level is subtractive, represents the introduction of economic inductance, and constitutes notes of indebtedness.

War is therefore the balancing of the system by killing the true creditors (the public which we have taught to exchange true value for inflated currency) and falling back on whatever is left of the resources of nature and regeneration of those resources.


Mr. Rothschild had discovered that currency gave him the power to rearrange the economic structure to his own advantage, to shift economic inductance to those economic positions which would encourage the greatest economic instability and oscillation.


The final key to economic control had to wait until there was sufficient data and high-speed computing equipment to keep close watch on the economic oscillations created by price shocking and excess paper energy credits - paper inductance/inflation.


Disenchanted's picture




Corrected correction: The big global banks own The Fed and other CBs, most corporations, and governments.


Another brief excerpt from that( Silent Weapons for Quiet Wars ):



Application in Economics


To use this method of airframe shock testing in economic engineering, the prices of commodities are shocked, and the public consumer reaction is monitored. The resulting echoes of the economic shock are interpreted theoretically by computers and the psycho-economic structure of the economy is thus discovered. It is by this process that partial differential and difference matrices are discovered that define the family household and make possible its evaluation as an economic industry (dissipative consumer structure).


Then the response of the household to future shocks can be predicted and manipulated, and society becomes a well-regulated animal with its reins under the control of a sophisticated computer-regulated social energy bookkeeping system.


Eventually every individual element of the structure comes under computer control through a knowledge of personal preferences, such knowledge guaranteed by computer association of consumer preferences (universal product code, UPC; zebra-striped pricing codes on packages) with identified consumers (identified via association with the use of a credit card and later a permanent "tattooed" body number invisible under normal ambient illumination).


Catullus's picture

Fascinating.  Though human beings are not circuits and the structure of production is not a switchboard that can use electrical engineering as a means of analysis. 

"Owning the Fed" doesn't mean anything.  They're a legalized counterfeiter.  It wouldn't matter if it were a "public" CB or a "private" CB.  In fact, the bankers prior to 1907 attempted to create central bank under the Treasury Department.  Does it matter that it failed and it took them another decade before they could create the Fed?  No. 

To those who only view the world in terms of state power (statists), yes.  This means everything because their god "The State" is not in absolute control.  And Hudson falls under the common leftist mistake that democracy somehow means that the people are in control because they cast a vote for a representative twice a decade.  It's not the banks "own" the government.  Both parties mutually benefit from this relationship and they continue to walk hand-in-hand down the path of enriching themselves. 

But without the state, the banks would not be able to compel anyone to do business with them. 

Disenchanted's picture



The US government is at least 16 trillion $$ in debt, most of that owed(and interest paid) to private banksters that are masked by The 'Fed'. In my book that is owned.


and btw 'We the People' are part of the collateral for that debt...actually we are the chattel.

tulip_permabull's picture

Austrians advocate honest money. Neo-liberals do not. End of discussion.

ebear's picture

>>BOTTOM LINE: The U.S. trade balance may improve as consumer budgets are squeezed, limiting imports, and as domestic shale gas cuts import demand. But capital inflows are unlikely to increase. And until interest rates begin to rise, capital outflows will continue (much as was the case in Japan after 1990). The U.S. is thus suffering a “Japan syndrome.”<<

In a global economic decline (which I think it's safe to say is upon us) where is capital going to migrate to if not the center?  As long as the US dollar is the reserve currency and the US doesn't unilaterally devalue, I think it's unlikely capital will go anywhere but into US treasuries, blue chip stocks and real estate.  As jim Puplava often says, it's the best house in a bad neighborhood.  I think he's right.


Yen Cross's picture

 That's heavy IIlene.

     The more you write, the more I see your subdued concervative side! I like it!

Overdrawn's picture

Horrible History Series is brilliant:  In this 3 minute clip they explain the causes of the French Revolution.


In 1789 the people of France decided that King Louis XV1 and his rich friends had been living the high life at their expense for long enough.    Sound familiar?  Watch the full clip.

Heroic Couplet's picture

This is what collapse looks like. I'd like to see the damage that can be totaled and laid on Phil Gramm's head. Republicans want deregulation. They're too dumb to see that it leads to increased risk, and risk in the finance sector is the last thing we need, so let the collapse take place. The more hedge fund managers, day traders, and bankers destitute, broke, unemployed, and on food stamps, the better off the world will be.

sgt_doom's picture

Well, Prof. Hudon's been right going on over 40 years now ....

Great blog post, Ms. Ilene.

My rant for the week:

Revisionism Math:  just like in Algebra, a negative plus a positive equals a negative

When we saw union members in Wisconsin, prior to their recall election debacle, cheer Bill Clinton, the former governor of Arkansas, who did to that state what Gov. Walker is doing to Wisconsin, we saw revisionism in its purest form!

Just as so much fictitious revisionism has spewed forth after the murders of President Kennedy, Rev. Martin Luther King, Jr., and Sen. Bobby Kennedy, so does positive revisionism spew forth on those who wage economic warfare against us.

We believe President Kennedy was the first president to both broke diplomatic relations and halt foreign aid to a country where a democratically-elected government was overthrown in a military junta.  (Compare that against the Obama Administration’s financing of the coup of the democratically-elected President Zelaya of Honduras.)

There were many brave and progressive “firsts” from the Kennedy administration, yet few are aware of them today; fewer still recall that Kennedy announced the withdrawal of 1,000 Marines from Vietnam by the end of 1963, with the remaining US military to be withdrawn sometime before or by the end of 1964.

Instead, we have Exhibit A:  Bill (and Hillary) Clinton --- that fellow who did so much to lay the groundwork for the coming global meltdown brought about by massive financial fraud (continued on by the legislation of the Bush administration, naturally).

Many claim that Clinton was responsible for the surging stock market during his administrations, but lest we forget, his program was based on the bond market, which performed poorly to mediocre in comparison to the stock market back then.

It was Clinton who signed the Telecommunications Act of 1996, allowing for the final consolidation of by the corporate media and the recombining of AT&T (to lead the attack on network neutrality).

It was Clinton who signed the Gramm-Leach-Bliley Act, permitting the final dissolution of Glass-Steagall.

It was Clinton who signed the Commodity Futures Modernization Act, denying oversight of credit derivatives and their underlying securitizations, as well as promoting insurance fraud with credit default swaps (naked swaps).

It was Clinton who appointed an array of suspicious and anti-democratic types:  such as Warren Christopher (as his secretary of state) who was once the deputy attorney general involved with the FBI’s COINTELPRO operation (we think he may have also been the liaison between that program and the Army’s illegal domestic surveillance program also).

It was Clinton who appointed David Rockefeller’s man and protégé, Peter G. Peterson, to his commission to “… end welfare as we know it.”

Not surprisingly, shortly before exiting the White House, Clinton signed the Intelligence Authorization Act for Fiscal Year 2001, containing Section 308, which grants complete immunity and legal exemption from the US Constitution to intelligence personnel.

Now why do so few recall what Clinton actually did, yet believe the fiction surrounding John F. Kennedy and his administration?


Battling Wall Street:  The Kennedy presidency,  by Donald Gibson

Thy Will Be Done, by Gerard Colby and Charlotte Dennett

Into the Buzzsaw, edited by Kristina Borjesson

John Kenneth Galbraith, by Richard Parker

Congressional Record, years 1992 -- 2000

Other source links:

geno-econ's picture

Easy to pick and choose. War in Iraq over WofMD ?  Ownership society? Corrupt SEC ? Increase in Debt/(cheney-debt doesn;t matter) etc..  Both parties to blame!

Bob's picture

Great rant!

Bill formally institutionalized Extraordinary Rendition, too.  There was one fucking busy guy . . . getting his dick sucked, too.  Amazing.

No wonder he's a rich celebrity while Kennedy's dead. 

falak pema's picture

you should see the Chris Hedges videos on "Brace yourself the american empire is over"  and "Call to action".

His historical perspective is very illuminating on the demise of the US liberal movement after RR took over America; Clinton and Obama being the greatest examples of this demise, all on the RR financial/political mantra page, in reality.They bought in bigtime.

See it here : Jesse's Café Américain

For the USA to get out of this corrupt mess it needs a new political paradigm shift and a new generation of politically motivated leaders in COngress, government and the legal system, that protect the "we the people" legacy from the kleptocratic reality of NWO financialised capitalism. It will take blood sweat and tears. Over many generations, alas.

Bob's picture

Yeah, I just saw that interview last week!  It's refreshing to hear the abject failure of liberalism broken down so clearly and depressing to fully appreciate the full scope of the obstacles to its recovery. 

It don't look good.  The money is bet heavily against it.  Interesting times, for sure. 

reader2010's picture

Come on, the Greater Depression is what doctor has ordered for the NWO.

putaipan's picture

at the risk of repeating myself.... "the greatest generation fought the great depression and fascism....yeah, but they didn't have to fight them at the same time and in the homeland"

LawsofPhysics's picture

Let the paper-pushers hang themselves. Time to redefine wealth for these fuckers again. Bring it.

Bob's picture

I'm ready for every fucking one of them to Go Galt, personally.  I really can't see the self-righteous parasites making much of a go with that in the real world after a decent unwind of debt-based assets.

Vidar's picture

No: we need commodity money, no central bank, and no tax system.

This is more statist hogwash.


The root of the problem is the organized monopoly on force and all that it entails. As long as the state apparatus exists someone will take advantage of it. The only way to have a peaceful, prosperous future is a private law system.

Divine Wind's picture

No tax system means a government, at all levels, without revenue.

This means no sewage systems, water treatment, navigable waterways for commerce, defense, fucked up roadways, etc...

What did I miss in your formula for nirvana?

Or did you mean no taxes for YOU?

You arrogant fuck.

tulip_permabull's picture

Because no group of people will ever freely enter into cooperative operations to improve their quality of life. That can only happen at gunpoint. Just ask Pol Pot.

debtandtaxes's picture

Sorry, but I - for one - did freely enter into co-operative operations. I was taught I had the choice of living within the sytem or opting out. When i was a kid you could get land up north in Canada not subject to property tax. You could build your house, dig your well, install your septic and use generators. You could live off the land off the grid and eat what you breed, grow and catch. Trade meat, crops, fur and artwork for clothing and whatever else you want.

Though my dad preferred the idea of living on a houseboat and doing cash-only day labour at various ports to earn fiat and scrounge for much of what you want. Our society discards so much that with patience you can get what you want free.

Anyway I decided to go into the system.  Now I realize my kids won't have the same choices.

Bob's picture

The neoliberal position more or less in a nutshell.

tulip_permabull's picture

No. Neo-liberals are statists. Because the state facilitates their corruption.

Bob's picture

The State was a tool of convenience for the neoliberals that is now reaching the end of its usefulness . . . so we see the ball being handed off to a more fanatically puritanical branch of the family that will do the job of essentially eliminating govt and establishing a beautiful New World Order where money and only money rules. Hudson has it right, imo. 

Sure, the old neoliberals were statists of a sort.  The new ones necesarily must be anti-statists preaching "freedom." Just to make it a gripping story, it is the commies--who are conveniently albeit exhaustively defined as anything and everything that might impede the omnipotent will of capital--that must be exterminated.

Ironically, serfdom can be reached by more than one road . . . even if the Lords did get the State to build the road for them.  Privatization, baby--it's New and Improved!

Freedom is slavery.  Apparently the only thing that matters is that it is not government run.