Michael Hudson & Ania: Will the U.S. ever collaborate with BRICS?

Notes on the interview taken by Prof. Hudson:

1) Was there ever in American history a debt jubilee? Can Trump announce it and if he does what would that mean for the American citizens and the future of the country?

There’s never been a debt jubilee, but there has always been a strong anti-bank movement in the United States. There was the Shays rebellion after the Revolutionary War and much opposition to Hamilton’s vast financial giveaways to the banking sector. Populist opposition was strong enough to enable Andrew Jackson to close down the Bank of the United States in Philadelphi, but that simply led to a hard-money bullion-based currency.

After the Civil War the banking interests insisted in reversing the rise in wages and prices that had occurred, claiming that this impaired the power of creditors over labor and commodities. That policy led to economic depression from the mid-1870s through the 1880s and 1890s. If we have time later I can read you some writings from that era.

But on balance, U.S. diplomats have used their creditor power to gain control of debtor countries, just as Britain and France did in the 19^th-century epoch of financial colonialism.

After World War I, the United States surprised Europe by demanding payment of the arms debts incurred before U.S. entry into the war. That led to the 1929 stock market crash and the Great Depression. In 1931 the US did agree to a moratorium on Inter-Ally debts and German reparations, but there really was no other choice.

And in the 1980s “Brady bonds” wrote down Latin American debts, but that also was a response to the reckless lending by banks and bondholders.

Oh, wait a minute. Of course under President Obama there was a jubilee – for the banks that had indulged in wholesale junk-mortgage fraud. They were bailed out, and their victims were evicted from their homes instead of having their mortgage debts written down to more honest levels.

I guess that’s been a law of history: The wealthiest people don’t pay their debts. That’s a characteristic of the novels of Charles Dickens and other British writers – tailors going unpaid by their aristocratic customers. And of course Trump made his fortune by having his debts forgiven.

And there is no way that the U.S. Treasury will ever be able to pay off America’s debt to its foreign bondholders.

So it takes a hard line toward debtor countries who owe dollars, but is itself the biggest dollar debtor of all, and has no thought of ever paying off its official debt.

2) There is more coming out from DOGE, this time is about the US Treasury Department who has more waste and abuse of the taxpayer funds that so far anything else they have looked at. 23%

And it appears that there are people receiving entitlements to the tune of $50 billion a year that have no known social security number or ID on file.

50 billion that’s a billion dollars a week in fraud and abuse.

The CIA’s “black budget” is probably in there somewhere. But this isn’t considered to be fraud. It includes bribes to foreign officials to buy their support of U.S. policies. There are many activities of the U.S. government that are too politically embarrassing to report

But not only is a billion dollars a week going to the unknown sources with no social security numbers and no valid ID in addition to that apparently the Treasury Department doesn’t keep automatized records of their payouts so there is no way to follow up and check as to where the money is going. So as of right now the Treasury Department and DOGE has agreed that going forward the Treasury Department will now automize all of the payments that they make, like where the money is going, to what entities, to whom.

It is shocking that the Treasury Department has no accountability and keeps no form of records.

Not really shocking at all. If you are going to do what Trump has accused the Democrats of doing and rewarding party supporters, and also administering the “black budget” of CIA activities, that’s how it works.

Two questions here: 

1- What is even the point of the existence of this department.

The Treasury used to be in charge of all U.S. monetary and financial policy. But in 1913 the commercial banking system sought to take control of financial policy away from Washington and the federal government, and shift most of its operations to the financial centers, headed by New York for the big banks and international monetary policy, and then Boston, Philadelphia, Chicago for the commodities trade, Denver and San Francisco as gold or silver producing centers.

That left the Treasury mainly to serve as the tax collector for America’s first income tax, which also was created in 1913. Initially, only 2% of Americans had to pay income tax – the wealthiest families, mainly in finance, real estate and monopolies. So the income being taxed was almost entirely rentier income.

But since 1980 rentier income has been untaxed, and the higher income and wealth brackets have had their taxes slashed.

These tax cuts were passed by Congress, but in the last few years the IRS employment has been cut back sharply on auditing the tax returns of the very rich. The tax examiners that are still left have focused mainly on the middle class. So the Treasury has rolled back progressive taxation and made it regressive in practice as well as in law.

Trump has just closed down the Consumer Finance Protection Bureau (CFPB) that was created in 2010 to prevent exploitation of bank customers and other victims of high finance. The banks don’t want to be regulated. And the Treasury’s ability to do so has been undercut.

It is now the Federal Reserve that sets interest rates and acts as protector of the commercial banking system, bailing out its losses in the enormous junk-mortgage fraud that exploded in 2008. The Fed represents its commercial bank members, not voters.

Trump has accused the Treasury of targeting political adversaries for tax harassment, and protecting its friends.

And former Treasury officials have told me that large-scale bribery is responsible for much of the undocumented spending. For instance, the carloads and pallets loaded with shrink-wrapped dollar bills sent to Afghanistan and other areas, and also the widespread bribery of foreign officials to keep them loyal to the United States.

Finally, the Treasury control veto power in the International Monetary Fund to impose pro-creditor rules on the unipolar international financial system.

2) Will all the US States be free from the income tax?

Certainly not. The Republican libertarian attack is on government spending and the role of government itself, in the spirit of Ronald Reagan and Margaret Thatcher. That’s the model.

But the Trump tax cuts from his first administration will be maintained, and taxes on the wealthy will continue to shrink. Trump has promised to end the “carried income” tax credit classifying financial income as “capital gains” and taxed at very low concessionary rates. Trump will blame Congress, and politicians of both parties will support their campaign donors and vote against limiting rentier income.

So the U.S. tax system will continue the U.S. policy of finance capitalism instead of industrial capitalism. Revenue from the Finance, Insurance and Real Estate (FIRE) sector will continue to be un-taxed. Commercial real estate, for instance, has long been almost entirely exempt from the income tax by giveaways such as the depreciation allowance (pretending that buildings are losing their value even as their price is soaring).

The wealthier you are in the United States, the lower your tax rate is.

3) With the Executive Orders that President Trump is signing how do you see the future of the US Dollar?

The dollar’s exchange rate will rise sharply at first as investors in other countries view U.S. Treasury securities as a flight to safety from the international disruption that Trump’s tariffs and sanctions are causing. Many countries will find their export earnings reduced to a point where they are unable to pay their foreign-currency (dollar) debts falling due, and that may lead to a financial panic.

Many Global South currencies will depreciate against the dollar.

But over the long term, of course, much of the world will feel a revulsion against U.S. monetary warfare. The effect will be to spur dedollarization.

That trend will be aggravated as the U.S. economy itself suffers blowback from Trump’s aggressive policy. Tariffs will cause breaks in the supply chains for many industries. The effect will be to make the United States even more dependent on foreign economies for industrial products and raw materials.

4) Do you see the USA collaborating with BRICS in the future?

Certainly not. We’re in a civilizational war by the US/NATO West against the principles of international law that underlie the United Nations and indeed the basic principles of civilization seeking peaceful prosperity.

Trump has threatened to impose punishing economic sanctions against BRICS countries that pursue policies that U.S. diplomats consider to be at odds with U.S. policy.

US officials will try and pry client oligarchies in Brazil and other countries away from the BRICS, or act to veto its policies. And the United States will threaten Saudi Arabia if it uses its own wealth that is now in the United States to support the BRICS to give it financial weight.

If that fails, the U.S. will not hesitate to confiscate gold and official financial reserves in the West, as it has done to Russia, Iran and Venezuela.

So U.S. diplomacy has weaponized international finance and world trade to prevent the BRICS from developing an alternative.

(Ed. Note: Categorized – War on BRICS)