How they ruined the most rich country with the little help of oligarchs?

Interview of Andrei Rajewski with a professor of US economics Michael Hudson about the economy of Venezuela

Part 2

However, Daniel Yergin in the Wall Street Journal (February 7) writes that China, in an attempt to hedge its stakes, has started backstage talks with the Guaydo group – obviously, to secure the same deal as the Maduro government. But, given the hostility of the United States towards China and the complete dependence of Guaydo on secret support from the United States, such a deal seems unlikely.

AR: Venezuela held a lot of gold in the UK and money – in the USA. How could Chavez and Maduro trust these countries? Or they had no other choice? Are there viable alternatives to New York and London, or are they still “the only fun in the city” for world banks?

MK: Neither the Bank of England nor the Fed has ever had real trust, but it seemed incredible that they would deny the official depositor the right to withdraw his gold. The reluctance (or inability) of the Bank of England to confirm its obligations means that the unthinkable has happened now. The question arises: Did these central banks not sell this gold through forward transactions in the post-London Gold Pool and its successor markets in an attempt to keep the price and maintain the visibility of the effective US dollar standard?

Paul Craig Roberts described how this system works in forward markets in currencies, stocks and bonds. So, the Fed can offer a buyout of shares for three months at a price of, say, 10% higher than the current price. Speculators will buy stocks by bidding to take advantage of the promise of the “market” to buy stocks. Thus, by the time three months pass, the price will increase. This is largely how the American “Rescue Team of the Drowning Man” supported the US stock market.

The system works in defiance of market trends – just to keep gold prices. Central banks that own gold can come together and offer to sell gold at a low price in three months. In this case, the “market” will understand that when selling gold at a low price, it makes no sense to buy more gold in order to raise its price. So the forward settlement market forms the current market.

The question is whether buyers of gold (such as Russia and China) bought so much gold that the US Federal Reserve and the Bank of England really had to “earn” on their forward sales and steadily deplete their gold reserves? If so, then they “lived for today”, keeping gold prices as long as they could. At the same time, they know that some day the world will return to the gold standard that existed before 1971 to finance the intergovernmental balance of payments deficit, the United States will run out of gold, and they will not be able to maintain their military spending abroad (not to mention the trade deficit and about the departure of foreign investors from the US stock and bond market).

In my book on Super-Imperialism, I explain why the Vietnam War ended because of a lack of gold. The same logic applies today to America’s extensive network of military bases around the world.

The refusal of England and the United States to pay Venezuela means that other countries are also aware that official foreign exchange reserves of foreign countries may become hostage to US foreign policy and even US judicial decisions on awarding this gold to foreign creditors or to anyone who can file a lawsuit. US legislation is directed against these countries.

This “hostage taking” is now forcing countries to urgently develop some viable alternative. The world de-dollarizes, and the gold standard remains the only way to limit the balance of payments deficit imposed on the United States by their own armed forces. A military empire is very expensive – and gold is the “peaceful” limitation of the payment deficit caused by hostilities.

The United States overestimated its capabilities and began to destroy the foundations of a global financial order oriented to the US dollar. This order allowed the United States to become an “exclusive country” capable of managing the balance of payments deficit and external debt, which they are not (or are not) able to pay. At the same time, they claim that these dollars erupt under their military expenditures outside the country, which they regard as “supply” to the markets of other countries. And this “proposal” is allegedly secured by central bank reserves (stored in the form of loans to the US Treasury — Treasury bonds and bills), which are intended to finance the US budget deficit and its military expenditures, as well as the balance of payments deficit of the United States. for a huge military budget.

Given the fact that the EU acts as a branch of NATO and the US banking system, this future alternative should be linked to the Shanghai Cooperation Organization, and gold should be stored in Russia and / or China.

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AR: What can other Latin American countries — such as Bolivia, Nicaragua, Cuba, and possibly Uruguay — and Mexico do to help Venezuela?

M.Kh .: The best thing they can do is to join the creation of a mechanism that promotes dedollarization, as well as an international institution to ensure the cancellation of those debts that countries are unable to pay without introducing austerity measures and, thus, destruction their economies.

An alternative is also needed for the World Bank – one that would issue loans in national currency, primarily to subsidize investments in food production in the country. This would protect the economy from foreign food sanctions – the equivalent of a military siege aimed at capitulation under the threat of mass starvation. Such a “World Bank for Economic Acceleration” will put in the first place the development of self-sufficiency of its members, instead of promoting export competition, which burdens borrowers with external debt. This debt makes them defenseless in the face of the financial blackmail that Venezuela is currently experiencing.

As a Catholic country, Venezuela could turn to the Pope for support in the matter of debt cancellation and control over the debtor countries’ solvency without introducing austerity measures, without creating motives for emigration from the country, depopulation and forced privatization of state property.

It is necessary to approve two principles of international relations. First, no country can be obliged to repay foreign debt in foreign currency (such as the US dollar or their satellite currency) of those countries whose banking system prevents payment of payments.

Secondly, no country can be obliged to repay foreign debt at the cost of losing its state autonomy — the right to determine its own foreign policy, tax taxes and issue its own money and be free from the need to privatize its state assets for the sake of payments to foreign creditors. Any such debt is a “bad loan”, which testifies to the lender’s own irresponsibility or, even worse, the malicious seizure of assets while collecting the debt. It is in this, most likely, and was the meaning of the loan.

AR: Thank you very much for taking the time to answer my questions!