AMERICAN imperialism and the continuing prevalence of the dollar ensures foreign countries pay for its jingoism, a leading economist has claimed.
Michael Hudson, a financial analyst who teaches at the University of Missouri, said the Pentagon’s history of military intervention abroad does not negatively affect the domestic economy.
The 2020 budget put aside $721.5 billion, or £585 billion, for military spend, but according to Mr Hudson, the wars end up funding themselves through a complex global financial mechanism.
He told the Moderate Rebels podcast: “So all this money that we have spent abroad, how are we ever going to get it back?
“Well. these dollars we have spent around the world, mainly for the 800 military bases and the other activities we have, these dollars would end up in foreign central banks.
“And foreign central banks, what are they going to do with them?
“They don’t buy companies; they buy Treasury bonds.
“So we run a monetary deficit; the dollars are spent abroad; the central banks lend them back to the Treasury, and that finances the budget deficit, but it also finances the balance of payments deficit.”
The reserve currency for most economies is the US dollar, meaning they treat any IOUs the Department of Defense writes as an asset, rather than using it to collect the debt.
It is why, Mr Hudson explained, that several nations, including Russia and China, are now attempting to de-dollarise and return to the gold standard.
The shift, while not complete, is already happening – back in March the eight members of the Shanghai Cooperation Organization, including China, Russia, and Pakistan, made the decision to conduct bilateral trade and investment and issue bonds in local and national currencies instead of US dollars.
However, until the dollar is completely abandoned, the system will continue.
Mr Hudson wrote in 2003: “The Treasury bonds standard of international finance has enabled the United States to obtain the largest free lunch ever achieved in history.
“America has turned the international financial system upside down, whereas formerly it rested on gold, central bank reserves are now held in the form of US government IOUs, that can be run up without limit.
“In effect, America has been buying up Europe, Asia, and other regions with paper credit, US Treasury IOUs that it has informed the world it has little intention of ever paying off.
“And there is little Europe or Asia can do about it except to abandon the dollar and create their own financial system.”
The US is also able to flex its financial muscle in order to supplement its aims in other nations, according to Mr Hudson.
Venezuela, for example, has been a target for the Pentagon since Hugo Chavez took over in 1999.
Three coups since have led to nothing, but on the economic side, the US has attempted to force Venezuela into relinquishing its debt to the US through sanctions.
He said: “It tried to grab these reserves by saying, ‘Let’s block Venezuela from earning the money by exporting the oil and earning the money from its US investments to pay the foreign debt. So we’re just going to grab the investment, and we’re going to select a mini dictator; we’re going to give it to Mr. Guaidó, and say, ‘This doesn’t belong to Venezuela; we’re arbitrarily taking it away and we’re giving the oil distribution assets in North America to Guaidó.”
“’We’re going to block Venezuela from paying the debt, and that means it’ll default on foreign debt, and so the vulture funds and the bondholders can now grab Venezuelan oil, anywhere, under international law, because it is pledged as collateral for its debt, just as if you’d borrowed a mortgage debt and you’d pledged your home and the creditor could take away your home.'”
Last week Venezuela surprisingly published oil prices in Chinese Yuan, rather than dollars.
A press statement from the oil ministry said he move to price oil in yuan was to rid itself of the “tyranny of the dollar.”
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