Yves here. While I like quite a lot in this interview, I have reservations about Hudson’s discussion of alternatives to the dollar as a way to curb US military adventurism. While he is right that we are abusing our role as hegemon and are overextended from a military perspective, the Soviet Union also had a decade plus of military over-reach before it abandoned the Warsaw Pact countries. In addition, be careful what you wish for. It took two World Wars and a depression for the advanced economies of the 20th centruy to move from the gold standard to a new monetary order.
An interview with Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “The Bubble and Beyond.” Cross posted from The Saker
The Saker: We hear that the Ukraine will have to declare a default, but that it will probably be a “technical” default as opposed to an official one. Some say that the decision of the Rada to allow Iatseniuk to chose whom to pay is already such a “technical default”. Is there such thing as a “technical default” and, if yes, how would it be different in terms of consequences for the Ukraine for a “regular” default?
Michael Hudson: A default is a default. The attempted euphemism of “technical” default came up with regard to the Greek debt in 2012 at the G8 meetings. Geithner and Obama lobbied the IMF and ECB shamelessly to bail out Greece, simply so that it could pay bondholders, because U.S. banks had issued credit default insurance (CDS) against Greek bonds and were on the hook for a big loss if a default occurred. The ECB suggested euphemizing default as a “voluntary renegotiation,” asking banks and other bondholders to agree to write down the debt.
But according to the international bondholders’ organization – the International Swaps and Derivatives Association (ISDA) – credit defaults can be triggered if a debt restructuring is agreed between “a governmental authority and a sufficient number of holders of such obligation to bind all holders,” making it mandatory. According to the ISDA’s definitions: “The listed events are: reduction in the rate of interest or amount of principal payable (which would include a ‘haircut’); deferral of payment of interest or principal (which would include an extension of maturity of an outstanding obligation); subordination of the obligation; and change in the currency of payment to a currency that is not legal tender in a G7 country or a AAA-rated OECD country.”[1]
That sounds pretty clear. Getting the ISDA to classify the bond swap as a “credit event” enables holdouts to collect default insurance from their counterparties. There is little such insurance here, but bondholders can then move to seize government property abroad. This is what Paul Singer’s vulture fund has done with Argentina, writing new international law that will apply to Ukraine.
Under London debt laws (where Russia’s debt is registered), Parliament would have to designate Ukraine as a HIPC country (such as the African countries Singer has gone after) to block creditor behavior. I don’t see Parliament doing this for Ukraine, as its poverty is self-imposed by warfare.
If the IMF were to claim that Russia’s $3 billion loan is not official, this would rewrite international law and mean that loans from Sovereign Wealth funds of any nation (OPEC, Norway, China, etc.) have no international protection. Such a double standard would fracture the world’s debt markets along New Cold War lines – with financial warfare replacing military warfare. I doubt that the world is ready for this “nuclear” financial option.
The Saker: The Rada has also passed a law allowing the government to seize Russian assets in the Ukraine. I am not sure if these are Russian state or Russian private/corporate assets. What would be the economic and legal consequences from such seizures of assets if the government goes ahead with this plan? Could Russia take retaliatory measures against the Ukraine or appeal to an international court?
Michael Hudson: That would be so radical a step that it is beyond civil law. If Ukraine did this while still receiving IMF, U.S. and Canadian lending, its creditors could be held as responsible. Morally that is. The question is, what courts? It’s true that Israel draws this ethnic exception with Arabs – but does Ukraine want to use that as its legal justification?
When Cuba or other Latin American countries sought to buy out U.S. investments at the declared book value. The result was always attempted military coups. It would be an act of war. Russia could demand reparations, of course – but from whom? Could it seize Western assets of countries backing the Kiev junta? Could it respond by nationalizing German and French holdings, and watch the ensuing outcry with amusement?
The Saker: The Ukrainian government has gone out of its way to cut as many economic ties with Russia as possible. The Donbass has been bombed out and completely alienated, all defense contracts with Russia have also been canceled, Russian companies are excluded from bidding on contracts in the Ukraine, Russia has been declared an “aggressor country”, etc. This means that for the time being the Ukraine wants to be 100% dependent on the West. Do you believe that the West (USA+EU+IMF+WB+etc.) has the will and the means to continue to lend money to the Ukraine or to support the current regime in power? Can the US government simply print dollars and send them to Poroshenko or are there material limits on how much the West can do to support the current regime? What will happen to the Ukraine if the West cannot support it, how bad do you expect the economic crisis to be?
Michael Hudson: The “West” is not in the charity business. Its firms do not want to lose money, and the EU Constitution bans the European Central Bank and European taxpayers from financing foreign governments. They buy government bonds only from banks – and few banks hold Ukrainian bonds!
Future Ukrainian governments could repudiate economic transactions under the junta in the same way that the Allies cancelled Germany’s internal debts in 1947/48 in the currency reform – on the logic that most debts were owed to former Nazis. The present Ukrainian kleptocracy is not a very safe umbrella to sponsor privatization selloffs and other economic transactions with the West, despite George Soros’s hopes to acquire its land and infrastructure. Even Ukraine’s debt to the IMF and other international agencies may be rejected as “odious debts” that financed a government at war against its own population.
The Saker: It is generally accepted that the recession of the Russian economy has rather little to do with the sanctions imposed against her, and that it is mostly the result of the fall in oil prices. Do you believe that this was a coincidence, or the the US and the Saudis jointly conspire to drop the price of oil like what was done in the late 1980s to crash the Soviet Union? Where do you see the price of oil going in the short to mid term future and do you expect the Ruble to rise again?
Michael Hudson: I don’t think the fall in oil prices was a conspiracy to hurt the Soviet Union. Many models have shown the role of financial speculation in driving up oil prices (and those of other minerals, as speculators turned to commodities to do what they had been doing with stocks and bonds for years). The Saudis had their own objectives, in trying to crush foreign competition, including shale oil.
I don’t see the price of oil rising much, because Europe’s economy is being turned into a dead zone, and debt deflation is also shrinking U.S. economic growth.
For the ruble to rise in value, Russia would need to re-industrialize. The neoliberal revolution after 1991 was indeed intended to dismantle post-Soviet industry, to pull it up by its roots. H.I.I.D. and A.I.D. operatives bought out Russian companies playing a key potential military role and dismantled them.
To re-industrialize, Russia needs to lower its costs of living, headed by housing. It needs to do what the United States actually did to subsidize its industry and also its agriculture: heavy public subsidy by picking up “external” costs, supplying agricultural extension and research services, price supports, etc.
Perhaps Putin can convince the leading oligarchs to “pull up the ladder.” They may keep their wealth, but will agree to an economic rent tax to prevent new giveaways and unearned income from burdening the Russian economy. This will fall heavily on the companies that foreign investors have bought, ending the drain of dividends.
The Saker: The most painful sanction against Russia was the denial of credit to Russian companies. Could the Russians simply begin borrowing from, say, Chinese banks or are there objective reasons which prevent Russia from doing so? Is Russia dependent on western banks and, if yes, for how long? Could Russia disengage herself from the western markets and chose to turn to Asia, Latin America and Africa instead?
Michael Hudson: Russia obviously needs to free itself entirely from Western banks. More important, it doesn’t need their credit. (Look at how China built up its economy without foreign bank credit!) Russia needs a real central bank to finance government deficits, and a public bank to extend credit on concessionary terms. The government can create credit on its computer keyboards in the same way that commercial banks do on their keyboards. That is how the Soviet Union functioned for many decades, after all.
There is no need whatever for Western or Russian banks to finance public budget deficits. There are plenty of Modern Monetary Theorists (MMT) who can explain how Russia might do this. It is the only way to minimize the cost of doing business.
If private-sector (Western, BRICS or even domestic Russian) financial charges are built into the cost of living (housing) and doing business, it will be difficult for Russia to be competitive. It needs to do what the U.S., Germany and China have done. Every successful economy in history has been a mixed economy. Instead, Russia swung from one extreme to an even worse one – from a statist economy to an extreme Ayn Rand/Hayek/Chicago School economy in 1991, with disastrous consequences – as if there were no knowledge of Western financial history or, for that matter, Volume III of Marx’s Capital and Theories of Surplus Value. The most effective response would be proactive credit creation to subsidize reindustrialization and agricultural modernization.
The Saker: How do you assess the performance of the Russian Central Bank to the combined drop in oil prices and US+EU sanctions. Many, including myself, were very critical of the measures taken, yet Russia has fared much better than expected and some are even predicting a return to growth before the end of the year. Did Elvira Nabiullina and her colleagues take the right decisions in letting the Ruble freely float?
Michael Hudson: Russia let the ruble float because the alternative would have been for foreign speculators to gang up Soros-style and loot Russia’s central bank reserves in a financial poker game. Foreign banks would have created enough credit to engage in naked short selling to manipulate markets and make a killing. Russia is not adept at this game, partly because Russia’s monetary authorities have been brainwashed by neoliberal ideology, without realizing its anti-socialist, anti-labor, pro-bank and pro-rentier sponsorship.
The Saker: Amongst the various proposals circulated in Russia two have been particularly strongly supported: the nationalization of “independent” Central Bank and its subordination to the Russian government and the creation of a fully convertible Ruble backed by the Russian gold (some suggest backing the Ruble by “energy”, i,e, oil and gas). What do you think of these proposals?
Michael Hudson: An “independent” central bank (such as the European Central Bank) means one that is controlled by private bankers, preventing governments from financing their own spending and obliging them – and the economy at large – to rely on private interest-bearing commercial bank credit.
Russia needs a real central bank serving government objectives – to re-industrialize the economy, and to rebuild it without the heavy financial overhead that has inflated housing costs, infrastructure costs, education costs and the cost of living in the West.
Gold can indeed be a part of this system – to settle international payments imbalances, not to back domestic currency. It became clear by the 1960s that no country can participate in a gold exchange standard and wage war. The gold drain is what forced the U.S. dollar off gold in 1971 – as a direct result of U.S. military spending, which was responsible for the entire U.S. balance-of-payments deficit.
Without gold, the world’s central banks shifted to U.S. Treasury bills – government IOUs issued to finance the budget deficit that was largely military in nature. This meant that global monetary reserves monetized U.S. military spending to surround these countries and destabilize them if they tried to withdraw from the system. (That is what my book Super Imperialism is all about.)
The easiest way to stop U.S. military adventurism is to restore gold and free the world from having to use a militarized U.S. Treasury-bill standard as their monetary base.
The Saker: If you had the undivided attention and support of Vladimir Putin, Dmitry Medvedev, Anton Siluanov and Elvira Nabiullina – what advice would you give them?
Michael Hudson: The missing item in today’s economic reforms is what classical economics focused on, from the French Physiocrats through Adam Smith, John Stuart Mill to Marx and his contemporaries: freeing industrial economies from the rentier carry-overs of European feudalism. The focus of classical value and price theory was to free economies from economic rent, defined as unearned income simply resulting from privilege: absentee land rent, mineral and natural resource rent, monopoly rent, and financial interest. The aim should be to prevent rent-extracting activities – defined as purely predatory transfer payments, an economically unproductive zero-sum activity.
The classical labor theory of value aimed at isolating those forms of income (land rent, monopoly rent and interest) that were socially unnecessary, and simply were legacies of past privilege. The halfway alternative was to tax land rent and monopoly rent (Henry George, et al.). The socialist alternative was to take natural rent-producing sectors into the public domain.
Europe did this with the major public utilities – transportation, communications, the post office, and also education, public health and pensions. The United States privatized these sectors, but created regulatory commissions to keep prices in line with basic cost-value. (To be sure, regulatory capture always was a problem, especially when it came to railroad charges.)
The Saker: Russia and China have embarked on what I believe is something unique in history: two ex-empires which have taken the political decision to become mutually dependent on each other, in fact creating symbiotic relationship. For example, China has basically decided to become fully dependent on Russia for energy and for military equipment. Russia, in turn, is hoping that the Chinese economy will allow Russia to diversify and grow. I would argue that they are in many ways perfectly complementary to each other. Do you agree with this assessment and how would you evaluate the potential of the economic/financial collaboration of these two super-powers? Could Russia and China together, along with the BRICS and SCO create a new, dollar-free and independent economy and market?
Michael Hudson: Two main dynamics are paramount. First of all, in making trade, investment and monetary arrangements, it’s important to be secure that they will be long-term. America has provided this long-term security for Russia and China, by making clear that it is opposing the rising power both of Russia and China (as well as Iran or any other potential player).
That is the second dynamic: America’s “divide and conquer” strategy seeks to pick off one potential rival after another. By joining forces with each other – and by extending the Shanghai Cooperation Organization to include Iran and other countries – this obliges the United States to wage a war on at least two fronts if it moves against either Russia or China. So their long-term relationship is mutual security against the only likely aggressor.
Capital investment in pipelines requires a long pay-off period, so it can’t be made subject to foreign diplomatic interference, as Russian gas sales to Europe are prone to. Europe seems quite willing to be left out in the cold, by electing politicians that simply are bought off by U.S. money.
That’s the unspoken key to U.S. diplomacy: simply bribe politicians, journalists, publishers and others. As long as the U.S. Treasury can print money without limit, as long as the world’s central banks are willing to absorb these dollarized IOUs by buying U.S. Treasury bonds to finance American military spending to encircle them, America is free of the balance-of-payments and foreign debt constraint that limits other countries’ military spending.
To counter this, Russia, China and other countries should develop an alternative monetary and payments system to the U.S. dollar, a financial system to replace U.S. banks, and ultimately their own bank clearing through an alternative to SWIFT.
If they succeed in this, U.S. neoconservatives will have overplayed their hand – and ironically will have become a force for world peace, by uniting the rest of the world’s economies, trade, financial and even defensive military systems to protect themselves from the U.S. threat. If they succeed, this threat will recede – but the U.S. withdrawal probably will not be a pretty sight, nor will the collapse of its financial system. The rest of the world will have to protect itself from the backwash, blaming foreigners.
The Saker: For all the dire predictions about the future of the dollar, the US continues to create dollars out of thin air, countries worldwide continue to use the Dollar for trade, the US debt is still raising, the poor become poorer, the rich richer and nothing seems to change even though in its foreign policy the US goes from one failure to another. How long can his continue? Is there an objective limit after which this system cannot continue? Can you foresee any event which will force the USA to give up being an Empire and become a “regular” country like so many other ex-empires in the past?
Michael Hudson: There is no objective limit to how long Dollar Dependency, Debt Deflation and Debt Peonage can continue, unless victims fight back successfully. Rome’s creditor oligarchy gave way to the Dark Ages for nearly a millennium.
Dollar Hegemony will be phased out as an alternative vehicle to hold international reserves is developed. That is the aim of the new BRICS bank and monetary clearing system. What now is needed is a complementary tax system and strategy of public investment and subsidy.
Rather than an “event” leading U.S. neocons to give up their aims, the process is likely to mirror the Western economies’ slow crash.
The Saker: China and the US a clearly on a political and even military collision course. Yet, many say that China and the USA are too deeply dependent on each other to ever have a real conflict. Are the USA and China really in a symbiotic relationship or can China somehow disengage from the US markets without creating a collapse for the Chinese economy? Michael Hudson: There is no real dependency, because both China and the United States aim at being economically and militarily independent, so as not to fall into subservience. The U.S. aim, of course, is to make other countries financially dependent on it, and also militarily dependent. That is why it needs to keep stoking warfare – as a kind of protection racket, to extort financial, trade and investment tribute and deeper dependency in its trading “partners.”
Michael Hudson: China and America do have a mutual trade and investment relationship. But it is not “symbiotic,” because it can be ended at any time without really threatening either party’s solvency and survival.
China is already shifting its production away from export markets to the domestic market. And in terms of monetary policy, it is sponsoring economic complementarity with the other BRICS members, Iran, South American and African countries.
The Saker: When you say “China and America do have a mutual trade and investment relationship. But it is not “symbiotic,” because it can be ended at any time without really threatening either party’s solvency and survival” could you please explain why you don’t think that if, say, the US and China had to sever their economic ties (Walmart & Co.) that would not severely hurt both economies? Is Walmart not crucial for the low-income sector of the US economy and to keep inflation low and is the income generated by these “Walmart-ties” not crucial for China?
Michael Hudson: What China has been supplying to Walmart can now be sold to its thriving internal market. China doesn’t need more dollars. Indeed, the more dollars it gets, the only thing it can safely do with them is lend them to the U.S. Treasury, funding the military’s “Asia Pivot” to encircle China. (That’s how the U.S. Treasury-bill standard has replaced the gold standard.)
Walmart, on the other hand, remains dependent on its Chinese suppliers. Its purchasing agents leave much less profit for the Chinese than they can get in their own market and in other Asian markets.
The Saker: The western capitalist model and its formula for globalization are coming under critique not only from Russia and China, but from many other countries in the world. Some say that China has developed an alternative model of state capitalism. In Latin America, “Bolivarian Socialism” is on the rise and in the Middle-East the Islamic Republic of Iran is also offering a different socio-economic model. How do you see the future of the capitalist system, with its globalization, banking and finance model, etc. Do you see a viable alternative emerging or is the “Washington Consensus” still the only game in town?
Classical economics was a doctrine of how to industrialize and become more competitive – and at the same time, more fair – by bringing prices in line with actual, socially necessary costs of production. The resulting doctrine (with Marx and Thorstein Veblen being the last great classical economists) was largely a guide to what to avoid: special privilege, unearned income, unproductive overhead.
The aim was to create a circular flow model of national income distinguishing real wealth from mere overhead. The idea was to strip away what was unnecessary – what Marx called the “excrescences” of post-feudal society that remained embedded in the industrial economies of his day. When the great classical economists spoke of a “free market,” they meant a market free from rentier classes, free from monopolies and above all free from predatory bank credit.
Of course, we know now that Marx was too optimistic. He described the destiny of industrial capitalism as being to liberate economies from the rentiers. But World War I changed the momentum of Western civilization. The rentiers fought back – the Austrian School, von Mises and Hayek, fascism and the University of Chicago’s ideologues redefined “free markets” to mean markets free for rentiers, free from government taxation of land and natural resources, free from public price regulation and oversight. The Reform Era was called “the road to serfdom” – and in its place, the post-classical neoliberals promoted today’s road to debt peonage.
Today’s Cold War may be viewed in its intellectual aspects as an attempt to prevent countries outside of the United States from realizing that (contra Thatcher) there is an alternative, and acting on it. The struggle is for the economy’s brain and understanding on the part of governments. Only a strong government has the power to achieve the reforms at which 19th century reformers failed to achieve.
The alternative is what happened as Rome collapsed into serfdom and feudalism.
The Saker: What are, in your opinion, the main consequences of the numerous US foreign policy failures for the US economy?
Michael Hudson: U.S. strategists often liken their geopolitical diplomacy to a chessboard. This may have a geographic sense of space – where is the oil, where are other mineral resources, which countries are getting strong enough to be independent – but the resulting diplomacy is nothing like a chess game at all. At least, not the way the United States plays the game.
But in chess, both sides move. The idea is to think ahead and anticipate the opponent’s strategy. Most grand masters study their opponents’ games and are familiar with their tactics and objectives when they sit down to play.
No such bilateralism characterizes U.S. policy. Back in the 1940s and ‘50s, the State Department was emptied out of China experts by Senator Joe McCarthy. The purge was conducted on the principle that most people who knew much about China, did so because they were sympathetic with it, and probably with Communism.
The inner contradiction here was that without understanding China’s policy aims and how it intended to achieve them, U.S. diplomats were operating in the dark. Naturally they floundered.
Fast-forward to today. As U.S. State Department neocon Douglas Feith noted, anyone familiar with Arab history is viewed as suspect, on the grounds that they must be sympathetic. So U.S. support for Saudi Arabian oil oligarchs goes hand in hand with Zionist anti-Arabism. When Feith interviewed an experienced Pentagon Arabist, Patrick Lang, for a job in Iraq after the invasion, Feith asked: “Is it really true that you really know the Arabs this well, and that you speak Arabic this well? Is that really true?” Lang said, yes it was. “That’s too bad” said Feith.[2] There was no room for someone with an ounce of sympathy for “those people.” Lang didn’t get the job.
So it’s hardly surprising that American unilateralism is conducted in a kind of political vacuum. (“We make our own reality.”) The result is hubris leaving to the inevitable fall. It’s like conducting foreign policy while wearing a blindfold.
The main failure of U.S. foreign policy is thus that of classical tragedy: a tragic flaw that brings about precisely the opposite effect from what is intended. Or as Marx put it, “internal contradictions” and irony.
The answer to your question depends on what you mean by “US policy.” What may be a disaster for the U.S. economy may not be a disaster for the special interests that have gained control of this policy. U.S. politicians are not so much elected by voters as bid for by their campaign contributors. The financial weight of Wall Street and, behind it, the oil industry as well as the real estate sector and the military-industrial complex has benefited the 1%? It’s been a success for them – at least in the sense of U.S. policy reflecting what the 1% want. It’s been a failure for the 99%, of course. And these days, the 1% may be so short-sighted that their aims may bring about the opposite of what they intend. This would include America’s Near Eastern failure to understand the dynamics of Islamic societies.
If by “failures” you mean the damage that has been done, I would rank the most serious one to be America’s opposition to secular governments in the Islamic lands, leading to the most extremist, literalist readings of Islam, capped by Saudi Wahabism.
The fatal turn began in 1953 with the U.S. overthrow of Iran’s Mossedegh government. The intention was simply to protect British and American oil, not to back Islamic extremism. But supporting the Shah in a Latin American-style dictatorship left only one practical venue for opposition: the Islamic mosques and other religions centers. Khomeini led the fight for freedom against the Shah’s dictatorship, torture chambers and subservience to U.S. foreign policy.
In Afghanistan, of course, the U.S. created Al Qaeda and backed Bin Laden to fight against the secular regime backed by Soviet Russia. The subsequent history of U.S. involvement in Iraq, Syria, Lebanon and elsewhere in the Near East has been one of supporting Saudi Wahabism. And it’s been a disaster from any point of view.
Anthropologists have decried the blind spot of American policy to the ethnic and religious divisions at work – not only the obvious antagonism between Shi’ite and Sunni Moslems, but between the pastoral nomadism that was the context for Wahabi extremism and anti-feminist doctrine. The Near East has been dominated by sheikdoms for the past four thousand years. But U.S. policy lumps all Islam together, missing these divisions.
Being a democracy, America can no longer afford a land war. No democratic country can. So the only military option that is practically available is to bomb and destroy. That has been U.S. policy from the Near East to the former Soviet sphere, from Latin America to Africa in supporting dictators that will follow U.S. foreign policy and that of its mining companies, oil companies and other multinationals.
U.S. foreign policy is simply “Do what we say, privatize and sell to U.S. buyers, and permit them to avoid paying taxes by transfer pricing and financialization gimmicks, or we will destroy you like we did Libya, Iraq, Syria et al.”
The result is to unify foreign countries into a resistance, obliging them to create an alternative path to U.S. financial hegemony. If America had pursued a policy of mutual benefit, other countries probably would have let America make money from them, as part of a mutual gain. But the U.S. stance is to grab everything, not share. This selfishness is what is most self-defeating ultimately.
Footnotes
[1] Katy Burne, “ISDA: Greek Debt Restructuring Triggers CDS Payouts,” Wall Street Journal, March 9, 2012.
[2] Steve Clemons, “Pat Lang & Lawrence Wilkerson Share Nightmare Encounters with Feith, Wolfowitz, and Tenet,” citing Jeff Stein, Congressional Quarterly
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Well, Yves, you know I’m not a gold bug. My point was to explain how the gold exchange standard was replaced in 1971 by the Treasury-bill standard: U.S. military spending as the basic central bank reserve throughout the world.
The question is, how to constrain this? It has to be an alternative to the dollar. If the US had to pay for its balance of payments drain by parting with gold, it couldn’t afford war.
Obviously, if it had to pay in yuan or rubles, it also couldn’t. “Gold” simply means non-$ in my explanation — as the subject was US diplomacy and how to check its military adventurism.
Thank you for this interview. I read it right after it was posted at Saker of the Vineyard, and have shared it with others.
Keep up the good fight.
Ditto here. Thanks so much for taking the time with Saker and others to share your interesting insights.
Thanks for the article, I am quite sympathetic to your arguments. I would like an explication on “Being a democracy, America can no longer afford a land war. No democratic country can.” It appears to me that the USA fought a land war twice in Iraq in the last 25 years. Unsuccessful, yes, but unaffordable – in what way? The correlations appear that both land wars in Iraq stimulated the US economy through greater deficit spending. IMO, the invasions were morally wrong and munitions are bad investments, still our American Democracy did it and would eagerly do it again given enough evilness to unlock our rage.
“Unsuccessful, yes, but unaffordable – in what way? ”
We’ll have Peace when we can no longer borrow to pay our War Debt.
Yes, it’s good to point out that Hudson’s remark about — ‘Being a democracy, America can no longer afford a land war.’ — might seem to contradict recent historical reality.
But during Gulf 1, IIRC, the U.S. lost more people to blue-on-blue fire than it did to the enemy. Likewise, during Gulf 2 and the immediate rush to Baghdad America had minimal casualties; it was the Iraq occupation — and its heedless, arrogant mismanagement in the service of the MIC’s looting — that was costly in blood and treasure .
I think if Hudson’s remark had the added stipulation that ‘Being a democracy, America can no longer afford a protracted land war with a serious opponent‘ that would be true. And he means ‘affordability’ in terms of keeping the American population on side as they eventually couldn’t be kept with Vietnam.
Though there’s also the question of whether America is a true democracy, of course.
A lot of the Iraq spending went to overseas contractors (Halliburton took its skim and hired local companies). So the war stimulus was much more limited than you’d think.
i propose tree-backed currency.
having gold as the backing for currency was useful because the limited supply of gold restrained money creation and thus, limited exploitation of the planet.
now that we have fiat money, limitless money means limitless exploitation. limitless exploitation of a finite planet strikes me as dangerous.
gold, however, is a poor choice for a planet/currency connector due to the toxic nature of the extraction of a semi-worthless substance (sure is pretty though!). that is why i feel we should anchor our currency with trees, something that keeps us alive and thriving, in order to constrain our ability to tear apart the big rock beneath our feet.
They did that in England for around 400 years with tally sticks.
those trees were dead. i’m talking about real live trees. you want more money, go plant more trees.
Or uproot the Amazon and every park on the planet.
i don’t quite understand..
The issue is ‘what is a tree’?
A hunk of metal has been used as monetary reserves because it is a specifically identifiable thing that doesn’t spoil, is easy to transport, easily divisible, easily recognizable, etc.
You can’t stick the Amazon rainforest in a vault; the very act of harvesting it destroys the meaningful concept of a tree.
But I’m a bit more radical personally. I dissent from all the mainstream views on monetary reserves. I’d suggest the problem is the idea of buffer stocks itself, whether we are talking gold or JG or trees :)
logistics, logistics..
i feel we do need, however, some sort of planet/currency anchor.
metals are nice, but their extractions are highly damaging.
but i bet if we can vapourize entire cities with one bomb, we can figure something out that works because fiat money is uncontrollable.
When people say stuff like “fiat money is uncontrollable” that comes down to “politics is uncontrollable.” In that case, fiat applies just as much to metals dug out of the ground; Beppe Grillo’s idea of simply siting banks immediately above gold mines becomes no longer a joke.
I love that idea. A green dollar. And this opens the way to both preserve resources and use them to back an environmental currency – because resources left in the ground can be valued just like gold in a vault. Trees. Topsoil. Pure water. Even new agricultural colleges.
well, that makes two of us.
can you please become “susan the president”?
the only real power our presidents now have is as “commander in chief.” I’d be impeached immediately!
Your comment reminds me that the “commander” in the “Comander in Chief” title, rendered into Latin, would come out as “imperator”. “Imperator”, rendered back into English, is “emperor”.
“First Lady” rendered into Italian comes out as “princepessa”, the modern feminine form of the Latin tite “princeps”, the “first citizen” title that Caesar Augustus coined for himself. “Princepessa” rendered back into English is “princess.” (“Princeps” in Latin became “principe” in Italian, “prince” in English.)
“Republic” comes from “Res Publica”, Latin for “commonwealth”. The Romans continued to call their government “res publica” long after if became a military government presided over by emperors. Just as we have. We even use equivalent titles!
In that case, base money on inverse carbon. The lower your carbon emissions, the greater your reserves/backing.
Or base your money on biodiversity. The more biodiversity, the greater your backing reserves. Every country would scramble to protect their own biodiversity, or reintroduce lost diversity, to back your currencies.
Great idea!!
And what about animal life and clean air /oceans being the silver & copper.
3..
ok, we’ve gone viral.
sorry, mr. hudson (thanks, by the way), to have brought your multitude of ideas expressed in your interview in this utopian direction, but hey, the eighth word of your initial comment is “gold”. that word attracts people like bugs to
goldfood.In the end all production is about energy, be it energy stored as food to feed the workforce, or energy in the form of electricity, coal, gas, oil, or something else that can drive the machinery that make things (including more production machinery).
So in the end, perhaps the best “backing” for currency would be some kind of energy unit.
Then again, i don’t see why there has to be a backing at all.
If some nation that do not have the privilege of being the printer of the world’s reserve currency tries to print its way out of a expensive war, their currency value will crash.
Damn it, we are still pretty much arguing over the Keynes’ Bankor here.
I think anyone elected to political office should be required to take birth control pills. The extra estrogen may help matters.
don’t they already wear old spice?
Old Spice doesn’t go far enough. But anyone with man boobs can’t be that intimidating.
Benjamin Franklin did that. His paper currency was land-based.
nice. but land can be turned into brownfields very quickly.
i guess it depends on how the land is managed. and land, unfortunately, is possessed by some and not by others.
i’m sure, however, we can find plenty of “useless” places to plant trees.
Michael,
What?
China does not “lend” dollars to the US Treasury. Neither do China’s sales* to Walmart, Best Buy, or Target “fund” US military operations.
What are you talking about? Or are you being sarcastic?
————————————
* CHINA’S SALES: For which they are paid in USD that, by law, cannot leave the US banking system; hence, China will buy treasury securities the way you or I would buy a bank CD. China has needed USD, for example, to buy oil on the world market up until now.
China could, of course, exchange the USD for Yuan and wire them home. But why? China issues (“prints”) its own Yuan; only entity that can legally.
China could buy US products (planes, engines, etc) with their USD. But why? They have our technology now.
So China moves its USD payments from Walmart, Best Buy, or Target from its checking account at the Fed to its savings account at the Fed, and ‘buys’ treasury securities. It’s still China’s money. It’s not the US federal government’s money to use.
Mr. Hudson,
Ms. Smith will never understand since she will never understand your premise or ideas since she does not understand what money actually is; from my perspective. Beside she seems to have not spent very much effort learning the history of it.
I agree with much in the above interview. Two additional points deserve to be made in the context of american military adventurism, however.
First of all, the point about the “introverted” nature of US foreign policy is even more valid when it comes to the US military itself. Ideally, when building a military, you look at what your enemies are doing, what their tactics and strategies are, and what their strength and weaknesses are, and try to adjust your own posture to account for that of any potential enemies.
The US military absolutely does not do this. Aircraft carriers are the most egrerious example, but the point goes as much for the rest of the surface navy to the fascination with high-tech gizmos to the idea that buying drones that cost nearly a quarter of a million dollars each are the way to the future. The US military is almost entirely introverted – it buys equipment and makes decisions based on what it wants (or rather, what Lockheed Martin wants), and little else. If you take a look at Russia or China, they buy weapons with a view to what the US does, weapons that are meant to kill americans first and line contractor’s pockets second. People today talk about the US military being this awe-inspiring goliath to the point where it’s even pointless to compare it to others, but the figure they quote is usually the amount of dollars the US spends on this military. Spending a lot of dollars on weapons is not the same thing as having a strong military. If you’re spending dollars on battleships and dreadnoughts after they’re long obsolete, it can actually mean quite the opposite!
If you look at the numbers, the US military has been shrinking quickly; there’s less ships, less planes, and less soldiers than there were 20 years ago, and less money spent on maintenance and training, because more and more funds are being cannibalized in order to keep the pork barrels rolling and the feeding frenzy going. It’s actually incredibly doubtful wheter the US surface navy could survive for more than five minutes if hostilities with China were ever to break out, and it’s pretty obvious that Russia and China are pursuing their own interests in the way they’re doing precisely because they know that the US doesn’t actually have a military that could pose a credible conventional threat to them.
The second point here is just that this seems like a problem that will take of itself, unfortunately. If what I’m saying is right, US military adventurism is not long for this world, it is self-terminating (quite literally!). People in the Navy obviously know that the entire surface fleet is one floating coffin that has no business ever being anwyehere near a chinese anti-ship missile, guided bomb or submarine. This insight can either lead to cooler heads prevailing and the US de-escalating, or it can lead to a conflict, after which US military adventurism sinks to the bottom of the sea along with the USS George H.W. Bush. If we’re lucky, an acceptance of defeat – rather than a go at the “tie” that is nuclear war – will be what follows.
The US has a mountain of unpayable debt, a military that is as corrupt as that of any banana republic you’d care to name, a disintegrating infrastructure and a political system that a vast majority of the population has lost faith in, with all of the implications for the future that entails. Russia and China are clearly acting today as if America won’t be around forever – or even for that long, in real terms – and it seems to me that few people have really faced the fact that all the historical evidence suggests they’re right.
There are great programs out there to give students a free education in exchange for 3 or so years of service as a discount-salaried teacher, and other professions. Couldn’t we apply this to the military? Instead of reducing it too far to be useful for anything, just throwing away a potential resource, we should repay ourselves for giving it a generous ride for 50 years. By using the military to clean up the planet. It has great organizational talents, extremely good equipment and it would provide lotsa jobs, making the economy stronger, if we retooled our goals from military adventurism to global cleanup. Everything from Kiev, to Fukushima, to Hanford, to the WIPP, to acidic oceans, to great plastic garbage gyres, to mitigating ocean rise, to designing new technology for sustainable living… and on and on. It’s not like we can just throw it all away – we really don’t have much time left.
Instead of an arms race we could promote a race to save the planet. And keep it.
Susan, that is a really, really bad idea. “The military” is nothing like what you might think. It’s a nasty cancerous disease that’s spreading over the planet, out of any national political control, “making its own reality.” Not a prayer of “we” re-tooling the military monstrosity in all its parts to a goal other than military adventurism, as you put it. Our generals and those “contractors” GIVE orders, they do not take them. US presidents, like imperial rulers in the past, see the reality that trying to face down the military monster is only going to get them shot, stabbed or garrotted to death.
“The Military” has already written its master plan for dealing with what is coming from an environmental collapse standpoint. Here’s the text: “Trends and Implications of Climate Change for National and International Security,” http://www.acq.osd.mil/dsb/reports/ADA552760.pdf , a bland enough mil-babble title, but get into it, past the recitation of slightly dated science and data on just how bad things are and are going to get. From the transmitting letter and memorandum to the Executive Summary to the substantive “strategic” provisions all through the document, it’s all about two basic things: “the military” running everything, “coordinating” the operations of all the militaries and national police of all the nations we stick our needles into, and making opportunities for coordinate “business interests” to sell more sh_t for profit and take control of more resources, from financial advice to genetically modified seeds to heavy construction equipment to engineering “services” and political direction. The whole enterprise (maybe you know “Catch-22,” the novel, and remember Milo Minderbinder and his global “M&M Enterprises,” which contracted with the Nazis to bomb our own troops for “cost plus 10%,” and in which “everybody has a share” of the losses and costs and Milo has all the profits? And Smedley Butler’s awakening to his having “served” as a thug enforcer for the more pointedly once “US”-based “racket” that is the Pentagram War Machine?) is corrupt, in all the ways that people have been talking about corruption in this blog.
“Tasking” the Military Blob to try to “make things better” is just a very, very, very bad idea.
take military as a metaphor. purge the swine and rename them STRATEGIC ARBOR SQUAD DELTA GROUP ALPHA.
them get ’em planting trees. it will calm them down.
hmmmf….and why is there a need to shut down US military activities ? should not in a democracy, the demos take better control of the direction ? I fully agree, that like all other important economies historically, the us dollars real value comes from the end of the bayonet. But is the US the only country to have ever played with its tanks ? This notion that all the worlds evils are because “america”
there are a thousand and one myths that are burped out in these types of discourses.
Mosaddegh…was more royal than Pahlavi…he was not democratically elected…and he canceled an election he was about to lose…not trying to suggest Pahlavi was of any real value long term to the Iranian People, but that would be like having Lady Gabriella Windsor take up at number 10. She is certainly intelligent, pleasant and attractive and would probably lead the country quite well…but she is still a royal…and so was Mosaddegh…
The french are never questioned on their standing by in Rwanda during the 100 days…the central bank of Rwanda is controlled by the French via the French Treasury CAF…they could have stopped keying in to their computers and cut off funding to the insanity…why are only US fumbles discussed in public ?
As to a land war…we have only fought one real land war since Pattons third army, and that was operation bitch slap saddam in January of 1991. We got in, we got ugly, we got victory…none of this mamby pamby lets just send in enough troops and equipment to drag it out for a while…in-out-over…
what america can not afford is the westmoreland school of human fodder…hmmm, lets see how many caskets for american soldiers I can have made today…
I don’t think it was the American Neos who convinced the Soviet to throw out Ryzhkov and sign on for the 500 days plan in 1990 or maybe there is more magic on Colonial Farm road than I thought possible…
as to the constant global conversation about Karl, he might as well have been a cave man…at least groucho lived in a world with electricity and transportation that did not stink up the streets…how fast did trains run and ships move when good ole Karl breathed the air on this fine planet of ours…?? the average sprinter could outrun a train back then, and the average grandma could outrun a sailboat or steamship when good ole Karl was around…slackers of the world unite…
is it possible there could be some other financial instrument that will be of value other than the US Dollar…physically, probably, the US Dollar will be the last great currency…since the physical financial instrument will probably go the way of the stagecoach…will some person in some third world country want to hold yuablles…??? is anyone desperate to go work in china or russia ??
There is more to the allure of the United States Dollar than bullets
the challenge will come if russia and china build democratic institutions which will draw people to want to move there…till then, not a chance the US Dollar plays second fiddle…
feeling exceptional today?
very much so…but some animals are more exceptional than others
prove it.
i think eleanor roosevelt would be very upset with what we have done with the world she left us…her last act was to make sure nixon lost…what a sad pathetic world we have become…
eleanor roosevelt was, through no fault of hers, the descendant of invaders. i suppose we all are, wherever on this orb one may reside.
the world was not hers to leave to us – not saying she wasn’t nice; i never had the opportunity to meet her. but did she have dibs on it?
as to nixon, well, in my unexceptional opinion, he was the best president since nixon, despite the omnipresent carnage being an albatross around his and every president’s neck.
let the merry breezes blow (those) synthetic winds
You mention france as though it acts as an independent Soveriegn. When you wake from your coma you might actually realize france is a fully controlled vassal of the empire. France does not take a piss without the consent of empire.
Tell me, when was the last time you were in Russia? China? Have you resided there? Visited? From what personal experience or source can you cite to validate your claims. Or are your thoughts simply opinion and conjecture? Or is the controlled mass media propaganda syndicate your sorce of information concerning democratic institutions in China or Russia? When you can provide any sort of personal observation or experience to back up your statements I may be able to take what you spew somewhat seriously. Until then, I’m afraid you are a very good joke.
In 2009, the governor of the People’s Bank of China, Zhou Xiaochuan, laid out some ideas which I think are similar to what Michael Hudson is talking about by proposing increasing the use of SDRs at the IMF which would be similar to Keynes bancor.
http://www.bis.org/review/r090402c.pdf
SDRs are currently in limited use and tied to 4 currencies, the USD, Japanese yen, Euro and British pound. He proposed enlarging this to all the major currencies. There are certainly important markets not represented here. Hence the AIIB.
Seeing how the IMF is dealing with the Ukraine, it seems that a combination of the IMF/AIIB or an IMF with a better basket of currencies bringing China and Russia to the table could very well bring a more balanced and nuanced approach to dealing with countries such as Ukraine and Greece.
This would be similar to a gold standard by offering more checks and balances but also more open ended by being more flexible for useful credit creation.
“useful” is the optimum term. until money creation is once again constrained by its being tied to some tangible asset (not gold which is toxic to mine; not hydrocarbons – too toxic), we are only hastening our entropic demise through the ever more rapid corruption of our planet in the name of “useful” ventures.
creation of “money” is too dangerous to be left in the hands of humans.
I liked this from Tony Wikrent’s post yesterday: “The obvious answer is the $100 trillion in new investment needed to stop climate change by building a new world economy that does not require fossil fuels.”
Michael Hoexter has also done great work here:
http://neweconomicperspectives.org/2015/05/bill-mckibbens-and-the-climate-movements-fatal-misunderstanding-of-the-role-of-demand-for-energyfossil-fuels.html
“To do this involves embracing an enormous, government-organized building project to restructure energy use combined with a moderation of energy use, curtailing at least for a few decades the wasteful and luxuriant use of energy enabled by the current relative cheapness of fossil fuels. I have outlined some of the components of this project Pedal-to-the-Metal(1), BuildingProject and Buses,Wifi,Bikeways).”
If we can view climate change as a global enemy we might be able to make some progress.
thanks, a well written essay.
but alas, it’s not just the climate we need worry about.
but yeah, the demand side for all of these environmental issues is a very important direction from which to approach their mitigation.
take gold, for example. arsenic, cyanide. yuck. but if we didn’t “need” if for money, we could just pick up chunks here and there and make nice wedding rings.
perhaps money backed by the least damaging forms of energy production would be useful, but this carries the danger of energy overproduction leading to overexploitation of the planet.
i’m not an economist, but this is what i envision:
you may say i’m a dreamer,
and i’m just the only one.
but one day i hope you’ll join me
and plant trees and get rich!
One of the reasons for my ‘obsession’ with the economics of Frederick Soddy is observations Soddy made 80 years ago are continually reaffirmed by the likes of Dr. Hudson. Soddy on gold (emphasis added):
Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 4657-4662). Distributed Proofreaders Canada.
creation of “money” is too dangerous to be left in the hands of humans.
You really need to read Graeber’s book on debt. All of the evidence is that systems of accounting and credit pre-date any form of physical money, which when adopted amounted to just being tokens to measure credit. That ‘cash’ could be absolutely anything. Humans not only create money, they decide what is even considered money.
From where I’m standing MMT is actually a return to a more natural (to the human experience) form of money, one that is ultimately just a system of accounting. Yes, I can see how removing cash constraints can enable environmental exploitation and destruction to go into overdrive. But I think to prevent that we would be much better served by fundamentally changing how humans and societies think about and interact with nature, rather than trying to restrain ourselves with hard limits on money, restraints that themselves cause immense human harm.
U.S. balance of payments (BOP) problems rose in the 1950s right after U.S. decided to help support both Germany and Japan industrialize (Read Harrod’s: The Dollar Problem, or something to that effect);; Harrod’s book was written in the 1960s. Hudson is wrong on several other issues without me having to labor through an exchange.
I didn’t get a hit on Amazon with a search for “the dollar problem” by Harrod. This is intriguing however. The following is from Varoufakis’s The Global Minotaur (Economic Controversies) (p. 83)
Despite the positive impact of the Global Plan on the domestic American economy, it was an uneven impact. That it was uneven is evidenced by the fact that segments of the economy not linked to the MIE or the ACE never recovered in step either with Germany and Japan or with the rest of the US economy. That it was not Washington’s main aim to bolster American companies across the board (though it was certainly one of its aims) can be gleaned from the ruthlessness with which the United States government introduced, whenever it saw fit, harsh regulations which ultimately discriminated against American multinationals, in pursuit of its top priority: the augmentation of the Deutschmark- and the yen-zones through the reinforcement of German and Japanese industry.
Varoufakis, Yanis (2013-02-14). The Global Minotaur (Economic Controversies) (p. 83). Zed Books. Kindle Edition.
Varoufakis also writes about “The Global Plan”. Have you got any refeerences? (I don’t recall any in his book.)
Oh for gods sake, I hate when people read a short form interview where someone is recounting MULTIPLE BOOKS WORTH of research and start arguing technical points. Read Superimperialism please. he documents how balances of payments deficits started to emerge and how they were able to delay a run on their gold reserves to break the peg for so many years.
Additionally, Harrod didn’t have good data. Hudson did a detailed analysis of the balance of payments data to make the case that the bop deficit was being driven by military spending abroad. I have a digitized copy if you’re interested
https://books.google.com/books?id=y5P3rQEACAAJ&sitesec=buy&source=gbs_atb
Do you have a title for the Harrod book? Calling Hudson “wrong” is probably overstating the case. But there may have been more to it than simply the cost of U.S. military adventurism. In Global Minotaur, Varoufakis writes:
By WWII Wall Street and its banks were firmly in control of US foreign policy (see Imperial Brain Trust). By then, is it not possible that the needs of Finance Capitalism had already trumped those of the Main Street industrial economy from which the fortunes managed by Wall Street had arisen? Wall Street’s “product” is debt, as Hudson keeps repeating. That right now is how the world creates its money, i.e. as debt. When it was backed by the demand for products which only the US could produce in a world devastated by global war or the gold the US accumulated selling the nations of Europe the means to destroy each other, the US had no problem getting the money it created “accepted” as Minsky would put it.
Anyhow, the general point is that the overriding goal of Wall Street driven US foreign policy was and remains preserving opportunities for debt (i.e. money) creation – NOT real wealth / job creation. Without the US military industrial complex the world – and particularly the US – would be awash in ‘excess’ industrial capacity. True, the world and particularly the US economy is in desperate need of resources to restructure itself along sustainable lines. But neither the infrastructure for which Hudson calls (to reduce costs in the US and make it competitive) nor a ‘helicopter drop’ of money on Main Street to provide the “useless eaters” with the effective demand to purchase the products of industry is acceptable. Both approaches would undermine the ability of Wall Street and its banks to create new “product”.
P.S. Title for Harrod book?
There is more to it which is why you should READ THE BOOK! He talks in detail about all the lending programs but the lending was a profit center supporting american balance of payments, not the drain. the thing that ended bretton woods was the run on gold which happened because of accumulations of dollars by central banks that they weren’t willing to hold anymore. those were accumulated for the most part because of the balance of payments deficits.
Harrod’s book is just called the Dollar.
making the world safe for Wall Street’s “product”
I have read Hudson’s Super Imperialism as well as its sequel Global Fracture. Super Imperialism certainly puts an interesting twist on the old saying
But there is indeed something more to it than simple self-serving ‘charity’. The title Super Imperialism suggests what that might be – using the state’s ability to create money to control the world beyond its borders instead of the old boot on the ground form of imperialism. This finance as a new form of warfare is a theme Hudson continues to develop.
But what I don’t remember is any discussion along this line:
Varoufakis, Yanis (2013-02-14). The Global Minotaur (Economic Controversies) (p. 83). Zed Books. Kindle Edition. It is a line of inquiry I assume Roy Harrod develops in a book I note was published BEFORE the demise of Bretton Woods.
The point here is it would appear the overriding priority of post-war economic and diplomatic policy was ‘making the world safe for the export of Wall Street’s (and Washington’s) ‘product’ debt – NOT locking in a perpetual balance of payments surplus or protecting American jobs.
Also, in her book All the Presidents’ Bankers Nomi Prins suggests the goal of terminating gold backing for exported US dollars was not so much accommodating the surpluses that had accumulated in foreign central banks by 1971 as freeing US banks (and by association the US government) from all constraints in the FUTURE creation of new debt.
It would appear that once US politicians and bankers discovered they could get away with paying the country’s way in the world with ex nihilo-created money the transition to a ‘post-industrial economy’ was on in earnest. Like Britain before it the country’s foreign policy emphasis shifted from obtaining markets for US products to finding and maintaining sinks / markets for U.S. debt. Treasury secretary Connolly is supposed to have informed the world the US dollar was “our currency but your problem.” Once the world decided it no longer wanted that problem, the switch from the soft-power of a money-based Super Imperialism back to the neo-conservative ‘hard power’ of boots-on-the-ground imperialism could hardly be a surprise.
Today, as I type I’m listening to Cspan speeches pro and con for TPP. People on this planet can’t be as obsessed as we are. They can live on far fewer resources than we do. We really get into a frenzy, which never accomplishes anything. There is too much denial among us. And the hysteria comes from a necessity to get real, by changing our entire system. Oh horrors! We are all Greece now. I raise my glass to the thought of there never being another bond to pay for domestic spending. If finance wants to be independent and private, let them be completely independent. Let them print and back their own money. Let them put their own assets at risk. “Independent Central Banks” are just an incorporated system of private bankers. We need, like Russia (per Hudson above), a real central bank, a sovereign central bank with public banking available in every state and town. That would go a long way toward taking the reins of the military and the MIC, and imposing political decisions on them. Evo Morales just stated at the EU trade conference that Bolivia doesn’t want competitive-commercial free trade because it is not what the people need. I agree. Free trade and military adventurism go hand in hand and pull us all over the cliff.
Yes thank you for always passing the ammo….
The US did not create Al-Qaeda or back bin Laden. This is a thing that gets repeated constantly (at one point I thought it too). But it simply isn’t true. As part of the deal with the Pakistani’s to move supplies and operatives over their border with Afghanistan it was arranged that any US money bound for anti-Soviet fighters first be given to the Pakistani ISI. They’re the ones who decided on the specifics of who got what. Some of that money did end up in the hands of Arab fighters like bin Laden, but the CIA had no direct contact with them. The CIA knew he was around and approved of the stuff he was doing to the Soviets, but they didn’t directly pay him or control him. In fact CIA operatives working in Afghanistan say that they only ever had real problems when the Arab fighters would show up, because those foreign Islamist types would have been just as happy to kill an American as a Russian.
a proxy by any other name.
out damn’d spot!