Economist Michael Hudson analyzes the collapse of Silicon Valley Bank, Silvergate, and Signature Bank, explaining the similarities to the 2008 financial crash. He also addresses the US government bailout (which it isn’t calling a bailout), the role of the Federal Reserve and Treasury, the factor of cryptocurrency, and the danger of derivatives.
The collapse of Silicon Valley Bank (SVB) late on 10 March sent science and technology start-up companies into chaos, and has left many questioning where investment will come from in future.
Regulators closed the bank after several days of turmoil following an announcement that it needed to raise US$2 billion to cover debts due to rising interest rates. This led to a run on the bank as several large venture-capital firms advised their clients to withdraw funds.
SVB was known for funding technology start-ups. Its location in Silicon Valley, a region in the San Francisco Bay Area of northern California, meant that many of these were green-energy or biotech companies.
High levels of global debt are likely to turn what could be a controllable shift from expansion to contraction into a blowout of unfulfilled expectations and obligations, leading to widespread suffering.
An enormous debt bomb threatens the U.S. federal government and the nation’s financial system unless warring politicians can agree on a plan to defuse it. However, there are even bigger debt bombs ticking away beneath us all, of which fewer people are aware. It may be impossible to disarm all of them, but action is required to minimize the casualties.
Let’s start by focusing on the immediate U.S. debt threat, then widen our view to take in longer-term and more serious liabilities that have the potential to bring down the entire global industrial economy.
The IMF managing director Kristalina Georgieva has now openly admitted that the year 2023 will witness the slowing down of the world economy to a point where as much as one-third of it will see an actual contraction in gross domestic product. This is because all the three major economic powers in the world, the US, the European Union, and China, will witness slowdowns, the last of these because of the renewed Covid upsurge. Of the three, Georgieva believes, the US will perform relatively better than the other two because of the resilience of its labour market; indeed the greater resilience of the US labour market provides some hope for the world economy as a whole.
There are two ironical elements in Georgieva’s remarks. The first is that the best prospects for the world economy today, even the IMF concedes if only implicitly, lie in workers’ incomes in the US not falling greatly. For an institution that has systematically advocated cuts in wages, whether in the form of remunerations or of social wages, as an essential part of its stabilisation-cum-structural adjustment policies, this is a surprising, though welcome, admission. Of course Georgieva, many would argue, is seeing US labour market resilience only as the result of US’s economic performance and not as its cause. But her considering it a “blessing” (though not an unmixed one for reasons we shall soon see) leaves one in no doubt that the demand-sustaining role of workers’ incomes is also being recognised by her.
This week, the jamboree of the rich global elite of the World Economic Forum (WEF) has started again after the COVID interregnum. Top political and business leaders have flown in on their private jets to discuss climate change and global warming, as well as the impending global economic slump, the cost of living crisis and the Ukraine war.
After the World War II, the role of the dollar has grown significantly in global trade. Since then, the American currency has been used not only for transactions in foreign markets but also for transactions within countries. The collapse of the USSR has made the dollar an informal tender (vs legal tender) across the territories of the former Soviet republics for many years. The similar situation happened in Zimbabwe when its national currency underwent severe inflation. Zimbabweans preferred the US dollar and other foreign currencies for their private purposes.
Two-thirds of respondents in a new USA TODAY/Suffolk University poll say the country has gotten off on the wrong track, and they express little confidence in either political party or any branch of government to effectively address the challenges they see ahead.
Each quarter, Patreon Plus supporters can ask Michael questions. Here is a transcript of the most recent one, just in time for our next Q&A this Thursday. Please support Michael’s work via his Patreon page.
Karl Fitzgerald: Alright, let’s get into it. We’ve got lots of good questions. Welcome, everyone. My name is Karl Fitzgerald. I’ve been Michael’s webmaster for over a decade now and yes, we’re so lucky to have Michael Hudson with us today. We’ve all read his books. We’ve all seen his whirlwind approach to unveiling the reality of economics so yes, Michael, great to have you here. I wanted to start off with just a nice easy one. I’m sure you could answer this in your sleep but for you, what are some of the guiding principles that listeners should really grasp in terms of just how rigged our economic system is today? What’s the handful of principles that you think are a useful barometer for people to grasp just how off-kilter our economic system is?
Michael Hudson: I’ve been working on a vocabulary to describe these principles. There are a number of seemingly opposing forces at work. I think we should call the inflation, The Biden Inflation, because the inflation that we’re seeing is almost entirely the result of Biden’s inaugurating a new 20- to 30-year cold war with Russia. He’s announced that it’s going to take 20 or 30 years. He said Ukraine is only the opening. His sanctioning of Russian oil, gas and food is pushed up by inflation by about at least 10% from Europe all the way to the United States. So, on the one hand, this inflation that people are saying is the problem has led the Federal Reserve to say, “Well, there’s a cure to that Biden inflation. Let’s have a depression and lower wage rates. If only we have more unemployment, we can cure the inflation.”
Biden calls on congress to intervene and block strike
A Journal of People Report
Currently, the tentative agreement mediated by the Biden administration in September has been rejected by four of the twelve unions that collectively represent the bulk of American freight train workers. Tens of thousands of rail workers will walk off the job if a deal is not reached by next week.
The railworkers had been in talk with employers regarding working conditions and compensation. The Presidential Emergency Board suggested the largest pay increases for rail workers in more than 40 years, but it didn’t resolve the unions’ complaints about the conditions of the workplace–especially access to paid time off and paid sick time.
The strikes can start as soon as 5 December. On December 5, the Brotherhood of Railroad Signalmen (BRS) is anticipated to go on strike. On December 9, three significant unions, including SMART-TD, may also do the same.
Though this fact is censored-out by all ‘news’-media in the U.S. and allied countries, it will be documented in this article, which is being submitted to all news-media and is free to publish and republish by any and all of them. We shall start here with the background:
Russia is the largest European country, and has long self-identified as being such, but the U.S. and UK have also long tried to fool Europeans to think that the UK and U.S. are ‘pro-Europe’, so as to take over Europe (add them to the U.S./UK empire) and so to prevent Europe from including its most powerful and largest country, Russia (which inclusion would protect the sovereignty of all European countries and prevent their take-over by UK/U.S.). Thus: the main force for “regime-change in Russia” (i.e., for U.S. take-over of Russia) has always been, and is, the UK/U.S. empire.
The “Five Eyes” alliance of the intelligence agencies of all five “Anglosphere” (or Rhodesist) countries — UK, U.S., Canada, Australia, and New Zealand — is an outgrowth of the goal that Cecil Rhodes had set in 1877 for the future Rhodes Trust, for UK to retake the U.S. and then to proceed to take over the entire world but ESPECIALLY all of Europe, including both Germany and Russia. That was the goal, and it remains the goal, of the Rhodesists.