The United States once supplied this energy and other natural resources to the rest of the world and was able to act as a swing producer, guaranteeing access at stable prices. By 1970, however, the demands of two world wars, together with its own burgeoning population and demand for resources to support an American lifestyle based heavily upon conspicuous consumption put an end to its ability to act as a swing producer. The status quo in the US circa 1970 consisted of: huge financial fortunes held and administered by US banks, Wall Street and the CEOs of multinational corporations; a vast segment of the economy dominated by oil and fossil fuels-based industries; and a booming real estate market and shrinking urban core as its population migrated to the suburbs --" a lifestyle heavily dependent upon automobiles and access to petroleum no longer available from domestic US sources in sufficient quantities at production costs competitive on world markets.
The United States emerged from WW II with overwhelming military as well as economic ascendency. As its economic preponderance weakened, however, it has come more and more to rely upon brute military force or the threat of force to hold onto its global empire --" to insure the US dollar continues to be accepted as the world's "legal tender'. But force has its limits in sustaining a US "Empire of Debt". If at a minimum the holders of that debt no longer receive some compensation for the wealth they exchanged to acquire it, e.g. interest or capital gains, the exploitive nature of the dollar-standard based international monetary system can no longer be denied.
Dr. Hudson repeatedly uses the tautology "Debts that can't be repaid won't be." as his principle argument for a debt jubilee, a general write-down of existing debts. That, no doubt, is where things are headed. In the meantime, however, we will continue to hear that US deficits are unsustainable and that we must all sacrifice to bring them under control. The real intent behind all of this, however, is not to do anything about existing debt or the international political and economic order which gave rise to it. Rather, the intent is to shore up the status quo so the US "Empire of Debt" can be expanded even further, i.e. to sustain the ability of Wall Street, banks, the US government and an increasingly international cast of characters to maintain the fiction of solvency for and increase the illusory value of their US dollar and Euro-denominated wealth.
There is a systemic aspect to the deficit game. Over the centuries the inhabitants of market-oriented economies like that of the US have come to accept the notion that the primary purpose of economic activity is to produce a profit for those who provide the money or credit that employs labor and industrial capital. But from time to time, though there is a very real need for the products and services produced by industry and labor, it is not possible for them to be produced at a profit --" or at least a rate of profit considered sufficiently high by creditors and investors to compensate for the presumed risk.
Capitalism excels at turning advances in science and technology, particularly those improving the productivity of workers, into new or less resource-intensive real-world products. The "creative destruction' precipitated by new products and new ways of producing existing products is responsible for both the huge profit margins for new investment capital and "destruction' of the value of money invested in existing industrial products and processes --" not to mention the laboriously acquired skills of a country's work force. When these waves of "creative destruction' ebb, however, the opportunities for large monetary profits ebb with them. In fact, in periods of intense innovation and change, the safest place for money is in the bank, poised to spring on the next opportunity for large profits and immune from the risk of being "creatively destroyed'.
In "America's Sixty Families", Ferdinand Lundberg explains this qualitative advantage in the monetary wealth accumulated by the descendants of the US Robber Barons:
"In contrast with the American millionaires the Indian princes, however, are mere paupers. Their wealth is frozen in jewels and land, and cannot be readily liquidated or transferred into other vehicles; moreover, their society does not utilize on a large scale the wealth-producing technology of the West. But the securities of American millionaires can be exchanged in a flash for any currency in the world, for land, for other stocks and bonds. The wealth of the Indian princes is immobile, static; the wealth of their American counterparts is mobile, dynamic. In the money markets of the world the feudal wealth of the Indian princes is of no consequence." [iv]
It is the profitability of money and credit creation which the economic policies of governments around the world are struggling desperately to preserve. By intervening indirectly as a consumer of last resort through, for example, defense contracts or public infrastructure projects, governments can restore profitability for the entire economy by providing a sink for idle capital and labor. In the last several years, we have witnessed more massive, direct government economic intervention in the form of bailouts and stimuli. Contrary to popular perception however, these interventions have been different from the past only in scale, not in kind.
In "Stabilizing an Unstable Economy", Hyman Minsky explains:
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