Is the rising price of gold a threat to dollar hegemony?
Cross-posted from Michael Hudson’s blog
NIMA ALKHORSHID: Hi everybody, today is Thursday, February 20, 2025, and our friends Richard Wolff and Michael Hudson are back with us. Welcome back.
RICHARD WOLFF: Glad to be here.
NIMA ALKHORSHID: Let’s get started, Michael, with your recent article about the price of gold and how the United States is trying to manage that. What’s your point in that article?
MICHAEL HUDSON: Well, the point is that the demand for gold has been running way ahead of supply for the last 15 years, and yet the prices remained remarkably quiet. There was a range of gold from $1,400 to $1,600 an ounce maybe 10 years ago, and then there was another range from $1,800 to $2,000 an ounce until just a year or two ago, and all of a sudden, finally, the prices began to rise. There are notes in the newspapers about England bullion dealers sending enormous plane loads of gold to the United States. So, needless to say, how do you explain what’s happening?
So, just a half hour before this show began, I got a phone call from one of the big cable networks wanting me to go on their show and to explain why gold today hit a new price. And I’m talking to you, not them. So, here’s what the situation is.
The United States wants to keep the dollar as the main international reserve. And the one thing that frightened American policymakers was that other countries would begin to de-dollarize by increasing the proportion of gold in their foreign exchange reserves. China, way up. Russia, way up.
About six years ago, Germany said, “You know that gold that we moved to you in the 1950s to keep in the Federal Reserve’s safety? Could you send that physical gold back to us? You know, we’re noticing that you’re grabbing the gold supplies of Venezuelan countries you don’t like. We’d just like to have the gold here.” And the United States said, “Well, you know, we really can’t send it right now. How about in six years?” Which is right about now. They still haven’t sent the gold.
And the question is, is there any gold left in Fort Knox? And why not? How can it be that the price of gold has been held down by the U.S. Treasury manipulating the price?
And it turns out that we can all now see that the price of gold is not like the price of copper or wheat. It’s not based on supply and demand. It’s all based on the Treasury manipulating the price of gold. And it does it in two ways. One is a very technical way that I won’t go into. It sells gold short. In other words, it sells. Well, the price may be $2,900 now, but we’ll sell it to you in three months’ time for $2,800 an ounce. Well, that means that nobody’s going to buy more gold now if you know you can buy it at $2,800 an ounce in three months. So, they keep holding the price down.
And the other way, for the last 15 or 20 years, the United States Treasury, the Bank of England, and other central banks have made money leasing their gold to gold bullion dealers. In other words, it’s like Avis leasing a car to somebody to drive. And the U.S. will lease to bullion dealers for a given price. Yes, we’ll lease you this gold. Here’s the current price of gold. You’ll pay us a premium for renting this gold. And then the bullion dealers will meet the supply of gold from hoarders, whether they’re jewelry makers, whether they’re investors, whether they’re hedge funds.
And this has worked pretty much ever since the United States went off gold in 1971. But what’s happened is that this making money by leasing the gold to other countries all of a sudden means that there’s no gold here. The United States has a claim on bullion dealers to say, well, send us back the gold that we’ve leased to you. Now, it’s like Avis saying, you’ve rented our car, you know, for two weeks. Now, give us back the car.
But the bullion dealers have sold most of the gold. And so, they’ll say, well, we’ll give you the money for the gold, but we don’t have the gold. So, it looks like all of a sudden, the United States, I won’t say a paper tiger, what do you call it, a gold lamé tiger? It seems that the United States doesn’t have the gold in its possession that it’s reported.
And so, a few days ago, Mr. Musk said, we’ve been trying to find out to do an audit to see how much gold is there in the Federal Reserve in New York City (that acts to hold foreign gold holdings in Fort Knox).
Well, you have some of the monetary conservatives in Congress, like Senator Paul saying, I want to go to Fort Knox. And look, let me see whether there’s anything in the vaults. They wouldn’t let him in. And he said, look, I’m a senator. I’m in Congress. You know, you have to let Congress [see]. We have to get in. The answer was, ‘this is national security’. Congress can’t know about how much gold we have or have not got there.
So now, you have Mr. Musk saying, we’re going to do an audit of the Fed, and we’re going to do an audit of the Federal Reserve, Fort Knox. You’ve got to let us in. And the United States panicked, and it’s been, the speculation is now, the gold price is going up because the United States can no longer have the gold to keep it down. And in fact, the United States is trying to buy it all back to put back in Fort Knox so that people will think, gee, it’s not — the U.S. does have the gold after all.
So all of a sudden, you’re seeing the links to which…. All of a sudden, the motivation for buying gold that has existed ever since 1971 has sort of broken out.
And everyone says, okay, now as demand for gold is going up, that means the price of gold is going to go up. When demand exceeds supply, that’s what’s happened. And as gold goes up, other countries, not only Russia and China, but all over Europe, all over the world are going to say, we can make much more money holding gold in our reserves than holding U.S. treasury bills or securities in our reserves. So let’s sell our U.S. treasury claims and buy gold.
Well, if that happens, you can imagine the de-dollarization of the world. And there goes the whole linchpin of American financial control of the world economy. There goes the central role of the U.S. dollar. All of a sudden, it’s given up not only to gold, but it’s giving it up to foreign currencies, the countries trading in each other’s currency, like China and Russia trading in their own domestic currencies for their imports and exports.
So you’re having a whole unraveling of the fiction that somehow there is no alternative to the treasury securities that foreign governments hold in their foreign exchange reserves that is a better buy than U.S. treasuries. All of a sudden, yes, there is a better buy. It’s gold. And so the gold bugs are all jumping on this.
And we’re all waiting to see whether Mr. Musk and his investigatory team gets to go into Fort Knox and the Fed and say, is there really gold there? What happened to it? And you mean that there hasn’t been a free market in gold all these years? Can you explain to us what’s behind U.S. policy?
And essentially, it’ll be the dynamic of America having the exorbitant privilege of being able to pay for all of its military spending abroad, its Cold War, its deindustrialization, simply by printing IOUs that end up in foreign central banks. And finally, they have an alternative just to say, we’re going to buy more and more IOUs. When, if you do the basic accounting, the United States owes foreign governments so much money, while it’s running a balance of payments deficit, mainly because of the war, that there’s no way it can ever pay the other countries the money that it owes them in dollars for the dollars they hold in their reserves.
So the whole linchpin of America’s free financial ride, which I described in my book, Super Imperialism, is coming undone. Along with everything else we’re seeing coming undone in American foreign policy these days.
NIMA ALKHORSHID: Richard, Go?
RICHARD WOLFF: Yeah, I think you can see this, and I guess Michael and I play this duet fairly often. Let me try to put it in a bigger historic context, what he’s saying.
The decline of an empire takes many forms. It took a lot of complicated maneuvers to build the empire up. The system that Michael just summarized. The ability of the United States dollar to play a certain role in the world, and then to be able to continue to do that, even when it goes from a surplus budget to a balanced budget, to a deficit budget, and now to deficits that we calculate in the trillions of dollars per year.
Okay, it doesn’t take a genius to understand that what might work at one level won’t work. What you can do if you don’t have a national debt higher than your GDP becomes a more questionable issue when your national debt is greater than your GDP. We’ve gone from one to the other, and it’s not a technical issue.
Basically, what Michael is teaching us is what are the mechanisms that begin not to work at one level, even though they worked at another level.
Why is it now that people are asking these questions? Well, it’s because the price of gold is going nutty. And when you ask, you know, what is it? Because literally, the price of gold is, if you take a look at the last 10 years, you will see price movements that have no possible explanation in the normal language that we use for that.
Now, you know, smart people will start saying, well, what’s going on here? Right. The investor only cares if I can sell it for more than I bought it. But the rest of us are trying to know what is going on here.
Now you begin to see that, oh, look, the Chinese who once were number one creditor of the United States are now number two. Why? Because Japan, which was used to be number two, has become number one
And the political relationship between Japan and the United States is about opposite to what it is. I mean, Japan subordinates itself to the United States for all kinds of reasons. China does not. And that’s a big fat hint as to what’s going on here.
And then when you point out that Russia is also, and then go even further, that our great ally England is also, these are statements of people making a very old decision. The deeper in debt is the debtor you are giving credit to, the more you better rethink what you are doing, because that person, if they get to the point that Michael mentioned, being unable to repay because they can’t play the old game, you’re going to be stuck. And you don’t want to be stuck. And even if you’re only stuck temporarily, that temporary being stuck could be the moment when you need that and you can’t get it.
It’s like people don’t understand, the FDIC guarantees your bank deposit, but they don’t guarantee how quickly you’re going to get it. If your bank folds and you make a claim, okay, they’ll process the claim. Two years later, you’ll get the money. Yeah, but in those two years, you needed the money for the operation for your wife who didn’t get it and who died. I mean, I’m making it up, but I just want people to see there’s a rational way in which a declining empire…
Let me go even further. Let me drive this home. Europeans, over the last 10 days, have been delivered a message they didn’t want to hear. That the difficulties of the American empire require not just tariffs and protection, because they can’t compete the way they once did, but also they’re going to eat their allies. They’re going to starve them and break them and take back from them whatever they think they gave them.
And, you know, it’s a very old story. If it’s very cold in your house and you have no more wood, you start taking the clapboards off the side of your house and feeding them into the furnace. Does that get you warm? Yes, it does. But the next time there’s a storm, the snow is going to come right into your living room.
You can’t do what you are doing. It’s not costless to take the clapboard. It may seem that way because you don’t have to pay for it. It’s already on your house, but you can’t do it. And you can’t do to the Europeans what you are doing without them now taking steps, not in hostility, but to save themselves that interfere with your plan to use their resources to save yourself.
We are at a very key moment. I know Michael and I have been saying that for a while, but it does seem to me that whether you look at gold prices or you look at Vice President Vance’s remarkable behavior in Europe last week, that you are seeing the acceleration of signs of decline.
MICHAEL HUDSON: Well, Richard, that’s what allies are for. We’ll call them
protectorates.
I want to make it clear that what we’re talking about is the foreign debt of the United States. The problem’s not domestic debt.
A few months ago on Neiman’s show, we explained how there’s no domestic problem about running a deficit because as long as the United States owes debts in dollars, it can always print them for Americans.
The problem is that if it owes debts in dollars to foreign countries, it can’t print their currency and they don’t want any more dollars. There’s a dollar glut now. And it’s that dollar glut, I think, that’s led President Trump to say, we’ve got to cut back our military spending. The military spending is not only increasing the domestic budget deficit that’s now causing enormous interest payments to the bondholders, but it’s also creating a real problem internationally. People are now doubting the fact that the dollar can pay.
Doubting? They’re calculating that they know that the dollar can’t pay. So he’s trying to say, well, what do we do? We’ll make the allies pay. Let’s send them a bill for the Cold War. We’re going to stop spending money on Russia, a war with Russia, because that’s been the single largest factor in the U.S. balance of payments deficit, pumping all these dollars into the world economy that end up in foreign central banks that want to use them now to buy gold.
So that’s the connection between military spending and the reason that gold is going up. And Trump, I think that it’s to avoid this reality breaking through that the dollar now has run out of its ability to dominate the world economy in the way that it’s done since World War I, by having most of the world’s gold supply.
In 1950, the United States had 80% of the world’s monetary gold. Well, you can imagine how far that’s gone down now. It was the major export power for agriculture, oil, and industry because Europe had been destroyed during the war.
None of that exists anymore. The whole world that was put together after World War II is falling apart. And Trump is recognizing that and is trying to disengage from the Cold War.
And the problem is that by disengaging, he’s not only shown the fiction that’s underlying the price of gold in the U.S. dollar, but the fiction that Europe needs Cold War protection, that Europe needs military protection in case Russia is going to invade.
And you’ve seen in the last few days a radical, for the first time, a change in the whole narrative about what the Cold War is all about and what the war in Ukraine of NATO against Russia and NATO against China is all about.
You’re having a whole change in the narrative and it’s met on absolute denial. I watched last night on NBC and CBS and Trump saying, you know, it was NATO and Ukraine that attacked Russia. Russia responded to that. Ukraine had a chance for peace and it didn’t want it. That’s why we don’t want it at the table. It’s had three years to negotiate peace. It was on the table, all signed. And then Boris Johnson came from England and said, no, no, no fight.
And Trump is saying, here’s what really happened. And Europe, you know, we’re not going to pay for the fiction that Europe is going, that Russia is going to be willing to lose 10 million people, 10 million soldiers militarily invading Europe. It’s not going to. It has no need for Europe. There’s nothing Europe has to offer Russia. It’s all a fiction. And the fiction is made up by the military arms makers that are trying to say, you have to buy our arms. You have to make us enormously profitable in order to stop Russian elephants from invading. This whole fictitious narrative is all coming apart now.
And partly it’s the financial narrative. It’s the military narrative. It’s the whole narrative that the countries are going to invade. The only country that’s doing, that is invading, the only group is NATO’s expanding. And Trump says, we just can’t afford to waste money subsidizing the military industrial complex. And in fact, his team, Musk and the others are looking into the enormous overpaying by the Pentagon for military spending, the enormous overpaying for Cold War spending through [US]AID and the National Endowment for Democracy and all of the CIA’s black budget. All of this is being calculated and presented. I think that when the State of the Union message comes up by Donald Trump in March, he’s going to give all of the preliminary results of the findings. And he’s going to say, you know, this is what we found.
The reason we’re running a deficit is this enormous waste on projects that we don’t need, that don’t help America, that only help the special interests of the arms manufacturers, the neoliberals, the neocons that have taken over, the whole Democratic Party, and the newspapers and the magazines and the media that the grand Wurlitzer of U.S. CIA policy has been manipulating foreign opinion to imagine that Russia had an unprovoked attack on Ukraine instead of being provoked for all of the reasons that President Putin of Russia and Secretary Lavrov have been spilling out in talk after talk.
I think all of this was discussed at Saudi Arabia at the meeting last week, and it’s very clear when you have Marco Rubio and the Secretary of State and the other people there who in the past have not been, have actually been cold warriors, not been soft on Russia. They’re acknowledging the reality of what’s been happening historically is very much like Nixon going to China.
Only the Republicans could have done this. Not because it’s obvious that they’re not Putin’s puppets. They’re not puppets of China. Only they could have been able to do this without being said, “Oh, you’re just foreign agents.”
The whole fictitious narrative of the Biden administration and the democratic, the Obama administration before that, that started this whole Cold War pivot towards fighting Russia is all coming untangled now. And we’re going to see the unraveling being spilled out in the coming months.
RICHARD WOLFF: So let me add again, this is the unraveling of an empire. It is the effort of a particular group of people to manage that process and to achieve it by providing support for the people at the top, the 10% of Americans who own the 80% of the shares, who sit on the boards of directors, all of that, and the enormous apparatus that they created over the last 80 years of American hegemony. This is a recognition by a portion of them. Still a minority in my, as best I can tell. But a minority that captured power, which is already telling you a lot. And they are going to try to hold on for the top, for the top, while the larger picture is adjusted because they can’t do it anymore. And they’re willing to say it.
I want to remind people, because Michael just reminded me, that let’s go back to 1971, when the unthinkable thing, among others, was to take the United States off the gold standard that had been established in Bretton Woods at the end of World War II as part of the new international order. And Nixon said, we’re no longer buying gold at the agreed price. We’re going off the standard. And gold then, you know, what is it now? It’s thousands of dollars, not 42 or whatever it was back then.
Okay, so that was a Republican conservative, who was in a position to say the unthinkable, that a Democrat could not have, you know, could not have done it.
And so I think we’re seeing again, somebody who for his own political advancement reasons, latches on to something much bigger than himself, that he can ride for a while.
But now, and maybe here’s a disagreement between Michael and me, I don’t know. The neocons thought they had the way to run the system. For a while, it looked like they could do it. For a while, they kind of did it. And then they couldn’t do it anymore. And now they’ve fallen.
No one should think that the people now in charge are not equally full of contradictions that they may not be able to control. They may not be.
For example, it may not be, to put it in the largest term, it may not work out to hold on to the wealth and privileges of the top 10 or 15 percent of the United States as the rest of the empire goes down. And as those people at the top push the costs of decline onto the mass of people.
So I’m reminded of that when I watch the wholesale firing of large clumps of federal workers. What, what, what is that? We’re not stupid. So the notion that all of this is about efficiency. I mean, that’s too stupid. I’m not going to deal with that. That’s like saying it’s all because of the oak tree over there in the corner. I understand that the oak tree is very powerful, but I’m not going to take that seriously.
So what are they doing? Well, Michael gives us part of the answer. They have got to do something about the level of deficits that are now out of control. So they’re going to, they’re going to cut the government workers. They’re going to tell us it’s about efficiency. But we all know that, you know, efficiency is like beauty. That’s in the eye of the beholder.
You’re going to savage all kinds of programs. Not just diversity, equality, inclusion, DEI programs, obviously that, but lots of other things are going to go. We already see a dozen examples in the press of firing people and then rehiring them the next morning when you realize this is not a group of workers about whom the efficiency story can be told.
You know, you’ll do a lot of that. You’ll get a lot of media because the right, the liberal media don’t understand the situation. So they give the right story for Trump to overthrow them. I mean, you’re watching stupidity squared here, but that again is a sign of a decline.
But the working class may not accept this. The working class may understand that if you actually fire hundreds of thousands of employees from the federal government, you are number one teaching a section of your working class that accepted lower wages than they might otherwise have demanded because they got security in their job. Yes, it’s hard working for the post office, but once you have the job, you have it for the rest of your…
They’re being told, no, you don’t. There is no security in federal employment. That’s a shock to the American system. And you know who the bulk of government employees have been for 50 years? Those excluded from the mainstream of this culture: women, black, and brown people. That’s who you see in the post office. I’m exaggerating, but you get the point.
You’re taking people whose loyalty to capitalism was already questionable, and you’re hurting them, and you’re shocking them, and you’re taking away the security that was what they bargained for in accepting the rest of this culture. We’re going to watch that play out, and I guarantee you that’s going to shake this society.
But I’m not done. Those people laid off in the public sector, where the hell are they going to go? They have to go to the private sector, and there they will be an excess supply of labor, and they will drive down wages, working conditions, all the rest of it. As they offer themselves, desperados with no government job to save them, they have to go and join the other greeters at the Amazon’s workplace, or shopping, or the Walmart, or wherever they can get the lousy jobs that will be available to them, also without security.
We already have a reviving labor movement in this country. This is going to be a big recruitment boost for them. Hopefully they know it, and will understand it, and will take advantage of it.
But I’m not so clear that Mr. Trump has understood this well enough. To have a billionaire be at the head of who’s firing everyone, that’s not smart, that’s stupid. Because what that does is it galvanizes the gap between them and me. I’m a postal worker, I just lost my job, and that evening on television, I see the world’s richest man gloating over what he’s doing. Uh oh, that’s not smart. That’s not smart at all. And that kind of mistake can come back and bite you in the rear end.
The Europeans, last point. There is something pathetic in what we’re watching. All of those European leaders, who can’t agree on hardly anything, gathering in some expensive palace in downtown Paris, being spoken to by Mr. Macron, whose days as the leader of France are numbered, and the number is small. You know, there’s something pathetic here. “We’re going to spend billions on defense.” Sure you are. Of course you are.
And where is that money going to come from? How are you going to do that? Germany is your powerhouse. They’re looking at another year of recession. They’re not powerhousing anything. They need the oil and gas most from Russia, and they’re looking like they’re not even going to take it, even if it were provided or offered to them. They’re so lost. And these are people of whom the best thing I have to say is, coming out of World War II, they did what I understand made sense then. But over the decades, they should have come to understand, the leaders, that they bet everything on the wrong horse.
MICHAEL HUDSON: Richard, I think what you’re describing is, well, on the one hand, we all approve the movements by the Republicans to end the Cold War, and to stop the military conflict.
The aim of all of this is to position themselves for the domestic class war that you’re describing. And I cannot disagree with you on that. That is precisely what’s been happening.
And when you see the, I was going to say President Musk, when you see Musk supporting the Alternative for Deutschland and the right-wing parties in Europe, the other parties that are doing what we like to see, ending the Cold War, ending the military confrontation, ending the killing, all of this is motivated by the fact that we don’t want to run a budget deficit anymore. And we’re not only going to stop with the canceling the military budget, running back military industrial weapons spending, we’re going to just walk right down the line and cut back the deficit for public service spending, public spending, social spending, in the way that you’ve just described.
Now, what is so striking about this historically, is that it’s the right-wing parties that have prepared themselves for all of this. And it’s all the way from Germany, to Italy, and to Holland, to Austria, to other countries, and saying, well, we’re not going to stop by ending [the Cold War, which] is over, the class war is back in business. We’ve positioned ourselves for beginning to balance the budget. We’re going to have to spend a lot more of our money buying American oil and gas. That’s going to create our balance of payments deficit. The reason we’re running a deficit is this enormous waste on projects that we don’t need, that don’t help America, that only help the special interests of the arms manufacturers, the neoliberals, the neocons that have taken over, the whole Democratic Party, and the newspapers and the magazines and the media that the grand Wurlitzer of U.S. CIA policy has been manipulating foreign opinion to imagine that Russia had an unprovoked attack on Ukraine instead of being provoked for all of the reasons that President Putin of Russia and Secretary Lavrov have been spilling out in talk after talk.
And it’s that harmony of class interests between the financial classes, the upper 1%, that is just as unequal in Europe, especially socialist countries like Sweden, as it is in the United States.
And part of the striking feature of this is there’s no left-wing defense about it. What you and I are saying today is what you would think that the labor union movement, the left-wing movement, would be acting on and preparing themselves for, and to put on a plane just as important as the settlement of NATO with Europe.
But that’s not the case because the left has for so long put its faith behind the ultra-right-wing party, the democratic party in the United States. It’s put its faith in the Democrats, which are the war party, the neocon party, the neoliberal party, the Obama party, the party that in 2016 would rather lose the election to Trump with Hillary than win the election with Bernie Sanders, who was quasi-socialist. The party that refused to have primaries in 2024 and would rather lose against Trump than letting an open set of primaries occur where some pro-labor candidate might just wipe the street with Harris
So you’re seeing the need to create a whole separate political party. And that requires a political movement and a political ideology and a political program.
And the only presidential candidate that had a program for that was Jill Stein that we’ve had on Nima’s show a number of times, spelling that out.
And the one thing that the Democrats and the Republicans are in agreement on is we see the danger of a working-class party and a working-class self-interest occurring. We’ve got to prevent any third party from getting access to the ballot for presidential election and for state and local election. We’ve got to make sure that the American voters are limited to voting between the Republican and the Democratic Party, both of whom back the 1%. And the only difference between us is: is the 1% going to make most of its money on military industrial stocks or on other, non-military, non-war spending?
Exactly the same thing is happening in Europe. This is the common fight with Europe, where the Labor Party in England under Starmer just signed a 100-year agreement to support Ukraine. He’s coming to meet President Trump next week in Washington, I think. That’s going to be very interesting to hear.
You’re having Germany saying, we’re going to ban the AFD, Alternative for Deutschland Party, from running on the fact that it’s fascist. What’s fascist? Opposing the war with Russia. What’s fascist? Opposing genocide in Gaza? They banned criticism of genocide and fascism from the Near East to Ukraine. They’re trying to ban political parties who are not Cold War parties there and certainly parties who would represent social spending and labor interests.
And because the labor interests have been co-opted by groups calling themselves pro-labor, like the Labor Party in England or the Social Democratic Party, the SPD in Germany, you’re you’re seeing this is, this is going to be what determines the next 10 or 20 years. And the United States is in, and Europe has let the media be concentrated in the hands of right-wing interests.
In the United States, it’s the neocon right-wing interest. The New York Times, the Washington Post, the Wolfrey Journal, saying that the major media papers in England, Germany other countries are also controlled by the right wing.
The prize in this fight is the narrative. Who are people going to believe? Are they going to believe that the way to stabilize the economy is, well, you’ve got to uh, create unemployment. You’ve got to prevent, we’ve got to save you workers from inflation by firing as many workers as we can. If we can only hold your wages down enough, the price of eggs won’t go up so much. This is the neoliberal, this is the economics profession in the mainstream. This is the philosophy of how central banks operate, and it’s the philosophy of both the, what passes for the left wing and the right wing governments in Europe.
So I guess what we’re trying to do all by ourselves here is to create an alternative narrative, hoping that somehow this will solidify and create a concrete political movement and concrete political program to oppose this from the almost absence of any program that has access to the public media to the press, to the television, cable to the media outside of the internet here.
RICHARD WOLFF: Let me, let me add to that if I can two considerations. One, for all of this to work, there has to be a redistribution of wealth and power. In other words, for this program that Michael has outlined, for you to end the Cold War, to reconnect the U.S. and Russia, to subordinate the European, all of this, they’re going to try to redistribute wealth in a variety of forms.
One, that we’ve talked about, by offloading the costs of the empire decline onto their middle and lower classes, by concentrating their wealth so that they can create, quote, a European defense architecture, trying to hold power in this universe of “Russia’s our endangerment. We are the leaders you should all vote for because look, we are saving you from Russia.”
You know, the alliance with the United States was rationalized and celebrated in that way. Now that the United States won’t play the role, they’re going to do it with defense. And that means cutting back on social programs.
In order for this to work, there has to be an acceptance by the mass of people of a decline in their standard of living. I don’t see any way out of it. Certainly relative decline, but possibly an absolute decline. Okay, so how are you going to get that?
The only way to get that, given what we see in the world today, is if political coalitions of the sort we see in Trump, or for that matter in the Christian Democratic Union, or the Social Democrats in Germany, or Macron, all of that, is the following: the ruling class, a small group of people, the one to five to ten percent who sit at the top, have always understood that in a universe of universal suffrage, their hold on power is insecure.
They don’t have, to use old language, a mass base. And so they have crafted a way to do that. I’m going to use the American example, but with suitable adjustments, it applies in Europe as well.
So here in the United States, the Republican Party presents itself traditionally as the best way to do that. Over recent decades, the Democratic Party has tried to become a competitor to do the same thing.
So the Republicans build their coalition as follows. They go to white supremacists and say, “If you support the Republican Party, and in particular, tax cuts for the rich, free, doing whatever it is we want, we will give you a lease on life, which the rest of American society won’t give you.”
Number two, we will go to those of you that are very upset about abortion. We will give you more than Republicans have given you in the past, if you give us the support we need to take the economic steps that are necessary.
They go to the gun enthusiasts. They go to the Christian fundamentalists. We can make a list. We all know the communities that have cut a deal. In the words of Billy Graham’s son, “Mr. Trump is not a good Christian, but he is very good for Christianity.” Okay, there it is. Don’t need a compass to know what that’s all about. This is a deal.
The Democrats couldn’t or wouldn’t do what was necessary to hold on to their mass base: non-whites, trade unions, women, minorities, all of that, intellectuals, because the Democratic Party leadership wasn’t able to deliver to them socially, so decided instead to go after the money of the rich to become competitors with the Republicans for the big donations. And they got them on condition that they downplayed the unions and the minorities. And they did that. So they lost those people, and they ended up voting for Trump.
Okay, so now the question becomes and here is what I would like to say. It is conversations like this, bringing up the aspects that mainstream media either ignore or downplay. That’s our best chance and here’s the politician in me to weaken, to break, to atrophy that alliance.
If we can make clear that the cost of what is proposed by Trump and Musk, and what is accommodated, as I’m sure we’ll see, by the Democrats, is the undercutting of the social position of people who are Christian, people who are white supremacists.
We can’t, and we don’t want to, argue them out of their prejudices. That’s who they are. That’s something else. We will be the enemies of that no matter what we do. They’ll figure that out. We know it.
But we can appeal to them on the grounds of what is happening to them as caught up in the very things we discuss on this program. And that is the way to weaken, to break down that coalition, to make it much harder for the Trumps and the Musks to get the support of all of those particular mass bases they count on.
That’s crucial. I think, and we should understand that that’s as important a function of our discussions as anything else. Yes, we want to equip the left to understand better, to strategize better, to figure out weak points to attack. Yes, we should. But we also can do very important work on the coalition without which none of this is going to happen. None of it.
And by the way, if we don’t, the Democratic Party will. They will have to do it in order to once again become the party in power with their mass bases out-voting the mass bases that the Republicans get.
And in that struggle, we will always see Jamie Dimon explaining to the world that he doesn’t care which of these parties wins. Because he wins in either case.
And I can see it now. I can see him being in no way disturbed to watch Mr. Musk using efficiency to rationalize cutting social program. That is as old as Methuselah. All businessmen want to believe that you can cut taxes and all it does is remove the free-loading fat from the federal budget. That’s how they talk. They were brought up on that way of thinking. And in that way, there’s nothing new about Mr. Trump at all.
MICHAEL HUDSON: Richard, there’s one word that we haven’t said, and I haven’t heard it anywhere in any public media. And that is “peace dividend.” Just think after every earlier end of a war, there was always a talk of a peace dividend at the end of the war. You don’t hear about that now. And why not?
Well, you’ve just described how the peace dividend is not going to go to the people that have expected it on the end of earlier wars. I think this phrase, peace dividend, can be our stake that we drive through the heart of Dracula and the Democratic Party and the Republican right. What are they going to do for a peace dividend? Who is it going to go to? Is the peace dividend going to take the form of large-scale unemployment, of laying-off of government regulatory agencies? They’ve just begun to lay off IRS officials. So nobody can check the tax returns of the wealthiest people. And already the tax returns investigations are mainly on the middle class, not the 1%. So that’s really what we’re…
Let’s look at what kind of cuts are occurring. And for every kind of cut that Musk’s team comes up with and saying, is this a peace dividend or a class-war dividend? That’s the phrase, that’s the narrative, I think, that we want to put in place. And it is a peace dividend, not to spend as much money on the military budget, Raytheon and all the other merchants of death.
But is it going to be basically, okay, we’re cutting down the deficit, so we don’t have to spend so much interest charges on rolling over the federal debt, and can lower the interest charges along with the military spending. But they’re going whole hog. And when Musk says, we’re going to cut it across the board, what he means, we’re going to cut the peace dividend as well as the end of the Cold War.
That’s exactly what we want to point out, that ending the Cold War should be an ability to increase wages, consumer spending, to increase the living standards of wage earners and what’s called the middle class, which are wage earners that don’t want to think of themselves as wage earners, but sort of as real estate investors in miniature, capitalists in miniature, we want a change of the narrative.
I think that you said that maybe the voters can change the Democratic Party, I don’t think that’s possible. I think the Democratic National Committee has structured the Democratic Party as a separate corporate entity controlled by the existing board of directors of the party that is more Soviet than the Soviet Union used to be.
And you’ve just had the last head of the Democratic National Committee saying that any supporters of Bernie Sanders, we want to keep out of the National Committee and out of voting.
So the National Committee, when it comes to the nominating convention for presidents, can outvote all the voters. Talk about the 0.1% having more votes than the 99.9%. That’s how the Democratic Party is structured with the Central Committee.
So I don’t think it can be done through the Democrats. It has to be done through a new political movement that is not suckered into thinking that somehow the only alternative to supporting labor and wage earners is the Democratic Party.
Trump has already won more of the labor support. And I think with his skill at narrative, he’s probably going to retain the support. And I don’t see any of the Democrats in Congress in all of the party line votes that have been coming up, as being willing to take a stand in the kind of things that used to be called, associated with Bernie Sanders and the squad. They’ve been utterly silent in all this.
They’re tickled to death to see, finally, the Democratic Party and Republicans have a consensus today that they can achieve the dream of President Obama, who is going to change everything.
Finally, they can roll back Social Security and Medicare. That was Obama’s dream, the bipartisan chance, the bipartisan agreement. The 2008 crisis when he bailed out the banks prevented him from doing that. But that remains the dream of both the Democrats and the Republicans together as a duopoly.
So we’re fighting two parties. We’re not just fighting one party there. You’ve described how the Republicans mobilize their own base, which is rather unique. But the Democratic base is equally unique. And that’s really the problem here.
And it’s the same problem that you have in Germany, France, and the other countries. You have Macron holding on to power and the whole power elite there. You’re having that all throughout Europe.
While all of that’s happening, just today at the group of 20 meetings, you have pictures of President Putin meeting with President Xi, or the Russian and Chinese delegates, I’m sorry, meeting together, providing the alternative.
So I think we may juxtapose the position in the NATO countries to the much more pleasant discussions that are occurring in the global majority.
RICHARD WOLFF: Yeah. One is in the elevator going up, and one is in the elevator going down. And they pass each other, but the movement is unmistakable.
Here’s two things to end with that I think illustrate your point, Michael. I noticed in the press yesterday, somebody in the Musk operation is nervous. And the way he articulated the nervousness was the reaction. They do a lot of polling, the reaction of workers all over the country to the mass firing of public employees. Nobody is missing it.
So the suggestion of this worker is that what they better do is have an immediate dividend. His word, an immediate dividend. He didn’t call it a peace dividend. He called it getting the people to support the effort at efficiency so that they can send every voter a check for 82 dollars and 19 cents, which is your benefit from the achieved efficiency of firing 280,000 or whatever it’ll be, workers.
But you see, they are worried. They are worried about what they are doing and how it might spin out of their control and turn against them.
And here’s a second example. Tremendous effort coming from the spokespeople of military producers, how what we are doing is a very important, get ready, pivot to Asia. You know what that is? That’s an attempt to say, okay, you can cut the budget, but we have to make as big a danger out of China as we used to out of Russia. When Russia is no longer useful as the arch enemy to protect against, we have to say it against China.
The United States, which shares the Pacific Ocean, might pull that off. For the Europeans, that’s too big a stretch. They can’t do that. They have to hold on to Russia. And in that difficulty for them, we also will have extraordinary opportunities.
MICHAEL HUDSON: I agree.
NIMA ALKHORSHID: Then let’s wrap it up. Thank you so much, Richard and Michael, for being with us today. Great pleasure as always. Listening to you and learning from you.
RICHARD WOLFF: I learn each time and I’m grateful too.
NIMA ALKHORSHID: Take care. Bye bye.
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