Monday, July 14, 2014

At Issue Is Who Shall Rule The World: RT and Michael Hudson

Interview With Michael Hudson

July 09, 2014 "ICH" - "RT" - - RT: Could you summarize for us the tried and tested steps that will lead from IMF loans, to Ukraine's best assets ending up in private Western hands - the IMF's 'knee-breaker' role as you memorably described it as?

Michael Hudson: The basic principle to bear in mind is that finance today is war by non-military means. The aim of getting a country in debt is to obtain its economic surplus, ending up with its property. The main property to obtain is that which can produce exports and generate foreign exchange. For Ukraine, this means mainly the Eastern manufacturing and mining companies, which presently are held in the hands of the oligarchs. For foreign investors, the problem is how to transfer these assets and their revenue into foreign hands – in an economy whose international payments are in chronic deficit as a result of the failed post-1991 restructuring. That is where the IMF comes in.

The IMF was not set up to finance domestic government budget deficits. Its loans are earmarked to pay foreign creditors, mainly to maintain a country’s exchange rate. The effect usually is to subsidize flight capital out of the country – at a high exchange rate rather than depositors and creditors getting fewer dollars or euro. In Ukraine’s case, foreign creditors would include Gazprom, which already has been paid something. The IMF transfers a credit to its “Ukraine account,” which then pays foreign creditors. The money never really gets to Ukraine or to other IMF borrowers. It is paid to the accounts of foreigners, including foreign government creditors, as in IMF loans to Greece. Such loans come with “conditionalities” that impose austerity. This in turn drives the economy even further into debt – forcing the government to tighten the budget even more, run even smaller budget deficits and sell off public assets.

RT: Can Ukraine expect the so-called 'IMF effect' of 1 in 5 of the impoverished population emigrating to work abroad, and what consequence could this have on a country to lose its brightest minds?

MH: Ukraine already draws in foreign emigrants’ remittances equal to about 4% of its GDP. (About $10 billion a year.) Most of this money comes from Russia, the rest from Western Europe. The effect of IMF austerity plans is to drive more Ukrainians to emigrate in search of work. They will send some of their earnings back to their families, strengthening the Ukrainian currency vis-à-vis the ruble and euro.

Complete story at - At Issue Is Who Shall Rule The World:

CC Photo by Flickr User teacherdudebbq2 Subject is IMF Chaos & Poverty

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