This event continues our “End-Times Economics” series led by Michael Hudson, exploring how global capitalism and empire are reshaping our economic and political reality.

Grace Blakeley — who recently held an excellent conversation with Ann Pettifor at the David Graeber Institute — represents a new generation of political economists. Together with Hudson, one of the most influential critics of financial capitalism, they will discuss how today’s crises are unfolding and what they reveal about the changing structure of the global economy.

Because this announcement is written well in advance, the exact focus of the conversation may evolve as events continue to unfold.

Recording & Transcript

The conversation has been streamed live on our Youtube Channel: https://www.youtube.com/watch?v=ZFNf6bAKTf4

NIKA DUBROVSKY: Hello, everyone. Welcome to the David Graeber Institute. We are very happy to welcome Michael Hudson and Grace Blakeley, both leading economists, writers, and people for whom David himself had a great deal of affection.

As in this whole World Series, we’re talking about the economy of the end of the world. And these are about the best people one could possibly imagine asking such a thing.

Michael Hudson told me that it was actually David Graeber who first introduced him to Grace. So I’m especially delighted that they’re meeting here again in this space.

I don’t really imagine these two people need much moderation. So we will come back at the end of the discussion with questions. Otherwise, I’ll simply hand things over. Perhaps we could begin by asking each of you to say how you understand what is going on now in the world — that looks to me more like a perestroika coming back — and then let the conversation unfold from there.

Michael?

MICHAEL HUDSON: …through classical antiquity. But that would probably take a few hours. So the more specific your question can be, the better.

We have an entertainer as president of the United States. Politicians here are called — there’s a new word that’s used in the vocabulary here — they’re called ‘influencers’. And they’re elected by being able to raise financing from very large contributors who believe they can influence voters to support a position.

President Trump’s largest contributor is an influencer, Miriam Adelson, who gave him $250 million to appoint Rubio as Secretary of State, and just gave him $20 million more to accelerate the fight alongside Israel to try to bring about what you just said — the end of the world. And the end of the world has a lot of emotional appeal for Donald Trump.

I’m talking now from where I live in Forest Hills in New York City. And right up the street on the way to the park where I sit is the school where Donald Trump went to school. And he was expelled from the school because he was a badly behaved child — kept threatening to jump out the window and doing things. So his father sent him to a military academy to train him. And that military academy really shaped Trump’s idea. And of course, what do you learn at a military academy? You learn how to be a great leader of an army and conquer people.

And so Trump thought — well, his father always called him a loser in life. Sent him to the military academy to be a winner. And that’s what he wants to do. But most of all, he wanted attention, and he wanted to be famous. And how can you be more famous than doing what he tried to do last Saturday? He asked the head of the armed forces — General Haig — I’m blocking out the name — for the codes for the atom bomb so that he could authorize an atomic attack. And the general insisted that Trump be removed from the room and refused to give him the codes.

But Trump harbors the design that he really wants to do something that will make him famous throughout history. And probably the most famous way you can do it in history is to start an atomic war that blows up the world. A thousand years from now — two thousand years from now — after people begin slowly to rebuild civilization from what Trump threatens to reduce to the Stone Age, he’ll be remembered in history as the man who brought the whole world to an atomic end and had to start civilization all over.

So that’s the only personal perspective I can give on the end of the world. There is a constituency advocating the end of the world, especially the Christian Zionists here who read Revelation. The U.S. ambassador to Israel said that if we can have an atomic war in Israel, that will essentially be the conflagration that the Bible talked about. Jesus will come back and send all the Christians up to heaven and everyone else to hell. So there’s a lot of support.

It’s very hard to get an influencer to actually become president of the United States with at least the potential to have his hands on the atom bomb to start an atomic war. But that’s the situation where Western democracy has evolved to.

GRACE BLAKELEY: Thanks so much, Michael. And yeah, just from what Nika said, I wanted to pick up and remember a very fond memory I have of David, which is when he first introduced me to you, Michael. He took us to his favourite Chinese restaurant — which I’m pretty sure now, having spoken to a few people, he actually takes everyone to this same restaurant and orders the same sets of things.

And I was a big fan of Michael at the time. His work had really influenced some of my earlier work on financialization, and I still count him as someone who’s really been a huge intellectual influence on me. So I was always very grateful to David for having introduced us, and it’s great to be here and talking to you right now.

Picking up on what Michael was just saying, it kind of made me think of two different things — two stories that have recently been in the news.

The first was the story about U.S. troops being told that the war in Iran is the next step towards the apocalypse. We heard loads of complaints from service people around the U.S. after they had been told that they were living in the end times and that the war was kind of God’s divine plan, basically. And this was all referencing the Book of Revelation, which describes a war in the Middle East leading to Armageddon and the second coming of Christ.

The second set of stories that it made me think of was how unbelievably profitable this conflict has been for the oil companies. BP and Shell in particular, who have significant investments outside of the Middle East, have been able to take advantage of higher oil prices — their share prices have increased substantially.

And all of this — these stories about how we’re living through a war that the U.S. Army is telling us is heralding Armageddon, and the fact that that war is also pushing up the share prices of some of the largest oil companies in the world — made me think of that famous Mark Fisher quote (paraphrasing Fredric Jameson) when he says: it’s easier to imagine the end of capitalism than the end of the world.

Fisher called this capitalist realism, and he based it around the idea that capitalist ideology has become so deeply embedded in our societies that we can no longer imagine an alternative to it. The focus was generally on the fact that it’s hard to imagine the end of capitalism. But I think what is really interesting about the time that we’re living in right now is not just that it’s hard to imagine the end of capitalism — it’s also become pretty easy to imagine the end of the world. The end of life as we know it, the end of our civilization, almost. It doesn’t feel that far off anymore, because of all these crises and catastrophes — from climate breakdown to war to economic turmoil to all of the various potential apocalyptic events that we hear about so much in the media.

We see these visions of apocalypse flash before our eyes all the time — with every war, every virus, every headline about ecological collapse. So living inside a capitalist economy doesn’t just make it hard to imagine alternatives to capitalism. It makes it easier to imagine the end of the world. And I don’t think that’s an accident or a coincidence.

I don’t think it’s just religious zealotry that U.S. service people were told that this war is heralding Armageddon. It’s not just about building a rigid group identity. It’s kind of about reassuring people that they’re right to feel terrified and scared — that they’re right to feel like everything is collapsing around us. We are living through the end times. Life keeps getting worse. There’s a constant new crisis around every corner. Living standards are being eroded. There’s not much hope for the future.

And this message that the Trump administration is basically saying to people is: “It’s OK that it feels like the end of the world, because it’s all part of a bigger plan.” That message is compelling precisely because the economic system that we live in is so destructive. The harder it becomes to earn a living, the more people worry about climate breakdown, the more they hear about war and death and new viruses, the easier it is to believe that the end is really coming.

And that is a really powerful tool for those at the top — to convince us that basically there’s no hope. Not just that there’s no hope beyond capitalism, but actually that we’re kind of nearing Armageddon or the end times or whatever.

Whilst this system is very much not working for the majority of people, for the small minority who govern this system, it absolutely is. So all of these things that make us think of chaos and catastrophe and apocalypse are creating profits for those at the top. This war creating those massive profits for the oil companies, for the arms manufacturers as well.

I also saw some headlines the other day which showed that some of the biggest banks have made massive profits off all the volatility that’s been taking place in financial markets, which allows them to make trades and take a cut of the trades they’re executing on behalf of their clients — massively increasing their profits.

Then there are the tech CEOs that are supporting all of these conflicts in various different ways, supporting the U.S. government, all seeing their share prices increase on the back of that and on the back of the massive rollout of data centres that are destroying communities across the U.S. and soaking up all of our resources.

So the system isn’t dysfunctional for everyone, even though it feels kind of apocalyptic. And I think this is the really important thing — because the tiny group of people who are benefiting from collapse basically want us to believe that we are living through the end of the world.

And you know, some of them actually, I think, even believe it themselves. The Elon Musks of the world saying: things are screwed on planet Earth, so I’m going to go off to Mars. Or the wealthy people who are investing in military bunkers and doomsday compounds all over the world. They want us to think that there is no hope for the future — not for us anyway, and not on this planet; maybe for them on another planet.

And the craziest thing about this moment is that the more havoc they wreak, the easier it becomes for the rest of us to think that they’re right — that there is no alternative, that the end is nigh, that the apocalypse is coming, the billionaires who caused it will just leave, and the rest of us will have to pick up the pieces.

And, you know, it’s understandable why a lot of us feel that way. There is so much chaos and turmoil and fear, and just death and destruction taking place at this particular juncture in the history of capitalism.

But those visions of the apocalypse — whatever the end might look like — that’s not here yet. And the fight against those people at the top is not hopeless, even though they really want us to believe that it is. Because for every billionaire spewing poison into the atmosphere, there are so many people who are fighting for life here now on this planet.

The communities across the U.S. who are resisting the data centres, such that we’ve now seen several data centres being shut down as a result of community organising, and states even introducing moratoria on the expansion of those data centres. The movement against all of these wars — it hasn’t stopped them, but it has created a thorn in the side of much of our political class. Here in the U.K., in some ways, the Palestine movement is to a great extent responsible for the rise of the Green Party, which is close to taking over the Labour Party precisely because Labour was so bad on its support for Israel, and the Greens are really succeeding on the back of this groundswell of anger at just the horrific actions of our political class.

So this is kind of some of the stuff that I write about, and some of the stuff that I want us to think about as well — which is: where are these seeds of resistance that are allowing us to imagine something better than the end of the world?

The thing that I think about often — my partner has got me really into cyberpunk recently. These kind of post-apocalyptic dystopian visions of what life is going to look like when the tech companies take over and control every aspect of our lives. But I’ve also seen something really cool recently, which is solarpunk. And this is a utopian vision of what the future could look like if the technologies that we’re inventing now were put to use for people and for planet rather than for those at the top.

And I think that we can already see sprouts and seeds of this kind of new, more hopeful future emerging all over the world — in things like community energy that’s been taken back and taken into ownership by local cooperatives and those sorts of things.

And I think that’s where David’s work and message comes back in, because he was so intent that we shouldn’t allow our imaginations to be crushed by the power of capital — and that imagining what a new world might look like is itself a form of resistance. And in the process of imagining it, we learn how to build something new.

MICHAEL HUDSON: While Grace was talking, that reminds me that after all, we’re talking to the David Graeber Institute. And what does all this have to do with all of our main concerns, which is about debt and the debt cancellation that David and I discussed? I guess Grace is all in favour of that as well.

It has quite a bit to do with it. Because the genius of Iran’s response to being threatened — having all of its bridges blown up, all of its electric power utilities blown up, its oil production blown up, and being pushed back into the Stone Age by Trump — all of this is defended against by Iran saying: “We’re not going to suffer alone.”

There’s only one way we have of defending ourselves against the enormous military power of the U.S. — with all the bombs it has, all the missiles, all the aircraft. If we go down, all of the Arab oil countries in our neighbourhood are going to go down too. There’s not going to be any oil available. If we’re not able to export oil, then the Arab countries that are letting American military bases operate as centres to bomb us and destroy our living — they’re going to be taken out too.

And what this threat does is the equivalent of what was called, when I was growing up in the 1960s, mutual assured destruction from the atom bomb. Both Russia and the United States said: if you bomb us, we can bomb you, and we’ll wipe both of us out.

Well, what Iran says is: if we’re wiped out militarily to the degree that Trump and Israel are threatening, then we’re going to make sure that the whole rest of the world that is dependent on OPEC oil is not going to be able to get it. And this twenty percent cut in the supply of oil is going to lead to mutually assured economic destruction — and specifically physical destruction, financial destruction.

It’s going to work as follows. The very first effect will be that without oil, you are not able to produce fertilizer. And that’s going to cut back agricultural yields, pushing up food prices. It’s going to immediately increase the prices of energy — oil and gas — for countries in the global south and Europe that need oil and gas to heat their homes and turn on the lights and power their factories. It’ll cut back the sulfuric acid made out of oil that’s used in mining. Iran has already cut back the helium, which is being used not only in hospitals for MRI testing, but also for cryogenic computer chip making. There will be all sorts of industries — from aluminium to automobiles to heavy industry — that are all going to be closed down.

This is a way of bringing about something that David and I and the rest of us have all thought about: maybe we can get people aware of the need to write down the debts. Well, now, without our intervening in any way at all, you’re having the threat of Iran — and really Trump — closing off OPEC oil from the rest of the world. This is going to lead to such a financial disruption that the debts can’t be paid.

For Global South countries, they already are burdened with having to pay enormous dollar debts on all of the money that the International Monetary Fund and international banks and bondholders have lent them to finance the trade deficits they’ve been forced into by following orthodox economics — specialising in raw materials instead of becoming self-sufficient and industrialising.

They’re going to have a choice. If they have to pay, the choice is this: Are we going to cut back our economy and impose depression — cut back our social spending so that we can afford to pay the higher prices for our oil and pay our debts? Or are we going to say: “Sorry, we’re going to put our survival above the payment to the bondholders. We’re not going to pay the debts that we owe because we can’t afford to, thanks to Donald Trump making it impossible to pay dollar debts.” These dollar debts are the result of failed policies and broken promises — that following neoliberal economics was going to make us more prosperous, when all it’s really done is push us more into debt.

Same thing for the industrial economies. All of a sudden you have the United States being the most highly debt-leveraged economy in the world, as it was in the 1920s when the 1929 stock market crash came. The United States and Western Europe have been financialised — that means banks have lent money to private capital companies that have bought out stockholders and other corporations, taking them private, all on credit. Well, if there’s a breakdown of industrial production in the sectors I’ve mentioned, these companies that have been bought out on credit cannot pay their debts. That means that the banks and the bondholders and the retirement funds that pay for pensions are all going to find themselves illiquid and, in fact, really insolvent.

We’re at the point that David and I have been talking about for over a decade: the tendency of debt to grow faster than the ability to pay it has all of a sudden been vastly accelerated by the war by Trump and Netanyahu against Iran.

The actual intention is to bomb Iran, as there seems to be imminent [action] judging from the ships and aircraft that have been flown into the area. And Donald Trump gave a very good speech earlier this week saying: if there is a big world crisis, yes, we know that I’ll be causing a crisis by bombing Iran, but America is going to come out less bad than other countries. Of course, we’re going to have a little bit of suffering, but at least we’re independent in oil — we can get by on oil, but other countries can’t.

Well, the problem is that the American financial system is linked to other countries. And the problem is that even if America can deal with oil, it can’t deal with all of the financial strains and the debt strains that have been blown up. And the American economy is going to go down with the European economy and the rest of the economy.

…In 1931, the main international debts — the inter-ally debts owed by American allies, Britain, France, and others to America for arms bought before America entered the war — were cancelled, and German reparations were cancelled. But it was too late. The world had already been forced into the Great Depression, and the only way it could come out of it was with Keynesian military spending, basically.

Well, that’s going to be the situation today. Is it really likely that other countries can say: “Well, yes, we’re in a depression. We’ve all been wiped out militarily. Let’s just spend more money on the military and rebuild the economy.” That’s what Germany’s trying to do now — trying to rebuild its army and act as the arms producer of Europe.

That’s really the dream that they all have — that there’s a way they can survive the world crisis that’s coming, a way they can get rich off the end of the world. Because the fact is that most great fortunes in history have been made in crisis situations, desperate situations where people are desperate to raise money for anything. It’s easier to make money in a crashing market than it is in a growing market.

So this is a great crash that all of the big financial conglomerates have been looking at: how can we come out on top, how can we benefit from all of this? This is going to be what the world is going to be talking about, I think, for the next few years.

GRACE BLAKELEY: Yeah, I kind of want to pick up on what Michael was saying there about the dynamics of debt and lending at this stage in the economic cycle, and how that is being affected by the increase in interest rates that we’re seeing as a result of the war in Iran — or that we’re likely to see as a result of the war in Iran.

I think it’s really important to understand — if we want to understand the dynamics of financialisation since the crisis of 2008 — we have to move beyond traditional bank lending in the bond market and also look at what’s going on in private financial markets, and particularly private credit. Because right now we’re living through this big bubble in private credit.

Essentially what this is: a bunch of very big, powerful asset managers that lend to private companies outside of traditional financial markets. So if you’re a small, medium-sized company, you can borrow from a bank. You can borrow from a bunch of banks through a syndicated loan. You can issue bonds — though that’s less likely as a smaller company. Or you can take out a loan from a non-bank financial institution. And a lot of the time, this is a big asset manager like Blackstone, Aries, Blue Owl — these kinds of big institutions that essentially manage other people’s money. A lot of smaller companies have been taking out loans in this private credit market.

This has also been impacted by the astonishing growth of private equity since the financial crisis, because private equity firms are often highly leveraged — they borrow lots of money to buy smaller firms and then often load all of that debt onto the balance sheets of the firms they’ve bought.

And this market for private credit has ballooned since the financial crisis of 2008. Primarily — at least partly — because after the crisis, regulators put much more restrictions on bank lending. And as a result — you know, we often think about regulation as pushing on a balloon: when you try to clamp down on one area, the activity moves somewhere else. And this is exactly what we saw after the crisis. A lot of that lending moved into the shadow banking system, into private credit markets.

When we talk about shadow banking, that’s really banking activities that just take place outside of the traditional banking system. So when you have a non-bank financial institution like a big asset manager issuing lots of debt, that is part of the shadow banking system.

So now you have a multi-trillion-dollar industry dominated by a handful of these big asset management firms, many of which are in charge of governing your pension or maybe your savings. And those firms go out, raise lots of money, and then lend it to mid-market companies.

For a long time after the crisis, interest rates were obviously very low — this was very profitable. The loans were relatively easy to repay. The economy was doing OK — not amazingly, but interest rates were so low that it didn’t really matter.

And a lot of firms that were not really growing particularly well just piled debt on debt on debt on debt. We saw this particularly affecting software companies. There was this big boom during the pandemic among software companies — everyone being like, you know, B-to-B software-as-a-service is going to be the next big thing. And these companies which don’t have a lot of capital — they don’t have a lot of actual physical assets that can be sold if they go bankrupt — they’re capital-light and have a ton of debt. And most of that debt comes from this private credit system.

And what’s been really interesting recently is that investors have been talking about this thing called the SaaSpocalypse — which is basically a lot of these businesses that borrowed lots of money from investors who were betting that this business model would boom are massively exposed to AI. And they’ve seen their share prices fall as a result. They’re also massively exposed to rising interest rates because, again, not many assets and a lot of debt.

So we’ve seen the SaaSpocalypse — basically all these B-to-B software-as-a-service companies losing tons of money. And that is really heavily impacting the shadow banking system, because these private credit companies have lent so much money to these enterprise software-as-a-service companies. One stat I’ve got here is that one eighth of the total industry-wide lending of business development companies in private credit is exposed to software-as-a-service companies.

And this has been exacerbated by the rise in interest rates as well, which has just made it so much harder for these firms to pay back their cash. And what you’re seeing now is really fascinating — defaults look like they’re not very high in this sector of the market. But that’s because they’re not really being registered. And this is the other thing about private credit: the debt isn’t publicly traded, and so its value is basically assessed by the firms that own it. And they’re all saying it’s fine — all of these businesses are going to be able to pay back this money.

What is actually happening is the businesses aren’t paying back the money. They’re doing something called payment in kind, which is basically adding the value of the interest payments they’re supposed to be repaying onto the value of the loan — which is effectively saying they can’t afford to repay the interest, and the loan is just increasing and increasing and increasing with all of that unpaid interest.

And it’s a similar dynamic to what we’ve seen in crises that have taken place before.

It also matters because we’re not just talking about this multi-trillion-dollar business of private credit. A lot of people say: well, it doesn’t really matter because these private credit lenders aren’t as highly leveraged as traditional banks — they have a lot more cash and other forms of capital available to them if some of their investments do go under. But what’s interesting is that the shadow banking system is very deeply connected to the traditional banking system. A lot of senior executives at places like JP Morgan, Citi, Wells Fargo have come out and said they actually have quite a lot of exposure to private credit — they’ve lent billions to private credit funds through all sorts of fairly opaque and complicated finance mechanisms.

Also, pension funds are massively involved in private credit. Insurance companies — especially life insurance — have just been channeling tons and tons of money into this sector. And it’s all become this kind of web of really close connections between all these different parts of the financial sector, all concentrated within private credit.

And it’s very easy to see how this could end. Some of these businesses, when it finally becomes clear that they actually can’t keep paying their loans, you’ll end up seeing potentially a wave of defaults, a liquidity crisis, investors trying to take out their money. And that’s actually already started happening, because lots of investors in these private credit funds have tried to take their money out in recent months. And the funds have said: you can’t have your money back — because they’re semi-liquid funds, which means you can’t have your money back whenever you want.

And the traditional banking system is, of course, not insulated from this stress. I was reading something in the Financial Times the other day that said: if private credit does blow up in the way that it possibly could, we could be seeing a full-blown credit crunch where everyone’s scrambling to access cash. This is the type of stuff that Michael talks about all the time — it’s a rush for liquidity. People are forced to sell assets to meet margin calls, which exacerbates the falling prices of the assets in question. And then you get a full-blown credit crunch.

And this is another thing that’s been triggered by basically the Iran war to an extent, and also the AI boom as well. And people just aren’t prepared for it. Some sectors of the financial regulatory ecosystem are saying: we need to do some stress tests to figure out what’s going on in shadow banking. But nobody really knows how this is going to blow up, because nobody knows what the system looks like. Nobody’s mapped it. We’ve never been through a crisis in shadow banking before.

And ultimately, we all know what’s going to happen. It’s going to be the taxpayer — ordinary people — who are forced to bail out these private institutions that have spent the last ten years or so making vast sums of money by basically committing regulatory arbitrage.

And that’s a big crisis waiting to happen, I think.

MICHAEL HUDSON: What Grace has been describing is a Ponzi scheme. The whole economy has turned into a Ponzi scheme. And that means — as she pointed out — you’re lending debtors the money to pay the interest so that they don’t default.

All this happened in 2009 after the big bank crisis occurred in America — the junk mortgage bank fraud crisis that left Citibank and many other big banks insolvent because they made junk mortgages with fictitious values assigned to land to borrowers. The word that was used was ‘NINJA’: borrowers with no income, no jobs, no assets.

Well, they all expected the debts to be written down, because if a bank made a fraudulent loan knowing there was no chance of it being repaid, the banks should lose the money. Instead, when President Obama came in, he became probably the most anti-Black, anti-Hispanic, anti-minority president since Woodrow Wilson. He said: “Well, we can’t let the banks go under — they’re my major campaign contributors. We’re going to make the victims of the junk mortgages actually pay the loans, and if they can’t, we’re going to evict them.”

Well, of course they couldn’t pay, because the loans were way beyond their ability to be paid. And so they lost their homes. And the whole tendency in the United States towards increasing home ownership was reversed. These homes — from which the junk mortgage victims, mainly Black and Hispanic, were evicted — were bought up by large companies: Blackstone, BlackRock, all sorts of private investors. And America began to turn into a landlord economy.

Meanwhile, the stock market had crashed and the property market had crashed. What was Obama’s solution? The solution was what was called ‘zero interest rate policy’. He said: the government is going to create enough credit. We’re going to flood the economy with credit so that banks can borrow at such a low price that they can bid up the price of real estate again. The price of a home or an office building is worth whatever a bank will lend. Low interest rates made it possible for new borrowers to carry the debts and somehow save the banks from their insolvency.

Now, Grace said it’s a taxpayer expense — but it wasn’t a taxpayer expense at all. Taxes on taxpayers paid less and less, because the wealthiest taxpayers had the lowest tax rates of all, and tax rates were cut on the wealthiest taxpayers much more than on anyone else. The Federal Reserve simply printed the money.

And what’s happened today: the current U.S. Secretary of the Treasury, Bessent, has even written some wonderful articles in the journal *International Economy* pointing out that the Federal Reserve has been just buying all of these bonds that the U.S. government is issuing as it runs a budget deficit. What’s happening is the Federal Reserve is buying them — not private buyers, because they don’t have the money. The Federal Reserve is buying them and just monetising the debt. So the Ponzi scheme is being continued — not by getting new lenders in (because the new lenders say, hey, it’s a Ponzi scheme; we’re not going to lose our money as late joiners of the Ponzi scheme always do) — the government creates the money, and it’s all just artificially printed.

There’s a very false discussion in the popular press — as if, well, when oil prices go up, that’s going to increase the consumer price index, and the Federal Reserve is going to raise interest rates, because they have to make sure that the power of capital over labour isn’t cut back by the fact that with higher inflation, capital can’t buy as many goods and services. We don’t want the big investors, the bondholders and the bankers, to lose money by not being able to buy as many goods and services.

Well, that’s all a myth. Banks don’t lend money to people to buy goods and services. They lend money to people to buy assets — to buy real estate, to buy other corporations, to lend out. The banks create money just to keep this Ponzi scheme of growing debt growing. It has nothing to do with consumer prices.

In fact, the only prices that the Federal Reserve worries about is labour’s wages going up. And if wages go up, they say: we need to raise interest rates so that somehow industry won’t borrow from the bank to build more factories and create employment, and we want to have unemployment to keep wages down so that the economy will remain profitable for the employers.

Well, that’s also a myth — because banks, again, don’t lend money for people to build factories. There’s a whole fictitious view of what orthodox economics depicts as banks doing, because they want to draw a happy face picture as if banks are playing a productive role, not a predatory passive role of making money in their sleep — passively — as a form of economic overhead, not a contribution to gross national product.

And yet America and other countries report gross national product: when property prices go up, when home prices go up, that’s added as an addition to GDP. And when banks charge higher penalty rates on borrowers who fall behind on their credit card rates of 19 percent — a penalty rate that pushes the charge up to 31 percent — that’s counted as GDP in the national income and product accounts, as if somehow what the banks are producing is a product. And they’re not producing a product. All of these financial claims on debtors are not a product at all. They’re just an expense that is disconnected from the whole productive economy of goods and services.

It’s all a myth that banks and other rentier interests — landlords, banks, insurance companies — are creating a product. They’re a charge.

And I’m glad Grace mentioned insurance companies, because a lot of them are all involved in this Ponzi scheme. And if they go under, they’re not going to be able to pay the life insurance policies. And many of the funders, as she pointed out, are pension funds. And where are they going to put their money? They’ve turned it over to money managers that have been funding the private capital companies that have been subordinating the economy and engaging in *enshittification* — just trivialising everything.

Well, they’re not going to be able to pay. So the whole system of Social Security and pensions and social spending is all going to be wound down as a result. So it’s not that taxpayers are going to create the money to pay the banks — but the real taxpayers, the wage labourers who pay the highest rates, are going to be the big losers.

GRACE BLAKELEY: Yeah — great to hear you talk a little bit more about that, Michael. It’s super valuable to have your perspective on this. As you say, another example of the Ponzi economy, about which you’ve written so much.

I also want to just — because, you know, it’s easy to think about all the vulnerabilities in this system and how close we are to collapse. But I also think it’s really important for us to remember that there are still a bunch of very powerful actors within the finance sector, and indeed the wider economy, who are making loads of money right now. And they’re profiteering, basically, from this war in lots of different ways.

So the investment banks — Goldman Sachs, JP Morgan, et cetera — their commodities trading desks and their trading desks more generally are making so much money because volatility is precisely where those trading desks make their cash. So all of the ups and downs that we’ve seen in financial markets, driven by Trump saying one thing one day and another thing the next day — that is creating a fortune for these trading desks, just as it created a fortune for them during the 2022 invasion of Ukraine. I think that was the year that Goldman Sachs’ commodities trading revenues were the best in their history. And again, this is happening again with some of the big banks today making huge amounts of money from trading on volatility, as well as all of the other things they get paid for — working with the oil majors, the defence contractors, the war economy, etc.

Then there are also the commodity traders themselves — trading desks within oil companies, within mining companies, hedge funds — basically people whose job is to trade commodities. They’ve seen massive profits. The trading desks of BP, for example, have been able to exploit the differences in prices in commodities futures and actual barrels of oil, making vast sums of money through arbitrage opportunities.

And you know, that’s the business model of these commodities traders. They buy physical oil where it’s cheap and ship it where it’s expensive. And when war disrupts supply routes, the spreads increase and they’re able to make huge sums of money. And actually, often sanctions can help this model by creating grey areas and more opportunities for arbitrage.

And yeah, this all stems back to the massive deregulation of commodities trading that we saw from about the 2000s. There’s a really great book on this called *Price Wars*, which looks at how the deregulation of commodities trading created this big boom in finance — adding to the bubble that was taking place at the time during the early 2000s — and also massively destabilised commodities prices for ordinary people, particularly food prices. And this has been linked to a lot of domestic political unrest, particularly around the Arab Spring — as a result of that deregulation of commodities trading feeding directly into higher prices for ordinary people.

And underneath all of that, there’s a whole ecosystem of financial institutions that make money from insurance and dealing with the uncertainty that comes from the fact of war. So the underwriters who are raising premiums on all the tankers passing through the Strait of Hormuz, reinsurance markets, hedge funds that are also taking positions on all of these different oil prices, currencies, whatever.

And yeah, this is kind of to Michael’s point — to what Michael has written about for a very long time. These rentiers — these extractive institutions — are not producing anything. They’re not innovating. They’re not really even investing in anything. They are literally making money from arbitrage, from trading small differences in price between different markets. And they’re just extracting. There is this rentier class that is able to skim off the top at all of these choke points in the global economy.

And they have a vested interest in all of this instability and all of this chaos continuing for as long as possible — so that the worse things get for ordinary people, the better they get for big finance.

MICHAEL HUDSON: Well, it should be obvious from what Grace just said that the way to make a fortune in today’s economy is by finance, not by industry. You don’t make money by building a factory and employing labour to produce more goods and services. You make money by borrowing money to buy a company and then just cutting costs. When workers quit, you just make the rest of the workers work harder. You lower the quality of the product — enshittification — and just bleed it and leave it a bankrupt shell. That’s how you make a fortune financially. And that’s what the whole West has done. It’s a business plan.

No wonder Trump is willing. And the financial backers of him are saying: well, time to blow up the whole system. Let’s just make our final asset grab.

GRACE BLAKELEY: I was just going to say, I think that we’re getting to the end, but yeah.

NIKA DUBROVSKY: Yeah, it’s actually very interesting. I remember the end of the Soviet Union — and it looks like, in the Soviet Union at the end, the economy was not just working very badly. It was just a disaster. Sorry, but… so you couldn’t buy food, you couldn’t buy this, nobody understood what was going on. So now you describe this system of Ponzi scheme in the West, which also doesn’t make sense.

The Soviet Union ended up in perestroika. Grace was talking about solarpunk and all of these amazing futures that maybe are possible. And Michael is living in New York where Mamdani is now trying to do his best to introduce socialism into the crazy capitalist world.

So maybe we are living through a different perestroika for the West — even if it looks very scary.

So my question would be: how do both of you feel — is there any chance for us, living in this part of the world, to have some kind of sane arrangement?

MICHAEL HUDSON: We’re not going to go right to it — because the powers that be, namely all of the financial powers, make money on instability, not stability. That’s what Grace was saying. If you look at all of the profits of the big banks in the last quarter, they’ve all been trading profits — financial speculation, arbitrage, and derivatives.

You don’t make money when everything is going normal. You make money when people are panicking. How do you do that? You create a panic. Well, that’s exactly what Donald Trump has done today with the full backing of the European governments, for all that.

The result may very well be — as I pointed out — the same thing that David Graeber and I wanted to see. We want to see the debts wiped out. Well, you’re going to see such a wave of defaults that a lot of debts will be wiped out. But probably the debts that won’t be wiped out are the debts to the most predatory, parasitic largest banks and insider deals — who are the largest political campaign contributors to both the Republican and the Democratic Party. So things probably will get worse rather than better, even though there’s going to be a selective debt cancellation on the way to the whole system crashing down.

How long will that take? That’s what I guess we can talk about next time.

GRACE BLAKELEY: Yeah — look, what I would say is that — kind of what I was saying at the beginning, really — is that, you know, even if you look at it from the macro level, we see all of these forms of crisis and instability and breakdown. It is also possible to see lots of signs of hope, particularly when we look at things from the bottom up rather than the top down.

I’m writing a lot at the moment on my Substack about all these different forms of resistance that are emerging in this moment. And it is really amazing and incredible to see the way that people are coming together and fighting back — especially when we live in such an individualistic society where collective organising is either actively prohibited by the state, or discouraged, or just hard to do because no one has time, no one has money. Those kinds of imaginings of new worlds and of ways of getting there have just been closed off. But even so, we see these amazing forms of resistance.

Like I wrote a piece last week about tech workers and content moderators — basically for things like TikTok and Meta — who do horrific jobs watching the most deranged stuff on the internet, getting paid absolutely nothing, trying to form a union and actually doing that really successfully. To the extent that companies like TikTok are investing in trying to beat them back. We’ve seen the same thing in Amazon. Chris Smalls’ efforts in organising Amazon workers in the U.S. have been amazing. Even things like dock workers across Italy and various parts of Europe refusing to load shipments of arms going to Israel.

We’ve seen amazing new forms of community organising cropping up everywhere. The community wealth building movement, for example, which exists all across the U.S. and the U.K., is supporting people to do things like take ownership of community energy projects. So you have community-owned wind farms, community-owned solar projects.

The growth of the cooperative movement is something, again, really important to shout about.

So I don’t see the change as coming from enlightened political leaders who suddenly realise that they’ve brought about the end of the world through their own greed and corruption. I see it as coming from us — basically organising in the cracks that exist within this system, in the context of all this chaos, to take back control and really try and figure out what comes next.

NIKA DUBROVSKY: Amazing. So thank you so much, everyone. And hopefully see you again soon at DGI. Bye-bye.

GRACE BLAKELEY: Thank you so much, Nika. Thanks, Michael. Bye.

MICHAEL HUDSON: Bye-bye.