Michael Hudson on the US Economy – Surprisingly Resilient or Potemkin Village?

You provided a really in-depth analysis of Russia, but could you elaborate a little bit more on China? What do you think has been the effect of Trump’s trade war and more recently, Biden’s various tax restrictions against the Chinese economy. Will this hurt Beijing or actually empower Beijing?

Well, China has a great benefit that the Western countries don’t — it treats money as a public utility. Its banking is a state bank, not a private banking system. In America, the private banks lend money to the financial sector to make money in the stock market, in the bond market by buying stocks and bonds already issued, and in the real estate market by buying homes and commercial real estate that’s been built long ago. Banks in the West do not lend money to build factories or machinery. They don’t lend money to set up business. They leave that to the stock market, basically, but not the banks. China uses its Bank of China, its government central bank, to actually spend money and provide credit to the real economy, to build new real estate, to finance new industrial producers, new manufacturing facilities. That’s the great advantage of China. To the extent that America tries to produce sanctions on China, the effect will be the same as producing sanctions on any other country. They’ll force the country being sanctioned to replace imports with its domestic production to do import substitution. You can be sure that that’s what China is doing right now, especially with the information technology that America is concentrating its sanctions on. If you look at the number of patents that are made in information technology, China’s way ahead of every other country in this. They’re producing an enormous educated engineering class that is not being produced in the United States or the West. If you are a leading student and you want to make money in the West, you’ll go into finance. And finance has the effect of destroying industry, not helping it. Whereas China is sending its graduates into engineering and the computer technology and the science primarily not into making money by financial maneuvering and getting the rest of the economy into debt to yourself.

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