Episode 199 – The Breaking of the World with Thomas Fazi

Macro N Cheese – Episode 199
The Breaking of the World with Thomas Fazi
November 19, 2022

 

[00:00:04.620] – Thomas Fazi [intro/music]

So, what transpired in UK context was actually quite extraordinary, because it was, I think, a rare instance of the central bank of a currency issuing country deliberately acting to sabotage a government.

[00:00:23.060] – Thomas Fazi [intro/music]

So I think part of it is creating an artificial spending crisis in order to justify new austerity measures. And part of the austerity measures is simply convincing people, once again, that there are very tight limits on what governments can and can’t do, even though the pandemic has shown that, to a large extent, to be a lie.

[00:01:35.140] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.080] – Steve Grumbine

And yes, this is Steve with Macro N Cheese. If you can’t hear this sexy, Barry White like voice, folks, I have been hit with this bug and has really impacted me. So, hopefully you can tolerate Steve an octave lower. We have a great guest. Last week I was in Italy with Clara Mattei talking about the capital order and how economists invented austerity.

I liked it so much over here in Italy that I decided to stick around and talk to my good friend Tom Fazi. Thomas has been on here several times and is co-author with Bill Mitchell of the book “Reclaiming the State”. He’s also a journalist and an activist, writes at the UNHERD. That’s U-N-H-E-R-D. I just was so excited about several articles that he’s written lately, but it really got me thinking after the last interview how important it would be to bring Thomas in to talk about some of the class war that is going on, banker style.

The banking elite across the world have had their way with society as a whole and have embarked upon some really shady business. And stuff that, if you’re a Modern Monetary Theory activist/adherent/aware/informed, you know what they’re doing. It’s an attack on the working class. And Thomas really is able to present this stuff well. You can follow Thomas on Twitter at Battle for Europe. And without further ado, let me bring on my guest, Thomas Fazi. Welcome to the show, sir.

[00:03:24.340] – Thomas Fazi

Hey. Hi there. Thanks for having me on the show. It’s a pleasure to be back.

[00:03:28.760] – Grumbine

Absolutely. This article you wrote is called “The Bankers Have Launched A Class War: What’s Really Causing the Public Spending Crisis”. And I know this is UK centric, so let’s start there, then let’s work across this paradigm, how it plays out on a much larger basis. Very insightful writing here, sir.

[00:03:50.520] – Fazi

Thanks a lot. Well, yeah, so I’ve been following very closely the events that transpired in the UK over the past month or so and I think they’re very instructive of the kind of power dynamics that are at play more in general, I would say, across western countries. So, pretty extraordinary events have happened in the UK over the past month and I think it’s really useful to go over that because I think it tells us a lot about what’s happening behind the scenes, at major policymaking elite levels.

Again, not just in UK, more broadly in the west and possibly even beyond the west. So, of course, it all started with Liz Truss’ shortly lived, very shortly lived government just over a month ago. She came to power just less than two months ago and has been kicked out just as quickly and I think it’s interesting to look at what’s happened there.

So, basically we were told Liz Truss comes from the right wing of the Conservative Party, from the right libertarian, free market neoliberal wing of the British Conservative Party. And basically shortly after coming to power she approved a budgetary package. And that budgetary package, basically, had various measures, some were supply side and some were tax side and some were spending side.

But all the focus of the media, of the national establishment was on one measure, which was these tax cuts that Liz Truss was trying to push. And of course from a distributional perspective they were very bad. They were cutting the tax rate for the highest incomes. So, of course, it was a classic neoliberal pro rich measure and in that sense it was really bad. But we’ve seen these kind of measures before.

This is what neoliberals do, they get into power and they try to reduce taxes for corporations and for their wealthy friends. This is what they do. And usually the establishment is quite happy about these kinds of measures. They don’t tend to complain about them. What we saw in this case was everyone just went crazy.

Massive hysteria in the media, massive hysteria in the elite financial circles where everyone started saying, oh, this is absolutely crazy to have these tax cuts at a time of high inflation. It’s absolutely unacceptable. And, essentially, what happened was that first the country’s Treasury Minister was forced to resign, and shortly thereafter, Liz Truss herself was forced to resign because of the huge palaver that was made around this budget.

It was said that the budget had caused government interest rates to rise, it caused the value of the pound to collapse, and that, basically, the British economy was on the verge of apocalypse. And she needed to go. And the narrative was that this was all because she tried to push through these tax cuts, which apparently markets weren’t happy about, and so they had punished the government by pushing up interest rates and selling off the pound and that this had caused the British economy to crash and she needed to go.

And she was soon enough replaced by the former Chancellor of the Exchequer in British terms, or the former finance minister who has now become the new Prime Minister. And he came in saying, I’m going to fix the mess that Truss created by attempting this crazy tax cut, which opened a huge hole in the budget deficit, almost caused the economy to implode.

And so what we need to do now is, of course, stay on the path of fiscal sustainability. We got to reassure markets, we got to reassure investors. I’m going to do that by, essentially, cutting back deficit, paying back the debt, and, essentially, bringing the country back on a path of fiscal sustainability, ie austerity. And of course, this is how it’s all been presented.

And I would say this is how the average British person or anyone that’s been following these events, this is the understanding of what has happened. You’ve got this ultra free market, pro market Prime Minister that comes to power, tries to push through these crazy tax cuts, which almost destroy the economy. And, luckily, shortly before the economy is completely destroyed, a much more responsible person comes in to save the day and to put the country and the British economy back on track by, basically, pursuing responsible public finances.

And so gone are the tax cuts and problem solved. Now, almost nothing of this narrative is true. In fact, what we see is that, well, first of all, it doesn’t make much sense that markets and international financial institutions or technocratic institutions such as the IMF and the World Bank suddenly have developed a sensibility for distributional matters and have suddenly turned against tax cuts for the rich.

Anyone can see there’s something off there. So, it was pretty clear for me right from the beginning that the target of the attack on Truss, on the government’s budget wasn’t the actual tax cuts themselves, which, in fact, were a very small part of the budget. Most of the budget was taken up by, basically, energy relief measures, so spending measures aimed at reducing the energy bills for households and businesses.

And that was done by, essentially, the government coming in and spending and covering part of those costs through, essentially, fiscal policy. So, that’s what most of the budget was taken up by a spending side measure, not by the tax cuts, but everyone was talking about tax cuts. In fact, I think what really made policy elites mad was even though politics of Truss were really bad and, as I said, libertarian, right wing, pro market policies, and, of course, as I said, tax cuts were very bad from the distributional perspective.

But I think that’s not why she annoyed so many people in elite circles. What annoyed them was that what Truss and what her Finance Minister said more than once was that, yes, even though there’s high inflation, we’re going to finance these measures through deficit spending because we don’t think it’s that big a deal. So, that’s one interesting aspect.

Truss’ politics were bad, but she understood how government finances work, as a lot of neoliberal politicians do. So, she didn’t have too many qualms about engagement deficit spending to finance these spending measures, but, also, to cut taxes or help wealthy friends. So, clearly part of the aim of these policies was highly criticizable.

But the underlying framework which was operating, I think, was a good one. She was operating within a framework where she understood how the finances of a modern currency issuing country work. And I think that’s what really pissed people off. The fact that what she was doing was defying the orthodoxy, the consensus which says that at a time of high inflation you absolutely can’t spend, you can’t deficit spend, because that’s inflationary.

And, so, I think that was a problem. What they were really afraid was the fact that she was going to lift the veil of how government finances work and the fact that even at the time of high inflation there’s nothing. And even though the UK government has accrued a lot of debt throughout the pandemic, as a lot of other countries have done, this doesn’t pose any problem whatsoever in terms of fiscal sustainability and so on and so forth.

And we know these things to be true. And Truss, I think, understood that as well as her Finance Minister did. She understood these issues quite well. And, in fact, one could look at what happened and say “oh, but she wasn’t right because there was a crisis”. But, first of all, what was this crisis that supposedly almost crashed the British economy?

What we saw was an increase in government bond interest rates. Why were the interest rates rising? They were rising because the Bank of England had been raising rates, interest rates, for quite some time and in fact, long term British bond interest rates had been rising even before Truss came to power. And once Truss came to power, the Bank of England announced that it would have continued raising rates.

So, effectively, this wasn’t the markets punishing Truss or anything of the sort, because markets don’t tend to think like that, even though a lot of people on the left tend to think that markets have feelings and emotions and tend to punish governments that do things they don’t like. But that’s not really how governments operate.

This wasn’t some kind of morality tale that their markets were trying to impart to the British government. Interest rates were rising mainly due to the actions of the Bank of England, which clearly was aiming at creating problems for the government. I think that’s pretty clear. So, in fact, what we saw at play was something that we’re used to seeing, for example, in the Eurozone context, where, clearly, you have governments on the one hand and then you have a supranational central bank that essentially controls governments and decides what governments can and can’t do.

It’s like a fully independent central bank in the truest sense of the word, with all that this entails, and we’ve spoken about this in the past. But in currency issuing countries, you don’t usually see such overt tensions between central banks and government. Even though most central banks are formally independent, they tend to support whatever budgetary or fiscal policy the government decides to pursue.

So, what transpired in the UK context was actually quite extraordinary because it was I think a rare instance of the central bank of a currency issuing country deliberately acting to sabotage a government. And it’s not just me that says this. You’ve got Narayana Kocherlakota, who’s a former president of the Federal Reserve Bank of Minneapolis, wrote an article, I think, in the Washington Post which was titled “Markets Didn’t Oust Truss. The Bank of England Did.” 

So, anyone that understands the dynamics that are going on behind the scenes understands what went on. So, what went down was something akin to a coup, I would say. The closest thing to a financial coup or monetary coup that you can have, at least in a currency issuing country. But, of course, that also had to do with the fact that among the pillars of the orthodoxy that Truss was challenging, there was also the alleged independence of the bank of England.

On more than one occasion, Truss and Kwarteng, her finance minister, had challenged the notion of the Bank of England’s independence, saying that Bank of England should be more accommodating of government policies in terms of interest rates and so on and so forth. And that’s clearly another thing that didn’t buy her any support in those circles, in the technocratic circles of the British deep state.

And, so, I think that simply made the Bank of England even more prone to get rid of her because all the power of the Bank of England rests on this idea of independence. And, in fact, what we saw was that the Bank of England in that case was acting quite independently of the government. Clearly, there wasn’t much coordination there.

So, that’s really what went down and the objective of that operation, or coup, if you want to call it that, we can say was completely reached. Because they got rid of Truss and they put someone in her place, Rishi Sunak, who fully adheres to the orthodox view of fiscal policy. And, so, since he’s come to power, we’ve heard him reiterate the usual shopping bag of banalities about the need to cut back spending, cut back debt to pursue austerity and so on.

So, basically, they’ve managed to reassert the orthodoxy and I think that was a problem with Truss. And I think, as usual, the left adopted a completely myopic, short sighted and, ultimately, self defeating attitude in the whole crisis because it, basically, sided with the market, with the Financial Times, with the IMF, with all those players that were saying that Truss’s budget was completely responsible, was going to crash the economy.

So, instead of criticizing content of her policies, which was completely legitimate and it’s something that I did myself in several articles, her neo-Thatcherite policies. And, so, instead of actually criticizing the content of our policies they just went along with the mainstream narrative that the problem wasn’t so much that these policies were bad from a distributional perspective, but that they were unsustainable from a fiscal standpoint.

And, of course, what the left ended up doing and, of course, I’m talking not just the Labour Party but also the left of the Labour Party. With few exceptions they all went along with this narrative. And what’s the result? All that you’ve achieved is, yes, you got rid of Truss who was a neoliberal who at least wasn’t queasy about engaging in deficit spending and you’ve replaced that with another neoliberal who has a completely austerity bent outlook.

So, where’s the victory there? And in doing so, you’ve completely reinforced the orthodox narrative. And essentially the idea that governments can only get away with the policies that are approved by financial markets, which is, of course, the great lie of modern economics. This idea that currency issuing governments, at the end of the day, can only do what markets let them do because, otherwise, the value of the currency will crash or they’ll send interest rates skyrocketing and so on and so forth.

And, in fact, we know that’s a complete lie. As I said, the only reason interest rates were rising was because the Bank of England wanted them to rise in order to put pressure on the government. And, in fact, when the collapsing value of the bond yields started creating problems with pension funds that had used these bonds to then invest, then leverage them through very complex financial instruments to raise more money.

Once they started creating problems for the pension funds because of the hyper financialized nature of pension funds nowadays which rely on safe assets such as bonds to raise money on financial markets which they then used to do risk investing and so on. As soon as their high interest rate policy started created pension funds, the Bank of England intervened and immediately sent interest rates down again, proving that, ultimately, interest rates are entirely controlled by the central bank, in this case by the Bank of England.

And of course the bank of England could have come out and say we’re going to do whatever it takes to guarantee financial stability in order for the government to pursue whatever policies it chooses to pursue under its democratic mandate. That’s what it should have said but that’s not what it said. Instead the Bank of England was one of the main players fueling this notion that the government’s policies were extremely dangerous and were crashing the British economy.

And, so, this brings us to where we are today in the UK. But I would say more in general in the west which is a situation where all major powers are trying to, basically, reassert, I would say, the pre-pandemic orthodoxy in terms of government spending and monetary and fiscal policies. And they’re doing that, of course, by raising interest rates across the board.

All central banks are raising interest rates. In that article I wrote focused on the Bank of England but, of course, the Bank of England’s decision to raise interest rates even more, which it announced just last week, comes on the heels of similar raises by other major central banks. First and foremost the Federal Reserve, which is pursuing quite an aggressive policy of monetary tightening.

And I think the objective is twofold. On one hand, I think what the objective of this policy is to, as I said, lower once again the veil over the mechanics of government spending. A veil that had been kind of lifted, I would say, throughout the pandemic. Insofar as it was openly acknowledged, essentially, all major governments engaged in massive deficit spending, which was pretty much entirely financed by the central banks.

Now, we know that central banks always finance government spending, but they made it very overt throughout the pandemic by having the central banks buy up, essentially, all the bonds that were issued by the governments to finance the pandemic measures. So, in the case of the UK, it was so obvious that the British government started differentiating between gross and net public debt.

So, they were, essentially, admitting, even in their own budgetary statements, that the debt increase accrued throughout pandemic wasn’t actual debt because it was entirely owed by the bank of England. And the same thing happened in the US, in the eurozone, everywhere. So, governments simply issued more bonds to finance these measures, and the bonds were entirely bought up by the relevant central banks of those countries.

So, that was starting to expose the great lie of how government spending works. And I think just as they did after the financial crisis, after the measures that were put in place to avoid a complete collapse of the system, we know that in 2008 and in the coming years, we also saw massive government spending to bail out big banks.

And that was done, also, through essentially having the central banks by government bonds, insofar as it was necessary to do what was needed to be done to bail out those responsible for the financial crisis. But soon after the narrative became, “oh, now we’ve accrued all this debt, now we have to bring it back down through austerity”. Even though, of course, that was completely unnecessary.

There was absolutely no need to engage in austerity after the financial crisis. Again, the need was to lower the veil on how government spending works. Because if people realize “Wait a minute, so you’re telling me that governments can spend within limits, but they can spend pretty much whatever they want and have that be paid by the central bank?” They must ask “If you can do that to bail out banks, or if you can do that to pay people to stay at home during a pandemic, then why can’t you use that power to give people better jobs, better services, better infrastructure, better housing, better transport and so on?”

And I think that’s what elites really fear, people realizing how government spending really works. So, part of what’s happening is you have to lower the veil back down on how this works. And you do that by engineering an artificial need for austerity through higher interest rates. Of course, we know that higher interest rates don’t per se require governments to lower government spending or to issue less bonds.

They don’t create any problems of financial sustainability. A currency issuing government can pay whatever interest rates it wants. But because of the myths that we’ve been fed about how government spending works, it’s very easy to make people believe that there’s a spending crisis when interest rates rise.

Because they look at these high interest rates and they say, oh, well, it’s becoming too expensive for the government to raise debt, even though that’s not a problem, per se. And even though the interest rates are only rising because the central banks want them to rise. So, I think part of it is creating an artificial spending crisis in order to justify new austerity measures.

And part of the austerity measures is simply convincing people once again that there are very tight limits on what governments can and can’t do, even though the pandemic has shown that to a large extent to be a lie. The idea is that, yes, you can do these things in times of emergency, but you can’t do this in normal times. So, I think that’s one of the aims of this policy.

And then there’s kind of a more medium, long term aim. And I think that really has to do with what they fear: a strengthening of labor bargaining power as a result of really structural changes in Western economies that have to do with a number of factors. But I would say the major factor is we have already begun this process of de-globalization, of reshoring of production.

Which is part of a wider geopolitical conflict, where the west is starting to increasingly de-link from China and bring production of supply chains close to home for economic reasons. Because pandemic is also exposed just how fragile these massive supply chains are. But I think also for geopolitical reasons in the context of what is increasingly becoming a new Cold War with China and its allies and of course, Russia.

And, of course, what this means is that there’s pros and cons, I think, to all of this. But I think one of them at least from the perspective of western working classes, there’s quite an obvious benefit in the sense that one of the major weapons has been used to weaken western working classes has been the shipping of delocalization of production to far flung countries, especially China.

Once for geopolitical reasons, strategic reasons, you start to bring production back home, clearly, that means that you have to increasingly rely on your own labor force. And that means that these labor forces acquire more bargaining power. And you see the labor capital balance, which has been completely tilted towards capital for the past 30-40 years starting to shift back towards labor.

And I think they know that this is an inevitable scenario given what are these kind of longer term trends. And, so, I think through these policies they’re also trying, to some extent, to preempt this rise in labor bargaining power. And one of the ways you do that is by essentially artificially raising unemployment. I think that’s one of the aims of this policy.

[00:26:52.460] – Intermission

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[00:27:43.390] – Grumbine

Let me jump in for a second. I’m going to say something and you can push back completely, but here’s what I believe. The interest payment raise is a way of securing the gap between the poor and the rich. By forcing a funneling to claw back the gains of the pandemic, the little bit of money, some may have found a way to free away. This is a way of ensuring that the gap stays intact.

I believe strongly that austerity is not just simply a gentleman’s disagreement, that it’s beyond class warfare, that it is literal murder. And because you don’t see a gun, people have a hard time tying it together. And I believe it is beyond time for people that understand these things to stop this gentleman’s handshake game.

And it’s time for us to really talk about these people as murderers, killers, unfit for society. I think you got the world split into a number of ways. The people that like to look at graphs and tables and watch their stock portfolio go up and then the people that are at the bottom that have to find a way to eat, house themselves and survive.

And because there’s a perverse polite police out there that embrace in friendly terms those people that are killing the poor. It never becomes the real war it needs to be. And so we go through this dance. Every time there’s gains at the bottom, they claw it back through some form of austerity, through interest rate hikes, decreasing deficits, balanced budgets, everything you’ve said. Do you agree that these people amount to murderers or do you think they’re just good misguided people?

[00:29:37.160] – Fazi

No, they know perfectly well what they’re doing. They understand how the system works very well. So in that sense, what you’re saying is completely true. I think they are, on some level, sociopaths. There are people that are literally engaging in what Engels called social murder. If you kill one person, you go to jail for life.

But if you deliberately decide to cut back health spending, which causes the death of tens of thousands of people, you’re just a politician doing what the market demands. Even though I think they know perfectly well what they can and can’t do. I think this to me is very clear. And so, yes, they are engaging in social murder because these policies really make the difference between life or death for hundreds of thousands, millions, billions of people on a global level.

And I think much of the suffering is completely unnecessary. It is entirely the result of policies that are aimed at maintaining and ensuring that a tiny elite continues to basically hold the rest of society at ransom. And I think this is what interests elites more than anything else, even more than profits. It’s about power that comes before anything else.

And in fact, if they were simply looking for profits or they were simply looking to boost the economy, including the profits of capitalists, they would spend, they would engage in austerity. Of course spending would raise the living standards of workers or ordinary people, but it would also raise the profits of ordinary businesses, capitalists across the board.

So clearly you can’t just understand these policies in terms of profit. And in fact, I would say that in order to maintain the power they have over society they are ready to accept even lower profits. So power is more important than profits from their point of view. And as you were saying, what worries them in the current context is that workers might start to demand a bit more than they demanded until now.

In terms of wages, in terms of living conditions, in terms of basic economic rights, especially in a context of structurally higher prices. What we’re going through isn’t just temporary. So what in the UK, for example, is called a cost of living crisis. This isn’t just about inflation. Year on year inflation is going to go down but prices are going to stay high.

And so I think they’re really afraid that people are going to become a bit more emboldened and start demanding a little bit more respect. Especially in a context where their bargaining power potentially could increase, where demand for labor is strong and there’s not much slack in labor markets, there’s not so much unemployment.

In that context, workers would suddenly realize how much power they have and to some extent, at least in some sectors, I think the workers have started. I would say maybe one of the good things of the nightmare of the past three years is that at least in some sectors workers have realized just how crucial they are.

So if we look at for example, the logistics sector, the trucking sector, you’ve got sectors that have continued to operate all throughout and even when everything else was shut down. When in these sectors workers realized that they had real power, they could shut down the economy if they wanted to. And I think that’s what they’re afraid of, workers realizing that or acquiring the same kind of power and the same kind of leverage in other sectors as well.

And so in order to preempt that they’re ready to, as you say, murder people. Make people go hungry, die of desperation, they just don’t care. And of course, part of it is that they’re so removed, of course, from the everyday reality of people that I think they might even find ways of rationalizing what they’re doing. Read a great term the other day.

These aren’t just technocrats or oligarchs that are cosmocrats. That’s a great term, isn’t it? Cosmocrats, which had never come about before. And it says that these people literally rule the world and I think today more than ever. So I think that’s also a problem that we face today in the sense that we are facing a power elite that’s definitely the most powerful power elite that ever existed in the history of humanity.

Kind of concentration of wealth and power and the nexus of corporate and state and even supra-state power that we see today and I think became apparent and was also in turn and strengthened throughout the pandemic, this nexus of tech-pharma-media. What we have is a concentration of power that’s really unprecedented, I would say, in history of humanity.

And again, pandemic has really accelerated these trends in terms of widening inequality and increasing concentration of power in the hands of a very small but incredibly powerful oligarchy. Now pretty much has complete control over the flow of information through both traditional media and digital social media.

And it’s really able to influence the opinions and thoughts of the masses on a level that I think was inconceivable even just a few years ago. So this is kind of the context that we’re in today and this is kind of more sobering part of what we’re going through. But again, the situation I think is going to bring the class conflicts in society back to the fore once again.

And partly as a result of the policies that they are pursuing in an attempt to preempt the re-emergence of class conflict. They are not going to manage to do that, I think. And of course, they’re going to try to do what they’ve always done: convince people to choose policies that are completely against their interests.

And they’re gonna try to taper over the material reality of people by projecting this virtual reality and having people live in this virtual reality which is constructed by the media and increasingly so by today digital media. But I think that can only go so far. At some point, the contradictions between actual reality and this virtual reality that they strive to construct I think is going to reach its limits.

And I think especially in the context of what’s going to be, I think, really growing mass hardship even in countries that haven’t known that kind of hardship in past years. So I think these are also going to be interesting times in many ways. And in terms of interest rates yes, as you were saying. Yes, absolutely. You got to give them credit for having created a system where they always win.

So they win when there’s extremely low interest rates, for example, through policies, through quantitative easing bond purchasing policies. Policies that we’ve seen over the past ten years, which lower the interest income deriving from, for example, government bonds. And so the kind of corporate subsidies that government bonds represent were lowered through these policies of low interest rates.

But at the same time, they also injected huge amounts of cash into the financial system, which was then used by banks and investment funds to basically engage in extremely high risk, high return speculation in financial markets. So this is one of the consequences of quantitative easing. And so getting the interest revenue, the interest streams.

The asset holdings was decreased, but the interest they were receiving from these high risk speculative investments that they were doing as a result of the huge amounts of money that were being injected into the financial system, they made huge amounts of money over the past 10-15 years purely as a result of these low interest policies.

And now with this shift to high interest policies, clearly maybe they’re going to scale back some investments, maybe some investments are going to become less profitable as a result of the rise in interest rates. But at the same time you’re offering them once again this form of basically subsidies for the rich where the very small minority of people that actually do invest in bonds and assets will see the interest revenues from these assets increase.

And so once again they can just sit back and wait for the money to start flowing in without doing anything. A lot of people have criticized, of course, the quantitative easing and low interest policies — for the right reasons, not for the stupid reasons you sometimes hear from the mainstream media. We’ve also had legit criticisms of these policies over years, even from myself.

We know that these QE policies have been very bad in distributional terms. They widened inequality because they boosted value of the assets that are held by the richest sections of society. But unless you change the rules of the game, it’s not by raising interest rates that you’re going to change the balance of power in society because the bank always wins, literally.

So you got to turn the tables and completely overhaul the system. Higher interest rates, they are going to keep the balance of power in society completely unchanged. And in fact, to the extent that these interest rate hikes are going to be used to implement austerity and cut back on public spending and healthcare spending and so on, they’re almost certainly going to increase the gap between the workers and the ultra rich. So whatever they do, they end up coming on top. They win, as the game is completely rigged.

[00:40:00.260] – Grumbine

Let me throw this out there. Alexandria Ocasio-Cortez is standing on top of Nancy Pelosi’s desk making bold demands right before she gets into office. Shortly thereafter, she completely stops doing that kind of stuff and is now submissive calling her Mama Bear. Now, the average person has been told, it’s not a matter of finance, we just need the votes.

And they’ve reduced it to, “sure, you’ve got power. Of course you can vote your way to this beautiful world”. But the way they’ve got this set up, there’s two doors. You go in one door, and you just walk through a rotating door, and it doesn’t take you anywhere. You go in circles and you come out fatigued, feeling like, wow, we fought the good fight. That’s the electoral side.

Then you’ve got the other side, which is a direct threat to power, where you’re actually building parallel institutions, organizing. You’re not allowing neoliberals to lie to you anymore. You’re not giving them the respect that they don’t deserve anyway. You’re saying you’re the enemy and not allowing them to do this.

We’re at this point where these naive people will just vote for more progressives, and it’s fundamentally missing the entire dynamic. There’s a layer that this whole elective process doesn’t touch. It feels like nothing ever changes unless the elites decide it’s going to change. And then it changes, but it changes always to our detriment.

My understanding of modern monetary theory shows me that we can solve all these crises. We’re constantly told we just got to find a way to get the votes. But in the United States alone, as an example, we had the House, we had the Senate, we had the White House, and we were more feckless in power than we were when we were, quote unquote, fighting against Trump.

And the embrace of the neoliberal NATO approach to slicing the world into two by cutting off Russia, China, and the rest of the non neoliberal countries that aren’t willing to play ball. It’s death to the working class. The way they’ve approached this.

[00:42:23.210] – Fazi

I would say that’s pretty accurate description of where we’re at. It would be very naive to think that we live in democracies. I think we live in our oligarchies or plutocracies, where the system is entirely rigged. And not just the reasons I was saying earlier that the electoral system is rigged by big money as well. And you’ve got apparatuses within the state that are able to disempower even executive power now.

So even getting into government isn’t enough. I think Liz Truss shows in a way when you control the media, when you control the narrative, when you’re able to pressure even the most powerful governments in the world to toe the line, this is where we’re at. They pour huge amounts of money into skewing the electoral system. So that’s rigged itself by money.

But even if you were to find a way around that and somehow come into power, which is almost impossible to get into power without support money, that’s clearly the case for the US. But similar situation in other countries as well. Even if you found a way to bypass that, you would still find yourself under immense pressure from the so called deep state and from corporate media and from the technocratic institutions that actually run these countries, such as central banks and the big private banks and so on.

So, yeah, I think there’s no… It’s not helpful to close our eyes to reality. This is the reality of the countries that we live in. As I said, we live in a situation where power is more concentrated than ever. And so just focusing on the electoral cycles is very naive. And of course, I think the only way, or at least a precondition for managing to achieve anything is having strong mass support.

That would be crucial. Even if you were to get into government, you would be facing such massive powers unless you had huge public support, pressure would be just unbearable, I think. So you would need that kind of support to keep you going. I think that the extra parliamentary work, the extra electoral work that you were talking of is crucial.

Educating people about the reality of, for example, government spending is fundamental. It’s not sufficient, but it is a necessary precondition to be able to change anything. Otherwise you’ll find yourself in situations such as the one in the UK, where most of the electorate is now convinced that austerity is needed because that’s what they’ve been telling them.

And so you’ve got people that actually now openly embrace and support measures that are completely against their interests because they’ve been told there’s no alternative. So I think that kind of educational work, which is what course we’ve all been trying to do for years, I think with success, I think is incredibly important.

But yes, I completely have to agree on the feebleness of the so-called American progressives and even the so called American socialists. The socialist wing of the Democratic Party is really astounding. The way they’ve embraced what are essentially neocon foreign policies with regards to Russia and China is absolutely disgraceful.

It’s disgraceful in terms of what this means for the world, but it’s also disgraceful in terms of what it means just for the American working class. They have nothing to benefit from continuation of this permanent war economy, and even less so from what is shaping up to be a second or new Cold War against most of the world at this point. This isn’t just US versus Russia and a few proxy countries.

This new Cold War is a completely different one than the old one. It’s one way. The US is a declining power with declining influence over the rest of the world, where most of the world isn’t following the US. For example, with regards to its policies against Russia and China. The US sphere of influence now is pretty much limited to Europe and Australia and New Zealand, most countries, most middle income, I would say even increasingly most developing countries, aren’t playing along with the US anymore.

And I think they are increasingly turning to the so called enemies of the US because they’ve seen what the US led neoliberal policies have done to their countries over the decades, and they’re not going to stand for that anymore. And now, for the first time, they have an alternative. And so the US is basically pushing these countries into the arms of Russia and China.

So even from a geopolitical perspective, it really doesn’t make much sense. I would say it makes even less sense from Europe’s perspective. At least the US, in the very short term is benefiting from the conflict of Ukraine. For example by replacing Russian gas with its own natural gas, which it is now selling to Europe at much higher prices than what we used to pay for Russian gas.

So at least there are short term gains for the US in this power play, but there’s absolutely no gains whatsoever for Europe, which is in fact heading towards basically long term impoverishment and de-industrialization by going along with US new Cold War strategy. So it’s even more baffling to see just how suicidal policies that Europe is pursuing are. I think it really shows the complete subjugation of European leaders to America, again, completely against the basic national interests of these countries. It really is baffling.

[00:49:15.640] – Grumbine

Let me ask you one final question. The United States had built up its glorious monuments and all of its halls of justice throughout the years, and the United States had built up its base during World War Two and the following years that often are seen as the golden years. And we let it go. We allowed ourselves to become a decrepit superpower that had invested its entire energies into the military.

And here we are now, as China has got its belt and road initiative and has linked up countries around the world in not a master-servant relationship, but more of a cooperative one. And the US licking its wounds from austerity as it destroyed itself in this method, and so it needed enemies. Biden in the State of the Union address had already labeled China the enemy.

Since 2015, 2016, to cover up Hillary’s loss, they have been busy making Russia the enemy. This is a wounded animal that’s backed into a corner that is trying to maintain its hegemony. What do you foresee as being the net outcome of the US fall from grace? How do you see this playing out?

[00:50:40.460] – Fazi

There aren’t that many potential scenarios. The US seems to have chosen the worst possible strategy, which is to do everything that’s in its power to maintain its dominant position in the world, even though that’s clearly an impossibility. Because of the structural changes of the world economy are such that we have already entered a multipolar world. It’s really a reality.

It’s just a reality that the US elites don’t seem ready to accept. But, brought to extreme conclusions, the endgame is war with China. There aren’t that many ways around it. If the US wants to bring what seems to be a new foreign policy strategy to its extreme consequences. That’s what we’re heading for. But I think any sane person can realize that would have the consequences that are absolutely potentially catastrophic for the entire world.

And so I think this is probably, I would say, the most dangerous moment that we’ve ever faced, I would say for humanity. But I think even much more dangerous even than the height of the Cold War. I think today the situation is much more dangerous because as you said, the US is a wounded beast. We know that wounded animals tend to act irrationally.

And so I think we are witnessing much more irrational policies than we witnessed even at the height of the Cold War. And so I think it’s an extremely dangerous situation that we’re in. And I can only hope that at some point there’s enough pressure that builds up in the United States first and foremost, but more in general in the west against this crazy neocon neoimperialist policy.

Because it’s going to be so damaging also, especially to ordinary people in the west. And so I think at some point there’s going to be inevitably some pushback against these policies. To some extent we are already witnessing quite strong popular opposition in Europe. Especially to the anti-Russian sanctions, just because people are realizing that they’re having destructive consequences for the livelihoods of ordinary people.

And I think if the US and west more generally continues to go down this path, I think we are inevitably going to see a pushback. And I think that gives us reason to hope that at some point west or the US, in particular, are going to have to just face reality and accept that this multipolarity is going to be the reality of the next century, whether they like it or not.

So I think the outcome partly depends on us. These are two potential outcomes. One is this utterly destructive conflict with Russia and China, and of course I’m talking military conflict, not just an economic conflict. Or the west is just going to have to adapt to this new reality. I think that partly depends on our ability to apply pressure on our elites as well.

There aren’t that many outcomes. But I think either way it’s about accepting the old world is gone forever and there’s no turning back. And as you say, it’s not a bad thing. I think the entire world has to benefit from a much more multi polar global reality. I think that’s in the interest of all of humanity, regardless of what one thinks of the political and economic regimes in other countries.

One can very easily disagree or not like the systems that rule other countries, other major powers such as China and Russia, but at the same time realize that it’s in the interest of all of humanity coexisting with different realities, different political regimes, different economic regimes. And that countries have the right to pursue their own path to development.

And I think for all that one can criticize China for, I do think that they are pursuing a non imperialist vision of international collaboration. So I think China truly is interested in building a multipolar world because it would be in it’s own interest. I think China, as a rising power clearly has nothing to benefit from an all-out conflict with the US.

Or with trying to replace the US as the single dominant global superpower. Just like clearly Russia has no interest in all out conflict with the US. And the west more in general. And I think clearly this is the outcome that most of the countries of the world are hoping for. So really, I think it’s up to us as Western citizens. Our countries are the ones that are pushing for this conflict.

This push towards an all out conflict is not coming from these other countries. For all the failings they may have, it’s coming from us. I think that’s something we have to realize as citizens of the west. And I think we have to step up to our responsibilities and do whatever we can to avoid this outcome.

[00:56:09.640] – Grumbine

Thomas, I really appreciate your time with me today. There’s very few interviews that I don’t walk away happy that I did the interview. This is one of the best interviews for me. I want to thank you so much for all your time, Thomas. This has been an incredible journey for me.

[00:56:28.120] – Fazi

Thanks for having me on the show.

[00:56:29.670] – Grumbine

Appreciate the validation. And with that, folks, I’m Steve Grumbine with Macro N Cheese. And we are out of here.

[00:56:42.490] – End credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives