Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
Brief history of the corrupt worldwide tax evasion system instituted by the United States at Therealnews.com.
HUDSON: Well, Panama was basically carved off from Colombia in order to have a canal. And it was created very much like Liberia. Its not really a country in the sense that a country has its own currency, its own tax system. Panama uses U.S. dollars. So does Liberia. And the real story that didn’t come out in the Panama papers, which naturally focused just on criminal people laundering money, Panama wasn’t designed to launder money. It was designed to launder earnings. Mainly by the oil and the gas industries, and the mining industry.
And Panama and Liberia were long noted as having flags of convenience. That meant that oil tankers and mineral ships would register themselves under the corporate flags of Panama or Liberia, or some other country that used the U.S. dollar, not its own currency.
Well, I first found out about this about 40 years ago, when I was doing a study of the balance of payments for the oil industry. And I went to Standard Oil, whose treasurer met with me to walk me through their balance sheet. And I said, I cant figure out whether Standard Oil and the other oil companies make their money at the producing end of oil, or at the distributing end of refining and selling it. And he said, well, we make our earnings right here in New York, in the Treasurers office. I said, what do you mean? He said, we sell the oil that we buy from Saudi Arabia or the near East at very low prices to the tanker company thats registered in Panama or Liberia. And they don’t have an income tax in their country, because they’re not a real country. And we sell then the oil to the downstream distributors in the United States or Europe. We sell that crude oil at a very, very high price. So high that there’s no profit to be made at all in refineries or selling the oil. So we don’t pay the tax collector in Europe anything. We don’t pay the American government anything. All of our earnings are reported as being made in the tankers.
And I said, well, I’ve looked at the balance of payments reports here from the Federal Reserve and the Treasury Bulletin. I see here’s Europe, here’s Latin America, here’s Africa and Asia. I can’t find where these profits are. And he said, ah, look at the very last line. And it’s international. And I said, international, aren’t all these countries, Europe, international? He said, no. International means they’re really part of the United States abroad. They’re the offshore banking centers. Panama, Liberia, etc. So I found out that basically Panama, Panamanian companies, were set up initially to register oil tankers and mineral ships in order to make the appearance of taking all of their profits on the transporting the oil, or the copper, or the minerals, from third world countries to the United States and Europe.
Interviewer: Michael, you have indicated in one of your articles that you were actually approached by a State Department operative in 1967. Tell us more about that experience.
HUDSON: Yeah. From a State Department person who’d gone to work for Chase. The problem that America had in the 1960s was the Vietnam war. The entire balance of payments deficit of the United States in the 1950s and the 60s, right down to the early 70s, was military spending abroad. And the problem was that the dollar was either going down or the United States had to sell gold, and that’s what led to Nixon finally taking the dollar off gold in 1971. Well, the United–it’s tried to fight against that. So the State Department came to Chase, and they said, we’ve got to figure out some way of getting enough dollars to balance the military deficit. And we found out the way to do it. We want to make the United States the new Switzerland of the world.
Michael, can you make a calculation of how much criminal capital there is in the world? How much do the drug dealers make, the criminals all over, the dictators. How much goes to Switzerland, and how can we get this criminal money in the United States?
Well, the end result was that the U.S. government went to Chase and other banks and asked them to be good American citizens, and make America safe for the criminals of the world to keep their money so that we would support the dollar.
And Chase had already, when Chase had been asked to have a bank in Saigon so that the Army and other people wouldn’t put their money in French banks that would end up with General de Gaulle cashing it in for gold, Chase said, okay, we will help set up banks. And other banks really did this not to evade the law, not to break the law initially, but to be good citizens and attract crooked capital from all over the world. Now, the same thing happened with the British West Indies. They had declared their independence, but in order not to be a real country, in order to attract flight capital to England, they rejoined the empire as a colony so that they could serve as money laundering. And the idea was to have all of this money come to the United States.
Well, all of this context can easily be traced. If you look at the money that goes into Panama and other offshore banking centers in the Caribbean, none of this money stays in Panama.