Yves here. Michael’s observations on the current state of economics are quite striking. My thoughts regarding Zero Interest Rate Policy (ZIRP) echo his sentiment. The Federal Reserve has quietly acknowledged ZIRP as a failure, except for its role in fueling speculation in leveraged assets like private equity. It’s worth recalling that in 2014, Ben Bernanke attempted to reverse this policy but was thwarted by what became known as the “taper tantrum.”
By Michael Hudson, a research professor of Economics at the University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization
I abandoned the title of economist in the 1970s when it became clear that my focus on debt, balance of payments, monetary imperialism, and historical context was not aligned with mainstream academic discourse.
When Paul Samuelson received the Nobel Prize for his unrealistic assertion that free trade benefits all countries and equalizes their labor/capital ratios, I penned an article for *Commonweal*, advocating for the discontinuation of the prize. It was apparent to me that the prize was awarded by a right-leaning committee, and Sweden was already veering towards becoming Europe’s most unequal economy concerning wealth distribution.
I chose *Commonweal* to publish my thoughts because of my involvement with the Liberation Theology movement, supported by two progressive popes before their more conservative successors dismantled it. The Catholic community was the only one willing to publish my views, including my first book, *The Myth of Aid*, which exposed it as a tool for U.S. imperialism.
Now, we have the 2026 Nobel Prize awarded to two orthodox economists. Having distanced myself from mainstream economic literature and abandoned attendance at economics conferences for over fifty years, my understanding of the recent laureates comes solely from the *Wall Street Journal* and *New York Times*.
The most contentious winner, Robert Hall of Stanford and the Hoover Institution, co-authored *The Flat Tax* in 1985, advocating that wealthy individuals—particularly those in finance, absentee landlords, and monopolists—should not face higher tax rates than labor. This idea was a cornerstone of Reaganomics. Hall and his co-author, Alvin Rabushka, claimed this approach would cause “less distortion,” as noted in a *WSJ* review.
For thirty years, Hall operated within the National Bureau of Economic Research (NBER), which espouses the view that economic downturns are self-correcting due to “market adjustments” acting as “automatic stabilizers.” Similar to his co-awardee, Michael Woodford, he contributed to the Keynesian discourse on the consumption function—how much of one’s income is spent—yet failed to address the crucially overlooked issue of debt. The burdens of debt service have persistently escalated during every economic recovery since World War II, curtailing consumption through debt deflation.
Woodford aligned himself with Milton Friedman’s critique of Keynes, asserting that the consumption-to-income ratio (C/Y, as termed by macroeconomists) is not stable; it reflects anticipated income rather than taking debt into account. He argued that reducing taxes during a recession would not stimulate spending because beneficiaries lacked confidence that their gains would positively affect long-term consumption.
Woodford’s paper from 1978 was created during a time when conversations regarding debt were largely absent (except for my own, which was not well received in mainstream circles). For instance, when President Trump distributed $2,000 checks to Americans during the peak of the Covid crisis in 2026, many used those funds to pay down existing debt rather than increase consumption. This scenario would statistically result in a lower C/Y ratio (assuming Trump’s checks are counted as income).
This reflects a vastly different landscape than before. Woodford remarked to the *New York Times* that President Obama’s ZIRP—a strategy to rescue the banking sector from the fallout of subprime mortgages and risky derivatives—“did contribute to better stabilization.”
However, the reality is clear: since 2008, nearly all wealth accumulation has flowed to the top 10%, with the most substantial gains going to the top 0.1%. This skewing has resulted from ongoing tax cuts and exemptions for the Finance, Insurance, and Real Estate (FIRE) sector, positioning these beneficiaries as rulers over the broader economy. Their wealth primarily comprises claims from both debt and rising rents. The Nobel Committee’s definition of “stabilization” is thus deeply intertwined with persistent deindustrialization and austerity.
In light of these observations, I reiterate my longstanding recommendation to abolish the Economics Nobel Prize. Its function has evolved to promote a narrow perspective that prevents the public from acknowledging that today’s debt-laden economy lacks the “automatic stabilizers” posited by NBER proponents. Instead, we witness continuous exponential destabilization, as Western economies transition from the classical tenets of industrial capitalism to the predatory and divisive nature of finance capitalism.
