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 All Comments / By Dirk Bezemer
    From: The Journal of Economic Issues, Vol. L No. 3, September 2016 Abstract: Conflation of real capital with finance capital is at the heart of current misunderstandings of economic crisis and recession. We ground this distinction in the classical analysis of rent and the difference between productive and unproductive credit. We then apply it to...
  • Most classical economists treat the financial sector not so much as invisible – though I understand what you mean – but as intermediaries, between saving and investment. Thus, S equals I. That’s how interest rates came to be known as reflecting the time value of money, plus, in individual cases, a risk premium.

    The problem is that this all assumes a stable money supply.

    The Fed creates money out of thin air and uses it to purchase securities from 23 big banks, and promises that it will do so until it meets a specific short term interest rate target.

    That’s basically legal counterfeiting – and it benefits those who get the new money earliest. The big banks get it first – and the government benefits from the purchase of its securities and support of its borrowing rate. Suppressing government borrowing costs isn’t the only impact, though. Consider the “risk free rate” in the CAPM equation. All streams of future cash flows are discounted to achieve a present value. All other things held equal, a reduction in the discount rate will lift the PV – i.e., support the prices of future cash flows – – – coming from stocks, bonds, patents….. So when the Fed suppresses interest rates, it inflates the stock market. Now, a lot of people think that we’re talking the ten year T, which is only indirectly impacted by Fed policy. But the cash flow is perpetual – and is typically considered to come in years. Moreover, if you look at most firms’ balance sheets, most of them borrow for ten year tenors. Most importantly, the INVESTOR’s holding period is now measured in months, not years. So, use FFR……

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  • […] Finance is Not the Economy – The Unz Review – […]

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  • […] effects of both indefinite optimism and indefinite pessimism may as well have been copy-pasted from Unz.com, My Posting Career, or even Counter-Currents (p. […]

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  • The authors, Dirk Bezemer and Michael Hudson are showing large scale credit creation from the 1980′s onwards, feeding into asset price inflation in what they call the Financialization of the economy (US and much of Western Europe).

    They show the bubble effects in speculative assets such as real-estate, stocks and bonds with the main observation that it puts the “real” productive part of the economy at risk. Speculative investments work on the “Bigger Fool” theory . An asset gain covers the interest payment until it doesn’t , at which point the Ponzi scheme collapses, harming the real economy (demand and scarce bank credit for non-speculative borrowers).

    It’s a good straightforward analysis, but they probably could have explained some points more clearly or with a different emphasis, and they missed a big one completely.

    I prefer Micheal Pettis’s way of simply looking a credit creation as good investment or bad investment. Good investment returns the capital and with interest and is really confined to very special opportunities like opening up the West, rebuilding Europe after WW2 or introducing mass use technology such as electricity, motor vehicles or digital computing.

    Bad investment consumes capital and builds a debt mountain – for instance funding government tax shortfalls, consumer loans, speculative bubbles, or probably worst of all, wars on credit.

    Also they could maybe have put the Financialized economy more in context. The general background is Friedman’s Neoliberal “World is Flat” idea involving deregulation and unrestricted world trade. For example, US industrial production (real economy) is being hit from three sides 1) Higher returns to capital in the Ponzi scheme (while it lasts) 2) WTO/NAFTA etc. allowing mass outsourcing of US manufacturing capacity 3) Accelerating automation of production/distribution with disappearing jobs in many areas, e.g. publishing, travel agencies, factories etc.

    For example, Andy Grove(ex CEO Intel) gets into this, talking about Hon Hai Precision Industries:
    “The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple (AAPL), Microsoft (MSFT), Dell (DELL), or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard (HPQ), Intel, and Sony (SNE)”

    Grove applies a 10x rule to production of electronic goods, with each new device creating 10 jobs in Asia for 1 in the US. The idea is that some of these outsourcers could reduce their extra large profit margins and keep some of the $ Billions and 100.000′s jobs in the United States.

    There are also some more subtle points that they could have expanded: If Asian outsourcing is as harmful to US manufacturing/employment/deficits, then the bubble in asset prices came at exactly the right moment with its “feel good factor” hiding the erosion in real wages and employment. Similarly US citizens are not too good at Long Term Austerity.

    Feel Good asset prices also serve to hide spectacular US inequality that they refer to, where 120.000 families ( 0.1%) now have the same wealth as the lower 90% of the population combined (even something the British and Russian aristocracies didn’t manage) – with plenty of 0,1% members being recent arrivals thanks to outsourcing and QE finance.

    The authors curiously only see Austerity or Write-Offs as solutions to imploding bubbles and ignore a third route through higher inflation.

    For example, In the first 6 months of 1975 British inflation was running at 30% p.a. with Sterling bondholders getting wiped out, but from 1971 to 1979 British debt was reduced from 76% to 56% of national income. Or, in a more extreme case, the large scale currency printing of Weimar Germany that evaporated unpayable foreign and domestic government debts (downside that by 1923, the price of a cabbage that had recently sold for 25 pf cost 50.000.000 marks).

    There’s also an important racial aspect.

    Jewish Americans are 2% of the American population but over the period in question obtained through racial patronage most of the top FED and Treasury positions (Janet Yellen, Stanley Fisher, Benjamin Bernanke, Donald Kohn, Jack Lew, Sarah Bloom, Stuart Levey, Alan Greenspan, Lawrence Summers, Robert Rubin, Samuel Bodman, Stuart Eizenstat) and have close connections to the Wall St./merchant banking/hedge fund beneficiaries of Bubble Finance, with the suggestion that QE, ZIRP, the aggressive removal of Glass Steagall, SEC approval of 30:1 leverage and full $ bailouts of their speculative positions in 2008 were policies designed to channel a large part of the$ Billions in rentier gains to themselves rather than the public.

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  • British-born Jewish science journalist, author and former columnist at the Jew York Times, Nicholas Wade in book, A Troublesome Inheritance, has claimed that Jews possess a genetic “adaptation to capitalism”. Wade also argues that humans can be divided into discrete races, and that between those races, there are differences in behavior, temperament, intelligence, and even political and economic structures. Although the specifics of the arguments change, what remains constant is the idea that white people of European descent are inherently smarter, better, more “civilized” than members of other races, especially black Africans and their descendants.

    In December 2010, Isaac Stone Fish claimed at the Newsweek magazine that Chinese business community uses Jewish Talmud as a guide.

    Listen to a video below to learn more about Capitalism.

    https://rehmat1.com/2015/01/22/capitalism-is-jewish/

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  • @Art
    An excellent comment - thanks.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages.
     
    In the 60's Jewish importers began the destruction of our electronic industry. Next came cars.

    The impoverishment of America’s middle class has undermined the nation’s financial stability.
     
    This impoverishment kicked into high when Allen Bubbles Greenspan was made FED chief.

    Through ever increasing debt - he engineered one debt bubble after another, until the 2008 fiasco. Junk bonds, savings and loan, the internet bubble, the home price bubble, and now the stock bubble.

    How can anyone not see this – things are totally screwed up. Today we are at ZERO interest rates with the big banks feeding money to the 1%. They use this new debt to inflate stock prices - skimming the profits to themselves – the economy be dammed.

    Of course this about big money making more money, not about actual business creation of valued goods and services.

    It isn’t easy not to run into a (negative) mention of “Jews” for a ten-comment streak. I had not for 9 and your comment was the 10th I was reading :)

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  • The Company store in a company town,
    mining the miners to keep them down.

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  • @Sam Shama
    [Through immigration, we have been divided....]

    How could you say that Art?

    Is this the same "Christ-said-all-men-are-created-equal" Christian Art? Or was it a JEW that influenced this momentary bigotry?

    P.S. The Jews love you

    Not the Jews I’ve worked for and with, buddy, not at all.

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  • @Alden
    I didn't mean a brand new expensive car. I meant a reliable car. Reliable cars are not all that cheap I also stated that car payments are ok but putting gas oil and routine maintainence on a credit card to get to work means you are not being paid enough.

    Reliable cars are available fairly cheaply. They may not look great, but they’re available and they’re the right choice for someone who has not yet saved up enough for a better, newer vehicle.

    As for putting gas and oil and routine maintenance on a credit card, it can mean that you are not being paid enough for your useful work. But it can also mean that the person lacks the skills, intelligence, or work ethic needed for his work actually to be worth what he wants to be paid. Neither the facile answer of the right nor that of the left is “the” answer here.

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  • @Art
    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    I agree 100 % – the beginning of the end of America as a free optimistic people began with the JFK assassination.

    Hillary will put a dagger in us. An ethnically divided nation like California is our future.

    Through immigration, we have been divided and conquered by the Jews and their media.

    [Through immigration, we have been divided....]

    How could you say that Art?

    Is this the same “Christ-said-all-men-are-created-equal” Christian Art? Or was it a JEW that influenced this momentary bigotry?

    P.S. The Jews love you

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    • Replies: @RadicalCenter
    Not the Jews I've worked for and with, buddy, not at all.
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  • @Durruti
    Thanks for the comment/feedback.

    You see what I see.

    The VISION is all we have.

    We must Restore our Democratic Republic! [easier said than done]

    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    Perhaps some help from our "Decembrists."

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiwyu-j5-bOAhVILB4KHdjoD-oQFggcMAA&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FDecembrist_revolt&usg=AFQjCNHp6hCTeUOsPn55LwwdR8eZm7FONA&sig2=mzyg2HBYbiCOYAvvA2CdaQ

    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    I agree 100 % – the beginning of the end of America as a free optimistic people began with the JFK assassination.

    Hillary will put a dagger in us. An ethnically divided nation like California is our future.

    Through immigration, we have been divided and conquered by the Jews and their media.

    Read More
    • Replies: @Sam Shama
    [Through immigration, we have been divided....]

    How could you say that Art?

    Is this the same "Christ-said-all-men-are-created-equal" Christian Art? Or was it a JEW that influenced this momentary bigotry?

    P.S. The Jews love you
    ReplyAgree/Disagree/Etc.
  • @Art
    An excellent comment - thanks.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages.
     
    In the 60's Jewish importers began the destruction of our electronic industry. Next came cars.

    The impoverishment of America’s middle class has undermined the nation’s financial stability.
     
    This impoverishment kicked into high when Allen Bubbles Greenspan was made FED chief.

    Through ever increasing debt - he engineered one debt bubble after another, until the 2008 fiasco. Junk bonds, savings and loan, the internet bubble, the home price bubble, and now the stock bubble.

    How can anyone not see this – things are totally screwed up. Today we are at ZERO interest rates with the big banks feeding money to the 1%. They use this new debt to inflate stock prices - skimming the profits to themselves – the economy be dammed.

    Of course this about big money making more money, not about actual business creation of valued goods and services.

    Thanks for the comment/feedback.

    You see what I see.

    The VISION is all we have.

    We must Restore our Democratic Republic! [easier said than done]

    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    Perhaps some help from our “Decembrists.”

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiwyu-j5-bOAhVILB4KHdjoD-oQFggcMAA&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FDecembrist_revolt&usg=AFQjCNHp6hCTeUOsPn55LwwdR8eZm7FONA&sig2=mzyg2HBYbiCOYAvvA2CdaQ

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    • Replies: @Art
    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    I agree 100 % – the beginning of the end of America as a free optimistic people began with the JFK assassination.

    Hillary will put a dagger in us. An ethnically divided nation like California is our future.

    Through immigration, we have been divided and conquered by the Jews and their media.
    ReplyAgree/Disagree/Etc.
  • @Durruti
    Nice detailed article from Bezemer & Hudson. Thanks to Unz for placing it here.

    I forwarded it to an economist friend, who should appreciate it.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages. The long decline of the local economy has led to the political decline of the working class, as well as the decay of cities, towns, and infrastructure, such as education.

    The impoverishment of America’s middle class has undermined the nation’s financial stability. Without a productive foundation, the government has accumulated a huge debt of $trillions of dollars. Adding to the debt, the so-called ‘Bailout’ of the nation’s Bankers has looted America’s workers of another $13trillion. This debt will have to be paid, or suffered by future generations. Concurrently, the top 1% of the nation’s population has benefited enormously from the discomfiture of the rest. Additionally, the interest rate has been reduced to 0, thereby slowly robbing millions of depositors of their savings, as their savings cannot stay even with the inflation rate.

    In the absence of Time, (Einstein's 4th dimension), I append a revolutionary appreciation of - how to deal with debt (by Jefferson). This Jefferson approach is specially favored by Anarchists, such as myself.

    The Restoration of the Republic will be a Revolutionary Act, that will cancel all previous debts owed to our unconstitutional regime and its business supporters. All debts, including Student Debts, will be canceled. Our citizens will begin, anew, with a clean slate.

    As American Founder, Thomas Jefferson wrote, in a letter to James Madison:

    “I set out on this ground, which I suppose to be self evident, ‘that the earth belongs in usufruct to the living’:”

    “Then I say the earth belongs to each of these generations, during it’s course, fully, and in their own right. The 2d. Generation receives it clear of the debts and incumberances of the 1st. The 3d of the 2d. and so on. For if the 1st. Could charge it with a debt, then the earth would belong to the dead and not the living generation.”

    For the VISION - of a bright shiny new Republic, complete with our Constitution, with its Bill of Rights, a happy and prosperous and productive people, with our Pride, our Sovereignty, and our Honor restored!

    An excellent comment – thanks.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages.

    In the 60′s Jewish importers began the destruction of our electronic industry. Next came cars.

    The impoverishment of America’s middle class has undermined the nation’s financial stability.

    This impoverishment kicked into high when Allen Bubbles Greenspan was made FED chief.

    Through ever increasing debt – he engineered one debt bubble after another, until the 2008 fiasco. Junk bonds, savings and loan, the internet bubble, the home price bubble, and now the stock bubble.

    How can anyone not see this – things are totally screwed up. Today we are at ZERO interest rates with the big banks feeding money to the 1%. They use this new debt to inflate stock prices – skimming the profits to themselves – the economy be dammed.

    Of course this about big money making more money, not about actual business creation of valued goods and services.

    Read More
    • Replies: @Durruti
    Thanks for the comment/feedback.

    You see what I see.

    The VISION is all we have.

    We must Restore our Democratic Republic! [easier said than done]

    The remnants of our Republic was destroyed on November 22, 1963. JF Kennedy was our last Constitutional President.

    Perhaps some help from our "Decembrists."

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiwyu-j5-bOAhVILB4KHdjoD-oQFggcMAA&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FDecembrist_revolt&usg=AFQjCNHp6hCTeUOsPn55LwwdR8eZm7FONA&sig2=mzyg2HBYbiCOYAvvA2CdaQ
    , @Anonymous
    It isn't easy not to run into a (negative) mention of "Jews" for a ten-comment streak. I had not for 9 and your comment was the 10th I was reading :)
    ReplyAgree/Disagree/Etc.
  • Excellent article.
    Thanks to Messrs. Bezemer and Hudson, and to unz.com for presenting it.

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  • […] life to impose austerity and polarize the distribution of wealth and income. More recently, Marx ([1887] 2016, 1), in Chapter 30 of Capital, distinguished “credit, whose volume grows with the growing […]

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  • @MarkinLA
    India is REAL capitalism, the way capitalists want it. It amazes me that so many people are deluded by this ridiculous notion of an illegitimate "crony capitalism" or some other term designed to make people think that capitalism at its base is pure good and is only corrupted by evil people. As long as people have to eat and people have dependents to support, somebody will always be in a subservient position and can be taken advantage of. Capitalists do use this power all the time.

    In the US immigration was used to break the labor movement in the late 1800s as well as the 1980s onward. In the US coal miners were paid in company script that could only be used in the company store or pay the rent for the company provided housing. This too was real capitalism the way capitalists wanted it.

    Things like 40 hour work weeks and the end of child labor didn't come about because we became more capitalistic it came about because capitalists lost some political power and had to accept some socialism.

    This “crony capitalism” brought back the story of Michael Fleischer, the brother of Bush’s former press secretary, Ari Fleischer 48, a businessman, has been in charge of reviving the Iraqi economy.

    “Fleischer said he wanted to serve in Iraq because he believes Bush had embarked on “a noble path” in freeing and democratizing the country and he believed he had skills that would be helpful. He said that from his Foreign Service stint, he was already acquainted with Paul Bremer, the presidential envoy who heads the CPA. With an assist from his brother, Ari, who “got my resume to Bremer,” Fleischer landed interviews that led to his appointment. Among Fleischer’s key tasks was training more Iraqi businessmen in the ways of U.S.-style procurement so they can land part of the $18.4 billion in reconstruction aid the U.S. has earmarked for Iraq.”

    “Competitive bidding “is a new world for the Iraqis,” Fleischer said. Under Saddam Hussein, “it was all done by cronies. The only paradigm they know is cronyism. We are teaching them that there is an alternative system with built-in checks and built-in review.” The broad goal, said Fleischer, is to nurture a system that is “friendly to a free market, friendly to private property rights and . . . limited government.””

    No better advertisement for crony capitalism than that.

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  • @Sam Shama
    Did not know of List, but Ha-Joon Chang has uncommon insight; sort of like Amartya Sen.

    Also Song Hongbing . His bestseller The Currency Wars was not translated in to English.

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  • @Alden
    Puhleeezeee

    India is an excellent of the nastiest kind of capitalism, agriculture and most of all, horrible usurious money lending

    Untouchables paid less than a slave earned in room board clothes and spending money, child labor starting at age 6 or so, and minstouud 500 percent debt. There are small farmers in India still paying off a tractor their grandfather bought 70 years ago.

    Then there the cultural customs demanded by the religion and way of life that get people into horrible debt such as families whose incomes in US dollars is
    $20,000 a year throwing 5 day weddings costing the $150,000 US dollars

    And those weddings are paid for by borrowing at 500 percent interest from the unregulated money lenders Thosr money lenders have great influence in preventing government regulations curbing their avaricious practices

    When India ends child labor and enforces some health and safety rules and gives workers tables so they do t have to squat on the ground to do their work and get crippled by arthritis by age 40 get back to us.

    India is REAL capitalism, the way capitalists want it. It amazes me that so many people are deluded by this ridiculous notion of an illegitimate “crony capitalism” or some other term designed to make people think that capitalism at its base is pure good and is only corrupted by evil people. As long as people have to eat and people have dependents to support, somebody will always be in a subservient position and can be taken advantage of. Capitalists do use this power all the time.

    In the US immigration was used to break the labor movement in the late 1800s as well as the 1980s onward. In the US coal miners were paid in company script that could only be used in the company store or pay the rent for the company provided housing. This too was real capitalism the way capitalists wanted it.

    Things like 40 hour work weeks and the end of child labor didn’t come about because we became more capitalistic it came about because capitalists lost some political power and had to accept some socialism.

    Read More
    • Replies: @utu
    This “crony capitalism” brought back the story of Michael Fleischer, the brother of Bush's former press secretary, Ari Fleischer 48, a businessman, has been in charge of reviving the Iraqi economy.

    "Fleischer said he wanted to serve in Iraq because he believes Bush had embarked on "a noble path" in freeing and democratizing the country and he believed he had skills that would be helpful. He said that from his Foreign Service stint, he was already acquainted with Paul Bremer, the presidential envoy who heads the CPA. With an assist from his brother, Ari, who "got my resume to Bremer," Fleischer landed interviews that led to his appointment. Among Fleischer's key tasks was training more Iraqi businessmen in the ways of U.S.-style procurement so they can land part of the $18.4 billion in reconstruction aid the U.S. has earmarked for Iraq."

    "Competitive bidding "is a new world for the Iraqis," Fleischer said. Under Saddam Hussein, "it was all done by cronies. The only paradigm they know is cronyism. We are teaching them that there is an alternative system with built-in checks and built-in review." The broad goal, said Fleischer, is to nurture a system that is "friendly to a free market, friendly to private property rights and . . . limited government.""

    No better advertisement for crony capitalism than that.
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  • @5371
    Good piece. Put it together with a Friedrich List/Ha-Joon Chang challenge to free trade dogma, and you have a resounding rebuff to neoliberal "thought".

    Did not know of List, but Ha-Joon Chang has uncommon insight; sort of like Amartya Sen.

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    • Replies: @utu
    Also Song Hongbing . His bestseller The Currency Wars was not translated in to English.
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  • @RadicalCenter
    Nice points, except that a person who is not debt-free and lacks substantial savings should never buy a brand-new vehicle in the first place. Buying such a rapidly-depreciating asset isn't prudent and the common decision to do so holds back tens of millions of Americans.

    Just about nobody "needs" a new vehicle in order to get to work, school, etc., reliably.

    So, the system is indeed rigged against the average person in the USA and elsewhere, but let's not blame government, bankers, whomever, for so many Americans being foolish, ignorant, or shortsighted enough to buy vehicles they can't afford (and, for that matter, attend universities they can't afford).

    I didn’t mean a brand new expensive car. I meant a reliable car. Reliable cars are not all that cheap I also stated that car payments are ok but putting gas oil and routine maintainence on a credit card to get to work means you are not being paid enough.

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    • Replies: @RadicalCenter
    Reliable cars are available fairly cheaply. They may not look great, but they're available and they're the right choice for someone who has not yet saved up enough for a better, newer vehicle.

    As for putting gas and oil and routine maintenance on a credit card, it can mean that you are not being paid enough for your useful work. But it can also mean that the person lacks the skills, intelligence, or work ethic needed for his work actually to be worth what he wants to be paid. Neither the facile answer of the right nor that of the left is "the" answer here.
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    Economists believe that people go into business to make a profit.

    But where have they ever produced a survey that proves this?

    Every survey shows that people want a good life. A nice home, neighborhood, peace and love in their family, decent schools, low crime, nice infrastructure etc. This is why people go to work or start a business. Making a profit is an intermediate goal, not the end in itself. The ultimate teleological goal is to live a good life.

    Imagine two nations/economies.

    In Bratroit, you earn a high wage as do your fellow managers. However, prosperity is not widely shared in your country. The few very rich isolate themselves in gated communities and commute to work in helicopters. There is a large class of unemployed and debt slaves. The streets are mean and nasty.

    Commuting to work is a bitch because cars clog the arterials. Roaming gangs of yoofs hurl rocks through windshields of cars and rob the passengers, often killing them. Your tap water is unfit to drink. Your toilet often backs up because of some down-stream blockage. Raw sewage is pumped into the bay and the beaches are biohazards. Signs warn you against swimming in the bay.

    Your children are afraid to attend public school because of the daily violence. Teachers crouch behind plexiglas shields in front of their desks. The roads are pockmarked with potholes. Public parks are desolate wastelands of broken glass and burning fires.

    Independent surveys rate your country's government as one of the most corrupt in the world, with bribery and graft endemic. Tax revenue that should go towards repaving roads ends up in the commissioner's pockets.

    But you, personally, are employed at a very well-paid job and live in a nice home surrounded by an eight foot high wall surmounted by broken glass bottles. You are comparatively and absolutely rich.

    Now imagine another nation, Normark.

    Wealth is evenly distributed because everyone earns a lifetime sustainable wage. This is the non-negotiable condition that all parties have agreed to when they sit down at the table to hammer out economic decisions.

    The schools are models of light, cleanliness and order. The children are healthy, clean-limbed and appear happy. There are very few discipline problems and your children can walk or bike to school without fear of molestation. Your commute is easy because trolleys run every 10 minutes from a stop within walking distance from your house. Sanitary systems function perfectly, tap water is drinkable, the bay is pristine and your family often spends weekends swimming and sailing in your small boat on the bay.

    The prime minister earns the same as a doctor, who earns little more than a plumber. A bus driver can raise a family. Factories are clean, well lighted and offer day care, and showers. Your children's education is paid for, including books and fees, through college. As college and technical school students they may commute on public buses for free.

    You make an average wage in this country which allows you to own a small car and modest, well built brick house. Your health care is provided for life. Surveys by independent agencies rate your country's government as the most transparent, least crime-ridden in the world.

    Which would you choose?

    Most people would choose the latter because they don't want to live in fear of violence and poverty. People are not interested in profit per se. Money is only a means to living the good life. So why do economists focus on profit only? Because their concerns are actually quite narrow. They want to create mathematic models and profit is a number, whereas happiness or life satisfaction is nebulous and difficult to quantify. So how can an economist offer advise as to how we should organize our society? They can't. Except to tell us how, show us the mechanics or how certain choices will entail or imply certain outcomes. Economists are technicians, not moral philosophers.

    Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?

    All of the above are true. There is a terribly destructive war being waged by the psychopathic sadists who occupy Wall Street top floor corner offices against the egalitarian societies which place human happiness above profit.

    Anonymous (and Anna)

    For the last two decades rates of productivity, and efficiency(which were quite good) never translated into higher wages for the worker, even though it was THEIR ability to get more done, and more done well, which was the reason.

    The vast majority of profits from productivity and efficiency went right into the hands of the top brass and CEO’s of major corporations, not the workers.

    Comparative ratios of the increase in CEO pay over worker pay, tells this tale most dramatically.

    CEO’s have paid themselves over 200 times what they were making two decades ago, workers wages have stayed virtually the same.(even adjusting for inflation)

    What happened with the vast majority of workers who were homeowners, is they were able to rationalize their lack of increase in income , with the substantial increase in the value of their homes.

    While people were not making that much more money, they FELT they were getting RICHER, because the value of their home was doubling every seven years.

    Perhaps had home valuations increased in a much more modest way, workers would have pressed much harder for fairer wages, to achieve the essential “brick” which you have referred to ?

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  • @Alden
    Excellent!!! One thing I have to add is that so many middle class "professional" workers have to accumulate debt just to get to work every day.
    I think that car payments are ok, but if one has to put gas oil batteries tires and car repairs on credit cards that the worker doesn't earn enough to pay off at the end of the month it's time to quit work and go on welfare.
    A lot of those equity loans were taken out to buy new cars to drive to work at the job that didn't pay enough to buy a decent car in good running condition. Many have to pay for their commuter tickets with credit cards they can't pay off completely every month so the debt increases with interest

    Nice points, except that a person who is not debt-free and lacks substantial savings should never buy a brand-new vehicle in the first place. Buying such a rapidly-depreciating asset isn’t prudent and the common decision to do so holds back tens of millions of Americans.

    Just about nobody “needs” a new vehicle in order to get to work, school, etc., reliably.

    So, the system is indeed rigged against the average person in the USA and elsewhere, but let’s not blame government, bankers, whomever, for so many Americans being foolish, ignorant, or shortsighted enough to buy vehicles they can’t afford (and, for that matter, attend universities they can’t afford).

    Read More
    • Replies: @Alden
    I didn't mean a brand new expensive car. I meant a reliable car. Reliable cars are not all that cheap I also stated that car payments are ok but putting gas oil and routine maintainence on a credit card to get to work means you are not being paid enough.
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    Economists believe that people go into business to make a profit.

    But where have they ever produced a survey that proves this?

    Every survey shows that people want a good life. A nice home, neighborhood, peace and love in their family, decent schools, low crime, nice infrastructure etc. This is why people go to work or start a business. Making a profit is an intermediate goal, not the end in itself. The ultimate teleological goal is to live a good life.

    Imagine two nations/economies.

    In Bratroit, you earn a high wage as do your fellow managers. However, prosperity is not widely shared in your country. The few very rich isolate themselves in gated communities and commute to work in helicopters. There is a large class of unemployed and debt slaves. The streets are mean and nasty.

    Commuting to work is a bitch because cars clog the arterials. Roaming gangs of yoofs hurl rocks through windshields of cars and rob the passengers, often killing them. Your tap water is unfit to drink. Your toilet often backs up because of some down-stream blockage. Raw sewage is pumped into the bay and the beaches are biohazards. Signs warn you against swimming in the bay.

    Your children are afraid to attend public school because of the daily violence. Teachers crouch behind plexiglas shields in front of their desks. The roads are pockmarked with potholes. Public parks are desolate wastelands of broken glass and burning fires.

    Independent surveys rate your country's government as one of the most corrupt in the world, with bribery and graft endemic. Tax revenue that should go towards repaving roads ends up in the commissioner's pockets.

    But you, personally, are employed at a very well-paid job and live in a nice home surrounded by an eight foot high wall surmounted by broken glass bottles. You are comparatively and absolutely rich.

    Now imagine another nation, Normark.

    Wealth is evenly distributed because everyone earns a lifetime sustainable wage. This is the non-negotiable condition that all parties have agreed to when they sit down at the table to hammer out economic decisions.

    The schools are models of light, cleanliness and order. The children are healthy, clean-limbed and appear happy. There are very few discipline problems and your children can walk or bike to school without fear of molestation. Your commute is easy because trolleys run every 10 minutes from a stop within walking distance from your house. Sanitary systems function perfectly, tap water is drinkable, the bay is pristine and your family often spends weekends swimming and sailing in your small boat on the bay.

    The prime minister earns the same as a doctor, who earns little more than a plumber. A bus driver can raise a family. Factories are clean, well lighted and offer day care, and showers. Your children's education is paid for, including books and fees, through college. As college and technical school students they may commute on public buses for free.

    You make an average wage in this country which allows you to own a small car and modest, well built brick house. Your health care is provided for life. Surveys by independent agencies rate your country's government as the most transparent, least crime-ridden in the world.

    Which would you choose?

    Most people would choose the latter because they don't want to live in fear of violence and poverty. People are not interested in profit per se. Money is only a means to living the good life. So why do economists focus on profit only? Because their concerns are actually quite narrow. They want to create mathematic models and profit is a number, whereas happiness or life satisfaction is nebulous and difficult to quantify. So how can an economist offer advise as to how we should organize our society? They can't. Except to tell us how, show us the mechanics or how certain choices will entail or imply certain outcomes. Economists are technicians, not moral philosophers.

    Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?

    All of the above are true. There is a terribly destructive war being waged by the psychopathic sadists who occupy Wall Street top floor corner offices against the egalitarian societies which place human happiness above profit.

    “Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?”

    Excellent questions. I think of Sweden and people like Barbara Specter. But she is just a low level operative. Is there a bigger plan?

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    ReplyAgree/Disagree/Etc.
  • @CanSpeccy
    These authors, Steve Keen, and others outside the bubble of Nobel-Prize-winning bullshit economics, have well revealed the pathologies of the FIRE economy that has dominated the West since the drive for globalization went into high gear in 1994 with Clinton's signature to the GATT agreement, a treaty that exposed US labor to unrestricted competition from workers of the Third World earning less than 5% of US wages.

    As Western workers became increasingly uncompetitive in the internationally tradable sectors of the economy, they made up for the short-fall in income by taking on ever increasing amounts of debt, the debt bubble continually stimulated by declining interest rates (now absurdly entering negative territory), and money creation, mainly by private institutions.

    The question is, what to do?

    The answer, obviously, is to redirect capital from consumption and speculative investments in a Ponzi economy into productive activities. Trouble is, Western governments are all owned by the banks and other financial corporations that reap the profits of the debt-based economy.

    So what to do? A lynching or two might help. At least the total public humiliation of scoundrel politicians such as Blair and Brown and Cameron, the Bush's and the Clinton's would be a start, so the ongoing public humiliation of Hillary, a life-long liar and swindler, is an encouraging start. A war crimes trial for Bush and Blair would be another step in the right direction. Publicly debagging some Central Bankers, past and present, would be a good idea too.

    Can’t join you in calling for illegal / extra-judicial violence.

    But we should indeed prosecute the Bushes, Clintons, and Obamas (and their foreign counterparts) for war crimes and for corruption. The sentence should be life in prison without possibility of parole — in a regular prison, with the general population and no special protections, just like any of us here would be placed.

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  • Anonymous • Disclaimer says:
    @annamaria
    "...the smallest unit of currency in an economy is a lifetime’s wage that would sustain a working family. That is because anything less would result in the self-destruction of the economy."
    Thank you. Excellent!

    Economists believe that people go into business to make a profit.

    But where have they ever produced a survey that proves this?

    Every survey shows that people want a good life. A nice home, neighborhood, peace and love in their family, decent schools, low crime, nice infrastructure etc. This is why people go to work or start a business. Making a profit is an intermediate goal, not the end in itself. The ultimate teleological goal is to live a good life.

    Imagine two nations/economies.

    In Bratroit, you earn a high wage as do your fellow managers. However, prosperity is not widely shared in your country. The few very rich isolate themselves in gated communities and commute to work in helicopters. There is a large class of unemployed and debt slaves. The streets are mean and nasty.

    Commuting to work is a bitch because cars clog the arterials. Roaming gangs of yoofs hurl rocks through windshields of cars and rob the passengers, often killing them. Your tap water is unfit to drink. Your toilet often backs up because of some down-stream blockage. Raw sewage is pumped into the bay and the beaches are biohazards. Signs warn you against swimming in the bay.

    Your children are afraid to attend public school because of the daily violence. Teachers crouch behind plexiglas shields in front of their desks. The roads are pockmarked with potholes. Public parks are desolate wastelands of broken glass and burning fires.

    Independent surveys rate your country’s government as one of the most corrupt in the world, with bribery and graft endemic. Tax revenue that should go towards repaving roads ends up in the commissioner’s pockets.

    But you, personally, are employed at a very well-paid job and live in a nice home surrounded by an eight foot high wall surmounted by broken glass bottles. You are comparatively and absolutely rich.

    Now imagine another nation, Normark.

    Wealth is evenly distributed because everyone earns a lifetime sustainable wage. This is the non-negotiable condition that all parties have agreed to when they sit down at the table to hammer out economic decisions.

    The schools are models of light, cleanliness and order. The children are healthy, clean-limbed and appear happy. There are very few discipline problems and your children can walk or bike to school without fear of molestation. Your commute is easy because trolleys run every 10 minutes from a stop within walking distance from your house. Sanitary systems function perfectly, tap water is drinkable, the bay is pristine and your family often spends weekends swimming and sailing in your small boat on the bay.

    The prime minister earns the same as a doctor, who earns little more than a plumber. A bus driver can raise a family. Factories are clean, well lighted and offer day care, and showers. Your children’s education is paid for, including books and fees, through college. As college and technical school students they may commute on public buses for free.

    You make an average wage in this country which allows you to own a small car and modest, well built brick house. Your health care is provided for life. Surveys by independent agencies rate your country’s government as the most transparent, least crime-ridden in the world.

    Which would you choose?

    Most people would choose the latter because they don’t want to live in fear of violence and poverty. People are not interested in profit per se. Money is only a means to living the good life. So why do economists focus on profit only? Because their concerns are actually quite narrow. They want to create mathematic models and profit is a number, whereas happiness or life satisfaction is nebulous and difficult to quantify. So how can an economist offer advise as to how we should organize our society? They can’t. Except to tell us how, show us the mechanics or how certain choices will entail or imply certain outcomes. Economists are technicians, not moral philosophers.

    Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?

    All of the above are true. There is a terribly destructive war being waged by the psychopathic sadists who occupy Wall Street top floor corner offices against the egalitarian societies which place human happiness above profit.

    Read More
    • Replies: @utu
    "Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?"

    Excellent questions. I think of Sweden and people like Barbara Specter. But she is just a low level operative. Is there a bigger plan?
    , @alexander
    Anonymous (and Anna)

    For the last two decades rates of productivity, and efficiency(which were quite good) never translated into higher wages for the worker, even though it was THEIR ability to get more done, and more done well, which was the reason.

    The vast majority of profits from productivity and efficiency went right into the hands of the top brass and CEO's of major corporations, not the workers.

    Comparative ratios of the increase in CEO pay over worker pay, tells this tale most dramatically.

    CEO's have paid themselves over 200 times what they were making two decades ago, workers wages have stayed virtually the same.(even adjusting for inflation)

    What happened with the vast majority of workers who were homeowners, is they were able to rationalize their lack of increase in income , with the substantial increase in the value of their homes.

    While people were not making that much more money, they FELT they were getting RICHER, because the value of their home was doubling every seven years.

    Perhaps had home valuations increased in a much more modest way, workers would have pressed much harder for fairer wages, to achieve the essential "brick" which you have referred to ?
    ReplyAgree/Disagree/Etc.
  • @CanSpeccy
    These authors, Steve Keen, and others outside the bubble of Nobel-Prize-winning bullshit economics, have well revealed the pathologies of the FIRE economy that has dominated the West since the drive for globalization went into high gear in 1994 with Clinton's signature to the GATT agreement, a treaty that exposed US labor to unrestricted competition from workers of the Third World earning less than 5% of US wages.

    As Western workers became increasingly uncompetitive in the internationally tradable sectors of the economy, they made up for the short-fall in income by taking on ever increasing amounts of debt, the debt bubble continually stimulated by declining interest rates (now absurdly entering negative territory), and money creation, mainly by private institutions.

    The question is, what to do?

    The answer, obviously, is to redirect capital from consumption and speculative investments in a Ponzi economy into productive activities. Trouble is, Western governments are all owned by the banks and other financial corporations that reap the profits of the debt-based economy.

    So what to do? A lynching or two might help. At least the total public humiliation of scoundrel politicians such as Blair and Brown and Cameron, the Bush's and the Clinton's would be a start, so the ongoing public humiliation of Hillary, a life-long liar and swindler, is an encouraging start. A war crimes trial for Bush and Blair would be another step in the right direction. Publicly debagging some Central Bankers, past and present, would be a good idea too.

    The short statement is land near a work place isn’t industrial capital and productivity does not go up when it rises in price . Productivity falls.

    The solution is to stop taxing wages and capital and shift necessary taxes on land values as well as tight credit standards on real estate, with all risk on the owner not to be put on the public account.

    The short answer is our economy is too dependent on cash flows from real estate and other assets growing in value.

    The other factor is government intervention, if at all. If cash flows are a problem, especially in trying to remove the real estate cash flow addiction, it seems as if Monetarist or Keynesian solutions are the only ones considered. Simply sending money to house holds to pay off private debt in $1,000 increments would do better than either one. The credit system still functions, but savers are still rewarded.

    The most common long term asset we should be able to invest should be capital with perhaps patent protection, not squatting on valuable locations of real estate

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  • @edNels


    The worst post from Hudson yet. When Hudson is good is when he uses regular english to make his points. Most of the economists can't quite do that, because they learned in school that to be an economist is to be an obscurantist. That helps to make you worth something to those who pay the bills, and don't forget, since you will be getting a teaching credential, there is the issue of job security too...

    Once they start breaking out these fool graphs, it's a giveaway that either somebody can't simply say it plain English in a matter of fact way and remain interesting or readable, and even in the best scenario, it is condescending, to think that the reader needs some visual aids.

    I don't see why Prof Hudson decided to go all pedantic, but he is real good usually. Maybe he has professional reasons to make it harder to comprehend his writings, 'cause, I don't feel ashamed to not be able to read Economics, I know it's intentionally cryptic, and is supposed to make mere mortals wilt from boredom and mystification. One is expected to be obligingly overcome, and withdraw, and let the great intellects take care of it. I can just see them in their teachers lounge smoking pipes in tweedy jackets and talk gibberish to each other, it's a weird art form.

    I complained to a Econ 1b teacher about the ''run on setences'' and extraineous language in the text book, and would he paraphrase a random paragraph please, no, but he said: " well, Economics isn't for everybody,'', I sped to the book store to turn it back in and drop.

    I hope prof. Hudson gets his promotion, and returns to explaining things to the average geo.

    I’ve said what the problem is in plain English, pain English and stain English. Nothing gets through. A lot of it is based on Henry George which is the least pedantic economist of the 19th century. Trust me it doesn’t matter how simple one makes it. Nothing gets through.

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    ReplyAgree/Disagree/Etc.
  • @Anonymous
    I think I am widely read, and this has got to be the best financial essay in the last decade. And zero comments? These profs have nailed it, and I'll read the rest of what they got to say. Finally, academics I can cite! I'll be mining this for my blog tomorrow.

    John Wiley Spiers

    You must be new to the Michael Hudson effect. One of my favorite essays was Ricardian trade Theory Finacialized. I sent it to several people I know, confident it was going to virally transmit because it answered the question as to why countries with roads, airports , telecommunications etc cannot compete with 3rd world hell holes.

    Nobody cares.

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  • “In light of the fact that “debts that can’t be paid, won’t be paid,” the policy question concerns how they “won’t be paid.” Will resolving the debt overhang favor creditors or debtors? ”

    Creditors.

    “Will it take the form of wage garnishments and foreclosure, and privatization selloffs by distressed governments? ”

    Of course.

    There. 7000 words later, the inverted pyramid of piffle has been parsed and posted for
    consumption.

    We will not be able to vote our way out of this mess.

    Most will crouch down and lick the hand that feeds them.

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    ReplyAgree/Disagree/Etc.
  • @Anonymous
    Remember in the third grade when the teacher, as part of her demonstration about magnetism, put a bar magnet beneath a sheet of paper and sprinkled iron filings on the paper? And how, with a little shaking, the filings arranged themselves into the characteristic 2-D torus shape with which we are all familiar? All the filings head to toe in column each of which was separated one from another by a regular distance.

    Maybe you remember (or not?) that each tiny filing was magnetized and itself became a miniature magnet with a north and south pole. And that each filing acted on its neighbor head to toe, and side by side according to the laws of attraction and repulsion such that, each being about the same size and therefore strength of field, would tend to act equally with all its neighbors and the result would be a regular pattern.

    One could, with sufficiently fine, accurate tools measure the strength of the magnetic field surrounding each filing and calculate just what the force was that each exerted on each. And, if one were to perturb a specific area, say by flicking a few particles with their finger, one could laboriously calculate the forces exerted on each filing by its neighbor that would act to reform them into a regular pattern again.

    Yes, one could do it that way, but it would be a lot of hard work and calculation that can be accomplished far easier by understanding that the particles are arrayed along dominating, so-called magnetic lines force created by the bar magnet hidden beneath the paper.

    The first way of analysis is characteristic of the English speaking world and is called Logical Atomism. Reality is reduced to tiny bits which are then reassembled by subjecting them to some relational Law which is applied iteratively until a comprehensive whole emerges.

    The second way is characteristic of German thinking and is known as Gestalt thinking. The whole is prior to and organizes the parts.

    Above, I said that the smallest unit of currency in an economy is a lifetime's wage that would sustain a working family. That is because anything less would result in the self-destruction of the economy.

    This is teleological thinking. Thinking from the final desired end result back towards the now. Thinking from finished product back to specific lesser causes and conditions.

    The lifetime's wage is the bar magnet. It creates a force field within which all else must align. It is more Real than any other consideration.

    Bizarre, huh? But it is. It is prior to and trumps all else.

    Economists analyze specifics, iron filings in relation to each other and, when there is a perturbation, theorize trying to relate how the filings will affect one another as they struggle to realign themselves. This is why their theories have no predictive value. They mistakenly believe that the locus of causation lies in the filings themselves rather than the field within which they exist.

    So, I'm not speaking metaphorically. The Root Cause is a family's living wage. It is the Prime Mover. Every disfunction is a consequence of deviating from that Ideal.

    “…the smallest unit of currency in an economy is a lifetime’s wage that would sustain a working family. That is because anything less would result in the self-destruction of the economy.”
    Thank you. Excellent!

    Read More
    • Replies: @Anonymous
    Economists believe that people go into business to make a profit.

    But where have they ever produced a survey that proves this?

    Every survey shows that people want a good life. A nice home, neighborhood, peace and love in their family, decent schools, low crime, nice infrastructure etc. This is why people go to work or start a business. Making a profit is an intermediate goal, not the end in itself. The ultimate teleological goal is to live a good life.

    Imagine two nations/economies.

    In Bratroit, you earn a high wage as do your fellow managers. However, prosperity is not widely shared in your country. The few very rich isolate themselves in gated communities and commute to work in helicopters. There is a large class of unemployed and debt slaves. The streets are mean and nasty.

    Commuting to work is a bitch because cars clog the arterials. Roaming gangs of yoofs hurl rocks through windshields of cars and rob the passengers, often killing them. Your tap water is unfit to drink. Your toilet often backs up because of some down-stream blockage. Raw sewage is pumped into the bay and the beaches are biohazards. Signs warn you against swimming in the bay.

    Your children are afraid to attend public school because of the daily violence. Teachers crouch behind plexiglas shields in front of their desks. The roads are pockmarked with potholes. Public parks are desolate wastelands of broken glass and burning fires.

    Independent surveys rate your country's government as one of the most corrupt in the world, with bribery and graft endemic. Tax revenue that should go towards repaving roads ends up in the commissioner's pockets.

    But you, personally, are employed at a very well-paid job and live in a nice home surrounded by an eight foot high wall surmounted by broken glass bottles. You are comparatively and absolutely rich.

    Now imagine another nation, Normark.

    Wealth is evenly distributed because everyone earns a lifetime sustainable wage. This is the non-negotiable condition that all parties have agreed to when they sit down at the table to hammer out economic decisions.

    The schools are models of light, cleanliness and order. The children are healthy, clean-limbed and appear happy. There are very few discipline problems and your children can walk or bike to school without fear of molestation. Your commute is easy because trolleys run every 10 minutes from a stop within walking distance from your house. Sanitary systems function perfectly, tap water is drinkable, the bay is pristine and your family often spends weekends swimming and sailing in your small boat on the bay.

    The prime minister earns the same as a doctor, who earns little more than a plumber. A bus driver can raise a family. Factories are clean, well lighted and offer day care, and showers. Your children's education is paid for, including books and fees, through college. As college and technical school students they may commute on public buses for free.

    You make an average wage in this country which allows you to own a small car and modest, well built brick house. Your health care is provided for life. Surveys by independent agencies rate your country's government as the most transparent, least crime-ridden in the world.

    Which would you choose?

    Most people would choose the latter because they don't want to live in fear of violence and poverty. People are not interested in profit per se. Money is only a means to living the good life. So why do economists focus on profit only? Because their concerns are actually quite narrow. They want to create mathematic models and profit is a number, whereas happiness or life satisfaction is nebulous and difficult to quantify. So how can an economist offer advise as to how we should organize our society? They can't. Except to tell us how, show us the mechanics or how certain choices will entail or imply certain outcomes. Economists are technicians, not moral philosophers.

    Now, the interesting question is why are a certain chosen people fiddling with the internal affairs of those countries like Normark and attempting to wreck their economy by importing hordes of peoples whose values make them unassimilable? Is it out of envy? Jealousy at those who make the chosen look bad for never having themselves, created such happiness? A desire to undermine through strife and fracture those societies, so that they may step in with their ruinous notions of profit as the end all and be all of life, which creates the conditions that puts them in the 1% and reduces the rest of the population to debt slavery?

    All of the above are true. There is a terribly destructive war being waged by the psychopathic sadists who occupy Wall Street top floor corner offices against the egalitarian societies which place human happiness above profit.
    ReplyAgree/Disagree/Etc.
  • @Rehmat
    No matter which way you slice the cake - Capitalism was created by Western vultures to loot the 99% world population.

    India’s famous human rights activist and author, Arundhati Roy, in her new book, ‘Capitalism: The Ghost Story’, examines the dark side of democracy in contemporary India, and shows how the demands of the globalized western capitalist banking system has subjugated billions of peoples to the highest and most intense form of racism and exploitation. Watch two videos below to understand the evil world of capitalism and the evildoers who benefit from this system.

    Roy says that India’s 100 richest people controls 25% of the country’s GDP. A 2010 Oxford University study reported that 55% of India’s populations of 1.1 billion live below poverty line.

    Roy, though, talks mostly the capitalist culture in her native India – she would certainly get medal of ‘antisemitism’ from ADL and other Jewish supremacists for attacking the Jewish-controlled Council on Foreign Relations (CFR), which is funded by Rockefeller, Carnegie and Ford Foundations, and CIA .....

    https://rehmat1.com/2014/03/28/arundhati-roy-on-capitalism/

    Puhleeezeee

    India is an excellent of the nastiest kind of capitalism, agriculture and most of all, horrible usurious money lending

    Untouchables paid less than a slave earned in room board clothes and spending money, child labor starting at age 6 or so, and minstouud 500 percent debt. There are small farmers in India still paying off a tractor their grandfather bought 70 years ago.

    Then there the cultural customs demanded by the religion and way of life that get people into horrible debt such as families whose incomes in US dollars is
    $20,000 a year throwing 5 day weddings costing the $150,000 US dollars

    And those weddings are paid for by borrowing at 500 percent interest from the unregulated money lenders Thosr money lenders have great influence in preventing government regulations curbing their avaricious practices

    When India ends child labor and enforces some health and safety rules and gives workers tables so they do t have to squat on the ground to do their work and get crippled by arthritis by age 40 get back to us.

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    • Replies: @MarkinLA
    India is REAL capitalism, the way capitalists want it. It amazes me that so many people are deluded by this ridiculous notion of an illegitimate "crony capitalism" or some other term designed to make people think that capitalism at its base is pure good and is only corrupted by evil people. As long as people have to eat and people have dependents to support, somebody will always be in a subservient position and can be taken advantage of. Capitalists do use this power all the time.

    In the US immigration was used to break the labor movement in the late 1800s as well as the 1980s onward. In the US coal miners were paid in company script that could only be used in the company store or pay the rent for the company provided housing. This too was real capitalism the way capitalists wanted it.

    Things like 40 hour work weeks and the end of child labor didn't come about because we became more capitalistic it came about because capitalists lost some political power and had to accept some socialism.

    ReplyAgree/Disagree/Etc.
  • edNels [AKA "geoshmoe"] says:

    The worst post from Hudson yet. When Hudson is good is when he uses regular english to make his points. Most of the economists can’t quite do that, because they learned in school that to be an economist is to be an obscurantist. That helps to make you worth something to those who pay the bills, and don’t forget, since you will be getting a teaching credential, there is the issue of job security too…

    Once they start breaking out these fool graphs, it’s a giveaway that either somebody can’t simply say it plain English in a matter of fact way and remain interesting or readable, and even in the best scenario, it is condescending, to think that the reader needs some visual aids.

    I don’t see why Prof Hudson decided to go all pedantic, but he is real good usually. Maybe he has professional reasons to make it harder to comprehend his writings, ’cause, I don’t feel ashamed to not be able to read Economics, I know it’s intentionally cryptic, and is supposed to make mere mortals wilt from boredom and mystification. One is expected to be obligingly overcome, and withdraw, and let the great intellects take care of it. I can just see them in their teachers lounge smoking pipes in tweedy jackets and talk gibberish to each other, it’s a weird art form.

    I complained to a Econ 1b teacher about the ”run on setences” and extraineous language in the text book, and would he paraphrase a random paragraph please, no, but he said: ” well, Economics isn’t for everybody,”, I sped to the book store to turn it back in and drop.

    I hope prof. Hudson gets his promotion, and returns to explaining things to the average geo.

    Read More
    • Replies: @gwynedd1
    I've said what the problem is in plain English, pain English and stain English. Nothing gets through. A lot of it is based on Henry George which is the least pedantic economist of the 19th century. Trust me it doesn't matter how simple one makes it. Nothing gets through.
    ReplyAgree/Disagree/Etc.
  • @Anonymous
    A pile of dross--sand--is transmuted into gold--an Integrated Chip--through the intelligent application of Intelligence. This is the value added by Labor.

    Things worth doing are those which have a future.

    Getting drunk on prom night and driving a car occupied by three other teenagers over a ravine at 80 mph into a two foot diameter tree trunk is an example of behavior which does not have a future.

    Patching a leaky roof or planting a garden are examples of behavior that does have a future.
    A sound economy is one based on behavior that has a future i.e. it is self perpetuating and life enhancing.

    Because Labor is the essential ingredient to all viable economic activity, the smallest unit of currency in a functioning, healthy economy is the lifetime wage of a worker that will enable him to raise a family in comfort and ensure that he lives in modest comfort and happiness for his/her allotted span of 80 years.

    Whenever business planners, economists, workers, managers, owners et al sit down to negotiate wages, investment etc. this is the irreducible minimum, the quantum with which they must deal. It is the standardized brick with which they must build their edifice. All else derives from this and is, in a sense, just the technical working out of the details. The job of economists is to grind through the details, the ratios that keep current assessments of today's wage in line with gains in productivity, percentage of profits allocated to reinvestment in production, interest, dividends etc.

    It is a waste of energy to do a job so poorly that one must do it over and over again. An intelligent person strives to minimize wasted energy. Therefore there is a tendency for intelligent people to devise ways to make a product perform better and to make it with less effort.

    Gains in productivity mean the supply of goods increase in proportion to the money supply. A worker's wage buys more and more as time passes. In an economy in which the life-time wage of the worker is the basis of all calculations the value of money rises through time. A steady rise in the value of money allows planners to make accurate predictions and calculations for future scenarios. The result is a well ordered economy.

    Importing alien workers who will work for less than natives is a form of counterfeiting. If wages are halved and there are no concomitant gains in productivity, then demand declines by half as well. When purchasing power falls, then in order to maintain sales, manufacturers must cheapen goods. Cheaper goods fall apart sooner. With goods falling apart sooner, production must increase if standard of living is not to decline. Then, the worker must work harder to maintain a lower standard of living. That is how, paradoxically, importing cheap labor reduces quality of life.

    When speculators borrow money to purchase productive assets, they are artificially, expanding the money supply. Having little interest and even less talent at running factories, speculators reroute money that should go to wages and research and development into interest payments, dividends and stock buy backs thereby depleting the Intelligence of the company. Depleted of its Intelligence, the company can no longer make a competitive product that would enable it to compete in world markets. The nation then runs a trade deficit and must borrow abroad to make ends meet if it is to avoid lower consumption and massive layoffs. To repay this foreign debt, the nation must expand its money supply. Expanding the money supply with no increase in productivity would result in inflation except that wages are no longer tied to the expanding money supply (see above).

    Since wages are delinked from inflation, the worker must borrow to buy what he makes. Borrowing puts him in debt to the banks which are the same financial speculators that now own his factory. The speculator is loaning money to the worker so that he (the worker) can support himself while he works for the speculator-owned factory to make the money with which he repays the loan that allows him to stay alive and work for the financial speculators that borrowed virtual money to buy the factory for which the worker works.

    The financial speculators must make enough money on the interest of its loans to the worker to pay off the loans with which they bought the company and to pocket a profit as well. Nor can they let wages outrun the interest on the consumer and home loans they make to the worker/borrower or the long-term interest on the loans they incurred in buying the company for which their wage slave works. But, since productivity is not growing fast enough to offset overall need for money to make interest payments, the money supply must be expanded. All of this new money ends up in the pockets of the financial speculators.

    This is why union contracts that linked wages to inflation had to be broken and labor bargaining power undermined by mass immigration policies.

    The upshot is the violation of the first principle laid out above. That is, the minimum unit of currency in an economy is the wage necessary to maintain a worker and his family comfortably for the duration of his normal life. All other units of currency are subunits of this. Such a policy is possible only in a Nation/State that has secure borders and which cares for the well-being of its citizen/workers.

    Ergo, the final judgement is that the current crop of financial speculators cares not a whit for its workers nor for the long term health of the economy over which it exercises power. The solution is to forcibly remove them and reinstall an elite who are indigenous and who share the motives and goals of the base population to the extent of realizing that the smallest unit of currency in a functioning economy is that which promotes the lifetime well being of a worker and his family.

    Excellent!!! One thing I have to add is that so many middle class “professional” workers have to accumulate debt just to get to work every day.
    I think that car payments are ok, but if one has to put gas oil batteries tires and car repairs on credit cards that the worker doesn’t earn enough to pay off at the end of the month it’s time to quit work and go on welfare.
    A lot of those equity loans were taken out to buy new cars to drive to work at the job that didn’t pay enough to buy a decent car in good running condition. Many have to pay for their commuter tickets with credit cards they can’t pay off completely every month so the debt increases with interest

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    • Replies: @RadicalCenter
    Nice points, except that a person who is not debt-free and lacks substantial savings should never buy a brand-new vehicle in the first place. Buying such a rapidly-depreciating asset isn't prudent and the common decision to do so holds back tens of millions of Americans.

    Just about nobody "needs" a new vehicle in order to get to work, school, etc., reliably.

    So, the system is indeed rigged against the average person in the USA and elsewhere, but let's not blame government, bankers, whomever, for so many Americans being foolish, ignorant, or shortsighted enough to buy vehicles they can't afford (and, for that matter, attend universities they can't afford).
    ReplyAgree/Disagree/Etc.
  • Anonymous • Disclaimer says:

    Remember in the third grade when the teacher, as part of her demonstration about magnetism, put a bar magnet beneath a sheet of paper and sprinkled iron filings on the paper? And how, with a little shaking, the filings arranged themselves into the characteristic 2-D torus shape with which we are all familiar? All the filings head to toe in column each of which was separated one from another by a regular distance.

    Maybe you remember (or not?) that each tiny filing was magnetized and itself became a miniature magnet with a north and south pole. And that each filing acted on its neighbor head to toe, and side by side according to the laws of attraction and repulsion such that, each being about the same size and therefore strength of field, would tend to act equally with all its neighbors and the result would be a regular pattern.

    One could, with sufficiently fine, accurate tools measure the strength of the magnetic field surrounding each filing and calculate just what the force was that each exerted on each. And, if one were to perturb a specific area, say by flicking a few particles with their finger, one could laboriously calculate the forces exerted on each filing by its neighbor that would act to reform them into a regular pattern again.

    Yes, one could do it that way, but it would be a lot of hard work and calculation that can be accomplished far easier by understanding that the particles are arrayed along dominating, so-called magnetic lines force created by the bar magnet hidden beneath the paper.

    The first way of analysis is characteristic of the English speaking world and is called Logical Atomism. Reality is reduced to tiny bits which are then reassembled by subjecting them to some relational Law which is applied iteratively until a comprehensive whole emerges.

    The second way is characteristic of German thinking and is known as Gestalt thinking. The whole is prior to and organizes the parts.

    Above, I said that the smallest unit of currency in an economy is a lifetime’s wage that would sustain a working family. That is because anything less would result in the self-destruction of the economy.

    This is teleological thinking. Thinking from the final desired end result back towards the now. Thinking from finished product back to specific lesser causes and conditions.

    The lifetime’s wage is the bar magnet. It creates a force field within which all else must align. It is more Real than any other consideration.

    Bizarre, huh? But it is. It is prior to and trumps all else.

    Economists analyze specifics, iron filings in relation to each other and, when there is a perturbation, theorize trying to relate how the filings will affect one another as they struggle to realign themselves. This is why their theories have no predictive value. They mistakenly believe that the locus of causation lies in the filings themselves rather than the field within which they exist.

    So, I’m not speaking metaphorically. The Root Cause is a family’s living wage. It is the Prime Mover. Every disfunction is a consequence of deviating from that Ideal.

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    • Replies: @annamaria
    "...the smallest unit of currency in an economy is a lifetime’s wage that would sustain a working family. That is because anything less would result in the self-destruction of the economy."
    Thank you. Excellent!
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  • @woodNfish

    more can only be measured by others having less.
     
    Only if you think it is a zero sum game. More can also be measured by what you currently have.

    I am afraid I need your help on that one.

    How can I measure with the same measure?
    You need some form of comparison with the past or others.

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  • @woodNfish

    banks deem fewer borrowers creditworthy and may simply resort to fraud (“liars’ loans,” in which the liars are real estate brokers, property appraisers and their bankers, and Wall Street junk-mortgage packagers).

    ...banks innovated in the junk-mortgage market after 2001, followed by a host of community banks. Rising fragility was catalyzed by Wall Street and Federal Reserve enablers and bond-rating agencies, while a compliant U.S. Justice Department effectively decriminalized financial fraud.

    ...the policy response of the US and European governments and their central banks was to save the banks and bondholders (who incidentally are the largest class of political campaign contributors). This policy choice preserved the remarkable gains that the “One Percent” had made, while keeping the debts in place for the “99 Percent.” This accelerated the polarization that already was gaining momentum between creditors and debtors. The political consequence was to subsidize the emerging financial oligarchy.
     
    When it crashes, those responsible should be hunted down and executed.

    Don’t forget, in the US prosecuting Wall Street crooks is ‘antisemitism’.

    David Brooks in his Op-Ed published in ‘The Jew York Times’ (October 10, 2011), entitled ‘The Milquetoast Radicals’, wrote: “Take the Occupy Wall Street movement. This uprising was sparked by the (Canadian) magazine Adbusters, previously best known for 2004 essay, “Why Won’t Anyone Say They Are Jewish?“, an investigative report that identified some of the most influential Jews and their nefarious grip on policy. If there is a core theme to Occupy Wall Street movement, it is that the virtuous 99 percent of society is being cheated by the richest and greediest 1 percent.

    Kalle Lasn, the editor of Abusters, in the said article, had produced a list of 50 neocons (Zioncons) proving 26 of them being Jewish. Moreover, he stated that neocons have “a special affinity” for Israel and their influence helps to tilt US foreign policy toward Israel. Kalle Lasn was not talking about the obvious Jewish neocons Doug Feith, Richard Perle and Paul Wolfowitz – but the dual-citizen holders like former Attorney-General Michael Mukasey, former head of Homeland Security Michael Chertoff, former anti-Iran Defense Intelligence Agency analyst Larry Franklin, former senior Pentagon official Edward Luttwak, Henry Kissinger, adviser to Pentagon, Rabbi Dov Zakheim, Bush’s Pentagon Comptroller who was unable to explain the disappearance of $3.3 trillion dollars shortly before 9/11, Kenneth Adleman, Lewis ‘scooter’ Libby, Elliott Abrams, Robert Satloff, Marc Grossman and many more….

    https://rehmat1.com/2011/10/16/is-occupy-wall-street-movement-anti-jewish/

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  • Good piece. Put it together with a Friedrich List/Ha-Joon Chang challenge to free trade dogma, and you have a resounding rebuff to neoliberal “thought”.

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    • Replies: @Sam Shama
    Did not know of List, but Ha-Joon Chang has uncommon insight; sort of like Amartya Sen.
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  • @Anonymous
    I think I am widely read, and this has got to be the best financial essay in the last decade. And zero comments? These profs have nailed it, and I'll read the rest of what they got to say. Finally, academics I can cite! I'll be mining this for my blog tomorrow.

    John Wiley Spiers

    I’ll await your (hopefully) MUCH abbreviated synopsis.
    I don’t believe he has ever posted less than 7000 words.

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  • @Willem Hendrik
    I agree that the jewish ideology teaches it's followers to circumvent rules and still abide to the letter.
    In countries like India though, with different ideologies, with tens of millions of child-slaves now working the fields, also wealth is accumulated by few.
    China, you have to be connected to the communist party to be able to make serious money and keep some of it. Hundreds of millions are still scraping the land for food.

    It is the human condition to want more. And more can only be measured by others having less.

    On a more upbeat note: In the end, it is all rented.

    more can only be measured by others having less.

    Only if you think it is a zero sum game. More can also be measured by what you currently have.

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    • Agree: Outwest
    • Replies: @Willem Hendrik
    I am afraid I need your help on that one.

    How can I measure with the same measure?
    You need some form of comparison with the past or others.
    ReplyAgree/Disagree/Etc.
  • @woodNfish

    ...the modest, safe, productive life of Russians was over. The vast wealth of the Soviets, accumulated by the intensive work of generations, has been divided and shared by a few (mainly Jewish) oligarchs. The rich became obscenely rich, while the middle class perished.
     
    source: http://www.unz.com/ishamir/a-crooked-mile/

    No, it is more than that and you can bet it has "Jew" written all over it.

    I agree that the jewish ideology teaches it’s followers to circumvent rules and still abide to the letter.
    In countries like India though, with different ideologies, with tens of millions of child-slaves now working the fields, also wealth is accumulated by few.
    China, you have to be connected to the communist party to be able to make serious money and keep some of it. Hundreds of millions are still scraping the land for food.

    It is the human condition to want more. And more can only be measured by others having less.

    On a more upbeat note: In the end, it is all rented.

    Read More
    • Replies: @woodNfish

    more can only be measured by others having less.
     
    Only if you think it is a zero sum game. More can also be measured by what you currently have.
    ReplyAgree/Disagree/Etc.
  • Anonymous • Disclaimer says:

    A pile of dross–sand–is transmuted into gold–an Integrated Chip–through the intelligent application of Intelligence. This is the value added by Labor.

    Things worth doing are those which have a future.

    Getting drunk on prom night and driving a car occupied by three other teenagers over a ravine at 80 mph into a two foot diameter tree trunk is an example of behavior which does not have a future.

    Patching a leaky roof or planting a garden are examples of behavior that does have a future.
    A sound economy is one based on behavior that has a future i.e. it is self perpetuating and life enhancing.

    Because Labor is the essential ingredient to all viable economic activity, the smallest unit of currency in a functioning, healthy economy is the lifetime wage of a worker that will enable him to raise a family in comfort and ensure that he lives in modest comfort and happiness for his/her allotted span of 80 years.

    Whenever business planners, economists, workers, managers, owners et al sit down to negotiate wages, investment etc. this is the irreducible minimum, the quantum with which they must deal. It is the standardized brick with which they must build their edifice. All else derives from this and is, in a sense, just the technical working out of the details. The job of economists is to grind through the details, the ratios that keep current assessments of today’s wage in line with gains in productivity, percentage of profits allocated to reinvestment in production, interest, dividends etc.

    It is a waste of energy to do a job so poorly that one must do it over and over again. An intelligent person strives to minimize wasted energy. Therefore there is a tendency for intelligent people to devise ways to make a product perform better and to make it with less effort.

    Gains in productivity mean the supply of goods increase in proportion to the money supply. A worker’s wage buys more and more as time passes. In an economy in which the life-time wage of the worker is the basis of all calculations the value of money rises through time. A steady rise in the value of money allows planners to make accurate predictions and calculations for future scenarios. The result is a well ordered economy.

    Importing alien workers who will work for less than natives is a form of counterfeiting. If wages are halved and there are no concomitant gains in productivity, then demand declines by half as well. When purchasing power falls, then in order to maintain sales, manufacturers must cheapen goods. Cheaper goods fall apart sooner. With goods falling apart sooner, production must increase if standard of living is not to decline. Then, the worker must work harder to maintain a lower standard of living. That is how, paradoxically, importing cheap labor reduces quality of life.

    When speculators borrow money to purchase productive assets, they are artificially, expanding the money supply. Having little interest and even less talent at running factories, speculators reroute money that should go to wages and research and development into interest payments, dividends and stock buy backs thereby depleting the Intelligence of the company. Depleted of its Intelligence, the company can no longer make a competitive product that would enable it to compete in world markets. The nation then runs a trade deficit and must borrow abroad to make ends meet if it is to avoid lower consumption and massive layoffs. To repay this foreign debt, the nation must expand its money supply. Expanding the money supply with no increase in productivity would result in inflation except that wages are no longer tied to the expanding money supply (see above).

    Since wages are delinked from inflation, the worker must borrow to buy what he makes. Borrowing puts him in debt to the banks which are the same financial speculators that now own his factory. The speculator is loaning money to the worker so that he (the worker) can support himself while he works for the speculator-owned factory to make the money with which he repays the loan that allows him to stay alive and work for the financial speculators that borrowed virtual money to buy the factory for which the worker works.

    The financial speculators must make enough money on the interest of its loans to the worker to pay off the loans with which they bought the company and to pocket a profit as well. Nor can they let wages outrun the interest on the consumer and home loans they make to the worker/borrower or the long-term interest on the loans they incurred in buying the company for which their wage slave works. But, since productivity is not growing fast enough to offset overall need for money to make interest payments, the money supply must be expanded. All of this new money ends up in the pockets of the financial speculators.

    This is why union contracts that linked wages to inflation had to be broken and labor bargaining power undermined by mass immigration policies.

    The upshot is the violation of the first principle laid out above. That is, the minimum unit of currency in an economy is the wage necessary to maintain a worker and his family comfortably for the duration of his normal life. All other units of currency are subunits of this. Such a policy is possible only in a Nation/State that has secure borders and which cares for the well-being of its citizen/workers.

    Ergo, the final judgement is that the current crop of financial speculators cares not a whit for its workers nor for the long term health of the economy over which it exercises power. The solution is to forcibly remove them and reinstall an elite who are indigenous and who share the motives and goals of the base population to the extent of realizing that the smallest unit of currency in a functioning economy is that which promotes the lifetime well being of a worker and his family.

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    • Replies: @Alden
    Excellent!!! One thing I have to add is that so many middle class "professional" workers have to accumulate debt just to get to work every day.
    I think that car payments are ok, but if one has to put gas oil batteries tires and car repairs on credit cards that the worker doesn't earn enough to pay off at the end of the month it's time to quit work and go on welfare.
    A lot of those equity loans were taken out to buy new cars to drive to work at the job that didn't pay enough to buy a decent car in good running condition. Many have to pay for their commuter tickets with credit cards they can't pay off completely every month so the debt increases with interest
    ReplyAgree/Disagree/Etc.
  • @Willem Hendrik
    Human nature is responsible.

    At least everybody is having fun shuffling digits, keeping busy.

    In the old days people had to build piramides, dig canals with a shovel or do other back-breaking work. Now you may break a fingernail. Isn't that progress?

    Human nature is responsible.

    A voice crying in the wilderness.

    Cassandra by Robinson Jeffers

    The mad girl with the staring eyes and long white fingers
    Hooked in the stones of the wall,
    The storm-wrack hair and screeching mouth: does it matter, Cassandra,
    Whether the people believe
    Your bitter fountain? Truly men hate the truth, they’d liefer
    Meet a tiger on the road.

    Therefore the poets honey their truth with lying; but religion—
    Vendors and political men
    Pour from the barrel, new lies on the old, and are praised for kind
    Wisdom. Poor bitch be wise.
    No: you’ll still mumble in a corner a crust of truth, to men
    And gods disgusting—you and I, Cassandra.

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    ReplyAgree/Disagree/Etc.
  • These authors, Steve Keen, and others outside the bubble of Nobel-Prize-winning bullshit economics, have well revealed the pathologies of the FIRE economy that has dominated the West since the drive for globalization went into high gear in 1994 with Clinton’s signature to the GATT agreement, a treaty that exposed US labor to unrestricted competition from workers of the Third World earning less than 5% of US wages.

    As Western workers became increasingly uncompetitive in the internationally tradable sectors of the economy, they made up for the short-fall in income by taking on ever increasing amounts of debt, the debt bubble continually stimulated by declining interest rates (now absurdly entering negative territory), and money creation, mainly by private institutions.

    The question is, what to do?

    The answer, obviously, is to redirect capital from consumption and speculative investments in a Ponzi economy into productive activities. Trouble is, Western governments are all owned by the banks and other financial corporations that reap the profits of the debt-based economy.

    So what to do? A lynching or two might help. At least the total public humiliation of scoundrel politicians such as Blair and Brown and Cameron, the Bush’s and the Clinton’s would be a start, so the ongoing public humiliation of Hillary, a life-long liar and swindler, is an encouraging start. A war crimes trial for Bush and Blair would be another step in the right direction. Publicly debagging some Central Bankers, past and present, would be a good idea too.

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    • Replies: @gwynedd1
    The short statement is land near a work place isn't industrial capital and productivity does not go up when it rises in price . Productivity falls.


    The solution is to stop taxing wages and capital and shift necessary taxes on land values as well as tight credit standards on real estate, with all risk on the owner not to be put on the public account.

    The short answer is our economy is too dependent on cash flows from real estate and other assets growing in value.


    The other factor is government intervention, if at all. If cash flows are a problem, especially in trying to remove the real estate cash flow addiction, it seems as if Monetarist or Keynesian solutions are the only ones considered. Simply sending money to house holds to pay off private debt in $1,000 increments would do better than either one. The credit system still functions, but savers are still rewarded.

    The most common long term asset we should be able to invest should be capital with perhaps patent protection, not squatting on valuable locations of real estate
    , @RadicalCenter
    Can't join you in calling for illegal / extra-judicial violence.

    But we should indeed prosecute the Bushes, Clintons, and Obamas (and their foreign counterparts) for war crimes and for corruption. The sentence should be life in prison without possibility of parole -- in a regular prison, with the general population and no special protections, just like any of us here would be placed.
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  • Wonderful article I read it twice and should read it again.

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  • Thank you gentlemen, for an excellent essay.

    and thanks too, to the Unz Review, for posting it.

    I have always tried to make a distinction between a belief in capitalism with those who reject it (for whatever rationales)…..and the FRAUD that can be allowed to permeate within a capitalist system that can most hastily speed the system and the society which employs it, into crises and collapse.

    They are NOT the same thing.

    Its impossible to say where the US economy would be today, were the massive and systemic fraud that enabled both our catastrophic war debt, and our horrendous banking debt, not allowed to win the day.

    I think you gentlemen would do very well to explore the fraud that permeates throughout our political and financial system, not just the mechanisms of production and rent.

    For it is within the mechanisms of this “defrauding” that we see the MOST injurious and life threatening elements to our nations solvency, evolve.

    For example ,In the banking crisis, Citicorp kept all its subprime derivative transactions , OFF BOOK . This constitutes a profound “defrauding” of the investor who purchases its stock.

    We know to a certainty, that “blue chips” like Citigroup were heavily weighted in every pension fund, 401k plan, and mutual fund across the country.

    When Citi decided to disclose their losses from their (hidden) subprime bungle and throw them on the books, the stock dropped from $ 70 down to $1.90 virtually overnight.

    If people had their retirement fund in a conservative mutual fund which weighted heavily in Citi, their nest egg of 10k shares of Citigroup went from a value of $700,000.00 to $19,000.00 in under a week.

    Imagine, if you will, this “nest egg” represented the retirement fund of a mason who had been highly “productive” building homes for forty years, and we begin to see how “fraud” can disable the most positive results of any healthy “production” cycle.

    This constituted a deep, deep hemorrhaging of wealth throughout our entire economic system.

    And it is really all due to FRAUD, gentlemen.

    Were Citigroup to have been HONEST with its investors by having its subprime trades on the books the WHOLE TIME, not hidden, like they did, buyers and holders of the stock could have viewed an actual balance sheet, not a phony one,THEN made the choice to own or sell the stock.

    This is just one example, of the way in which “fraud” can destroy the wealth of nations, but it is by no means the only one.

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  • I’ve read this and other such essays and struggled to relate the empirical logic to my reality. Both of my businesses own the real estate that shelters the workers, equipment and inventory. I have trouble distinguishing between the productivity of the capital, labor and real/or estate necessary for production. Arguments citing Norman invaders –but not Anglos- seem a bit dated.

    This is not to say there isn’t misuse. Anything from tulip bulbs to liar loans can be subject to exploitation. I can’t think of a business loan that I took and promptly repaid that I regret. Maybe we’re discussing the government’s decision to “roll the dice” again when the storm clouds were already ominous.

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  • This has got to be one of my favorite pieces I have read all year. Bravo.

    Thanks for publishing this Unz.

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  • @Willem Hendrik
    Human nature is responsible.

    At least everybody is having fun shuffling digits, keeping busy.

    In the old days people had to build piramides, dig canals with a shovel or do other back-breaking work. Now you may break a fingernail. Isn't that progress?

    …the modest, safe, productive life of Russians was over. The vast wealth of the Soviets, accumulated by the intensive work of generations, has been divided and shared by a few (mainly Jewish) oligarchs. The rich became obscenely rich, while the middle class perished.

    source: http://www.unz.com/ishamir/a-crooked-mile/

    No, it is more than that and you can bet it has “Jew” written all over it.

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    • Replies: @Willem Hendrik
    I agree that the jewish ideology teaches it's followers to circumvent rules and still abide to the letter.
    In countries like India though, with different ideologies, with tens of millions of child-slaves now working the fields, also wealth is accumulated by few.
    China, you have to be connected to the communist party to be able to make serious money and keep some of it. Hundreds of millions are still scraping the land for food.

    It is the human condition to want more. And more can only be measured by others having less.

    On a more upbeat note: In the end, it is all rented.
    ReplyAgree/Disagree/Etc.
  • Wonderful essay on productive vs non-productive financial activity.

    One can almost hear Ezra Pound chanting his great poem With Usura in the background. Pound defined all non-productive loans as “usury”. You can read With Usura and listen to Pound himself declaiming With Usura via this link:

    http://quantumtantra.blogspot.com/2011/07/with-usura.html

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  • I keep the article as an index of the usual economist suspects. During the writing, I think my wallet was stolen – again.

    Where is their elevator pitch? The authors admit this blah, blah, blah has begin ongoing for 300 years and the lobbyist for the asset owners always win. The progressives (tools of wealth) even got us morons to have our income taxed to complete the skimming operation. Wealth is not made building the house but burning it down.

    My elevator pitch: Tax balance sheets not income statements.

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  • @woodNfish

    banks deem fewer borrowers creditworthy and may simply resort to fraud (“liars’ loans,” in which the liars are real estate brokers, property appraisers and their bankers, and Wall Street junk-mortgage packagers).

    ...banks innovated in the junk-mortgage market after 2001, followed by a host of community banks. Rising fragility was catalyzed by Wall Street and Federal Reserve enablers and bond-rating agencies, while a compliant U.S. Justice Department effectively decriminalized financial fraud.

    ...the policy response of the US and European governments and their central banks was to save the banks and bondholders (who incidentally are the largest class of political campaign contributors). This policy choice preserved the remarkable gains that the “One Percent” had made, while keeping the debts in place for the “99 Percent.” This accelerated the polarization that already was gaining momentum between creditors and debtors. The political consequence was to subsidize the emerging financial oligarchy.
     
    When it crashes, those responsible should be hunted down and executed.

    Human nature is responsible.

    At least everybody is having fun shuffling digits, keeping busy.

    In the old days people had to build piramides, dig canals with a shovel or do other back-breaking work. Now you may break a fingernail. Isn’t that progress?

    Read More
    • Replies: @woodNfish

    ...the modest, safe, productive life of Russians was over. The vast wealth of the Soviets, accumulated by the intensive work of generations, has been divided and shared by a few (mainly Jewish) oligarchs. The rich became obscenely rich, while the middle class perished.
     
    source: http://www.unz.com/ishamir/a-crooked-mile/

    No, it is more than that and you can bet it has "Jew" written all over it.
    , @another fred

    Human nature is responsible.

     

    A voice crying in the wilderness.

    Cassandra by Robinson Jeffers

    The mad girl with the staring eyes and long white fingers
    Hooked in the stones of the wall,
    The storm-wrack hair and screeching mouth: does it matter, Cassandra,
    Whether the people believe
    Your bitter fountain? Truly men hate the truth, they'd liefer
    Meet a tiger on the road.

    Therefore the poets honey their truth with lying; but religion—
    Vendors and political men
    Pour from the barrel, new lies on the old, and are praised for kind
    Wisdom. Poor bitch be wise.
    No: you'll still mumble in a corner a crust of truth, to men
    And gods disgusting—you and I, Cassandra.
     

    ReplyAgree/Disagree/Etc.
  • banks deem fewer borrowers creditworthy and may simply resort to fraud (“liars’ loans,” in which the liars are real estate brokers, property appraisers and their bankers, and Wall Street junk-mortgage packagers).

    …banks innovated in the junk-mortgage market after 2001, followed by a host of community banks. Rising fragility was catalyzed by Wall Street and Federal Reserve enablers and bond-rating agencies, while a compliant U.S. Justice Department effectively decriminalized financial fraud.

    …the policy response of the US and European governments and their central banks was to save the banks and bondholders (who incidentally are the largest class of political campaign contributors). This policy choice preserved the remarkable gains that the “One Percent” had made, while keeping the debts in place for the “99 Percent.” This accelerated the polarization that already was gaining momentum between creditors and debtors. The political consequence was to subsidize the emerging financial oligarchy.

    When it crashes, those responsible should be hunted down and executed.

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    • Agree: edNels
    • Replies: @Willem Hendrik
    Human nature is responsible.

    At least everybody is having fun shuffling digits, keeping busy.

    In the old days people had to build piramides, dig canals with a shovel or do other back-breaking work. Now you may break a fingernail. Isn't that progress?

    , @Rehmat
    Don't forget, in the US prosecuting Wall Street crooks is 'antisemitism'.

    David Brooks in his Op-Ed published in 'The Jew York Times' (October 10, 2011), entitled ‘The Milquetoast Radicals’, wrote: “Take the Occupy Wall Street movement. This uprising was sparked by the (Canadian) magazine Adbusters, previously best known for 2004 essay, “Why Won’t Anyone Say They Are Jewish?“, an investigative report that identified some of the most influential Jews and their nefarious grip on policy. If there is a core theme to Occupy Wall Street movement, it is that the virtuous 99 percent of society is being cheated by the richest and greediest 1 percent.

    Kalle Lasn, the editor of Abusters, in the said article, had produced a list of 50 neocons (Zioncons) proving 26 of them being Jewish. Moreover, he stated that neocons have “a special affinity” for Israel and their influence helps to tilt US foreign policy toward Israel. Kalle Lasn was not talking about the obvious Jewish neocons Doug Feith, Richard Perle and Paul Wolfowitz – but the dual-citizen holders like former Attorney-General Michael Mukasey, former head of Homeland Security Michael Chertoff, former anti-Iran Defense Intelligence Agency analyst Larry Franklin, former senior Pentagon official Edward Luttwak, Henry Kissinger, adviser to Pentagon, Rabbi Dov Zakheim, Bush’s Pentagon Comptroller who was unable to explain the disappearance of $3.3 trillion dollars shortly before 9/11, Kenneth Adleman, Lewis ‘scooter’ Libby, Elliott Abrams, Robert Satloff, Marc Grossman and many more....

    https://rehmat1.com/2011/10/16/is-occupy-wall-street-movement-anti-jewish/
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  • A brilliant essay, one which lays the groundwork to explicitly model credit and finance as inputs in the neo-classical model.

    Keynes was a giant and recognised the deleterious effects of credit growth outstripping the growth of non-rent output, back when these things were not well understood let alone explicitly modelled.

    A relevant question/quibble perhaps, but have you thought of how much capital needs to be deployed in the process of price discovery in order to ensure full reflection of all available information? We are increasingly in the grips of machines taking over the investment processes and in that environment, the obvious answer is not zero, but begs the question as to whether the current amount of “active” investing adds any more information content to prices, or worse, actually contaminates the signal. In the latter case, active trading is nothing more than a zero-sum game, where society could care less overall but there are winners and losers among the active traders. Much of what passes for “Global Macro” and other styles of HF investing are pure punts, with zero effort expended at determining the optimal allocation of funds for the economy. The societal harm in this case is large but would require an article by itself.

    As an aside, it’d be interesting to resurrect the “Socialist Calculation” debate from the 1940s (Oscar Lange et.al., https://en.wikipedia.org/wiki/Socialist_calculation_debate) in this context, updated with the technological, real-time information access that could theoretically be made available to central planners.

    What are the prescriptive policies? Who decides what is or isn’t rent? How do we tackle the issue of re-distributive taxation on these?

    Enjoyed this post immensely. Please keep them coming.

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  • Excellent piece. Superb, really.

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  • Hudson’s analysis of the ills of our FIRE based economy is, as usual, accurate, but this essay lacks his prescription for a cure. In the past when he has provided a glimpse of his prescriptions they have relied heavily on government power and intervention. I have seen nothing in his writings but the exchange of one oligarchy for another.

    Radical measures are coming whether they involve “helicopter money” or a jubilee (the only “difference” being in who are the recipients of the largess), but be prepared to meet the new boss, same as the old boss.

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  • This was indeed an excellent essay , but quite long and therefore not likely to be widely read other than by persons with some command of the lingo. I’m a former tech analyst/equity trader who had his epiphany in 1995, reading Robert Prechter’s At the Crest of the Tidal Wave. It became obvious that the US was going to sacrifice its industrial base to non-productive finance and that the consequences would eventually be catastrophic. By 1997 equity valuations could no longer be logically determined and seemed frothy. I’d saved earnings and at age 51 decided it was time to go. Left the profession, left the US. I’m a strong believer in subsidiarity and in “small is beautiful”. I now spend monthly on all expenses what a garage space in Manhattan cost 20 years ago and live a more graceful life than friends spending ten or more times that per month.

    The ill-gotten gains of the renter class, along with the political influence it buys them, must be confiscated and the privately owned central bank system suppressed and eliminated in favor of state banks. The US must re-industrialize no matter how great the difficulties. Trump’s platform is the only viable means of correcting gross imbalances.

    I am and have always been anti big government, and an old school industrial capitalist, but this jiggery-pokery is not productive, as the authors demonstrate, so for the first time in my life I see the necessity of governmental intervention in an area of public policy from which it should ordinarily be kept. Not this time, though: this time, only decisive and draconian measures will do the trick.

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  • “…by 2009, the top 10 percent of income “earners” received about half of the national income, not taking into account capital gains, which is where the largest returns have been made. Anthony Atkinson, Thomas Piketty, and Emmanuel Saez (2011) show that this is a general trend in most developed economies.”
    Sigh.
    And yes, this is neo-Feudalism.

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  • No matter which way you slice the cake – Capitalism was created by Western vultures to loot the 99% world population.

    India’s famous human rights activist and author, Arundhati Roy, in her new book, ‘Capitalism: The Ghost Story’, examines the dark side of democracy in contemporary India, and shows how the demands of the globalized western capitalist banking system has subjugated billions of peoples to the highest and most intense form of racism and exploitation. Watch two videos below to understand the evil world of capitalism and the evildoers who benefit from this system.

    Roy says that India’s 100 richest people controls 25% of the country’s GDP. A 2010 Oxford University study reported that 55% of India’s populations of 1.1 billion live below poverty line.

    Roy, though, talks mostly the capitalist culture in her native India – she would certainly get medal of ‘antisemitism’ from ADL and other Jewish supremacists for attacking the Jewish-controlled Council on Foreign Relations (CFR), which is funded by Rockefeller, Carnegie and Ford Foundations, and CIA …..

    https://rehmat1.com/2014/03/28/arundhati-roy-on-capitalism/

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    • Replies: @Alden
    Puhleeezeee

    India is an excellent of the nastiest kind of capitalism, agriculture and most of all, horrible usurious money lending

    Untouchables paid less than a slave earned in room board clothes and spending money, child labor starting at age 6 or so, and minstouud 500 percent debt. There are small farmers in India still paying off a tractor their grandfather bought 70 years ago.

    Then there the cultural customs demanded by the religion and way of life that get people into horrible debt such as families whose incomes in US dollars is
    $20,000 a year throwing 5 day weddings costing the $150,000 US dollars

    And those weddings are paid for by borrowing at 500 percent interest from the unregulated money lenders Thosr money lenders have great influence in preventing government regulations curbing their avaricious practices

    When India ends child labor and enforces some health and safety rules and gives workers tables so they do t have to squat on the ground to do their work and get crippled by arthritis by age 40 get back to us.
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  • I COMPLETELY agree with Mr. Spiers. I’ve read a fair bit about The Great Depression and the Austrian School’s explanations for modern economic problems, but this article now requires me to START OVER from bare ground.

    I expect I’ll have to read it 2 or 3 times just to understand what is being said, and then read it again to try to catch the linkage and logic.

    And then of course there are the references…

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  • Nice detailed article from Bezemer & Hudson. Thanks to Unz for placing it here.

    I forwarded it to an economist friend, who should appreciate it.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages. The long decline of the local economy has led to the political decline of the working class, as well as the decay of cities, towns, and infrastructure, such as education.

    The impoverishment of America’s middle class has undermined the nation’s financial stability. Without a productive foundation, the government has accumulated a huge debt of $trillions of dollars. Adding to the debt, the so-called ‘Bailout’ of the nation’s Bankers has looted America’s workers of another $13trillion. This debt will have to be paid, or suffered by future generations. Concurrently, the top 1% of the nation’s population has benefited enormously from the discomfiture of the rest. Additionally, the interest rate has been reduced to 0, thereby slowly robbing millions of depositors of their savings, as their savings cannot stay even with the inflation rate.

    In the absence of Time, (Einstein’s 4th dimension), I append a revolutionary appreciation of – how to deal with debt (by Jefferson). This Jefferson approach is specially favored by Anarchists, such as myself.

    The Restoration of the Republic will be a Revolutionary Act, that will cancel all previous debts owed to our unconstitutional regime and its business supporters. All debts, including Student Debts, will be canceled. Our citizens will begin, anew, with a clean slate.

    As American Founder, Thomas Jefferson wrote, in a letter to James Madison:

    “I set out on this ground, which I suppose to be self evident, ‘that the earth belongs in usufruct to the living’:”

    “Then I say the earth belongs to each of these generations, during it’s course, fully, and in their own right. The 2d. Generation receives it clear of the debts and incumberances of the 1st. The 3d of the 2d. and so on. For if the 1st. Could charge it with a debt, then the earth would belong to the dead and not the living generation.”

    For the VISION - of a bright shiny new Republic, complete with our Constitution, with its Bill of Rights, a happy and prosperous and productive people, with our Pride, our Sovereignty, and our Honor restored!

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    • Replies: @Art
    An excellent comment - thanks.

    In the 1970s, the Oligarchy began the destruction and looting of America’s middle class, by encouraging the export of industry and jobs to parts of the world where workers were paid bare subsistence wages.
     
    In the 60's Jewish importers began the destruction of our electronic industry. Next came cars.

    The impoverishment of America’s middle class has undermined the nation’s financial stability.
     
    This impoverishment kicked into high when Allen Bubbles Greenspan was made FED chief.

    Through ever increasing debt - he engineered one debt bubble after another, until the 2008 fiasco. Junk bonds, savings and loan, the internet bubble, the home price bubble, and now the stock bubble.

    How can anyone not see this – things are totally screwed up. Today we are at ZERO interest rates with the big banks feeding money to the 1%. They use this new debt to inflate stock prices - skimming the profits to themselves – the economy be dammed.

    Of course this about big money making more money, not about actual business creation of valued goods and services.
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  • Anonymous • Disclaimer says: • Website

    I think I am widely read, and this has got to be the best financial essay in the last decade. And zero comments? These profs have nailed it, and I’ll read the rest of what they got to say. Finally, academics I can cite! I’ll be mining this for my blog tomorrow.

    John Wiley Spiers

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    • Replies: @boogerbently
    I'll await your (hopefully) MUCH abbreviated synopsis.
    I don't believe he has ever posted less than 7000 words.
    , @gwynedd1
    You must be new to the Michael Hudson effect. One of my favorite essays was Ricardian trade Theory Finacialized. I sent it to several people I know, confident it was going to virally transmit because it answered the question as to why countries with roads, airports , telecommunications etc cannot compete with 3rd world hell holes.

    Nobody cares.
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