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If you want to learn real economics instead of neoliberal junk economics, read Michael Hudson’s books.
What you will learn is that neoliberal economics is an apology for the rentier class and the large banks that have succeeded in financializing the economy, shifting consumer spending power from the purchase of goods and services that drive the real economy to the payment of interest and fees to banks.
His latest book is J is for Junk Economics. It is written in the form of a dictionary, but the definitions give you the precise meaning of economic terms, the history of economic concepts, and describe the transformation of economics from classical economics, where the emphasis was on taxing incomes that are not the product of the production of goods and services, to neoliberal economics, which rests on the taxation of labor and production.
This is an important difference that is not easy to understand. Classical economists defined “unearned income” as “economic rent.” This is not the rent that you pay for your apartment. Economic rent is an income stream that has no counterpart in cost incurred by the receipient of the income stream.
For example, when a public authority, say the city of Alexandria, Virginia, decides to connect Alexandria with Washington, D.C., and with itself, with a subway paid for with public money, the owners of property along the subway line experience a rise in property values. They owe their increased wealth and their increased incomes from the rental values of their properties to the expenditure of taxpayer dollars. If these gains were taxed away, the subway line could have been financed without taxpayers’ money.
It is these gains in value produced by the subway, or by a taxpayer-financed road across property, or by having beachfront property instead of property off the beach, or by having property on the sunny side of the street in a business area that are “economic rents.” Monopoly profits due to a unique positioning are also economic rents.
Hudson adds to these rents the interest that governments pay to bondholders when governments can avoid the issuance of bonds by printing money instead of bonds. When governments allow private banks to create the money with which to purchase the government’s bonds, the governments create liabilities for taxpayers than are easily avoidable if, instead, government created the money themselves to finance their projects. The buildup of public debt is entirely unnecessary. No less money is created by the banks that buy government bonds than would be created if the government printed money instead of bonds.
The inability of neoliberal economics to differentiate income streams that are economic rents with no cost of production from produced output makes the National Income and Product Accounts, the main source of data on economic activity in the US, extremely misleading. The economy can be said to be growing because public debt-financed investment projects raise the rents along subway lines.
“Free market” economists today are different from the classical free market economists. Classical economists, such as Adam Smith, understood a free market to be one in which taxation freed the economy from untaxed economic rents. In neoliberal economics, Hudson explains, “free market” means freedom for rent extraction free of government taxation and regulation. This is a huge difference.
Consequently, today the US economy is focused by policymakers including the Federal Reserve on maximizing rentier income at the expense of the growth in the real economy. Rentier income has the productive economy in a death grip. The economy cannot grow, because consumer income is siphoned off into payment of interest and fees to banks, and is not available for increased purchases of real goods and services.
Neoliberal economics is a predatory device that justifies the exorbitant incomes of the One Percent while blaming rising debt on those forced into debt-peonage in order to survive. Hudson’s virtue is that he explains the historical development of debt-peonage and makes it clear that this is the status that the One Percent intends for the 99 Percent. He resurrects classical economics and reformulates economic theory in keeping with the facts on the ground instead of rentier interests.
(Republished from PaulCraigRoberts.org by permission of author or representative)
 
• Category: Economics • Tags: Michael Hudson, Neoliberalism, Privatization 
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  1. Exactly so, Paul.

    The money powers don’t have much to worry about when ten thousand times as many commoners are put out of work mining coal or manufacturing washing machines or outright killed in war.

    The profits have been so staggering that they can afford a whole country of their own or perhaps even a planet to ride out the Terminator-style post apocalypse disaster.

    The regulations that harm blue-collar workers and industries don’t matter one whit when the Federal Reserve is pumping out money that’s driving a financial market boom.

    That’s the kind of money that buys whole political parties, the media, third world governments, etc. which are then tools to extract even more wealth from the peons of the globe.

    The one thing you haven’t figured out yet Paul is that the global warming hysteria, now pathetically re-branded as “climate change”, is one of those corrupt rent-seeking symptoms of the disease.

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  2. nickels says:

    ‘Killing the Host’ is a great book.

    E Michael Jones ‘Barren Metal’ is also a great economics text in a similar vein, although he is not so forgiving of the classical economists either, seeing them as the original justifiers of the heartless capitalist exploitation engine.

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  3. If you want to learn real economics instead of neoliberal junk economics, read Michael Hudson’s books.

    True.

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  4. I’ll believe the “world’s best economist” claim when Hudson or someone else explains the last 36 years to me.

    During that time (the bond bull market ran from Aug 1981 to Aug 2016) interest rates marched downward and holding anyone’s long term debt was like planting a money tree in the back yard.

    Does anyone recall the term “Bond Vigilante?” Back in Olden Days they were bond holders who objected when Congress and the Executive branch began to spend like drunken sailors loose in a bordello with a credit card.

    Along came the 1981-2016 period and we discovered that no matter how much debt was issued, bond buyers wanted more. Congress & presidents discovered they didn’t need to actually TAX anyone in order to sustain massive increases in government spending, they could just issue bonds.

    Where is the World’s Greatest Economist, to explain how borrowing to spend a single dollar put that dollar cascading into the economy (growing GDP) while SIMULTANEOUSLY adding a second dollar in wealth, called a bond, treated as an accounts receivable?

    What magic! Two for one? What was not to love?

    Add in the magic of globalism’s arbitrage of manufacturing (overseas) and flooding into the USA vast numbers of new “workers,” and CPI/wage inflation was VANQUISHED!

    No inflation? But a massive rise in credit, borrowed into debt, and added to the SEA of WEALTH called the Bond Ocean? Why, the marriage of neo-Keynesians and Monetarists was a match made in Heaven, no doubt!

    What.
    The.
    F**k!

    I have yet to see anyone, anywhere, realize that 35 years of major increases in government spending, sustained by issuing debt (IOU’s) into an insatiable bond market warped the living hell out of our economy.

    What grew like weeds these past 3 decades?
    The Medical-Insurance Cartel.
    The Higher Ed Cartel.
    The Welfare Administration Cartel (all those supposedly private social service agencies are nothing but government employees covered with a tissue of “private.”)
    The Military Industrial Complex (holdover from the ’50′s and ’60′s.)
    The Anti-Racism, Anti-Sexism, Anti-Queerism, etc., etc., Cartel.

    And banking. Did I mention the FIRE economy?

    All this was grown because bonds were in a bull market. The rub is that now that there is hundreds of trillions of dollars, perhaps even a quadrillion dollars in IOU’s now existing, even small changes in interest rates have vastly leveraged effects.

    The yield of the 10-year T-note DOUBLED, from 1.3% to 2.6% in just a few months last year. This evaporated astronomical amounts of capital value from existing debt.

    When I see an economist confront the inevitable cataclysm this represents, and the background of how we got to this insanity in the first place, then I’ll pay my respects.

    What happens when a world addicted to the crack cocaine of vast borrowing is cut off, cold turkey, when rates rise enough to quench the thirst of bondholders? What happens to tens of millions of people whose jobs depend on Uncle Sugar just putting another round of drinks on the National Mastercard, when the card (thought to be a no-credit-limit gig) is DECLINED at the terminal?

    Those who think this can’t or won’t happen must believe that our Masters of The (Fed) Universe actually control interest rates, and that history’s march has been indefinitely postponed.

    I think they’re smoking the crack pipe too much. It was a 35 year bond rally. It appears to be OVER. Time and history obey no man or committee thereof.

    Read More
    • Replies: @bluedog
    Well written reply and as close to the facts as you can get, what's happens when they take away the juice, and that's one reason we want a war a big war between Europe and the Bear for then when we/they go down we will still be on top..
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  5. If I work, create an economic surplus (product I sell but don’t consume 100% of the proceeds) and wish to lend that to a willing borrower and charge interest, explain to me why I should pay excessive taxes on that income.

    Read More
    • Replies: @nickels
    Because usury is a sin.
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  6. The rentier class has gone way too far over the line especially in the US. When we hit the wall in 1929 there existed an intact system to attempt to restart. Maybe it took a war to do it but it least it was possible. This time the bandits burned the town before they left with the loot. If only we had decent fire prevention but alas, who knew?

    http://robertmagill.wordpress.com

    Read More
    • Replies: @dc.sunsets
    The "wall" in 1929 was hit because a credit bubble produced by the Fed during the '20's ended.

    The ensuing bust (1930-32) was a snap-back decline in the money supply, which the Fed couldn't stop despite trying to reflate the credit cycle. The Great Depression (which followed) was entirely Government-made, as one stupid idea after another was implemented to fight the symptom, which was a shrinking supply of money that resulted in declining prices. World War 2 didn't cure the depression. Living standards didn't return to normal until after the war, and after war rationing came to an end. People who think wars "cure" economic declines should simply burn down their own houses and massacre their neighbors...since it must be good for the economy....(facepalm.) Talk about Bastiat's Broken Window Fallacy.

    As I see it, the main problem we face is that banks create the ability to enter the marketplace and buy without first having had to produce. This is a violation of the axiom Say's Law.

    For there to even BE a market, something has to be made (so it can be sold.) In a barter economy, in order to enter the market you MUST have something to trade. You MUST have produced (or borrowing someone else's product.) Production MUST precede the ability to consume (or buy something.)

    A monetary economy eliminates the need to perfectly match supply and demand specifics in a barter economy, but it is RANK CRIMINALITY to allow ANYONE to create money out of thin air, and this includes "credit money."

    If the banker in a game of Monopoly (tm) simply starts writing "$500" on strips of paper and then rents those to other players, what happens? Prices skyrocket. The Banker gets RICH on the interest. But in the aggregate, EVERYONE ELSE LOSES.

    Modern (fiat money, fractional reserve) banking allows banks to create demand (credit money) out of thin air. Lending precedes deposits. Lending created-credit is NOT production (of anything but monetary inflation.) It is counterfeiting---a crime---by any other name.

    Bank credit + a secular bull market in debt + fiat money + rampant social optimism = The Great Credit Bubble and Great Asset Mania.

    The last 35 years were the 1920's raised to a large exponent, carried on for enough decades to see entire industries employing tens of millions of people flourish and grow to massive size.

    We can only quail in terror at what must follow when this ends.

    One can hope fractional reserve banking and fiat money will be abandoned, but we humans do love our stupid collective notions.

    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  7. bluedog says:
    @dc.sunsets
    I'll believe the "world's best economist" claim when Hudson or someone else explains the last 36 years to me.

    During that time (the bond bull market ran from Aug 1981 to Aug 2016) interest rates marched downward and holding anyone's long term debt was like planting a money tree in the back yard.

    Does anyone recall the term "Bond Vigilante?" Back in Olden Days they were bond holders who objected when Congress and the Executive branch began to spend like drunken sailors loose in a bordello with a credit card.

    Along came the 1981-2016 period and we discovered that no matter how much debt was issued, bond buyers wanted more. Congress & presidents discovered they didn't need to actually TAX anyone in order to sustain massive increases in government spending, they could just issue bonds.

    Where is the World's Greatest Economist, to explain how borrowing to spend a single dollar put that dollar cascading into the economy (growing GDP) while SIMULTANEOUSLY adding a second dollar in wealth, called a bond, treated as an accounts receivable?

    What magic! Two for one? What was not to love?

    Add in the magic of globalism's arbitrage of manufacturing (overseas) and flooding into the USA vast numbers of new "workers," and CPI/wage inflation was VANQUISHED!

    No inflation? But a massive rise in credit, borrowed into debt, and added to the SEA of WEALTH called the Bond Ocean? Why, the marriage of neo-Keynesians and Monetarists was a match made in Heaven, no doubt!

    What.
    The.
    F**k!

    I have yet to see anyone, anywhere, realize that 35 years of major increases in government spending, sustained by issuing debt (IOU's) into an insatiable bond market warped the living hell out of our economy.

    What grew like weeds these past 3 decades?
    The Medical-Insurance Cartel.
    The Higher Ed Cartel.
    The Welfare Administration Cartel (all those supposedly private social service agencies are nothing but government employees covered with a tissue of "private.")
    The Military Industrial Complex (holdover from the '50's and '60's.)
    The Anti-Racism, Anti-Sexism, Anti-Queerism, etc., etc., Cartel.

    And banking. Did I mention the FIRE economy?

    All this was grown because bonds were in a bull market. The rub is that now that there is hundreds of trillions of dollars, perhaps even a quadrillion dollars in IOU's now existing, even small changes in interest rates have vastly leveraged effects.

    The yield of the 10-year T-note DOUBLED, from 1.3% to 2.6% in just a few months last year. This evaporated astronomical amounts of capital value from existing debt.

    When I see an economist confront the inevitable cataclysm this represents, and the background of how we got to this insanity in the first place, then I'll pay my respects.

    What happens when a world addicted to the crack cocaine of vast borrowing is cut off, cold turkey, when rates rise enough to quench the thirst of bondholders? What happens to tens of millions of people whose jobs depend on Uncle Sugar just putting another round of drinks on the National Mastercard, when the card (thought to be a no-credit-limit gig) is DECLINED at the terminal?

    Those who think this can't or won't happen must believe that our Masters of The (Fed) Universe actually control interest rates, and that history's march has been indefinitely postponed.

    I think they're smoking the crack pipe too much. It was a 35 year bond rally. It appears to be OVER. Time and history obey no man or committee thereof.

    Well written reply and as close to the facts as you can get, what’s happens when they take away the juice, and that’s one reason we want a war a big war between Europe and the Bear for then when we/they go down we will still be on top..

    Read More
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  8. nickels says:
    @dc.sunsets
    If I work, create an economic surplus (product I sell but don't consume 100% of the proceeds) and wish to lend that to a willing borrower and charge interest, explain to me why I should pay excessive taxes on that income.

    Because usury is a sin.

    Read More
    • Replies: @dc.sunsets
    Is renting a car a sin?

    Is renting a backhoe a sin?

    Is renting a room a sin?

    If renting money is a sin, then renting anything that money can buy must be, also.
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  9. @nickels
    Because usury is a sin.

    Is renting a car a sin?

    Is renting a backhoe a sin?

    Is renting a room a sin?

    If renting money is a sin, then renting anything that money can buy must be, also.

    Read More
    • Replies: @nickels
    Don't be upset at me for pointing out 2000 (probably more, considering the days of Jubilee in the ancient world) of social and moral teachings.

    For example:

    http://www.ewtn.com/library/ENCYC/B14VIXPE.htm

    Basically, exponential interest, expansion of the money supply destroy society.

    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  10. @Robert Magill
    The rentier class has gone way too far over the line especially in the US. When we hit the wall in 1929 there existed an intact system to attempt to restart. Maybe it took a war to do it but it least it was possible. This time the bandits burned the town before they left with the loot. If only we had decent fire prevention but alas, who knew?

    http://robertmagill.wordpress.com

    The “wall” in 1929 was hit because a credit bubble produced by the Fed during the ’20′s ended.

    The ensuing bust (1930-32) was a snap-back decline in the money supply, which the Fed couldn’t stop despite trying to reflate the credit cycle. The Great Depression (which followed) was entirely Government-made, as one stupid idea after another was implemented to fight the symptom, which was a shrinking supply of money that resulted in declining prices. World War 2 didn’t cure the depression. Living standards didn’t return to normal until after the war, and after war rationing came to an end. People who think wars “cure” economic declines should simply burn down their own houses and massacre their neighbors…since it must be good for the economy….(facepalm.) Talk about Bastiat’s Broken Window Fallacy.

    As I see it, the main problem we face is that banks create the ability to enter the marketplace and buy without first having had to produce. This is a violation of the axiom Say’s Law.

    For there to even BE a market, something has to be made (so it can be sold.) In a barter economy, in order to enter the market you MUST have something to trade. You MUST have produced (or borrowing someone else’s product.) Production MUST precede the ability to consume (or buy something.)

    A monetary economy eliminates the need to perfectly match supply and demand specifics in a barter economy, but it is RANK CRIMINALITY to allow ANYONE to create money out of thin air, and this includes “credit money.”

    If the banker in a game of Monopoly ™ simply starts writing “$500″ on strips of paper and then rents those to other players, what happens? Prices skyrocket. The Banker gets RICH on the interest. But in the aggregate, EVERYONE ELSE LOSES.

    Modern (fiat money, fractional reserve) banking allows banks to create demand (credit money) out of thin air. Lending precedes deposits. Lending created-credit is NOT production (of anything but monetary inflation.) It is counterfeiting—a crime—by any other name.

    Bank credit + a secular bull market in debt + fiat money + rampant social optimism = The Great Credit Bubble and Great Asset Mania.

    The last 35 years were the 1920′s raised to a large exponent, carried on for enough decades to see entire industries employing tens of millions of people flourish and grow to massive size.

    We can only quail in terror at what must follow when this ends.

    One can hope fractional reserve banking and fiat money will be abandoned, but we humans do love our stupid collective notions.

    Read More
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  11. nickels says:
    @dc.sunsets
    Is renting a car a sin?

    Is renting a backhoe a sin?

    Is renting a room a sin?

    If renting money is a sin, then renting anything that money can buy must be, also.

    Don’t be upset at me for pointing out 2000 (probably more, considering the days of Jubilee in the ancient world) of social and moral teachings.

    For example:

    http://www.ewtn.com/library/ENCYC/B14VIXPE.htm

    Basically, exponential interest, expansion of the money supply destroy society.

    Read More
    • Replies: @dc.sunsets
    Points well taken and made. I sincerely apologize if I came off as attacking.

    Perhaps our ancestors were wise in holding scheduled debt jubilees. It certainly limited the otherwise metastatic growth of debt and debt-slavery.

    If one simply stops trying to violate Say's Law, I think most of the evils of debt go away. Of course, that also requires an honest monetary system, and we know our rulers don't like that.

    The ability to create money without the need to create product is perhaps the simplest way to ruin a society, a civilization and a people.

    Fekete's "Real Bills Doctrine" seems to have great promise. The only people legally allowed to create credit are producers, and their extension of credit is limited in both duration and size by the transaction between them and the next firm on their product's path to final sale.

    Maybe we'll be lucky and this will eventually emerge, long after this current morass crashes and burns.
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
  12. Can second the recommendation – don’t know if Hudson is the best, but he definitely is up there, and his books are both readable and incisive.

    Read More
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  13. @nickels
    Don't be upset at me for pointing out 2000 (probably more, considering the days of Jubilee in the ancient world) of social and moral teachings.

    For example:

    http://www.ewtn.com/library/ENCYC/B14VIXPE.htm

    Basically, exponential interest, expansion of the money supply destroy society.

    Points well taken and made. I sincerely apologize if I came off as attacking.

    Perhaps our ancestors were wise in holding scheduled debt jubilees. It certainly limited the otherwise metastatic growth of debt and debt-slavery.

    If one simply stops trying to violate Say’s Law, I think most of the evils of debt go away. Of course, that also requires an honest monetary system, and we know our rulers don’t like that.

    The ability to create money without the need to create product is perhaps the simplest way to ruin a society, a civilization and a people.

    Fekete’s “Real Bills Doctrine” seems to have great promise. The only people legally allowed to create credit are producers, and their extension of credit is limited in both duration and size by the transaction between them and the next firm on their product’s path to final sale.

    Maybe we’ll be lucky and this will eventually emerge, long after this current morass crashes and burns.

    Read More
    ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

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