I’m not an economist. I came across this 13 minute video featuring economist Michael Hudson. I think he’s a Marxian thinker of some sort. I’d be interested in any comments on what he’s saying:
Without reading the other comments here, the first thing that comes to my mind in evaluating this criticism is that it is essentially a criticism of "corporatism" a la Ron Paul. (Now I could be misreading this as I am not especially economically literate.)
Corporatism as I understand it is a situation where the government coordinates with corporations to ensure that "the division of spoils" is directed at favored parties or groups (in particular the elites or those groups that direct funds toward government) at the expense of those who are part of the "labor" class. In that light it is hard for me to disagree with anything Hudson is saying. The only question is how culpable "capitalism" as a theory in action is for this. I'm confused by what he calls "privatization" as I do believe what he criticizes is a sort of fascistic collaboration between government and the other agents of a financialized economy.
Yeah I think we are definitely moving that direction and are largely there already. Just look at the big Tech and government collaboration that is now coming to light + what we already know about the defense contractors/government relationship (h/t Eisenhower). From the perspective of us plebes/proles Fascism vs. Marxism doesn't make a lot of difference. Might be good to keep the lampposts handy.
I'm not an economist either but Hudson's preference for industrial capitalism seems to be based not on Marxist thought, but that we would all be better off if the employment of capital was put to use by industrialists to actually make things. Financial capitalism, so ably aided and abetted by almost our entire financial establishment is akin to skimming and bleeding. Anything that sucks wealth from the productive economy. It is instructive to consider who benefits. In general it’s not the lower or middle classes, the latter of which is slowly being eradicated.
His opinion on what happens because of compound interest and ever increasing debt levels have been validated time and again. Refer the many municipalities that were sold on the idea of extravagant infrastructure schemes using revolving debt that bankrupted many towns. Many people had their pensions evaporate from this one. Who made the loans? The usual suspects of big investment banks who take their fee and leave the town high and dry.
I don't know if kids still want to become investment bankers as they did a few years back (I think it's you-tubers now), but in a society where so much attention is focused on money, doesn't that bode ill if our young generation's aspirations are to make a killing on transactions? Anyone want to become an entrepreneur these days?
Martin Armstrong uses an interesting and I think similar concept that banking has changed from relationship banking to transactional banking. I know my bank was always trying to get me to invest in some fund or other, presumably not with my best interests in mind but for their fee income to go up – skimming me.
Catherine Austin Fitts and CJ Hopkins recently came out with a video (We Need to Talk About Mr. Global – Part 1) in which she describes how if you decentralize private and public finance - invest in communities and incentivize people - you create, by many multiples, more wealth in communities. Now that’s a revolutionary idea.
As for Hudson, he may be a bit of a mumbler and may attempt to identify too many failings of the system in too short a time, but I prefer to think he and others like Armstrong and Fitts have social consciences and are on target.
Quite a guy, that Marx, here he's considered an Economist while over at the Psychology Department they consider him the Godfather of Modern Sociology. Any implementation of his theories seems to have cost over 100 Million their lives and at least 2 fold given them lives of misery. Though only armed with a Layman's Education of Economics I see this man is telling us how to pick up a turd from the clean end, but that's me and I'm no economist.
There is much discussion as to which system of economics works best. It is clear what doesn't work. Government intervention. This is when a bunch of people with no knowledge of how economies function and with no skin in the game decide what is best for everyone.
Hayek and the Austrian school would argue that the market eventually gets things right, when many individuals with skin in the game make their individual decisions to further their own future. Excesses get corrected, and the ship rights itself. It is not perfect, but then people are not perfect.
Hayek and the Austrian school works even when it doesn't work, as individuals with skin in the game react to protect themselves. As Robert Burns would put it, The best laid schemes o' Government an' Men. Gang aft agley.
Where should I move to enjoy the benefits of Austrian economics? It seems to me that "how economies function" is always and everywhere at least partly--and often much more than that--a political matter. I find the idea that any economy can somehow run on auto-pilot to be naive. As for people with skin in the game reacting to protect themselves, I suppose the 1% do react to protect themselves. Who will react to protect the rest of us from the 1% who buy off those who will protect them?
Maybe due to your background you give government too much importance. People have survived floods, earthquakes and concentration camps. Surviving government stupidity is relatively easy. We hit the iceberg in 1929, and in a few years the market would have corrected. Instead we got government intervention, and hit bottom ten years later when the "Grapes of Wrath" came out. My father closed his business, took on another job and we were comfortable. Others I knew invested in depressed stocks and real estate, and made fortunes. Austrian economics is based on how resourceful people react, not some theoretical idea as to how we might create a perfect system. Too many of these refuse to recognize that the pie might grow so you can end up with a win-win situation for all classes of society.
My argument is that economics never happens in a vacuum--it always happens in some organized societal setting and so is always partly political. To follow out your metaphor, to see the iceberg ahead but to maintain course on the conviction that we'll survive the crash just like others--perhaps some FEW other--survived concentration camps doesn't sound prudent to me. By the same token, maintaining as Forbes does that our financialized economy--in which the 1% oppress the rest and impose their woke views through control of corporate boards--is still better than Communism so why talk about it? also seems the height of imprudence.
BTW, re the iceberg in 1929, it seems that Austrian school economists are NOT all in agreement re the causes and solutions, have changed their views at times, and are not all opposed to government intervention. IOW, at least some of them recognize that economics doesn't occur in a political vacuum. Cf.
You are truly amazing. To come up with this wiki article in such a short period of time, which should be required reading for all thoughtful Americans! I would also recommend the writings of Amity Schaes for a critique of FDR and the New Deal. The subject is complex, and the Austrians are not monolithic, even to the point of some admitting that Keynes might have had a point as a temporary measure.
One important quote. "In the Austrian view, it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. Therefore, by the time the Federal Reserve tightened in 1928 it was far too late to prevent an economic contraction."
So where are we now? We have unprecedented public and private debt, our government continues spending money that doesn't exist, and productivity is something our government is not interested in. What will be?
There are others who have convincingly made Hudson's point about money creation. Ellen Brown in "Web of Debt" for one. Here is the Amazon blurb:
"EXPLODING THE MYTHS ABOUT MONEY. Our money system is not what we have been led to believe. The creation of money has been privatized, or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions -- including the Federal Reserve, the branches of which are 100% privately owned. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices -- and robbing you of the value of your money. Web of Debt unravels the deception and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln. If you care about financial security, your own or the nation's, you should read this book."
G. Edward Griffin makes the same points in the excellent "The Creature from Jekyll Island" which chronicles the creation of the Federal Reserve and it purpose and operations.
Luongo makes similar points to this extent: 1) he reminds readers/listeners that the Fed is privately owned, and 2) that most money creation in the US is in the form of corporate bonds rather than bank loans. Which is private debt.
Yikes. First, he's all over the place. Each one of the topics he's trying to "analyze" is worthy of a good 15-30 minute video on its own (I took and entire semester economics course called money and banking just covering the fed and money creation and this guy believes he can simply take it apart in 1-2 minutes of his video?). Not that he'd be capable of producing such a video. He wades ankle deep into some leftist talking point, captures some nugget of truth, and believes he's knocking down the underpinnings of our economy one after the other.
He's from the crackpot school that can't understand the difference between a flow of money and the quantity of money. That's why he thinks that more money has to be created in order to service debt. He's not a Marxian or anything else besides a dope.
Too many wrong assumptions here. Got lost in his many analytical mistakes, and Marxist prejudice vs capitalism. The 08 bailout was an enormous mistake, but had the economy been allowed to continue to grow under Trump, repatriating manufacturing and liberating energy, it would have been manageable. Now, we are in real real trouble.
To be honest, the link to original video in the description is 1 year ago, so we're living in the time when people that haven't been paying the rent for the last year can finally be kicked out. What have rents done? Landlords are imbedding the risk of future lock downs & eviction moratorium by increasing rents. Massive institutions are buying real estate as a steady hedge against inflation risk & stock market instability.
QE is something advocated for by Bernanke & Janet Yellen so the commie needs to get on board with the financial fiction we're living in.
Always weird to hear a self avowed Libertarian like Tom Luongo cheer for the current Fed Chair to do anything to help our ailing economy, just juxtaposed against the old "Audit the Fed" mantra, but he's appeared at engagements with Dr. Ron Paul, so maybe we're in a time of correction so the truth can find the light at some point. Go Team Jay! Wring out that liquidity to help keep U.S. afloat.
Prices got to rich, so the big funds backed off for the moment.
Everyone is waiting for prices to cool a bit. US real estate markets are cooling, and there is an increase in inventory.
In California due to years of under building housing, there is a huge shortage, especially of affordable multi family. No affordable multi family is being build without subsidies, which have nasty strings attached, because it does not pencil out.
Commercial office real estate has huge issues due to the work from home change, and how major downtowns have become no go zones.
Retail space with the increase in e-commerce is also not doing great.
BlackSTONE announced their cessation. P/E has a problem. Classic for "Crowded Trades". They weren't the only "Smartest Guys In The Room". Others did exactly the same thing, the exact same way, and overbid Single Occupancy Homes in the midst of Blue Hell(BLM)/Covid Evacuations. Prices rose so quick the market stalled, as the "flight to safety*" stalled.
Then, they then jacked rents on the same Single Occupancy Homes to stay ahead of "inflation". Renters get a vote too, so they don't, as in rent. Stay home with mom & pop, despite the lack of privacy. Here's the trade, P/E borrowed to get in and most are no longer getting paid. Marginal players will be forced to dump things. Deeper pockets will try and wait it out. The bad news? It's a trade. An auction in one room only. Everyone gets in through the only door to the room to own it, but there's only the same one door out. Not everyone gets through in a "timely" manner.
Repeat for any financially leveraged "asset".
I call it deleveraging, but others will call it Deflation, which requires an entirely different public mindset, which I don't think we've entered. And that would be really, really bad.
Look at most commodity price charts of the last 6 months and you'll see exactly when financing disappeared. 50+% collapses. LastBearStanding 's substack (Down The Drain) lays out the details of "Why?" pretty clearly. Loss of Collateral for trading purposes.
Mixed bag - Tom Luongo and inside/ outside money make a lot more sense.
He was light on inflation in this video, such as the fact our money is beyond cheap, it’s still at an effectively negative interest rates.
No mention of Wef, green new deal, and war on agriculture and energy for climate change!
The ideal for investment being buy an asset that produces income, such as multi family housing, that you can increase the rents each year (horrible affordable housing shortage in Ca - and minimum wage is linked to inflation), and you repay the loan with cheaper money. And your tenants are paying your loan, if you got the right deal.
It's technically for his Patrons only - but for some reason he made it publicly available. I only shared in this case because of the credit he provided to you.
This guy is mixed up a bit. He keeps talking about compound interest. But that isn’t really what is happening with the big boys on Wall Street. They borrow money to buy real tangible asset which drives up the price of the assets. The borrowed money is paid back with new borrowed money. The bond or loan never really lasts until maturity which would entail the compound interest effect this guy is mumbling about. The borrowed money (bond or loan) is paid back early before the loan term ends. Long before the original maturity of the borrowed money. The artificially low interest rate imposed by the Fed is only a short term expense or cost to borrow the money.
Keep buying real assets with cheap money. Pay back the borrowed money with newly borrowed money and buy more assets. And keep inflating the “value” of the assets at a greater percentage than the cost of the borrowed money. Get some other sucker to purchase the inflated asset with their own borrowed money with the hope of selling it to the next sucker. And in the process more and more borrowed money builds in the system. A legalized Ponzi where when it all collapses the losses are subsidized by the public and the profits were realized by the private actors doing all of the borrowing and buying. Bottom line is it is all a giant scam and very inefficient and expensive in creating any lasting value for the overall economy. But some players at the top who are good at navigating such a system and have priority access to the cheap money do quite well for themselves. The rest of us are just chumps left holding the bag.
The biggest problem with capitalism is when politics gets mixed in. Then you get crony capitalism, which flourished during FDR's Great Depression, conspiring to put the little guys out of business, and then going on to trade profitably with the enemy during WWII, which was supposed to be against the law. If government would only confine itself to assuring just weights and measures and a stable currency...but it seems the big guys always end up buying the government. Of course the New Deal was dressed up with benevolent socialist trappings, all for the people, just like now.
If I had to guess, I'd guess that he'd agree with what you're saying--that what he calls "industrial capitalism" is fine but, given human nature, it tends to morph into crony capitalism.
That's the type of discussion I was hoping to stimulate. It's not a question of necessarily agreeing with his nostrums. Many conservatives, in my experience, believe that the American economy as we know it today is simply the working out of market forces and that politicians should just leave it alone. Economic reform can't happen without political reform.
There's a lot of truth, mixed in with ideological untruths, in his words.
Economics 101: there are limited resources in the world, and demand is unlimited (because humans are infinitely greedy). Imagine a large pie, which represents all of the resources (goods and services) in the world. There are two levers for this pie - grow it and shrink it, and how to divide it.
The only way to grow the pie is to increase productivity - produce more goods and services (more workers, more efficient inputs or operations). Hudson concedes that "Capitalism" is quickly efficient at this, but eventually it morphs into crony capitalism (which he says happened in the 70's, 80's and 00's,) where in the elites simply skim a vig off the top, whilst not improving productivity - so the pie stays the same size, and the elites take an ever larger increasing share of it.
I must recommend this recent thread: https://twitter.com/bidetmarxman/status/1564267348017938434. It touches many of the points Hudson does, including capitalism vs marxism, as well as how all of it ties into our geopolitical reality, all in lucid prose and great detail.
Without reading the other comments here, the first thing that comes to my mind in evaluating this criticism is that it is essentially a criticism of "corporatism" a la Ron Paul. (Now I could be misreading this as I am not especially economically literate.)
Corporatism as I understand it is a situation where the government coordinates with corporations to ensure that "the division of spoils" is directed at favored parties or groups (in particular the elites or those groups that direct funds toward government) at the expense of those who are part of the "labor" class. In that light it is hard for me to disagree with anything Hudson is saying. The only question is how culpable "capitalism" as a theory in action is for this. I'm confused by what he calls "privatization" as I do believe what he criticizes is a sort of fascistic collaboration between government and the other agents of a financialized economy.
FDR was an outspoken admirer of Mussolini for a time. Those ideas have been under the surface in US politics for a long time.
Yeah I think we are definitely moving that direction and are largely there already. Just look at the big Tech and government collaboration that is now coming to light + what we already know about the defense contractors/government relationship (h/t Eisenhower). From the perspective of us plebes/proles Fascism vs. Marxism doesn't make a lot of difference. Might be good to keep the lampposts handy.
Matt Taibbi reviews The Lords of Easy Money:
https://www.zerohedge.com/political/taibbi-people-versus-unelected
I'm not an economist either but Hudson's preference for industrial capitalism seems to be based not on Marxist thought, but that we would all be better off if the employment of capital was put to use by industrialists to actually make things. Financial capitalism, so ably aided and abetted by almost our entire financial establishment is akin to skimming and bleeding. Anything that sucks wealth from the productive economy. It is instructive to consider who benefits. In general it’s not the lower or middle classes, the latter of which is slowly being eradicated.
His opinion on what happens because of compound interest and ever increasing debt levels have been validated time and again. Refer the many municipalities that were sold on the idea of extravagant infrastructure schemes using revolving debt that bankrupted many towns. Many people had their pensions evaporate from this one. Who made the loans? The usual suspects of big investment banks who take their fee and leave the town high and dry.
I don't know if kids still want to become investment bankers as they did a few years back (I think it's you-tubers now), but in a society where so much attention is focused on money, doesn't that bode ill if our young generation's aspirations are to make a killing on transactions? Anyone want to become an entrepreneur these days?
Martin Armstrong uses an interesting and I think similar concept that banking has changed from relationship banking to transactional banking. I know my bank was always trying to get me to invest in some fund or other, presumably not with my best interests in mind but for their fee income to go up – skimming me.
Catherine Austin Fitts and CJ Hopkins recently came out with a video (We Need to Talk About Mr. Global – Part 1) in which she describes how if you decentralize private and public finance - invest in communities and incentivize people - you create, by many multiples, more wealth in communities. Now that’s a revolutionary idea.
As for Hudson, he may be a bit of a mumbler and may attempt to identify too many failings of the system in too short a time, but I prefer to think he and others like Armstrong and Fitts have social consciences and are on target.
And quoting Marx doesn’t a Marxist make.
Thanks!
Quite a guy, that Marx, here he's considered an Economist while over at the Psychology Department they consider him the Godfather of Modern Sociology. Any implementation of his theories seems to have cost over 100 Million their lives and at least 2 fold given them lives of misery. Though only armed with a Layman's Education of Economics I see this man is telling us how to pick up a turd from the clean end, but that's me and I'm no economist.
There is much discussion as to which system of economics works best. It is clear what doesn't work. Government intervention. This is when a bunch of people with no knowledge of how economies function and with no skin in the game decide what is best for everyone.
Hayek and the Austrian school would argue that the market eventually gets things right, when many individuals with skin in the game make their individual decisions to further their own future. Excesses get corrected, and the ship rights itself. It is not perfect, but then people are not perfect.
Hayek and the Austrian school works even when it doesn't work, as individuals with skin in the game react to protect themselves. As Robert Burns would put it, The best laid schemes o' Government an' Men. Gang aft agley.
Where should I move to enjoy the benefits of Austrian economics? It seems to me that "how economies function" is always and everywhere at least partly--and often much more than that--a political matter. I find the idea that any economy can somehow run on auto-pilot to be naive. As for people with skin in the game reacting to protect themselves, I suppose the 1% do react to protect themselves. Who will react to protect the rest of us from the 1% who buy off those who will protect them?
Maybe due to your background you give government too much importance. People have survived floods, earthquakes and concentration camps. Surviving government stupidity is relatively easy. We hit the iceberg in 1929, and in a few years the market would have corrected. Instead we got government intervention, and hit bottom ten years later when the "Grapes of Wrath" came out. My father closed his business, took on another job and we were comfortable. Others I knew invested in depressed stocks and real estate, and made fortunes. Austrian economics is based on how resourceful people react, not some theoretical idea as to how we might create a perfect system. Too many of these refuse to recognize that the pie might grow so you can end up with a win-win situation for all classes of society.
My argument is that economics never happens in a vacuum--it always happens in some organized societal setting and so is always partly political. To follow out your metaphor, to see the iceberg ahead but to maintain course on the conviction that we'll survive the crash just like others--perhaps some FEW other--survived concentration camps doesn't sound prudent to me. By the same token, maintaining as Forbes does that our financialized economy--in which the 1% oppress the rest and impose their woke views through control of corporate boards--is still better than Communism so why talk about it? also seems the height of imprudence.
BTW, re the iceberg in 1929, it seems that Austrian school economists are NOT all in agreement re the causes and solutions, have changed their views at times, and are not all opposed to government intervention. IOW, at least some of them recognize that economics doesn't occur in a political vacuum. Cf.
https://en.wikipedia.org/wiki/Great_Depression#Common_position
And read down from there re Heterodox views.
You are truly amazing. To come up with this wiki article in such a short period of time, which should be required reading for all thoughtful Americans! I would also recommend the writings of Amity Schaes for a critique of FDR and the New Deal. The subject is complex, and the Austrians are not monolithic, even to the point of some admitting that Keynes might have had a point as a temporary measure.
One important quote. "In the Austrian view, it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. Therefore, by the time the Federal Reserve tightened in 1928 it was far too late to prevent an economic contraction."
So where are we now? We have unprecedented public and private debt, our government continues spending money that doesn't exist, and productivity is something our government is not interested in. What will be?
There are others who have convincingly made Hudson's point about money creation. Ellen Brown in "Web of Debt" for one. Here is the Amazon blurb:
"EXPLODING THE MYTHS ABOUT MONEY. Our money system is not what we have been led to believe. The creation of money has been privatized, or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions -- including the Federal Reserve, the branches of which are 100% privately owned. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices -- and robbing you of the value of your money. Web of Debt unravels the deception and presents a crystal clear picture of the financial abyss towards which we are heading. Then it explores a workable alternative, one that was tested in colonial America and is grounded in the best of American economic thought, including the writings of Benjamin Franklin, Thomas Jefferson and Abraham Lincoln. If you care about financial security, your own or the nation's, you should read this book."
https://www.amazon.com/Web-Debt-Shocking-Truth-System/dp/0983330859
G. Edward Griffin makes the same points in the excellent "The Creature from Jekyll Island" which chronicles the creation of the Federal Reserve and it purpose and operations.
https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/091298645X
Both are excellent books.
OK, that helps me understand the "privatization" criticism angle. Thanks!
Luongo makes similar points to this extent: 1) he reminds readers/listeners that the Fed is privately owned, and 2) that most money creation in the US is in the form of corporate bonds rather than bank loans. Which is private debt.
Yikes. First, he's all over the place. Each one of the topics he's trying to "analyze" is worthy of a good 15-30 minute video on its own (I took and entire semester economics course called money and banking just covering the fed and money creation and this guy believes he can simply take it apart in 1-2 minutes of his video?). Not that he'd be capable of producing such a video. He wades ankle deep into some leftist talking point, captures some nugget of truth, and believes he's knocking down the underpinnings of our economy one after the other.
He's from the crackpot school that can't understand the difference between a flow of money and the quantity of money. That's why he thinks that more money has to be created in order to service debt. He's not a Marxian or anything else besides a dope.
Too many wrong assumptions here. Got lost in his many analytical mistakes, and Marxist prejudice vs capitalism. The 08 bailout was an enormous mistake, but had the economy been allowed to continue to grow under Trump, repatriating manufacturing and liberating energy, it would have been manageable. Now, we are in real real trouble.
To be honest, the link to original video in the description is 1 year ago, so we're living in the time when people that haven't been paying the rent for the last year can finally be kicked out. What have rents done? Landlords are imbedding the risk of future lock downs & eviction moratorium by increasing rents. Massive institutions are buying real estate as a steady hedge against inflation risk & stock market instability.
QE is something advocated for by Bernanke & Janet Yellen so the commie needs to get on board with the financial fiction we're living in.
Always weird to hear a self avowed Libertarian like Tom Luongo cheer for the current Fed Chair to do anything to help our ailing economy, just juxtaposed against the old "Audit the Fed" mantra, but he's appeared at engagements with Dr. Ron Paul, so maybe we're in a time of correction so the truth can find the light at some point. Go Team Jay! Wring out that liquidity to help keep U.S. afloat.
"Massive institutions are buying real estate"
Still? I've read that Blackrock is backing off that.
Prices got to rich, so the big funds backed off for the moment.
Everyone is waiting for prices to cool a bit. US real estate markets are cooling, and there is an increase in inventory.
In California due to years of under building housing, there is a huge shortage, especially of affordable multi family. No affordable multi family is being build without subsidies, which have nasty strings attached, because it does not pencil out.
Commercial office real estate has huge issues due to the work from home change, and how major downtowns have become no go zones.
Retail space with the increase in e-commerce is also not doing great.
BlackSTONE announced their cessation. P/E has a problem. Classic for "Crowded Trades". They weren't the only "Smartest Guys In The Room". Others did exactly the same thing, the exact same way, and overbid Single Occupancy Homes in the midst of Blue Hell(BLM)/Covid Evacuations. Prices rose so quick the market stalled, as the "flight to safety*" stalled.
Then, they then jacked rents on the same Single Occupancy Homes to stay ahead of "inflation". Renters get a vote too, so they don't, as in rent. Stay home with mom & pop, despite the lack of privacy. Here's the trade, P/E borrowed to get in and most are no longer getting paid. Marginal players will be forced to dump things. Deeper pockets will try and wait it out. The bad news? It's a trade. An auction in one room only. Everyone gets in through the only door to the room to own it, but there's only the same one door out. Not everyone gets through in a "timely" manner.
Repeat for any financially leveraged "asset".
I call it deleveraging, but others will call it Deflation, which requires an entirely different public mindset, which I don't think we've entered. And that would be really, really bad.
Really bad.
Look at most commodity price charts of the last 6 months and you'll see exactly when financing disappeared. 50+% collapses. LastBearStanding 's substack (Down The Drain) lays out the details of "Why?" pretty clearly. Loss of Collateral for trading purposes.
"BlackSTONE"
Well, I said I'm not an economist, right? :-)
There seem to be respected voices out there using one or the other of those "D" words.
https://redstate.com/nick-arama/2022/09/07/new-poll-on-student-debt-bailout-and-how-biden-tactic-is-backfiring-big-time-n624182
Mixed bag - Tom Luongo and inside/ outside money make a lot more sense.
He was light on inflation in this video, such as the fact our money is beyond cheap, it’s still at an effectively negative interest rates.
No mention of Wef, green new deal, and war on agriculture and energy for climate change!
The ideal for investment being buy an asset that produces income, such as multi family housing, that you can increase the rents each year (horrible affordable housing shortage in Ca - and minimum wage is linked to inflation), and you repay the loan with cheaper money. And your tenants are paying your loan, if you got the right deal.
He sure dislikes bankers.
https://youtu.be/5l5cNvA6J_o Another shout out to you Mark by TL, at 15:40
I'll have to check that out. It looks like he's covering some interesting things--the JPMorgan flap in Germany, etc. Thanks.
It's technically for his Patrons only - but for some reason he made it publicly available. I only shared in this case because of the credit he provided to you.
This guy is mixed up a bit. He keeps talking about compound interest. But that isn’t really what is happening with the big boys on Wall Street. They borrow money to buy real tangible asset which drives up the price of the assets. The borrowed money is paid back with new borrowed money. The bond or loan never really lasts until maturity which would entail the compound interest effect this guy is mumbling about. The borrowed money (bond or loan) is paid back early before the loan term ends. Long before the original maturity of the borrowed money. The artificially low interest rate imposed by the Fed is only a short term expense or cost to borrow the money.
Keep buying real assets with cheap money. Pay back the borrowed money with newly borrowed money and buy more assets. And keep inflating the “value” of the assets at a greater percentage than the cost of the borrowed money. Get some other sucker to purchase the inflated asset with their own borrowed money with the hope of selling it to the next sucker. And in the process more and more borrowed money builds in the system. A legalized Ponzi where when it all collapses the losses are subsidized by the public and the profits were realized by the private actors doing all of the borrowing and buying. Bottom line is it is all a giant scam and very inefficient and expensive in creating any lasting value for the overall economy. But some players at the top who are good at navigating such a system and have priority access to the cheap money do quite well for themselves. The rest of us are just chumps left holding the bag.
Yeah, I was puzzled by his use of the term "compound interest."
The biggest problem with capitalism is when politics gets mixed in. Then you get crony capitalism, which flourished during FDR's Great Depression, conspiring to put the little guys out of business, and then going on to trade profitably with the enemy during WWII, which was supposed to be against the law. If government would only confine itself to assuring just weights and measures and a stable currency...but it seems the big guys always end up buying the government. Of course the New Deal was dressed up with benevolent socialist trappings, all for the people, just like now.
If I had to guess, I'd guess that he'd agree with what you're saying--that what he calls "industrial capitalism" is fine but, given human nature, it tends to morph into crony capitalism.
"Writing the laws to exempt unearned income from taxes is a key characteristic."
And a key indicator that our political class has been bought off. Follow the money.
That's the type of discussion I was hoping to stimulate. It's not a question of necessarily agreeing with his nostrums. Many conservatives, in my experience, believe that the American economy as we know it today is simply the working out of market forces and that politicians should just leave it alone. Economic reform can't happen without political reform.
There's a lot of truth, mixed in with ideological untruths, in his words.
Economics 101: there are limited resources in the world, and demand is unlimited (because humans are infinitely greedy). Imagine a large pie, which represents all of the resources (goods and services) in the world. There are two levers for this pie - grow it and shrink it, and how to divide it.
The only way to grow the pie is to increase productivity - produce more goods and services (more workers, more efficient inputs or operations). Hudson concedes that "Capitalism" is quickly efficient at this, but eventually it morphs into crony capitalism (which he says happened in the 70's, 80's and 00's,) where in the elites simply skim a vig off the top, whilst not improving productivity - so the pie stays the same size, and the elites take an ever larger increasing share of it.
I must recommend this recent thread: https://twitter.com/bidetmarxman/status/1564267348017938434. It touches many of the points Hudson does, including capitalism vs marxism, as well as how all of it ties into our geopolitical reality, all in lucid prose and great detail.
Thanks.