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It’s been clear for a while that our leaders, political and economic, are trying to create another depression, but I wasn’t quite clear on why. I mean, I figured they make money on it, of course, but I didn’t connect all the dots. ‘

This interview’s a few months old, but it explains so much:

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, coming to you today from New York City. Now joining us is Michael Hudson. He’s a distinguished research professor at University of Missouri-Kansas City. He’s also the author of many books, including Super Imperialism: The Economic Strategy of American Empire, and Trade, Development, and Foreign Debt: A History of Theories of Polarization Versus Convergence in the World Economy. That’s a mouthful. Thanks for joining us.

PROF. MICHAEL HUDSON, UNIVERSITY OF MISSOURI-KANSAS CITY: Thank you.

JAY: So President Obama’s deficit commission has reported. The press, the media, and most of the political punditry all seem far more worried about government debt than depression. Why?

HUDSON: Because they’re essentially appointed by the banking interests. When the government runs into debt, it has to borrow from the banks. They want to scale down government debt in order to scale down government taxes. So it’s part of a one-two punch against the economy, basically. To the deficit commission, a depression is the solution to the problem, not a problem. That’s what they’re trying to bring about, because you need a depression if you’re going to lower wages by 20 percent.

JAY: And why do they want to do that?

HUDSON: Because they have the illusion that if you pay labor less, somehow you re going to make the economy more competitive, and the economy can earn its way out of debts –meaning their employers, the banks and the companies and make more profits and pay more bonuses and stock options, and somehow their constituency, Wall Street and the corporate economy, will become richer if they can only impoverish the economy.

So essentially you can think of it as between a parasite and the host economy. A smart parasite in nature actually is in a symbiosis with the host and tries to steer to new food. It wants the host to find new food, doesn’t want it to get bigger; the parasite wants itself to get bigger. But to do that, it has to take over the host’s brain and make the brain think that the parasite, in this case the host, is the industrial economy, the real economy, production and consumption.

The parasite is basically the financial sector. That’s the deficit commission. That’s the largest financier of the Obama administration. Obama appointed Wall Street lobbyists for the deficit commission, and basically their mind is a one-track mind: reduce labor’s wages. So what we have here is a dumb parasite, not a parasite. That’s the problem that’s facing the American economy today. The problem is that the parasite’s not only taken over the brain of the economy, which was supposed to be the government, but it’s taken over its own brain in the process. And it actually imagines that corporations can make larger profits and the industrial, the financial system can survive if they just bring on a depression. In fact, it’ll be the exact opposite.

JAY: Well, back up a step, because if you go into the recent crisis, … the amount of consumer debt as a result of lack of real wages and real demand is, I’ve always understood, is one of the underlying reasons for the crisis. You create this bubble, but it’s based on artificial debt. So if you take out even more consuming power by driving down wages, you take out even more consuming power by cutting unemployment insurance, you take out even more consuming power by various new kinds of taxes they’re even talking about in terms of consumer taxes, so don’t they actually exacerbate the problem, exacerbate the crisis? You’re saying they want to.

HUDSON: From their point of view, let’s look at how Wall Street and the large corporations view of the economy. They look at two cost functions. One is the cost of doing business –the cost of hiring labor and producing goods. But the other cost is that of taxes. The object is to reduce their taxes by shifting the tax burden off finance, off industry, onto labor. And the function of the deficit commission is to change the tax system, to get rid of the taxes that fall on capital, and to make the taxes fall only on labor. That’s going to at least free them from the government so that they can use all of the government’s credit-creating power to bail themselves out.

So the second thing they want to do after cutting taxes is to cut social spending so that as much of the government spending power as possible is available to bail out the inevitable collapse when it comes financially and to give subsidies to companies.

So the idea is basically to reverse the progressive era’s whole economic philosophy, and this involves impoverishing the economy in the process. But you have a mindset very much like you had in England for centuries that somehow thinks, if you can only hurt labor, you’ll be helping capital. That’s why England lost its industrial position. It’s the wrong mindset. It doesn’t work. But that’s how they feel, because that’s their mentality.

JAY: Well, in terms of their mentality, is it simply apres moi, le deluge? Like, we’ll make some short-term dough, and we’ll worry about the long-term later? Or do they actually believe somehow this creates something long-term?

HUDSON: The financial sector has always lived in the long term. Already a century ago you had financial books decrying the fact that banks and large lenders were hit and run: they would try to put investors into stocks, and then they’d leave them there and take their, take what they could. Right now they realize that the game is over. All they can do is try to play for a little more time, as long as they can, pay themselves bonuses, pay themselves stock options.

And most of the money that the government was creating in the form of quantitative easing recently, it’s all the $600 billion is reported to have gone abroad. So it’s going to the BRIC countries: Brazil, Russia, India, China Third World countries, Malaysia.

JAY: Where they can make money on the interest spread.

HUDSON: Partly that, but they’re buying foreign stocks, they’re buying foreign assets, they’re buying foreign real estate, mineral rights. They’re buying everything they can. The rats are jumping ship.

JAY: Okay. Now, you said because they realize the game is over. Why is the game over? And which game?

HUDSON: For the time being, the ability to pay debts. They realize that a debt that can’t be paid won’t be. The economy is so deeply in debt one-third of American real estate has mortgages in excess of its market price. So the Federal Reserve has come right out and said what we need is a reinflation. We need to restore the bubble economy. We need to push housing prices back up so that labor has to go into a lifetime of debt in order to afford access to housing.
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Fukushima

Complete disaster:

The Nuclear Safety Commission of Japan released a preliminary calculation Monday saying that the crippled Fukushima Daiichi nuclear plant had been releasing up to 10,000 terabecquerels of radioactive materials per hour at some point after a massive quake and tsunami hit northeastern Japan on March 11.

The disclosure prompted the government to consider raising the accident’s severity level to 7, the worst on an international scale, from the current 5, government sources said. The level 7 on the International Nuclear Event Scale has only been applied to the 1986 Chernobyl catastrophe.

Where hippie punching gets you

Digby:

The fact is that there is no liberal establishment willing to validate liberalism. Indeed, for reasons only they can tell us, they almost always go out of their way to exclude anyone who can readily be identified as a person of the left and rush before the cameras and into print to reassure America that they have no support. I have my theories about why that might be, but suffice to say it’s a fairly easily documented phenomenon. There is simply no space in the establishment political dialog for explicitly left policy or rhetoric.

I’m thinking that TNR is one place where the liberal wonks (Cohn excluded) might take a minute and ask themselves if their reflexive derision of the hippies for being unrealistic and lacking in pragmatism has served their own goals. When you wake up one morning and see a Democratic president praising the biggest spending cuts in history at a time of 8.8% unemployment, it might be time to take a look in the mirror.

Wisconsin voter fraud

An 80-year-old Democrat who’s on the board of canvassers in Waukesha County and says, “I don’t know anything about computers,” wants people to know that contrary to numerous reports, she really can’t verify Kathy Nickolaus’ version of events.

WI recall

Dems just got a new piece of ammo.

Medicare

People want to do the right thing, but they’re being misled as to what that is.

Why Iceland voted no

Iceland refused to socialize the losses of private sector banks, and now everyone’s all in a tizzy about it. I say, good for them:

Prime Minister Johanna Sigurdardottir warns that the vote may trigger “political and economic chaos.” But trying to pay also threatens this. The past year has seen the disastrous experience of Greece, Ireland and now Portugal in taking reckless private sector bank debts onto the public balance sheet. It is hard to expect any sovereign nation to impose a decade or more of deep depression on its economy inasmuch as international law permits every nation to act in its own vital interests.

Attempts by creditors to persuade nations to bail out their banks at public expense thus is ultimately an exercise in public relations. Icelanders have seen how successful Argentina has been since it imposed a crew haircut on its creditors. They also have seen the economic and political disruption in Ireland and Greece resulting from trying to pay beyond their means.

Creditors did not give accurate advice when they told Ireland that it could pay for its bank failures without plunging the economy into depression. Ireland’s experience stands as a warning to other countries about trusting overly optimistic forecasts by central bankers. In Iceland’s case, in November 2008 the IMF staff projected yearend-2009 gross external public and private debt at 160% of GDP – but observed that an exchange rate depreciation of 30% would push the ratio to 240% of GDP, which would be “clearly unsustainable.” But the most recent IMF staff report (January 14, 2011) shows end-2009 gross external debt at 308% of GDP, and estimates end-2010 gross external debt at 333% – even before taking the Icesave and other debts into account!

The main problem with Iceland’s obligation to Britain and the Netherlands is that foreign debt is not paid out of GDP. Apart from what is recovered from Landsbanki (now with the help of Britain’s Serious Fraud Office), the money must be paid in exports. But there has been no negotiation with Britain and Holland over just what Icelandic goods and services these countries would be willing to take in payment. Already in the 1920s, John Maynard Keynes pointed out that the Allied creditor nation had to take some responsibility just how Germany could pay its reparations, if not by exporting more to these countries. In practice, German cities borrowed in New York, turned the dollars over to the Reichsbank, which paid Britain and France, which paid the money back to the U.S. Government for their Inter-Ally Arms debts. In other words, Germany tried to “borrow its way out of debt.” It never works over time.

The normal practice would be for Iceland to appoint a Group of Experts to lay out the strongest possible case. No sovereign nation can be expected to acquiesce in imposing a generation of financial austerity, economic shrinkage and forced emigration of labor to pay for the failed neoliberal experiment that has dragged down so many other European economies.

Now I know

I once heard Al Gore talk about why he didn’t push back against the 2000 election . “Because that way lies revolution,” he said. No one picked it up, it wasn’t reported in the media. But I thought that was notable.

And now I know what he meant. Because I see the system now as so rotted, so thoroughly corrupt, that I don’t see any other solution. And I don’t want it (for God’s sake, I’m in my 50s, I’d rather be chilling!), but it’s beginning to look inevitable. Is it just me, and people like me, who are immersed in this stuff?

Or do regular people feel this way, too?

You’re fired

Donald Trump is such a dumb fuck. He claims Obama’s grandparents put a fake birth announcement in the local paper so he could be a United States citizen.

Except that when he was born, he would have been a U.S. citizen no matter where he was born. Because he had at least one parent who was a U.S. citizen, who was raised here.

Not that facts actually matter, but don’t insult my intelligence, shithead. And yeah, your hair looks like a piece of roadkill.

Pottery Barn Libya

You break it, you bought it!

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