Set Up To Fail

Renegade Economists interview 05.09.2012 Interview with Professor Michael Hudson by Karl Fitzgerald Listen KF: We welcome to the show Professor Michael Hudson, Distinguished Research Professor at the University of Missouri-Kansas City, the leading Post-Keynesian university in America. It’s been fantastic to see, Michael, that the public profile of UMKC has really taken off with Randall Wray, yourself and Stephanie Kelton being quoted quite widely these days. Can you explain what Post-Keynesianism is? MH: The fact that we all have a very similar approach is what has enabled us to challenge the neoliberal Chicago School. Our approach is heterodox - we see that money is created, basically, on computer keyboards. When a bank lends money, they create a deposit by writing a loan. You ...

Wall Street’s War Against the Cities

Why Bondholders Can’t – and Shouldn’t – be Paid The pace of Wall Street’s war against the 99% is quickening in preparation for the kill. Having demonized public employees for being scheduled to receive pensions on their lifetime employment service, bondholders are insisting on getting the money instead. It is the same austerity philosophy that has been forced on Greece and Spain – and the same that is prompting President Obama and Mitt Romney to urge scaling back Social Security and Medicare. Unlike the U.S. federal government, most states and cities have constitutions that prevent them from running budget deficits. This means that when they cut property taxes, they either must borrow from the wealthy, or cut back employment and public ...

Financial Predators v. Labor, Industry and Democracy

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Europe’s sovereign debt crisis in historical perspective Sankt Georgen University, Frankfurt, June 22, 2012 Michael Hudson's new book The Bubble and Beyond can be purchased here. The Eurozone lacks a central bank to do what most central banks are supposed to do: finance government deficits. To make matters worse, the Lisbon Agreement limits these deficits to 3% – too small to pull economies out of depression by offsetting private-sector debt deflation. Even if central banks could monetize higher levels of deficit spending, there are good reasons not to subsidize unfair tax systems and tax cuts on the real estate and financial “free lunch” windfalls that classical economists urged to be the tax base. Under classical tax policy, Europe would not have had a ...

The Weaponization of Economic Theory

Europe’s three needs: a debt write-down, a real central bank, and a more efficient tax system Brussels Talk, Madariaga College, Governing Globalisation in a World Economy in Transition, June 27, 2012 What can Europe learn from the United States? First, the United States – like Canada, England and China – have central banks that do what central banks outside of Europe were created to do: finance the budget deficit directly. I have found that it is hard to explain to continental Europe just how different the English-speaking countries are in this respect. There is a prejudice here that central bank financing of a domestic spending deficit by government is inflationary. This is nonsense, as demonstrated by recent U.S. experience: the largest ...

Paul Krugman’s Economic Blinders

In Mr. Krugman’s reading, private debts need not be written down or the tax system made more efficient. It is to be better subsidized – mainly with easier bank credit and more government spending. So I am afraid that his book might as well have been subtitled “How the Economy can Borrow its Way Out of Debt.” That is what budget deficits do: they add to the debt overhead.

Firing Alan Greenspan

During the interview for the documentary Real Estate 4 Ransom, Prof Michael Hudson discussed Greenspan's reputation in his formative days on Wall St, revealing a controversial 1966 incident. Transcript Why are real wages falling? MH: They’ve (wages) been going down because essentially the economy shifted radically throughout the world, starting in 1979, when Margaret Thatcher was elected Prime Minister of England and Ronald Reagan was elected President of here (The USA) … claiming to defend capital. The Reagan Bush Administration in its 12 years, quadrupled American debt by slashing taxes on the upper brackets while sharply increasing taxes on labour. They increased it largely by having Alan Greenspan create the Greenspan Commission to look at social security and pushing the myth that social security ...

Debts that can’t be paid, won’t be

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An excerpt from a paper published for the conference Paradigm Lost: Rethinking Economics and Politics. I am speaking to this paper in Berlin this week. The full paper can be downloaded from their website (PDF). A common denominator runs throughout recorded history: a rising proportion of debts cannot be paid. Adam Smith remarked that no government ever had repaid its debt, and today the same can be said of the overall volume of private-sector debt. One way or another, there will be defaults – unless debts are paid in an illusory fashion, simply by adding the interest charges onto the debt balance until the sums finally grow to so ...