Published in Fakt (Warsaw) Poland's vote to join the European Community has put an end to the centuries of military rivalries that have long devastated the nation and its neighbors. Entry into the EC makes future internecine wars unthinkable. That was the easy decision to make. Poland now must confront the financial issue dividing Europe: the European Central Bank's destructive monetarist ideology, and the constraint against running budget deficits of more than 3 percent of Gross Domestic Product (GDP). If obeyed, this 3% budgetary constraint would depress business conditions by preventing member countries from using the traditional counter-cyclical policy that has pulled economies out of recession since the Great Depression - budget deficits. For the past 75 years, governments have "primed the pump" by running budget deficits when business cycles have turned ...
Saving, Asset-Price Inflation, and Debt-Induced Deflation
Post-Keynesian Conference Kansas City Summary The exponential growth of savings and debt takes the form mainly of loans to finance the purchase of real estate, stocks and bonds. These loans extract interest and amortization charges that divert revenue away from being spent on goods and services. The payment of debt service by the economy’s non-financial sectors interrupts the circular flow that Say’s Law postulates to exist between producers and consumers. Financial institutions re-lend their interest and other financial inflows as new loans to finance asset purchases. The result is that net savings do not increase for the economy as a whole. Meanwhile, lending out savings helps bid up asset prices, but does not necessarily promote new tangible investment and employment or increase real wages and commodity prices. In fact, new tangible investment and employment ...
Russia: Reforming the Reformers
an Interview with Michael Hudson for Counterpunch By STANDARD SCHAEFER On Sunday, March 14, Russians will re-elect Vladimir Putin for a second term as president. In the Duma elections three months earlier, on December 7, his United Russia party won such overwhelming support that he will have the power to rewrite the constitution dictated by former Pres. Yeltsin under force of arms a decade ago. In which direction will Mr. Putin go? Will he continue to support the oligarchs who designated him to succeed Pres. Yeltsin? Their privatizations in the mid-1990s have gutted Russian industry and led to collapsing living standards, public services, science and technology, emigration and population shrinkage. Will this prompt Mr. Putin to shift gears to enforce what he has called a "new social contract"? If so, what does this ...
An Insider Spills the Beans on Offshore Banking Centers
an Interview with Michael Hudson for Counterpunch. By STANDARD SCHAEFER The oil industry created the practice of countries (SHIPS?) flying "flags of convenience" as a means of avoiding income taxes nearly a century ago. Since the 1960s the U.S. Government itself has encouraged American banks to set up branches in Caribbean hot-money centers and more distant islands as a means of attracting foreign money into the dollar. The initial aim was to help finance the Vietnam War by turning America into a new Switzerland for the world's hot money. This policy succeeded in turning the United States into a flight-capital center for third-world dictators, Mexican presidents and Russian oligarchs. The former Soviet Union now finances a substantial portion of the U.S. balance-of-payments deficit with the flight capital that neoliberal "reformers" facilitated by backing ...
How Privatization Sterilizes Culture
an Interview with Michael Hudson for Counterpunch. By STANDARD SCHAEFER Since the 1980s computer technology has been promoted as democratizing leisure by lowering the production costs of knowledge and culture. Consumers were promised more free time, yet a quarter or even a third of family income for the low- and middle-income brackets now goes to pay debt service, leaving insufficient revenue available for the promised leisure society. Culture traditionally was a luxury, often the first item cut from in lean times. In these times, however, we're told consumption is patriotic, something that should be maintained even during national emergencies. Curiously, when it comes to cultural products like music, prices come down but quality is sacrificed. Anyone who knows how "live" recordings on LP records sound fuller, despite the occasional hiss or click, ...
Review in the German Journal Intervention
Rezensionen Michael Hudson (2003), Super Imperialism. The origin and Fundamentals of U. S. World Dominance, London (416 Seiten, broschiert, Pluto Press) »Der Dollar ist unser Geld, aber Euer Problem«, so wird die Einstellung der US-Regierung zur globalen Rolle der eigenen Währung gerne zitiert. Und tatsächlich scheint es so, als hätten vor allem die anderen Länder Probleme mit der US-Währung. Wertet der Dollar kräftig auf, wie zuletzt 1999 / 2000, so importieren die anderen Länder Inflation. Wertet der Dollar dagegen ab, so kommen die Exporte der anderen Industrieländer unter Druck. Nur die USA scheint dies alles wenig zu stören. Müssen sich andere Länder über die Außenstabilität ihrer Währung Sorgen machen, war es für die Vereinigten Staaten über Jahrzehnte selbstverständlich, praktisch jedes Leistungsbilanzdefizit mit Leichtigkeit finanzieren zu können. Selbst militärische Unternehmen wie den Vietnamkrieg (oder ...
The Mathematical Economics of Compound Rates of Interest: A Four-Thousand Year Overview Part I
“Whoever enters here must know mathematics.” That was the motto of Plato’s Academy. Emphasizing such abstract ratios as the Pythagorean proportions of musical temperament and the calendrical regularities of the sun, moon and planets, its philosophy used the mathematics of nature to reveal an underlying harmony and order in the universe and hence, in an ideal society. But there was little quantitative analysis of economic relations. Although the Greek and Roman economies were increasingly wracked by debt, there was no measurement of this phenomenon, or of overall production, distribution and other macroeconomic measures. The education of modern economists still consists largely of higher mathematics whose use remains more metaphysical than empirically measuring the most important trends. Over a century ago John Shield Nicholson (1893:122) remarked that “The traditional method of English ...
