The "Latvian option" is the buzzword of the moment among European bankers and financial journalists. In October, the Latvian people voted in a coalition headed by the incumbent prime minister Valdis Dombrovskis, whose government had savaged social benefits, cut pay and inflated unemployment in 2009. Was this proof that austerity measures could not only work, but actually be popular? Was Latvia the model that Greece, Ireland and Spain should emulate? The Wall Street Journal, for one, has published several articles promoting this view. Most recently, Charles Doxbury advocated Latvia's internal devaluation and austerity strategy as the model for Europe's crisis nations to follow. The view commonly argued is that Latvia's economic freefall (the deepest of any nation from the 2008 crisis) has finally stopped and that recovery (albeit very fragile and ...
Financial Interests Dictate Sovereign Policy
Interview with Michael Hudson, Eleftherotypia, Sunday December 12, 2010. 1. A recent article of yours, “Schemes of the Rich and Greedy,” cites the bailouts in Europe among such schemes. What are the main faults with bailouts, and for whom are they designed? The financial sector is trying to get politicians to siphon off money from labor and industry to pay bankers. This will impede capital formation and living standards. The banks misrepresented the real value of balance sheet and hence what they really were owed under actual market conditions. Now that they have taken the money and run, the «real» economy is being told to pay the off their bad loans. The arrogance of this demand prompted Angela Merkel to ask why governments – meaning «taxpayers» – should pay for bad bank loans ...
Deficit Hawks One Two Punch
More at The Real News December 16, 2010 Why Government is More Afraid of Debt than Depression Michael Hudson: Deficit Hawks Want a One Two Punch Against the Economy Transcript 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 ...
From WikiLeaks to 21st Century Potato Famines
Professor Hudson appeared on the Renegade Economists radio show in Melbourne, Australia last Wednesday. Listen
Obama's Bushism
I almost feel naïve for being so angry at President Obama’s betrayal of his campaign promises regarding taxes. I had never harbored much hope that he actually intended to enact the reforms that his supporters expected – not after he appointed the most right-wing of the Clintonomics gang, Larry Summers, then Tim Geithner, Ben Bernanke and other Bush neoliberals. But there is something so unfair and wrong that I could not prevent myself from waking up early Tuesday morning to think through the consequences of President Obama’s sellout in the years to come. Contrary to his pretense of saving the economy, his action will intensify debt deflation and financial depression, paving the way for a long-term tax shift off wealth onto labor. In achieving a giveaway that Democrats never would have ...
Adam Smith critiques the Deficit Reduction Commission
What would Adam Smith have said about the Bowles-Simpson economic report last week? What a pity the great free marketer was not around to serve on the Deficit Reduction Commission. He not only would have rolled over in his grave, he would have risen up wielding an ax to the fiscal proposals that are diametrically opposite to the fiscal principles that he and his original free market contemporaries urged. Writing in the wake of the French Physiocrats with their Impôt Unique to collect the revenues that France’s landed aristocracy drained from the countryside and towns, Smith endorsed the idea that the least burdensome tax was one that fell on land rent: A more equal land-tax, a more equal tax upon the rent of houses, and such alterations in the present system of customs ...
Schemes of the Rich and Greedy
Tax-Avoidance - The Worst is Yet to Come “Let me tell you about the very rich. They are different from you and me.” “The Rich Boy,” by F. Scott Fitzgerald The 30-year campaign of the wealthy to rig our economic system – especially the tax component – for their own benefit will accelerate with the GOP capture of the House of Representatives and the likely capture of the presidency and Senate in two years. For a foreshadowing of what is to come, a dress rehearsal has been conducted in Latvia, Iceland, Ireland and other financially strapped countries. Latvia has been burdened with the world’s most regressive tax system, while Iceland and Ireland have become record setters in tapping taxpayers to bail out financial crime syndicates, a.k.a. banks. The Irish bailout will encumber its people ...
Krugman, China and the role of finance.
Here’s the quandary that the U.S. economy is in: The Fed’s quantitative easing policy– creating more liquidity so that banks can lend more – aims at helping the economy “borrow its way out of debt.” But banks are not lending more, for the simple reason that a third of U.S. real estate already is in negative equity, while small and medium-sized businesses (which have created most of the new jobs in America for the past few decades) have seen their preferred collateral (real estate and sales orders) shrink. How can banks be expected to lend more to re-inflate the economy’s asset prices while wages and consumer prices continue to drift down? The “real” economy as a whole therefore must shrink. What has made the argument over Fed policy so important over ...
Dollar War in Detail
Eric Janszen, Interview with Dr. Michael Hudson 6 November, 2010 Janszen (E): What I’m noting, starting with the gold crisis over the last few weeks, and the public nature of some of the complaints that we’re hearing out of Brazil and China and the front page of the Financial Times, we seem to be heading into a pretty serious currency crisis. Hudson (H): Yes, the currency crisis is caused by what’s called Quantitative Easing (QE) – flooding the economy with credit, and specifically Ben Bernanke’s and Tim Geithner’s threat to create another $1 trillion worth of new Federal Reserve credit over the next twelve months. The Financial Times reports that all of the last $2 trillion the Fed created has gone to the BRIC countries (Brazil, Russia, India and China) and to Third ...
Mr. Obama’s Most Recent “2%” Sellout is his Worst Yet
Now that President Obama is almost celebrating his bipartisan willingness to renew the tax cuts for the super-rich enacted under George Bush ten years ago, it is time for Democrats to ask themselves how strongly they are willing to oppose an administration that looks like Bush-Cheney III. Is this what they expected by Mr. Obama’s promise to rise above partisan politics – by ruling on behalf of Wall Street, now that it is the major campaign backer of both parties? It is a reflection of how one-sided today’s class war has become that Warren Buffet has quipped that “his” side is winning without a real fight being waged. No gauntlet has been thrown down over the trial balloon that the president and his advisor David Axelrod have sent up over the ...
