Monetary | Michael Hudson

Palatial Credit: Origins of Money and Interest

By Michael Friday, April 6, 2018 History of the Near East, Monetary money supply Permalink

Origins of Money and Interest: Palatial Credit, not Barter Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between planting and harvesting, few payments were made at the time of purchase. When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these “pubs” would then pay most of this grain to the palace for consignments advanced to them during the crop year. These payments were financial in character, not on-the-spot barter-type exchange. As a means of payment, the early use of monetized grain and silver was mainly to settle such debts. This monetization was not physical; it was administrative ...

How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

By Michael Wednesday, October 28, 2015 Articles, Financial, Monetary economic history, Financial sector, wall st Permalink

As published in the Social Sciences Research Network Michael Hudson University of Missouri, Economics Department, 211 Haig Hall, 5120 Rockhill Road, Kansas City, MO 64110, USA and Peking University, No.5 Yiheruan Road, Haidan District, P.O. Box 1008/71m, Beijing, P.R. China The Eurozone today is going into the same deflationary situation that the U.S. did under Jackson’s destruction of the Second Bank, and the post-Civil War budget surpluses that deflated the economy. But whereas the Fed’s creation was designed to inflate the U.S. economy, Europe’s European Central Bank is designed to deflate it — in the interest of commercial banks in both cases. 1. Introduction Deflation was the main U.S. financial problem prior to 1913. To replace the Treasury conducting its fiscal operations independently from the banking system, New York banks urged more power over public finances and ...

Incorporating the Rentier Sectors into a Financial Model

By Michael Wednesday, September 12, 2012 Articles, Debt, Monetary, Real Estate and Georgism Debt, Economic Theory, Euro, FIRE, land Permalink

by Dirk Bezemer and Michael Hudson As published in the World Economic Association's World Economic Review Vol #1. ABSTRACT Current macroeconomics ignores the roles that rent, debt and the financial sector play in shaping our economy. We discuss the Classical view on rents and policy responses to the rentier sector in the 19th century. The finance, insurance & real estate sector is today’s incarnation of the rentier sector. This paper shows how financial flows can be conceptually and statistically studied separately from (but interacting with) the real sector. We discuss finance’s interaction with government and with the international economy. 1. Introduction Now that the Bubble Economy has given way to debt deflation, the world is discovering the shortcoming of models that fail to explain how most credit creation today (1) inflates asset prices without raising ...

Europe’s Transition From Social Democracy to Oligarchy

By Michael Tuesday, December 6, 2011 Articles, Debt, Financial, Monetary Debt, Financial sector, neoliberalism, Washington Consensus Permalink

As first published in Frankfurter Allgemeine Zeitung The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011. The problem is that Greece lacks the ready money to ...

Krugman, China and the role of finance.

By Michael Monday, November 22, 2010 Articles, Monetary China, currency speculation, Krugman, neoliberalism, privatization Permalink

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 ...