Michael Hudson on the real debt problem

hudson

Find above a new video from Micheal Hudson skewering many of the monetarist assumptions underpinning today’s world of finance. I don’t agree with it all but it’s certainly a point of view that is more right than wrong.

Houses and Holes
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Comments

  1. Private Debt, Private Debt, Private Debt!

    How on earth do we get the idiot/corrupt politicians talking about the stupidity of increasing private debt for residential property ahead of the election.

    Increasing private debt for residential property only helps bank executives get bonuses in the short term – even bank shareholders get shafted in the end.

    Great summary of the issues we face with private debt.

    • “Increasing private debt for residential property only helps bank executives get bonuses in the short term – even bank shareholders get shafted in the end.”

      Not quite right, increasing private debt also allows incumbent politicians to claim the resulting growth is down to their ‘strong economic stewardship’.

    • “If the American (insert any country) people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”

      — attributed to Thomas Jefferson

  2. Interesting site http://mfjs2210.wordpress.com/2011/02/24/the-real-news-network-analysis-by-billy-chapman-and-phil-hedrick/ . I am not sure about this guy who doesn’t even know the names of freddie and fannie properly…. politicians have never spoken of bank bailouts?? he is sensationalising. Government can open the printing presses with minimal effect…. Maybe so far but there are large long term consequences. 25% of salary – maybe thats how they used to do it but that has no effect on repayment, disposable income is what matters… I listened to the first half then gave up.

    • The message is private debt and it is correct. Disposable income? Is the money people earn somehow removed from the entire economy – looking at this in isolation is pointless – disposable income is a product of the economy as are private debt repayments.

      • AJ,

        To assess a loan for individuals or business you take their income and deduct expenses. Whats left is disposable and available for debt servicing.

        For individuals, if buying a house removes rent then more is disposable. A bank approves a loan if this number is positive after loan repayment, adjusted for sensitising an upswing in interest rates.

        Are you saying if I earn $1000 and spend $100 a week the 25% rule I spoke poorly of is as relevent as it is to the person who earns $150 and spends $100 or the person who earns $1000 and spends $900. Rubbish. One clearly has 900 to service debt, much more than the others despite similar income and expenses in each case.

        A 25% figure is dumb. Disposable income, or in a company’s case cashflow, is what matters. A percentage of individuals revenue (effectively what he argues) make ZERO sense.

  3. “I don’t agree with it all but it’s certainly a point of view that is more right than wrong.”

    +1. Up until about the 10min mark, anyway, where the interviewer (I think) stumped him. Hudson’s basic arguments re private debt are ok – his belief in the reasons for US Treasury strength in the post-GFC environment are dangerously flawed.