[Marxism] Michael Hudson: Economic 'Recovery' Feels Weak Because the Great Recession Hasn't Really Ended
mdriscollrj at charter.net
Sat Oct 8 19:53:14 MDT 2016
*This was in my inbox yesterday
***https://www.youtube.com/watch?v=P0lXz1YFiko*. As many here know,
Hudson is **a former Wall Street economist who used to work at the Chase
Manhattan Bank; he has written a number of books, starting with his
path-breaking 44-year old /Super Imperialism/**/: The Economic Strategy
of American Empire/. **Years before that, I just learned from Wikipedia,
he was assigned the English-language rights to the works of György
Lukácsby the author, and also the rights toLeon Trotsky'swritings and
archives after his widow's death.He has presented this same talk before,
**including last Spring on a Left Forum panel with Michael Perelman and
Bertell Ollman, This is an appalling view of what's coming. As to his
underlying reasons for it, I miss any linkage/tie-in, pro or con, to the
tendency of the rate of profit to fall, and I wonder if he has ever
expressed his thoughts on it.
**For that and other reasons, it's Interesting to compare and contrast
Hudson's analysis of the just-released IMF report, and his concept of
debt deflation, with that of Michael Roberts, also in my inbox
Hudson's emphasis is on debt, what the IMF had to say about the banks
and the utter failure of the system; Roberts's review of the report,
consistently with his strong feelings toward the TRPF, concentrates on
IMF's remarks on the prospects for global slump, and he does so without
mentioning the comments made in the report on the weakness of banks and
the global indebtedness now having reached an eye-popping $152 trillion.
He is not nearly as apocalyptic as Hudson.
Both/and? Blind men and elephants? Any one-eyed kings?
The Real News Network
Published on Oct 7, 2016*
Kim Brown: ...a new report released Wednesday by the International
Monetary Fund shows that some banks in the United States and Europe may
not be strong enough to survive another downturn even with state
assistance. Joining us from New York is Michael Hudson. Michael is a
distinguished research professor in economics at the University of
Missouri at Kansas City. His latest book is titled /Killing the Host:
How Financial Parasites and Debt Bondage Destroy the Global
Economy/...the IMF report says that despite banks being stronger now
than before the financial crisis of 2007-2008, about 25% of US banks and
about a third of European banks are too weak to even benefit from a
potential rise in interest rates in any recovery, should the economy
take a downturn. But before we get into any question about the health of
banks, Michael, are we still in recession or are we firmly in recovery now?
Michael Hudson: We're not in a recovery and we're not fully in a
traditional recession. People think of a business cycle as a boom and a
recession and then there are automatic stabilizers that revive the
economy, but this time we can provide no recovery, because every
recession since 1945 began with a higher and higher and higher level of
debt; and the debt is so high now that, since 2008, we're in what I call
debt deflation. There are people who have to pay so much money to the
banks that they don't have enough money to buy the goods and services
they produce, so there's not new investment, there is not new
employment, the market is shrinking and people are defaulting and the
companies can't pay the banks. Now the bank's product is debt. They try
to tell customers that debts are good for you, but the customers can't
afford any more debt, so there's no way the banks can continue their
current business plan; in fact there's no way that the banks can be
paid, so that's what the IMF doesn't follow through in its analysis, by
saying if the banks are broke it's because the financial system is
broke, and the financial system is broke because the whole idea of
trying to get rich by running into debt was a false model; so the end of
the long cycle since 1945 loaded the economy with debt, and we're not
going to be able to get out of it until you write down the debt; and
that's what the IMF thinks is unthinkable. It can't say that because
it's supposed to represent the interests of the banks so all they can
say is. "Gee, the banks won't make money even if there is a recovery but
there isn't a recovery because people have to pay the banks," and it's
all a vicious circle and they're basically throwing up their hands and
they don't know what to do.
Kim: Michael, why has growth been so weak over the past 8 years or so?
Michael: Well, if you take the average family budget...if you have to
pay about 40% of your income for housing, if you have to pay 15% of your
paycheck for F.I.C.A. Social Security wage withholding, you have to pay
for medical care, you have to pay the bank debt, you have to pay your
credit card debt, your student loans, then you're only going to have 25%
or 35% , maybe one third of your salary, that's all you have to buy
goods and services. But the way you get a job is with a company that
sells goods and services, and the companies aren't hiring because
nobody, the consumers don't have enough money to buy the goods and
services. So we're in a chronic debt deflation. There's no way that you
can recover unless you write down the debts, and that's what the IMF is
basically implying. It's not spelling it out because that's not what's
said in polite company.
Kim: The headline in Market Report about this IMF report reads, 'Forget
too big to fail; the big concern is banks too weak to survive. If the
banks almost capsized the global financial system, are weaker banks
better for consumers?'
Michael: Banks that are very narrow and do what banks used to do before
President Clinton abolished Glass-Steagall in 1999, small banks where
the consumers are, fine, but most banks and Deutsche Bank is at the top
of the spectrum here, banks have decided, well, we can't make money
lending to borrowers anymore, so we're going to have a second plan;
we're going to lend money to casino capitalists. That is how we're going
to make money. To people who want to gamble on derivatives. Now a
derivative is a bit whether a stock or bond or real estate is going to
go up or down and there's a winner and a loser. It's like betting on a
horse race, and so the big banks gamble not for real production, not for
investment, so the gamblers borrow from Deutsche Bank. So the best
gamble in the world right now is betting whether Deutsche Bank stock is
going to go down. So all the short sellers have borrowed money from
their banks to place bets the Deutsche Bank stock is going to go down.
So it's wringing its hands and saying, 'Oh. the speculators are killing
us,' but all the banks are providing the money to the speculators to bet
Kim: Michael, the IMF report says that if the Eurozone governments could
help banks dump bad loans, it would have a positive effect on big
capital. What would be the effect on consumers and the EU economy at
large if banks were able to just dump these bad loans?
Michael: It's really very simple mathematics. You would have to abolish
people's pension plans, you'd have to abolish social spending, you'd
have to raise taxes, you'd have to have at least 50% of the European
population emigrate to Russia and China, you would have to have mass
starvation. Very simple. That's the price the Eurozone thinks is well
worth paying. It's the price where you would have to turn the entire
Eurozone into Greece. You'd have to have the governments sell off all
their public domain, sell off the railroads, sell off the public land.
You'd have to essentially introduce neo-feudalism. You'd have to roll
the clock back a thousand years and reduce the European population to
slavery. Simple solution. A solution that the Eurozone has imposed on
Greece, and it's the solution that the leaders and the banks are urging
for responsible economists to promote for the population at large.
Kim: Let's talk about the other little nugget of information released by
the IMF, that global debt has now reached $152 trillion, and this
includes government debt, household debt and non-financial firms debt.
What does all this debt mean for the global financial system and for
everyday people here, Michael?
Michael: It means the only way people can repay the debt is by cutting
their living standards very drastically, by shifting their pension plans
from defined benefit plans to who knows what you're going to get in to,
defined contribution plans where you put your money into a roach motel
and who knows what comes out. You'll get rid of Social Security. For
governments, it means you'll abolish governments, turn it over to the
banking system to run. with the idea that the role of government is to
extract income from the economy to pay the bondholders; and what they
mean when they say pay the banks is, pay the bank's bondholders, who are
basically the one percent. So what you're seeing right now in this IMF
report and in this growth of debt is that the one percent owns maybe 3/4
of all this debt. So you have a choice: you can say either save the
economy or save the one percent from losing a single penny. And every
government from the Obama administration right though Angela Merkel, the
Eurozone and the IMF says we're going to save the banks, not the
economy. No price is too high to pay to try to make the system go a
little bit longer. But the fact is that ultimately it cannot be saved
because of the mathematics that are involved. Debts grow and grow and
grow, and the more they grow the more they shrink the economy. And when
you shrink the economy, you shrink the ability to pay the debts. So it's
all an illusion and the question is, how long are people going to be
willing to live in this illusion?
Kim: Well, that was my next question for you, not only how are people
going to live in this illusion, but how much longer is this illusion
going to be sustainable before we see another collapse of economies
around the world? Is this something that is impending that we should be
expecting to come, that we should be readying ourselves for?
Michael: We're in the same collapse that we were in after 2008. There's
not a new collapse. There hasn't been a recovery. Wages for the ninety
nine percent have gone down steadily. They've gone down especially for
the bottom 25% of the population. They've gone down especially for
Blacks and for Hispanics and for blue collar workers. Their net worth
has actually turned negative and they don't have enough money to get by.
In fact, one of the big consulting firms, Ernst and Young, just did a
study of the Millennials, and they found that 78% of Millennials are
worried about not having enough of a good paying job opportunity to pay
off their student loans; 74% can't pay for health care when they get
sick, and 79% don't have enough money to live when they retire. So we're
already having a whole generation that's coming on not only here but in
Europe that isn't able to get jobs, and the only way they can live is if
they have rich enough parents to have given them a trust fund.
Kim: We've been speaking with Michael Hudson. Michael is a distinguished
research professor in economics at the University of Missouri at Kansas
City. His latest book is titled /Killing the Host: How financial
parasites and debt bondage destroy the global economy/. Michael, you
said you have another book coming out. Is that right?
Michael: Yes, later this month. Its title is /J is for Junk Economics/.
It's a review of why economists promise that we'll somehow recover and
why this is basically junk and why to be an economist these days you
have to participate in this fairy tale that we can recover and still
make the banks rich, and it's a fairy tale.
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