Wednesday, January 2, 2013

Michael Hudson’s ‘How I learned to love the right kind of govt deficit’

Why the financial squeeze imposes needless austerity

A continuation of M Hudson's article I posted yesterday @11.13. Lots of MMT - he claims that government surpluses have coincided with depressions, and discusses the difference between 'good' deficits - spending that gets the economy moving - and 'bad' deficits from govt spending not on goods and services and hiring employees but on buying (or taking liability for) mortgages and bank loans, insurance default bets and arbitrage gambles, thus subsidising financial losses by keeping the debts in place so that banks can “earn their way” out of negative net worth by lending again to support the prices of their assets.

Posted by icarus @ 06:21 PM (2201 views)
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4 thoughts on “Michael Hudson’s ‘How I learned to love the right kind of govt deficit’

  • Dunno what happened there. Try

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  • or just click on the top link on the left….

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  • Yep, quite a bit of MMT in there.

    This bit caught my eye:

    Current tax policy encourages financial and rent extraction that has become the major economic problem of our epoch. Industrial productivity continues to rise, but debt is growing even more inexorably. Instead of fueling economic growth, this of credit/debt threatens to absorb the economic surplus, plunging the economy into austerity, debt deflation and negative equity.

    So despite the fact that the financial system is broken, it has gained control over public policy to sustain and even obtain tax favoritism for a dysfunctional overgrowth of bank credit. Unlike the progress of science and technology, this debt is not part of nature. It is a social construct. The financial sector has politicized it by pressing to privatize economic rent rather than collect it as the tax base. This financialization of rent-extracting opportunities does not reflect a natural or inevitable evolution of “the market.” It is a capture of market structures and fiscal policy. Bank lobbyists have campaigned to shift the economic arena to the political sphere of lawmaking and tax policy, with side battlegrounds in the mass media and universities to capture the hearts and minds of voters to believe that the quickest and most efficient way to build up wealth is by bank credit and debt leverage.

    I think that’s a pretty good summary of where we’re at with HPC. Despite creating an unprecedented financial crisis in 2008, most people still regard property speculation as being in their long-term interest and the government is still smitten with big banking.

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  • Literally a slow motion car crash. Heavens knows where it will all end – not in a good way, that’s for sure. Probably in a massive currency crises; the question is who will go first?

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