Thursday, January 10, 2019

Michael Hudson: Oligarchy will never cancel the debt

Chilling stuff! Michael Hudson says that the Western oligarchy would sooner let 90% of people in the world die rather than cancel any of debt they believe is owed to them.



Hudson states that the problem originates with the privatization of finance. “Every society in history for the last 4,000 years has found that the debts grow more rapidly than people can pay,” he says. “The problem is a small oligarchy of 10 percent of the population at the top to whom all of these net debts are owed to. You want to annual the debts to the top 10 percent. That’s what they’re not going to do. The oligarchy is running things. They would rather annul the bottom 90 percent right to live than to annul the money that’s due to them. They would rather strip the planet and shrink the population and be paid rather than give up their claims. That’s the political fight of the 21st century.”

27 comments:

Konrad said...

Hudson states that the problem originates with the privatization of finance.

That’s it in a nutshell.

Actually we should say the full privatization of finance. Ancient Sumer had private debts between businesses, but most debts were owed to the state.

Sometimes when the ancient Romans prepared to attack an enemy, they would check to see if the enemy had an advanced monetary system. If so, the Romans offered to forgive poor people’s debts if they would surrender. Sometimes this worked. Sometimes it didn’t. When it worked, the “debt free” population ended up indebted to the Romans.

This would not work in the USA, because American peasants have been programmed to worship their creditors. If China offered to erase average Americans’ debts (mortgages, car loans, student loans, etc) Americans would fight to protect their creditor-parasites.

A commentator in the video notes that what caused Rome to collapse was ecological disaster caused by the greed of creditors and oligarchs. They agriculturally depleted Italy, and it took a thousand years of much reduced population for Italy to recover ecologically.

Michael Hudson says that ecological disaster (caused by the privatization of finance) led to the Dark Ages.

Today the greed of creditors and oligarchs is doing the exact same thing. Simon Johnson (former chief economist for the IMF) says that bankers and oligarchs have unbridled greed in their DNA. They cannot stop themselves from destroying ecologies and civilizations.

Likewise (and more importantly) I say that denial of this reality is in the DNA of average American peasants. Creditors could not perpetrate their crimes if the peasants did not eagerly allow it.

When the USA is gone, Israel will latch on to a new host (e.g. China) and will make the host go through the same process of greed, depletion, and collapse. Then the Israeli parasite will move to its next host.

Meanwhile most MMT advocates ignore the private debt crisis, preferring to babble about their “job guarantee.” American liberals and conservatives ignore the crisis by bickering about Trump’s wall. Economics textbooks pretend it does not exist.

On a side note, Simon Johnson mentions the Mayans, whose civilization was mostly gone by the time the Spaniards invaded. For a long time archaeologists could not figure out why the Mayans vanished, since archaeologists, like everyone else, have been programmed to worship creditors, and to pretend that the private debt crisis does not exist.

Quite simply the Mayan nobility became so greedy that they used up all natural and human resources to keep building palaces and temples for themselves at the expense of the masses. Mayan peasants were mentally programmed to accept this greed as right and just, and “the will of the gods.” When Central America was hit by a prolonged drought, the Mayans could not deal with it. Rather than change their thought habits, they preferred extinction. Today’s Americans are the same.

Mayans still exist today, but they have no knowledge of what happened. They are like the post-nuclear-war humans in the original Planet of the Apes movie.

Konrad said...

A YouTube viewer writes, “I am with the Romans on this: A debt is a debt."

This is why we are headed for another Dark Age.

Creditors create debt out of thin air, and they use that debt to steal and to enslave. It is true that the peasants cheer for their own slavery, but that’s because their owners program them to.

This YouTube viewer blesses the creditors’ monumental crimes, and their total lack of compassion. He cheers for ecological disaster and the coming collapse. Why? Because he is a selfish little maggot.

Bob Roddis said...

These "debts" exist because banks with special privileges can and do loan "money" created out of nothing. Borrowers then have to work and work to earn "money" (which they most definitely cannot create out of nothing) to pay back these loans plus interest. This is a natural result of the modern money system that MMTers celebrate. I suppose that is the incentive for MMTers and "progressives" to lie about the current system and to somehow blame it on Hayek and libertarians who have sought its abolition for decades.

Andrew Anderson said...

These "debts" exist because banks with special privileges can and do loan "money" created out of nothing. Bob Roddis

Yet you have not yet indicated any support for the idea that all citizens, at least, be allowed accounts at the Central Bank or Treasury itself.

This would allow all other privileges for "the banks" to be abolished too since we would then have an additional payment system that did not have to work through them. This, in turn, would greatly reduce the ability of banks to safely create deposits.

So please tell us, Bob. Should citizens be allowed to use fiat in account form? Or should they be limited to mere physical fiat and private bank deposits? Thus perpetuating the ability of banks to drive people into debt?

Bob Roddis said...

Definition of fiat:

1: a command or act of will that creates something without or as if without further effort - - According to the Bible, the world was created by fiat.

3: an authoritative or arbitrary order : DECREE

So please tell us, Bob. Should citizens be allowed to use fiat in account form?

I do not support the concept of money by fiat. It’s unnecessary, fraudulent, idiotic and corrupt and enforced by the commands of thugs. It is the opposite of something created peaceably and voluntarily. So you do the logic.

Andrew Anderson said...

The logic is that inexpensive fiat is the ONLY ethical money form for government use. Otherwise, the taxation authority and power of government (cf. Romans 13:1-5) is misused to benefit private interests such as gold owners and fiat hoarders.

So, unless you are advocating anarchy (no government), which is un-Biblical, btw, then you'd best figure out how inexpensive fiat shall be created and used in an ethical manner, i.e. a stupid metal cannot substitute for thinking about ethics.

So what is it, Bob? Are you an anarchist? Or for government enforced injustice? The logic is that these are your only two options if you oppose inexpensive fiat.

Kaivey said...
This comment has been removed by the author.
Kaivey said...

Rewritten -

I'm all for public banks but as we have a free market, then private banks, if they do their job right, aren't so bad, in theory. 

Although the money is created out of thin air, it comes as a contract. The person who borrows the money has to do real work to get paid, and then he will be able to pay the loan off. The borrowed money gets its value when the borrower does the work to earn the money to ba able to pay the loan back. 

All money is work in a stored form. If I work in my dentist's garden for four hours and he gives me a voucher for an hours work at his surgery, then I have been paid. 

But I could borrow some vouchers from a bank and with them I could buy and hour's worth of work at the dentist. Now, when I do four hours work in my dentist's garden, he can pay me in vouchers. And I now have the vouchers to pay the loan off. If I do an extra 15 minutes in my my dentist's garden, I can then earn the money to pay interest I owe back too. 

Can you see how the voucher system works, and why bank credit is real money? It's money up front, for sure, but work has to be done afterwards which turns it into real money.

Work is money, and money is work. We could work for each other directly, but it would be cumbersome and modern society could not exist. So, fiat money is smart way to pay each other for doing work.

The fiat system is a brilliant as no commodities are needed - no expensive gold needs to be dug up first. Fiat is incredibly inexpensive to produce, usually with just digits being typed into a computer keyboard. The bank charges a small fee to administer the service, and all the money disappears again as the loan gets paid back.

As the loan gets paid off, the person will be working to obtain the money which will just go straight back to the bank to be destroyed. Now the work has been done and everyone has been paid. 

You can view the fiat money system as a promise to do work, where, when the work gets done the money is earned to pay the loan back to the bank. Everything is now in balance and there is no new money created out of thin air floating about forever - it all has to be paid back.

Fiat money and bank credit are not free money.

Work = money, and money = work. The fiat/ bank credit system is how we exchange work with each other in the most easy to accomplish form. 

Ed Zimmer said...

Rather than define "fiat", define "fiat currency". That's currency that has value only to the extent it's users believe it has value. Users believe it has value only to the extent that it reliably and consistently accomplishes what they expect of it. If its users perceive that its purchasing power next year will be roughly equivalent to this year and that the currency issuer's economy is relatively stable, an issuer's fiat currency is stable.

Andrew Anderson said...


Rewritten -

I'm all for public banks but as we have a free market, then private banks, if they do their job right, aren't so bad, in theory.
kv

Except we don't have truly private banks and neither are public banks an ethical option to our current government-privileged banks.

Andrew Anderson said...

That's currency that has value only to the extent it's users believe it has value. Ed Zimmer

Try telling that when your taxes are due - IN FIAT.

Ralph Musgrave said...

Bob Rodis opposes commercial bank created money AND central bank created money. But he does apparently want "voluntarily" created money - which consists of what exactly? He doesn't tell us because he is clueless.

The reality, as anthropologists have shown, is that "voluntarily created money" just hasn't arisen in most societies in history: i.e. it is kings, rulers, etc who have introduced money.

You could count tally sticks and bills of exchange as a form of voluntarily created money, but they are hopelessly inefficient compared to good old dollars. Anyway I doubt Bob Rodis knows what tally sticks or bills of exchange are.

Konrad said...

Federal Reserve Chairman Jerome Powell is doing his part to distract public attention from the disastrous private debt by whining about the trivial federal debt. "I'm very worried about it," Powell said at The Economic Club of Washington, D.C.

Powell said the U.S. government is “fiscally unsustainable,” even though the U.S. government can create infinite money out of thin air.

Powell has overseen a number of interest rate increases, which increase the amount that newly sold Treasury securities pay as interest. Powell says that this non-burden (caused by him) is a burden on the U.S. government.

The ultra-corrupt Fitch Ratings says that because of the ongoing government shutdown, Fitch may reduce the federal government's triple-A score. (All serious investors ignore this nonsense.)

https://www.cnbc.com/2019/01/10/fed-chairman-powell-says-he-is-very-worried-about-growing-amount-of-us-debt.html

Ralph Musgrave said...

There are two big problems with commercial / private bank created money. First, that money is a short term liability of those banks - banks borrow short and lend long. But that strategy fails regular as clockwork: most recently in 2007/8.

So why have a form of money that risks bank failures and ten year long recessions when the central bank can create any amount of money any time: enough to bring full employment in fact.

Second, as Joseph Huber explained in his work "Creating New Money" (p.31), money creation by private banks enables them to lend at an artificially low rate of interest. Clearly if you're a money lender and you can simply print some of the money you lend out rather than ATTRACT IT by paying interest to depositors & bond holders, you're on to a winner. Put another way, the profits from seigniorage are a subsidy of private banks.

Kaivey said...

Okay, government fiat money is slightly different to bank credit. Bank credit needs to be paid back, but governments can deficit spend where not all the money gets paid back as taxes. When people pay tax, they are forfeiting some of the work they have done and this pays for the public services. But deficit money can circulate in the system bringing the economy up to steam, or people can also use it for their savings, but the bank, or their saving scheme, will reinvest that money too. The deficit money becomes real money as society does the work to supply the goods and services the government buys - which are the services for the public.

AXEC / E.K-H said...

MMT: The art of shooting oneself in the head
Comment on Kaivey on ‘Michael Hudson: Oligarchy will never cancel the debt’

“Here is maverick economics Professor Michael Hudson on MMT, taken from his book J is for Junk Economics (p.155-7). Hudson is supportive of the theory and the economic policies which it implies.” (Nick Johnson)#1

On the other hand, Michael Hudson maintains: “Every society in history for the last 4,000 years has found that the debts grow more rapidly than people can pay,” he says. “The problem is a small oligarchy of 10 percent of the population at the top to whom all of these net debts are owed to. You want to annul the debts to the top 10 percent. That’s what they’re not going to do. The oligarchy is running things. They would rather annul the bottom 90 percent right to live than to annul the money that’s due to them. They would rather strip the planet and shrink the population and be paid rather than give up their claims. That’s the political fight of the 21st century.” (See intro)

Michael Hudson is either a lousy economist or schizo.

The macroeconomic Profit Law is given as Q=Yd+(I−S)+(G−T)+(X−M) and reduces to Q=(G−T) for Yd, I, S, X, M = 0. The reduced Profit Law says that the profit of the business sector Q is equal to the deficit (G−T) of the public sector. In a nutshell: Public Deficit = Private Profit. In other words, permanent deficit-spending is a permanent free lunch for the Oligarchy.

Roughly speaking, the MMT policy of deficit-spending/money-creation produces a growing public debt which is, by and large, held by the Oligarchy. And the Oligarchy agrees on rolling over the debt again and again, but does not agree to annul it: “That’s what they’re not going to do.” No, this is the very definition of debt that it has to be repaid eventually. In the meantime, the creditor gathers interest income.

Michael Hudson’s economic schizophrenia consists of promoting MMT and thereby permanently feeding the Oligarchy through deficit-spending and then complaining that 10 percent of society is “running things”.#2

MMTers are too stupid to realize that it is MMT policy itself that empowers the Oligarchy continually.#3

Egmont Kakarot-Handtke

#1 Michael Hudson on Modern Monetary Theory
https://peofdev.wordpress.com/2017/07/31/michael-hudson-on-modern-monetary-theory/

#2 MMT: A free lunch for the Oligarchy
https://axecorg.blogspot.com/2018/11/mmt-free-lunch-for-oligarchy.html

#3 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html

Kaivey said...

Good points, Ralph, and more to reflect on. Money can get complicated.

Kaivey said...

'Roughly speaking, the MMT policy of deficit-spending/money-creation produces a growing public debt which is, by and large, held by the Oligarchy. And the Oligarchy agrees on rolling over the debt again and again, but does not agree to annul it: “That’s what they’re not going to do.” No, this is the very definition of debt that it has to be repaid eventually. In the meantime, the creditor gathers interest income.'


Egmont. The government doesn't charge interest on the government created deficit
money, so people can store it without worrying about the interest. So, what's the problem with some people using it as their savings, even if they are very rich?

Noah Way said...

Time to cancel the oligarchy.

Kaivey said...

That's true, Ed Zimmer, but the whole economy has to be tanking for it to be a concern. Then nothing is safe, anyway.

Andrew Anderson said...

The government doesn't charge interest on the government created deficit
money, so people can store it without worrying about the interest. So, what's the problem with some people using it as their savings, even if they are very rich?
kv

Fiat is the creation and property of the State. So why should banks and the rich get to use it for free, kv?

That said, ALL citizens have an inherent right to use fiat FOR FREE up to a reasonable limit but beyond that they should pay for it, i.e. negative interest since fiat is meant to circulate, not be hoarded or used to drive people into debt as the banks do.

Noah Way said...

Proper taxation would keep money from accumulating in the wrong places. Just like it does now, we just need to change the definition of "wrong".

Andrew Anderson said...

"Oligarchy will never cancel the debt" Dr. Michael Hudson

Dr. Hudson might note the following then:

1) Abolishing all privileges for "the banks" would be deflationary, since the repayment of existing credit could not be safely balanced with new credit.

2) Properly metered equal fiat payments to all citizens could just counter the deflation in 1).

The above is roughly what Steve Keen advocates in his "A Modern Jubilee."

So no need to cancel the debt in the first place IF we'll combine restitution with reform.

AXEC / E.K-H said...

Kaivey

You say: “The government doesn’t charge interest on the government created deficit money, so people can store it without worrying about the interest. So, what’s the problem with some people using it as their savings, even if they are very rich?”

OK, let us go step by step into the political details.

(i) The government follows MMT advice and initiates deficit-spending/money creation for some worthy social purpose.

(ii) According to the reduced Profit Law, profit of the business sector Q is equal to the deficit (G−T) of the public sector, i.e. Public Deficit = Private Profit.

(iii) Only the central bank exists. Profit takes the form of deposits at the central bank. The central bank pays no interest on deposits.

(iv) Does the business sector keep idle balances at the CB? Hardly. One possibility is profit distribution. Let us assume that all profits are distributed to the firms’ owners, i.e. the Oligarchy. The business sector’s deposits at the central bank go down, the Oligarchy’s deposits go up.

(v) Does the Oligarchy keep idle balances at the CB? Hardly. They take the money and finance foundations, media, political parties, universities, think tanks, members of the legislative/executive, charities, and a horde of social media trolls. The Oligarchy does not invest in business but in political power.

(vi) The media/academics/trolls then get very busy and tell the world that MMT is a good thing, that it eliminates unemployment and other social woes, that public debt is an asset, that the state cannot go broke, that budget balancers are either yokels or sadists, that MMTers are the real Progressives, that MMT is a scientific breakthrough, and that nobody has to worry about children and grandchildren because they owe the ever-increasing public debt to themselves.

(vii) Eventually, these political investments bear fruit, the “people” get what they want, and the cycle starts again at (i). The whole thing is a positive feedback loop.

Your idea that the Oligarchy puts their distributed profits as savings on a zero-interest account is, of course, possible in principle. This presupposes, though, that the Oligarchy is even more stupid than you which, however, is an extremely unrealistic assumption.

Egmont Kakarot-Handtke

Kaivey said...

But isn't that private profit that everyone makes. All the small and medium sized businesses, and all businesses, and my pension and savings. What's wrong with that? You say the debt has to repaid one day, but why? Some people even say that government deficit spending is 'debt free' money.

Money is very difficult to understand. If all the money came from private banks, then it would all need to be paid back one day. But if the oligarchs make billions in profits, then they get to keep that money for good. It's theirs and they earned it according to the rules of the market. But if it never gets paid back then compound interest will kick in and other people be in debt they can't repay. The rich capture the money as people buy their goods and services, but how do people pay the loan back. They can repay loan back but someone else will have to be in debt.

I guess it's the velocity of money which means the the loans do get paid off. A dollar may circulate 7 or 8 times before the bank destroys it. A dollar going through the bank may be considered to have paid off part of the loan, but the bank also pays it's staff, its taxes, and all its outgoings and so the money circulates again back out into society. You and the MMTers may understand this better.

Don't get me wrong, Egmont, I'm interested in your ideas.

AXEC / E.K-H said...

Kaivey

You play dumb: “You say the debt has to repaid one day, but why? Some people even say that government deficit spending is ‘debt free’ money.”

Debt has to be repaid because this is the very definition of debt. Otherwise, it is a gift.

The MMT salespeople are hell-bent on selling deficit-spending/money-creation and when people have second thoughts about exploding public debt they are told that this (i) is not a debt at all but savings, (ii) will not be repaid anyway, (iii) is for a good social purpose and only bad people are against helping the unemployed and the poor and the vulnerable, (iv) that the Oligarchy will never cancel the debt, (v) a debt jubilee will eventually solve all problems.

All this is self-contradictory blather.

Your role as a member of the MMT sales team is to play down the negative consequences of MMT policy for the ninety-nine-percenters and to distract from the fact that that the one-percenters/Wall Street/Oligarchy are attempting to get the institutional profit-generator treasury/central bank politically into their hands and to execute the Functional-Finance program of permanent deficit-spending/money-creation which is nothing but a program of permanent self-alimentation.

Take notice all morons from the Walrasian, Keynesian, Marxian, Austrian, and MMT school, macroeconomic profit does not come from the exploitation of workers or the value creation of entrepreneurs but from deficit-spending of the household and government sector. Your profit theories are false since Adam Smith. Your ideas about Capitalism and Socialism are proto-scientific garbage. Your economic policy proposals are a political fraud.

Egmont Kakarot-Handtke

Kaivey said...

If the oligarchs capture all the government deficit money then we could tax them more until G-T = 0. Then your equation balances.