Michael Hudson — “Creating Wealth” through Debt: The West’s Finance-Capitalist Road

I kid to this previously, but it was in a list of links. It is important enough to give it its own post.

Hudson at his best. It's a must-read. Longish, so save it for the weekend if time is an issue.

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
“Creating Wealth” through Debt: The West’s Finance-Capitalist Road— To be delivered at the Peking University, School of Marxist Studies, May 5-6, 2018

Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

How Taxes Were Shifted Off Real Estate — Sharmini Peries interviews Michael Hudson

Video and transcript.

Michael Hudson
How Taxes Were Shifted Off Real Estate
Sharmini Peries interviews Michael Hudson

Michael Hudson and Ahmet Öncü — The Legacy of Veblen in the Age of Post-Industrial Capitalism

An important book has just been published from a 2012 conference in Istanbul on Thorstein Veblen: Absentee Ownership and its Discontents, edited by Michael Hudson and Ahmet Öncü. It is published by ISLET and is available on Amazon.…

The present collection of essays trace how Thorstein Veblen described the way in which the mid-19th century’s industrial capitalism was becoming centered on what today is called the Finance, Insurance and Real Estate (FIRE) sector. Each author in this volume discusses the character of today’s capitalism, and how and why the capitalist class remains politically dominant despite the fact that it repeatedly fails to fulfill the requirements of economic leadership it claims to fulfill. Together, these papers contribute to a better understanding of “capital in the twenty first century,” to use the phrase that has become popular following Thomas Piketty’s best seller.…

Excellent post on Veblen's prescience about economic rent and financial rent-seeking by FIRE becoming the basis of late stage capitalism.

Counterpunch
The Legacy of Veblen in the Age of Post-Industrial Capitalism
Michael Hudson and Ahmet Öncü

Financial Diversion — Gordon Long interviews Michael Hudson

On the FIRE economy.

MichaelHudson.com
Financial Diversion

Gordon Long interviews Michael Hudson

Dean Baker — Washington Post Pushes for Government Guaranteed Subprime Mortgage Backed Securities

The bulk of its lead editorialtouting the prospects for bipartisanship is focused on pushing the Johnson-Crapo bill, a measure that would replace Fannie Mae and Freddie Mac with a system whereby the government guarantees 90 percent of the value of privately issued mortgage backed securities (MBS). This means that Goldman Sachs, Citigroup and other folks who might issue MBS could now tell their customers that even in a worst case scenario they couldn't lose more than 10 percent of the value of their securities. 

Fans of the market should be asking two questions here. What problem is this intended to solve? And why do private issuers need a government guarantee?

More moral hazard and perverse incentives in FIRE.

Beat the Press
Washington Post Pushes for Government Guaranteed Subprime Mortgage Backed Securities

Dean Baker

If you had any doubt that the upper echelons of finance were sociopaths, read this

Great piece in New York Magazine by a reporter who crashed the annual gala of the Kappa Beta Phi "secret society" of financial titans. If you had any doubt that these people are a bunch of depraved, egomaniacal sociopaths, read this.

Here is an excerpt:

As I walked through the streets of midtown in my ill-fitting tuxedo, I thought about the implications of what I’d just seen.

The first and most obvious conclusion was that the upper ranks of finance are composed of people who have completely divorced themselves from reality. No self-aware and socially conscious Wall Street executive would have agreed to be part of a group whose tacit mission is to make light of the financial sector’s foibles. Not when those foibles had resulted in real harm to millions of people in the form of foreclosures, wrecked 401(k)s, and a devastating unemployment crisis.

This should be a siren call telling us that if our nation is to survive--no, if THE WORLD AS WE KNOW IT is to survive--where societies are established for the benefit and "general welfare" of the people who live in them, then the Finance, Insurance, Real Estate (F.I.RE) sector has to be dismantled or shrunk down to a level where it's parasitic tentacles are no longer a threat.

Wer're a long way from that.

Here is a list of the Kappa Beta Phi members.

Erika Bolstad — Report finds insurers unready for climate change-related disasters

The insurance industry is ill-prepared to handle climate change-related disasters, regulators and industry watchers warned Thursday, saying the business hasn’t evolved enough in the face of rising sea levels and extreme weather fueled by climate change.

Failure to plan for the effects of climate change might challenge the stability of one of the largest sectors of the world economy, said Mindy Lubber, the president of the sustainability nonprofit organization Ceres, which authored a report that looks at insurers in three states. There were 11 extreme-weather events that each caused at least a billion dollars in losses last year in the United States. Superstorm Sandy alone caused $50 billion in economic losses.

"If climate change undermines the future availability of insurance – something we’re already seeing in places like Florida – it threatens the economy and taxpayers as well," said Lubber, whose nonprofit encourages investors, companies and public interest groups to accelerate sustainable business practices....

Only 23 companies of the 184 required to make such disclosures have comprehensive climate-change strategies.... 
Of the 23 insurance companies with a comprehensive strategy to cope with climate change, 13 are foreign-owned, the study found.

Read more here: http://www.mcclatchydc.com/2013/03/07/185159/report-finds-insurers-unready.html#storylink=cpy

US companies in denial?

McClatchy
Report finds insurers unready for climate change-related disasters
Erika Bolstad | McClatchy Newspapers

Randy Wray — Crony Capitalism, American Style

The Wall Street bank’s business model is fraud. In many of my blogs I’ve been focusing on US real estate because a) homes are where most of the wealth of the bottom 99% of the population is held; b) the real estate mess is like Shrek’s onion, with layer upon layer of fraud; c) the bursting of the real estate bubble is what set off the Global Financial Crisis; and d) real estate fraud is the main tool used by the 1% to move all wealth to the top.

Each day we get more evidence to support what many of us have been saying for the past couple of years.

Economonitor | Great Leap Forward
Crony Capitalism, American Style
L. Randall Wray | Professor Economics, UMKC

Michael Hudson and Dirk Bezemer — Incorporating the Rentier Sectors into a Financial Model

Michael Hudson has put up his and Dirk Bezemer's recent paper on rentierism at his place, if you haven't read it yet. It's short.

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.

Michael Hudson
Incorporating the Rentier Sectors into a Financial Model
Michael Hudson, Visting Professor, UMKC, and Dirk Bezemer, Associate Professor, University of Groningen

Glad to see MMT allies bringing economic rent to attention. It is not only central to the problems we face, in many ways it is the problem as the fat underbelly of modern capitalism, filled with parasites, that is resulting in many diseased conditions, just as happens in human physiology.

Michael Hudson — Paul Krugman’s Economic Blinders (revised)

Michael Hudson's initial post on this appeared at Naked Capitalism here, with many comments, and was posted here at MNE, also with many comments.

Subsequently, Hudson sent this message to gang of 8:

Mitch Green at UMKC has thoroughly re-edited and improved my article from today’s NEP and Counterpunch (and Steve Keen’s blog).     Michael

The edited version is a definite improvement and contains points for discussion, such as the Minskian aspect of MMT that requires reform in addition to fiscal policy adjustment and the neoliberal position regarding trade under a floating rate system holding that currency adjustments will resolve imbalances arising from disproportionate labor costs among countries.

It seems to me that Hudson is articulating a more nuanced MMT position, taking composition of debt into account, instead of challenging it arguing that the outsized role that FIRE has carved for itself, along with a tax structure that shifts taxes disproportionately onto labor relative to ability to pay, is leading to unsustainable private debt, public debt being used to funnel wealth to the top, and a trade imbalance arising from non-competitiveness of US workers due to their debt burden. The upshot is that there is a distributional problem that has become structural due to mishandling of debt.

Perhaps comments on the revised edition are called for.
Read it at New Economic Perspectives
Paul Krugman’s Economic Blinders

by Michael Hudson

Rodger Mitchell — What is AARP’s real mission? Not what you might think.

Because the public does not understand the differences between Monetary Sovereignty and monetary non-sovereignty, and because AARP, the media and the politicians don’t explain these differences, it is fairly simple to fool everyone into believing Social Security and Medicare are “broke” (John Boehner’s favorite lie).

AARP goes along with — in fact encourages — the BS, because a free Social Security retirement plan and a free Medicare are not nearly so profitable as paid-for retirement plans and paid for health insurance.

Did I mention? AARP sells insurance.

Read it at Monetary Sovereignty

What is AARP’s real mission? Not what you might think.
by Rodger Malcolm Mitchell

If you haven't already read Yves Smith's AARP Back in Bed With Effort to Cut Social Security and Medicare at Naked Capitalism, please do and pass it on as she requests.

Disclosure: I admit to bias. I sent my membership card back when AARP lobbied to deliver Medicare Part D into the hands of Big Pharma, as did many others at the time. This is not an organization that represents the interests of seniors. Don't be fooled.