Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
The Lehman 10th Anniversary spin as a Teachable Moment
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
“Was it worth it? What was not saved was the economy.”
ReplyDeleteThe financial economy was saved, but not the real economy. Wall Street was saved, but not Main Street.
“Today’s financial malaise for pension funds, state and local budgets and underemployment is largely a result of the 2008 bailout, not the crash.”
Yes, the parties saved were creditors (i.e. banks and bondholders), not debtors, who are now worse off than ever.
Of course, this was what most Americans wanted. For most Americans, rescuing creditors is good, while rescuing debtors is evil. It is “communism.” What does rescuing debtors have to do with communism? Nothing. But the label of “communism” works anyway.
“Also saved was the idea that the economy needs to keep the financial sector solvent by an exponential growth of new debt.”
This is what will finish the Western Empire. Public debt (the “national debt”) is trivial, but private debt is a lethal cancer.
I could comment on the rest of this article, but all of it is outstanding. Everyone should read it.
“The financial economy was saved,”
ReplyDeleteAll of their earnings were wiped out .... Lehman went bankrupt, BS went bankrupt, GSEs were bought out for $1 each, AIG wiped out, etc....
WaMu wiped out , First Union, most Mortgage REITs wiped out,
ReplyDeleteMergers, acquisitions, and bailouts do not mean “wiped out.”
ReplyDeleteWaMu was bought by JP Morgan. First Union merged with Wachovia in 2001. Wachovia was bought by Wells Fargo in 2008.
AIG was bailed out, not “wiped out.” Same with GSEs like Fannie Mae and Freddie Mac. Real estate investment trusts were not wiped out.
The financial world was bailed out, not “wiped out.” That’s why the stock market continues to set records.
I the past I thought you had the intelligence of a maggot. I apologize for that.
You have the intelligence of a rock.
“Michael Hudson was one of the few that predicted the crisis.”
ReplyDeleteBullshit...
Lol all those investors got nothing....
ReplyDeleteThe title says “10 tr Lehman anniversary”... anniversary of what?????
Their bankruptcy douche....
How does you Art Degree people’s brain work where “bankruptcy” becomes synonymous with “bailout”???
ReplyDeleteMergers, acquisitions, and bailouts do not mean “wiped out.”
ReplyDeleteWhat happened then is that consolidation in finance made the TBTF's even bigger and more systemically dangerous.
Bullshit
ReplyDeleteHarper's Magazine May 2006
The new road to serfdom — An illustrated guide to the coming real estate collapse
Michael Hudson
Uh, the Lehman bankruptcy led to the coverup of insolvency and bailouts of the TBTF's?
ReplyDeleteIt was the Lehman bankruptcy that catalyzed a crisis that was building at least from the March and the failure of Bear Stearns and its takeover by Chase.
FRANKO™
ReplyDeleteGuaranteed 100% fact-free.
Here is the narrative: the rich are saved form losing money; only the little people pay taxes. What is so hard about understanding this?
ReplyDeleteFor Franko, bailed out means "wiped out." Richer than ever means “wiped out.” The infusion of billions of federal dollars to save creditors means a "total loss" for creditors.
ReplyDeleteArt Degree
Art Degree
Art Degree
In the 1995 movie Se7en, a cop asks a serial killer, “When a person is insane, as you clearly are, does he, like, know he’s insane?”
We can amend that to read, “When a person is a moron, as Franko clearly is, does he, like, know he’s a moron?”
It was the Lehman bankruptcy that catalyzed a crisis that was building at least from the March and the failure of Bear Stearns and its takeover by Chase.”
ReplyDeleteEverything was fine the system was dealing with some volatility in prices of real property caused by inappropriate defense acquisition policy for foreign “nation building “ and the short term fiscal surpluses being put into the TTLs...
Third week in September Fed started to increase Reserve Assets by 100b per week and Broker Dealers couldn’t get financed as banks had to reallocate Capital to finance these trillions of new reserve assets thus shutting down all the Broker Dealers and causing a reduction in risk asset prices...
I predict a hurricane will hit the US east coast....
ReplyDeleteTom he has been “predicting” another one now for 10 years... might as well say Shiff predicted it....
ReplyDeleteAll the MMT people have been bearish the whole time on “deficit too small!” thesis... (meanwhile now “deficit!” is increasing and all we hear is crickets btw...so this is hard to understand...)
Meanwhile leading flow has been steadily increasing the whole time even just a little under Dems and now recently accelerating under typical GOP style fiscal policy and things are improving...
Tom you know where you have to watch these days is China... they are adding reserves and their market keeps going down.... they better stop adding reserves or soon they may cause a bigger GFC type problem and have to recapitalize their banks like Germany...
“Here is the narrative: the rich are saved form losing money;”
ReplyDeleteLOL, if you were an owner of Bear, Lehman most BDs you lost munnie, , if you had the GSEs you lost munnie, , if you had a bank you lost munnie, , if you had a mortgage REIT you lost munnie
You guys Liberal Art/Platonist/dialectic method where you keep coming up with these whacked out “theses!” that defy the empirically valid just does not stand in a world being absolutely dominated by Science.... sorry....
ReplyDeleteI saw this film on TV when I was about 10 years old and it was about a young Prince and in it he did something wrong, so they got the "whipping boy" out and caned him. I asked my mum, why did they do that, and she told me that in the olden days they weren't allowed to whip the Prince so they whipped a poor pauper boy instead? I thought, hey, that isn't fair. But it looks like this stills goes on today, the bankers f-up and everyone else gets the thrashing, while the elite go, 'ouch, that really hurt, I thought for a moment that I might lose some of my money'.
ReplyDeleteThere is something about you guys dialectic you’ve been trained in that is causing you guys to see everything that stands opposed to your “thesis” as a conspiracy .... I don’t fully understand it yet but am working on it for you guys .... I’ll let you know...
ReplyDelete"LOL, if you were an owner of Bear, Lehman most BDs you lost munnie, , if you had the GSEs you lost munnie, , if you had a bank you lost munnie, , if you had a mortgage REIT you lost munnie."
ReplyDeleteIndeed! And the 99% lost their homes, pension plans, employment, credit rating, and in some cases their lives.
Why am I not surprise you have stated you watch FOX cable news.
CLUELESS!!!!!
"It was the Lehman bankruptcy that catalyzed a crisis that was building at least from the March and the failure of Bear Stearns and its takeover by Chase.”
ReplyDeleteEverything was fine the system was dealing with some volatility in prices of real property caused by inappropriate defense acquisition policy for foreign “nation building “ and the short term fiscal surpluses being put into the TTLs...
Third week in September Fed started to increase Reserve Assets by 100b per week and Broker Dealers couldn’t get financed as banks had to reallocate Capital to finance these trillions of new reserve assets thus shutting down all the Broker Dealers and causing a reduction in risk asset prices...
Matt, as I said before, this is a huge claim and to be taken seriously you need to write up a paper on it showing how the leverage ratio was the chief cause of the crisis and how the crisis could be have been avoided by changing the ratio. Otherwise, it is just gassing.
Everything was fine after Bear? Dream on.
Before Bear, based on what I was seeing on the ground, I had already told my friends in RE to get out in August-September 2006. Those that did quickly made out. Those that didn't — some times the same people, since RE is illiquid — got crushed. A friend is still holding a piece of property from then, waiting for prices to recover. But that was the only property he got stuck with and did well on the others. So no big deal.
After Bear, I told my friends to lighten up on equities. By summer I said to get out, that the shit could hit the fan. Not that it would, but all the conditions were in place for a global crisis.
I was not involved in either RE, finance or economics at the time. I was just a curious bystander that could read the writing on the wall. Or was I just lucky?
This I will tell you. I never give friends advice on anything unless I am sure and it's a really big deal for them. This was obvious to me. Only later did I learn what was actually going on. I did not run into MMT until after than, since I started to look into why the "experts" had missed the obvious.
Tom he has been “predicting” another one now for 10 years
ReplyDeleteDid you read his article? He gave reasons that turned out to be correct. There is a difference between a raw prediction and a detained forecast.
He is also right about the next downturn, and he is not alone in saying it. The conditions were not addressed and now there is still a large private debt overhang.
When the next pullback occurs, and the financial-economic cycle has not been abolished ("It's different this time"), those chickens will come home to roost. Why? Because I doubt very much the politics will permit another rescue of the ownership class at the expense of workers, who also happen to be the majority of voters. The bipartisan establishment of both parties is on the way out and already struggling mightily for survival in power.
When exactly will it hit? No one can tell for sure, but financial and economy cycles under capitalism are sure, although their frequency cannot be predicted exactly. On the other hand, there are indicators of the amplitude based on prevailing conditions that change slowly, other than at turning points.
I have been saying for some time that I am betting on the next "awakening" to hit as a result of crisis in the decade of the 20s. I think there will be a big reorganization then, as there was in the 30s of the last century. It turned out good for the US, terrible for Germany and therefore the world.
We'll have to wait and see what happens this time. But I expect global warming to be playing an increasing large factor socially, politically and economically then. China may be reaching parity with the US by then and beginning to surpass it, owing the sheer numbers. When China becomes the market that everyone wants access to instead of the US market with the US workers being the consumers of last resort, everything changes.
This will be happening 2020-2040. Of course, it's impossible to foresee the details and timing, e.g., whether there will be war, which is looking increasingly likely, I would say, baked in already.
Then there is also the march of the time into the Digital Age and AI.
We stand on a cusp of history in my view. The old wave has crested and begun to break, while the new wave is rising behind it on the ocean of time.
“Everything was fine after Bear? Dream on”
ReplyDeleteThe system was dealing with it as normal... similar to LTCM in late 90s..., building material costs were collapsing when DOD bid went away and corresponding real property prices were falling which introduced bearish volatility....
Bush did the 165b retroactive tax refund ($650 checks sent out in May) to drain the TTLs and things started to stabilize after Bear that summer...
Once Fed started the big reserve add third week in September the whole thing locked up and Lehman and the others could not get funded until govt did the TARP to add capital (350b) to cover all the trillions of new reserves they added... then system stabilized and started back up but slooooowwwwly...,
This is what is happening currently in Germany and China only to a lesser magnitude...
“this is a huge claim and to be taken seriously you need to write up a paper on it showing how the leverage ratio was the chief cause of the crisis”
ReplyDeleteI already know what happened thru the science ... I’m telling you didactically here .... this is not some “thesis” I am conjuring up like a squirrel getting a nut...... if some dialectic trained person wants to have a go at it via that methodology then I will certainly turn over all of this to them and they can have at it via that methodology like you say...
I already know what happened via the science... I’m not a dialectic I’m a didactic...
Tom what you dialectic guys appear to be doing in here is when your “thesis” is true, then you claim any “anti-thesis” is a lie.... eg “neo-Liberal lies!!” etc... the whole “neoliberal conspiracy!” is drawn like a gun...
ReplyDeleteBut when your thesis is false (eg “deficit too small!”, “bailouts!”, etc..) then you are saying any “anti-thesis” is either false or you say you disagree with that anti-thesis... but not calling it a “lie!!!”...
So something in your thesis which is true which is then opposed you are calling a lie but something false in your thesis which is then opposed you don’t call a lie...
So this is interesting....
I already know what happened thru the science
ReplyDeleteThen write a scientific paper on it and put it out there for debate.
As Feynman said, the purpose of science is to prevent us from fooling ourselves.
If yu are sure everyone in economics and finance is a fool, then show them.
Or if you regard it as proprietary knowledge that gives you an edge in trading, then be quite about it and don't make claims that remain unsubstantiated.
Matt, you still misunderstand what dialectic is about. As I said, it is about several things, dialogic aka Socratic dialectic, i.e., open debate based on reason, and also historical dialectic as the opposition of conflicting view in the course of events. Neither of these obey the thesis, antithesis, synthesis model as a general rule, although there are special cases that fit it.
ReplyDeleteScience is often taught didactically, least at the more basic levels of high school and undergrad, but at the graduate level on needs to defend one's views, and that is dialectical.
Scientific papers are part of the dialectic of science where views are put forward and challenged.
Subjects that have formal frameworks and normal models are generally taught didactically. Subjects that don't are not taught didactically.
Some subjects that have competing frameworks are sometimes taught didactically. This happens when the partisans of a particular view point have the upper hand politically and can close the debate. This is the case in economics. Economics should be taught dialectically by presenting the conflicting points of view and showing the strengths and weaknesses (tradeoffs) involved in each approach.
As far as lying goes, it is found to be present also in the scientific world. People do knowingly misrepresent data, for example. That is lying. Of course, people also make mistakes. That is not lying. Scientific ethics is clear on this. There are cases where intent is not clear, too, and people argue over whether it was an innocent mistake.
Discovering this is part of the dialectic of science.
“Scientific papers are part of the dialectic of science where views are put forward and challenged. ”
ReplyDeleteIn science they write reports.... you may be talking about Rationalist Science with the dialectic like Darwinism...
Looks like something went down in 1860 a schism or something..... first year that a BS Degree was awarded and year Darwin published Origin of the Species.... the BS people just went off in their own science methodology and left the rest of the academe to the dialectic...
What I’ve written here over time should be enough... if the reader is competent...
Matt, you don't know much about science other than what you have been taught didactically as an undergrad.
ReplyDeleteThis is too silly to merit a reply.
“other than what you have been taught didactically”
ReplyDeleteI know ... that is what works.... the dialectic doesnt work (deficit dove is best you can hope for due to the built in compromise) ... so if you want to do what works then that’s what you have to do...
Unless you like getting nowhere...
ReplyDelete