Saturday, June 27, 2020

Michael Hudson on Coronavirus and Debt Winners and Losers

Yves here. Michael Hudson discusses the deflationary impact of the coronacrisis and how modern, misguided approaches to unsustainable debt loads are making matters worse.
Remarks given at the 1st ASECU Teleconference ‘Systematic Crises Triggered the Current Pandemic & Progressive Way-Outs,’ May 8, 2020
Naked Capitalism
Michael Hudson on Coronavirus and Debt Winners and Losers
Yves Smith

5 comments:

Ralph Musgrave said...

Yves says "....in this case the winner is the aggressor – the financial sector. Its demands for payment have set the stage for today’s economic breakdown." Oh yes?

I fail to see how banks which have made loans to business and households and now find some of the latter cannot repay their loans or pay the interest have gained anything from the Covid crisis.!!!

Matt Franko said...

They are all johnnie one notes Ralph...

Think of a Neil Young electric guitar solo... if you have to ...

Andrew Anderson said...

[here's a comment Yves would not publish]

Business and industry doesn’t have to wait until they have the money to expand. Sound of the Suburbs

That's Gold Standard thinking since inexpensive fiat allows the entire economy to use, save and honestly lend FIAT without the need for private bank deposits.

So there's no need to defend privileges for banks since those are OBSOLETE as well as inherently CORRUPT.

Ralph Musgrave said...

Andrew, I quite agree. Perhaps one of the daft supporters of the existing bank system in academia can riddle me this.

Mutual funds, stock brokers, pension funds etc etc lend out or invest money placed with them by customers, but there's no taxpayer backed deposit insurance or billion dollar bail-outs for them if they make a hash of it, and quite right because the latter transactions are COMMERCIAL transactions, and it's not taxpayers' job to support commerce. In contrast, banks do EXACTLY the same thing, i.e. lend money, but if THEY make a hash of it, taxpayers come riding to the rescue, despite the fact that what banks do there is just as much COMMERCIAL as is the case with stock-brokers etc.

Of course people have a right to a totally safe method of storing money, but the state can provide that facility, while not engaging in COMMERCE, i.e. lending on the money.

Matt Franko said...

Ralph,

Bank loans are Assets to a bank.... deposits are Liabilities...

Loans are regulated against Capital ie banks are required to maintain a minimum ratio of (A-L)/A .... (A-L)/A > Regulatory Constant

How are banks lending out munnie placed with them by deposit customers?

Look at the equation in time domain... . if Deposit Liabilities increase without banks themselves creating a corresponding increase in Capital, the numerator DECREASES and the bank risks regulatory violation...

The increase in (A-L) has to happen FIRST.... before any additional deposit liabilities can be accepted by a bank...