Sat 2010-09-25 11:02 EDT

Where is the World Economy Headed?

Michael Hudson

...financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still to control land, basic infrastructure and the economic surplus -- and also to gain control of national savings, commercial banking and central bank policy...Indebted ``host economies'' are in a similar position to that of defeated countries. Their economic surplus is transferred abroad financially, while locally, debtors lose sovereignty over their own financial, economic and tax policy. Public infrastructure is sold off to foreign buyers, on credit and therefore paying interest and fees that are expensed as tax-deductible and paid to foreigners. The Washington Consensus applauds this pro-rentier policy. Its neoliberal ideology holds that the most efficient path to wealth is to shift economic planning out of the hands of government into those of bankers and money managers in charge of privatizing and financializing the economy. Almost without anyone noticing, this view is replacing the classical law of nations based on the idea of sovereignty over debt and financial policy, tariff and tax policy...Bankers in the North look upon any economic surplus -- real estate rent, corporate cash flow or even the government's taxing power or ability to sell off public enterprises -- as a source of revenue to pay interest on debts...The original liberals -- from Adam Smith and the Physiocrats through John Stuart Mill and even Winston Churchill -- urged that the tax system be based on the economic rent of land so as to keep down the price of housing (and hence labor's cost of living). The Progressive Era followed this principle by aiming to keep natural monopolies such as transportation, communication and even banks (or at least, free credit creation) in the public domain. But the post-1980 world has encouraged private owners to buy them on credit and extract economic rent, thereby shifting the tax burden onto labor, industry and agriculture -- while concentrating wealth, first on credit and then via the enormous recent public bailouts of this failed financial debt pyramiding and deregulation...At issue is the concept of free markets. Are they to be free from monopoly and special privilege, or free for the occupying financial invaders and speculators?...

World Economy Headed.

Fri 2010-09-17 19:54 EDT

Obama's Thatcherite Gift to the Banks

Michael Hudson

I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War's Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee -- cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain's notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees -- guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times...This threatens to be the kind of tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. The ``infrastructure bank,'' reports The New York Times, ``would be run by the government but would pool tax dollars with private investment.'' It would be a test balloon for financing ``a broader range of projects, including water and clean-energy projects,'' for which Democrats already are drawing up a blueprint...

bank; Obama's Thatcherite Gift.

Tue 2010-08-24 20:21 EDT

Gonzalo Lira: How Hyperinflation Will Happen

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain...For its part, the Federal Reserve has been busy propping up all assets--including Treasuries--by way of ``quantitative easing''...But this Fed policy--call it ``money-printing'', call it ``liquidity injections'', call it ``asset price stabilization''--has been overwhelmed by the credit contraction...the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation...Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It's not that they want more money--they want less of the currency: So they will pay anything for a good which is not the currency...Treasuries are now the New and Improved Toxic Asset...there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil...asset managers will sell Treasuries...right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields...The Fed's buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries...It will be a flash panic...By the end of that terrible day, commodites of all stripes--precious and industrial metals, oil, foodstuffs--will shoot the moon...if it doesn't happen this fall, it'll happen next fall, without question before the end of 2011...

Gonzalo Lira; happened; Hyperinflation.

Phil's Favorites - By Ilene Thu 2010-08-19 15:58 EDT

Time for a New, New Deal?

Phil of Phil's Stock World

...The Big Lie being told by the right is that we can solve our problems by cutting spending and (ROFL) lowering taxes...Of course, let's keep in mind that the $1.5Tn the government spends directly employs 2.7M people and millions more indirectly so, for every person you cut, make sure you add back $20,000 a year for unemployment benefits and administration (or are we going to throw them all on the street?)...the real glove-across-your-face insult to your intelligence comes when they try to tell you that giving tax breaks to the rich and to corporations will help...US Corporations only paid a grand total of $138Bn in taxes in 2009 (6.5% of all taxes collected)...US Corporations have done nothing but outsource America's future for decades and it is time for the bottom 99% of the income earners (those earning less than $250,000 a year) to wake up and smell the class warfare that is being waged against them. How can we even begin to entertain the idea of cutting government and cutting government spending when the sum total contribution of Big Business America represents a rounding error in our national budget?...When private business fails to expand, when the budgets cannot be balanced because 25% of the population is unable to make income tax contributions due to loss of jobs and homes -- then a wise man knows when it is time to step in and let the Government fill the void. Not with more bailouts to the rich who, like Reagan's deficit ``are big enough to care for themselves'' but with bold programs that invest in the future of this country and utilize the skills and labor of this country and make America strong and independent...

Ilene; new; new deal; Phil's Favorites; Time.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-23 11:01 EDT

Charting The Second Half Economic Slowdown

Goldman's Jan Hatzius...summarizes all the adverse trends that continue to not be priced into stocks. He notes that while the inventory cycle has boosted growth, this artificial rise is now losing steam. Key headwinds facing the economy are that fiscal policy, which has been expansionary, has now become to restrictive; that there has been no overshoot in layoffs for a mean reversion expectation; that the labor market multiplier is very much limited; that while capital spending is just modestly above replacement levels, the large output gap suggests spending should be subdued; the housing overhang is still huge and house prices have further to fall; that there are risks to US from European crisis; that inflation is dropping (and non-existent) even as utilization is low everywhere, which creates a major deflation risk; that the scary budget deficit will destroy any hope for future fiscal stimulus as public debt is surging out of control; lastly, with Taylor-implied Fed rates expected to be negative, the Fed's monetary policy arsenal is non-existent...

chart; dropped; economic slowdown; long; survival rate; Timeline; zero; Zero Hedge.

New Economic Perspectives Mon 2010-07-19 13:51 EDT

The Myths About Government Debt and Deficit as Told By Carmen Reinhart and Kenneth Rogoff

Yeva Nersisyan

...with nearly 10% of the US labor force unemployed and another 7% underemployed, the public debate is now focused on the false issue of deficits and debt. A case in point is a recent book by Carmen Reinhart and Kenneth Rogoff, ``This Time is Different'' that has become a bestseller...The media as well as academia have fawned all over this book...The crux of the book is that each time people think that ``this time is different'', that crises cannot occur anymore or that they happen to other people in other places. True. This is exactly what Hyman Minsky was arguing more than 40 years ago. Reinhart and Rogoff don't really explain why this perception leads to crises...The book is mostly on crises driven by government debt...[however] Aggregating data over different monetary regimes and different countries cannot yield any meaningful conclusions about sovereign debt and crises. It is only useful if the goal is to merely validate one's preconceived myth about government debt being similar to private debt...As far as I can tell Rogoff and Reinhart haven't identified a single case of government default on domestic-currency denominated debt with a floating exchange rate system...Professional economists are a major impediment on the way to using our economic system for the benefit of us all. And Reinhart and Rogoff are no exception.

Carmen Reinhart; Deficit; government debt; Kenneth Rogoff; myth; New Economic Perspectives; told.

New Economic Perspectives Fri 2010-07-02 17:26 EDT

Europe's Fiscal Dystopia: The ``New Austerity'' Road to Neoserfdom

Michael Hudson

Europe is committing fiscal suicide -- and will have little trouble finding allies at this weekend's G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and Prime Ministers from Britain's David Cameron to Greece's George Papandreou (president of the Socialist International) and Canada's host, Conservative Premier Stephen Harper, are calling for cutbacks in public spending...It is a self-destructive logic. Exacerbating the economic downturn will reduce tax revenues, making budget deficits even worse in a declining spiral. Latvia's experience shows that the response to economic shrinkage is emigration of skilled labor and capital flight...A half-century of failed IMF austerity plans imposed on hapless Third World debtors should have dispelled forever the idea that the way to prosperity is via austerity. The ground has been paved for this attitude by a generation of purging the academic curriculum of knowledge that there ever was an alternative economic philosophy to that sponsored by the rentier Counter-Enlightenment...

Europe's Fiscal Dystopia; Neoserfdom; new austerity; New Economic Perspectives; Road.

New Economic Perspectives Mon 2010-05-24 10:52 EDT

The Coming European Debt Wars

Michael Hudson

Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive. Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87% of Latvia's debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private sector debts to foreign banks, not to finance a domestic budget deficit as in Greece...No one wants to accept the fact that debts that can't be paid, won't be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies...The question is, who will bear the loss?...There is growing recognition that the post-Soviet economies were structured from the start to benefit foreign interests, not local economies. For example, Latvian labor is taxed at over 50% (labor, employer, and social tax) -- so high as to make it noncompetitive, while property taxes are less than 1%, providing an incentive toward rampant speculation...Future relations between Old and New Europe will depend on the Eurozone's willingness to re-design the post-Soviet economies on more solvent lines -- with more productive credit and a less rentier-biased tax system that promotes employment rather than asset-price inflation that drives labor to emigrate...

Coming European Debt Wars; New Economic Perspectives.

Sat 2010-05-22 21:16 EDT

CFEPS Research - L. Randall Wray

L. Randall Wray is a Professor of Economics at the University of Missouri-Kansas City, a Senior Research Associate at the Center for Full Employment and Price Stability [CFEPS]...A student of Hyman P. Minsky while at Washington University in St. Louis where he earned his Ph.D. in economics (1988)...Professor Wray has focused on monetary theory and policy, macroeconomics, and employment policy. He is currently writing on modern money, the monetary theory of production, social security, and rising incarceration rates (Penal Keynesianism). He is developing policies to promote true full employment, focusing on Hyman P. Minsky's "employer of last resort" proposal as a way to bring low-skilled, prime-age males back into the labor force. Wray"s research has appeared in numerous books and journals...

CFEPS Research; L. Randall Wray.

Sat 2010-05-22 20:00 EDT

"Drop Dead Economics": The Financial Crisis in Greece and the European Union

Michael Hudson

Financial lobbyists are using the Greek crisis as an object lesson to warn about the need to cut back public spending on Social Security and Medicare. This is the opposite of what the Greek demonstrators are demanding: to reverse the global tax shift off property and finance onto labor, and to give labor's financial claims for retirement pensions priority over claims by the banks to get fully paid on hundreds of billions of dollars of recklessly bad loans recently reduced to junk status. The Greek bailout should be thought of as a TARP for German and other European bankers and global currency speculators. Almost $1 trillion is being provided by governments (mainly Germany, at the cost of its own domestic spending) into a kind of escrow account for the Greek government to pay foreign bondholders who bought up these securities at plunging prices over the past few weeks. They will make a killing, as will buyers of hundreds of billions of dollars of credit-default swaps on the Greek government bonds, speculators in euro-swaps and other casino-capitalist gamblers. (Parties on the losing side of these swaps now will need to be bailed out as well, and so on ad infinitum.) This windfall is to be paid by taxpayers -- ultimately those of Greece (in effect labor, because the wealthy have been untaxed) -- to reimburse Euro-governments, the IMF and even the U.S. Treasury for its commitment to predatory finance. The ³sanctity of debt -- sacrificing the economy to pay bondholders -- is to be used as an excuse to slash Greek public services, pensions and other government spending...

Drop Dead Economics; European Union; Financial Crisis; Greece.

Thu 2010-05-13 13:39 EDT

The People v. the Bankers

Michael Hudson

Financial lobbyists here in the U.S. are using the Greek crisis as an object lesson to warn about the need to cut back public spending on Social Security and Medicare. This is the opposite of what the Greek demonstrators are demanding: to reverse the global tax shift off property and finance onto labor, and to give labor's financial claims for retirement pensions priority over claims by the banks to get fully paid on hundreds of billions of dollars of recklessly bad loans recently reduced to junk status. Let's call the ``Greek bailout'' what it is: a TARP for German and other European bankers and global currency speculators. The money is being provided by other governments (mainly the German Treasury, cutting back its domestic spending) into a kind of escrow account for the Greek government to pay foreign bondholders who bought up these securities at plunging prices over the past few weeks...This windfall is to be paid by taxpayers -- ultimately those of Greece (in effect labor, because the wealthy have been untaxed) -- to reimburse Euro-governments, the IMF and even the U.S. Treasury for its commitment to predatory finance. The payment to bondholders is to be used as an excuse to slash Greek public services, pensions and other government spending. It will be a model for other countries to impose similar economic austerity...

bankers; people.

Jesse's Café Américain Sun 2010-05-09 08:30 EDT

Guest Post: The Perils of Credit Money Systems Managed by Private Corporations

Jesse

...The paper system being founded on public confidence and having of itself no intrinsic value, is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain.The corporations which create the paper money cannot be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business. And when these issues have been pushed on from day to day until the public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given; suddenly curtail their issues; and produce an unexpected and ruinous contraction of the circulating medium which is felt by the whole community. The banks, by this means, save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people...Recent events have proved that the paper money system of this country may be used as an engine to undermine your free institutions; and that those who desire to engross all power in the hands of the few and to govern by corruption or force are aware of its power and prepared to employ it... Andrew Jackson, Farewell Address, March 4, 1837

Credit Money Systems Managed; Guest Post; Jesse's Café Américain; peril; private corporations.

Tue 2010-04-27 08:22 EDT

Anecdotal Economics: A Chicken in Every VAT

...The retail consumer is back, and she* is in the mood to shop, we reliably are told. The Census Bureau reported March 2010 Advance Retail and Food Service Sales improved 7.6 percent from a year ago, and for 1Q2010 are 5.5 percent above 1Q2009...So why do state sales tax revenues tell a different, disconnected story? In the Nelson A. Rockefeller Institute of Government's April 2010 State Revenue Report, which chronicles the woeful status of state tax collections, concludes that sales tax collections fell almost 9.0 percent in 2009, a statistically significant 2.8 percent more than the reported decline in retail and food service sales made up estimated by the Census Bureau...It's a significant disconnect between theory (Census Bureau) and reality (actual sales tax collections), much as the similar, significant disconnect between the Employment Situation reported by the Bureau of Labor Statistics (theory), which appears to be masking the true extent of unemployment in America with all those marginally attached and discouraged workers, and the meaningful decline in actual payroll tax withholdings (reality), as reported by the Treasury Department in its Daily Treasury Statements...

Anecdotal Economics; chickens; VAT.

Mon 2010-04-26 14:57 EDT

SPIEGEL ONLINE - Druckversion - A Homecoming for Lost Jobs: Burned by Offshoring, Mid-Sized Firms Return Production to Germany - SPIEGEL ONLINE - News - International

SPIEGEL ONLINE, Hamburg, Germany

The trend towards offshoring production from Germany to other countries is slowly being reversed, with medium-sized businesses leading the way. In fact, Germany is itself becoming an attractive location for foreign investment...Many thousands of German companies joined the march to Eastern Europe and China during the past 15 years, hoping to reduce production costs there. But recently many have been returning, disillusioned. Smaller companies in particular are finding they overestimated the apparent advantages of low labor costs or more advantageous tax laws. So far, it has not been the largest and most well known companies that have begun reconsidering Germany as a production location. And the return home usually involves considerably less ballyhoo than the earlier offshoring of production. Nevertheless, the trend is significant because medium-sized companies are both the heart and the driving force behind the German economy...

burned; Druckversion; Germany; homecoming; International; Lost Jobs; Mid-Sized Firms Return Production; news; offshore; Spiegel Online.

Mon 2010-04-26 14:55 EDT

When Outsourcing Fails: One in Five German Firms Leaving China - SPIEGEL ONLINE - News - International

SPIEGEL ONLINE, Hamburg, Germany

Citing fast-climbing labor costs and pesky production quality problems, a growing number of German companies are doing an about face and pulling their manufacturing operations out of China. Some are searching for countries with lower wages while others are returning production to Germany...

German Firms Leaving China; International; news; Outsourcing Fails; Spiegel Online.

naked capitalism Wed 2010-04-21 12:20 EDT

Guest Post: Dodd Financial Reform Bill Is All Holes and No Cheese

George Washington

In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd's proposed financial reform legislation wouldn't have prevented the current crisis ... and won't prevent the next crisis...

cheese; Dodd Financial reform Bill; Guest Post; holes; naked capitalism.

New Deal 2.0 Tue 2010-03-09 17:23 EST

Wall Street's War Against Consumers and Labor Heats Up

Michael Hudson

...Throughout the world, scaling back the 20th century's legacy of progressive taxation and untaxing real estate and finance has led to a public debt crisis. Property income hitherto paid to governments is now paid to the banks. And although Wall Street has extracted $13 trillion in bailouts just since October 2008, the thought of raising taxes on wealth to pay just $1 trillion over an entire decade for Social Security or health insurance is deemed a crisis that would lead Wall Street to shut down the economy. It is telling governments to shift to a regressive tax system to make up the fiscal shortfall by raising taxes on labor and cutting back public spending on the economy at large. This is what is plunging economies from California to Greece and the Baltics into fiscal and financial crisis. Wall Street's solution - to balance the budget by cutting back the government's social contract and deregulating finance all the more - will shrink the economy and make the budget deficits even more severe. Financial speculators no doubt will clean up on the turmoil.

0; consumer; labor heats; new dealing 2; Wall Street's War.

Mon 2010-03-08 09:41 EST

Truthdig - Calling All Rebels

Chris Hedges

There are no constraints left to halt America's slide into a totalitarian capitalism. Electoral politics are a sham. The media have been debased and defanged by corporate owners. The working class has been impoverished and is now being plunged into profound despair. The legal system has been corrupted to serve corporate interests. Popular institutions, from labor unions to political parties, have been destroyed or emasculated by corporate power. And any form of protest, no matter how tepid, is blocked by an internal security apparatus that is starting to rival that of the East German secret police. The mounting anger and hatred, coursing through the bloodstream of the body politic, make violence and counter-violence inevitable. Brace yourself. The American empire is over. And the descent is going to be horrifying...

called; rebel; Truthdig.

Harper's Magazine Thu 2009-11-19 10:20 EST

An Object Lesson in Governmental Failure: Derivatives reform

KEN SILVERSTEIN

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it...he House Financial Services Committee hosted a panel on reform of the market for derivatives,...the committee, headed by Congressman Barney Frank (D-Wall Street), invited a panel of eight guests who were distinguished by their uniformly pro-industry positions...In response to complaints from Americans for Financial Reform, which represents hundreds of consumer groups and labor unions, the committee issued an invitation--the night before the hearing was held -- to Rob Johnson of the Roosevelt Institute. For the committee, the last minute inclusion of Johnson -- a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee -- apparently constituted sufficient balance...About five days later Johnson submitted his full testimony to the committee, to be included on its website along with the statements of the other eight panelists...the committee's general counsel would not allow posting of the testimony because Johnson had not submitted it during the hearing. (Of course, since Johnson had been invited at the last minute it was impossible for him to fulfill this pointless requirement.)

Derivatives reform; Governmental Failure; Harper's Magazine; object lessons.

zero hedge Wed 2009-10-14 12:12 EDT

Why Did U.S. SDR Holdings Increase Five Fold In The Last Week Of August?

...The big question mark at the end of August is when the U.S. International Reserve Position increased by almost 50%. The reason for this: a near quintupling of S.D.R. holdings on the U.S. balance sheet in the span of one week... By purchasing $40 billion in SDRs virtually overnight, what the Fed has done is to increase the value of the entire basket pro-rata, while in the process reducing the actual value of the dollar (which is a weighted constituent of the SDR basket). This was an operation to reduce the dollar's value: pure and simple. In many ways it explains why the DXY has continued its straight one way decline since the beginning of September, when many pundits assumed the market was finally going to tank on profit taking after Labor day. By performing this dollar adverse transaction, the Fed sent a loud and clear signal what the Fed was going to do going forward vis-a-vis the i) dollar and ii) its derivative, the stock market.

August; Folding; U.S. SDR Holdings Increase; weekly; Zero Hedge.

Tue 2009-09-22 08:18 EDT

Guest post: Regulation in Defense of Capitalism

Rick Bookstaber

Will regulation hobble capitalism? I think the opposite is true. Properly done, government regulation of the financial industry will move the industry closer to the capitalist ideal. By capitalism, I mean where those who take the risks and put up the money get the fruits of their labor. And, importantly, where those who take the risks and put up the money actually do take the risks, bearing the full costs of failure as well as success.

capitalism; defense; Guest Post; Regulators.

Rick Bookstaber Sun 2009-09-20 14:30 EDT

Regulation in Defense of Capitalism

Rick Bookstaber

Will regulation hobble capitalism? I think the opposite is true. Properly done -- and I think most of the financial regulation that is envisioned fits into this camp -- government regulation of the financial industry will move the industry closer to the capitalist ideal. By capitalism, I mean where those who take the risks and put up the money get the fruits of their labor. And, importantly, where those who take the risks and put up the money actually do take the risks, bearing the full costs of failure as well as success.

capitalism; defense; Regulators; Rick Bookstaber.

naked capitalism Tue 2009-09-01 13:10 EDT

Twenty-Five Years to Work Off the Debt Overhang?

T. S. Eliot was right. Human beings cannot stand very much reality. As much as I have an appetite for bearish views (I figure the optimist case gets disproportionate air time), the headline of Ambrose Evans-Pritchard's latest piece, ``Our quarter-century penance is just starting,'' is grim even by the standards of the bearish faithful. Great comment by DownSouth, quoting Martin Luther King and Reinhold Niebuhr to the effect that by delegating to elites what should be the role of labor unions and grass-roots organizations. Niebuhr wrote: ``when collective power, whether in the form of imperialism or class domination, exploits weakness, it can never be dislodged unless power is raised against it'' ``Before we can fix the economy, the polity must be repaired first.''

debt overhang; naked capitalism; working; years.

Thu 2009-07-30 00:00 EDT

Michael Hudson: The Toll Booth Economy

Michael Hudson: The Toll Booth Economy -- by Michael Hudson ``The Latest in Junk Economics'' What is missing is a critique of the big picture how Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest final stage seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations...What have been lost are the Progressive Eras two great reforms. First, minimizing the economys free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to ones own labor and enterprise) by taxing absentee property rent and asset-price (capital) gains, by keeping natural monopolies in the public domain, and by anti-trust regulation...A second Progressive Era aim was to steer the financial sector so as to fund capital formation. Industrial credit was best achieved in Germany and Central Europe in the decades prior to World War I. But the Allied victory led to the dominance of Anglo-American banking practice, based on loans against property or income streams already in place. Todays bank credit has become decoupled from capital formation, taking the form mainly of mortgage credit (80 per cent), and loans secured by corporate stock (for mergers, acquisitions and corporate raids) as well as for speculation. The effect is to spur asset-price inflation on credit, in ways that benefit the few at the expense of the economy at large.''

Michael Hudson; Toll Booth Economy.

Tue 2008-05-13 00:00 EDT

naked capitalism: Why So Little Interest in Danish "Flexicurity"? (Income Inequality/Labor Inefficiency Edition)

Danish; Flexicurity; Income Inequality/Labor Inefficiency Edition; interesting; naked capitalism.

Sun 2007-09-09 00:00 EDT

naked capitalism: Dani Rodrik Questions Conventional Wisdom on Labor Market Rigidities

Dani Rodrik Questions Conventional Wisdom; labor market rigidities; naked capitalism.

Sun 2007-09-09 00:00 EDT

Dani Rodrik's weblog: Are labor market rigidities responsible for Europe's unemployment?

Dani Rodrik's weblog; Europe's unemployed; labor market rigidities responsible.