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

<Michael Hudson> Well, I think you’re quite right in organizing the conference to point out that today’s pandemic crisis hastens and intensifies the internal contradictions that have been building up. Many of these contradictions are going to be blamed simply on the virus. But there is an underlying problem that the virus is exposing and turning into a crisis. That underlying problem is the debts that have been building up for the last few decades.

We are in a situation much like a war. There are winners and there are losers in a war. In this case the winner is the aggressor – the financial sector. Its demands for payment have set the stage for today’s economic breakdown. This has been the case throughout history. Finance always has been the great destabilizing factor. Right now, you’re having businesses – retail stores, restaurants, hotels, airlines and other businesses that are being closed down or operating at only a small capacity far below break-even levels. These businesses are not able to pay their stipulated rents or mortgage debt service. Their landlords are not able to pay their banks.

Workers have been laid off, and they’re unable to pay their landlords or creditors. So they are falling more deeply into debt. Entire states and the cities, like New York State and New York City, are being squeezed. In addition to having to pay local unemployment insurance, they have to maintain basic infrastructure and social services. But their d tax revenues ae plunging as a result of fewer sales taxes and income taxes. So the pandemic is creating a fiscal crisis as part of the overall debt and real-estate crisis.

The question is, how do we get out of it? What is happening is what legal contracts call an Act of God. What do you do when economic activity is disrupted and the flow of payments that people have every month – their debt service, their rents or their mortgage, or their credit cards and other basic ongoing expenses. What do you do when they can’t be paid? I think that this crisis is laying the problem bare. It is a problem that’s occurred in Western civilization for the last 2,000 years. But what is so striking is how much more adroitly ancient civilizations handled this problem. They did so in a completely different wat from how other civilizations have handled things.

I have written quite a bit about Bronze Age archaeology in the ancient Near East. That is where the Act of God stipulation originated. It appears in the Laws of Hammurabi c. 1750 BC. The problem that the Babylonians had to deal with was what to do when there is a flood, a drought, warfare or a pandemic. What should be the rules when, suddenly out of nowhere, cultivators and the citizenry on the land are rendered unable to grow and harvest crops, out of which to pay the debts that they have run up during the year and are falling due. They owe the taxes, sharecropping or other rent that could not be paid.

Hammurabi was quite specific about how to handle this situation. Paragraph 48 of his Laws said that there would be a debt and a tax amnesty when the weather god, Adad, created a flood or otherwise prevented debts and other obligations from being paid. If the storm god floods the lands, the debts and rents don’t have to be paid. A fresh start was made under conditions of balance for the next crop season.

The basic problem was similar to that today: How does a society restore continuity and save itself from disruption creating a permanent loss and distortion of existing wealth and income relationships? What Hammurabi and every other Babylonian, Sumerian ruler and other Near Eastern rulers did between about 2,500 BC and the 1st century BC was to proclaim amnesties in such circumstances. If they hadn’t done that, cultivators would not have been able to pay their creditors and they would have fallen into bondage. They would have owed their labour and crops to their creditors.

This would have caused a serious fiscal problem for rulers. If victims of a crop failure or other economic interruption had to pay their creditors with their labour and crop surplus, this labor and crop tax wouldn’t be available to pay the palace its normal claims for taxes and corvée labour duties to build infrastructure or even serve in the army. Social balance and continuity would have been destroyed – from within. So when Hammurabi and every ruler of his dynasty proclaimed a clean slate cancelling the debts and rent arrears that had mounted up unpaid, proclaiming a return to the normal situation prevented a creditor oligarchy from emerging and seeking its own interest as distinct from that of the palace.

All this changed in Roman times. Classical antiquity protected the financial and rentier elites. Cicero and the other Roman leaders said that all the debts had to be paid, even (or indeed, precisely because!) this led to the enslavement of poorer Romans and Greeks. Rome’s creditor oligarchy used every crisis as an opportunity to grab the land of the smallholders, to force the population into bondage and to get control of their land.

We’re seeing the same basic dynamic occur throughout the post-Roman Western world. Creditors are now already planning to buy up distressed real estate from landlords that default as their rents are not paid. There is going to be a huge bankruptcy sale. Large private capital funds have already announced their intention to begin buying out the retail stores that have gone bankrupt, along with their real estate.

Individuals who are unable to pay their debts, workers who’ve been laid off, are told to borrow from their pension funds or social security accounts. That means that they won’t be receiving the retirement income they need to live. Likewise, the states and the cities that Jeffrey Sachs mentioned also are facing a debt crisis with their bondholders. Mitch McConnell, the Republican Senate head, said that Democratic states like New York, New Jersey and California should cover their shortfall by taking the pension funds that they’ve set up for public employees. The financial sector’s intention is to use this crisis to wipe out the pension funds and transfer the savings of the wage-earners to pay bondholders and other creditors. The promises that state and local governments made for pension in exchange for not asking for higher wages are to be wiped out.

The debts that have been built up are being used as a financial warfare tactic. It is more efficient than military warfare. Debt has been used to strip away the assets of middle-class people, of home owners, of employee pension funds, to suck their savings and property up to the top of the economic pyramid. The pandemic crisis has created a battlefield. Its rules have been written by the financial sector and their lobbyists as an opportunity for the largest property and financial grab since the Great Depression.

The result will be that much of the American and European economies are going to end up looking like the Greek economy five years ago, when it was unable to pay its euro-debts. You can look at Greece as the future of the United States, catalysed by the coronavirus pandemic.

<Grigoris Zarotiadis> Thank you. Thank you, Tatiana, Professor Hubenova, thanks a lot. Michael, it’s your turn and allow me, before you start, because there was an extra question addressed to you, but also to the rest, included perhaps in the previous questions: who are the big winners, in economic terms, after current developments? Dear Michael, you have the floor.

<Michael Hudson> I’ll talk about the questions in reverse order, beginning with the idea that there may be an inflation to help pay off the debts.

Just the opposite: What we are facing now is an era of debt deflation. It’s the worst debt deflation since the Great Depression. I’ve already described how there are going to be major defaults in real estate, especially for commercial real estate, for stores and all the other businesses that are going without income while their rents have accrued. If we are going to have a close-down for at least three more months, with no income for stores, entertainment, motion-picture houses and museums, paying three months’ back rent is not viable. There’s no way in which stores, or many wage-earners, can earn enough to pay the rent out of normal work and business. So, they’re going to go out of business.

There is going to be a wave of bankruptcy, and that will be followed by fire sales of real estate. Unemployment is going to lead to lower wage levels, and there also will be cutbacks in public spending for social services, transportation and other normal programs. Privatisation sell-offs will occur, much like Margaret Thatcher’s in England. this is now going to be imposed upon Europe. It’s possible that the Eurozone will break up if it does not change its rules and create the euro-money to enable Italy and Spain to get by. But at present the Eurozone rules are that all the money, all of the credit that is needed to grow in Europe, should be borrowed from banks at interest.

Banks can create this money on their keyboards electronically. The government could do the same, but relinquishes this privilege to the privatized banking sector. As Modern Monetary Theory explains, a central bank can simply print the money that is needed to fuel economic growth. But the financial sector has captured the hearts and minds of central bankers, from Europe to the United States.

The problem is these banks don’t lend money to create means of production or livelihood. They don’t lend money to build factories. Banks lend money against assets already in existence, mainly real estate, houses, buildings, and also companies – and to corporate raiders to buy other companies on credit. So, the effect of this bank lending has been to inflate the price of real estate, because a house or a building is worth whatever a bank will lend against it.

The financial sector has become less and less productive, and more predatory. It has prevented European governments from having a central bank that directs deficit spending into the real economy. Only the banks and financial sector, the elite One Percent, are supported, as in the United States. Ten trillion dollars ’s put into the economy, mainly into the stock and financial markets, the bond market and the real estate market, but not into production.

The Eurozone does not do that. This means that the governments of Europe are not really democratic. Europe is governed by the European Central Bank. It works for its customers, the commercial banks. And the commercial bankers say: “We want to starve the economy of credit, so that we, the commercial bankers, can create the money to lend to our customers, and charge interest and financial fees. Our own financial speculation that all the growth, the surplus that Europe produces, should be turned over to the financial sector.” That’s what the Europeans have voted for. In effect they vote for lower wages, cutbacks in public services and shorter pensions. These living standards are threatened by the way in which the financial dimension of the coronavirus crisis is being managed.

You’re seeing a disparity between Italy and the Mediterranean countries and northern Europe. Countries need credit in order to recover. But the Eurozone refuses to provide the credit that is needed to get through the coronavirus suspension of economic activity and its aftermath of unpaid debts, rents and other obligations. The Eurozone is treating Italy, Greece, Portugal and Spain just like President Trump here in America is treating the Democratic states like New York, New Jersey and California. The effect is to create a deflationary crisis. That makes it impossible to pay the backlog of debts and rents.

We may see a power grab creating something much like feudalism. In the United States it’s suggested that for student loans, or for loans to wage-earners collateralized by the debtor promising to pay 10%, 20%, 25% of everything they earn for the rest of their life. This is like a tax, but it’s really a form of debt peonage. It’s a payment much like medieval serfs had to turn over their economic surplus to their landlords. Well, now the wage-earners, small business and even big business in America and in Europe are going to have to turn over even more of their earnings to the financial sector in order to survive.

This may seem a crazy way to organize society, but it is how Western civilization has been structured on the basis of protecting creditor rights, not debtor solvency and overall social balance and continuity. Unlike non-Western societies, unlike even China today, credit in Europe and America is privatized. The supply of credit, like money, should be a public utility. Just like public health should be a public utility. Just like roads and communication should be a public utility. Europe has let it be privatized in an aggressive, predatory way.

As long as governments subordinate the will of democratic voters to whatever the central banks tell you, you are not a democracy. Jeffrey earlier mentioned what Aristotle thought. Aristotle explained a kind of eternal political triangle. He said that many constitutions appeared to be democratic, but they’re, actually, oligarchic. That’s because democracies tend to evolve into an oligarchy. The oligarchy makes itself hereditary into an aristocratic ruling class. Finally, thank heavens, some of the wealthy aristocrats fight among themselves and they try – like Cleisthenes did in Athens as early as 406 BC – to take the masses into their camp, and become democratic and order to mobilize support in the citizens against the other aristocrats. Then you have a democratic revolution, but democracy once again develops into oligarchy. That’s the eternal political triangle that Aristotle described.

And that’s what you have in Europe. It’s not a democracy anymore; it’s an oligarchy making itself into the same kind of hereditary aristocracy that occurred in classical antiquity. Many of you hoped that Europe had overthrown the aristocracy after World War I when you did indeed get rid of the kings and royalty. But you opened the way for a new kind of oligarchy turning itself into a hereditary aristocracy, that of finance. That’s the task before you to solve. The only thing I can say is that, perhaps, this crisis has indeed catalysed this basic internal contradiction and will create a response that deals with the pandemic by cancelling debts and de-privatizing the banking sector.

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  1. S

    A recipe for disaster.

    The economics of globalisation has always had an Achilles’ heel.
    In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
    Not considering private debt is the Achilles’ heel of neoclassical economics.

    Policymakers can convince themselves “debt doesn’t matter” as they think banks are financial intermediaries.
    Our knowledge of privately created money has been going backwards since 1856.
    Credit creation theory -> fractional reserve theory -> financial intermediation theory
    “A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

    Now we are really in trouble, and no one will see what is going wrong.
    In the UK it’s been going wrong from pretty much day one.

    Debt is rising faster than GDP and this is unsustainable.

    When you use neoclassical economics, policymakers run the economy on debt until they get a financial crisis.
    Policymakers don’t realise it’s the money creation of bank loans that is making the economy boom as they head towards a financial crisis.

    At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
    Policymakers run the economy on debt until they get a financial crisis.
    1929 – US
    1991 – Japan
    2008 – US, UK and Euro-zone
    The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.

    The Americans were the first ones to run their economy on debt until they got a financial crisis in 1929. They had no idea what had happened and plunged into the Great Depression.

    Japan was next in 1991, and by carefully studying the Great Depression they avoided this fate.
    Richard Koo used to be a central banker at the Federal Reserve Bank of New York, and he looked at both sides of the bank’s balance sheets during the Great Depression.
    Richard Koo shows the US money supply / banking system (8.30 – 13 mins):
    1) 1929 before the crash – June 1929
    2) The Great Depression before the New Deal – June 1933
    3) During the New Deal – June 1936

    The money supply ≈ public debt + private debt

    The “private debt” component was going down with banks going bust and deleveraging from a debt fuelled boom causing debt deflation (a shrinking money supply).
    It was the public borrowing and spending of the New Deal that helped the economy recover.
    The money supply ≈ public debt + private debt
    The New Deal restored the money supply by increasing the “public debt” component of the money supply.
    Once the New Deal was working, they reduced Government borrowing and plunged the nation back into recession again.
    The enormous public spending and borrowing of WW2, eventually sorted things out.

    Japan saved the banks.
    Japan realised they needed to maintain the money supply with public borrowing and spending as they paid down private debt.

    The money supply ≈ public debt + private debt
    The “private debt” component of the money supply was shrinking, so they needed to maintain the money supply by increasing the “public debt” component.
    They wanted to avoid the debt deflation of the Great Depression (a shrinking money supply).
    This was the lesson of the “New Deal”.

    We are one step on, and Japan learnt from the mistakes of the Great Depression.

    The money supply ≈ public debt + private debt
    The “private debt” component of the money supply was shrinking, so they needed to maintain the money supply by increasing the “public debt” component.
    A private debt problem became a public debt problem.

    Adair Turner has built on Japan’s experience and has come up with the solution of Government created money.

    The money supply ≈ public debt + private debt
    You can maintain the money supply while paying down the overall debt as both private and public debt are too high already.

    1. tusitala

      Another cutting and insightful analysis from Michael Hudson. The reforms of Cleisthenes in Athens should be dated to 508 BC.

  2. Ignacio

    This is great and I just wish Hudson’s narrative makes its way to mainstream sites and media and gets the attention it deserves. One of the early thoughts I had during the lockdown is that the pandemic could be the eye-opener event that would make evident how the financial world has become the bloodsucker of our societies. During the Great Recession our “astute” prime minister Mr. Mariano “Donothing” Rajoy (kind of Spanish version of Joe Biden), in order to justify the rescue of the Banks with public debt and social cuts said that “banks are the circulatory system of our economies” and I cannot think of a worse metaphor he could have selected. To make methafors current we can say that the financial system does quite much like SARS CoV 2 does to our circulatory system and is causing thrombosis that, if systemic, could be lethal.

    1. Billy

      Unless you simplify this subject to the point where an Eighth Grader, the average reading comprehension of Americans, could understand it, you are never going to get even the beginnings of your desired result. The higher education and knowledge base of the average European makes them unable to comprehend why the sheeple in the U.S.A. do not rebel.

      It is a fun writing exercise to try and make a comic book out of Mr. Hudson’s writing so that the average Booboisie, using H.L. Mencken’s almost one hundred year old term, could understand it. The illustrations would of course be a different challenge.

    2. Susan the other

      Here, this morning on NPR they were touting all the programs Congress recently passed “giving” the states money to dispense to municipalities and corporations. You’d think “problem solved” by Congress. But it’s just nonsense. Dispensing money is a good idea, but the way they did it it will not save the economy. The economy is complete haywire. The streets are so quiet right now it’s downright audible. America and the Western World run on hustle and bustle. On good gas mileage and great bargains. All I can think is, “It’s over.” Speaking of ancient wisdom, the Achilles heel of our economic hubris is within seconds of the arrow. I’m thinking, “Damn, I never realized it would be this depressing.”

  3. Sound of the Suburbs

    Learning from the Great Depression.

    Richard Koo used to be a central banker at the Federal Reserve Bank of New York, and he looked at both sides of the bank’s balance sheets during the Great Depression.
    Richard Koo shows the US money supply / banking system (8.30 – 13 mins):
    1) 1929 before the crash – June 1929
    2) The Great Depression before the New Deal – June 1933
    3) During the New Deal – June 1936

    The money supply ≈ public debt + private debt

    The “private debt” component was going down with banks going bust and deleveraging from a debt fuelled boom causing debt deflation (a shrinking money supply).
    It was the public borrowing and spending of the New Deal that helped the economy recover.
    The money supply ≈ public debt + private debt
    The New Deal restored the money supply by increasing the “public debt” component of the money supply.
    Once the New Deal was working, they reduced Government borrowing and plunged the nation back into recession again.
    The enormous public spending and borrowing of WW2, eventually sorted things out.

    Japan saved the banks.
    Japan realised they needed to maintain the money supply with public borrowing and spending as they paid down private debt.

    The money supply ≈ public debt + private debt
    The “private debt” component of the money supply was shrinking, so they needed to maintain the money supply by increasing the “public debt” component.
    They wanted to avoid the debt deflation of the Great Depression (a shrinking money supply).
    This was the lesson of the “New Deal”.

    We are one step on, and Japan learnt from the mistakes of the Great Depression.

    The money supply ≈ public debt + private debt
    The “private debt” component of the money supply was shrinking, so they needed to maintain the money supply by increasing the “public debt” component.
    A private debt problem became a public debt problem.

    Adair Turner has built on Japan’s experience and has come up with the solution of Government created money.

    The money supply ≈ public debt + private debt
    You can maintain the money supply while paying down the overall debt as both private and public debt are too high already.

  4. Yen

    He’s been saying this for ages! Americans are simply not interested in change. Lets be honest about it. Otherwise there would be no way that biden would have won.

    1. Ignacio

      What is honest about your reply? Your TINA take? It is honest to admit that there is no alternative so any other thinking is dishonest?

      1. Yen

        Are you implying Biden won because of a lottery? As far as I remember he won fair and square in many states.

        1. Yves Smith Post author

          Huh? Iowa was fair? The Southern firewall, where states that the Dems are just about sure not to win in the general, have disproportionate impact on the nomination? The press and debate treatment of Sanders was fair? The Dem machine mobilizing to tip the scales on the Weekend of Long Knives, was fair? The removal of tons of polling stations in poor neighborhoods in Texas, triggering lines as long as seven hours, was fair?

          You have an extremely peculiar definition of “fair”.

        1. Massinissa

          From Yen maybe. I’m kind of tired of people whining about ‘americans not interested in change’ without having much of any evidence to back that charge up other than Biden barely winning a crowded primary that may have been interfered with. It was ok the first time but Yen and a couple others have been parroting that over and over.

        2. Aumua

          I’m with Yen in that ideas like debt cancellation are nice to talk about but we’re so far from the implementation of it that it’s just some intellectual exercise at this point. This is simply good old fashioned cynicism, of which we have a long tradition here at NC. Some Americans might be interested in change, but we have so little power to change anything within the system as it stands. The vast majority of Americans really do believe that “pay your debts. no matter what” is the right way to be for everyone. They are default agents of the system, and so we have to fight them as well as the oligarchy to undo a 2000 year old (according to the article) code of law.

          I don’t know what it’s going to take to move that much inertia, but it’s not going to just happen because it’s logical or whatever.

          1. The Historian

            “I don’t know what it’s going to take to move that much inertia, but it’s not going to just happen because it’s logical or whatever.”

            I’ve been reading “The New Way of the World: On Neoliberal Society”, by Dardot and Laval (thank you Amphortas – it is a great book) and I think I agree with them – that as a society, we have been purposely conditioned over many decades to accept what has happened to us. And I agree with you, it is going to take a lot to overcome that conditioning . Thankfully there are people like Michael Hudson who can say with authority, that no, we do not have to accept the conditioning – that there are other ways to live – and they’ve been proven to work.

            1. Jonathan Holland Becnel

              Hear Hear!!!

              I liken the Internet to the Printing Press. The world’s young people are talking to each other and not OTHERIZING each other with terms like Barbarian or Foreigner. Let’s make a brand new world and a society for the better!

      2. GramSci

        “Let’s be honest” normally means “Let’s be honest with ourselves”. I read Yen as not accusing Hudson of dishonesty, but rather lamenting the self-delusion of Americans.

        I only hope Europe wakes to reality, but I’m alarmed by what I see there, too. The ascendancy of the likes of Macron and Bojo, and the persistent Francoism of Spanish acquaintances whom I once thought might be friends.

        Like Yen, I fear we’re in for a hard landing.

        1. Ignacio

          Then, as i guess we are not being honests to ourselves according to the comment. If the singular was used I could understand but this universal plural is what I dislike.

    2. DJ Forestree

      Absolutely agree with the fact that Americans or an overwhelming majority of them, are not interested in really changing their regime. Most likely this is because that majority understands very well, by instinct or in a rational way, that everyone in the US has somehow benefitted from the status of their nation as the world hegemon. Even the ones that count themselves as oppressed have benefitted from the wars, the centrality of the US Dollar, the imposition of undemocratic regimes abroad, the looting of resources across the world, the imposition of American culture and values as global ones. Look at a photo of the recent riots: those shoes and clothing the protestors are wearing, where were they made? how many millions have to be starved and paid misery wages so that you could go out in Michigan wearing that t-shirt and those running shoes? what kind of pain is behind the prices and the mileage of those cars they drove to the protests, and how come they pay so little for their gas? how many of the protestors (and the anti-protestors) ended their night by stopping at a fast food restaurant and buying cheap burgers and sodas? what about the makers of those smartphones they are holding, those devices used to document their protests through videos and photos that will be distributed by “social media” and thanks to the power of gigantic US monopolies? how is that way of living not part and parcel of their nation being the supreme power in today’s world? You can be a victim of a crime and you can also be a willing or unwilling participant in the consummation of such crime.

      1. Amfortas the hippie

        amen to all that!
        I’ve been a doomer all my life…felt the “something’s wrong with the world” for as long as i can remember.
        but it wasn’t until the internet(99) and 9-11 and it’s aftermath that i really set about looking for what was at the roots.
        the Second Invasion of Iraq was the last straw: “now why would they do that?”
        hence: peak oil…and then peak everything else…including peak economics, as in wall street isn’t connected to main street, but sucks it dry any way.
        this series of epiphanies led to thinking about what i could do about it…which ended up being what i had already been all but forced into: withdraw into an enclave and set about making as much autarky as possible, and drawing in my neighbors as much as i could.
        I understood a long time ago that “it takes a village”…the Libertardian Ideal of One Man, Alone is hokum.
        But how to lead one’s neighbors out of the proverbial cave?
        everything you said is why this is all but impossible…at least until the mass communication crashes and the trucks stop running.
        To your enumeration I’ll add one important thing: To really, actually change the fundamental workings of even a tiny, isolated and integrated place like where i live will take sacrifice and hard work…and it’s simply Too Hard without the push of collapse for more than a few to even think about.

        the sad part(ghost of gramsci) is that this means that the change that will come(because of things like the laws of thermodynamics and Nature’s prerogative) will be chaotic, and nobody will be ready for it.
        because there’s no reason to get ready for it if you convince yourself that “everything’s fine”.

        Mr Hudson’s book(“Forgive them…”) is next on the list/pile on the bed.
        I both look forward to it, and dread it, because of all that might have been.

        1. DJ Forestree

          You are right, and we can all do a little part in trying to promote some kind of change in our societies, according to our beliefs and to the room for change available. It sounds like you have been trying and to a great extent succeding in doing your part. I think the cuasi impossibility of change, as a larger, really broad project could be explained at least in part in this interview posted by Yves here a couple of years ago:

          “How the Agricultural Revolution Changed our Social and Economic Evolution”.


          1. Henry Moon Pie

            That was a good piece:

            I think about it in this way: when we engaged agriculture the trajectory of our social and economic evolution was altered profoundly. We think it was a major evolutionary transition for humans. So what does that do to the human being? First of all, individual humans become less important and it sets humans up in this vast, self-referential economic system that’s no longer engaged in the rhythm and dynamic of the non-human world. It sets humans up to have this kind of oppositional relationship with the non-human world.

            One aspect missed in most of these analyses of the effects of the move to agriculture is the role of fear. When we were hunter-gatherers, we were at home in nature. Yes, it could be a dangerous place, but we had evolved to survive there, and we knew we belonged there.

            Once we became settled, nature became a scary thing. Woods weren’t full of food. They were full of monsters, at least at night.

            And our response to this growing fear (“Quick! Rebuild those walls, Jerusalem!”) is to strive for control over nature.

            The unhappy inference to be drawn from this is that these attempts to control are likely to get even more outlandish as the fear increases, driven most immediately by the virus but with environmental collapse in the background. We’ll never let go of trying to control nature until we deal with our fear.

            1. Amfortas the hippie

              “…these attempts to control are likely to get even more outlandish…”
              and see Pepe’s take, that apparently couldn’t make it past Asia Time’s editors, and had to be air-dropped into strategic culture(which is a La Rouche outpost, if i’m not mistaken)

              i guess we’re all inundated(like how everybody forgot how to read a book, including me,lol)…so the exceedingly strange “left” turn by the Davos People of late has gone largely unnoticed and unremarked…
              a weird hybrid of eco-socialist global manorialism, likely with a shrinking of the ordinary Human’s horizons of thought and awareness…as well as a No-Fault(plausible deniability, “it’s Nature!”) reduction of the Human Herd to a more manageable level…
              with the usual Davos Set as hyperabstracted Lords of the various Manors.
              I haven’t been able to bring myself to watch things like “Elysium” or “the 3%”, because it feels far too close to near future reality…and that feature of the in-universe of “Altered Carbon” was too abstract, perhaps, for most people to see, given the hyperviolence and gee-whiz.

              Ima gonna go burn some paper trash, now, with my morning splif, and watch a bunch of grasshoppers immolate themselves in the resulting bright fire.
              an apt analog, perhaps.

        2. Pym of Nantucket

          I like your approach. I have done a great deal of volunteering and activism in politics and became increasingly frustrated by the growth of belief as the basis of arguments and ideas. So eventually, like you, I have my retreat in a small town in the mountains.

          I think the most important achievements in the 20th century could well be in advertising where a lot of private money was deployed to get to the bottom of human psychology. The terrifying result is that there are well used methodologies which easily defeat rationalism in every argument. The internet provides tireless and relentless powerful software and hardware to undermine rational decision making. This may sound bleak, but I honestly think machine learning will be the only way to get rational decision making to prevail again.

          The Genie is out of the bottle with respect to mass manipulation of human emotion. I believe, sadly, future rational decisions will be made without us and mostly without our knowledge.

          1. Henry Moon Pie

            I don’t think it’s necessary for us carbonites to bow down to some lifeless assemblage of silicon to emerge from the Bernays sauce. Just follow the advice of a level-headed dancer (audio).

      2. Aumua

        Yep that’s what the kids call “privilege” these days, and American privilege is one the most obnoxious kinds in the world. We in the west all partake of it, brown, white, rich and poor. So solidarity with all oppressed peoples, especially those who suffer from the worst oppression! Because we cannot be free of it until they are.

    3. Tomonthebeach

      Of course, Biden did not really win. DNC saw to that. And that is part of the problem – we are a one-party oligarchy masquerading as a 2-party democracy. The moral question Hudson begs is whether or not it is too late to reverse course.

      If Trump is voted out, I would not be surprised to see far more lawlessness, vandalism, and theft driven by rage AND need. Meanwhile, the police will have been disbanded or rebranded or something less than ideal for massive civil revolt. Somebody like Sanders would have sufficient empathy to calm the situation. Alas, Biden keeps gaffing along propped up by handlers.

    4. Jonathan Holland Becnel

      I’m a Millennial American, and, I can assure you, We are interested in change.


  5. jr

    The existence of this forum is one of a legion of rebuttals to your “points.” The Sock Puppet candidate got where he is due to a complex, interrelated web of causes, of varying natures and hues, within which we find that people can say or do things that make no sense to you but make perfect sense to them. Then there is the lying and propaganda…

    1. Oh

      The crooked DemoCrat leadership fixed the primaries and got Bernie to quit and that was the main cause for this sockpuppet to be running against the Orange Crook. Short of canceling the election and re-doing the primaries, there’s no way out of the soup we’re in. We, as people have to disband the two parties and start over if we want to have a democracy.

      1. Carla

        “We, as people have to disband the two parties and start over if we want to have a democracy.”

        Hear! Hear!

        In order to “start over,” we will also need this Constitutional amendment:


        Please see if your Congress critter is one of the 74 co-sponsors. If so, thank them. If not, make it happen.

        Also, most importantly, we need companion legislation to be introduced in the Senate. This is proving even harder than we thought it would be. Despite persistent and passionate citizen lobbying over the last 9 years, none of our “progressive” U.S. Senators have stepped up. Sherrod Brown, no dice; Bernie Sanders, nothing doing; Elizabeth Warren — hah – are you dreaming? Does your Senator have the guts?

        Join the movement here:

  6. Sound of the Suburbs

    Today we equate wealth and money.
    In Weimar Germany and Zimbabwe there was far too much money, and it caused hyper-inflation.
    You can just print money, and if you are not too careful, you will create too much of the damn stuff and end up with hyperinflation.
    We have become economically disorientated and we worry about all the wrong things.

    So, if you can just print money, where does the real wealth in the economy lie?
    I spent some time puzzling over this and eventually realised the wealth creation in the economy was measure by GDP.
    I had already found out banks create money out of nothing, so this could not be the source of wealth creation, and if that wasn’t, what was?
    The BoE has confirmed banks create money.

    Paul Ryan was a typical, confused neoliberal and Alan Greenspan had to put him straight.
    Paul Ryan was worried about how the Government would pay for pensions.
    Alan Greenspan told Paul Ryan the Government can create all the money it wants, there is no need to save for pensions.
    What matters is whether the goods and services are there for them to buy with that money.
    That’s where the real wealth in the economy lies.

    Weimar Germany and Zimbabwe had created far too much money compared to the goods and services available within the economy causing hyper-inflation.
    Economists do identify where real wealth creation in the economy occurs, but this is a most inconvenient truth as it reveals many at the top don’t actually create any wealth.
    This is the problem.
    Much of their money comes from wealth extraction rather than wealth creation, and they need to get everyone thoroughly confused so we don’t realise what they are really up to.

    The Classical Economists had a quick look around and noticed the aristocracy were maintained in luxury and leisure by the hard work of everyone else.
    They haven’t done anything economically productive for centuries, they couldn’t miss it.
    The Classical economist, Adam Smith:
    “The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money.”

    Ricardo was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist.
    They soon identified the constructive “earned” income and the parasitic “unearned” income.
    This disappeared in neoclassical economics.

    GDP was invented after they used neoclassical economics last time.
    In the 1920s, the economy roared, the stock market soared and nearly everyone had been making lots of money.
    In the 1930s, they were wondering what the hell had just happened as everything had appeared to be going so well in the 1920s and then it all just fell apart.
    They needed a better measure to see what was really going on in the economy and came up with GDP.
    In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
    The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.

    So all that transferring financial assets about doesn’t create wealth?
    No it doesn’t, and now you are ready to start thinking about what is really going on there.

    Introduce “economic liberalism” and everyone will go for the easy money.
    Creating real wealth, involves real work, producing new goods and services in the economy.
    Why bother working hard and building up a company yourself?
    Asset strip companies other people have built up, that’s easy money.

    We created a parasitic rentier capitalism and then the coronavirus hit.
    There was nearly as much wealth extraction as wealth creation in the economy, and a shrunken economy just won’t cope this.
    The suction pump of rent, dividends and interest are now extracting wealth out of a smaller economy and something has got to give.

    The central banks have already had to keep reducing interest rates, so the economy could cope with the debt load. They had got pretty close to zero with the fully functioning economy we had before the coronavirus hit.
    A smaller economy can’t cope with the debt load.

    1. Sound of the Suburbs

      Someone else has noticed.

      “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus Deaton, Nobel prize winner.

      1. Michael Hudson

        what bullshit Angus’s pretense is.
        In Germany, he refused to appear at a TV interview with me and David Graeber, claiming that by wanting to get rid of economic rent, we would end capitalism as he knew it. He said he wouldn’t appear on the same stage with people who did not believe in capitalism.
        Don’t let him get away with this pretense — until he explains statistically just what rent he means. To him and his libertarian friends, “rent seeking” is what governments do by taxing, NOT what landlords, monopolies and banks do.
        Be careful to recognize that right-wing anti-government advocates have their own inside-out definition of “rent-seeking.”

          1. Tomonthebeach

            Well, you have to grant Case and Deaton do make a strong case for the fallout of the system. Sadly that seems to be where it ends.

        1. Sound of the Suburbs

          Angus Deaton is getting older and maybe he has had a change of heart.
          A few of the early, neoliberal zealots have seen the error of their ways as they have seen the way things have panned out, e.g. David Stockman.
          Angus Deaton’s recent book “Deaths of Despair” suggests he is having second thoughts.
          I haven’t read it, but saw a YouTube video of him and his wife talking about it, and they do seem genuinely concerned about the way things have turned out.

  7. clarky90

    70 AD was a Jubilee year. It was also the year that the 2nd Temple of Jerusalem was utterly destroyed. The totality of the Hebrew genealogy records were burned. To this day, it is no longer possible to prove descent. (FI, who is a Kohen?). All of the books/scrolls were burned. The records of all of the accounts (debts and credits) went the same way. 70 AD was a Jubilee year in theory, as well as in practice. The entire slate was literally, wiped clean.

    “A trumpet-blast of liberty” will sound on the night of Sunday, 27 September, 2020. The Day of Atonement. This will be the 40th iteration of God’s (not man’s) Jubilee since 70 AD!

    “John 2:14
    In the temple courts (The 2nd Temple) He found men selling cattle, sheep, and doves, and money changers seated at their tables.

    John 2:15
    So He made a whip out of cords and drove all from the temple courts, both sheep and cattle. He poured out the coins of the money changers and overturned their tables.

    John 2:16
    To those selling doves He said, “Get these out of here! How dare you turn My Father’s house into a marketplace!”

    Fear not.

  8. Bob Hertz

    Hudson is correct about the coming debt crisis….but some parts of it can be ameliorated, with the money and with the politicians we have now.

    For example, the Heroes Act passed by House Democrats in May would set up a $100 billion fund to pay back rents for the unemployed. This would sustain both renters and their landlords for a number of months.

    Student debt is 85% owned by the federal government, so it could be forgiven legislatively. Numerous proposals in Congress are heading in this direction.

    Just allowing student debt to be included in normal bankruptcy would be a great relief…….and would not cost over $20 billion a year when federal guarantees are invoked.

    Credit card interest could be covered in part by the government for a year, at a cost of about $60 billion.

    I have been cataloging these band-aid steps and many are achievable.

    However — I do not have an answer for what to do if massive corporations and state/local governments start crashing into bankruptcy at once.

  9. Sound of the Suburbs

    “The problem is these banks don’t lend money to create means of production or livelihood. They don’t lend money to build factories. Banks lend money against assets already in existence, mainly real estate, houses, buildings, and also companies”

    Banks – What is the idea?
    The idea is that banks lend into business and industry to increase the productive capacity of the economy.
    Business and industry doesn’t have to wait until they have the money to expand. They can borrow the money and use it to expand today, and then pay that money back in the future.
    The economy can then grow more rapidly than it would without banks.
    Debt grows with GDP and there are no problems.

    The UK used to be the great financial superpower and it looks as though we understood this in the past.

    What happened in 1979?
    The UK eliminated corset controls on banking in 1979 and the banks invaded the mortgage market and this is where the problem starts.
    The transfer of existing assets, like real estate, doesn’t add to GDP so debt rises faster than GDP until you get a financial crisis.

    Before 1980 – banks lending into the right places that result in GDP growth (business and industry, creating new products and services in the economy)
    Debt grows with GDP
    After 1980 – banks lending into the wrong places that don’t result in GDP growth (real estate and financial speculation)
    Debt rises faster than GDP
    2008 – Minsky Moment, the financial crisis where debt has over whelmed the economy
    After 2008 – Balance sheet recession and the economy struggles as debt repayments to banks destroy money. We are making the repayments on the debt we built up from 1980 – 2008.
    Japan has been like this since 1991.

    1. Sound of the Suburbs

      There are quite a few ways to get banks to lend in a productive manner.

      You could use the corset controls the UK used before 1980.
      This kept bank credit away from financial speculation and debt grew with GDP.

      OR …..
      Richard Werner worked out what went wrong in Japan.
      The BoJ used to use window/credit guidance to steer bank credit away from financial speculation and this was the basis for all the Asian Tiger economies, until they discovered financial liberalisation.

      OR …..
      Germany uses small non-profit banks that are very local to communities and businesses.
      There is no gain from financial speculation and they are closely tied to the people they serve.

      1. JEHR

        As I understand it, the banks were originally built to lend money so that businesses could build and create products and services for public and private needs. Often there were small banks in many towns and in the large cities just for those purposes. The banks earned money from the interest on their reasonably priced loans. The banks sought to fulfill the public purpose through loans and earned a reasonable return for their efforts.

        Gradually over time, the banks became larger, moved to bigger cities, moved to other countries, closed out their small banks and began expanding into loaning money for mortgages and more risky ventures where profit became the goal. Land became the banks’ magic lantern. The banks bought out the trust companies who usually made more risky loans than the banks. Banks sought out more and varied ways to create more wealth and greater profits: they became larger and expanded into even more countries; they sought more deregulation so, for example, they managed to be able to use depositor’s money to invest in risky ventures such as the stock market.

        Now the banks are in the insurance business and they speculate on the stock market. From small organizations in small towns, banks have become behemoths in every large city in many countries and have become too big to fail. They no longer care so much to help society prosper by lending money for businesses which produce goods and services: their goal is make ever expanding profits, to make money from money.

        Banks also engage in “shadow” activities; that is, activities that are totally deregulated such as betting on derivatives, using private equity and other speculative activities that only make huge profits for the banks themselves. In other words, they have become a huge cancer on society.

        The question is: how does society rid itself of this ever expanding and replicating activity that used to be called “banking?”

        1. TomDority

          I would think taxing it away would work –
          The internet stores succeeded because they had a tax advantage built-in – they fought hard to be exempt for all sorts of reasons publicly but, that had nothing to do with the real reason which was market advantage by not having sales tax (a 5 or 8 percent advantage at the profit end of things … at the margin)
          Same thing for a capital gains and tax structure that favors asset price inflation instead of real investment in the real economy.
          All the lending for housing and everybody doing the property ladder was a zero sum game except to the lenders —- end result was a hugely increased cost of living, working and doing real business (real business does not include stock market or FIRE sector style finance) which is not tax favored but, tax hindered as compared to the FIRE sector and asset price inflation BS.
          Solution – decrease tax rates upon labor and real tangible capital and place it upon monopoly, special interest, speculative and predatory income.

          Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery.
          It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices.
          But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other.
          Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both.
          Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.
          Written around 1929 anon

          1. Sound of the Suburbs

            William White (BIS, OECD) talks about how economics really changed over one hundred years ago as classical economics was replaced by neoclassical economics.
            He thinks we have been on the wrong path for one hundred years.
            Small state, unregulated capitalism was where it all started and it’s rather different to today’s expectations.
            Rent seeking was a problem that the Classical Economists were only too familiar with, but this knowledge disappeared as economics moved on into Neoclassical Economics and this exacerbates inequality.

            What did we get from Ricardo and what is now missing?
            We got Ricardo’s Law of Comparative advantage.

            Ricardo was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
            “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist.
            What does our man on free trade mean?

            Disposable income = wages – (taxes + the cost of living)

            Employees get their money from wages and the employer pays through wages.
            Employees get less disposable income after the landlords rent has gone.
            Employers have to cover the landlord’s rents in wages reducing profit.
            Ricardo is just talking about housing costs, employees all rented in those days.
            Employers and employees both win with low housing costs and a low cost of living.

            There were three groups in the capitalist system in Ricardo’s world (and there still are).
            Workers / Employees
            Capitalists / Employers
            Rentiers / Landowners / Landlords / other skimmers, who are just skimming out of the system, not contributing to its success

            From Ricardo:
            The labourers had before 25
            The landlords 25
            And the capitalists 50
            ……….. 100

            He looked at how the pie got divided between the three groups.

            One group is missing from today’s economics, which should ensure it is forgotten.
            Keynes was still calling for euthanasia of the rentier, but that concept disappeared around 1980.

            1. Yves Smith Post author

              I removed quite a few of your monologues.

              Stop trying to take over NC. Your comment frequency is excessive and I get private complaints.

              Get your own blog. This is your final warning. I’ve already told you to cut it out and you’ve refused.

  10. k teh

    An accounting change is not going to fix the problem. Governments are temporary.

    We do not owe the money to ourselves; we owe the debt to nature and nature is beginning to collect. It’s not the end of the world; it’s the end of an empire cycle.

    From the perspective of the universe, the system is physical chemistry and a small symptom is organic chemistry. Humans are not inconsequential, but neither are we gods.

    There are not too many people on the planet; there are too many poorly educated people on the planet, by human design. Advertising, most of the market securities, is designed to capture emotion and trigger autonomic response.

    BLM is like a bunch of college kids occupying the university library for the night. And the response to the virus has nothing to do with the virus.

    Empires defeat themselves, and the victor is always nature. Time is location dependent, relative to the observation point. Watching your children grow up is the best education, which is why government is always a child trafficking scheme.

    Reparations… the voters cannot begin to contemplate what they have done.

  11. The Rev Kev

    Dr. Hudson has talked many times about the successful, pragmatic approach to debt in use by the Sumerians and Babylonians and why we should think about copying these methods. But this ancient era is fascinating for other reasons as they were also experimenting with other concepts such as cities, banking, mass-agriculture, irrigation, etc.

    There must have been a lot of experimenting going on in this era to see what worked and what did not. Point is, you wonder about the other forms of government that must have been tried back then which failed. I have little doubt that some places refused to cancel debts and found themselves unable to compete against the other local powers in this region which decided to cancel debt as a matter of course.

  12. William Hunter Duncan

    My fiancé has $73,000 in debt from her Catholic private college BS degree. She is an arborist, taking home on average about $500/wk. Doing the math, if she spends $800 on debt service every month, we figure she will be debt free about the time she should be retiring.

    I bought my (little) house about 12 minutes before the market collapsed in 2007, and probably now I’m not even above water.

    That is debt bondage, debt servitude. Bankers and creditors should try it some time, see how it feels. Of course they know that it breaks the spirit over time, that is much the point, if not most of it. This is why I despise the Democratic Party perhaps more than the transparently soulless Republicans. You don’t get to be usurous and self-righteous and lecture me about my privilege (or laziness).

    Divide and conquer. I assume as long as we Americans hate each other (and both parties play the poor against the poor), they are safe in their towers and enclaves and 5th homes or whatever. If they continue on this path however, I don’t see how we get past this pandemic without the violence getting a lot worse than what we saw here in Minneapolis, spilling out wherever race and economic resentments are boiling over. None of us win if it comes to that. I would like to avoid that. But the elite of this country seem content to use this crisis to solidify their rule, and our bondage.

    1. Tomonthebeach

      Neolib capitalism is like musical chairs. You can use debt to make money, as I suspect most of us have. But when the music (production) stops because the oligarchs are hoarding all the wealth, 10s of millions will have no place to sit and will have to rent a chair – if they can. That is when Jesus’ admonition about inheriting everything as the priced of their soul. No pay, no buying, no selling, no profits, no rents – just obscenely big houses. Hmm. When did we see that before?

    2. sierra7

      William Hunter Duncan:
      “But the elite of this country seem content to use this crisis to solidify their rule, and our bondage.”
      Ah, sir! That is the story of history and of revolutions!
      It seems subsequent elites (anywhere) never believe they are not the benevolent suppliers of jobs, wealth, etc. on the masses.
      It’s only when the rumble of the Tumbrels echo in the streets that they realize that the end is near and the “streets again must be washed in blood”!
      Keep the faith. The confrontation of this mess is not far off!

  13. Billy

    Wonder what the effect would be of only allowing the write-off of interest on loans for productive lending, creating new factories, buildings, infrastructure and jobs?

    That is, if Bain and Company, or the guy that took over Sears, or real estate speculators, could not deduct from their income the interest on loans used to take over preexisting assets, wouldn’t it lead to the creation of more consumer goods, salaries, housing and a better standard of living?

    1. heresy101

      It would be beneficial for the average person, home buyer, and renter.

      One of the reasons housing is too expensive is that the banks will lend too high amounts so the borrower can pay their (the bank’s) interest. People won’t pay, or can’t pay, the ridiculous housing prices if the interest is not deductible. Thus, housing prices will have to drop to what people can pay without the interest deduction. A guess is 10-20% of the cost of a house.

  14. Michael Morris

    Nice article, and nice to see here, which in previous visits i found to be ridiculously pro EU and Remain. The ECB is the worst culprit of all central banks. Its been in existence a couple of decades but it’s done more to pervert monetary policy than any other CB on a relative scale. The fake inflation target of 2%, which ECB uses as the magic threshold when reached, to stop printing, does anyone actually believe that? Oh they’ll make sure its never reached. How do you create inflation in the real economy when all the digital free money is being contained in the financial markets, which is where one finds the hyperinflation. Look at the S&P since 2008 bailouts, that is hyperinflation, all the evidence anyone needs. Everything else is chump change. This is not capitalism, this is moral hazard on steroids, all emanating form the original sin, 2008.Todays ridiculous bailouts of everything inc charities FFS, is just another symptom of what started in 2008.

    The CBs printing and buying assets which have completely destroyed the “free” concept of Capitalist markets. This is state controlled fixed price economy. Anyone who calls it free market is a liar, or hasn’t got a clue.

    I do blame ECB much more than the FED, because FED tried to normalise, perhaps too late, but they tried. ECB because they can’t be honest about the fact all their sovereign debt purchases are simply the product for Draghi’s whatever it takes nonsense. So NIRP since 2014, and still deflationary economy. Its got to be the biggest failure of CB in history. Thanks god UK brexited, and anyone who still doesn’t get it, needs a lobotomy.

    Anyways thanks for the Hudson article. Its one of the few things ive read here worth my time.

    1. John Wright

      Out of curiosity, what sites have you found that have “things” worth your time?

    2. Jonathan Holland Becnel

      It’s not that we are Pro Brexit so much as we are Anti-whatever the Neoliberal Establishment wants???

  15. Expat2uruguay

    This was part of a larger conference that had three Fashions concentrating on the effects of the coronavirus in three areas: macroeconomic, business, and societal. Michael Hudson participated in the macroeconomic panel discussion. Here’s the YouTube link to the entire 4 Hour Teleconference. The participants were from all over the world and the whole thing is in English!


  16. Susan the other

    Just a funny feeling. The blurb about the US having a bumper crop of corn this year? Well, as the Church Lady always says, Isn’t that nice. And I’d just add, convenient too. Since our frack-wells are imploding in real-time, isn’t it nice that we have a bumper crop of corn so the extra can go to ethanol. I don’t want to be too optimistic, but that almost sounds like industrial planning to me.

  17. Susan the other

    and per Hudson’s recount of Aristotle’s insight that revolution is instigated by competing oligarchs – it’s quite possible that this time it really is “something entirely different”. Because until now the human race could just go out and take whatever it needed from the environment (commonly called profit) and leave the trash behind. Until now the people with money could enlist the people without into service. Because in the process the underlying logic of capitalism lived – that there was gain; there was always profit. Lots for the oligarchs and a smudge for the restofus. So this time it is different because profit will be difficult to achieve because of the environment. And the things that are required to make life sustainable have no profit except sustainability itself. It’s a paradigm change. If we want to salvage anything of capitalism we need to redefine profit. I don’t know why we can’t do that. There’s so much work to be done and so many people who want to work.

    1. Massinissa

      The problem is that the Capitalists want a monopoly on the ability to employ the proles, and will disallow any sort of government employment guarantee because it threatens their power to employ. I don’t know what can be done to decrease their power. Perhaps an economic collapse combined with a public demand for public employment? Somehow though I doubt the working classes will be organized enough to make that sort of demand during any sort of major economic collapse.

      1. Anarcissie

        The ruling class must now be pretty weak, or we would not see such exemplars of incompetence and inanition as Trump and Biden held up as ‘leadership’. Therefore, I expect some trivial event to set off a sort of political avalanche. We all just saw a seemingly trivial event, the murder of yet another Black man by the police, something that happens all the time, turn into huge tide of demonstrations, riots, looting, arson, more police violence, and blubbering advertisements and articles in the New York Times and the New Yorker. I don’t know if it’s 1789 or 1917 yet, but — definitely getting there. — Probably not going to very nice if it happens. Maybe stock up basic supplies.

  18. oaf

    …We are all slaves…Debt-slaves….wage-slaves….and Market……..is Master.

    Jubilee coming!


    1. Bakes

      No one is going to “grant” us a jubilee. No one is going to “rescue” us.

      We must individually as a population rescue ourselves and grant us our own jubilee. This would involve all of us “going Galt” and simply not paying our rents and bills. I know, blasphemy!

      But seriously, if 10 to 20 per cent of the population simply stopped paying their bills, then what? If more than that even better. It takes months to foreclose while you shelter free of charge. Then you use your savings to acquire and live in a Van, RV, Trailer in a Walmart parking lot. Don’t laugh. Don’t sneer. There will be plenty of capitalists ready and willing to profit off of a rent/mortgage strike.

      Don’t take me too literally. What I am really suggesting is in the event of a serious rent/mortgage strike, there is little the rentiers can really do. And there are plenty of entrepreneurial concerns that will be ready to step up to the plate and offer solutions.

      1. Yves Smith Post author

        You appear not to have been paying attention. We covered the foreclosure crisis. There were 9 million foreclosures when only between 53 and 55 million homes had mortgages on them. Pull out a calculator. That is a rate of nearly 17%. The level did not prevent those homes from being seized.

        And people still need places to live, so what happened? The homes were purchased by private equity and turned into rentals, and often maintained way less well than mom and pop landlords would.

        1. Amfortas the hippie

          but those actions still relied on fundamental assumptions regarding the legitimacy, even the reality, of those debts…as well as the legitimacy(and reality) of those Entities that scooped them up.
          I think the principal is valid…which is likely why topics like “rent strike”, “debt strike” and “general strike” were subsumed in the hive mind so quickly by the last straw black victim. Can’t have those Thought Virii at loose in the world!
          I’ll also not that those 3 Virii in quotes, above, were impossible to talk about in the proverbial Feed Store. Debts are regarded as sacrosanct…and it makes my small c conservative specimen pool very uncomfortable to have that idea challenged.
          I remember a few, isolated, stories from 12 years ago about people squatting in their houses that they used to own, mailing in keys, etc…and the New Owners looking the other way, because mowing, etc would dig into the Bottom Line(holy).
          Similarly, those stories evaporated(I was excited about them!)

          and…I should also note, that I have told the story of “The Conflict of the Orders (https://en.wikipedia.org/wiki/Conflict_of_the_Orders) in that same Feed Store, without being burned at the stake, and even with people asking follow up questions afterwards.

          “Their poverty secured their freedom, since our desires and our possessions are the strongest fetters of despotism.”-Ed Gibbon

        2. Bakes

          I do not disagree with anything posted by Yves at 11:26. And thanks to blogs such as NC I have been able to stay informed of the foreclosure crisis as well as other financial crises.

          I am not the best writer and so may not always be clear. Yes, private equity may be able to snap up properties for pennies on the dollar. But then what. In the northeast, rents are typically more costly than mortgage ownership of similar properties. (Just ask any realtor! :-) ) Anyone foreclosed upon for not meeting debt obligations will be even less likely to be able to meet the higher rental obligations. And having gone through foreclosure their credit will be impaired.

          Even at pennies on the dollar, private equity needs a return on investment. Where I fall short is in my ability to determine at what point does the population become unable to support that return on investment. Cheers!

  19. ewmayer

    Hudson on the Hammurabic era:

    This would have caused a serious fiscal problem for rulers. If victims of a crop failure or other economic interruption had to pay their creditors with their labour and crop surplus, this labor and crop tax wouldn’t be available to pay the palace its normal claims for taxes and corvée labour duties to build infrastructure or even serve in the army. Social balance and continuity would have been destroyed – from within.

    So in Hammurabi’s day, taxes *did* fund government operations, thus the rapacity of the creditor class was reined in by the fact that if their claims overwhelmed hoi polloi’s ability to earn a living and generate a surplus to remit to the government, there was only one place for the latter to get its money, namely from the Fat Cats. Contrast with today, and the MMT “taxes don’t fund government spending” tenet. OK, great, so government can continue to operate and (supposedly) do good stuff like provide infrastructure and social welfare even when taxes fall short of the demands for same. But it seems to me that Hudson’s description of the pre-Roman era points out a truly dark side to that freedom, as practiced by actual humans: a government which can create as much fiat as it likes is free to do things like wage war without limits and, when the same creditor class whose vast capital allows it to effectively make the rules by which government operates has squeezed the pips in form of the bottom 90-whatever-percent to the extent that they can no longer fund the operations of government and pay off their private debts, is liable to say “so what? we can just print to make up the shortfall”, and worse, use the same fiat-conjuration power to enrich the creditor class when the pips can no pay their debts to it, either. In other words, while the MMTers focus on the wonderfulness of being able to conjure up fiat to do Good Stuff, in the real world it is much more likely to fund Bad Things, in form of imperial violence and ever-worsening inequality. As Yogi Berra said, “in theory, theory and practice are the same. In practice, they’re different.”

    For most governments the resulting excesses would fairly quickly end in hyperinflationary ruin, but when one owns the One Currency to Rule Them All, one enjoys the exorbitant privilege of effectively getting one’s creditors to fund one’s excesses.

    1. JBird4049

      What you’re saying is true to a point. The United States is being hollowed out by its elites like with the Western Roman elites who consumed so much of the resources and reduced most of the population to effective serfdom.

      When the barbarians arrived they had not the ability to repair the aqueducts that were destroyed, nor the ability to maintain an effective army, and much of the population joined the invaders. One of the ways to date Roman artifacts is by how fine or crude it is. The earlier in the Western Roman Empire, the better quality and the later it was the worse it was. The invaders tried to maintain or rebuild the Empire, but there really was not enough of the infrastructure like trained workers to do all the specialized skills needed to run a civilization. The whole thing just fell apart.

      The current ruling class is like a parasite killing its host.

    2. lcn

      That’s why MMT gets more favorable traction from Wall Street folks than from so-called liberals like Krugman.

    3. Basil Pesto

      MMT as a noun could never have existed, Mitchell, Wray, Mosler et al could never have investigated how money is created in our economies and collaborated with each other and compiled their text book, and, everything else being equal taxes still wouldn’t fund federal government spending, regardless of the existence of the theory (which is not an abstraction/hypothesis which is what I take the famous Berra quote to mean by ‘theory’)

      A key value of MMT, it seems to me, is that it provides an umbrella-term which might be helpful in disseminating this understanding to as many people as possible, so that when their politicians tell them “we can’t afford it” they can reply “bullshit”, and when, in the US, their gov’t spends its money on, say, military geegaws instead of, say, universal health care, they won’t shrug their shoulders and say ‘fair enough’ when it’s rationalised by the usual suspects on television, but instead won’t stand for it.

  20. lcn

    The World Economic Forum will have for its January 2021 meeting The Great Reset (of capitalism) as a theme. Key words from Klaus Schwab include sustainability, fairness, and stakeholder inclusion.

    So far, reactions come mostly from right wing nationalists who view the initiative as more radical than Bernie Sanders’ Green New Deal.

    Any thoughts?

      1. Amfortas the hippie

        I don’t know.
        I don’t think 30,000 feet is enough.(my Holmesian Mind Palace is a tar paper shack, near Picard, on the “shores” of the Sea of crisis(https://en.wikipedia.org/wiki/Picard_(crater))

        Maybe “They” reckon that they’ve perhaps squeezed the Plebs to something near a breaking point, and fear an uncontrolled reaction(it’s not like “they” don’t have historians or philosophers to consult)
        …and figure that a controlled descent to a lower level of existence(for us’n’s) is in order, if they want to keep their place in the Manorhouse.
        People like David Icke and Alex Jones have done a disservice to thinking about the shape and function, mores and folkways, of the Power Elite…such that even I feel the scratch of tinfoil on my brow when I say things like this.
        It’s hard to figure out the mindspace of someone you think doesn’t really exist.

    1. Susan the other

      Yes, one thought. They are busy chumming the waters. Engineering for the new world. This morning on BBC there was a panel of engineers all talking about how they are addressing the social problems caused by Covid19 – as if the virus will be raging among us forever. That’s possible, but the attitude that we can rebuild society; transportation; sanitation; etc. with a few tweaks here and there and everything will be just fine is 19th Century to my thinking. Yes we need to build a new sustainable world, but it needs to be planned and appropriate to reality. The WEF is not exactly known for its ability to get real. Their idea of “initiatives” are profit-making initiatives. Self perpetuating initiatives. Imo it is society who will come up with the best ideas, not the captains of archaic industry.

      1. lcn

        Thanks, I’m also skeptical of their aims. Was it really a well intentioned desire to reform or just a self-preservation initiative? Maybe both.

        Even then, there’s no denying that capitalism, in its current iteration, needs to be reformed if not altogether toppled.

        That these globalist neoliberals are now at least amenable towards reform gives me a sort of expectation that changing the system is now possible with their hands being forced by nature through this corona pandemic.

  21. Tom

    So if democracies evolve into oligarchies then maybe they aren’t that great? And what’s the causal factor here? My guess is human nature and it would be wise of us to figure out how to improve our nature. There’s too much of the irratio so animal inside us exemplified by the extreme greed of the finance sector and mad politics.

  22. k teh

    there is going to be massive inequality here. the city folks are going to take all those passive gains and move out, creating waves of inflation from the big city epicenters. It’s inflationary because no work was done. The fed prints and depreciating assets are inflated, double the “error.” We just had 8 houses sold in one day, for $12M cash (electronic money), and most “working” people here are already paying 50% of take-home for rent, collecting unemployment instead of going back to work. Doing everything possible wrong.

    Lamenting this situation, she says she is going to turn her cabin into an airbnb….

    The beat goes on.

    Hopefully, you moved at the end of the last sub-cycle and are already dug in.

    They can’t get an inflation pulse? Where are they looking and what instrument are they using?

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