Hudson: Dress Rehearsal For Debt Peonage

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

'this' refers to the maths of debt growing exponentially. debt only grows exponentially if the interest isn't repaid. if a company borrows to finance some aspect of real production then they should be able roll ove rthe value of that loan several times over in a year in production cycles and earn more than enough profit to pay the interest, so debt doesn't have to grow exponentially, it only tends to do so when its being used to speculatively flip assets like houses.

Bryan and Rafferty are doing some work on where they think derivatives are taking us, I think they might have some serious marxist leanings but don't hold that against them, what they say about where the world of derivatives is taking us reminds me a bit of what you are saying. A world of reductionist market actions, some kind of mass orgy for a free market idealogue; I have some serious concerns of where the invisible hand will take us without some moral fibre giving it a guiding hand.

http://www.thefreelibrary.com/Dick+B.....-a0175443928

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

If the borrowing stops, then the entire system collapses and defaults will become inevitable. Just as what happened starting in 2007 leading to the bear market of 2008 and the Great Recession of today.

Those defaults may be part of the intended result.

In the view of Michael Hudson, if I understand him correctly, debt is essentially a "rent to own" mechanism for the benefit of the Banksters.

The interest on the mortgage you pay them (and it's almost entirely interest, not principle, for most mortgage payments) is essentially rent on the property. The increases in asset prices justify higher rents (higher interest due on the bigger mortgages.) Eventually they push enough "home owners" into sufficiently hopeless debt that the banks can take title and become (or rent out the "opportunity" to become) de jure landlords. The goal is always to maximize the banks portion of a property's income stream, and to minimize what's left over for governments, putative owners or other parties.

The default step merely allows the banks to start piling on late fees and penalties on top of the missing interest payments, so as to hasten the day that the putative owner will settle on any terms possible and so as to maximize the portion of the properties market value belonging to the bank.

Like inner city drug dealers, the goal of the banks is not to provide you with an affordable means to home ownership. Rather the goal is to move as much money and property as possible from your pocket to their pocket. Not all banks are such, but the more predatory ones, hence in most cases the largest and most influential ones are such.

[Diarmuid]

Re: Hudson: Dress Rehearsal For Debt Peonage

Yes, the events of the last year, by the government, bankers, and those bailed out and not held accountable, and the corruption of our leaders and skewed economic system has now become so transparent, that nothing less of what is described above could be expected.

This I fear represents a sea-change in our society. The "I can't trust anybody anymore and everyone for themselves, in a society that no longer enforces rule of law or responsibility" is seeping into the consciousness of those paying attention. The american ideal and ethic of fairness, hard-work, and merit, is no longer hanging by a thread; it is now being transfigured in effigy as a symbol of folly.

Bingo - Thank you for putting this so clear in words. I believe this may well be one of the greatest challenges we face as a society and not only in the US.

[Diarmuid]

Re: Hudson: Dress Rehearsal For Debt Peonage

You missed your calling, Mike. You'd have made a great oracle at some ancient Grecian temple. Two millenia later historians would still be debating the meaning of your enigmatic prophecies .

Mike devining for itulip? :p

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

The argument that I have made is that the interest is mathematically unpayable from the very beginning (since only a chartered institution can create the dollars necessary to service the debt --ie. pay interest). Because the banks don't create the interest in the original transaction, the issuance of such a loan automatically makes it a requirement for someone else to borrow more money into existence at a later time just to service the debt of the first loan. But remember the new loan will more than likely be charged interest. So it's a cycle of perpetually growing debt that can never be repaid in full without further borrowing. If the borrowing stops, then the entire system collapses and defaults will become inevitable. Just as what happened starting in 2007 leading to the bear market of 2008 and the Great Recession of today.

the interest can be repaid without someone else taking out another loan if the the laon is used productively to grow GDP and profits.

On Steve Keen's blog there is quite detailed discussion about this.

When there is such massive theft and looting of the American populace, with little uproar, how can you *not* have such little faith in people and the system??

I take having faith in people to mean that you provide education and access to enough resources and information to let people make decisions with some sort of collective consciousness. Its very hard work and a constantly evolving thing fraught with compromise. The easier option, as George Bush could get his head around, is to have a dictatorship; something that the finance and corporate world clearly understands as well.

[ST]

Re: Hudson: Dress Rehearsal For Debt Peonage

Audio (1 hour on recent events)

available until 9/9/09

http://www.kpfa.org/archive/id/53994

Nice find, don. Thanks muchly for posting it.

[don]

Re: Hudson: Dress Rehearsal For Debt Peonage

Nice find, don. Thanks muchly for posting it.

Thanks, Steve. It seems Hudson is speaking more and writing less. Probably indicative of the speed of events. My more ideological friends can only listen so far- they don't dispute anything he says, they simply can't take the level of disclosure. It hurts too much. An interesting phenomenon.

[Starving Steve]

Re: Hudson: Dress Rehearsal For Debt Peonage

If the Obama Administration would wake-up and invest in building hydro-electric dams, atomic power plants, building larger levies for New Orleans, re-dredging the St. Lawrence Seaway to modern standards for ocean vessels, de-salinization of sea water in California, drilling for oil offshore; in short, projects that produce serious economic dividends for the future, the deficits run-up now really would be of little importance. But instead, Bernanke's deficits have re-enforced consumption, waste, corruption, and bail-outs for the bankers who caused this down-turn in the first place.

In short, Bernanke's deficits have just dug the nation's debt-hole deeper. There is no economic plan for the future except to run even bigger deficits.

The U.S. was ready for serious change in November 2008, but unfortunately the Democrats were unwilling to really change the country. The same old system is just being bailed-out. It's called, "putting lip-stick on a pig".

[Yaowarat]

Re: Hudson: Dress Rehearsal For Debt Peonage

Those defaults may be part of the intended result.

In the view of Michael Hudson, if I understand him correctly, debt is essentially a "rent to own" mechanism for the benefit of the Banksters.

Hudson used the term "Rentier State" several times, and I had to read up on what exactly it meant:

The Rentier State
http://en.wikipedia.org/wiki/Rentier_state

[ricket]

Re: Hudson: Dress Rehearsal For Debt Peonage

the interest can be repaid without someone else taking out another loan if the the laon is used productively to grow GDP and profits.

How is it possible to repay $1200 in principal + interest to a chartered bank who issued a loan whenever only $1000 was put into the money supply in the first place? It's all nominal, nothing to do with the "value" of the loan. Selling your product at a higher profit later isnt going to make the missing interest appear out of nowhere, since only a chartered bank in the Federal Reserve system is allowed to create money.

You will never be able make the accounts balance because the (principal+interest amount owed) side of the balance sheet is always greater than the (principal amount created) side.

Again, the *only* way that a non-chartered entity who owes a loan to a chartered bank in the Federal Reserve system can pay back that loan is by borrowing the interest into existence at a later time (with another loan). It's quite simple and it's not anything "theoretical" but actually quite specific to the financial system as it exists today in the United States.

Say the unit of currency was Microsoft Vista licenses. Assume Microsoft loaned you 400 Vista licenses and you had to "return" (ie pay back) 450 licenses (50 licenses are for "interest"). If Microsoft is the only company that issues those licenses (because it's a proprietary product that they have written the source code for), then how do you think you will be able to return 450 licenses without having to go back to Microsoft (at a later date, or with a different company) and purchase 50 extra licenses to pay back the original transaction? What happens if Microsoft doesnt directly sell licenses, but only loans them out, which have to be paid back with *even more* licenses at a later date? When Microsoft is a monopoly on the issuing of licenses for Vista, much like the central banks who have a monopoly on the issue of money, you'll see why our financial system is flawed and in fact why it is based on fraud.

[cjppjc]

Re: Hudson: Dress Rehearsal For Debt Peonage

How is it possible to repay $1200 in principal + interest to a chartered bank who issued a loan whenever only $1000 was put into the money supply in the first place? It's all nominal, nothing to do with the "value" of the loan. Selling your product at a higher profit later isnt going to make the missing interest appear out of nowhere, since only a chartered bank in the Federal Reserve system is allowed to create money.

You will never be able make the accounts balance because the (principal+interest amount owed) side of the balance sheet is always greater than the (principal amount created) side.

Again, the *only* way that a non-chartered entity who owes a loan to a chartered bank in the Federal Reserve system can pay back that loan is by borrowing the interest into existence at a later time (with another loan). It's quite simple and it's not anything "theoretical" but actually quite specific to the financial system as it exists today in the United States.

Say the unit of currency was Microsoft Vista licenses. Assume Microsoft loaned you 400 Vista licenses and you had to "return" (ie pay back) 450 licenses (50 licenses are for "interest"). If Microsoft is the only company that issues those licenses (because it's a proprietary product that they have written the source code for), then how do you think you will be able to return 450 licenses without having to go back to Microsoft (at a later date, or with a different company) and purchase 50 extra licenses to pay back the original transaction? What happens if Microsoft doesnt directly sell licenses, but only loans them out, which have to be paid back with *even more* licenses at a later date? When Microsoft is a monopoly on the issuing of licenses for Vista, much like the central banks who have a monopoly on the issue of money, you'll see why our financial system is flawed and in fact why it is based on fraud.

Thanks again. I never tire of these examples.

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

although reductionist reasoning can be helpful it think here it is not, you need to take the whole complexity of the system including velocity of money flows into account. a loan could be made, efficiency and production increased as a result and the loan paid off.

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

although reductionist reasoning can be helpful it think here it is not, you need to take the whole complexity of the system including velocity of money flows into account. a loan could be made, efficiency and production increased as a result and the loan paid off.

For a while, yes. However exponential growth of the quantity of money in circulation will always eventually exceed any finite limits on the production of us earth (or even galaxy) bound humans.

Or, what is more to the point, the trust in integrity of the government backing an increasingly dominant currrency will eventually fail, as all governments who gain excess power will eventually become corrupt and fail.

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

yes I'm in full agreement with you with regard to these two points.

unfortunately capitalism as we currently know it can't see past its nose with regard to sustainable economic activity. Similarly those in power in our current capitalist system aren't rewarded for long term thinking. Different in China though. Not saying I like China either, they certaintly currently aren't too bothered by sustainability, but that could change once they've established economic dominance. They've certainly got more control over heading this way if they want; ability to torture opposition too.