Hudson: Dress Rehearsal For Debt Peonage

[don]

Audio (1 hour on recent events)

available until 9/9/09

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

[rabot10]

Re: Hudson: Dress Rehearsal For Debt Peonage

Thanks ///////////

[merry]

Re: Hudson: Dress Rehearsal For Debt Peonage

http://aud1.kpfa.org/data/20090826-Wed1300.mp3

Here is a direct link for those that would like to transfer to another device...

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

Because this audio is only available until Sept 9, 2009 on its original kpfa.org site, I made a copy of the mp3 audio file on my website at http://thepythoniccow.us/20090826-Wed1300.mp3.

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

Generally I regard hudson as an all round guru. Couple of questions though.

Why would the bankers want the population to leave, they've got the by the balls and the idea is to strip as much income out of people as possible as I understand it; isn't letting them emigrate letting them off the hook, don't they want as many slaves as possible?

Also, Hudson always talks about debt growing faster than the economy as theoretical fact. I don't think this is necessarily true, if the debt is used for productive sources then the debt can be used to turnover its value many times over in a year and generate income far in excess of the interest payments and there is no need for the debt to outgrow the economy. Of course the bankers don't want this coz they make less money and have less power and when they've got the power its never going to happen, so while I agree with Hudson in the current circumstances I think he needs to qualify this because it does lead to misleading understandings of the nature of debt.

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

Also, Hudson always talks about debt growing faster than the economy as theoretical fact. I don't think this is necessarily true, if the debt is used for productive sources then the debt can be used to turnover its value many times over in a year and generate income far in excess of the interest payments and there is no need for the debt to outgrow the economy.

Some, including I presume the esteemed iTuliper ricket, would note that whereas the growth of debt+interest is exponentially unbound in the mathematical world, the productive economy is materially bound to some limit in the material world (say the size of planet earth.)

In other words, the productive growth required to grow an economy to keep pace with the debt and its ever increasing interest cannot go on forever.

More seriously (in my view), the overly flexible boundary between (1) financial and economic prudent behaviour and (2) outrageous financial bubbles in a pure debt-based monetary system allows those bubbles to grow faster and more virulent, due to human civlizations fundamental lack of the moral understanding of how to organize itself on such large scales. A fine article by Stewart Dougherty at The Metastasis of Moral Hazard and its Effect on Gold discusses this moral failing at length. Here are three paragraphs from that article:

There is accumulating evidence that the Washington – Wall Street moral hazard experiment has gone disastrously wrong, and that just like any other accidental discharge of a deadly virus, the moral hazard virus is now loose and swiftly propagating throughout society. By so blatantly colluding with Wall Street, Washington has lost all moral authority, and the people now have only one place to turn: themselves. An ethic of, “If they can do it, so can I,” is spreading, as people realize that fabric of American society has been shredded and replaced by a free-for-all mentality whereby everyone must fend for oneself in order to survive.

...

The American psychological landscape has been parched by the searing winds of financial desperation, surging inequality and dying hopes. And the tinder of the desiccated American Dream, once the great calling and aspiration of a nation, is now piled so high that a spark igniting it would unleash raging flames reaching up to and scorching an astonished Sun. Yet politicians and the press are so divorced from reality that when the people express at town meetings and other venues their deep, legitimate frustration over the loss of their hopes and nation, they are viewed as whiners, or paid political activists. As noted earlier, denial is very dangerous drug.


Civilized society requires a foundation of morality, decency and justice to survive. The spread of moral hazard, should it happen, will have a disastrous effect on America’s institutions. Few investment classes will be safe in an environment of elevated moral hazard, because both legal and illegal counterparty risk will surge. Legal counterparty risk occurs when, for instance, a corporate executive at a public company is awarded excessive, unwarranted pay at shareholder expense.

[marvenger]

Re: Hudson: Dress Rehearsal For Debt Peonage

Some, including I presume the esteemed iTuliper ricket, would note that whereas the growth of debt+interest is exponentially unbound in the mathematical world, the productive economy is materially bound to some limit in the material world (say the size of planet earth.)

this assumes the interest isn't repayed, granted a lot of it hasn'y been but it doesn't have to be that way.

More seriously (in my view), the overly flexible boundary between (1) financial and economic prudent behaviour and (2) outrageous financial bubbles in a pure debt-based monetary system allows those bubbles to grow faster and more virulent, due to human civlizations fundamental lack of the moral understanding of how to organize itself on such large scales. A fine article by Stewart Dougherty at The Metastasis of Moral Hazard and its Effect on Gold discusses this moral failing at length. Here are three paragraphs from that article:

thats why if you have such little faith in people and your system is based on hedonistic atomisation you better have some good regulation

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

thats why if you have such little faith in people and your system is based on hedonistic atomisation you better have some good regulation

If you are such an amoral reductionist, then there is no such regulation, unless someone else with moral fiber constructs and imposes it. A maximum security federal penitentiary holding hardened psychopathic criminals is an example of such. Its inmates are lacking morals, and that system only works if the guards impose (a rather primitive) order.

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

this assumes the interest isn't repayed, granted a lot of it hasn'y been but it doesn't have to be that way.

Huh? What assumes interest is not repayed? What does your word "this" refer to?

thats why if you have such little faith in people and your system is based on hedonistic atomisation you better have some good regulation

Regulation is a vital part of enforcing a well understood order. It intentionally tilts the field so that the "good" guys, those who honor this order, are favored over the "bad" guys who abuse that order.

My point was perhaps unclear. I was not stating that we need good regulation to keep such fraud from running rampant. I agree that we need such, and I agree we have lacked such. But that was not my point.

My point was a less common one. We human lack such a well understood order for this arena. We don't know how to organize an economy of the scope and complexity that we have recently obtained for human civilization. The moral fabric of civilization does not apply in its current form and expression to the new world economy.

Without a moral fabric to which honorable leaders consent, without a fabric that they even comprehend, there is no good regulation.

We have clues, and bits and pieces of understanding, of what such a morality might include, mostly by way of analogy with more familiar arenas.

[Mega]

Re: Hudson: Dress Rehearsal For Debt Peonage

Bad News Hudson
http://news.bbc.co.uk/1/hi/world/8226717.stm
Mike

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

Bad News Hudson
http://news.bbc.co.uk/1/hi/world/8226717.stm
Mike

So how is this news article about Iceland bad news? Iceland is paying only within their means. They refuse to become debt surfs to the point of their own ruin. I suppose it would have been better in some ways if Iceland had told Great Britain to stuff it entirely, but this seems to be a tolerable compromise.

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 .

[c1ue]

Re: Hudson: Dress Rehearsal For Debt Peonage

Mega,

What your article noted was exactly what Dr. Hudson said was a huge positive precedent: that Iceland would repay the UK and the Netherlands banking intervention on Icesave, but only at Iceland's ability to repay (no more than 4% of GDP).

Thus unlike the IMF's standard prescription (being attempted in Latvia right now), there won't be a massive reduction in education, health care, etc etc.

The bigger point is that Dr. Hudson has been square on the money thus far: the bailouts in the US have been entirely to the benefit of a very few.

That he now says we're in the endgame where the FIRE oligarchs are laying their eggs in the carcass of a dying host (the USA and UK) is quite disturbing. Or put another way - systemic looting.

[ThePythonicCow]

Re: Hudson: Dress Rehearsal For Debt Peonage

That he now says we're in the endgame where the FIRE oligarchs are laying their eggs in the carcass of a dying host (the USA and UK) is quite disturbing

I hereby nominate you for the understatement of the day award. .

[vinoveri]

Re: Hudson: Dress Rehearsal For Debt Peonage

T
here is accumulating evidence that the Washington – Wall Street moral hazard experiment has gone disastrously wrong, and that just like any other accidental discharge of a deadly virus, the moral hazard virus is now loose and swiftly propagating throughout society. By so blatantly colluding with Wall Street, Washington has lost all moral authority, and the people now have only one place to turn: themselves. An ethic of, “If they can do it, so can I,” is spreading, as people realize that fabric of American society has been shredded and replaced by a free-for-all mentality whereby everyone must fend for oneself in order to survive.

:

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.

[ricket]

esteemed iTuliper ricket

Hah!

would note that whereas the growth of debt+interest is exponentially unbound in the mathematical world, the productive economy is materially bound to some limit in the material world (say the size of planet earth.)

In other words, the productive growth required to grow an economy to keep pace with the debt and its ever increasing interest cannot go on forever.

Correct. You can't have exponentially growing unlimited debt in a limited reality without massive inflation.

this assumes the interest isn't repayed, granted a lot of it hasn'y been but it doesn't have to be that way.

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.

thats why if you have such little faith in people and your system is based on hedonistic atomisation you better have some good regulation

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??

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.

I just hope it doesnt lead to an overreactive police state to enforce those laws. I never trust democracy rule because if you are not in the majority, you will suffer.